Curis, Inc. (CRIS) Q3 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q3 2017 Curis, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today’s conference, James Dentzer, Chief Financial and Chief Administrative Officer. Please go ahead.

Thank you, operator, and welcome to Curis’ third quarter 2017 earnings call. Before we begin, I would like to encourage everyone to go to the Investor section of curis.com to find our earnings press release and related financial tables. I would also like to remind everyone that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult our SEC filings for additional detail. Now, I’ll turn the call over to our President and CEO, Dr. Ali Fattaey.

Thank you, Jim, and good morning, everyone, and thank you for joining us today. The past quarter at Curis was marked by multiple achievements in advancing our drug candidates, as well as extending our capital runway. And today, I’d like to enumerate these and then provide a brief update on each of them. First, we succeeded in filing and the FDA has now accepted our IND application for our third drug candidates CA-4948 to enter the clinic soon. CA-4948, as you know, is an oral small molecule inhibitor of the IRAK4 kinase, which we intend to test in patients with non-Hodgkin’s lymphoma and specifically those that harbor mutations in the MYD88 gene. Second, we presented initial dose escalation results from the Phase 1 trial of CA-170 at the ESMO International Conference and are currently continuing with the trial in multiple countries for this oral small molecule inhibitor of PD-L1 and VISTA immune checkpoints. Third, we have closely examined the results of the Phase 2 trial of CUDC-907 in patients with MYC-altered DLBCL and are preparing for discussions with the FDA regarding these results. Fourth, we secured sufficient cap sold through an equity financing to extend our cash runway well into 2019. These accomplishments are consistent with our business plan to develop multiple oncology drug candidates, which we expect to commercialize in certain territories should they reach the registration state. I would like to begin with an update on CA-170, the first orally administered small molecule checkpoint antagonist in our collaboration with our partner Aurigene. CA-170 targets the PD ligands and the VISTA inhibitory immune checkpoints. We presented initial results from 21 evaluable patients treated as part of the dose escalation stage in the Phase 1 trial of CA-170 with doses ranging from the initial 50 milligram through 800 milligram once daily continuous dose cohort at the ESMO Conference. At the time of the presentation, four patients, including one immunotherapy treatment naïve patients with melanoma had continued shrinkage of their tumors over multiple cycles. We also noted evidence of an increase in the population of cytotoxic T cells within the patients tumors after CA-170 treatment, which is consistent with an immunomodulatory effect of the drug candidate. The safety profile during those escalation has been good with no dose limiting toxicities observed thus far that prevent us from continued escalation. Therefore, we are continuing the dose escalation stage with a cohort at the 1,200 milligram once daily dose. We also plan to present an update from this ongoing Phase 1 trial at the Society of Immunotherapy of Cancer or SITC Conference later this week. In collaboration with our partner, they also expect to initiate a Phase 2 trial of CA-170 enrolling select populations of patients in multiple centers in India, and we will provide further update on this trial upon its initiation. I would now like to provide an update on CUDC-907, which is being investigated as a monotherapy treatment in a Phase 2 trial in patients with relapsed or refractory MYC-altered diffuse large B-cell lymphoma or DLBCL. Although in the front-line setting, some patients with DLBCL have a long-term benefit from R-CHOP standard of care treatment. Patients with relapsed or refractory disease have few options to salvage a cure. The population of these patients with MYC-altered disease appear to have a poor prognosis on second-line treatment and even after stem cell transplants for curative purposes. This is a clear unmet need and is also the same population that appears to benefit the most from CUDC-907 treatment. Overall, in the Phase 1 and Phase 2 trial of CUDC-907, we have observed nine patients with MYC-altered relapsed or refractory disease that benefit with a durable complete response. Given the importance of complete and durable responses in this population of patients, we are currently preparing to discuss these results with the FDA and planning for further development of CUDC-907 in this indication. We also expect to present these results at the upcoming ASH Conference in December. I would now like to update on our IRAK4 kinase inhibitor drug candidate CA-4948. IRAK4 kinase pathway is altered in human cancers as evidenced by the high rate of activating mutations in the MYD88 gene in a number of different hematologic malignancies. We have previously presented non-clinical data, which showed that CA-4948 is a potent inhibitor of IRAK4, in biochemical assays, potently inhibits toll-like receptor signaling in cell-based assays, and results in significant anti-tumor activity in vivo animal models of MYD88 altered diffuse large B-cell lymphomas. During the past quarter, we filed an IND application with the FDA, which has now been accepted and we expect to begin patient enrollment in this Phase 1 trial during this quarter. This study will enroll patients with non-Hodgkin’s lymphoma during the dose escalation, and in particular, patients with cancers that are shown to have alterations in the MYD88 gene or TLR pathway. We plan to provide further updates on this trial with its initiation. Our initial non-clinical data also showed encouraging effects of CA-4948 in models of Acute Myeloid Leukemia and MDS disease. We plan to evaluate the merits of clinical testing of CA-4948 for treatment of patients with these heme malignancies in 2018. Regarding our drug candidate, CA-327 in partnership with Aurigene, which is an orally bioavailable small molecule that targets PDL1 and TIM3 immune checkpoints, IND enabling studies for CA-327 are nearing completion and we expect to prepare for regulatory filing for CA-327 in the first-half of 2018. Lastly, we’re very pleased to note Roche and Genentech’s continued commitment to commercialize Erivedge globally for the treatment of patients with advanced basal cell carcinoma. And with that, I will turn the call over to Jim for a discussion of our financial results.

Thank you, Ali. For the third quarter of 2017, we reported a net loss of $15.5 million, or $0.11 per basic and diluted share, as compared to a net loss of $28.3 million, or $0.21 per basic and diluted share for the same prior year period. Revenues were $2.4 million and $1.8 million for the third quarter of 2017 and 2016, respectively. Revenues for both periods comprise primarily royalty revenues recorded on Genentech and Roche’s net sales of Erivedge. Operating expenses were $16.9 million for the third quarter of 2017, as compared to $29.5 million for the same period in 2016. As a reminder, operating expenses and net loss for the three months ended September 30, 2016 included the non-cash in-process research and development charge of $18 million related to the amendment of Curis’s license agreement with Aurigene, in which Aurigene accepted $18 million of Curis’s stock in lieu of $25 million of cash milestones. Research and development expenses were $13.4 million for the third quarter of 2017, as compared to $6.8 million for the same period in 2016. The increase in research and development expense was primarily due to a payment to Aurigene of $3.8 million for an exclusivity option in September 2017, as well as increased direct spending related to clinical activities of CA-170, and increased employee-related expenses, primarily due to additional headcount. General and administrative expenses were $3.4 million for the third quarter of 2017, as compared to $4.7 million for the same period in 2016. The decrease in general and administrative expenses was driven primarily by a one-time stock-based compensation modification expense incurred in 2016 and also lower legal, professional, consulting and other administrative expenses. Other expense was $1.0 million for the third quarter of 2017, as compared to $0.6 million for the same period in 2016. Other expense primarily consisted of interest expense related to the loan obligations of Curis Royalty, a wholly owned subsidiary of Curis. As of September 30, 2017, Curis’s cash, cash equivalents, marketable securities and investments totaled $69.2 million and there were approximately 164.0 million shares of common stock outstanding. With that, we’ll open the call for questions.

[Operator Instructions] Our first question comes from the line of Brian Skorney from Robert Baird. Your line is now open. Brian Skorney, your line is now open, if you could please check your mute button. And it looks like our next question will be coming from the line of Peter Lawson from SunTrust. Your line is now open.

Ali, I was just thinking about the days you’re going to begin at SITC, any color you can give us around number of patients and number in each cohort if possible?

Obviously, it will be – hello, Peter, and thank you for your questions. Obviously, it will be enumerated in the presentation. We expect to present roughly a total of close to 40 patients with three quarters of those patients being evaluable for disease assessment. Similar to the presentation that we made, more than half of the patients are from the group of immunotherapy treatment naïve from cancer types that have an approval for PD1 or PD-L1 checkpoints inhibitor treatments. So that’s sort of the enumeration for the presentation coming up at SITC.

Okay. And what kind of follow-up would it be now for those patients?

It’s a good question. So majority of the group one patients and again, sorry for the rest on the callers, the group one are patients that are immunotherapy treatment naïve with cancer types that have an checkpoint antibody approved in the U.S. And as I mentioned, more than half of our patients from that group, those are the ones that have been enrolled predominantly this year, and again, the two countries where the most of the enrollment have been South Korea and Spain. So we’re looking at patients that have now been – some patients that have now been on treatment for over six months in that category.

Thank you. And then the Indian Phase 2 trial, you mentioned it was multiple sites. So that’s, I guess, that’s beyond Tata Memorial?

That’s correct. Tata Memorial is the one that we look at as the leading site for the enrollment of these. But there are a few other centers needed, and in particular, to be able to get the numbers of patients in the cancer type. So we’re quite interested in and keen to enroll. We will expand just slightly beyond the Tata Memorial as well. And again, I think, once this is approved and trial is initiated, we’ll be able to give full details of that study, as well as enrolling centers as well.

And when could we see an update from that Phase 2? And remind me again, what’s the doses that we would be using?

Sure. I don’t think we have indicated that yet in the context of the actual dose. It is possible though in terms of the design of the study to initiate with a dose that we have cleared for that Phase 2 and that would be, for example, the 800 milligram dose that we know now that we’ve cleared that. And then as needed or if needed go beyond that particular dose in the Phase 2 trial. In terms of the, as I said, we’ll give more details on the initiation. We do think it’s possible that either late this year or beginning of next year the trial could get started. And our hope is that given that it is a Phase 2, the patients can come on at any time into that study. And so we should have readouts within 2018 from that study as well.

Okay. Thank you so much.

Sure. Thank you, Peter.

Thank you. Our next question comes from the line of Chris Shibutani from Cowen. Your line is now open.

Thank you. Good morning. On CA-170 as far as more granularity of the patient data, first on biomarker data options that you can – that we should expect to learn a little bit more about in terms of getting further characterization of the kinds of responses that you’re seeing?

Yes. Good morning, Chris, and thank you for your question. As we’ve guided before previously for the SITC presentation, obviously, given roughly two months after the ESMO presentation. In terms of the patient numbers, as I described for Peter, in response to Peter’s question, we will have some more patients at the doses that we discussed – we’ve described already. We do expect significantly larger number of patients to be eligible or evaluable for disease. And then the team has also spent quite a bit of efforts to ensure that majority of the tumor biopsies pre and post treatment that we have available for the patients are analyzed with respect to the profile of the CD8 cytotoxic T cells within the tumor biopsies. That’s been an area of focus for us. And a profile of those patients with respect to their tumor biopsies and then again, the – any extent of tumor shrinkage and duration on stay of treatment is really what we expect to present for this group of patients.

And then with your CUDC-907, the discussions with the FDA, I believe you said have not yet occurred. Can you maybe frame for us what you think based upon your current portfolio [Technical Difficulty] the financial resources on hand, what you think would be realistic go-forward scenario that we should be thinking about there?

Sure. So, as I said, we described both here during this call, but as previously as well. What we tried to look at with CUDC-907 is the clinical benefit that it provides, which DLBCL patients, it provides it for and put that in the context of historical data in terms of how those patients perform. I think with respect to relapsed/refractory DLBCL in general, complete responses and durable complete responses tend to be rare. And those definitely in terms of their durability tend to be very rare for the MYC-altered population of patients. As I indicated, this is the same exact population, of course, where we see CUDC-907 benefiting that. With respect to our goals is really to put this data, this clinical benefit data, as I mentioned in the context of historical, have a discussion with the FDA with respect to the possibility of the same path that we were on, which is, is this data merited for accelerated approval with the FDA. And approach it from that perspective in terms of our discussions, it would obviously require us to have designed studies that allow us to do a randomized study potentially for CUDC-907 and that’s the second portion of the discussions that we would have with the FDA. With respect to resources and prioritization, obviously, this is a drug candidate at Curis that has the most amount of clinical benefit at this point associated with it. Therefore, we think it’s a serious drug candidate that provides a serious benefit for a defined population of patients with lymphomas. What we are focusing on, of course, is the preparation for that discussion with the FDA and design of studies. Therefore, from a resource perspective, it’s work of the team in preparing for that and it’s less clinical expenditure at this stage.

Great. Thank you for the updates.

Thank you, Chris.

Thank you. Our next question comes from the line of Adnan Butt from Guggenheim Partners. Your line is now open.

Hey, good morning, folks. Thanks for the question. I guess, I’ll start with 170 first. For the additional patients that will be at the SITC update, are they all 800 MYC patients?

Majority of our patients that have been treated are the 600 milligram and 800 milligrams patients that’s predominantly where we expanded the doses. So that’s correct, Adnan, it would be majority from dose to doses that have been done since the ESMO presentation, that’s correct.

Okay. And, Ali, at what point do you expect to be greater parity between exposure on activity for 170? Are you seeing patents now, if that’s something that could come about at SITC, or is that going to be more at the 1,200 mg level?

Yes. I know it’s an excellent question in terms of putting a correlation, if you will, between exposure and any readouts whether it’s clinical or biomarker in this context. Obviously, from a biomarker perspective, we began collecting and accessing tumor biopsies from patients starting at the 400 milligram dose. So going to 800 is basically only a doubling at this point into the dose, so probably a little bit more difficult to try and drive correlation between those two doses. We do think that 1,200 milligram dose will be also very informative for us, because that in a sense is a tripling of that dose and we look for being able to do that. We do some calculations back to what we’ve observed non-clinically and obviously, feel comfortable and confident that we are at doses, where we’ve seen both the similar biomarker activities as what we’ve observed in the clinic, but also where we’ve seen clear evidence of in vivo anti-tumor activity in the animal studies. We think that based on the ESMO presentation, the tumor shrinkages that we see in some patients is reflective of that exposure at this point.

Ali, that’s helpful. How high up at a dose level do you expect to get safely?

Yes, that’s an excellent question. Obviously, coming into the dose escalation for this particular drug, recognizing that it had a very safe profile non-clinically and frankly, have checkpoint inhibitor antibody. This is a fairly – relatively safe field, if you will, or class of drug. In animal studies, we have taken the drug at the – in both mouse and monkeys roughly to significantly higher exposure levels than what we are currently in the clinic. But I want to also point out that at the 800 milligram dose level, we are at exposure levels that is the highest we’ve tested in animals in terms of efficacy in the mouse model studies. So although, we can go higher, our expectation is that, we can go significantly higher without approaching dose limiting toxicity. I think, the more important question is the first one that you asked in terms of at what doses do we feel that we have reached a – if I may say, saturation of activity in terms of biomarkers. Those tumor biopsies are probably the most helpful for us in terms of assessing that at this point.

Okay, that’s very helpful. And did you say or are you able to say how much tumor biopsy data will be at SITC?

I – we didn’t enumerated, but it’s significantly more than what we had at the ESMO Conference presentation. We did have a fairly strong effort in assessing and processing all of the tumor biopsies that we had available up to this point.

Okay. And just one on 4948, how common process screening for MYD88 mutations? And then within NHL, will you be looking for any specific type of lymphoma?

Yes, it’s a good question, Adnan. The MYD88 mutations, there is a very prevalent one at amino acids 265 that is possible to screen. That mutation is on the common screening panels that people use for mutation or analysis of genes from cancer biopsies. We have also developed laboratory tests that we can detect these by simple sequencing methods. The prevalence of mutations in MYD88 and then particularly this one, it does exist in sub-populations of diffuse large B-cell lymphomas up to 30%, for example, the ABC subtype of the DLBCL, that will certainly be a population that we would enroll. Waldenstrom’s macroglobulinemia is obviously all have appeared to have mutations in MYD88, and we would expect to be able to get some of those patients into the study as well, as well as lymphoplasmacytic lymphomas patients with that disease that also define – are defined by a very high prevalence of mutations. There are also other lymphoma subtypes that appear to have activated toll-like receptor signaling that we would also expect to enroll that may not have necessarily MYD88 mutations. These are all populations that we would like to get in the dose escalation. However, we will not apply a selection genetic selection at this point in order to accelerate the dose escalation closer to the expansion stage at some point in 2018 is when we would expect to go forward selection of specific populations.

Okay, helpful. Thank you.

Thank you, Adnan.

Thank you. [Operator Instructions] Our next question comes from the line of Brian Skorney from Robert Baird. Your line is now open.

Hey, good morning, guys. Thanks for taking the question. Just went through the abstract book for SITC this weekend. And I just want to confirm that the kind of we’re looking on the abstract actually predates the presentation in September. It seems like there’s 19 evaluable patients versus 21 evaluable patients in September. And then on the melanoma patients that cited in the abstract with 14% lesion reduction by recess 23% immune-related response by criteria at the end of cycle two. It looks like patients will swallow that a little bit further in the September presentation. So and it does kind of look like, I don’t know if it’s recessed or IR response criteria that you have in the target. But can you just review what that patient was in terms of tumor reduction by the September presentation? Thanks.

Sure. Thank you, Brian, for your question. Yes, in general, I think, we’re beyond what the abstract shows for SITC. As I indicated to Peter’s question, we would have roughly or expecting to present approximately 40 patients total with three quarters of those patients being evaluable for disease at the time of the SITC presentation first. The – I believe the patient that you’re referring to that had tumor shrinkages over multiple cycles is at immunotherapy treatment naïve patients with melanoma. And at the time of the ESMO, we presented data in terms of their size of their tumor and their tumor shrinkage at cycles two. And then again, at cycle four, that patient has continued to receive treatments and will be further data presented on that particular patients as well at SITC.

Okay. Thanks.

Thank you, Brian.

Thank you. And at this time, I’m not showing any further questions. And I would like to turn the call back over to Dr. Fattaey for any closing remarks.

Thank you, and thank you, everyone, for joining the call today. I’d like to end the call by thanking the Curis team for their hard work in advancing our drug candidates. And also our partner, Aurigene, for the productive relationship that we have with them and continuing. We also like to thank Genentech and Roche for their work with commercialization of Erivedge. Of course, our investigators for their support with the development of our drug candidates. But most importantly, we would like to thank patients and their families for participating on our clinical trials and making our drug candidates a potential reality. So thank you, everyone.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.