Curis, Inc. (CRIS) Q3 2018 Earnings Report, Transcript and Summary

Good morning, and welcome to the Curis Third Quarter 2018 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to the company’s Corporate Controller, Bill Steinkrauss. Please go ahead.

Thank you, operator, and welcome to Curis’ third quarter 2018 earnings call. Before we begin, I would like to encourage everyone to go to the Investors section of the company’s Web site at www.curis.com to find our third quarter 2018 earnings release and related financial tables. I would like to also remind everyone that during the call, management 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 actual results may differ materially. For additional details, please see our SEC filings. Now, I will turn the call over to our President and Chief Executive Officer, Jim Dentzer.

Thank you, Bill. Good morning, everyone, and thank you for joining us today for our third quarter 2018 earnings call and business update. Joining me today are Bill Steinkrauss, our Corporate Controller who will provide an overview of our financial results and Bob Martell, our Head of R&D. Bob, Bill and I will be available to answer your questions during the Q&A portion of the call. In our press release this morning, in addition to our financial results, we made some important announcements as they relate to our business going forward. Let me take a few minutes to review these announcements and also share with you my perspective. As you know, on September 24, we announced a change in leadership. In the weeks since then, we have conducted a reassessment of the company’s strategic priorities and decided to make some adjustments to our business based on our findings. At Curis, we are fortunate to have three first-in-class therapeutics in the clinic, each of which has the potential to change the lives of patients suffering with cancer. That is a major accomplishment for a company our size and we have decided to heighten our focus on the rapid clinical development of these three programs. Our goal is to complete enrollment in the clinical trials of these compounds as quickly as possible and ensure that all three programs generate efficacy data in 2019. At the same time, we recognize that our forecasted cash burn was not sustainable. We have, therefore, made the decision to reduce headcount and expenditure in our preclinical science, pipeline expansion and general and administrative expenses which will offset increased spend in targeted areas of clinical operations. The net effect of these changes is a 27% reduction in headcount and a decrease in forecasted cash burn from approximately $11 million to $8 million per quarter. I would like to take a moment to extend my deepest appreciation to all of the employees impacted by these reductions. Their passion, dedication and commitment allowed Curis to get to where we are today and their efforts are very much appreciated. In particular, I would recognize and thank Dr. Ali Fattaey for his leadership in building a portfolio of truly innovative clinical stage assets. He has been a valued leader and friend and we wish him all the best. Now, I’d like to provide an overview of our three clinical programs. First, an update on our lead clinical candidate fimepinostat, which is being developed in patients with MYC-altered relapsed or refractory DLBCL. In clinical studies to-date, fimepinostat has proven safe, tolerable and efficacious achieving durable objective responses in 23% of patients and has generated a lot of excitement. As you know, the FDA, based on these data, granted fimepinostat Fast Track designation earlier this year. In discussions with the agency and clinicians since then, we have identified the best regulatory path for this drug, study of fimepinostat dosed in combination with venetoclax for patients with Double Hit or Double Expressor DLBCL. Patients with this subtype of DLBCL have an alteration in two genes, the MYC gene and the BCL2 gene. DLBCL patients with this subtype have the worst prognosis and chemotherapy is often no longer effective. The case for evaluating this combination regimen in this high, unmet need patient population is clear. In preclinical testing, the combination of fimepinostat, a MYC inhibitor, with venetoclax, an FDA approved BCL2 inhibitor, was both synergistic and compelling. We are currently working with the FDA to initiate a clinical study evaluating a fimepinostat and venetoclax combination in patients with DLBCL including patients with Double Hit, Double Expressor Lymphoma. As we already have safety, tolerability and efficacy data for both drugs in DLBCL, we expect this combination study to proceed quickly. We plan to start enrolling patients in the first half of 2019 and have initial efficacy data in the second half of 2019. Our priority is to get this drug through FDA registration as quickly as possible with the highest probability of success. Our long-term goal is to see fimepinostat added to every patient’s regimen in every type of cancer where a MYC inhibitor is helpful. Our second heme malignancy drug is CA-4948, a first-in-class and highly selective IRAK4 inhibitor in development for patients with MYD88-altered cancers. For certain patients with DLBCL and Waldenström's, a mutation in the MYD88 gene leads to over-activation of the myddosome and over-activation of the TLR pathway, which downstream leads to an over-proliferation of these cells. MYD88 signaling in this pathway is dependent upon IRAK4. By inhibiting IRAK4, CA-4948 turns down the activity of both the myddosome and the TLR pathway. At a healthcare conference recently, we disclosed some exciting early data from our ongoing clinical study. While the data are early and limited, the Phase 1 study assay results showed a tight correlation between drug exposure and inhibition of IL-6 cytokine release, which matches exactly what we have seen in both preclinical testing and also testing in healthy volunteers. The consistency of these data makes us even more optimistic about the opportunity with this compound. We look forward to reporting more data from this study in midyear 2019. Our third program in the clinic is CA-170, the first oral small molecule immune checkpoint inhibitor to enter the clinic and the only anti-VISTA agent in the clinic, which we are developing in collaboration with our partner Aurigene. CA-170 is a dual inhibitor targeting the VISTA and PDL1 immune checkpoints. To-date, CA-170 has demonstrated safety, tolerability and anti-tumor activity in patients across multiple tumor types. The data are encouraging and we are particularly interested in CA-170’s unique ability to target VISTA, an independent immune checkpoint pathway that has been identified as a potential resistance mechanism to treatment with anti-PD1 antibodies in melanoma and anti-CTLA4 antibodies in prostate cancer. CA-170 is the only molecule in clinical development to target VISTA. In recent literature and scientific conferences, investigators have noted that a proportion of biopsies assessed from non-small cell lung cancer, gastric cancer and triple negative breast cancer, among others, express high levels of VISTA on tumor cells. In reviewing all of the potential cancer populations that might benefit from anti-VISTA agent like CA-170, there appears to be an especially severe and unmet need in mesothelioma, which the Cancer Genome Atlas identifies as having 90% of its tumor cells expressing VISTA. Furthermore, our preclinical studies with CA-170 has shown significant in vivo anti-tumor activity in mouse models that do not benefit from anti-PD1 antibody treatment. We ascribed this anti-tumor activity of CA-170 to its ability to address VISTA in these models. Based on this, and to leverage our leading position in addressing VISTA, Curis has begun work with select clinical sites to initiate a study of CA-170 in patients with mesothelioma. We expect to provide initial data from this study in the second half of 2019. Before I turn the call over to Bill, I would like to conclude by stating that all three of our clinical programs are exciting, innovative and have the potential to change the lives of patients suffering with cancer. In reallocating resources and increasing our focus on clinical execution, we look to increase the speed and probability of hitting our clinical milestones and unlocking significant value. With that, I’ll turn the call over to Bill for a discussion of our financial results. Bill.

Thank you, Jim. Now for an update on our financial results. For the third quarter of 2018, we reported a net loss of $7.2 million, or $0.22 per share and basic share, as compared to a net loss of $15.5 million, or $0.53 per basic and diluted share, for the same prior year period. Revenues for the quarter ended September 30, 2018 were $2.8 million as compared to $2.4 million for the same period in 2017. Revenues for both periods comprised primarily of royalty revenues recorded on Genentech and Roche's net sales of Erivedge. Operating expenses were $9.3 million for the third quarter of 2018 as compared to $16.9 million for the same period in 2017. Research and development expenses were $5 million for the third quarter of 2018 as compared to $13.4 million for the same period in 2017. The decrease in research and development expense was primarily due to decreased costs related to clinical activities and manufacturing for fimepinostat, CA-170 and CA-4948, and an exclusivity payment to our partner Aurigene of $3.7 million made in September 2017. General and administrative expenses were $4.1 million for the third quarter of 2018 as compared to $3.4 million for the same period in 2017. The increase in general and administrative expenses was primarily driven by higher personnel costs and higher professional and consulting services, partially offset by lower stock-based compensation for the period. Other expense was $0.8 million for the third quarter of 2018 as compared to $1 million for the same period in 2017. Other expense primarily consisted of interest expense related to the debt obligations of Curis Royalty, a wholly owned subsidiary of Curis. As of September 30, 2018, our cash, cash equivalents and investments totaled $30.8 million and there were approximately 33.1 million shares of common stock outstanding. With that, we’ll open the call for questions. Operator? Margaret, are you on the line?

Yes, I’m online. I’m sorry. I couldn’t un-mute my line. Should we begin with the Q&A now?

Please.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Adnan Butt from Guggenheim Securities. Please go ahead.

Hi, everyone. Thanks for the questions. Jim, just a couple here. First, you talk a lot about prioritizing resources. The update that you gave today, fimepinostat, 4948 and then 170, is that an order of priority you’re listing or am I reading too much into it?

Hi, Adnan. First, thanks for calling in. Yes, you’re reading too much into it is the short answer. I think the way we are thinking about it is we have three really great programs here. We think all of these are company makers and we want to accentuate our ability to get these things into the clinic and develop them with all of the resources they deserve to ensure that we get data in 2019. And that meant we had to spend a little more on the programs than we were spending in the past. Of course with the existing cash burn and we started talking about adding more, that really became an unsustainable cash burn for us. So we didn’t want to sacrifice the additional spend in clinical operations, so that’s why we went to G&A and preclinical science. We frankly don’t need to build the pipeline more. We’ve got three great programs. We just want to make sure that we are doing everything we can and giving these programs all of the resources that we can to ensure that they move successfully and quickly through the clinic.

Okay. Second question, and again tell me if I’m reading too much into it. The emphasis today seems to be on data updates in 2019. Do you expect any updates from the SITC meeting which should be starting soon to allow us to judge the activity of 170 either overall or in mesothelioma?

So not in meso. So we are accentuating 2019 for the pieces that we’ve talked about. So we will of course have abstracts and posters at SITC. We’re also going to be at ASH. And all of that data is very helpful. I would describe our data with 170 to date just the way I did in the prepared remarks. We’ve got great safety, we’ve got tolerability, we’ve got anti-tumor activity. As we look at that data in comparison to the other antibodies that are commercially available, I would say that the anti-tumor not to – it’s not a surprise to anyone, the anti-tumor activity is there, it’s clear, but it’s also not as great as the antibodies are getting. So what we need to do is look at where that drug can go that is in frankly a place the antibodies can’t go, and that’s VISTA. And as we look to cross all the different places where we could test for VISTA, there are a lot of tumor types where a certain percentage of them have high expressions of VISTA. We looked at meso and saw not only do most meso tumors express lots of VISTA, 90% of them, but there’s really no good treatment for VISTA. So if we can show we work there, we prove out the VISTA thesis and we also have a commercial space frankly all to ourselves. It seems like a higher probability bet, certainly a quicker trial to run and one that if we get to the end of 2019 and we can validate that thesis, it generates a lot of value for the company.

Fair enough. Just to be clear, do you expect any update from your partners in India that the Phase 2 study at SITC or you cannot say?

I really can’t speak for them. I would encourage everyone to go to SITC. We’re planning on going to SITC. But of course I can’t comment on another company’s data even though they’re our partner.

Last one on fimepinostat. Are there – obviously you look for safety and tolerability. Is there an efficacy hurdle you’d be looking for in the Phase 1 study that you’ve contemplated before starting a pivotal?

I’m going to turn that one to Bob Martell, Adnan, if that’s all right.

Hi. This is Bob Martell. So we’re really excited about evaluating this in-patient to have Double Hit or Double Expressor Lymphoma because as you know that disease has an extremely poor prognosis and also is driven by those two drivers, MYC and BCL2. And so while both individually have had activity in that disease, so fimepinostat, as Jim mentioned, is over close to a quarter of the patients who had a very durable response; with venetoclax in the upper teens has had response. But the combination of the two seems very compelling to us and that’s why we’re pursuing that. So we will be looking for activity. Based on our preclinical models, this shows quite profound enhancement of activity in those models. And so our hope is that we’ll see that in the clinic as well. I don’t see any reason why we would not. We’ll work on administering those safely together and we feel fairly optimistic about that combination.

Thank you, Bob. Adnan, let me add to that. So when we think about the hurdle, the competition in this case is chemo and chemo in this patient population is really ineffective. We’re talking about response rates closer to 10% and a duration that last a couple of months at best. If we get anywhere near the kind of response rates that we saw in monotherapy with either venetoclax or fimepinostat, let alone the combination, I think it’s a much more compelling therapy than chemo, which is really where we’re headed. So again, the whole point of the trial design was where can we go which would lead to a very quick dataset with a severe unmet need and a hurdle that’s frankly not all that hard to beat. And that really is this space exactly.

Thanks, Jim. Thanks, Bob.

Thank you. The next question is from the line of Peter Lawson from SunTrust. Please go ahead.

Hi, Jim. Just thinking about CA-170, when do we kind of see the next update there? And you mentioned VISTA in mesothelioma patients. How many mesothelioma patients do you have in that cohort to kind of make that judgment call?

Sure. So let me start and then I’ll ask Bob to chime in as well. So we’re going to be talking about 170 at SITC. As I said, we are going and we – I believe we’re on a panel as well at SITC. So we will certainly be talking about 170 and the existing dataset. For the VISTA dataset, we are going to be enrolling that in the first half of '19, so we won’t have data until the back half of '19. So we won’t be talking about that at this conference, but we will of course over the course of 2019. Bob?

Yes, and just to add a little bit color also to the VISTA. VISTA is quite interesting even compared to the PDL1. In fact, as Jim mentioned, it’s quite uniquely very strongly expressed on tumor cells themselves. We think of PD1 as being an immune cell, T cell located modulator. This particular VISTA is strongly expressed on the tumor cells. Additionally when treated with checkpoint inhibitors tumors tend to increase their VISTA expression potentially as a resistance mechanism. And that’s why we’re really excited about exploring the mesothelioma population because there since over 90% of the tumors strongly express VISTA, we don’t even need a diagnostic really to evaluate that and actually have patients or the vast majority of patients having strong VISTA expression. So we think that that’s a great way to look at a relatively small number of patients without having to screen them and looking for anticancer activity. So we’ll do an initial evaluation at key dose levels that we think are relevant.

Let me add to that, Peter. So the long-term strategy with VISTA is somewhat similar to the strategy for fimepinostat. With fimepinostat we want to get to registration as fast as we can. Once we’re at registration, then we move sideways to every patient that might have a MYC-altered cancer where a MYC inhibitor would help. In 170, we’re going at VISTA in the fastest path we can with the highest probability of success in that meso group. Once we get to registration there, we move sideways commercially to every patient where VISTA expression characterizes their disease, and then this would be an additive to that therapy. But first things first, let’s get the quickest, cheapest, fastest path to registration for both drugs.

Got it. Thank you. And then the SITC abstracts, are they going to be kind of – and ASH abstracts, are they going to be pretty bland for data and we should kind of wait for the final presentation? And then as a follow up around fimepinostat, where are you kind of planning those registrational studies with the FDA in trial initiations?

Sure. So on the SITC abstracts, so the SITC abstracts are going to be a continuation of the discussions on the PD1 and PDL1 path that we’ve been headed towards over the past two years. So we presented the vast bulk of that data last year at SITC and we do have an update on the data since then. Of course, I can’t speak for Aurigene but as you know Aurigene is also doing a Phase 2 study in India. So we would be prepared to talk through what additional data we have, but I would expect that that initial data, the way we think about it is, it shows that the drug is safe, it shows the drug is tolerable and it shows we’re getting anti-tumor activity. The path forward though if we look to the commercial space, the path forward is it’s got to go head-to-head with the antibodies. And the antibodies efficacy is a high hurdle. So the probability of success for us would be greater I think if we tack towards VISTA where the antibodies cannot play. Then we can run a very short, quick, a high probability of success comparatively trial in order to get the drug approved. And then once the drug is approved, we move sideways. For fimepinostat, I’m sorry, Peter. Could you repeat that part of your question?

Just if you could remind us where you are for registrational studies with the FDA --

Yes. So part of the benefits of getting Fast Track designation was that we were able to have conversations with FDA and of course we’re having conversations with our clinicians. All of those conversations were starting from a place of everybody really liked the data. That’s the obvious part of getting Fast Track, right? The agency likes the data and of course the clinicians liked what they saw as well. Where we wanted to take the conversation was, okay, what is the fastest, highest probability of success for this drug and where everybody came out? We tested a lot of different combo therapies in the lab. As you know, we even have clinical data with Rituxan. But we have tested in combination with many different agents in the lab. The one that kept coming up and everybody was so excited about was BCL2 with fimepinostat because of course there are no other MYC inhibitors today. There is no BCL2 approved therapy in DLBCL. And Double Hit is of course exactly where that goes. It’s the disease that’s characterized by MYC alteration and BCL2 alteration. It makes the most scientific sense. It’s the one that clinicians were most excited about. Clearly, the agency was very excited about it as well. It’s about as clear cut a path frankly as I’ve ever seen in drug development. We’re really looking forward to getting that into patients and see what it looks like.

And I can just go back to the SITC question in terms of how I look at this is really laying a nice foundation for pivoting into the VISTA approach. Again, I think the VISTA provides a unique opportunity in a different tumor type than the ones that PD1 targeting strategies are utilized. Here, these are malignancies, as Jim mentioned, including a percentage of colorectal, lung and ovarian tumors that really have super high expression of the VISTA. And so at SITC, I see that we’re basically laying out the groundwork for that development or pivot.

Got you. Thank you. And congrats on the promotion.

Thank you very much, Peter.

Thank you. The next question is from the line of Brian Skorney from Baird. Please go ahead.

Hi. Good morning, guys. Thanks for taking the questions. I guess I’d start on fimepinostat. In the clinical trial you’re planning with venetoclax, how are you guys going to quality Double Hit versus Double Expressor Lymphoma in the study? Are you doing stratification to try to get relatively concentration of both? And would you expect differential responses based on the prior clinical data to Double Hit versus Double Expressor?

Hi, Brian. Good morning. Thanks for joining us. I’m going to push that question to Bob.

Yes, so obviously we’re going to enroll Double Hit patients. The broader population of Double Expressor as well will be enrolled. And we’ve set parameters around the percentage of cells that express both BCL2 and MYC. And so that will really guide the enrollment onto the study, in particular, during the expansion phases. But there will be several dose levels that where we’re exploring the optimal dose of that. So we’re expecting that the data that we identify during that study, that Jim mentioned, will be coming out in 2019 will have really the bulk of the patients with Double Expressor and Double Hit Lymphoma.

Got it. Thanks. And then just on CA-170 for the mesothelioma study, what are the thoughts on why you’re doing a high dose, low dose? It just seems like that 200 mg bid dose based on prior data maybe subtherapeutic is the reason to think that that level [indiscernible] inhibition would still kick in even though it looks suboptimal in 51 patients?

Yes, so that’s a really interesting question. As we think about many anticancer therapies, usually it’s the highest dose we try to get to with the maximum tolerated dose essentially. What we and our partners have found is that there is some scientific basis for I guess what I would call a bell-shaped curve in terms of efficacy as you go up with these. And the full understanding of that mechanism is still understudy. However, this is something that we’ve observed and we feel that this is the – the lower dose is a way to evaluate that. For the patients on that study we would allow them on at the lower dose for a couple of cycles. If it looked like they weren’t responding, they have the ability to escalate up to the higher dose. So we’ll be able to actually essentially look at both doses in that way fairly well.

Great. Thanks, guys.

Thank you, Brian.

Thank you. [Operator Instructions].

I think we’re ready to conclude, Margaret.

Sure. Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to the company’s President and Chief Executive Officer, James Dentzer, for any closing comments.

Thank you, everyone, and thank you, operator. I’d like to end today’s conference call by thanking the Curis team for their continuous hard work and our partner Aurigene for the productive relationships and shared vision in making a difference in patient care. I’d also like to thank our partners, Genentech and Roche, for the commercializing work that they do with our approved drug Erivedge, as well as our investigators for their support and dedication to the development of truly innovative therapeutics. Most importantly, I’d like to thank the patients in our clinical studies and their families for being an essential part of the process of developing the new generation of targeted drugs for the treatment of cancer. Thank you, everyone.

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines. Thank you.