Curis, Inc. (CRIS) Q4 2019 Earnings Report, Transcript and Summary

Good afternoon and welcome to the Curis Fourth Quarter and Year End 2019 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 Chief Financial Officer, Bill Steinkrauss. Please go ahead.

Thank you and welcome to Curis' fourth quarter and year-end 2019 earnings call. Before we begin, I would encourage everyone to go to the Investors Section of our website at www.curis.com to find our fourth quarter and year-end 2019 earnings release and related financial tables. I would also like to 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. Joining me on today's call are Jim Dentzer, President and Chief Executive Officer; and Bob Martell, Head of R&D. We will also be available for Q&A at the end of the call. I'd now like to turn the call over to Curis' CEO, Jim Dentzer. Jim?

Thank you, Bill. Good afternoon everyone and thank you for joining us today. 2019 was a formative year for Curis. We reported promising clinical data in our CA-4948 program, laying the groundwork for important expansion and further progress in 2020. We retooled our approach to addressing a meaningful oncologic target, VISTA, with the addition of our CI-8993 to our portfolio. And we established valuable partnerships that position Curis for sustained momentum well into the future. As many of you are acutely aware, the evolving COVID-19 pandemic presents unprecedented challenges to people across the globe. It has also brought to the forefront the importance and necessity of medical innovation. At Curis, we are dedicated more than ever to our mission of bringing our targeted cancer therapies to patients. We are closely monitoring developments related to COVID-19 and we remain focused on running our business as efficiently and seamlessly as we can. Now, let's jump into our clinical development programs for next-generation targeted cancer drugs. I'd like to start with our IRAK4 program. At the ASH Conference in December, we reported exciting preliminary data from our ongoing Phase I dose escalation study of CA-4948 an IRAK4 kinase inhibitor for the treatment of patients with relapsed or refractory non-Hodgkin's lymphoma, including patients with DLBCL, Waldenström's macroglobulinemia, and Oncogenic MYD88 mutation. These data provided the first ever evidence that targeting IRAK4 in this patient population results in anti-cancer activity and underscore the potential for CA-4948 to serve as a novel therapeutic option for these patients. The study is still ongoing. But we were pleased to report at ASH that the study has advanced into the therapeutic dose range. At dose levels of 200 milligrams twice daily and higher, five of six evaluable patients experienced a reduction in tumor burden. The mean reduction in these patients was 29%. One of these patients, a patient with Waldenström's, provided a really nice single patient example of the strong dose response we are observing in the study. This patient enrolled in the study at 50 milligrams twice daily. And was dose escalated to 100 milligrams twice daily, then escalated again to 200 milligrams twice daily. With each increase in dose, this patient is seeing further reduction in tumor burden. That this patient's individual dose response is consistent with the overall dose response seen with the group as a whole is very exciting. We are currently evaluating patients at the 300-milligram twice daily dose, and we will continue to dose escalate until the maximum tolerated dose and/or the recommended Phase 2 dose is determined. We expect to provide updated safety and efficacy data from this study later this year. Also at the ASH Conference in December, data were presented that highlighted CA-4948 as a potential therapy to treat patients with AML/MDS or acute myeloid leukemia or myelodysplastic syndrome, who have spliceosome mutation that cause the oncogenic long-form of IRAK4, a direct target of CA-4948. We plan to initiate this study in the first half of 2020. In short, this year is shaping up to be a busy one for CA-4948, and we are looking forward to updated efficacy data and we are excited to explore the clinical potential of CA-4948 in patients with AML/MDS and certain spliceosome mutation. Moving to our fimepinostat program, we announced earlier today that we are discontinuing our Phase 1 combination study of fimepinostat and venetoclax. Although we did not observe any drug-drug interaction from the combination, we also did not see an efficacy signal that would warrant advancing this combination to the next stage of development. Given current market conditions as a result of the COVID-19 pandemic, we have decided to focus our resources on CA-4948 and CI-8993. Ongoing analytical research with DarwinHealth to characterize biomarkers and tumor subtype alignment will help guide any future clinical development opportunities with fimepinostat. Our clinical progress in 2019 has been complemented by recent advancements on the corporate side of our business. Over the past few months, we have initiated multiple partnerships and collaborations that we believe position Curis well for the longer term. In February of this year, we amended our collaboration agreement with our partner, Aurigene, for the development and commercialization of CA-170, an orally available dual inhibitor of VISTA and PDL1. This amendment enables Aurigene to fund and conduct a large Phase 2b/3 randomized study of CA-170 in combination with chemo radiation in patients with non-squamous, non-small cell lung cancer. In return, Aurigene receives rights to develop and commercialize CA-170 in Asia, in addition to its existing rights in India and Russia. Curis will be entitled to receive royalty payments on future sales of CA-170 in Asia, while maintaining full commercial rights to CA-170 in the U.S., EU, and the rest of the world outside of Asia. This update to our collaboration agreement allows us to support the clinical advancement of CA-170, while leveraging Aurigene's expertise and resources for CA-170 late-stage development. We continue to believe that VISTA is a meaningful target in the cancer setting. In January of this year, we entered into an option and license agreement with ImmuNext for the development and commercialization of anti-VISTA antibody, including its lead compound, CI-8993, a clinical stage monoclonal antibody designed to antagonize the VISTA signaling pathway. We are particularly excited by the prospect of this partnership as it provides us another opportunity to pursue the VISTA pathway for the treatment of cancer. We hope to leverage our experiences from CA-170 to support the development of CI-8993 and plan to initiate a Phase 1a/1b dose escalation study of CI-8993 later this year. Also in January, we announced a scientific collaboration with DarwinHealth to characterize biomarkers and tumor subtype alignments for fimepinostat. We believe this collaboration will deepen our understanding of the MIC mechanism and potentially identify any future development opportunities for fimepinostat. Lastly, I want to touch on the $30 million transaction with Aspire Capital that we announced in February. Bill will walk through the details, but at a high level, this deal gives us an efficient and flexible capital source from a long-term health care-focused institution to support the clinical development of our candidate. We are pleased to extend our cash runway with this transaction as we have an important year ahead of us. I'll now turn the call over to Bill for a summary of our financial results for the year and fourth quarter. Bill?

Thank you, Jim. For the year ended December 31, 2019, we reported a net loss of $32.1 million or $0.97 per basic and diluted share as compared to a net loss of $32.6 million or $0.98 per basic and diluted share in 2018. In the fourth quarter of 2019, we reported a net loss of $8.6 million or $0.26 per basic and diluted share as compared to a net loss of $5.9 million or $0.18 per basic and diluted share for the same period 2018. Revenues for the year ended December 31, 2019, were $10 million as compared to $10.4 million for the same period in 2018. Revenues for both periods comprised primarily of royalty revenues recorded on Genentech and Roche's net sales of Erivedge. Revenues for the fourth quarters of 2019 and 2018 were $3.3 million and $2.8 million respectively. Operating expenses for the year ended December 31, 2019, were $34.4 million as compared to $39.8 million for the same period in 2018. Operating expenses for the fourth quarter of 2019 were $10.6 million as compared to $7.9 million for the same period in 2018. Cost of royalty revenues primarily amounts due to third-party university patent licensors in connection with Genentech and Roche's Erivedge sales were $0.5 million for the year ended December 31, 2019, as compared to $0.6 million for the same period of 2018. Cost of royalty revenues were $0.2 million for the fourth quarter of 2019 as compared to $0.1 million for the same period in 2018. R&D expenses were $22.3 million for the year ended December 31, 2019, as compared to $24.4 million for the same period in 2018. The decrease was primarily due to lower employee-related expenses, resulting from a headcount reduction, which occurred in the fourth quarter of 2018. This decrease was partially offset by increased clinical, manufacturing, and consulting costs for our ongoing Phase 1 clinical trial. R&D expenses were $7.5 million for the fourth quarter of 2019 as compared to $4.7 million for the same period in 2018. General and administrative expenses were $11.6 million for the year ended December 31, 2019 as compared to $14.8 million for the same period in 2018. The decrease was primarily due to lower personnel and stock-based compensation expense combined with lower legal and professional service expenses. G&A expenses were $3 million for both the fourth quarter of 2019 and 2018, respectively. Net other expense was $7.8 million for the year ended December 31, 2019 as compared to $3.2 million for the same period 2018. Net other expense primarily consisted of a $3.5 million loss on extinguishment of debt in conjunction with the March 2019 repayment of the loan obligation to Healthcare Royalty Partners, an imputed interest of $4.1 million, resulting from the sale of a portion of Erivedge royalties to Oberland Capital. For the fourth quarter of 2019 and 2018, net other expense was $1.3 million and $0.8 million respectively. As of December 31, 2019, our cash, cash equivalents, marketable securities, and investments totaled $20.5 million, which we expect to enable us to maintain our planned operations into the second half of 2020. In order to extend our cash runway, we announced in February that we have entered into a $30 million common stock purchase agreement with Aspire Capital. Under the terms of the deal, Aspire made an initial investment of $3 million and committed to purchasing up to an additional $27 million of common shares during a 30-month period, subject to certain limits. These future purchases will be made from time to time at our request based on the market price at the time of each sale. There are no warrants, derivatives, or other share classes associated with this agreement and we control the timing and amount of the further sale of common shares to Aspire. This facility provides us an accessible source of capital that is based on market pricing. We feel it is a great deal for Curis and for our shareholders. With that, I'd like to open the call for questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Soumit Roy with JonesTrading. Please go ahead.

Hello everyone. Thank you for taking the question and hope you guys are staying safe. Just a quick one on the IRAK4 inhibitor. Is this mutation in AML or MDS driver mutation? And should we be thinking of you are going to reposition the 4948 in AML/MDS setting?

Yes. Thank you, Soumit. Thanks for calling in. So, let me take a first start at that and then I'll hand over to Bob for a little more detail. So, the drugs and IRAK4 inhibitor, and we initially went at the non-Hodgkin's lymphoma space and the data that we've gotten so far has been terrific, really excited about that. And I think that's the very large commercial space, of course, because it looks like it goes everywhere a BTK goes and the preclinical data suggest they combine well. That's a $5 billion market today. The AML/MDS market, while smaller, is uniquely positioned from a regulatory perspective. It has historically been thought of as a heterogeneous disease, there is very new, off the press research that was presented by a [physician at Einstein] [ph] at ASH that has identified specific spliceosome mutations that that lead to an over-expression of IRAK4 in that disease. This is a place that BTKs can't go. In that application, we would suggest that his work identifies half the population in AML/MDS as having this overexpression of the long-form of IRAK4. Short-form is okay, the long form is oncogenic. And if we can target those patients, we can take a story to the FDA, where we can attribute a very specific population that can be identified by very specific genetic mutations that are uniquely addressable with our drug. So, that should lead to a very quick regulatory path. So, that's the strategy. Non-Hodgkin's lymphoma really flushes out that this drug works that we can get the anticancer activity and impact the tumors that we saw preclinically, and then, of course, it can do so in a very large commercial market. AML/MDS is taking advantage of hot off the press' research and identified a potentially accelerated path down the regulatory path. Bob, would you like to add to that?

Yes. Thanks Jim. That's a really important question. These spliceosome mutations have been known for quite some time in AML/MDS, but it's only been recently, just as Jim mentioned, in the last year that it's been discovered how they are really regulating AML/MDS. And in fact, it turns out that the primary regulator that's geared for long-term poor prognosis for these patients is actually this expression of IRAK4 long form. And the form of this protein is constitutively active and drives -- basically drives prevention of differentiation of the leukemia cells through traffic and also really target NF-kB pathway, which is essential for the survival of these leukemia cells and we can shut this pathway down fairly effectively with CA-4948. So, yes, it is a driver mutation. And yes, we will definitely target that as a registrational path that we take forward.

I think -- so let me close with on the NHL side, the data we've got so far looks terrific. So, at the cutoff point of ASH, we were already at therapeutic doses at 200 milligrams and higher, five or six patients are -- we're shrinking tumors. We're getting a mean reduction of 29% in those patients. Obviously, we've accumulated data since then that we're really excited to present later in the year. But the NHL story looks really strong as a commercial opportunity for us. On the regulatory side, we expect to take advantage of the hot of the press development, where we think we can get to commercial approval even more quickly. Even though it's a smaller market, our drug seems to be uniquely positioned in a way that should excite the FDA. We know it excites the clinician.

Absolutely. Thank you so much for taking the question and congrats on all the progress.

Thank you.

[Operator Instructions] The next question is from A.J. Rashid with Columbia Threadneedle. Please go ahead.

Yes, hi Jim. Thank you for taking the question. Two for you. One, with respect to Erivedge and IPF, a couple of years ago, the Hedgehog pathway was researched by Roche in that space. I'm wondering if you've had any discussions with them or if they've been doing anything else with Erivedge in the IPF space and/or related to the coronavirus issue with respect to its infliction on the lungs? That's the first question. The second question is with respect to Aspire and the PIPE financing. What other non-dilutive measures might you be considering to support the share price? And then number two, related to that, is the Aspire purchases that you mentioned at your discretion or the company's discretion, is that something that would be made public either before or after future purchases that Aspire will be conducting in the open market or private market either way? Thank you.

Sure. Thank you, A.J. So, first on Erivedge and Hedgehog pathway, I think there's been a lot of excitement among the scientific community about Hedgehog pathway and where it might go. I know that Roche and Genentech had been looking at IPF, frankly, also MF in the past. And I believe that they are no longer pursuing that as an opportunity, but I confess in the last quarter, I haven't had that conversation with them. But I know initially, that was part of the research that, of course, they thought that drug might have a place in that setting. On the Aspire transaction, I'm going to limit our comments to, of course, what can be publicly disclosed. I think in hindsight, we did not, of course, see the coronavirus pandemic coming, but I'm awfully glad we put the facility and placement we did. It certainly gave the company the financial freedom and flexibility that we need in this really frankly, scary time for our country and for the world. We certainly plan to make use of that facility and to expand upon the trials that we do have ongoing. We also have, as you know, the data that we put forth at ASH was really exciting. And of course, we've continued to add patients to that study. We're not yet prepared to go public with that data. But having that data in hand and pursuing the AML/MDS as well, we hope to be able to take advantage of the financial flexibility afforded by the Aspire transaction to pursue both of those aggressively and discuss that data as it becomes more mature over the course of this year. Thank you very much for your question.

Thank you much.

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 remarks.

Thank you, Gary. In 2019, we positioned Curis for near-term successes and laid the groundwork for longer term pipeline growth. We are eager to build on our initial successes with CA-4948 and are excited about the opportunities now available to us as a result of several new partnerships and collaboration. As we look to 2020, we are focused on advancing our clinical programs for CA-4948, and CI-8993. Before we close, I'd like to thank all of the patients and family who participate in our clinical trials as well as our internal team at Curis, and our partners at Aurigene and ImmuNext for their commitment and support. Thank you for joining our call today, and we look forward to updating you again soon.

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