Corvus Pharmaceuticals, Inc. (CRVS) Q2 2019 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Corvus Pharmaceuticals Second Quarter 2019 Business Update and Financial Results Conference Call. As a reminder, today's conference is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to Zack Kubow of Pure Communications. Please, go ahead.

Thank you, operator, and good afternoon, everyone. Thanks for joining us for the Corvus Pharmaceuticals second quarter 2019 business update and financial results conference call. On the call to discuss the results and business highlights for the second quarter of 2019 are Richard Miller, Chief Executive Officer; Leiv Lea, Chief Financial Officer; and Mr. Mehrdad Mobasher, Chief Medical Officer. The executive team will open the call with some prepared remarks followed by a question-and-answer period.I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements. Forward-looking statements are based on estimates and assumptions as of today and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including the risks and uncertainties described in Corvus' quarterly report on Form 10-Q filed with the SEC today and other filings the company makes with the SEC from time to time. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law.With that, I'd like to turn the call over to Leiv.

Thank you, Zack. I will begin with a quick overview of our second quarter financials and then turn the call over to Richard, for a business update.At June 30, 2019, Corvus had cash, cash equivalents and marketable securities totaling $96.8 million as compared to $114.6 million at December 31, 2018. Research and development expenses in the second quarter 2019 totaled $10.6 million compared to $9.7 million for the same period in 2018. The increase of $900,000 was primarily due to an increase in CPI-006 program costs. The net loss for the second quarter of 2019 was $13 million compared to a net loss of $11.6 million for the same period in 2018. Total stock compensation expense for the second quarter of 2019 was $1.9 million compared to $1.7 million of total stock compensation expense for the same period in 2018.I would like to note that we continue to carefully manage our expenses and currently expect full year 2019 net cash used in operating activities to be between $38 million and $42 million with a 2019 year-end cash balance between $73 million and $77 million.I will now turn the call over to Richard.

Thank you, Leiv, and good afternoon, everyone. Thank you for joining us today for our second quarter 2019 business update.During the quarter, we continued advancing all three of our clinical programs, highlighted by the presentation of the initial CPI-006, clinical data in an oral presentation at ASCO in June. On today's call, I will provide a recap of the highlights from ASCO, along with an update on our other development programs, including anticipated key milestones for the remainder of 2019. We had a very positive ASCO meeting, reinforcing our position as a leader in the development of the adenosine pathway based therapeutics, and in the development of second-generation immuno-oncology medicines. The initial data from our 006 clinical trial was presented in an oral presentation by Dr. Jason Luke, Principal Investigator of the trial and Director of the Cancer Immunotherapeutic Center at the University of Pittsburgh Medical Center, Hillman Cancer Center. The presentation included data from a total of 20 patients, 12 patients who received CPI-006 given intravenously as monotherapy at doses of 1, 3, 6, 12 milligrams per kilogram every 21 days and 8 patients who received the combination treatment of CPI-006 at 1, 3, 6 milligrams per kilogram every 21 days plus a fixed-dose of ciforadenant, 100 milligrams twice daily. These patients all had advanced refractory disease and had failed a median of four prior therapies.CPI-006 is a novel, first of its kind, anti-CD73 antibody. We created and are developing this antibody because it possesses unique immunomodulatory properties. We are pleased with the results presented at ASCO as they confirm what we set out to create with 006, an immunologically active and very selective antibody targeting CD73. The combination of immune stimulation and adenosine blockade is expected to be synergistic.Let me give a few takeaways from the presentation at ASCO. First, the clinical and laboratory results support a new immunotherapeutic approach with CPI-006 via both its activation of immune cells and the inhibition of adenosine production. 006 binds to a site on the CD73 protein that blocks its enzymatic activity, blocking the production of immunosuppressive adenosine. Other antibodies to CD73 have also been described to do that, of course, but our CD73 is also a co-stimulatory antibody. 006 interacts with the site on the CD73 molecule that leads to its activation. It is an agonist in this regard. This process is independent of adenosine. More specifically, we found evidence of B-cell activation and effects on lymphocyte trafficking in our treated patients. Treatment induced expression of markers of immune cells associated with activation of antigen presenting cells. And these effects are specific to CD73 positive cells, consistent with the exquisite selectivity of the antibody. Together, the immunologic data collected from these patients supports stimulation of the immune system and suggests the trafficking of activated cells to peripheral lymphoid tissues. And why is that important? Because immune cells become sensitized to tumor antigens in peripheral lymphoid tissue, namely regional lymph nodes, that's where the action happens. I want to emphasize that we are not aware of any other agent, antibody or small molecule, targeting CD73 that has exhibited these dual independent properties. Some companies are developing small molecule inhibitors of CD3 -- CD73 enzymatic activity, it is very unlikely, actually impossible, that such agents will have these immunomodulatory effects that I just described.Second, the initial very early results demonstrated a dose-dependent disease control in patients with advanced refractory disease when CD73 -- when our CPI-006 was administered as a monotherapy and when it was given in combination with ciforadenant. This included a trend toward longer disease control in patients with doses -- in patients receiving doses of 6 milligrams per kilogram and higher, and the combination therapy appeared to enhance disease control. Doses of 6 milligrams per kilogram and higher achieved sustained occupancy of CD73 sites on peripheral blood lymphocytes and 12 milligrams per kilogram were shown to achieve saturation of the antigen in tumor biopsies. In short, we are zeroing in on the optimum dose.Third, we were very pleased to see signs of tumor control and regression occurring in patients with very advanced cancers. These patients were resistant to previous treatments. In particular, we see early signs of activity in renal cell cancer and prostate cancer. We also reported a positive safety profile as CPI-006 was well tolerated at all dose levels with no dose-limiting toxicities observed so far.We are delighted with the response to our ASCO data from scientists and clinicians. The importance of the presentation was confirmed by the selection of our presentation for one of ASCO's Highlight of the Day sessions. For those that may not be familiar with these sessions, only a handful of papers are selected to be a highlight, and they are very popular with ASCO attendees because they provide an efficient way to keep informed on the most important discoveries and findings coming out of the meeting. The highlight of the Day presentation was made by Dr. Mary Disis, a leading oncology researcher from the University of Washington, and Editor-in-Chief for JAMA Oncology. In the session, Dr. Disis highlighted the key themes that we have been emphasizing about our approach to clinical development, starting with monotherapy to confirm single-agent activity and utilizing pharmacodynamic biomarkers to enhance our understanding of the clinical results.We also hosted a well-attended Analyst and Investor Meeting during ASCO, featuring Dr. Luke to review the 006 data. If you have not had a chance to listen to this presentation, I would encourage you to listen to the replay, which is available on our website.We continue to enroll patients with advanced cancer in our Phase I/Ib clinical trial with CPI-006, with a focus on the first two arms: Single agent and in combination with ciforadenant. To date, we are seeing a continuation of the trends reported at ASCO, and we have been pleased that our presentation at ASCO has stimulated increased interest in our study, which is now enrolling very well. We plan to provide an update from our 006 study at the SITC meeting in November with more patients, more immunobiology and longer follow-up both for the monotherapy and ciforadenant combination arms.I would now like to discuss ciforadenant, our small molecule drug that is an antagonist of the adenosine A2A receptor. Ciforadenant is the most advanced candidate in development across the landscape of A2A receptor antagonist, with more than 250 patients receiving treatment to date. It has demonstrated antitumor activity as a monotherapy and in combination with atezolizumab in patients that have failed a median three prior therapies and the drug's exhibited strong safety, PK and PD profile. Some of our patients have experienced durable responses and disease control out to now over 30 months. Some patients have been on therapy in excess of 2.5 years. We continue to enroll patients in our Phase Ib/II clinical trial evaluating ciforadenant in combination with atezolizumab. This study has most recently been focused on patients with advanced refractory renal cell cancer, which is a significant unmet need.We are also enrolling patients with prostate cancer. On our Q1 call, we noted that we have seen activity in prostate cancer and that AstraZeneca presented Phase I data for their oral A2A receptor inhibitor, also showing signs of efficacy in prostate cancer patients including responses in patients receiving monotherapy.As part of these protocols, we are testing patients for the Adenosine Signature to evaluate its use as a predictive marker for future studies. To date, we have treated about 14 patients with metastatic castration-resistant prostate cancer with ciforadenant as a single agent in combination with atezolizumab or in combination with CPI-006. We plan to deepen our experience with prostate cancer for both ciforadenant and for CPI-006 going forward.Related to the adenosine pathway and with the goal to broaden our pipeline, we continue to study and advance our selective adenosine A2B receptor inhibitor through preclinical studies. Our research has shown that inhibiting the A2B receptor does not have meaningful effects on the immune system, but it does have effects on fibrosis and other related processes. This activity has been reported by other scientists in the literature and is something we plan to continue exploring. Although reported by one group, we do not believe there is persuasive evidence to explore the dual simultaneous in addition of A2A and A2B receptors for immunotherapy, either with combinations of selected A2A drugs and A2B drugs or with a dual inhibitor that we have synthesized.Outside of the adenosine pathway, we are enrolling our Phase I/Ib study of CPI-818, our small molecule ITK inhibitor in patients with T-cell lymphomas, including peripheral T-cell lymphoma, cutaneous T-cell lymphoma and others. We believe CPI-818 has the potential to be directly cytotoxic to T-cell lymphomas and also may lead to enhancement of the immune system by increasing what is called the TH1 immune response, which could provide a therapeutic benefit for lymphomas and for solid tumors. Some of our research also indicates that this drug may be a very attractive candidate to examine in autoimmunity.As a reminder, the development of CPI-818 was based on a similar targeting strategy to that of BTK inhibitors, such as ibrutinib, and members of the scientific team at Corvus, including myself, led the development of ibrutinib, the first BTK inhibitor, which is now approved for the treatment of several types of B-cell lymphomas. We treated the first patient in our CPI-818 study during the second quarter, and the study is now open in the United States, Australia and South Korea. So far, CPI-818 has been well tolerated, and we are pleased with the PK and PD findings. We expect early clinical data to be presented in late 2019 or early 2020.In summary, we continue to believe Corvus is well positioned with three unique candidates in the clinic. We are encouraged with the latest data presented at ASCO, demonstrating that CPI-006 is unique among CD73 antibodies based on its dual mechanism of action, immunomodulation and adenosine blockade. We are seeing positive early signs of antitumor activity in the CPI-006 study and look forward to presenting additional more mature data later this year at the SITC meeting in November.Ciforadenant continues to demonstrate attractive pharmaceutical properties, including complete receptor blockade and high specificity for A2A. And importantly, ciforadenant and CPI-006, which are wholly owned by Corvus, appear to be complementary with attractive potential as a combination therapy.Outside of our three programs in the clinic, we are also advancing our pipeline assets, but the majority of our focus continues to be on our clinical work. We look forward to providing updates on our progress with our pipeline at upcoming medical meetings and in future business update calls. Let me remind everyone about SITC in November, where we anticipate presenting more clinical data and hosting an investor reception.I will now turn the call over to the operator for a question-and-answer session. Operator?

[Operator Instructions] We'll take our first question from Michael Morabito with Credit Suisse.

I just have two for you. One on CPI-006, I was trying to find out if I heard you correctly, are you still increasing the dose beyond 12 mg per kg in that? And how many new patients should we expect roughly when the data comes on SITC? And also, the OpEx guidance that you gave. You said you saw net 2019 cash use of $38 million to $42 million, but the first half use was already $26 million. So I was just wondering where the savings would be coming from?

Okay. So there's two questions. I'll take the first one. So we have continued to increase the dose of the antibody to now 24 milligrams per kilogram, not yet seen any MTD or DLT dosing toxicity. 24 milligrams per kilogram is the highest dose we're going to test. We know we're super saturating the antigen. And the dose that we'll use for our expansion part of the trial will be lower than 24 milligrams per kilogram. We're still working out the details of our pharmacokinetics and pharmacodynamics, but we're at higher than the dose we expect to use this in the future. And the financial question, Leiv, I'll let you take that one.

Sure, Mike. So for the first 6 months, our net cash used in operating activities was $18 million, which is a little bit half the $40 million at the midpoint of our full year forecast.

Michael, and also -- sorry, I forgot to answer the second part of your question, how many more patients. You're going to see at least a doubling of the patients.

We'll take our next question from Biren Amin with Jefferies.

This is Jed [ph] on for Biren. Just a couple from me. Could you just reiterate again for the prostate cancer patients that you said you're including in the Phase Ib study, could you just clarify the breakdown of those patients from monotherapy and combo, and when can we potentially expect to see the data on those patients?

I think we'll probably talk about some of that data at SITC. The breakdown, I don't have those exact numbers off the top of my head, but probably about half of more monotherapy, some of them were combo with Atezo while some are combo of 006 [ph].

And just a second one for me as well. Just regarding the ciforadenant non-small cell data from the Morpheus ongoing study. I think on the Q1 call, you said that there might be a cut of the data that would be seen around about this time. Is there any update on that, and when can we expect to see some data from that study?

So I don't have a cut on that data yet. Patients have been enrolled in the study, and they're still under follow-up. We don't control that study, as you know. I would expect that we'll be able to look at that data later this year.

Okay, got it. And maybe just one more from me, more of a biology one on 818. Is RLK down regulation or lack of expression, a consistent observation that's been seen across human T-cell lymphoma subtypes, or is it observed in more select subtypes? Just looking for a general trend there.

So first of all, our 818 is an ITK inhibitor, just to be clear, not RKL. But RKL is a very interesting story. The unique feature of our drug is that it inhibits ITK without inhibiting RLK, and that turns out to be biologically crucial and very difficult to do chemically. That's one of the reasons why we get this TH1 skewing. If you block -- this is a long story, but if you block ITK and not RLK, the differentiation of T-cells is such that you'll bias differentiation towards the TH1, which you want in cancer therapy. Now in terms of T-cell lymphoma, specifically, there's very good reason to believe that many, many T-cell lymphomas have over expression of the T-cell receptor signaling pathway, of which ITK is a critical signaling molecule. That was the whole rationale for going after ITK, similar to the rationale we used when we went after BTK in B-cell lymphomas.

[Operator Instructions] We'll take our next question from Tony Butler with ROTH Capital.

This is Deb [ph] on for Tony. Just had a quick follow-up for confirmation here. Rich, did you say that for the combo data for CPI-004 and CPI-006, that you're currently at the 24 mg, or is that in the monotherapy cohort?

The monotherapy is at the 24 mg per kg. The combo is just a little bit behind it. The combo is at 18.

18, okay. So you're definitely above the 12 hurdle, then.

Yes.

And then just a quick follow-up. Have you enrolled anyone in the CPI-006 plus KEYTRUDA combo arm?

Not yet. Our plan is to get more data on our own drugs, 006 and 444. And once we get more comfortable with that, then we'll open up the other arm.

Okay. And just to make sure I heard this correctly, did you say that you were positive or leaning more towards CPI-006 plus CPI-444 for the prostate cancer combo, or you're still trying to figure things out versus Atezo or not?

I would say we're still trying to figure things out. We've been extremely encouraged by what we're seeing with 006 and 444, and that has caused us to pay -- to look much more carefully at that combination.

We'll take our next question from Robert Driscoll with Wedbush Securities.

This is Ashwin [ph] on for Robert. I just wanted a quick clarification on the new prostate cancer arm, the Phase Ib/II study. Will you be using the Adenosine Signature to help select for those patients, or will that be more of a retrospective analysis?

We're going to use it retrospectively for two reasons. One, we need to also get more experience on Adenosine Signature negative as well as positive. And secondly, it really helps enrollment if you allow everyone in. If you require a biopsy and then tell patients you can't go on to the study, they get very irritated. So it makes this study a lot more practical.

And that concludes the question-and-answer session. I'd like to turn the call back over to Richard Miller for any additional or closing remarks.

All right. Thank you, operator. First of all, thanks, everyone, for joining us on the call today. I appreciate everybody's interest. Again, let me remind everybody about SITC in November and hopefully, you can attend our presentations, and you can also attend the investor reception that we're hosting. Thank you, operator.

Thank you. And that does conclude today's presentation. Thank you for your participation. You may now disconnect.