Iovance Biotherapeutics, Inc. (IOVA) Q3 2016 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to the Lion Biotechnologies Third Quarter 2016 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 maybe recorded. I would now like to introduce your host for today's conference, Greg Schiffman, Chief Financial Officer. Please go ahead.

Thank you. Good morning everyone. Thank you for joining us for Lion Biotechnologies first quarterly conference call. Joined today's call from Lion are Dr. Maria Fardis, our President and CEO; Dr. Michael Lotze, our Chief Scientific Officer; and Dr. Steven Fischkoff, our Chief Medical Officer. This morning we issued a press release that outlines the topics we plan to discuss today and it's available on our website at www.lbio.com. Before I turn the call over to Maria, I would like to remind everyone that statements made during the conference call will include forward-looking statements regarding Lion's goals, business focus, business plans, clinical trials plans, and result, potential future applications of our technologies, manufacturing capabilities, licensing and collaboration transactions, future updates and cash usage forecasts. Forward-looking statements are subject to numerous risks and uncertainties many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially than those projected on today's call and we undertake no obligation to publicly update any forward-looking statements. With that, let me test the call over to Maria.

Thank you, Greg. I have now been at Lion Biotechnologies for five months and I'm very pleased with the progress we have made to-date and the momentum we have gained. Let me start-off by reviewing some of the highlights. As I indicated when I joined the company, I'm very committed to executing on our mission in advancing frontier of personalized medicine. My goal is to execute a broad development program which will allow us to commercialize health in multiple indications. To support this goal we needed to build out team with the skills to successful execute such a clinical plan, develop the next-generation of TIL and to improve both, the process under capacity of manufacturing TIL. We have recently hired Greg Schiffman to be our Chief Financial Officer. Greg brings a breath of experience to cellular therapies as a result of his work and Dendrion which offered the first cellular immunotherapy product. In addition, over the past three months we have more than doubled the size of our employee base going from 22 to approximately 50 employees. While the majority of the new hires have been located in the new headquarter in San Carlos, California; we have also expanded our research team in Tampa, Florida. We plan to continue expanding the team as we build a fully integrated oncology company. In addition to growing our team, we have also focused on our process development initiative. Some of the preliminary work will be present at the upcoming Society for Immunotherapy Cancer Annual Meeting at SITC [ph] being held on November 9 to the 13 in National Harbor Maryland. This includes developing new assays to measure the protein TIL in a cell, as well as cryopreservation of the TIL, enabling more efficient controlling and shipping process. In addition, we have a post-run evaluation of artificial antigen presenting cells as a potential substitute for our peripheral blood mononuclear cells which could review the cost of manufacturing process as well as make it more reproducible and scalable. We are presenting a poster titled 'successful expansion and characterization of tumor infiltrating lymphocyte from non-melanoma tumors'. This study demonstrates the feasibility of culturing and expanding TILs isolated from non-melanoma tumors including bladder, cervicals, head and neck, lungs and total negative breast cancer. This is based on work we are doing to actively expand our pipeline and indications beyond melanoma. As part of this effort we amended our CRADA with NCI to extend it for additional five years. The CRADA includes the development of TIL therapy for the treatment of metastatic melanoma, bladder, lung, breast and HPV-associated cancers as well as exploring combination of TILs with FDA approved drugs such as checkpoints inhibitors. On the collaboration front, we recently signed an agreement with PolyBioCept AB and the Karolinska University Hospital in Sweden. We agree to fund two clinical studies in glioblastoma and pancreatic cancer to be conducted at the Karolinska University Hospital in which TIL are to be manufactured using a new combination of cytokines. We are very excited to start these two Phase 1 trials next year with the Karolinska University Hospital; one of the premier health technologies in Europe and a leader in drug development. Looking to 2017, we intend to expand the utility of TIL both in terms of additional indications, as well as increasing efficacy of response in melanoma. Some of these will be internal effort and others will be executed through partnerships. I look forward to updating you on these initiatives over the coming year. Second, we have put significant emphasis in process development to shorten the current manufacturing process and make it more streamlined and scalable. As I indicated earlier, some of our current work will be presented later this month at SITC. Our research and development team in Florida -- we will continue to pursue these efforts and I look forward to updating you on the progress overtime. Finally, we continue to execute our clinical development plan. We are actively enrolling patients into LN-144 Phase 2 Melanoma Study and we intend to present initial data at the upcoming conferences in 2017. We also plan on engaging health authorities as we explore how to move this product into the next stage of regulatory approval process. In addition, we are expanding utilization of TIL technology in new indications in cervical and head and neck cancers, combining these internal studies with the work being done at the Karolinska Institute lead to five indications being investigated for TIL technology in 2017. To execute on this clinical plan, we are significantly expanding our manufacturing capacity. We are actively working with existing and new collaborators to expand our contract manufacturing work, to support increasing number of clinical indications as well as larger files. In addition, we expect our manufacturing to be more efficient as we implement some of the improvements we are currently pursuing, enabling us to process more samples with our current process -- contract manufacturers. As I noted earlier, we are excited to bring Lion's TIL Technology to patients with high medical need. At this time next year we will have five clinical trials ongoing, our Phase 2 trials for LN-144 melanoma, two Phase 2 trials for LN-145 in both cervical and head and neck cancers; two Phase 1 trials in glioblastoma and pancreatic cancer to be conducted at the Karolinska University Hospital. I hope this gives you a sense of progress of what we have made over the past five months, as well as our future direction as we enter 2017. I would now like to turn the call over to Greg for a discussion of our financials. Greg?

Thanks, Maria. First, I would like to say how excited I am to join Lion Biotechnologies at this point in time. The next couple of years will be transformational for the company, and I'm excited to be able to be part of that process. For the third quarter, we had a cash usage of approximately $12 million. This has been higher than our historical run rate. Approximately $2.3 million for cash outflows associated with our financing last quarter. Additionally, $2.5 million is associated with the exclusive and co-exclusive license agreements we entered into with PolyBioCept AB for the development, manufacture and commercialization of products. We ended the quarter with cash and cash equivalents of $179.3 million providing us with a strong balance sheet to invest strategically in our business. We had two significant non-cash charges reflected in our statement of operations this quarter. Given the material nature of the non-cash charges, we are providing both GAAP and non-GAAP financials as we believe that it is important for you to understand the trends in our financial statement excluding these non-cash charges. Our GAAP net loss for the quarter was $68.2 million or $1.15 per share. Our non-GAAP net loss for the quarter was $10.1 million or $0.17 per share. As I indicated, the non-GAAP adjustments are all associated with non-cash charges. These include one-time non-cash deemed dividend of $49.5 million associated with the recent approval by shareholders to enable the preferred -- there is these shares restored in our June 2016 financing to be convertible into common shares. At the time of the approval the share price was $9.10 which was higher than the offering price of $4.75. Under GAAP, this share price change needs to be expand; this will never impact the company's cash and will not impact any future financial statement. In addition, our third quarter GAAP expenses included non-cash compensation totaling $8.6 million. This was $6.3 million higher than the quarter ended Q3 2015. The majority of this increase is associated with the departure of the company's former CFO. For the fourth quarter, we expect cash usage to be around $15 million which includes projected expenses related to expansion of our manufacturing capacity, as well as the growth in expenses associated with our addition of employees and expanding clinical agenda. We expect to end the year with $164 million in cash and cash equivalents. I'll now turn the call over to the operator for your question. Operator?

Thank you. [Operator Instructions] Our first from comes from the line of Joe Pantginis from Roth Capital Partners. Your line is now open.

Hi, good morning everyone, thanks for taking the question and congratulations on the progress. I wanted to ask two questions; first, with regard to the LN-144 study; how do you feel enrollments been going? How do you feel the efficiency of manufacturing has been going using the existing technology?

Good morning, Joe. Thank you for the question. We have been enrolling this study, as expected as we had initially forecasted; obviously we would like to expand our manufacturing capacity and that's something that we have been working on. I provided guidance that we are looking at a number of additional lines of manufacturing and we're very confident that in 2017 we will have additional lines available for a broader clinical program. As I noticed, we are starting two new studies and then number of patients in this study is like people are going to increase. So we are preparing for sort of the longer term plan. So I'm confident in terms of what the future holds, we are in a much better place for 2017.

Now that's helpful, thank you. And I guess my next question is a little more -- I guess philosophical at this moment because a lot of it is behind the scenes but I wanted to get maybe a little more color with regard to your efforts for next-generation TILs as well as the potential for using any of the technology that's been developed by Karolinska?

Absolutely, thank you again. So we are very excited about the possible combination of cytokine cocktail that we are looking at -- with Karolinska Institute. I would like to turn this over to our Chief Scientific Officer, Mike Lotze to speak to the next-generation TILs. A significant amount of work is being done at Tampa. Mike, do you want to comment?

Sure, thank you for the question. There are two primary factors; both, number of cells and the quality of cells that we're able to expand from the tumors that we acquire. One strategy is to use of combinations of various cytokines which are available to us and we're actively pursuing those strategies. The other one is available antibodies, including ones that are important for transient expression on TILs such as 41-DB and Ops-40 [ph] and we are pursuing those strategies. We're -- also have a number of other strategies that we are currently evaluating that we haven't revealed yet. So we think both great from us.

Okay, great, thanks a lot guys.

Thank you. Our next question comes from the line of Josh Schimmer from Piper Jaffray. Your line is now open.

Hi, thanks for taking my question. Probably you can give us more color in terms of the manufacturing turnaround on a clarification basis and tumor biopsy to TIL delivery? And then maybe a snapshot of your manufacturing capacity -- the number of patients you're able to keep those in the next revolver, say a month either currently or projecting out a couple of years? And then last question is, as you think about addition of cytokines, is the strategy there to -- or just a tendency on IL, I'll do it -- talk to this -- or would it be in combination with biopsy effects?

Perfect. Thank you so much Josh, good morning. Excellent question, so let's go through them one by one. The timing from biopsy to delivery of TILs to the patient has been disclosed, but we have been in the process that Professor Rosenberg and NCI has developed and this process is approximately five to six weeks from the time of harvesting, time of infusion of cells back to the patient. Having said that, that's what we call sort of the older process and we have improved the process like cutting it shorter; we haven't disclosed exactly how long but it is approximately 70% the duration of what it was before, and there is still further progress being made in making the process even shorter than that. We have not disclosed our capacity in terms of how many patients a month and it is variable considering that process duration is around five to six weeks, it's not exactly one month, so it makes it a little more difficult. But we are very hopeful that we are putting in place of 2017, that the capacity would be orders of magnitude higher than what we have right now. In terms of additional cytokines, the purpose of going to different cocktails is not necessarily to reduce IL-2. IL-2 is being used in two different setting; we use it both ex-vivo to grow the cell, and as well as once the cells are infused back into the patient, they are receiving around six doses of IL-2. The reason for going to other cytokines is mostly the growth of various types of cells, it changes the distribution of cells, various types of cells such as CD4 and CD8 distribution changes and the number of cells that are growing under those conditions. Sometimes it's prior and sometimes it's slightly different. So the incentive is trying to change the distribution of cells, we know that poly-clonality is very important in this type of write-off therapy for solid tumors and we are definitely trying to explore that potential opportunity.

Great, thanks very much.

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

Good morning. I'd like to focus a little more on manufacturing and just maybe taken a higher level view is; so that you're making progress in both optimizing it and maybe capacity improvement and so forth; but I'd like to get a sense of when do you feel that manufacturing is going to be at a stage where you're ready for commercial or even maybe a Phase 3 study? Is this something that maybe in 2017 or you think there is more work that needs to be done to kind of get to that stage?

Good morning, Boris, thank you for the question. It's an interesting topic, we want to sort of expand this in just a little bit. I can answer it a couple of different ways; we are looking at manufacturing facilities that have capacity to go commercial, they are qualified for commercial manufacturing. The second aspect that I would like to answer is, do we think that we are ready for commercialization? We are far from it, we are still in the clinical stage but we are definitely preparing at the sites that are able to support Phase 3 and they are able to support commercialization.

Got you. Okay, that's helpful. Now in terms of clinical development, so it sounds like you're expanding indications of your partnership to explore in various indications and it makes a lot of sense to kind of understand how tools work there. I'm just curious when will we get a sense of what the actual leading indication is for clinical development?

Okay, so I can answer that also in two ways for us. One way is based on where the strength of the data is, obviously [indiscernible] and cervical is where we have actual clinical data, fairly extensively in studying of melanoma and some has been published in the setting of cervical. So we are fairly clear in terms of where we should pursue sort of our patent for regulatory The second layer of complexity would be health authorities in determining what is an unmet medical; and again, we are pursuing that as well, trying to negotiate the various health authorities and understanding what needs -- windows of opportunity in those indication.

I see and do you have any plans; I'm just curious to perhaps have an Analyst Day or something where you would outline under the path forward and maybe something we can model over the next few years and turn clinical studies timeline and things of that nature?

Yes, we have talked to analysts in terms of -- from a timing perspective, likely around late first quarter, is it good time for us to be able to provide some meaningful information to analysts and otherwise.

Perfect. Thanks very much for taking my question.

Thank you. Our next question comes from the line of Gbola Amusa from Chardan. Your line is now open.

Good morning. This is Pradeep Kumar [ph] in for Gbola. So kind of following on from the questions about manufacturing turnaround time; we were wondering really where the -- what is the sufficiently short manufacturing process time to really give enough confidence to kind of use that forward as a standardized method, later stage clinical trial. And how much is that going to vary between implications?

Let me make sure, I understood your first question. Were you asking what is shortest possible manufacturing time; is that what your question was?

More like what is the manufacturing time where you feel that's sufficiently short to kind of plug it in moving forward into later stage profiles.

Okay, understood, thank you. Let me answer your second question because it's a level easier. How much variance is there in the process for different indications; the process is fairly similar for various indications, it's just about identical. So as we go from melanoma to cervical to head/neck, the process itself is not changing which is a nice part about it. What is good enough which is a really good question; it's a really good commercial question; I think it has to without patient population. We obviously would like to have the shortest possible process at any given time but you are correct that there is a sufficient amount of effort that as a company we would like to spend on it before we say this is good enough, you proceed with it and then you proceed with shortening it further as part of lifecycle management. We're looking into what is the shortest possible in a certain amount of time, that's a moving piece of information. It has to do with when we start our pivotal program and where we are in that development landscape. As I commented a little bit earlier was -- we -- the process itself is a five to six week process that has Rosenberg's process, and we believe that we can fairly easily short live to around 70% of the duration of the existing process. Can we go shorter? Of course we are looking into it but I'm not making commitments that that might be our commercial or Phase 3 process.

And so kind of primary related novelty particularly to the Rosenberg experience; is there any kind of gained wisdom from the Rosenberg efforts in terms of patient selection, in terms of -- insights about which kind of patients are going to be more amenable to TIL therapy or not?

Yes, we have asked that question from Professor Rosenberg as a matter of fact. He has not identified very specific clear predictive biomarkers. Having said that, we absolutely are looking into it and we have undertaken associated programs in-house ourselves to see if we can identify biomarkers that would identify the patient that respond better. We also have other strategies to increase the response phase; so while there is nothing unknown at this time, we do have a number of sort of backup plans as to how we plan to increase our response rate. Now having said that, I think I would like to take that opportunity to sort of highlight the responses of around 56% what Rosenberg has reported before is for a number of different various type of patients including heavily pretreated patients. And so does the patient population -- this is a line of therapy that seems to be working regardless of the previous statement that the patient might have had. So the patients are heavily refractory and yet they continue responding to TIL therapy.

Okay, great. Thanks very much.

Thank you. Our next question comes from the line of Ed White from FBR and Company. Your line is now open.

Hi Maria, thanks for taking my question. So it's just -- the AstraZeneca PDL-1 in head and neck, is there any timing as to when that study could start?

Hi, good morning Ed, thank you for the question. We are working on some preclinical, Mike Lotze's team in Tampa is working on some of the precursor work, preliminary that we would like to have completed before we start the clinical study. We are foreseeing that that study likely would start in 2017 but we have -- we really would like to have the data, the preclinical data in hand before we start that program.

Okay. And looking forward just in combinations because we have the year in the Keytruda studies. How important going forward should we be thinking about TIL with combination therapies? Is that going to be a priority for the company going forward so that you can go into the earlier line settings instead of the third line metastatic melanoma etcetera?

It is definitely important as you might notice from our pipeline. We certainly have undertaken those combinations through investigators sponsored studies. As you are aware, we have a Keytruda combination study that is undergoing as part of our CRADA at NCI. We also had an EPI combination study that was recently completed at Moffitt and I know that they are looking into publishing that result soon. So we are looking and there is a novel [ph] study that we are watching very closely at Moffitt as well for TIL combination in melanoma setting. So we are watching that space very carefully to see whether those combination settings would be significantly better compared to kill alone at the therapy, absolutely important.

Thank you. And then just lastly, as far as your CMOs, you were using or going to use [indiscernible]. Is that still the case? Are you looking to have two CMOs going forward or how should we be thinking about your relationship with the CMOs?

Thank you. We are looking at multiple CMOs; as a matter of fact, both Lonza and Wushi [ph] domain engaged with Lion of course. We are expanding our collaboration with some and we are adding additional one's into the process as well.

Okay, great. Thank you very much.

Sure. Thank you for the questions.

Thank you. [Operator Instructions] Our next question comes from the line of Matt [ph] from Jefferies. Your line is now open.

Hi, this is Matthew hold on for Biren Amin, thanks for taking my questions. I have a couple more on one -- for Phase 2 study; I was wondering if you can tell us how many patients you have currently enrolled? And how many patients we should expect data for next year? And then lastly, how many patients have been enrolled and have had tumor samples for processing but have progressed and have -- as a result never received the TIL therapy? Thanks.

Hi, Matthew, good morning. We have not disclosed the number of patients and typically I don't disclose them, it's a live process and it changes every time we speak. So we have not disclosed how many patients we have enrolled. In terms of how many we represent; I think it has to do with the timing of the Congress that we would select to present at -- and how much of the data has been cleaned, entered into the database as is reliable for review. In terms of how many have been processed -- if I can ask our Chief Medical Officer to speak to this; we're not going to provide specific numbers but seriously want to provide an approximate estimate that might be helpful.

Yes, I mean the number that we've processed is -- I can't disclose an exact number but it's certainly into two digits.

And in terms of the patients who might have sort of progressed while at some point being sort of processed; do we have an estimate of what percent that might be?

It's hard to give that number but we still have quite a few patients that are actually in process. What we've seen in the literature which is -- as we know is probably going to be similar to what we're seeing, it's something on the order of about 25%. I mean that's what's been in our literature. Obviously, we're working pretty carefully with patient's selection to try to do the best minimum.

And I think as we shorten our process, this has a significant impact on whether the patients progressed through the process or not. The other sort of point to consider, I think Ed also asked this question; and is sending those combination, if that proves to be significantly better than single TIL therapy, that's something that we can offer to patients while they're waiting for their TILs to grow. And all of these are strategies that we are looking into as I've mentioned a few minutes ago.

Okay, thank you.

Thank you. And at this time I'm not showing any further questions. I would now like to turn the call back over to Maria Fardis for any closing remarks.

Great, thank you. I would like to thank you for joining us today for our first quarterly call, we plan to continue to utilize these quarterly calls, speak to inform about our progress. Finally, I look forward to meeting with many of you at 15 Maryland next week or at an upcoming Piper Jaffrey Healthcare Conference on November 30 in New York City. Thank you.

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.