CytomX Therapeutics (NASDAQ:CTMX) Q4 2018 Earnings Call

0:00 Good afternoon and welcome to the Cytomix 2018 Full Year Financial Results 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 be given at that time. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. Please be aware that today's conference call is being recorded. I'd now like to turn the call over to Chris Keenan, Cytomix's Vice President of Investor Relations. You may begin.

0:29 Good afternoon, and thank you for joining us for our 2018 Full-Year Financial Results Conference Call. Here with me today is CytomX President, Chief Executive Officer and Chairman, Dr. Sean McCarthy, and Debonjon Ray, our Chief Financial Officer. Before we begin, I would like to remind you that we will be making forward-looking statements during the call. Because forward-looking statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict, and many of which are outside of our control. Important risks and uncertainties are set forth in our most recent public filings with the SEC at SEC.gov, including our Form 10-K filed today. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments, or otherwise.

1:18 A webcast of this call will be available on the Investor Relations page at Cytomix's website at Cytomix.com. I would now like to turn the call over to Sean.

1:29 Thanks, Chris, and good afternoon, everyone. I'm very pleased to be here with you today to review what has been a highly productive year for cytomics and also to outline what to look for in the year ahead. Over the past year, we've generated meaningful clinical proof-of-concept data for the ProBody platform across both of our lead wholly-owned programs as we've Presented at ASCO, ESMO, CITC, and also yesterday at our inaugural Research and Development Day held in New York. I refer you to the webcast from yesterday's event for a full update on our programs and pipeline. I would like to make a few brief comments here on our lead programs, CX072 and CX2009, on our PD1 probody, CX188, and also on our BMS Alliance.

2:20 PD-L1 ProBody Therapeutics, CX072, is active across a range of tumor types and has a potentially differentiated safety profile as monotherapy and, importantly, in combination with other agents such as ipilimumab. CX2009, our first-in-class CD166 ProBody drug conjugate, is generally well-tolerated and has demonstrated anti-tumor activity across multiple tumor types. In 2019, we will continue to explore the full potential of these innovative product candidates as we maintain our intense focus on discovery, development, and ultimate commercialization of a new generation of differentiated cancer therapeutics. Regarding CX2009, we're encouraged by the Phase I safety and efficacy data that we presented yesterday that show that this is an active drug candidate across several tumor types, with intriguing anti-cancer activity in heavily pretreated patients.

3:19 CD166 is a very novel target, and CX2009 has the potential to be a first-in-class targeted anti-cancer agent. Our next step for the program is to select the dose for further expansions into select tumor types, and additional work to this end is well underway. Regarding CX188, our PD1 probody, We recently decided to deprioritize this program, despite the fact the IMD was readily cleared by the FDA in Q4. We made this decision principally because of the ongoing success we're having with the anti-PDL1 probody CX072. We feel that capital allocation at this time to PD1, in addition to PDL1, is not the most efficient use of our resources, given the many other opportunities in our pipeline.

4:09 Now turning to our BMS alliance, This partnership was first entered into in 2014 and was expanded in 2017. In total, the Alliance provides BMS with access to up to 12 discovery targets. The lead program in the Alliance, the anti-CTLA-4 probody, BMS 986249, continues to progress through a Phase I-II clinical trial being run by BMS. In conjunction with our broad R&D update yesterday, we announced that BMS has deprioritized three collaboration targets. This reflects the natural ebb and flow of a long-term, multi-target, discovery-stage biotech-farmer partnership. The collaboration remains in full force and effect, and we look forward to continuing to make progress on existing collaboration programs and future targets that BMS may select.

5:01 Now with that, let me turn the call over to Dibhanjan for a review of financial results. I'll come back shortly after that for a look at the year ahead.

5:10 Thank you, Sean. I would like to review selected financial highlights for the year. We ended the year with cash, cash equivalent, and investments totaling $436.1 million compared to $374.1 million as of December 31, 2017. The increase is driven primarily by the $134.6 million we raised in our July follow-on offering, and the $21 million milestone payment we received from AbbVie related to the clearance of the CX2029 IND. These cash proceeds were partially offset by cash used to fund operations. Our strong balance sheet allows us to fund operations into 2021 assuming no new collaborations or financings.

5:57 Our cash guidance has not and does not include any material assumptions for milestone payments from the three BMS programs that Sean referred to. Research and development expenses were $103.9 million for the year compared to $92.3 million in 2017. This increase in research and development expenses was primarily attributable to additional costs related to our maturing pipeline, including personnel-related expenses. G&A expenses increased by $7.9 million for the year compared to the corresponding period in 2017 and was largely attributable to personnel-related expenses. With that, I will turn the call back over to Sean.

6:43 Thanks, Devajan. Whereas 2018 was in large part a year of platform proof of concept for cytomics, Throughout 2019, we anticipate seeing the utility and potential differentiation of our lead product candidates come into sharper focus as we continue to advance the CX072 and CX2009 clinical programs. We have much work to do and here are our key milestones for the year. For CX072, we anticipate additional updates on the monotherapy expansions, which will inform next steps on potentially advancing towards registrational studies in one or more specific indications. For the CX072 ipilimumab combination, we expect to initiate one or more expansion arms at a defined combination dose in an indication to be disclosed.

7:37 We also expect to present an update on our ongoing study of the combination of CX072 with the BRAF inhibitor vermirafenib. For the CX2009 program, as I mentioned earlier, Thank you very much. has publicly indicated that they anticipate providing an update on this program in 2019.

8:26 So we're excited about our continued progress with the platform and the pipeline. The emerging clinical data from our two lead programs support the utility of our technology and maintain us on the path to building a really great company. So with that, we'll now move to Q&A. Ladies and gentlemen, if you have a question at this time, please press the star and then the number one key on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. And to prevent any background noise, we ask that you please place your line on mute once your question has been stated. Our first question comes from the line of Ying Huang of Bank of America Merrill Lynch. Your line is now open. Hey, guys. This is Alec on for Ying. Thanks for taking our questions.

9:12 Two questions on CX2009. So given the canter of patient enrollment and the data for CX2009 you've seen to date, how quickly do you think you can come to a recommended dose for the expansion? I know you're sort of homing in on the 8 to 10 range. And then my second question relates to the tissue distribution. or frequency of CX2009 binding to cells outside of the tumor. How many of the treatment-related adverse events were due to nonspecific trafficking of the intact pro-body drug conjugate or binding to CD166 outside of the tumor? Thanks.

10:09 Yeah, thanks, Alec, for the questions. So we're not guiding on specific timing to getting to our expansion dose. We are making terrific progress there, and certainly these expansions are going to be initiated this year, but we're not ready to guide to specific timing. In terms of binding outside of the tumor, you know, it's very hard to say. The integrated pharmacology of CX2009 is illustrated in the data that we've presented. Antitumor activity, a generally well-tolerated safety profile with certain toxicities emerging, particularly at the higher doses, as you've seen, which, of course, is what you want to see with an anti-cancer agent. You push the dose until you get to see toxicity.

11:00 As we've described previously and yesterday, Many of the toxicities are anticipated based on DM4. There are other toxicities we need to understand in more detail, but it's very difficult, of course, at this point to ascribe any toxicity to whether it's target or payload. We just need to think about the integrated pharmacology and ultimately explore our expansion dose in a lot more detail in a lot more patients. Okay, and then one more question from me. Based on what you've seen in other DM4 studies, for the ocular toxicity, how effective would you say prophylaxis is in mitigating the tolerability issues there?

11:45 Yeah, we believe it can be very effective and is well-precedented and has been used in a number of other clinical studies. So we feel optimistic about the prospects for the prophylaxis program. Great, thank you. And our next question comes from the line of Boris Pieker of Cowen. Your line is now open.

12:11 Great. My first question is on 07-2 combo with Zelborap. I'm just curious, can you comment on the rationale for doing this as a combo instead of a triplet and the timeline when we may anticipate results? And lastly, what would you consider to be positive data for further development?

12:31 Yeah, hey Boris, thanks for the question. So, you know, our goal for the program is really unchanged from when we initiated it a couple of years ago in that it presents another effective opportunity to see how the background of the PD-L1 probody can lead to a differentiated overall safety and efficacy profile for the combination. Of course, we have are a growing and strengthening body of data with the ipilimumab combination, so with a checkpoint-checkpoint inhibitor. The vermirapinib-selvirap combination is asking a different question with a kinase inhibitor. We continue to enroll patients. As you know, we began enrolling this study ex-US, and that took some time to get going. We continue to enroll.

13:19 We are now enrolling patients here in the US, and we anticipate having an update on the program sometime this year. We haven't provided any specific guidance on exactly what success would look like. That will come when we present the data. In terms of the triplet, I think we've mentioned previously that it's a fair question given that standard of care has evolved particularly in the U.S., which is why the enrollment in the U.S. was challenging early on. But what we're trying to do here is show that we can capitalize on the benefits of full-dose femorafenib in combination with the PD-L1 probody. And if we can, that could potentially show a path forward for the doublet. That's been our goal from the outset, and that continues to be our goal.

14:10 And just the last part of my question in terms of efficacy to move this forward, any kind of a line in the sand that you could draw? Not right now. Great. Thank you very much for taking my questions. and our next question comes from the line of Raghu Ram Silvarju of HC Wainwright. Your line is now open.

14:32 Hi, guys. Thanks for taking my questions. This is Robert Burns on for ROM. So just three, if I may. I guess the first one would be a follow-up to what Boris was asking you. As we look at the melanoma space, we're starting to see these triplet combinations starting to move forward. So, you know, once you see the data for CX072, are you thinking about potentially adding on an additional agent to potentially make that type of combination more competitive in the landscape as we move forward. And then the second question I have relates to something that I saw on the 10K and how Amgen terminated two molecules in the EGFR project. I just wanted to know if that was the EGFR CD3 bispecific that was in the optimization.

15:17 If not or if so, how does this sort of – what does the timeline look for that?

15:24 and then I'll hold off for the last one.

15:26 Thanks.

15:28 So with regards to the first question on the triplet, we haven't provided any guidance that we would move into from the doublet to the triplet. I think we need to see how the doublet data comes out first and then take a look at the broader landscape at that time. But it's something that we'll look at. I didn't quite understand the Amgen question. Could you repeat that? I'm not aware of those developments on the Amgen side.

15:52 Yeah, so in the 10 cases in the fourth quarter of 2018, the Joint Steering Committee terminated work on two molecules in the Amgen EGFR project due to unacceptable test results. I just wanted to see if you could clarify that a little bit more.

16:07 Yeah, I can cover that, Robert. It's the Bonja. So as we've always said in the Amgen collaboration, one of the value propositions of working on this program with Amgen is they have Excuse me, lots of expertise in the T-cell bispecific space. So the right way to think about the collaboration is we've brought our pro-body technology, which potentially enables EGFR as a solid tumor T-cell bispecific target. That's exactly the sort of target that we feel like we can address with our pro-body technology. And Amgen brings forth lots of different T-cell bispecific technologies. So as we've said from the outset of this collaboration, there's a lot of lead selection that's ongoing in the collaboration, and that lead selection is essentially testing our probiotic technology with several different bispecific formats, and that's exactly what we're doing right now is we're leveraging our program or our technology against their bispecifics, and we're trying to find the best molecule.

17:07 So as part of that, we're testing lots of different molecules, and that's where we are in the process. They continue to be excited about the collaboration, and we're making good progress from a lead selection perspective.

17:20 Awesome. Yeah, I just wanted a little more clarification on that. That makes complete sense. And then I guess the last one is, you know, as you start, you know, working more with the expansion cohorts with CSO7-2 and you start initiating the IPI combo expansion cohorts, any guidance as to how we should be thinking about R&D expenditures in 2019 and 2021?

17:42 We haven't given any specific guidance on R&D expenditure. As you'll note, our R&D expenses went up this year, primarily related to the fact that now we're enrolling three clinical stage programs, or we did enroll three clinical stage programs in 2018 between 07-2009 and 2029. R&D expenditures will continue to increase. We haven't given any specific cash guidance, but for the fact of what I said earlier, which is we expect the cash and cash equivalents we have on our balance sheet to allow us to move the company into 2021 without any additional financings or new partnerships.

18:21 Awesome. Thanks for taking my question, guys. And our next question comes from the line of Mohit Bansal of Citi. Your line is now open.

18:33 Great, thanks for taking my question. Just trying to understand, so there was, in the CX209 trial, there was one toxicity which you characterized as a nervous system disorder. Can you please characterize that toxicity for us, help us with that? And then the second part is, so with CX209, it seems like a lot of these toxicities are probably payload related. but trying to understand if the therapy is targeted and then given that the mask and linker are working, what could be the critical reason that at high doses we are seeing toxicity here which could have been mitigated by masking of probody? Probably a basic question but I would love to understand that part, thank you.

19:29 Yeah, hey Mohit, thanks for the questions. With regards to the nervous system disorders, as you might imagine, that is peripheral neuropathy, and that's very much anticipated for the DM4 payload. So I hope that specific clarification helps. With regards to the masking and tox at higher doses, You know, I think as you appreciate, the dose escalation in this study really both surprised and impressed us in terms of the doses we've been able to get to, you know, up to this 9, 10 mg per kg range. And, you know, we're not entirely surprised to see a TOTS profile emerge at those doses where we're really pushing the envelope that, you may have elements in addition to what we would expect for DM4.

20:36 Again, think about the integrated pharmacology of this molecule. It's an antibody, so CD166 has a mask on it that then has the payload on it. And at these higher doses, it could be that there's some small amount of binding to target because masking is, at the end of the day, a dynamic process. It relates to the affinity of the mask for the antibody. So as we really push the envelope, is it possible there could be some low amount of binding to target in certain cases? I think it's a theoretical possibility. It's a difficult thing to tease apart, which is why we have to think about the integrated clinical pharmacology. But that's one thing to just think about.

21:18 Sorry. Thank you. And our next question comes from the line of Christopher Mirai of Nomura. Your line is now open.

21:29 Hello, this is Jackson Harvey. I'm for Christopher Murray. Thanks for taking my question. And thank you for clarifying the nervous system disorders. That's very helpful. With respect to that, I noticed that the peripheral neuropathy was apparent in kind of the mid-range of the dosing cohorts, but not in the highest dosing cohorts. Do you think this could be related to prior treatment with microtubule agents in the affected patients?

22:02 I think it's very difficult to know. I mean, the patient numbers here are obviously, on a dose-by-dose basis, relatively small, and the incidence of the TOPS In those particular cases is also relatively low. So I think it's a very difficult question to answer. I think we're going to have to, of course, learn more about the integrated tox profile of this molecule as we treat more patients. Thank you very much. Thank you very much.

23:10 Nothing. Actually, I'll ask you to hold that question until you see the full safety update and the AACR poster. That will present a more integrated update, but the principal toxicities have been reported in this presentation that we released yesterday in New York.

23:27 Got it. Thank you for taking my question. And our next question comes from the line of Joe Catanzaro of Piper Jaffray. Your line is now open.

23:39 Thanks, guys, for taking the question. I guess, Sean, you may have started to answer my first question. So at AACR, what additional data can we expect from 2009 that we didn't see yesterday?

23:52 Yes, as I said, it'll be a recap of the data that we presented yesterday, but with a deeper dive in particular on the safety profile, so with full safety tables and and more detailed information on patient demographics and all the usual in a more complete clinical presentation. Yesterday, obviously, was a high-level summary given the nature and format of the day.

24:17 Okay, got it. And then maybe my other question just asks you to maybe speculate a little. So I understand the 07-2 IPE expansion cohorts will initiate this year, right? So let's say you get the data there and it continues to suggest that that combination is much better tolerated. How do you envision maybe a registrational directed program looking like moving forward?

24:45 Thank you very much. 10 plus 3, 10 of the ProBody, 3 of IPI. We know from the data that Rachael presented yesterday that that is looking like a very active combination. It's like a very safe combination. We're not ruling out the possibility of registering on a single-arm study. But we are in the early days of really thinking that through. So is it possible or even likely that we would need to go to a randomized study?

25:32 I think that's probably fair to say, but we're not guiding formally in either direction just yet. Okay, got it. Thanks for taking the questions. And our next question comes from the line of Peter Lawson of SunTrust Robinson. Your line is now open.

25:56 Just on the toxicities around 2009, which ones concern you? Which ones do you think are more manageable? It seems that the ocular issues are manageable. I wonder if you could talk about the other toxicities and the severity and which ones you think are controllable.

26:17 Thank you. Yeah, great question. Hey, Peter. You know, again, small numbers, right, in this early study. And in terms of tox that we anticipated to see that we expected to need to manage at the higher doses, that, of course, is the ocular toxicity. Let me just make a few more comments on that. And Rachael touched on this yesterday in the R&D day. Going into this dose escalation, as we began to realize that we could dose escalate beyond 6 mg per kg, and as we kept going, we made a very affirmative decision in collaboration with our safety review committee to Dose Escalate initially without ocular prophylaxis so that we could get a clear sense of the overall profile of the drug from a safety and efficacy standpoint.

27:20 That was a very affirmative decision that we took early on in the program. And we took that decision in the full expectation that once we learned Thank you very much. and that we have a really good, I believe, a really good handle on moving forward hisocular toxicity. The others are, if you really think about it and you look at the safety table, it's still really early days in understanding what their incidence is, what their severity is, because the patient numbers are still small.

28:12 We need to learn more. So we're really quite focused on the oculotops at this point. We think we've got a handle on it. We're going to need to learn more about the integrated safety profile as we move forward. And there's much still to be learned for sure.

28:29 Thank you. And then on 2009, did we get further updates beyond ACR in 2019? Well, the

28:41 The principal update will be getting going on the expansion. We aim to disclose the indications that we're going into, the dose that we're going to those indications with, and what our objectives are of those expansions. That will become a lot clearer as the year goes on. As I said in my introductory remarks, Really for both of the lead programs, we're at a point in time right now where, as I said, we're making that transition from the platform proof of concept last year to 2019 where the development program supporting the product profiles is going to take more shape. And we'll have more to say about that as the year goes on. We're just not quite ready to do that just yet.

29:27 So hang in there. It's all coming.

29:31 And then just on the PD-1 program, the 118, what would make you return to that program? Is it more of a partnership program or how should we think about it?

29:42 I think that's probably right. Yeah, I think that's right. I mean, as I said, it's a funny thing actually because, you know, we've had several discussions with investors over the last year where we've been asked, you know, why are you doing both? And, you know, it looks like CX072 is working fine. We don't quite understand why you're doing CX188. I have to say, we were rather surprised by some of the feedback yesterday and really a little taken aback by some of the comments in the biotech press, which I think got the wrong end of the stick by a long margin. I could see a situation develop, as I said yesterday, where in a potential partnership, a partner may have interest in that molecule as well.

30:29 But for now, we're really thrilled with where we are with CX072. It's a couple years ahead in terms of its clinical program. It's performing just as we designed it to, and from a capital allocation standpoint, it just makes all the sense in the world to put PD-L1 on the shelf for the time being.

30:54 Gotcha. Thank you so much. I'm not showing any further questions at this time. I would now like to turn the call back to Sean McCarthy for closing remarks.

31:05 Great, thanks very much. And again, thanks to everybody for your time today and for those of you who were able to join us yesterday for our R&D event in New York. We did cover a lot of ground in that event, so if you haven't had a chance to go through all the data, I would encourage you to do so. We certainly feel that it gave a very broad-based, comprehensive, and integrated view of everything that we're doing as a company. We're really excited about our technology. We've come a long, long way. Thank you for participating in today's conference. Thank you for listening.