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Compugen Ltd. (CGEN) Q2 2019 Earnings Call Transcript

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Compugen Limited (NASDAQ: CGEN)
Q4 2017 Earnings Call
Aug. 31, 2017, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Compugen's Second Quarter 2019 Results Conference Call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available in the Investors section of Compugen's website, www.cgen.com. As a reminder, today's call is being recorded. I would now like to introduce Elana Holzman, Compugen's Director of Investor Relations and Corporate Communications. Please go ahead.

Elana Holzman -- Director, Investor Relations and Corporate Communications

Thank you, Operator. Thank you for joining us today. With me from Compugen are Dr. Anat Cohen-Dayag, President and CEO, Dr. Henry Adewoye, Chief Medical Officer, and Ari Krashin, CFO and COO. Before we begin, I would like to read the following regarding forward-looking statements. During the course of this conference call, the company may make projections and other forward-looking statements regarding future events or future business outlook, anticipated progress on Compugen's pipeline programs, and financing and accounting related matters, as well as statements regarding its corporate restructuring and anticipated reduction in expenses and cash savings.

We wish to caution you that such statements reflect only the company's current expectations and that actual events or results may differ materially. You are kindly referred to the risk factors and cautionary language contained in the documents the company files with the Securities and Exchange Commission, including the company's most recent annual report on Form 20-F, filed March 21st, 2019. The company undertakes no obligation to update projections or forward-looking statements in the future. I will now turn the call over to Anat.

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Anat Cohen-Dayag -- President and Chief Executive Officer

Thank you, Elana. Good morning and good afternoon everyone and welcome to our second quarter 2019 corporate and financial update. As Elana mentioned, today on the call I have with me Dr. Henry Adewoye, our Chief Medical Officer, who will provide updates on the clinical progress for our lead candidate COM701, currently undergoing Phase 1 critical study. We also have Ari Krashin, our CFO and COO, who will review our financial statements and position. Throughout the second quarter of 2019, we continued the strong execution of our clinical program for COM701. This includes the important milestone of first patient dosing and the dose escalation combination arm of our Phase I study with COM701 and Opdivo, which remains on track to complete enrollment this year.

Additionally, the COM701 monotherapy dose-escalation arm is progressing, and we look forward to rapidly advancing COM701 toward the monotherapy expansion cohort later this year, which will also evaluate our targeted biomarker-driven approach. We're also excited to have our second internally developed asset, COM902, an anti-TIGIT antibody, progress toward an R&D filing later this year. We've reached an important time in our company's development, having advanced the findings of our discovery platform into exciting differentiated clinical programs. Our path to these clinical programs has been unique. We have relied solely on our internal computational discovery platform to uncover to date three new biological pathways, including the known TIGIT pathway as important novel targets for the development of immune-oncology drugs.

These targets have been characterized with comprehensive preclinical validation demonstrating the power of our computational capabilities and our ability to translate these discoveries into clinically meaningful biological targets. We're now well-positioned with two therapeutic antibody candidate agents targeting the clinic, COM701 targeting TVRIG being developed internally and BAY1905254 targeting ILDR2 being developed by our partner Bayer followed by COM902 targeting TIGIT in an innovative earlier stage pipeline for continued development and expansion opportunity.

Importantly, we are not the only ones excited about these internally discovered targets and therapeutic programs, as we also have established a partnership with leading Pharma companies. These partnerships provide important external validation that our approach is powerful, valuable, and capable of providing truly novel targets with the potential to address significant challenges and unmet needs in the field of cancer immunotherapy.

I now like to provide a brief overview of COM701, our lead candidate, which is a clinical-stage anti-PVRIG monoclonal antibody. As far as we know, this is the only anti-PVRIG inhibitor currently in clinical testing, and this provides us with the first-mover advantage and a significant opportunity to deliver a first-class drug. Our preclinical work has established that this new PVRIG pathway is complementary to the TIGIT pathway and as part of the DNAM axis and as such may serve as an important new target for cancer immunotherapy. Is broadly expressed in both PD-L1 positive and negative tumors with potential clinical utility in many solid tumors, including endometrial, breast, ovarian, lung, and more.

I would like to highlight that our clinical program and overall development strategy for COM701 are science-driven and premised on our understanding of the PVRIG and TIGIT pathways and their possible intersection with the PD-1 pathway. This led us to identify a mechanistically driven drug combination for Phase 1 and more advanced studies as well as designed a robust biomarker strategy for patient selection. Our drug combination and biomarker strategies are designed to achieve maximum clinical influx and success. COM701 differentiated position in the crowded landscape of immuno-oncology has resonated well among the amino-oncology community based on which we now have 10 leading centers in the US participating in the trial. We are pleased with the progress we're making with our COM701 clinical program and look forward to providing relevant information on clinical license and data as they become available.

We will strive to be timely and transparent as the study advances. Having our pipeline originate from internally identified novel targets also affords significant advantages for our intellectual property position. Since being granted our original therapeutic use patent for COM701 in 2017, we have significantly extended and strengthened our intellectual property position. On the last call, I provided an update on two US composition of matter patents that cover COM701 and any anti-PVRIG antibody having complementarity-determining ingredients of COM701 that specifically binds PVRIG. These patents are providing us with exclusivity on COM701 for any therapeutic use in the United States.

Since then, we further strengthened our intellectual property position with an additional US patent that covers the combination of COM701 with any anti-PD-1 antibody. These new patents bolster our IP for combination therapy and based upon the previous granted patent that protects the combination of COM701 and COM902. With a strong internal IP team working closely with our scientists, we are pursuing additional patents in the United States, Europe, and in other jurisdictions intended to establish a broad and robust intellectual property portfolio covering both use and composition of matter protection to support the development and future commercialization of COM701, COM902, as well as earlier-stage candidates.

Turning now to COM902. We're excited about the potential of our anti-TIGIT program as we advanced toward the clinic. Our COM902 preclinical data is promising. We have shown very high-affinity binding with in vitro activity that is comparable to or better than the other clinical TIGIT antibodies. Importantly, our preclinical data supports our assumption that PVRIG pathway is complementary to the TIGIT pathway. We have shown the parallel inhibition of PVRIG and TIGIT enhances tumor growth inhibition supporting our combination development path. Our clinical planning for COM902 is still in progress, and we cared to share details about our upcoming plans as soon as they are available.

Together COM701 and COM902 have the potential to address an important biological axis that may be foundational in cancer immunotherapy and these assets demonstrate our ability to execute on our mission to develop new therapeutics for patients who are not responding to current immunotherapies or relapse following immunotherapy treatment. This mission also drives our earlier programs, which are largely focused on addressing immunosuppressive cells of the tumor microenvironment with a particular focus on immune cells of the suppressive myeloid lineage. With an improved cash position which Ari will elaborate on further in his prepared remarks, we now have sufficient cash resources to fund our operations through mid-2021. Our available capital will allow us to execute on our short-term value drivers, the Phase 1 study for COM701, and the continued development of our COM902 as a differentiated axis designed to maximize the clinical potential of COM701.

This capital will also allow us for the continued long-term investment in our earlier stage pipeline programs in computational discovery platforms. Together these short and long-term drivers will ensure our future growth.

Before I turn the call over to Henry, I would like to thank Dr. Arie Ovadia and Professor Yair Aharonowitz as they retire as members of our board for the continued support over the past decade and invaluable contributions to myself and the management team as we transform Compugen into a drug development company. I would also like to take this opportunity to welcome Eran Perry, who has more than 20 years of healthcare experience, as a new board member. We look forward to the support and guidance Eran will provide with his diverse experiences in healthcare management and finance. With that, I would now like to turn the call over to Henry for a detailed update on our clinical progress with COM701. Henry?

Henry Adewoye -- Chief Medical Officer

Thank you, Anat and good afternoon and good morning to everyone. I'm pleased to provide an update on our ongoing Phase 1 study, evaluating the safety, tolerability, PK/PD, and clinical activity of COM701 in patients with advanced solid tumors. On the last call, we provided an update that we have 10 active sites for the trial, all leading centers with extensive experience in oncology and immuno-oncology trials. As we previously disclosed, there's a very high level of interest and engagement by the investigators and clinical trial sites. This has enabled us to meet our enrollment goals as the study progresses and support our future enrollment targets. As a reminder, we currently have two trial arms enrolling patients. Arm A, the monotherapy dose-escalation of COM701; and Arm B, the dual combination with escalating doses of COM701 and a fixed dose of Opdivo.

Starting with Arm A, as planned, we completed in Q3 the enrollment of patients up to dose level 7 and the dosing schedule of COM701 administered every three weeks. We initiated COM701 dosing at Q 3 weekly dosing schedule based on our preclinical data. The clinical data gathered during the course of the clinical trial let us to evaluate a Q 4 weekly dosing schedule of COM701 monotherapy and in combination with nivolumab which is approved with a Q 4 weekly dosing schedule. As such, we will enroll patients to allow for such evaluation. The additional information obtained was in the form of the safety, tolerability, and preliminary antitumor activity of COM701 monotherapy and in combination with the nivolumab in the patient population.

Our expectation is that following the completion of the dose exclamation with the Q 4 weekly dosing schedule, we will enroll patients for the expansion cohorts using the schedule. We do not anticipate any substantive changes to our timeline of conducting the COM701 monotherapy dose-expansion cohort with a Q 4 weekly dosing schedule. We project that we will initiate the enrollment into this expansion cohort before the end of this year. In June, we presented at trial in progress poster at the ASCO annual meeting, and we're excited to share that we completed the sixth dose level in the monotherapy dose-escalation cohort. Importantly, they have no reports of dose-limiting toxicities in any of the cohorts tested to date, suggesting that COM701 has an acceptable safety and tolerability.

Our next updates on the clinical trial will be at the annual global meeting of the International Gynecologic Cancer Society scheduled to take place in Brazil in late September this year. In the COM701 monotherapy cohort expansion, we will enroll up to 20 patients with advanced non-small cell lung, ovarian, breast, and endometrial cancer and who have progressed on standard of care treatment. The cohort expansion utilizes a value marker driven strategy to select tumor types based on our preclinical data that demonstrated high PVRL2 expression, and we believe this strategy provides a targeted approach that enables us to treat the patient population most likely to benefit from COM701 immunotherapy and in combination with then anti-PD-1.

We will also employ retrospective biomarker analysis, which if confirmed, will serve for patient selection at later stages of the trial. As a reminder, high PVRIG expression is important as the clinical activity of COM701 lies in inhibiting the interaction of PVRIG with PVRL2. Bolstering this interaction is assumed to be the underlying molecular step, which leads to the activation of T cells in the tumor microenvironment and the ultimate generation of an antitumor immunoresponse to inhibit tumor growth.

Moving on, Arm B is our dual combination study evaluating escalating doses of COM701 with a fixed dose of Opdivo. In May, we announced an important milestone of first patient dosed, and enrollment is continuing as planned and expected to be completed by the end of this year. We are extremely of the progress we've made. We have demonstrated excellent on-track execution of our clinical program. As always, we remain grateful to the patients and their families and the investigators and the clinical trial side personnel who have been important to the progress of our trials and are deeply committed to advancing our programs to expand the patient population who will benefit from treatment with immunotherapy and in particular Novo immunotherapies such as COM701. I'll now hand the call over to Ari.

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

Thank you, Henry. Good morning and good afternoon to everyone. Our financial results for the second quarter of 2019 release this morning reflect the continued expenses associated with our Phase 1 study of COM701 as well as the asset of the restructuring process we underwent at the end of the first quarter. The reduction in expenses will continue over the course of 2019 with the full effect of the savings expected to be reflected in 2020. As of June 30, 2019, we had approximately $37 million in cash and cash related accounts compared with approximately $38 million at the end of the first quarter of 2019. The slight reduction in cash balances is attributed to the reduction of expenses as well as the process from our ATM facility during the quarter.

Our R&D expenses for the second quarter of 2019 decreased by almost 40%, in total $4.9 million compared with $8 million in the comparable period of 2018. The decrease was primarily due to the decrease in preclinical activity related to COM902, most of which was done in 2019 and the cost reduction measures implemented in the first quarter of 2019, offset by an increase in expenses associated with clinical related activity of COM701 Phase 1 trial as well as expenses associated with the preparation of the IND filing of COM902 planned for later this year. Net loss for the second quarter of 2019 $6 million or $0.10 per basic and diluted share compared to a net loss of $10.2 million or $0.19 per basic and diluted share for the second quarter of 2018.

As we mentioned in the past, we are committed to ensuring the progress of our ongoing Phase 1 study for COM701 as well as advancing our other programs. All of the recent shares sold through the ATM we believe with our current cash resources in the lower level of expenses, we have extended our cash run rate to mid-2021. Therefore, we decided to cancel the ATM program. Thank you, and with that, we will now open the call for questions.

Questions and Answers:

Operator

Thank you. They just and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press *1. If you wish to decline from the polling process, please press *2. If you're using speaker equipment, kindly lift the headset before pressing the numbers. Please stand by while we poll for your questions. The first question is from Mark Breidenbach of Oppenheimer; please go ahead.

Mark Breidenbach -- Oppenheimer & Company -- Analyst

Hey guys, thanks for taking the question and congrats on the progress. Just wondering if there's been any internal decision on your part as to when and how to present the initial results from Arm A and Arm B from the ongoing trial, is this something we could see data from by the end of the year or is 2020 more realistic in terms of your expectations?

Anat Cohen-Dayag -- President and Chief Executive Officer

So, Mark, thank you for the question, and in general, the patients under the monotherapy, the ones that Henry related to under the seven dose cohorts are still under assessment, and as we promised on this call, we will provide relevant information as it becomes available. I think that you should just need to understand that not only these are under assessment, Henry updated about the Q 4 weekly dosing schedule in the dual combo dose-escalation analysis is -- not only the analysis but the enrollment is still ongoing. So, in general, we will take care to present data, but we need to feel comfortable that we have the data that is needed to be presented. I also want to put things in perspective just in terms of the dose-escalation stages.

I understand that there is an excitement to see data, but I just want to ensure that people understand that the data for the monotherapy and the dual combo dose escalations are data for safety and tolerability, and while we will not hold data and we will present data it is important to state that the biological -- mainly in our program, the biological rationale for this program was based on scientific understanding, we were picking the indications, we were picking biomarker strategy, the combination strategy and I just want to ensure that while we understand the excitement to see data from this trial, this is a completely novel program. We're excited as well, this is a first in class, no one was targeting this target in advance, but I just want to keep things in perspective, this is safety and tolerability data, and we will take care to present as soon as we can, and data is available as well.

Mark Breidenbach -- Oppenheimer & Company -- Analyst

Okay, and the second question, really focusing on COM902. I'm curious given that this is moving toward the clinic it sounds like, what are your expectations regarding the first anti-TIGIT and PVRIG combination that will be tested in the clinic? Should we really be thinking that in terms of COM902 plus COM701 or would you expect this will likely involve Bristol-Myers Squibb's anti-TIGIT antibody?

Anat Cohen-Dayag -- President and Chief Executive Officer

So, while the agreement with BMS obviously is designed to allow for additional combinations and those that we discuss in the public, we obviously have our own TIGIT antibody, it is important for us to have the tools to be able to prove the hypothesis that we very much believe based on the predictions that we have and the preclinical data. So, this is the reason, but we keep pushing COM902 into R&D studies, and now R&D is on track to be fine this year and as we stated we are also planning the clinical path for this program. In terms of the combination, it's a very good question. We are committed to test our hypothesis so telling you at this stage what exactly will be I cannot because we are formulating our planning forward and obviously, we still need to do the monotherapy dose escalation with our own COM902, but we will share our thinking around this.

Mark Breidenbach -- Oppenheimer & Company -- Analyst

Okay, and maybe one last one for Ari. I just wanted to make sure since it sounds like the full effects of the cost reduction measures haven't come into play yet, is it reasonable to expect opex numbers will continue to fall in the second half of 2019. Thanks, thanks for taking the questions.

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

Hey Mark, yes, definitely. I mean, first of all, the first half has the full effect of Q1 because a restructuring only took place at the end of the quarter. As we move forward, and we're provisioning more people than with provisions operations, I expect it will go down, and I believe and assume that next year you'll see the regular run rate. I would also assume that Q2 almost reflects the run rate, it'll probably go down slightly next quarter as well.

Mark Breidenbach -- Oppenheimer & Company -- Analyst

Okay, thanks for that clarity and thanks again for taking the questions.

Operator

The next question is from Philippa Gardner of Jefferies; please go ahead.

Philippa Gardner -- Jefferies -- Analyst

Oh, hi there, couple of questions if I could please. Are you able to say, in terms of the dosing cohorts that you've looked at in the monotherapy arm with COM701 and now that you started the combo, are you able to say what dose cohort that relates to in the combo arm that you've now started? And then, just in terms of some your comments around sort of expectations, you're looking at some efficacy measures, but do you think it's fair to say that you're expecting, in terms of sort of antitumor activity that we're more likely to see that in the combo part of the trial rather than perhaps in the monotherapy arm of the trial? And then my final question, just on R&D spend, can you just give us an idea of what the magnitude of the restructuring costs that are running through your opex and in particular R&D for the second quarter, please? Thank you.

Anat Cohen-Dayag -- President and Chief Executive Officer

Henry, would you like to take the first and maybe even the second question?

Henry Adewoye -- Chief Medical Officer

Sure, I can answer, thank you very much. So, your first question relates to the dose levels for the combo? We previously reported that we observed no toxicities dose level 1 for the combo. We haven't disclosed the dose for COM701, but we did not observe any DLTs, and I'll just leave it there. Now, the second question you asked relates to whether we will see antitumor activity I would consider monotherapy or in combination. While -- you know we just talked about the DNAM axis where there are three components, DNAM, PVRL2, PVRIG, PVR, and TIGIT; we may see some preliminary antitumor activity and by that, as a clinician, as a tumor activity to me includes not just complete responses, special responses, but also disease control rate which includes stabilities. So, we would not be surprised to see that. Our expectation is that will be able to present or show information or data that shows some evidence of that but based on the axis that was used for data; we probably are going to also see additional antitumor activity in combination with a PD-1 which is nivolumab in this case.

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

I'm sorry, could you just repeat the last question you had, please?

Philippa Gardner -- Jefferies -- Analyst

Yeah, I was just trying to understand I guess what the magnitude of any restructuring costs that they were running through the second quarter. So, guess I'm just trying to figure out I guess what your underlying R&D spend was.

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

Understood. I mean basically, as we stated in Q1, kind of I would call it "one-time restructuring expenses" we're roughly between $1 million-$2 million of significance. So, right now it's mostly about provisioning, so that significant. I would say the run rate currently has about $25 million per year, and this is why we feel comfortable today that we have the status we have at least cash for the next two years.

Philippa Gardner -- Jefferies -- Analyst

Okay, thank you, and Henry, cannot just come back to my original question? I guess what I was really trying to ask is I know you haven't the doses in any of the cohorts, but I was just trying to understand in the combo arm what dosing cohort that relates to the monotherapy arm. So, did you start that say at cohort one like you did in the monotherapy arm or have you started that of a slightly higher dose than you did in the monotherapy?

Henry Adewoye -- Chief Medical Officer

We started that a slightly higher dose than the monotherapy COM701.

Philippa Gardner -- Jefferies -- Analyst

Perfect, thank you.

Operator

This concludes our Q&A session. I would now like to turn the call back to Compugen's President and CEO. Dr. Cohen-Dayag, would you like to make your concluding statement?

Anat Cohen-Dayag -- President and Chief Executive Officer

Thank you, operator. Q2 has been marked with continued execution and important progress across clinical and preclinical pipelines. Our Phase 1 study for COM701 continues to advance with patient enrollment in both the monotherapy and combination dose-escalation arms progressing as planned. We are ready to begin enrollment in the monotherapy expansion cohort following the completion of the Q 4 weekly dosing schedule and also complete enrollment in the combination dose-escalation arm, both by year-end. We are also excited with our progress toward IND filing of COM701 on tractor later this year and are enthusiastic to explore the clinical potential of our combination strategy.

Our improved cash position has extended hour cash run rate through mid-2021. We will remain focused on effectively employing our resources to advance our short and long-term objectives to ensure our future growth. Thank you all, again, for joining us today. We look forward to providing timely updates as we continue our progress on all these fronts in order to be transparent to our current and potential investors. Have a great day. Thank you.

Operator

Thank you, this concludes the Compugen Ltd. second quarter 2019 financial results conference call. Thank you for your participation; you may go ahead and disconnect.

Duration: 34 minutes

Call participants:

Elana Holzman -- Director, Investor Relations and Corporate Communications

Anat Cohen-Dayag -- President and Chief Executive Officer

Henry Adewoye -- Chief Medical Officer

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

Mark Breidenbach -- Oppenheimer & Company -- Analyst

Philippa Gardner -- Jefferies -- Analyst

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