U.S. Markets closed

Edited Transcript of CGEN.TA earnings conference call or presentation 5-Aug-19 12:30pm GMT

Q2 2019 Compugen Ltd Earnings Call

Tel Aviv Aug 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Compugen Ltd earnings conference call or presentation Monday, August 5, 2019 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Anat Cohen-Dayag

Compugen Ltd. - CEO, President & Director

* Ari Krashin

Compugen Ltd. - Chief Financial & Operating Officer

* Elana Holzman

Compugen Ltd. - Director of IR & Corporate Communications

* Henry Adewoye

Compugen Ltd. - Chief Medical Officer

================================================================================

Conference Call Participants

================================================================================

* Mark Alan Breidenbach

Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst

* Philippa Gardner

Jefferies LLC, Research Division - Equity Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for standing by. Welcome to Compugen's Second Quarter 2019 Results Conference Call. (Operator Instructions) 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, Compugen Ltd. - Director of IR & Corporate Communications [2]

--------------------------------------------------------------------------------

Thank you, operator, and 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 the forward-looking statement.

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 filed with Securities and Exchange Commission including the company's most recent annual report on Form 20-F filed on March 21, 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.

--------------------------------------------------------------------------------

Anat Cohen-Dayag, Compugen Ltd. - CEO, President & Director [3]

--------------------------------------------------------------------------------

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 I clinical 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 in 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 towards 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 and anti-TIGIT antibody progress towards an IND 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 this clinical program has been unique. We have relied solely on our internal computational discovery platform to uncover, to date, 3 new biological pathways including the known TIGIT pathway as important novel target for the development of immuno-oncology drug.

This target has 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 2 therapeutic antibodies candidates against our targets in the clinic. COM701 targeting PVRIG being developed internally and BAY 1905254 targeting ILDR2 being developed by our partner Bayer. Followed by COM902 targeting TIGIT and an innovative earlier-stage pipeline for continued development and expansion opportunities.

Importantly, we're not the only ones excited about these internally discovered targets and therapeutic programs as we also have established 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 phase of cancer immunotherapy.

I'd 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 our first-in-class drug.

Our preclinical work has established that this new PVRIG pathway is complementary to the TIGIT pathway and is part of the DNAM AXIS. And as such, they serve as an important new target for cancer immunotherapy.

It 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.

These led us to identify mechanistic-driven drug combination for Phase I, more advanced studies as well as design or a biomarker strategy for patient selection. Our drug combination and biomarker strategies are designed to achieve maximal clinical impact and success.

COM701's differentiated position in the crowded landscape of immuno-oncology has resonated well among the immuno-oncology community, based on which, we now have 10 leading centers in the U.S. 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 milestones and data as they become available. We will strive to be timely and transparent as the study advances.

Having our piping 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 expanded and strengthened our intellectual property position. On the last call, I provided an update on 2 U.S. composition of matter patents that covered 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 U.S. patent that covers the combination of COM701 with any anti-PD-1 antibody.

This new patent bolsters our IP for combination therapy and builds upon the previously 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 protections 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 advance towards the clinic.

Our COM902 preclinical data is promising. We have shown very high-affinity binding with (inaudible) that is comparable to or better than other clinical TIGIT antibodies.

Importantly, our preclinical data supports our assumption that PVRIG pathways is complementary to the TIGIT pathway. We have shown that parallel inhibition of PVRIG and TIGIT enhances tumor growth inhibition supporting our combination development paths.

Our clinical planning for COM902 is still in progress, and we intend 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 macroenvironment 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 I study for COM701 and the continued development of our COM902 as a differentiated asset 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 and 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 their continued support over the last 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, Compugen Ltd. - Chief Medical Officer [4]

--------------------------------------------------------------------------------

Thank you, Anat, and good afternoon and good morning to everyone.

I am pleased to provide you an update on our ongoing Phase I 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 in 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 2 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 sixth dose of Opdivo.

Starting with arm A, as planned, we completed in Q3 the enrollment of patients up to dose level 7 at the dosing schedule of COM701 administered every 3 weeks.

We initiated COM701 dosing -- Q3 weekly dosing schedules based on our preclinical data. The clinical data gathered during the course of the clinical trial led us to evaluate a Q4 weekly dosing schedule of COM701 monotherapy and in combination with nivolumab, which is approved with a Q4 weekly dosing schedule.

As such, we will enroll patients to allow for such evaluation.

The additional informations obtained were in the form on the safety, tolerability and preliminary anti-tumor activity of COM701 monotherapy and in combination with nivolumab in the patient population. Our expectation is that following the completion of the dose escalations with the Q4 weekly dosing schedule, we will enroll patients for the expansion cohorts using this schedule.

We do not anticipate any substantive changes to our timeline of conducting the COM701 monotherapy dose expansion cohort with a Q4 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 a trial in progress post the -- 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 profile.

Our next update on the clinical trial will be at a annual global meeting of the International Gynecology 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 biomarker-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 monotherapy and in combination with an anti-PD-1.

We will also employ retrospective biomarker analysis, which is confirmed will serve for patient selection at later stages of the trial. As a reminder, high PVRLG expression is important as the clinical activity of COM701 lies in inhibiting the interaction of PVRIG with PVRL2.

Blocking this interaction is assumed to be the underlying [pivotal] step, which leads to the activation of T-cells in the tumor microenvironment and the ultimate generation of an antitumor immune response to inhibit tumor growth.

Moving on. MB is a dual-combination study evaluating escalating doses of COM701 with a sixth 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're extremely proud of the progress we have 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 site 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 treatments with immunotherapies, and in particular, novel immunotherapies such as COM701. I'll now hand the call over to Ari.

--------------------------------------------------------------------------------

Ari Krashin, Compugen Ltd. - Chief Financial & Operating Officer [5]

--------------------------------------------------------------------------------

Thank you, Henry. Good morning, and good afternoon to everyone. Our financial results for the second quarter of 2019 released this morning reflect the [continued associated] with our Phase I study of COM701 as well as the effect 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 proceeds from our ATM facility during the quarter.

Our R&D expenses for the second quarter of 2019 decreased by almost 40% and totaled $4.9 million compared with $8 million in the comparable period of 2018. The decrease was primarily due to the decrease in preclinical activities related to COM902, most of which were done in 2018. And the cost reduction measures implemented in the first quarter of 2019 were offset by an increase in expenses associated with clinical related activities for the COM701 Phase I 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 was $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 I study for COM701 as well as advancing our other programs.

Following the recent shares sold through the ATM, we believe that with our current cash resources and 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 [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question is from Mark Breidenbach of Oppenheimer.

--------------------------------------------------------------------------------

Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [2]

--------------------------------------------------------------------------------

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, Compugen Ltd. - CEO, President & Director [3]

--------------------------------------------------------------------------------

So Mark, thank you for the question. And in general, the patients under the monotherapy, the ones that Henry [related] to under the 7 dose [that] cohorts are still under assessment. And as we promised on this call, we will provide relevant information as this becomes available. I think that you should just need to understand that not only these are under assessment, we are -- Henry updated about the Q4 weekly dosing schedule and the dual-combo dose escalation analysis but the enrollment is still ongoing.

So in the 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. And 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, which are mainly in our program, the biological rationale for this program is -- was picked based on scientific understanding, we were picking the indications, we were picking the biomarker strategy, the combination strategy. And I just want to ensure that while we understand the excitement of -- 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 put 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 to us.

--------------------------------------------------------------------------------

Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [4]

--------------------------------------------------------------------------------

Okay. And if I can 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 about in terms of COM902 plus COM701? Or would you expect us to more likely involve Bristol-Myers Squibb's anti-TIGIT antibody?

--------------------------------------------------------------------------------

Anat Cohen-Dayag, Compugen Ltd. - CEO, President & Director [5]

--------------------------------------------------------------------------------

So while the agreement with the BMS, obviously, is designed to allow for additional combinations and dose 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 that hypothesis that we very much believe in, based on the predictions that we have and the preclinical data. So this is the reason why we keep pushing COM902 into IND studies, and now IND is on track to be filed this year. And as we stated, we are also planning their clinical path for this program.

In terms of the combinations, it's a very good question. We are committed to test our hypothesis. So telling you at this stage, what exactly it 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 it.

--------------------------------------------------------------------------------

Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [6]

--------------------------------------------------------------------------------

Okay. And maybe one last one for Ari. 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?

--------------------------------------------------------------------------------

Ari Krashin, Compugen Ltd. - Chief Financial & Operating Officer [7]

--------------------------------------------------------------------------------

Mark, yes, definitely. I mean, first of all, the first half has the full effect of Q1 because the restructuring will need to [take] place at the end of the quarter. As we move forward, and we are transitioning more people than we are transitioning the operations, expenses will go down. And I believe and feel that next year, you'll see the regular run rate. I would also assume that Q2 almost reflects the run rate. We'll probably go down slightly next quarter as well.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

The next question is from Philippa Gardner of Jefferies.

--------------------------------------------------------------------------------

Philippa Gardner, Jefferies LLC, Research Division - Equity Analyst [9]

--------------------------------------------------------------------------------

A couple of questions if I could, please? Are you able to say in terms of the dosing cohort that you've looked at in the monotherapy arm with COM701? And now that you've started the combo. Are you able to say what dose cohort that relates to in the combo one and that you've now started? And then just in terms of some of your comments around sort of expectation, 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 an 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 cost that are running through your OpEx, and in particular, R&D are for the second quarter, please?

--------------------------------------------------------------------------------

Anat Cohen-Dayag, Compugen Ltd. - CEO, President & Director [10]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Henry Adewoye, Compugen Ltd. - Chief Medical Officer [11]

--------------------------------------------------------------------------------

Sure, I can. Thank you very much Philippa. So your first question relates to the dose level for the combo. We previously reported that we observed no toxicities at 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 related to whether we will see antitumor activity, and with COM701 monotherapy or in combination. While -- we discussed about the DNAM AXIS where there are 3 components, DNAM, PVRL2/PVRIG, PVR and TIGIT. We may see some preliminary antitumor activity and by that, as a clinician, antitumor activity [to make] includes not just complete responses, partial responses but also disease control rate, which includes stable disease. So we will not be surprised to see that. Expectation is that we'll be able to prevent or show information data that shows some evidence of that but based on the axis that we've elucidated, we are probably going to also see additional antitumor activity with the combination with PD-1, which is nivolumab in this case.

--------------------------------------------------------------------------------

Ari Krashin, Compugen Ltd. - Chief Financial & Operating Officer [12]

--------------------------------------------------------------------------------

Philippa, can you just repeat the last question you had, please?

--------------------------------------------------------------------------------

Philippa Gardner, Jefferies LLC, Research Division - Equity Analyst [13]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Henry Adewoye, Compugen Ltd. - Chief Medical Officer [14]

--------------------------------------------------------------------------------

Understood. I mean basically, as we stated in Q1, the kind of, I would call "onetime restructuring expenses" were roughly between $1 million to $2 million, not significant. So right now it's mostly [about] the transitioning, so it's not significant. I would say the run rate currently is about $25 million per year. This is why we feel comfortable today that we have -- to state that we have at least cash for the next 2 years.

--------------------------------------------------------------------------------

Philippa Gardner, Jefferies LLC, Research Division - Equity Analyst [15]

--------------------------------------------------------------------------------

Okay. And Henry, can I just come back to my original question. I guess, what I was really trying to ask is, I know you haven't disclosed the doses in any of the cohorts, but I was just trying to understand in the combo arm. What dosing cohort that relates to from the monotherapy arm? So did you start that at this, say, dose 1 like you did in the monotherapy arm? Or have you started that at a slightly higher dose than you did in the monotherapy?

--------------------------------------------------------------------------------

Henry Adewoye, Compugen Ltd. - Chief Medical Officer [16]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

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, Compugen Ltd. - CEO, President & Director [18]

--------------------------------------------------------------------------------

Thank you, operator. Q2 has been marked with continued execution and important progress across clinical and preclinical -- across our clinical and preclinical pipeline. Our Phase I 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 Q4 weekly dosing schedule, and also complete enrollment in the combination dose escalation arm both by year-end. We're also excited with our progress towards IND filing of COM701 on track for later this year and are enthusiastic to explore the clinical potential of our combination strategy. Our improved cash position has extended our cash runway through mid-2021. We will remain focused on effectively employing our resources to advance our short- and long-term objective 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 trends in order to be transparent to our current and potential investors. Have a great day. Thank you.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

Thank you. This concludes the Compugen Ltd. second quarter 2019 finance results conference call. Thank you for participation. You may go ahead and disconnect.