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Edited Transcript of JNCE.O earnings conference call or presentation 7-Aug-19 12:00pm GMT

Q2 2019 Jounce Therapeutics Inc Earnings Call

CAMBRIDGE Sep 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Jounce Therapeutics Inc earnings conference call or presentation Wednesday, August 7, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Elizabeth G. Tréhu

Jounce Therapeutics, Inc. - Chief Medical Officer

* Kimberlee Cobleigh Drapkin

Jounce Therapeutics, Inc. - CFO & Treasurer

* Komal Joshi

Jounce Therapeutics, Inc. - Head of IR & Strategic Finance

* Richard Murray

Jounce Therapeutics, Inc. - President, CEO & Director

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Conference Call Participants

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* Debjit D. Chattopadhyay

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* James Scott

JP Morgan Chase & Co, Research Division - Analyst

* James William Birchenough

Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst

* Michael Eric Ulz

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Steven James Seedhouse

Raymond James & Associates, Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to Jounce Therapeutics Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded at the company's request. I will now turn the call over to your host, Komal Joshi with Jounce Therapeutics. Please go ahead.

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Komal Joshi, Jounce Therapeutics, Inc. - Head of IR & Strategic Finance [2]

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Thank you, operator. Good morning, and thank you for joining the Jounce Therapeutics Second Quarter 2019 Financial Results Conference Call. This morning, we issued a press release, which outlines the topics that we plan to discuss today. The release is available in the Investors & Media section of our website at www.jouncetx.com.

Speaking on today's call will be our CEO and President, Dr. Rich Murray, who will provide an update on our recent pipeline progress, a corporate update and review key milestones for 2019; followed by our CMO, Dr. Beth Tréhu, who will provide an update on our clinical and preclinical development activities; lastly, our CFO, Kim Drapkin, will review our second quarter financial results. We will then open the call for your questions.

Before we begin, I would like to remind everyone that today's discussion will include statements about our future expectations, plans and prospects that constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including the risk factors discussed in our SEC filings. In addition, any forward-looking statements represent our views only as of today, August 7, 2019, and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change.

With that, I will now turn the call over to Rich.

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Richard Murray, Jounce Therapeutics, Inc. - President, CEO & Director [3]

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Thanks, Komal. Good morning, everyone. 2019 is shaping up to be a very productive and successful year for Jounce. As we head into the second half of the year, we've made significant progress against our corporate goals. As a reminder, our goals for 2019 include moving 3 immunotherapies into the clinic, presenting vopratelimab or vopra PFS and OS data, initiating new Phase II studies with vopra, establishing safety and recommended Phase II dose for JTX-4014, filing the IND initiating Phase I for JTX-8064 and advancing our next development candidate into IND-enabling studies.

On vopra, we presented exciting PFS and OS data from ICONIC at this year's AACR conference and initiated the Phase II EMERGE study. On JTX-8064, while we were tracking to meet the 2019 program goal, we made the strategic decision to exclusively license the program to Celgene, which we view as a successful outcome.

Turning to JTX-4014, our PD-1 inhibitor, I'm pleased to announce today that we've completed enrollment in the Phase I trial and determined the recommended Phase II dose. We plan to present data from the JTX-4014 Phase I study in the second half of this year.

Additionally, we remain on track to advance our next discovery program into IND-enabling studies. Our broad and wholly owned discovery pipeline includes multiple programs targeting T regulatory cells, macrophages and stromal cells. Although we've made tremendous progress in executing against our goals, we still have a lot to do, to address the growing unmet needs of cancer patients.

Before turning the call over to Beth to go into more detail on our program, I'd like to touch on our corporate strategy. Since joining Jounce over 5 years ago, together with the management team, I've been focused on building a company that has the ability and resources to develop novel IO targets and bring these therapies to the right patients.

Given the ever-changing landscape and complexity of IO drug development, we focused on creating a company that can support both discovery and development. On the heels of the renegotiation of the Celgene agreement, I believe we are in a stronger position than ever to move our wholly owned pipeline forward.

I'll now take a moment to summarize our recent Celgene renegotiation. In July 2019, Celgene exclusively licensed the worldwide rights to JTX-8064, our highly selective, potential first-in-class antibody that targets the LILRB2 receptor on macrophages. I'm very proud of our team as this speaks to the work that we've done to leverage our translational science platform to efficiently take JTX-8064 from target discovery to clinical candidate.

At the same time, we also entered into a mutual agreement to terminate our broader strategic collaboration with Celgene, which was signed in 2016. We now have the full worldwide rights to vopra, JTX-4014 and our entire discovery pipeline, resulting in a robust pipeline that includes the targets previously within the Celgene collaboration pool, plus our tumor stromal cell programs, which have always been wholly owned by Jounce.

The productive 3-year relationship with Celgene was very beneficial, helping us to build out our broad platform, and we are very pleased with this outcome. Also during the time, our team made great progress and advanced 3 programs into development, while continuing to build a broad pipeline of potential next-generation IO therapies.

Let me step back a moment and highlight why we believe the use of our translational science platform is critical to the advancement of novel immunotherapies.

In discovery, we interrogate the tumor microenvironment to understand and identify IO targets. Our discovery methods are sustainable, and we plan to continually to apply this approach to our target selection process. The exclusive license of JTX-8064 to Celgene is an important example of this technology at work and a validation of our approach.

Beyond discovery, our platform enables reverse translational to interrogate the characteristics of responding patients in our clinical studies. This has led to the key scientific findings underpinning the next stages of clinical development of our lead program, vopra. With our experienced team, validated platform and strong balance sheet, we continue to advance both our ongoing clinical and discovery programs and remain focused on understanding the underlying mechanistic science of our immunotherapies and the characteristics of responding patients.

With many exciting developments on the horizon, we believe Jounce is well positioned for significant value generation going forward. Beth?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [4]

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Thanks, Rich. I want to take a moment to touch on some of the recent highlights of our pipeline. We are particularly pleased with the progress we have made with vopra. Most notably, as Rich mentioned, in mid-June, we announced the initiation of our Phase II EMERGE study of vopra in combination with ipilimumab or ipi in PD-1 experienced patients with non-small-cell lung cancer or bladder cancer.

These patient populations represent a rapidly growing area of unmet need as PD-1 inhibitors move into earlier lines of therapy with few options and no established standard of care for patients who progress after PD-1 or PD-L1 inhibitor. Although PD-1 inhibitors have made great strides, unfortunately, there are still more patients who do not respond to therapy than those who do. As the primary activity of PD-1 inhibitors impact CD8 cells, we believe that focusing on the critical role of CD4 cells may help address this unmet need.

The Phase II EMERGE clinical trial of vopra and ipi builds upon the original science from our founders as well as the reverse translational subset analysis from patients who benefited in our ICONIC trial compared to those who did not. The EMERGE study also includes new dosing schedules and a novel combination sequence based on our understanding of the kinetics between ipi, the emergence of ICOS hi CD4 T cells and vopra. We are pleased to have begun enrollment in this study.

As a reminder, the Phase II EMERGE clinical trial is an open-label, multicenter study to evaluate the efficacy of vopra in combination with ipi. In the initial stage, we expect to enroll approximately 40 patients with non-small-cell lung cancer and approximately 40 patients with bladder cancer. The primary study end point is overall response rate and secondary end points include safety, duration of response, progression-free survival and overall survival. Additional important assessments will include close monitoring of ICOS hi CD4 T cell emergence and a range of other biomarkers, including exploratory assessment of potential predictive biomarkers. We expect to report preliminary efficacy and biomarker relationships to clinical outcomes for up to 80 patients in 2020.

Beyond the EMERGE trial, we are also in the planning stages of additional Phase II studies of vopra. As a reminder, in April, we presented exciting new data from the Phase I/II ICONIC trial of vopra at the AACR Annual Meeting, further establishing the importance of the vopra-associated ICOS hi CD4 T cell biomarker in defining patients with the greatest clinical benefit.

Specifically, we observed improved progression-free survival and overall survival in patients with the emergence of ICOS high CD4 T cells versus those without them. As we previously reported, the emergence of this population of cells was due to vopra and not to PD-1 inhibitors. Based on these reverse translational findings, strategies to optimize emergence and expansion of these cells have become a cornerstone of the vopra development program.

As Rich announced, we are pleased to have completed enrollment in the Phase I clinical trial of JTX-4014, our PD-1 inhibitor, and to have determined the recommended Phase II dose. We plan to report data from this study in the second half of this year.

Beyond these clinical programs, we also continue to advance and build out our discovery pipeline of novel IO targets, including T regulatory cells, macrophages and stromal cells. True to our goal of developing the right immunotherapies for the right patients, we plan to incorporate potential predictive biomarkers at an early stage in all of our discovery programs.

We expect to announce a new development candidate and move it into IND-enabling studies later this year. We are pleased with the progress we have made to date across our entire pipeline. We continue to focus on the underlying mechanistic science of our immunotherapies as we work towards bringing meaningful and long-lasting benefits to cancer patients.

Now I would like to turn the call over to Kim for a discussion of our Q2 financial results. Kim?

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Kimberlee Cobleigh Drapkin, Jounce Therapeutics, Inc. - CFO & Treasurer [5]

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Thanks, Beth, and good morning, everyone. As we reported in this morning's press release, cash, cash equivalents and investments as of June 30, 2019 totaled $152 million compared to $195.9 million as of December 31, 2018. The decrease was primarily due to operating costs incurred during the period. Subsequent to the quarter end, we received $50 million in July 2019, pursuant to our new license agreement with Celgene.

Turning to the P&L. Our collaboration revenue was $17.4 million for the second quarter of 2019 compared to $19.4 million for the same period in 2018. Recall that collaboration revenue currently noncash reflects the recognition of the Celgene upfront payment received in July 2016.

In connection with the termination of the broader Celgene alliance announced in July 2019, we expect that the remaining deferred revenue relating to our original strategic collaboration with Celgene will be fully recognized in the third quarter of 2019.

During the second quarter of 2019, we incurred $18.1 million in research and development expenses compared to $18.5 million for the same period in 2018. The decrease in expenses was due to lower external R&D costs, partially offset by an increase in employee compensation costs.

General and administrative expenses were $7.3 million for the second quarter of 2019 compared to $6.5 million for the same period in 2018. The increase in G&A expenses was the result of increased employee compensation costs, including higher stock-based compensation expense and costs to support our operations.

Net loss for the second quarter of 2019 was $7 million or a net loss per basic and diluted share of $0.21 as compared to a net loss of $4.7 million for the same period in 2018 or a net loss per basic and diluted share of $0.14. This increase was driven by lower noncash collaboration revenue.

We reiterate our updated revenue guidance and expect to record $50 million in cash revenue in 2019 related to the exclusive license of JTX-8064 and approximately $98 million in noncash revenue in 2019, representing the remaining recognition of the Celgene upfront payment received in July 2016.

Based on our operating and development plans, we continue to expect gross cash burn on operating expenses and capital expenditures for the full year 2019 to be approximately $80 million to $95 million. Our strong balance sheet allows us the flexibility to drive our innovative immunotherapy pipeline, plus efficiently execute against our strategic plans and goals. We are focused on executing our next Phase II studies of vopra and continue to advance the rest of our pipeline.

With that, we would now like to open the call for your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Debjit Chattopadhyay with H.C. Wainwright.

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Debjit D. Chattopadhyay, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [2]

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So I've got a couple. So since you have the recommended Phase II dose for JTX-4014, do you have a sense of how activity is stacking up versus the other PD-1s and 4014, so those serve as the best combination partner for vopra?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [3]

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Debjit, this is Beth. So we've always stated that our primary goal in developing JTX-4014 is to be able to use it in combination with other drugs in our pipeline. And we have mentioned that we plan to share the data from the Phase I study in the second half of this year.

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Debjit D. Chattopadhyay, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [4]

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So the next combination with vopra is 4014, and you don't really have to go to any other anti-PD-1s, that's what I should read into it?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [5]

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No. We haven't stated what the next combination is. We're currently in the planning stages of additional Phase II studies, and we'll share more information as time progresses.

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Debjit D. Chattopadhyay, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [6]

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Great. And then one last one. So in terms of the EMERGE study, what does the internal hurdle after the first bolus of 80 patients to the full 226 patient recruitment that's up on ClinicalTrials.gov right now? And could you just remind us on the rationale for choosing non-small-cell and urothelial as the first 2 indications?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [7]

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Sure. So we have an interim analysis built into the protocol and the initial number of patients that we've announced are to get to that point. And we haven't shared the details of that at this time.

Regarding the choice of the tumor types, so we put a lot of thought into this obviously. What we wanted was areas where there was a significant unmet need in the PD-1 experience space, but where we had reason to believe that ipi and vopra would make a difference. And so for non-small-cell lung cancer, if you recall, in the ICONIC study, we actually had patients who had benefit who were PD-1 experience non-small-cell lung cancers, who also had emergence of the ICOS hi CD4 T cells. So -- and that was in a combination with nivolumab. So we have reason to believe that a new IO combination in those patients is something reasonable to explore.

And then also in non-small-cell lung cancer because PD-1 inhibitors have moved into the front-line setting, we're able to go right into the second-line setting, so much less heavily pretreated patients than we treated in the ICONIC study. Hopefully, patients who will be less sick, be able to stay on study longer since we know that vopra seems to take a little while to work, and we need that emergence of those ICOS hi CD4 cells.

With respect to urothelial cancer, probably the major driver is that, that is one of the first tumors in which Pam Sharma showed induction of ICOS hi CD4 cells by ipi. And so we know the biology is active in that tumor type and that adding vopra on after induction of those ICOS hi CD4 cells by ipi fits our scientific rationale. So we believe there's a good scientific rationale for both and then also from kind of a market sense in unmet need, their earlier lines of therapy, patients who should be able to stay on long enough to benefit.

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Operator [8]

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And our next question comes from the line of Steve Seedhouse with Raymond James.

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Steven James Seedhouse, Raymond James & Associates, Inc., Research Division - Research Analyst [9]

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Just one question for me. What is the current head count of the company? Can you just talk about the -- your core competencies that you have across the drug development platform that you highlighted in the prepared remarks? Where are you strongest? And where might you be looking to build out more capabilities as Jounce grows and expands and advances the pipeline?

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Kimberlee Cobleigh Drapkin, Jounce Therapeutics, Inc. - CFO & Treasurer [10]

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Sure. Steve, this is Kim. So we currently have 127 full-time employees here in Cambridge. And one of the things that we've always been proud of is, we've been able to build a company with experience across the entire life cycle, if you will, of our programs from the early discovery into clinical.

And so we feel as though we have a very strong scientific bench in terms of what we need on the discovery side using our platform. Also we're able to do all of the reverse translational and the translational analysis work that we do internally. So we feel as though we've created a team that can go from start to finish, if you will, and really take us to where we need to be.

We don't have any major holes, if you will, right now in terms of functions that we'd be looking to expand. As we continue to develop and go into more clinical trials, we would add additional clinical head count. But our discovery is pretty much at the level we would like it to be and we feel as though we've built a team with a lot of expertise.

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Richard Murray, Jounce Therapeutics, Inc. - President, CEO & Director [11]

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Yes, maybe I'll pick up on that just a bit as well. Steve, this is Rich. The goal really with the focus on the translational work is to try to make that science interface with clinic as seamless as possible. And so that's really how we're structuring the company. I do think we will be seeing from Jounce more kind of light shining on new programs emerging. We -- obviously, we're very happy with the renegotiation of the Celgene deal, which included the out-license of JTX-8064.

And just to reemphasize that, that went from early target discovery, really, that biological early concept to a clinical candidate. And we think we did that in a very efficient manner. That same methodology, that same way of going after these new mechanisms that we think could eventually benefit patients is what we'll be employing on continuing on macrophages, T regulatory cells, stromal cells.

So we're happy with the kind of the horizon of skill sets and how we will progress discovery. And then of course, as you know, we're very much supporters of the idea of the reverse translational work that Beth told us about. So going forward is really -- it's more of kind of an integration -- forward integration rather than filling any particular gap.

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [12]

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And this is Beth, maybe I can just finish by adding, recently, we've really brought in some very senior and experienced people in the clinical organization as well. And so we feel like we have a very, very strong bench there as well.

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Operator [13]

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And our next question comes from the line of Jim Birchenough with Wells Fargo.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [14]

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A couple of questions. I guess first, can you maybe speak to the expected rate of ICOS hi CD4 cells induced by ipilimumab? What's your assumption in terms of these 2 tumor types? And is there some data to suggest a certain rate of ICOS hi T cells there?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [15]

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Sure. That's a great question, Jim. This is Beth. So in the data that Pam has published, its ranged from -- anywhere from 6% to up to 40%. And generally, they see it increasing after 1 to 2 doses of ipi. So that's kind of the range that we would expect at this point. And that's -- sorry, that's per patient, that's not the number of patients with ICOS hi, but for an individual patient treated with ipi, they have seen up to 40% of the peripheral blood CD4 cells being ICOS hi.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [16]

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Is there anything in the protocol, Beth? Or have you thought about -- if you're not seeing that sort of ICOS induction on T cells to increase the patient numbers or change anything? I'm just wondering if you run into a scenario where you're just not getting that induction of an ICOS hi T cell state?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [17]

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Sure. So it's something we're going to be monitoring very closely in the study. And as I think we've demonstrated, we have the ability to react to emerging data. And so this is a study where we will be following some of those key indicators very, very closely, and we'll be able to modify things as we go along in response to emerging data.

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Richard Murray, Jounce Therapeutics, Inc. - President, CEO & Director [18]

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Yes, maybe to add the implication there being, we will be looking at this as the study enrolls.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [19]

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Okay. Great. And then maybe just on the ability to dose ipi and vopra together and the tolerability of that combination, it seems from ICONIC that if you could get patients dosed long enough, there was a benefit. And so maybe what have you learned about the dosing protocol you're pursuing here, expected tolerability of the combination and what kind of confidence do you have that patients will be on vopra long enough to derive a benefit?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [20]

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Sure. That's a great question, something we talk about a lot. So first of all, we completed the dose escalation in ICONIC of ipi and vopra, and we're able to -- we did not have any dose-limiting toxicities. So we were able to dose the 2 drugs together. We were very pleased with that.

And with respect to keeping people on study longer, there are a number of different ways that we're addressing that. First of all, as I mentioned, these are definitely earlier-line patients. So these patients are going to be second, maybe some third-line patients. So they are not nearly as heavily pretreated or beat up as the patients who were in ICONIC, who were mostly fourth line and beyond.

We also have implemented other measures in the protocol that we believe will help keep people on study longer. Some of those, I think, we're not really ready to talk about publicly, but we think we have a good strategy for that. But in addition to tracking the ICOS hi CD4 cells, we are also absolutely going to be tracking the rate of how long people are staying on study. So that's something we'll be watching very closely.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [21]

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And maybe just a final question. In the lines of therapy you're dosing the combination, what would be the expected response rate for ipilimumab alone in lung and bladder cancer?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [22]

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Yes. There's not a lot of data on that. There's actually no data with ipi. There is some data with tremelimumab, and the response rate is about 6%.

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Operator [23]

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(Operator Instructions) Our next question comes from the line of Mike Ulz with Baird.

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Michael Eric Ulz, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [24]

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I just had a question on the Phase II EMERGE study. And maybe you can just comment on the early pace of enrollment here and the number of sites that are up and running? And then maybe how that's tracking versus your expectations? And then secondly, just curious if you've begun enrolling patients in the predictive biomarker cohort?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [25]

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Mike, so nice try. But you know, we don't usually share data on the pace of enrollment. I would say just we're pleased with how the study is going right now. I'm not really ready to share any additional details. And regarding biomarkers, as we've mentioned, we have -- are including several potential predictive biomarkers in the study -- in the EMERGE study itself.

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Operator [26]

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And our next question comes from the line of Cory Kasimov with JPMorgan.

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James Scott, JP Morgan Chase & Co, Research Division - Analyst [27]

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This is Gavin on for Cory. I apologize, I got on the call late. But just back to the Phase II EMERGE study, for that interim analysis, are you going to present data for both the lung and bladder so -- in the full 80? Or will this be spread out through the year?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [28]

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Yes. As we've stated, we expect to have data on up to 80 patients across both tumor types next year.

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James Scott, JP Morgan Chase & Co, Research Division - Analyst [29]

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Okay. And then just in terms of -- I think you answered this question from Steve. But can you just -- I think I misheard, but the 6% to 40%, that was for the hi ICOS CD4 T cell per patient?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [30]

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Yes. No -- yes, per patient. So if you look at a particular patient, and this is what we've been measuring as well, you can track the percentage of ICOS hi CD4 cells in the peripheral blood, CD4 cells over time. And so that's what Pam has shown that it's -- the max that it's increased to at least in the data that she's published has been up to 40% of the peripheral blood CD4 cells are ICOS hi after treatment with ipi.

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James Scott, JP Morgan Chase & Co, Research Division - Analyst [31]

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Okay. And is there a certain cutoff where you define that high versus low explicit number?

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Elizabeth G. Tréhu, Jounce Therapeutics, Inc. - Chief Medical Officer [32]

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Yes, there is and we've shared that, but yes, we do have a cutoff that we've identified.

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Operator [33]

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And I'm showing no further questions. And this does conclude our Q&A portion. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may disconnect. Everyone, have a great day.