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Edited Transcript of JNCE.O earnings conference call or presentation 9-May-18 12:00pm GMT

Thomson Reuters StreetEvents

Q1 2018 Jounce Therapeutics Inc Earnings Call

CAMBRIDGE May 16, 2018 (Thomson StreetEvents) -- Edited Transcript of Jounce Therapeutics Inc earnings conference call or presentation Wednesday, May 9, 2018 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Elizabeth G. Trehu

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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* Boris Peaker

Cowen and Company, LLC, Research Division - MD and Senior Research Analyst

* Cory William Kasimov

JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst

* Debjit D. Chattopadhyay

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

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Jounce Therapeutics First Quarter 2018 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 welcome to the Jounce Therapeutics First Quarter 2018 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 and Media section of our website at www.jouncetx.com.

Leading today's call is our CEO and President, Dr. Rich Murray, who will discuss Jounce's first quarter 2018 clinical and preclinical development activities; followed by our CFO, Kim Drapkin, who will review our first quarter financial results. We will then open the call for your questions. Our Chief Medical Officer, Dr. Beth Trehu, will also be available during the Q&A portion.

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, May 9, 2018, 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, and good morning, everyone. The first quarter of 2018 marked a time of continued progress for our clinical and preclinical pipeline. As you know, our goal is to discover and develop first-in-class immunotherapies, where we aim to match the right therapy to the right patients.

We use our Translational Science Platform to advance our programs from target selection to clinical development with a biomarker-driven approach. To date, our platform has informed our target identification, tumor type selection for the ongoing Phase I/II ICONIC trial and biomarker analysis from patient samples. This will enable us to develop an understanding of the patients in our trial and guide our next steps.

With that, let's begin this morning with our JTX-2011 program. We initiated the Phase I/II ICONIC clinical trial in August 2016. ICONIC is a four-part adaptive design, open-label trial with a Phase I and Phase II component. Both portions include JTX-2011 alone and in combination with nivolumab in patients with advanced solid tumors. The Phase II portion of ICONIC is evaluating preliminary efficacy across several different tumor types, each chosen based on the prevalence of ICOS-expressing immune cells within those tumors.

Across all indications, the patients enrolled are relapsed or refractory, with no standard treatment options. More specifically, in the gastric and triple negative breast cancer cohorts, the patients are advanced but are predominantly IO-naïve. To date, responses to PD-1 inhibitors in these tumors has been low. In other cohorts, such as head and neck cancer, melanoma and non-small cell lung cancer, almost all patients enrolled had also progressed on the standard-of-care PD-1 inhibitors. This is an increasing patient population with limited treatment options, and the unmet medical need remains high.

Since the start of ICONIC, the overall IO landscape has evolved and become more complex. In thinking about where the greatest unmet medical need exists, several key patterns have emerged, which include: First, when IO responses occur, they're more durable than previous standards of care; IO responses to approved PD-1 inhibitors can vary significantly by indication; response rates increase as you move up to earlier lines of therapy in a given tumor type; advanced relapsed or refractory patients are the most difficult to treat but also represent a significant unmet medical need and potentially a faster path to approval; and finally, using biomarkers to select patients may improve response rates. In the context of the IO landscape, we believe that the upcoming ICONIC data and additional ongoing exploratory biomarker analysis will help to inform our clinical development path in these tumor types.

Our ASCO 2018 abstract will be published next week and contains the following: Phase II monotherapy and combination safety data in all tumor types; preliminary efficacy data, which includes gastric cancer from both Phase II mono and combo cohorts, and triple negative breast cancer from the Phase II combo cohort. Although we do not have specific gastric and triple negative breast cancer cohorts in Phase I, we will provide the preliminary efficacy data from the patients with these tumor types who were enrolled in the Phase I.

Our ASCO abstract was selected for an oral presentation on Saturday, June 2. We will provide additional data on patients, longer-term follow-up and additional biomarker information and our next steps with the JTX-2011 program. Additionally, as stated in our 2018 objectives, we are on track to initiate a JTX-2011 and CTLA-4 inhibitor combination arm in our ICONIC trial, starting with safety dose escalation this year.

Now turning to some of our other programs. We remain on track to file an IND for JTX-4014, our PD-1 inhibitor, in 2018. Our belief is that combination therapy will be a mainstay of cancer immunotherapy, and we view 4014 as an important enabler for our pipeline. We continue to advance our first tumor-associated macrophage candidate coming from our Translational Science Platform through IND-enabling studies. We expect to provide more details this year on these efforts as the program advances.

We are driven by our science as we further the growth of the company by focusing on 4 key value drivers for 2018: report safety and preliminary efficacy data from ICONIC in the second quarter at ASCO; initiate our next combination with JTX-2011 and the CTLA-4 inhibitor; file an IND this year for JTX-4014, our PD-1 inhibitor; and continue to advance our first macrophage candidate through IND-enabling studies. We expect to communicate more on these value drivers throughout the year.

In summary, we believe Jounce has a unique approach with our Translational Science Platform that positions us well for the future, with potential first-in-class targets, capabilities to interrogate the tumor microenvironment, informed biomarker efforts and an evolving immuno-oncology pipeline aimed at addressing important unmet needs.

Now I'd like to turn the call over to Kim Drapkin, our CFO, for a discussion of our first quarter 2018 financial results. Kim, please go ahead.

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Kimberlee Cobleigh Drapkin, Jounce Therapeutics, Inc. - CFO & Treasurer [4]

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Thank you, Rich. Good morning, everyone. Jounce continues to operate from a position of financial strength. As we reported in this morning's press release, cash, cash equivalents and investments as of March 31, 2018, totaled $237.2 million compared to $257.9 million as of December 31, 2017. This decrease was driven by operating costs incurred during the quarter.

Turning to the P&L. Our collaboration revenue was $11.2 million for the first quarter compared to $20.3 million for the same period in 2017. Recall that collaboration revenue, currently noncash, reflects the recognition of the Celgene upfront payment of $225 million received in July 2016. The decrease in collaboration revenue was primarily due to the adoption of new revenue recognition accounting guidance during the first quarter and not due to a change in our activities under our collaboration agreement with Celgene. Under this new accounting guidance, we have transitioned from recognizing revenue on a straight-line basis to recognizing revenue based on our pattern of performance under the agreement.

During the first quarter, we incurred $18.2 million in research and development expenses compared to $15 million for the same period in 2017. The increase in R&D expenses was primarily driven by the following: increased employee compensation costs related to higher headcount; clinical and regulatory costs related to the ICONIC trial; and external research and development costs attributable to IND-enabling activities related to JTX-4014.

General and administrative expenses were $6.8 million for the first quarter 2018 compared to $5.6 million for the same period in 2017. The increase in G&A expenses is the result of increased employee compensation costs primarily related to stock-based compensation expense and professional services fees attributable to operating as a public company. Net loss for the first quarter 2018 was $13 million or a net loss per basic and diluted share of $0.40 as compared to net income of $0.4 million for the same period in 2017 or a net loss per basic and diluted share of $0.02 as a result of preferred stock dividends that were accrued prior to the completion of our initial public offering.

We continue to expect cash burn on operating expenses and capital expenditures for the full year 2018 to be approximately $80 million to $100 million and expect to record approximately $50 million to $60 million in collaboration revenue in 2018 from the recognition of the Celgene upfront payment. Given the strength of our balance sheet, we expect our existing cash, cash equivalents and investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements for at least the next 24 months.

Throughout 2018, we will continue to build momentum as we focus on our key value drivers while establishing a broad and diversified portfolio focused on bringing the right therapies to the right patients. Lastly, we continue to maintain a productive collaboration with our global strategic partner, Celgene.

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) And our first question comes from Boris Peaker with Cowen.

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Boris Peaker, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [2]

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My first question is on ICONIC. I'm just curious, how many monotherapy patients will we see at ASCO? And what do you see as a reasonable expectation for these group of patients?

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

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This is Beth Trehu. So the abstract will be public next week. And so I think we'll have a more meaningful discussion and provide more information after the abstract has been released and then in a few weeks later at ASCO.

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Boris Peaker, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [4]

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Got you, okay. I guess I don't know if this is going to be in the abstract, but just kind of a follow-up to that question is for the ICONIC patients, curious what fraction of those patients were you able to get a fresh biopsy just to assess ICOS level? And will you have some of that data as well at ASCO?

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

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Yes. So there's some data about that in the abstract. And we will be sharing data about that in the ASCO presentation.

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Operator [6]

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And our next question comes from 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 [7]

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So just to follow up on Boris' question on the ICOS level, should we understand it, from a monotherapy perspective, it wasn't really selected for ICOS expression, but on the combo study, it is more geared towards 2+ and 3+ ICOS expression?

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Elizabeth G. Trehu, Jounce Therapeutics, Inc. - Chief Medical Officer [8]

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Not exactly. So what we did, based on preclinical data suggesting that single-agent efficacy required higher levels, kind of the IHC 2+, 3+, for activity, what we did is in Phase I, we had no enrichment at all. In the Phase II part of the study for both monotherapy and combination, we basically -- we screened archival tissue for ICOS and we capped enrollment of ICOS 0 and 1 patients. And then we've kept enrolling, as we enroll only ICOS-high on the archival, then we keep enrolling until we confirm that we have at least 10 patients with ICOS-high scores based on a fresh biopsy in each cohort, which is target enrollment of 15 patients. So we're looking at the ICOS scores in monotherapy and in combination therapy. In the preclinical studies, the activity was not as closely linked to the ICOS score. As long as there were some ICOS-expressing immune cells in the tumor, then we saw activity.

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Debjit D. Chattopadhyay, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [9]

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Great. And then just one more follow-up. In terms of the relationship of ICOS expression on tumor mutational burden, especially somatic mutational burden, obviously TNBC and GC don't really fall in the upper left corner of that spectrum. So how do you think about using these as your first targets as opposed to some of the more obvious ones?

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Elizabeth G. Trehu, Jounce Therapeutics, Inc. - Chief Medical Officer [10]

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Sure. So I think the utility of tumor mutational burden as a selection criteria or an enrichment criteria, that data has actually been pretty recent, particularly with the nivolumab data. So there's not a lot of data actually on the relationship between tumor mutational burden and ICOS expression. Although if you look at the tumors that we initially identified through TCGA as being more likely to have higher levels of ICOS-expressing T cells in them, they tend to kind of be in that right-sided range in terms of mutations. But there's still a lot more work to be done to really understand that relationship.

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Operator [11]

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

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [12]

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I'm not sure if you're going to be able to answer this, but do you think we've got enough patients in ICONIC at this point to validate whether ICOS is useful or not as a biomarker to guide JTX-2011 development?

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Elizabeth G. Trehu, Jounce Therapeutics, Inc. - Chief Medical Officer [13]

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Yes. So the cohorts in ICONIC are pretty small. And so we see this as sort of early exploration. The ICOS biomarker in the study thus far is considered exploratory. So I think with the small numbers, we wouldn't expect that, that would be enough to tell us yes or no, this is the biomarker. If you recall with the early KEYTRUDA and nivo studies, I remember very well a plenary session at ASCO, where the big discussion was about is there some link between PD-L1 expression and efficacy. So I think it took really hundreds to thousands of patients before we really even understood the value of PD-L1 as a biomarker. So I think this is still pretty early. We're learning a lot from this study. And we'll continue to learn as we evaluate the incoming data.

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

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And I guess the other question is just in terms of setting context in triple negative breast and gastric cancer. I think you guys have provided some historical data for chemo. But is there a broader context that we should consider here or that you're considering here on what would be positive signal? Are you looking at what other investigational drugs have shown in these indications? Or how should we think about what would be good data?

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

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Yes. So I think for us, from this early study, what we're looking for is an acceptable safety profile, both monotherapy and combo. We're looking for a demonstration that the drug has activity. And we're looking for a relationship to a biomarker. And then it's good to know kind of what other drugs are doing in that space. But it's also really important to look at the patient population and a lot of other factors. So we can obviously have a more meaningful discussion about that after the data is presented.

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Operator [16]

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And our next question comes from Mike Ulz with Robert W. Baird.

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Michael Eric Ulz, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [17]

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Just with respect to the ICONIC study, I was wondering if you can maybe comment on the level of enrollment in some of the other cohorts, so like head and neck, melanoma or non-small cell lung, and then maybe which one of those is furthest along? Just trying to get a sense of when we might see some additional updates beyond ASCO.

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Elizabeth G. Trehu, Jounce Therapeutics, Inc. - Chief Medical Officer [18]

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Yes, thanks, Mike. We -- so we haven't really given any updates on enrollment to date. We'll be giving more information in a few weeks at ASCO.

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Operator [19]

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And our next question comes from Cory Kasimov with JPMorgan.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [20]

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First one is for the gastric cohort, are you able to comment on the relative breakdown of PD-1-naïve versus PD-1-experienced? And even if you can't talk about any specifics now, I'm curious how much you think this could impact the overall response rate and whether you'll break this out at ASCO. And then I have one follow-up.

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Elizabeth G. Trehu, Jounce Therapeutics, Inc. - Chief Medical Officer [21]

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Sure. So if you recall, the monotherapy cohorts started enrolling last April, the combination cohorts started enrolling in July. And as I think we've previously said, the combination cohorts certainly enrolled more quickly than monotherapy. But they started enrolling in July. And KEYTRUDA was approved in third-line gastric cancer in September. And the protocol required that once a PD-1 inhibitor was approved in one of our tumor types, then patients had to be PD-1-experienced, so -- but we'll provide the details at ASCO.

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Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [22]

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Okay. And then my follow-up is kind of a follow-up to Jim's question. But in light of recent high-profile developments in the IO space, how are you strategically thinking about kind of how much data is enough to get comfortable with moving into pivotal studies? Or is this maybe not as relevant to your initial relapsed/refractory target indications?

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Richard Murray, Jounce Therapeutics, Inc. - President, CEO & Director [23]

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Yes, Cory, I think at this point, we're not going to comment on that level of information. I mean, obviously it's going to be much easier to have the context of the discussion once our information is released.

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Operator [24]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may now disconnect. Everyone, have a good day.

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Kimberlee Cobleigh Drapkin, Jounce Therapeutics, Inc. - CFO & Treasurer [25]

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Okay, thank you.

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Richard Murray, Jounce Therapeutics, Inc. - President, CEO & Director [26]

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Thank you.

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Elizabeth G. Trehu, Jounce Therapeutics, Inc. - Chief Medical Officer [27]

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Thank you.

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Operator [28]

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You're welcome.