Genocea Biosciences (NASDAQ:GNCA)
Q4 2016 Earnings Conference Call
February 16, 2017, 09:00 AM ET
Rachel Frank - IR, Stern
Chip Clark - President and CEO
Jonathan Poole - CFO
Seth Hetherington - CMO
Jessica Flechtner - CSO
Phil Nadeau - Cowen and Co.
Stephen Willey - Stifel
Danielle Brill - Needham and Co.
Rahul Jasuja - FBR
Good morning and welcome to the Genocea Fourth Quarter and Year End 2016 Financial Results Conference Call. At this time, all participants are in listen-only mode. Following the formal remarks, we will open up the call for your questions. Please be advised that the call is being recorded at the company's request.
At this time, I'd like to turn the call over to Rachel Frank of Stern Investor Relations. Please proceed.
Thank you, Operator. Good morning and welcome to Genocea’s fourth quarter and year end 2016 financial and operating results conference call. This morning we issued a press release that which outlines the topics that we plan to discuss today. This release is available at www.genocea.com under the Investor Relations' tab.
Today on our call, Chip Clark, President and CEO will review the company’s recent business and clinical highlights and then Jonathan Poole; CFO will review the financial results. Seth Hetherington, Genocea’s Chief Medical Officer; and Jessica Baker Flechtner, Genocea’s Chief Scientific Officer are both with us today as well for the Q&A.
Before we begin, I would like to remind everyone that statements made during this conference call relating to Genocea’s expected future performance, future business prospects for future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.
All such forward-looking statements are intended to be subject to the Safe Harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from those forecast due to the impact of many factors beyond the control of Genocea.
Genocea expressly disclaims any duty to provide updates to its forward-looking statements whether as a result of new information, future events, or otherwise. Participants are directed to the risk factors set forth in Genocea’s 2015 Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission.
With that, let me pass the call over to Chip.
Thanks Rachel and good morning everyone. As we recently held a call on our compelling GEN-003 Phase 2b trial results and since we realized it’s a busy day for earnings, we'll keep our prepared remarks fairly short and focus on the Q&A session.
That said I want to touch on a few highlights from our press release and to discuss some expected milestones before I turn it over to Jonathan. But first I'd like to acknowledge that Genoceans you and the audience never speak. I want to thank our great team for their commitment and passion in enabling our 2016 accomplishments.
Last year we took important strides in both our GEN-003 program for genital herpes and our exciting programs in immuno-oncology. Our GEN-003 Phase 2b trial has been very successful so far. Remember this trial is an ongoing placebo-controlled study to evaluate a new Phase 3 ready formulation, to confirm the dose to be carried through to Phase 3 and to continue exploring the virologic and clinical efficacy of GEN-003 in genital herpes patients across a number of endpoints.
So far, GEN-003 has demonstrated a statistically significant reduction in the viral shedding rate, 28 days post dosing and statistically significant improvements versus placebo across multiple clinical endpoints at six months post dosing.
These data cement a product profile that our market research tells us is highly attractive to patients, physicians, and payers ahead of our Phase 3 program, which we expect to start in Q4.
During the year, we also made several presentations at major medical meetings around the 12 month's data from a previous GEN-003 Phase 2 trial. Importantly, these results showed that GEN-003 has a significant and durable effect on genital herpes viral shedding and clinical disease for at least 12 months after dosing.
This is a key pillar of our target profile as this durability could enable once yearly or longer, maintenance dosing, an important differentiating factor when compared to the current regimens of daily or episodic oral antiviral therapy.
At our first-ever R&D Day in December, we presented for the first time the results of extensive new market research based on GEN-003's demonstrated clinical profile. This research strongly suggests that patients, physicians, and payers all view GEN-003 favorably and support our belief that GEN-003 could have upwards of $2 billion global revenue potential if successfully developed worldwide.
For more detail on this market research, I encourage those who are unable to attend our R&D Day to listen to the replay, which is still available on our website.
We also wanted to note a recent publication of GEN-003 clinical data from our first Phase 1-2a clinical trial in the Journal of Infectious Diseases. We expect this publication to support the visibility of GEN-003 -- of the GEN-003 program in the medical and scientific communities.
So, what comes next for GEN-003? Well, we are preparing for our end of Phase 2 meeting with the FDA to confirm the design of a Phase 3 program. In the second half of this year, we anticipate additional data from our ongoing trials. The 24-month data from the Phase 2 trial will further inform likely timing of maintenance dosing.
The 12-month data from the Phase 2b trial, we expect to confirm the clinical profile of GEN-003 at one year post dosing. Given all of this, we remain confident that GEN-003 has strong potential not only to be the first of a therapeutic vaccine for a chronic infection, but also the first advance in the treatment of genital herpes in more than 20 years.
So now let me turn to our growing investment in immuno-oncology, where we are applying our proprietary ATLAS platform to cancer vaccine target discovery and to T cell immune response profile. In November, we presented data at SITCwhich is the Society of Immunotherapy of Cancer's Annual Meeting.
Supporting the potential of ATLAS to enable critical differentiation and personalized cancer vaccine design by letting a patient own T cells identified neoantigens rather than guessing through predictive algorithms. This was a proof of concept work we did in collaboration with leading researchers at Memorial Sloan Kettering Cancer Center. It's been shown that these algorithms are only 20 to 30% successful in predicting T cell antigens and it's evident that the resulting therapeutics may have limited response rates. Yetm as we saw with the creation of the [Parker Institute] Tesla industry-wide consortium in early December, the industry continues to chase better algorithms.
As we’ve shown, ATLAS comprehensively re-creates the patient actual T cell immune responses to cancer can thereby identify novel antigens and distinguish between neoantigen candidates that stimulate protective T cell responses and those that are irrelevant or maybe associated with inhibitory responses. So what does this mean for us? Over the past year, we have made significant progress in creating a fully integrated and differentiated cancer vaccine capability from tumor sequencing and bioinformatics to antigen selection to production capability and finally to vaccine adjuvant formulation.
Given our advances here, we believe are on track to file an IND on our first cancer vaccine what we are now calling GEN-009 by way by the end of this year. We have also made significant progress on our T cell profiling capabilities using ATLAS to characterize patient responses to immunotherapies and thereby to develop non-invasive assays to define patient selection for clinical trials and clinical practice.
We announced our first immune response profile in collaborations in December with Checkmate Pharmaceuticals seeking to optimize clinical development of that company’s lead candidate in combination with pembrolizumab. Our strategy is to continue to leverage this knowledge with additional partners into the future.
And finally, we’ve also made advances in our Epstein-Barr virus or EBV program. Our Atlas screening campaign here is ongoing and we believe as with each program we've initiated, we will identify novel T cell antigens that could play an important role in an effective immunotherapy against cancers caused by EBV.
With that review and brief look I had complete, let me now turn the call over to Jonathan.
Thanks Chip. In today's press release, we reported cash equivalents and investments of $63.4 million at December 31st, 2016 this is compared to $75.5 million as of September 30th, 2016 and $106.4 million at the end of 2015.
We expect that these funds will be sufficient for operating and capital expenditure needs into the first quarter of 2018 without assuming any proceeds from potential business development partnerships, equity or debt financings.
As Chip mentioned, our current operating plan include to start Phase 3 program between three and the fourth quarter along with the filing for GEN-009 IND by the end of the year. It remains our strategy to secure additional sources of financing and advances starting Phase 3 clinical trials for GEN-003.
R&D expenses for the quarter ended 31st December 2016 increased $5.3 million to $11.8 million from the same period in 2015. Reflecting higher manufacturing, clinical costs for GEN-003 along with higher personnel and lab-related costs related to Genocea's immuno-oncology programs. These increases were partially offset by reduced spending on infectious disease programs.
For the full year ended December 31st, 2016, R&D expense were $34.6 million compared to $28 million for the same period in 2015. Reflecting higher personnel costs, consulting, professional services costs and lab-related costs all of which support the continued advancement of GEN-003 and our immuno-oncology programs. These increases were offset by lower full year GEN-003 manufacturing cost in 2016 and lower GEN-004 cost, which a clinical trial was completed in late 2015 and at that time further development of this program was suspended.
G&A costs the fourth quarter of 2016 were broadly flat at $3.9 million compared to $3.8 million the same period in 2015. For the full year, G&A expenses were $15.5 million compared to $14 million in 2015. This increase reflects market research costs for GEN-003 and higher depreciation costs from facility expansion in late 2015.
Finally, net loss was $16 million for the quarter ended December 31st, 2016 compared to a net loss of $10.3 million for the same period in 2015 and for the full year, the net loss was $49.6 million compared to $42.5 million for the same period in 2015.
With that, let me hand the call back over to Chip to wrap-up.
Thanks Jonathan. We expect 2017 to be a year of execution as we seek to complete a deal of deals to advance GEN-003 and to progress our immuno-oncology program into the clinic and into additional collaborations.
We look forward to reporting on these and other milestones throughout the year and we'll now open up the call for your questions. Operator?
Thank you. [Operator Instructions]
Our first question comes from the line of Phil Nadeau from Cowen and Co. Your line is now open.
Good morning. Congratulations on the progress. Two questions. First, Jonathan, quick one for you. R&D in Q4 bumped up pretty significantly versus Q3. Is -- were there certain expenses that hit in Q4 that won't be repeated or should we assume Q4 is a reasonable run rate for 2017?
Hi, Phil. Thanks for the question. I think the main driver of the increase in the R&D cost in Q4 of was related to manufacturing for GEN-003 in preparation for Phase 3 trials. So, as you can imagine that's an activity which needs to happen particularly with the proteins, a good deal ahead of when we plan to start that trial. And so that was principally the driver of the larger costs in Q4 and we would expect some of those cost to continue to Q1. And then as those manufacturing cost diminish, the clinical costs would start ramping up towards the end of the year.
Okay. That's very helpful. And second on the end of Phase 2 meeting that you're going to have this quarter, what is the key area of -- I'm sorry, you hope to have addressed that meeting or key areas of uncertainty that you hope to have the FDA's opinion on?
So, I'm going to have Seth take that question.
First of all Phil, we're very confident that we have a great package to bring to the FDA. As we've said before, we've been in constant communication within -- throughout the development program. So, the key areas of discussion will be basically two-fold. One is the dose that we're proposing to take forward into Phase 3 as you know we've conducted three clinical trials and did a very comprehensive view looking at proteins and adjuvant concentrations for acceptable profile to that dose.
And the second will be to get a better understanding or get agreement on our plans for manufacturing for GEN-003 into the Phase 3 program, which again, has been well worked out and we're very confident that we'll have a nice agreement from the FDA on that point.
And I guess the third point would be the safety profile for GEN-003, which again, we've comprehensively been able to describe through our independent data safety monitoring board of a very good view on the safety and its acceptability for Phase 3.
And just one clarification on the manufacturing is that QA QC specs or is there some other element of manufacturing that you hope to get the FDA's opinion on?
It's probably going to be the method of manufacturing and then the specifications that go in into that manufacturing process. But again we're -- we've done quite a bit of work on that. We're following all the FDA guidelines and there will be a separate Phase 2 meeting at a later date to discuss the specifics of that. Again, we've great confidence that we're on the right track.
Great. And one last question for you Chip. You mentioned potential deals for GEN-003 during the year. Can you talk a little bit about what your ideal deal structure would be? What would be your kind of preferred route for partnership?
Phil thanks for the question. I think rather than structure I think the -- where we're focused is on value and what I mean by that is this; if you have a, for example, a hypothetical deal that was focused on a -- call it a clinical development deal versus a licensing deal where Genocea would do a comparatively less work for royalties and milestones.
It's easy for us to model which one is going to balance sort of short-term milestones against long-term upside from value creation. And so rather than be prescriptive on which deal structure is going to be best for us, I'll just say that the principal for us is that no matter what structure or structures we evaluate, it's going -- we're going to be seeking to optimize on that parameter more than anything else.
Got it. Thanks for taking my questions and congratulations again on progress.
Our next question comes from the line of Stephen Willey from Stifel. Your line is now open.
Yes, good morning. Thanks for taking the questions. I guess just with respect to the end of Phase 2 meeting with FDA that you guys have teed up for this quarter, is there going to be any attempt to, I guess, communicate that feedback to investors?
Yes, Steve this is Chip. I think the game plan is that we would just update through the normal course of business. I don't have the calendar in front of me to say that the next opportunity would be at investor conference or in earnings call, but it would be something like that rather than a press release.
And I think the main point in that strategy is echoing such confidence that we expect to go in with a complete package and we expect this to be important, but not to fundamentally change the way we think about development.
Okay. And then just with respect to the milestones that are listed for 2017. I guess I don't see the initiation of the Phase 2b oral antiviral combination study. So, just wanted to make sure that that was still on-track for the year end 2017 start?
Yes, I think we are still -- we put the ones that where we have the greatest certainty about the actual date here in front of -- here in the press release, but I think doing the combination study remains important to us and when we're ready to initiate it, we will provide more specific items.
Got it. And then maybe just lastly for Jonathan. I think you've -- you're saying here explicitly that you don't expect to start the Phase 3s before securing additional sources of financing, but just wondering if it's your intention to be able to fully fund the Phase 3s through completion before initiating those studies. Thanks.
Hi, Steve. Thanks. Yes, I think strong preference will obviously be that we start trials if we know we can finish from a fund raising perspective. And so I think that goal is consistent with our stated strategy to seek additional sources of financing including Chip mentioned partnerships or -- partnership or partnerships and obviously there are other ways in which we can secure capital as well. So, we'd want to be confident that that we had the finances to complete the program.
All right. Thanks for taking the questions and congrats on a productive year.
Our next question comes from the line of Alan Carr from Needham and Co. Your line is now open.
Hi, guys, this is Danielle in for Alan. Just a quick one about the oral combo study. Is that something that you had to think about running in-house prior to partnering or is [beyond track] afterwards?
Danielle, there are couple of -- thanks for the question. Let me just clarify. Are you asking if we see think that the initiation of the trial is gating for potential partners? Or are you asking if this trial would fall under the same umbrella as Steve suggested we might be biased against starting Phase 3 without inadequate way of funding it. Is -- are you asking the former or the latter?
I guess more of the former. Just maybe -- is it something you would think about running in-house has strengthened your data package for health secure a [partner].
I see. What -- I think we all view the trial as an important one. I think there's a widespread understanding that GEN-003 should work. There should be an additive benefit I should say in combination with oral antivirals and so we think it's an important study to run.
I don't think that we would view it as catering for a deal, especially as you consider the possibility that we would probably be quality year from study start to the point where we have the data that the clinical readout from that trial. So that -- we don't think it is on the critical path to partnering.
Okay. And then about the I/O program, do you have any initial implication that you are planning to presume?
We are continuing to evaluate the initial indication. We are based on a variety of factors none of which would surprise you such as your patient need and competitive landscape. I think would be able to give a more detailed update not just on that, but on the overall shape of the clinical development program as we get closer to the IND filing.
Great. Thanks for taking my question.
Our next question comes from the line of Rahul Jasuja from FBR. Your line is now open.
Can you guys hear us? If there's a question, we can't hear it.
Hello, can you hear me guys, sorry.
Yes, hello. Is that you, Rahul?
Yes, I had you on mute, I am sorry.
The question I have is, the first one I have is on GEN-003 and looking for some clarification on endpoints and I know there's a bunch of endpoints that are -- you have listed in your slide deck and on the R&D Day slide deck?
And then of course you've got the six-month data from the Phase 2b study, you got great viral shedding data for 12 months and so on, could you add some detail as to what potentially would you be discussing with the FDA in terms of the most appropriate clinical endpoint, is there some slack out there? Is there any end point that makes more commercial sense?
Thanks, Rahul. I will have Seth to take this question.
Sure. What matters the most to patients is, how frequently are they going to get recurrences and when they get how longer they are going to last. So for a six month clinical data that we discussed recently, we are able to show that we can reduce both frequency and duration of outbreaks. The product of those two turns out to be lesion rates.
In other words, over a period of time how many days is based actually have visible lesion priced, how many days of pain and suffering that actually have and we’ve shown that we can reduce that by approximately 40% just which is terrific. So what we will propose to the FDA is a lesion rate endpoint, with secondary endpoints being frequency recurrences, duration recurrences but also its been the historic endpoint for the proportion of patients that have not had an outbreak at six months and then at 12 months.
There has been nothing approved in 20 years and a lot has changed in terms of understanding of disease and the technology available to collect data. So we believe that lesion rates makes more sense in terms of being very comprehensive and reflecting what's really most important patients, the frequency of the recurrences and the duration when they do reoccur.
Okay, that's helpful in educating me and that's good. Thanks. Let me move on to the I/O program there and I think one of my questions may have sort of an academic flavor to it, but I think it’s important. We had that that R&D day with Dr. Drake that at slide deck were in he showed the responders and talked about which antigen are they responding to, implying that there's a new antigens that may be relevant data from clinically relevant situations.
As you develop your program -- you obviously got a differentiating factor where you got clinically relevant antigens as opposed to others that have algorithms and so on so that's clearly an advantage. But your preclinical studies that you plan combination studies, can you slice and dice and understand that if it is in particular the neoantigen problem or there could be other immunosuppressive factors that are not PD-1 pathway checkpoint related that could be the culprit as well. So, how do sort of discuss that [implanted] combination study that makes sense?
Thanks Rahul. I'm going to have Jess take that question.
Thanks Rahul. You really hit the nail in the head of the challenges that are stated by the industry in developing effective vaccine in immunotherapy. I think the strength of what we have does line ATLAS and finding the right target of the T cell response in the patient.
And we know that there's great success in modulating the impacts that the tumor has on the immune system by combining that with, for example, Checkpoint blockade. But what we are doing now is continuing to build our datasets and learn as much as we can about what makes effective immunity in these patients. It may be a combination of genetics and immunomodulation and vaccination. And these are all things that we will learn as we continue to develop our product in the clinic.
But really most importantly is ATLAS. It's finding the right target and going into these patients with a treatment that they can truly respond to and that will really make an impact on their disease.
Great. Thank you. And then one final question also on the I/O program. And maybe you have mentioned, but I'm not sure if I have the answer there. When you have these partnerships, for example, the one with Checkmate where you're working with them to help them with their neoantigen program. Is this more like a service model or would you plan to co-develop these drugs in conjunction with their partner?
Rahul, I think each deal is going to be different. But that I would say that in principle the way we would seek to structure these deals would be actually neither of those things. We don't -- we think that the value from the differentiated ATLAS platform is such that simply providing service is not our game, but we also don't -- we also think that we want to be able to partner this widely and I think a small number of partners would be willing to actually sharing the clinical development.
So, I think what you could expect us to focus on in terms of deal structure would be some sort of milestones and royalty-based structure that doesn't require us to do anything more than unleash ATLAS to figure out, for example, the right patients to get or not to get such a therapy. So, that's somewhere between the two poles that you laid out there.
Okay, great. Thank you. That's all I had and I look forward to end of Phase 3 meeting. Thanks.
We do as well. Thank you.
And that concludes your Q&A session. I will now like to turn the call back to Chip Clarke for any further remarks.
I will simply say thank you again to all of you for your interest in our story. We're very proud of our accomplishments last year. We're excited about what's to come this year and we look forward to keeping you updated.
Thank you for joining us today. You may now disconnect.
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