OncoMed Pharmaceuticals' (OMED) CEO Sunil Patel on Q3 2017 Results - Earnings Call Transcript

OncoMed Pharmaceuticals Inc (NASDAQ:OMED-OLD) Q3 2017 Earnings Conference Call November 2, 2017 4:30 PM ET

Executives

Peter Rahmer - Managing Director, Trout Group

Sunil Patel - Executive Vice President and Chief Financial Officer

John Lewicki - Executive Vice President of Research and Development

Robert Stagg - Senior Vice President of Clinical Research and Development

Analysts

Maury Raycroft - Jefferies

Michael Schmidt - Leerink

Mike King - JMP Securities

Nick Abbott - Wells Fargo

Peter Lawson - SunTrust Robinson

Operator

Good afternoon, everyone, and welcome to the OncoMed Pharmaceuticals 2017 Third Quarter Financial Results Conference Call. This call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Peter Rahmer, Managing Director at Trout Group.

Peter Rahmer

Thank you, Amanda. Hello, everyone, and welcome to OncoMed Pharmaceuticals financial results and corporate update call for the third quarter of 2017.

Leading the call today is Sunil Patel, our Executive Vice President and Chief Financial Officer. He is joined by John Lewicki, our Executive Vice President of Research and Development; Bob Stagg, our Senior Vice President of Clinical Research and Development; and Perry Karsen, Director and Member of the Special Committee of the Board.

Before we get started, I'd like to remind you that during this conference call, OncoMed will make certain statements that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our business plans and objectives, and timing and success of our clinical trials. Such forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. I refer you to our SEC filings for a discussion of risk factors that could cause our actual results to differ materially from those discussed today. We undertake no obligation to publicly update any forward-looking statements.

With that, I'd now like to turn the call over to OncoMed's Executive Vice President and Chief Financial Officer, Sunil Patel. Sunil?

Sunil Patel

Thanks, Pete. Good afternoon, everyone, and thank you all for joining us for OncoMed's Third Quarter 2017 Financial Results and Corporate Update Call. OncoMed continues to focus on discovering and developing novel anticancer therapeutics with the goal of having a meaningful impact on patient outcomes. OncoMed's pipeline of candidates seeks to address the drivers of cancerous growth, resistance, recurrence and metastasis.

OncoMed is currently advancing four programs in clinical development, including the newly initiated Phase Ia trial of GITR ligand Fc. OncoMed is also continuing to pursue the discovery of novel candidates from its immuno-oncology and biologics research efforts. The company is positioned to deliver value for both patients and shareholders with upcoming clinical updates from our navicixizumab, rosmantuzumab and anti-TIGIT programs in 2018.

I'll begin by providing an update on clinical development progress made over the course of the third quarter and offer a brief review of our pipeline before moving into financials and a brief corporate update. First, I'll start with our wholly owned GITR ligand Fc trimer program.

In September, OncoMed dosed the first patient in a Phase Ia single-agent trial in patients with advanced or metastatic solid tumors. GITR ligand Fc is a fusion protein with an IgG1 Fc-linked fully human trimer ligand and is designed to activate the costimulatory receptor GITR, which is known as glucocorticoid-induced tumor necrosis factor receptor, to enhance T cell-modulated immune responses. GITR ligand Fc differentiates from most other programs which utilize agonist antibodies to activate GITR via receptor clustering.

Our trimeric ligand activates GITR by direct ligand-induced signaling, and we have shown that it is significantly more potent than agonist antibodies in activating human T cell responses in vitro. The Phase Ia clinical trial is designed to assess the safety and tolerability of GITR ligand Fc. Secondary objectives include characterization of pharmacokinetics, immunogenicity and antitumor efficacy. Pharmacodynamic and potential predictive biomarkers focused on changes in immune system activation both within the periphery and in tumors will also be explored.

OncoMed now plans to initiate a Phase Ib portion of our Phase I clinical program to study anti-TIGIT in combination with anti-PD1. The PhaseIb portion is expected to begin enrollment in the first half of 2018. Working closely with our partner Celgene, we determined that an OncoMed initiated Phase Ib will enable us to maintain the most rapid pace of development for this competitive target. Celgene remains a supportive partner and retains to enter Phase I opt-in.

The Phase Ib portion of the anti-TIGIT trial will be designed to access safety and tolerability of escalating doses of the combination treatment. Initial data from our Phase I trial are expected to re-reported by year end 2018.

Next, Navicixizumab, OncoMed's anti-DLL4/VEGF bispecific antibody continues to enroll patients in two Phase Ib multicenter open label dose escalation and expansion studies in combination with standard care chemotherapies. One trial in patients with platinum-resistant ovarian cancer, who have failed more than two prior therapies or prior bevacizumab, and a second trail in patients with second-line metastatic colorectal cancer. Today, OncoMed has enrolled over 80 patients across the Phase I and Ib trails. Updated data are expected to be reported in 2018.

Moving on to Rosmantuzumab, our Phase Ia multicenter open label dose escalation and expansion study continues. The Phase Ia portion of trail is patients with advanced solid tumors and the Phase Ib portion of the trial is in combination with FOLFIRI and patients with previously treated metastatic colorectal or gastric cancer. As previously announced, enrollment of the study has been recently limited to patients that that harbor an RSPO3 gene fusion. We expect to provide an update on this trial in the first half of 2018.

With respect to our Wnt pathway inhibitor, vantictumab, data were presented at the 2017 AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics last weekend, demonstrating that a 6-gene breast cancer signature significantly correlated with PFS and OS outcomes in the company's completed Phase Ib breast cancer trial in 40 patients with baseline tumor assessments. The company continues to evaluate potential partnering opportunities for both vantictumab and ipafricept, including potential Wnt/immuno-oncology combinations.

Finally, OncoMed continues to leverage its robust drug discovery platforms to discover new therapeutic agents in the immuno-oncology arena, including novel approaches focused on unaddressed areas in the IO space. We look forward to presenting details of these emerging research programs at appropriate times in the future.

We will now review our third quarter 2017 financial results. We have made substantial progress in reducing our cost structure, including significant progress on closing down discontinued Phase I and Phase II clinical trials.

Now onto the financials, cash and short-term investments totaled $113.6 million as of September 30, 2017 compared to $184.6 million as of December 31, 2016. Revenues were $5.1 million for the third quarter of 2017, a decrease of $0.8 million compared to $5.9 million for the same period in 2016. The decrease in revenue was primarily due to lower revenue recognized from reimbursement of R&D costs for services performed in the third quarter 2017.

R&D expenses were $12.2 million for the third quarter 2017, a decrease of $15.2 million compared to $27.4 million for the same period in 2016. The decrease was primarily due to lower external research and development costs attributable to the decrease in Phase II clinical trials costs of demcizumab and tarextumab programs as a result of our discontinuation of the dosing of all patients of these programs and decrease in internal program costs due to reduced headcount as a result of the restructuring actions implemented in April of 2017.

General and administrative expenses were $3.9 million for the third quarter of 2017, a decrease of $0.6 million compared to $4.5 million from the same period in 2016. The decrease was primarily a decrease in personnel costs, including stock-based compensation expenses due to a decrease in headcount as a result of the restructuring actions implemented in April 2017.

Net loss for the third quarter of 2017 was $10.7 million, or $0.28 per share compared to $25.9 million, or $0.77 per share for the same period of 2016. The change in net loss from the prior-year quarter was due to lower R&D and lower G&A expenses.

OncoMed's proprietary technology platform, a highly experienced management team, our collaboration with Celgene and dedicated employees serve as the key value differentiators from other immuno-oncology companies. OncoMed continues to advance a broad pipeline of therapeutics against a diverse array of targets.

With numerous clinical trials underway, including the newly initiated GITR ligand Fc Phase Ia trial, OncoMed is well positioned for value creation in the coming months and years. OncoMed's founders started the company with a vision of building a platform for the discovery of therapeutic candidates and tackling novel targets that are central to fundamental cancer biology. The company remains committed to that initial vision. We look forward to updating you on our continued progress in the future.

Before we turn the call over to Q&A, I would like to provide a brief corporate update. OncoMed's Chairman and Chief Executive Officer, Paul Hastings, continues a personal leave of absence for medical reasons. As previously announced, Paul continues to be the CEO and Chairman of the Board of Directors during his leave of absence. We wish Paul a full and speedy recovery and look forward to his return.

I'd like to now open the call to Q&A. As a reminder, John, Bob and Perry are with me and available to answer your specific questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] And your first question is from the line of Maury Raycroft of Jefferies. Your line is open.

Maury Raycroft

Hi, good afternoon and thanks for taking my questions. The first question is around TIGIT. I'm wondering if you can provide any idea as to what tumor types you're going to be looking for and also if you can comment on which anti-PD1 you're going to be using in the combo study?

Sunil Patel

Thanks, Maury. I can welcome Bob or John to talk about the potential tumor types. We're not disclosing the PD1 at this point in time. We'll look forward to providing an update, but for various reasons, we don't want to disclose the choice of PD1 right now. Regarding the tumor type, is there anything you want to add?

John Lewicki

Yeah, I mean - this is John. I'll speak to the tumor types. Because obviously there are tumor types that have been shown to be responsive to IO agents such as anti-PD1, and obviously those are some of the tumors that we're going to be looking at. But what really differentiates TIGIT from targets such as anti-PD1, PDL1 is that the ligands for TIGIT, the PVRs are broadly expressed across a range of tumor types. So, what this enables us to do based on insights that we have into expression of the PVRs relative to the TIGITs, it enables us to explore an additional list of tumors. We haven't disclosed the specifics, but an additional list of tumors that we think could be particularly responsive to anti-TIGIT treatment.

Maury Raycroft

Okay. And just to clarify on the Celgene opt-in. Can that opt-in potentially happen before the end of the total Phase I or will it be at the end of the Phase Ib, likely in the second half of '18?

Sunil Patel

Regarding the TIGIT opt-in, the TIGIT opt-in is generally at the Phase I. The specific timelines for the opt-in will be in accordance with the collaboration agreement. It doesn't necessarily have to be at the full completion of the trial. There are opportunities along the way and it really depends on when we choose to push that forward.

Maury Raycroft

Got it and the other question is on RSPO3. So, we noted some data at the triple meeting. It looks like some interesting data characterizing some potential biomarkers in colorectal cancer. Can you sort of remind me what the - for RSPO3, the types of patients you're looking for ideally? Are these going to be patients that are over expressing RSPO3 or are they going to have particular mutations or fusions? And then maybe any comments on strategies to find and enroll these patients?

Sunil Patel

So recently we have limited enrollment to RSPO fusion patients. Earlier on the trial, we were enrolling patients of various degree of RSPO expression, but I think we previously announced that we had limited enrollment most recently to fusion patients. And we have acquired the services of an outside company to assist us in finding those patients. And that's gone reasonably well.

Maury Raycroft

Okay, great. Thank you.

Operator

Thank you and our next question is from the line of Michael Schmidt of Leerink. Your line is open.

Michael Schmidt

Hi, guys. Thanks for taking my questions. What percentage of patients is expected to be RSPO3 gene fusion positive across different tumor types?

John Lewicki

Hi, Michael, this is John. I think we have probably got the best insight into that, having searched for these patients, having reviewed numerous databases and like I said, having worked with a number of different clinical centers. I think an appropriate number to dial into at this point in time would be 2% to 5% of all colorectal cancer, but one important thing to appreciate here is that the RSPO3 fusions seem to be mutually exclusive from APC mutations. APC mutations that activate when signaling are present in about 70% of all CRC. So, of that 30% of patients who are APC wild type, the RSPO3 mutant population is roughly 10%. So obviously, that's a tool that we've used in searching for these patients.

Michael Schmidt

I see, very interesting. And I think the RSPO3 program is the first one with updated data in 2018, if I'm not mistaken. Can you just help us sort of set expectations for what that could look like? What cohorts, what type of patients and how many?

Sunil Patel

Well, we've been at the Ia and the Ib trial for a period of time and, so we should have a fully reasonable update that we'll be able to provide in the first half regarding the specific where we're going to roll the data out and exactly what we're going to say. We'll leave that aside for now. But in the first half, we should be able to provide a pretty meaningful update on the program.

Michael Schmidt

Great, thanks. And can you just comment - I'm just curious of looking forward, longer-term. I know you have some discovery activity ongoing in immuno-oncology or folks selling immuno-oncology drugs. And I was just wondering, what the overall strategy is? Is there a particular area [indiscernible] on? Are you going after validated targets, new targets? How should we think about the IO activities, the early-stage discovery work, longer term? Thank you.

John Lewicki

Michael, what we're trying to do in early-stage discovery is really to try a differentiated approach from the pack - from the rest of the pack. In other words, it's not that we don't consider some of the sort of contemporary list of targets to be very interesting, but we think there remains significant challenges in the I/O space. And what we're trying to do without getting into the specifics really is to target what we believe are some of the unaddressed areas in the I/O space. And one of the things that I might also reference is the fact that, with our GITR ligand Fc program, we really believe we've been able to master this whole approach to these TNF family of ligands. There are approximately 20 of these that play very important roles in modulating the immune system. So obviously that's one of the things that we are leveraging in trying to tackle some of these unaddressed questions.

Michael Schmidt

Great, thank you.

Operator

Thank you. Our next question comes from the line of Mike King of JMP Securities. Your line is open.

Mike King

Good afternoon, guys. Thanks for taking the questions. So maybe to ask a previous - one of the previous questions in a different way, Sunil, have you guys said what –with regard to the Celgene relationship, are they able to nominate any PD1 for combination, whether commercial or wholly owned or otherwise or has the - is that part of the contract redacted?

Sunil Patel

So, Mike, regarding the trials, before any option has occurred, the programs are generally under our purview, and so we are actually - we were collaborating with Celgene, of course. But we are actually the company that decides for our own programs, for example, what kind of PD1 we want to use in the trial. So certainly, we do that in collaboration and in consultation with our partner and we have a strong relationship with them, but they don't dictate the actual choice of a PD1 or any other trial design, for that matter.

Mike King

Right, no, I'm not saying they do. I'm just trying to think about what creates the best optionality and value creation for you guys. Okay, that's fine. And then with regard - so if I heard you correct, I got on the call a couple of minutes late. The - so neither GITR - sorry, GITR will not be updated in 2018?

Sunil Patel

We haven't - we didn't want to guide to any sort of data timeline on GITR. Just that - we just started the clinical trial back in September with the first patient dosed. Obviously, it depends on the pace of enrollment. We're very encouraged by what we're seeing so far. But we want to make sure that we have a full enough data set before we just kind of dole out a few cohorts here and there. And so, we really want to focus. We've got plenty to say next year with regards to navicixizumab, rosmantuzumab and most likely, TIGIT as well. And so, for GITR, frankly we need to leave that thing in the oven a little bit longer and hopefully generate enough data for it to be meaningful. Now if we have meaningful data earlier, we certainly will put it out.

Mike King

Okay. And that was the other one I was blanking on, TIGIT, will have updated data in 2018 at some point?

Sunil Patel

We should. Yes, that's our plan.

Mike King

Okay. And on both, are you looking for - is there a maximum biologic activity, dose limiting toxicity, a bit of both? And I'm just curious if any of the other agonists that your competitors are working on will play a part in your decision-making process about the path of clinical development. Thank you.

Sunil Patel

Right, so yeah, the trial will look in the phase I, and Bob, feel free to comment on this, but certainly we'll seek to find an MTD if we can. But we'll also use all of the various tools - biomarker tools, pharmacodynamic tools to really try and characterize what appropriate dosing might be. But also, just as important, we're looking at the safety profile and potential signs of activity in that. With regard to the competitors, obviously we're always on the lookout. We know there's a bunch of different programs on TIGIT and on GITR as well. We think we're highly differentiated against all of them, but we're certainly going to listen and see the data as it comes out, because we all are trying to advance this field towards patients and we want to all learn from each other.

Mike King

Okay, thanks very much. And best wishes to Paul.

John Lewicki

Thank you, Mike.

Operator

Thank you. Our next question is from the line of Jim Birchenough of Wells Fargo. Your line is open.

Nick Abbott

Hi, good afternoon. It's Nick on for Jim. And first, just to echo Mike's best wishes to Paul as well. So, in terms of GITR, I think you've elaborated a monotherapy scheme, and your competitors are looking at combinations with PD1 inhibitors and/or IDO inhibitors. So, what are your thoughts on expanding that program beyond monotherapy?

Sunil Patel

It's a great question. And we can talk about obviously the potential combination approaches. Right now, obviously in our current plan we have sufficient resourcing for the Phase Ia experiment to really try to and elucidate the profile. Given the backbone of the trimer, et cetera, we think we have a shot at potentially seeing evidence as a single agent. Clearly, the longer-term development, as with many of these sort of next-generation I/O agents will - can be pursued in combination and we're looking and exploring different alternatives there for right potential combination partners, but we think it's the best use of our resources and time right now to elucidate the single-agent activity before committing to a longer-term plan.

Nick Abbott

So, it sounds like then that once you have that single-agent data in hand, it might drive what you need to do in terms of partnerships or collaboration agreements?

John Lewicki

Yeah, and Nick, I think part of that is the fact that our agent is so different, right? We're using the ligand, so we expect to potentially see some things that have not been observed with the agonist antibodies, and I think it's important for us to get a good handle on the activity of our molecule before we actually embark on combination studies and things. But as Sunil said, this is a topic that we're thinking about every day and actively engaged in discussing.

Nick Abbott

Thanks, John. Moving to TIGIT, obviously you've talked about the - your TIGIT-expressing tumors is providing an obvious area for looking at combination therapy. And in terms of tumors that are sensitive to PD1 inhibitors, do you have an opinion as to how best to tackle those whether you take patients who are on a PD1 inhibitor and add your anti-TIGIT or patients who have experienced a - or have become relapse or refractory to PD1 inhibitor who've come off therapy and then they're going to restart the combination? How do you feel about what the best way to address this sort of PD1 nonresponsive refractory population is?

John Lewicki

Yeah, we're right now in the Phase Ia study. Obviously, what we're doing is we're dose escalating. We're pleased with the progress, and we're dose escalating rapidly and that does allow for us to also treat patients who've previously received PD1. So anti-PD1, so obviously that is - that's our current ongoing approach as we broaden out in this patient population. You start thinking about sensitive tumors. We had the question earlier, you start thinking about combinations. Of course, this whole issue of the patients who are refractory to PD1, progressed on PD1, become central. And one of the things we talk about is, if you're doing combination studies, are there areas where TIGIT, anti-TIGIT for example, could be particularly important in inducing responses to patients that have been refractory to agents, like the anti-PD1s, anti-PDL1s. So yes, it's something we're very active in considering and something that really factors into our program down the road.

Nick Abbott

Okay, thanks. And then also for me, on the RSPO3, realistically, at the clinical sites you have, how many of these gene fusion patients can you pick up or is there sort of a referral into these centers of gene fusion patients?

Robert Stagg

Sure. Well the study was originally designed as a 35-patient trial. And we hope to get to that point, and we hope to have about a handful of RSPO fusion patients when we're done with this trial.

Sunil Patel

And we are into the - as John mentioned earlier, we are working - and Paul I think mentioned, we're working with some outside collaborators to really try to improve our rate of being able to refer patients. Many patients are not at the sites that we've got and in cases where it's possible, we've been able to get them towards those sites, direct them to those sites and RPIs for treatment.

Nick Abbott

Okay, thanks. And just to clarify, RSPO3 is mutual exclusive with MSI-high?

John Lewicki

Not so clear there at this point in time. So, there's not really defined literature on that front. No one's looked at that company - or no one's looked at that question comprehensively, mutually exclusive, maybe not.

Nick Abbott

Okay. That's something you're looking at, obviously.

John Lewicki

Something we're looking at. Something I've paid a lot of attention to. There's a little bit of literature on it, but nothing beyond that that allows anyone to draw any definitive conclusions. But the only thing I'd say is not necessarily mutually exclusive.

Nick Abbott

Okay. And sorry, just go to back to the fusion. So, with the handful of patients then, you're obviously looking for a very strong signal?

John Lewicki

Right. We think, we are.

Nick Abbott

Thank you, very much.

Operator

Thank you. [Operator Instructions] And our next question is from the line of Peter Lawson of SunTrust Robinson. Your line is open.

Peter Lawson

John, I joined late, so sorry if I missed this. But did I get this right that the TIGIT safety data got pushed back from kind of mid '18 to late '18? If so is that slow enrollment or what's going on there?

Sunil Patel

Hey, Peter, it's Sunil. Actually, yeah - no, we have not pushed back any timelines around data. We're going to put data out obviously within - the progress of the TIGIT trial is going extremely well. We're quite enthused by what we're seeing in terms of patient enrollment, et cetera. We're - our plan is to bring out data next year. Exactly when it comes out, again going back to one of the previous responses, really, we want to come up with a meaningful data set. We don't want to put out data too early, which then becomes really difficult to interpret what it means. And so, we're trying to make sure that we generate the fulsome data set. But we expect that, that will be sometime next year. So, there's no change [indiscernible].

Peter Lawson

I mean just coincidently there's no kind of slowing of enrollment or difficulty now with the patients?

Sunil Patel

No, not at all. Enrollment is going really well.

John Lewicki

There's a lot of enthusiasm among investigators here. So, it's not an issue.

Peter Lawson

Got you, thank you. And then the GITR ligand do you have - I mean, how do you think that works? Do you think it's through activating CD8 T cells or removing T regs? Or do you think the trimer in anyway changes the way it acts?

John Lewicki

Yeah, so that's a good question. Obviously, T reg biology factors in importantly to GITR, and there's a lot of literature and experience we have that GITR - ligand stimulation of GITR actually suppresses the activity of T regs and that's something that we've confirmed experimentally. Obviously, there's a whole issue also of activating T cells. And I think this is particularly interesting in the context of our ligand versus the agonist antibodies. So, we've gone so far as to take donor T cells from humans and to compare our ligand to some of the prominent agonist antibodies, looking at things like DNA proliferation - or proliferate. So, for T cell proliferation, I'm sorry, interferon gamma release these sorts of measures, and what we've observed is we've observed that the ligand is a full and very potent agonist in stimulating these activities to T cells whereas the agonist antibodies are not as potent as the ligand, so sure, when we think about how this is differentiated activating CD8 T cells, obviously part of the equation.

Peter Lawson

Thank you. And so, for just changing tack for navi, is there any specific time in 2018 that you think you could - would release data? Is that kind of a year-end thing?

Sunil Patel

We're hoping to do it sooner than that. Obviously, we usually wait until we've got acceptances to promote exactly at what conferences, et cetera. But we - as we said in the release, we've treated over 80 patients on this agent now, between the Ia and Ib. And so, we ought to be able to have a pretty fulsome update on the program. It's really just trying to target when exactly can we do that next year. But it shouldn't be at the end of the year. We certainly would hope to do it before that.

Peter Lawson

Got you. And just kind of a housekeeping question. How should we think about kind of the collaborative revenue flow for next year by quarter?

Sunil Patel

Right, so one thing to point you there - yeah, so obviously our - in terms of our partnerships now, Celgene is our main agreement. We - the GSK agreement has passed and for Bayer, it's really focused on small molecules at this point. So, it's really Celgene and the real change that's going to occur, that many companies are going through is that accounting treatment. It's really the ASC 606, and so we'll be getting into that going forward. A lot of companies such as us are going through that in terms how revenue recognition is going to roll forward. Most of that, just to be frank, is really noncash for us. We've already gotten the payments from Celgene related to that. So, it really might change the future potential milestones as well as what we do with all the different revenue balance. So as soon as we get more clarity around 606, then certainly that - us and other companies in the biotech space will be putting out our view. And frankly, there may be some differences to folks. We think it will have a pretty substantial effect. But again, it's really noncash for us at this point.

Peter Lawson

Thank you and please send our best wishes to Paul.

Sunil Patel

Thanks a lot, Peter.

Operator

And at this time, I'm showing no further questions. I'd like to turn the conference back over to Mr. Sunil Patel for closing marks.

Sunil Patel

Thank you again for joining us today. And we appreciate your continued interest. We look forward to updating you on our progress across our R&D efforts in the months to come, and our team is always accessible to answer your questions. Thanks.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect.