NewLink Genetics' (NLNK) CEO Charles Link on Q4 2017 Results - Earnings Call Transcript

NewLink Genetics Corporation (NLNK) Q4 2017 Earnings Conference Call March 1, 2018 4:30 PM ET

Executives

John Henneman - Executive Vice President and Chief Financial Officer

Charles Link - Co-Founder, Chairman, Chief Executive Officer, Chief Scientific Officer

Eugene Kennedy - Chief Medical Officer

Analysts

Jenny Huang - Bank of America Merrill Lynch

Stephen Willey - Stifel, Nicolaus & Company

Michael Ulz - Robert W. Baird

Peter Lawson - SunTrust Robinson Humphrey Inc

Biren Amin - Jefferies

Operator

Good afternoon, ladies and gentlemen, and welcome to the NewLink Genetics Fourth Quarter and Year-End 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a Q&A answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Mr. Jack Henneman, Chief Financial Officer. Sir, you may begin.

John Henneman

Thank you. Good morning, and thank you for joining Dr. Charles Link, Chairman and Chief Executive Officer; Dr. Eugene Kennedy, Chief Medical Officer; and me, for the NewLink Genetics fourth quarter and year-end 2017 conference call.

After the market close, we issued a press release providing updates on our clinical development program for indoximod, NewLink’s IDO pathway inhibitor with a distinct mechanism of action, and fourth quarter and year-end financial results. Dr. Link will review our clinical and scientific priorities for 2018. Dr. Kennedy will review highlights for our clinical development programs, and I will wrap up with the fourth quarter and year-end 2017 financial results and updated cash guidance.

Certain statements made during this call are forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ is contained in our periodic reports filed with the SEC. The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. Information presented on this call is contained in the earnings release we issued this afternoon and our Form 8-K to be filed later today, which may be accessed from the Investors page of the company’s website.

I will now turn the call over to Dr. Link.

Charles Link

Thank you, Jack. Thank you for joining us today. In 2017, we presented peer-reviewed data, a key oncology meeting that supports the Phase 3 development of indoximod and announced plan to initiate two randomized clinical trials this year.

We presented Phase 2 data of indoximod plus pembrolizumab in advanced melanoma at the Third Annual International Cancer Immunotherapy Conference with encouraging overall and complete response rates and progression-free survival.

We presented Phase 2 data from a randomized, double-blind study of indoximod plus cancer vaccine for patients with metastatic castration-resistant prostate cancer at ASCO Annual Meeting, which demonstrated a statistically significant improvement in median progression-free survival compared to monotherapy.

As well, we presented Phase 1b data of indoximod plus chemotherapy in newly diagnosed AML, which suggested the potential for indoximod in treatment regimens beyond PD-1. These data are encouraging and supports the potential for indoximod to improve outcomes for patients with cancer across a broad range of indications.

Our priorities in 2018 will build upon this base and focus on expanding our clinical development in two key indications: advanced melanoma and metastatic pancreatic cancer. In melanoma, we announced the design of our pivotal trial, Indigo301. We are proceeding with the work necessary to initiate the randomized portion of this trial in the second or third quarter of 2018.

In addition, we plan to present the full dataset for the Phase 2 trial of indoximod plus checkpoint blockade in metastatic melanoma at an upcoming medical meeting in the first-half of 2018.

In pancreatic cancer, in September, we formed a clinical collaboration with AstraZeneca for our randomized Phase 2 trial, Indigo201, for patients with metastatic pancreatic cancer. This study will be a randomized, blinded Phase 2 trial of indoximod plus durvalumab, AstraZeneca’s PD-L1 inhibitor plus chemotherapy and is expected to begin in the first-half of 2018.

In addition, NewLink Genetics has completed its own single-arm Phase 2 trial of indoximod plus chemotherapy in metastatic pancreatic cancer and expects to present those data in the first-half of 2018.

Finally, indoximod is an ideal pathway inhibitor with a differentiated mechanism of action compared to that of direct enzymatic inhibitors. We have continued to do work to determine key aspects of the indoximod mechanism of action and plan o present those data at the AACR Annual Meeting in April.

Now I will turn the call over to Dr. Kennedy, who will discuss our clinical programs in greater detail.

Eugene Kennedy

Thank you, Chuck. As Chuck mentioned, we are working toward commencing two randomized trials, Indigo301 in advanced melanoma and Indigo201 in metastatic pancreatic cancer.

Indigo301 is our pivotal trial in metastatic melanoma. To review, the design includes a 2-arm randomized, double-blind, placebo-controlled study in approximately 620 patients, whereby indoximod will be given in combination with either nivolumab or pembrolizumab at physician’s discretion. The trial will be conducted at approximately 100 sites in the United States, Europe, and Australia.

We are updating the Indigo301 timeline due to factors related to our dose determination efforts and additional time spent on manufacturing. Clinical evaluation of the indoximod salt formulation is begin addressed in ongoing trials, including the dose determination portion of Indigo301 in healthy volunteer study.

Initial data from these trials suggest that the tablets of indoximod manufactured to the original specification achieved a different exposure level of indoximod in humans than we had anticipated from the preclinical work. We have therefore made minor modifications to those specifications and the manufacturing process. We have accordingly extended the clinical evaluation to test the modified tablets in healthy volunteers.

We expect the results of the evaluation of the new indoximod tablets within approximately two months and those results will determine how quickly we could begin the randomized portion of Indigo301. Because of the cumulative impact of these CMC refinements and the related regulatory requirements, we have updated our expectation for the initiation of the randomized portion of Indigo301 to the second or third quarter of 2018. We still expect to complete enrollment during 2019.

Our work also continues towards the commencement of Indigo201. Indigo201 is our randomized, blinded Phase 2 trial of indoximod plus durvalumab plus chemotherapy in metastatic pancreatic cancer. We still expect to initiate that trial by the end of June.

As Chuck mentioned, we are doing preliminary work to determine other indications where focused trials might reveal potential for indoximod in combination therapy. For example, at AACR, we will present early data describing the effect of indoximod in combination with radiotherapy in the treatment of certain pediatric brain tumors.

We continue to make progress on our clinical development of indoximod and look forward to updating investors as information becomes available.

Now I will turn the call over to Jack to discuss the financials.

John Henneman

Thanks, Eugene. Before we move to the Q&A, I want to provide a quick overview of recent financial events, key financials for Q4 and year 2017 and guidance for 2018.

IN 2017, NewLink Genetics raised approximately $74 million from a successful underwritten offering of $55 million in October, as well as additional funds from an ATM. With these transactions completed, we believe the company’s cash position is sufficient to fund operations in the near and medium-term.

NewLink Genetics ended the year on December 31, 2017 with cash and cash equivalents totaling $158.7 million, compared to $131.5 million for the year ending December 31, 2016, and we expect to end 2018 with approximately $75 million in cash on hand.

NewLink Genetics reported a net loss of $13.7 million, or $0.37 per diluted share for the fourth quarter of 2017 and a net loss of $72 million, or $2.30 per diluted share for the year ended December 31, 2017, compared to a net loss of $13.5 million, or $0.46 per diluted share for the fourth quarter of 2016 and a net loss of $85.2 million, or $2.94 per diluted share for the year ended December 31, 2016.

The company ended 2017 with 37.1 million shares outstanding. Please refer to the press release that we put out this afternoon for more detail on financial results. As we look ahead, NewLink Genetics plans to participate in the Oppenheimer 28th Annual Healthcare Conference held March 20, and the William Blair 8th Annual Cancer Immunotherapy Conference on April 4th, both in New York City.

Now, I’d like to turn the call back over to Chuck before we open the call up to questions. Chuck?

Charles Link

Thank you, Jack. The key takeaway from this call is that, we are making significant progress in our clinical development program. 2018 will be a year when we initiate two important randomized trial; Indigo301 for patients with advanced melanoma and Indigo201 for patients with metastatic pancreatic cancer in collaboration with AstraZeneca.

In addition, we will be presenting the full datasets from our Phase 2 trial in melanoma and from our Phase 2 trial in pancreatic cancer. Most importantly, data from these and other trials continue to support the opportunity for indoximod to improve the outcomes of patients with cancer in different combination therapies in a different cancer indications.

With that, we will open up the call for questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from the line of Ying Huang from Bank of America. Your line is now open.

Jenny Huang

Hi, guys, this is Jenny on for Ying, thank you for taking our question.

Charles Link

Hi, Jenny.

Jenny Huang

We just want to follow-up on, I guess, where you are currently in the process of the dose determination and what conviction you have around initiation of the randomization portion of your Phase 3 in 2Q? And do you have the option to go back to a non-salt formulation if you’re unable to get the exposure levels that you want in humans?

And then secondly, with the delay of randomization, how do you think enrollment may be affected by results of ECHO-301? Thank you.

Charles Link

Hi, thanks, Jenny. So to begin with, with your questions there, as we’ve been discussing for some time, as our indoximod program evolved from early development to a randomized Phase 3 study with potential commercialization, there was – it was necessary to change manufacturing from indoximod free base and gel capsules to indoximod salt formulation and compressed tablets to decrease the pill count and optimize PK. This work has been done. Tablets have been evaluated in a variety of clinical situations.

As we said, the results we obtained to date have been different than what we predicted based on preclinical studies. Therefore, we have made some minor tweaks to manufacturing, that’s done and we’ll have results from clinical testing in the next two months. As far as our confidence at this point, it remains high.

John Henneman

So this is Jack. You also, I think, asked about the potential impact of ECHO-301 on enrollment. I think, the important thing to remember as the starting matter is the tremendous amount of both basic science and increasingly clinical data around IDO as a target. And these big commitments, many companies not just us and Incyte, but others are making the IDO field.

Obviously, it would be great for our trial if ECHO-301 were positive, but I think, if it weren’t, the question would be what was the nature of the miss? And how would the communications around that influence our ability to enroll? Obviously, under certain circumstances, we’d be forced to take a hard look at the design of our own clinical trial program. But pending that and pending understanding how that trial would work out, we feel pretty confident in our own ability to show the effectiveness in indoximod in the Phase 3 trial we’ve designed.

Jenny Huang

Great. Thank you so much.

Charles Link

Thank you.

Operator

And our next question comes from line of Stephen Willey from Stifel. Your line is now open.

Charles Link

Hi, Steve.

Stephen Willey

Yes. Hey, thanks for taking the questions. Just wondering if you can maybe speak to the, I guess, the delta and exposure levels relative to what you were seeing versus what you were expecting? And maybe just as kind of a follow-on to the prior question. I guess, your confidence is high, but I guess, how well do you feel you understand what’s driving the difference here? And I think maybe more importantly, how confident are you that you’re going to be able to address these issues based on the manufacturing changes that you’ve made?

Charles Link

Thanks for the question, Steve. I think that when we moved to the new formulation, there were some goals that we had including trying to decrease pill count. We had a high pill count with the gel cap, we had a total pill count of six. And so one of our goals is to optimize the reduction in pill count and then optimize the exposure at the same time by reducing the total pill count to make it easier for patients to take.

So we remain sort of committed to that that goal of reducing the pill count and getting solid exposures after reduced pill count relative to large pill burden that we used in the Phase 2 trial. We think that that’s very achievable.

Stephen Willey

Okay. And I guess, just given the fact now that it’s -- that the initiation of the randomized portion is likely to occur after an ECHO disclosure, do you feel that that kind of gives you now maybe a little bit more flexibility around your statistical plan in terms of, I guess, how you may choose to wait each of your co-primary endpoints from an alpha perspective?

Charles Link

Yes. So as you know the trials, our trials and Incyte’s – BMS, as far as I know, have not reported how they’re using the Alpha on the pre-specified endpoints that are planned. Ours are the same as Incyte trial and having overall survival and progression-free survival as the two main endpoints. But you do make a good point that there could be information that we gain from the results of that trial that might be informative to us. So that could give us an advantage in terms of tweaking things.

Stephen Willey

Okay. And then just lastly, is it safe to assume that Indigo201 trial will also be using the novel indoximod formulation and that the end of June trial start date, there is dependent upon the manufacturing resolution as well?

Charles Link

That is correct. So we’re keeping the guidance that we think that we’ll be able to do that start that trial by the end of June.

Stephen Willey

Okay. Thanks for taking the questions.

Charles Link

There’s one – yes, there’s only one formulation drug, which is the new salt formulation. Thanks, Steve.

Stephen Willey

All right. Thanks.

Operator

And our next question comes from the line to Mike Ulz from Robert W. Baird. Your line is now open.

Charles Link

Hey, Mike.

Michael Ulz

Hey, guys, thanks for taking the question. In terms of the full Phase 2 data for indoximod, you mentioned targeting first-half 2018. Should we be thinking ASCO, or is there still a chance for AACR, or is there something else I’m missing?

Charles Link

So until we have a final abstracts accepted, I can’t tell you exactly which meeting. But I think that you’re probably guessing in the right direction.

Michael Ulz

Okay. Gotcha. And then just with respect to NLG919, if you can just give us an update on the current status there and then your current thinking in terms of plans going forward with that asset? Thanks.

Charles Link

So we’re still in the process of completing the return of NLG919, which is our specific enzymatic inhibitor of IDO from Genentech. And so that sort of is in process. So as that has been going on, we’ve been sort of working on our planning and strategy around 919. We still think that there’s potential value in NLG919 sort of rollout those plans once we get a lot of the operational work completed on getting the asset returned.

Michael Ulz

Got it. Thanks, guys.

Charles Link

Thank you.

Operator

And our next question comes from the line or Peter Lawson from SunTrust. Sir, your line is now open.

Charles Link

Hi, Peter.

Peter Lawson

Hey, Chuck. Just probably a couple of questions around just timing of data like when we’d see AML data and then kind of, I guess, the pancreatic PD1, PD-L1 chemo study? Would that be – do you think that’s positioned for accelerated approval?

Charles Link

So you’re asking if those datasets are putting us in a position for accelerated approval?

Peter Lawson

For the pancreatic – yes, maybe, I should start again. So…

Charles Link

The pancreatic cancer data really is the basis for the randomized trial – forms one of the basis for the randomized trial that we’re doing with AstraZeneca, with durvalumab plus indoximod plus gem plus ABRAXANE. And that’s sort of how we feel, is that, was sort of the basis for initial data to consider pushing that further by doing a combination of checkpoint blockade in that trial.

The AML trial has been used now in part to treat patients with the new salt formulation to get ideas of PK effect. So we sort of interrupted the Phase 1a portion of that trial in combination with chemo. And we are sort of assessing the plans for how we would move that further into development, working and discussing things with key opinion leaders in the AML field and that sort of stuff.

But we haven’t been accumulating more data at full dose in terms of responsiveness, because we’ve employed that trial in part to speed the salt formulation to get the randomization open on the melanoma trial.

Peter Lawson

Gotcha. Thank you. And then just on the manufacturing changes, how far through that process do you think you are? Do you think you’re a couple of weeks to finding a solution?

Charles Link

I think overall, we’re pretty far through the process, because I mean, we’re obviously at the point of manufacturing that the tweaks that we’ve done to the tablet can be used clinically that we would have results we expect within the next two months. So that can give you a sense of that.

Peter Lawson

Okay, thanks.

John Henneman

So it should be said that – this is Jack. It should be said that these are fundamentally simple changes.

Peter Lawson

Okay. Thank you.

John Henneman

I don’t want to go into greater detail, but they’re not hard to implement.

Charles Link

Thanks, Peter.

Peter Lawson

Thank you. Take care.

Operator

And our next question comes from the line of Biren Amin from Jefferies. Sir, your line is now open.

Biren Amin

Yes, thanks for taking my questions. Just on the formulation changes, do you need to see similar AUC levels? Is that what the gating item is before you start 301?

Charles Link

So it’s really a combination of the AUC levels that we see, whether they are equivalent or better and the choice of pill count relative to those AUC levels. So we’re trying to both optimize exposure and optimize pill count and sort of making a judgment about that. Originally, it was the gel capsules. It was six gel capsules at a time. And ideally the lower the pill count is, the easier it would be in terms of commercial venture going forward, and obviously, the Phase 3 drug should be the same as our commercially prepared drug. We’re trying to be attentive to seriously exposures relative to pill count that we feel comfortable forward – move forward for the Phase 3 randomization portion.

Biren Amin

And do you have a specific number on the pill count that you would move forward with? Is it instead of six, are you trying to get to…?

Charles Link

Yes, we haven’t put out a specificity about that. But sort of giving you a judgment call, we look at all the data at the different pill count and what the exposures look like at each pill count level.

Biren Amin

And Chuck is there an option to just maybe wait for the prodrug formulation given this delay?

Charles Link

The prodrug is in – is still in Phase 1a development. So that’s not growing up along and we really think of that as a next generation compound. And so I think that with the situation we’re at right now with the CMC, we fully anticipate that we will be able to get going on the Phase 3 randomization on the relative near-term and that the issues that we have we think are imminently solvable if it takes – this takes the steps we’ve already taken to tweak the manufacturing process.

Biren Amin

Got it. And then….

Charles Link

But that was already prepared and manufactured obviously, ready for the clinic with that – with the changes.

Biren Amin

And I think you mentioned a couple of datasets at AACR. I guess, should we assume that the Phase 2 melanoma data is likely for ASCO as a result, given you did mention that, that would be at AACR?

Charles Link

That’s probably a reasonable assumption, Biren.

Biren Amin

Okay. And then I guess, for the Phase 2 melanoma data, will we also get the biopsy cohort at ASCO as well?

Charles Link

Yes, there’s a biopsy cohort as well. We’re trying to look at the physiology of the tumor and how it changes after the checkpoint blockade is given to the patient the pre and post-biopsy sort of a mix up.

Biren Amin

Got it. And then maybe one last question. Do you have cash through the readout of 301 as a result of those delay?

John Henneman

So right now we have cash, I’ll say, significantly past the enrollment or the planned enrollment of Indigo301. If we pursue all the programs we have laid out internally, we would not have cash through the readout. If push came to shove, there are steps we could take to dramatically extend. But the – at the end, our sort of guidance is our guidance, we expect to complete this year with $75 million in cash, assuming no financings, no incremental dilutive or non-dilutive sources of cash. And you consider when the timing from that, it would be challenging to get through readout without having something more come in.

Biren Amin

Okay. Thank you.

Charles Link

Thank you very much, Biren.

Operator

[Operator Instructions] And I’m showing no further questions in the queue at this time. I’ll hand the call back for closing remarks.

Charles Link

Well, we thank you very much for your interest and look forward to seeing you at Investor Conference throughout 2018. Obviously, it’s an another important year for NewLink and pushing indoximod in further development.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program and you may all disconnect. Everyone, have a great day.