NewLink Genetics Corp (NLNK) CEO Charles Link on Q3 2018 Results - Earnings Call Transcript

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About: NewLink Genetics Corporation (NLNK)
by: SA Transcripts

NewLink Genetics Corp (NASDAQ:NLNK) Q3 2018 Earnings Conference Call November 1, 2018 4:30 PM ET

Executives

Lisa Miller - Director, IR

Charles Link - Co-Founder, Chairman, CEO & Chief Scientific Officer

Eugene Kennedy - Chief Medical Officer

Carl Langren - CFO & Principal Accounting Officer

Analysts

Stephen Willey - Stifel, Nicolaus & Company

Jenny Leeds - Bank of America Merrill Lynch

Colleen Hanley - Robert W. Baird & Co.

Operator

Good day, ladies and gentlemen, and welcome to the NewLink Genetics Third Quarter 2018 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded.

I will now turn the call over to Lisa Miller, Director of Investor Relations.

Lisa Miller

Thank you. I would like to remind everyone that certain statements made during this call are forward-looking statements under the 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 in our Form 8-K, which maybe accessed from the investors page of the company's website.

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

Charles Link

Thank you, Lisa. Good afternoon, and thank you for joining Dr. Eugene Kennedy, Chief Medical Officer; Mr. Carl Langren, Chief Financial Officer; and myself for the NewLink Genetics Third Quarter 2018 Conference Call. After the market closed, we issued a press release reviewing recent clinical highlights and third quarter financial results. I will provide an overview of our clinical activities, Dr. Kennedy will review highlights of our clinical development programs, and Mr. Langren will wrap up with the third quarter 2018 financial results and comment on our cash position.

NewLink Genetics has published extensive data supporting indoximod as a potentially important immunotherapy. Clinical activity has been observed when indoximod has been combined with PD-1 blockade, chemotherapy, radiation and vaccines in cancer indications, such as advanced melanoma, pancreatic cancer, pediatric brain tumors, acute myeloid leukemia and prostate cancer. As outlined in our presentation at AACR in April, we have data illustrating indoximod's mechanism action, demonstrating that indoximod counters tumor-driven immune evasion by modulation of AhR-driven transcription of genes that control immune function on CD4 T cells and through its direct impact on effector T cells. For these reasons, we remain confident in indoximod's potential as immunotherapy.

Our indoximod clinical program is focused on indications of important unmet need, supported by encouraging early data with the potential to produce additional validating data. These target indications include recurrent malignant pediatric brain tumors, frontline DIPG and frontline AML. As these trials continue to enroll, we remain encouraged by the data produced thus far. In addition, our Phase I dose escalation trial continues with NLG802, a prodrug of indoximod with the potential to significantly increase levels of exposure that can be achieved with indoximod.

In addition, several abstracts have been accepted for presentation at upcoming medical meetings, including an oral presentation at ASH. Dr. Kennedy will discuss these programs in greater detail in a few moments. Our Phase II clinical trial of NLG207, our nanoparticle formulation of the topoisomerase 1 inhibitor camptothecin is maturing. Finally, in parallel, we are pursuing other opportunities with the potential to expand our pipeline.

And now, I would like to turn the call over to Gene, who will discuss our clinical programs in greater detail. Gene?

Eugene Kennedy

Thank you, Chuck. As Chuck mentioned, we are focusing our clinical priorities on indoximod in a limited number of specific indications. We continue our evaluation of indoximod plus standard-of-care radiotherapy for patients with recurrent malignant pediatric brain tumors. Distinct from this group of patients, we also continue to enroll a cohort of frontline patients with DIPG, who receive indoximod in combination with standard-of-care radiotherapy followed by indoximod plus chemotherapy.

We are also continuing to evaluate indoximod plus standard-of-care chemotherapy in frontline AML. In all of these indications, we have produced promising early clinical data suggesting the potential for indoximod to improve the lives of these patients.

In addition, clinical work to evaluate NLG207 plus paclitaxel in recurrent ovarian cancer is maturing. I will elaborate on development activity with this compound and on indoximod in AML a bit later.

NewLink has presented some very encouraging data in its malignant pediatric brain tumor programs and these trials continue to enroll. Approximately 4,600 new cases of pediatric brain tumors are diagnosed each year. Of those, around 70% of the most common types of these pediatric brain tumors now have survival rates in excess of five years. However, for patients that relapse, conventional therapy has limited benefit and outcomes are uniformly fatal.

Last November, we first presented promising Phase Ib data for pediatric patients with recurrent malignant brain tumors at the Society for NeuroOncology Annual Meeting. That early data suggested adding indoximod to radiochemotherapy may act as an endogenous vaccine and allow patients to respond to additional therapy after previously having become refractory to treatment. The trial continues to enroll with some early but encouraging overall survival data, which we hope to present in the first half of next year.

Another area of clinical focus for NewLink is DIPG, a subtype of pediatric brain tumors. While a rare tumor with a few hundred new cases a year in the U.S., the prognosis for DIPG patients is especially dire, with approximately 20% survival at two years and approximately 1% survival at five years. These patients are treated quite differently from other pediatric brain tumor patients with radiotherapy being the only standard-of-care therapy used in the frontline setting. Today, neither radiotherapy nor any experimental therapeutic approach has been shown to meaningfully prolong survival for these children, but does provide some degree of symptomatic relief after completion of therapy.

After initiating a subset cohort of frontline DIPG patients, we expanded that cohort to 30 patients. The company presented promising updated Phase Ib data from the DIPG cohort at the International Symposium on Pediatric Neuro-Oncology, or ISPNO, in July. These data demonstrated symptomatic improvement in all patients in the cohort and radiographic improvement in the majority of patients with one complete response reported. The trial continues to enroll, and we are currently increasing the number of sites in order to enroll patients who may find it difficult to travel to our original location.

While both of these pediatric tumor trials are single-arm, we are making an effort to obtain control data in these patient populations to evaluate the potential for indoximod to improve patient outcomes. As standard of care of therapy has not changed meaningfully, we believe it is appropriate to use a historical control data set as comparative arm. We have obtained the DIPG control data set and will evaluate data from our DIPG trial in comparison as the survival data matures. For the recurrent pediatric brain tumor trial, we are working with multiple groups to develop a controlled data set that matches the cohort in our trial and expect to have that data in the near future.

Another area of clinical focus for the company is AML, a malignancy for which there remains unmet need. The incident rate for this disease is approximately 19,000 cases per year in the U.S., and the prognosis remains poor for the majority of patients. NewLink is targeting the roughly half of patients classified as young enough and fit enough at diagnosis to receive classic aggressive 7+3 induction chemotherapy. The majority of recent clinical development work has been in the second line or a lab setting where genetic markers drive targeted therapies. Whereas NewLink's focus is in first-line AML.

The most important clinical outcome from frontline therapy for AML is achieving a CR after initial therapy. However, the majority of patients with a complete response relapse. A critical determinant of prognosis according to numerous studies has been the presence or absence of minimal residual disease, or MRD, negativity, an assessment that the regulatory authorities have accepted as the basis for clinical development in pediatric leukemias and quite recently, as the basis for approvals in adult lymphoblastic leukemia, or ALL. We believe that a regulatory strategy based on MRD and AML can be successful, and we are working with an established leader in this field, Hematologics in Seattle, Washington. With this strategy, we can believe -- we believe we can validate indoximod in frontline AML.

Today, we are pleased to announce that an abstract with updated data from our Phase Ib trial of evaluated indoximod plus 7+3 chemotherapy in newly diagnosed AML was accepted for oral presentation at ASH. As of July, when the abstract was submitted, 31 newly diagnosed AML patients were consented with 25 included in the intent-to-treat analysis and 19 meeting qualifications for the per-protocol analysis.

Per-protocol patients were defined as those who took at least 80% of the scheduled indoximod doses. Of 25 intent-to-treat patients, 21, or 84%, achieved CR. And 15 of 19 per-protocol patients, or 79%, achieved CR. 12 of the 15 per-protocol CR patients had an MRD sample submitted at the end of induction at the time of abstract submission. 10 of these 12, 83%, were MRD negative. Add to the other three, two died of complications of AML treatment prior to an MRD marrow sample being submitted while one patient's results were pending. Of the 12 patients who had MRD sample submitted at the end of induction, one went directly to bone marrow transplant without undergoing consolidation therapy and was, therefore, taken off protocol.

Of the remaining 11 patients, all the 11 patients, 100%, were MRD negative at the end of consolidation, the prespecified endpoint of the protocol. Additionally, we have been working with our researchers to develop a control data set evaluating the MRD status of patients who received upfront 7+3 therapy without indoximod using the same MRD assay we are employing. These contemporaneous samples are from patients with the same diagnosis undergoing the same chemotherapy without the addition of indoximod. The MRD assay is run by the same reference laboratory we are using for our study and should provide additional context within which to evaluate the single-arm data generated in this Phase I trial. We are looking forward to including these data in the ASH presentation.

Today, we would also like to highlight that three abstracts have been accepted for presentation at the Society for Immunotherapy of Cancer, or SITC, Conference, which will take place in Washington, D.C., on November 7 through the 11. Two of these abstracts discuss indoximod's effects on the tumor microenvironment in advanced melanoma and pancreatic cancer. These biomarker data are from our Phase II trials of indoximod plus checkpoint inhibition in advanced melanoma and indoximod plus standard-of-care chemotherapy in pancreatic cancer. We believe these data will provide evidence supporting indoximod's mechanism of action in patients. The third abstract presents pharmacokinetic data from our ongoing Phase I trial of NLG802, a prodrug of indoximod. NLG802 is designed to increase absorption, but is orally administered drug compared to indoximod. In preclinical models, administration of 802 resulted in nonhuman primates having 4 to 5 fold increased exposure compared to the parent compound. We look forward to presenting these data at SITC.

Beyond our work on indoximod, clinical development is also proceeding with our drug candidate NLG207, formerly CRLX101. NLG207 has previously received fast track designation from the FDA. NLG207 is a nanoparticle formulation of the topoisomerase 1 inhibitor camptothecin and is being evaluated in combination with paclitaxel in a Phase II trial for patients with recurrent ovarian cancer. Previously presented data with NLG207 in recurrent ovarian cancer appear encouraging. All patients have completed treatment in this trial and data analysis is underway.

In summary, we continue to be encouraged by our data produced thus far in pediatric brain tumors and frontline AML and look forward to presenting additional data in these indications at upcoming medical conferences. We believe NLG207 in ovarian cancer is promising and look forward to presenting data next year.

Now I will turn the call over to Carl to discuss the financial results for the quarter and our cash forecast.

Carl Langren

Thank you, Gene. Before we move into the Q&A, I will comment on our cash guidance and provide an overview of key financials for Q3. We anticipate a cash use of approximately $10 million per quarter, which allows our cash runway to extend into the second half of 2021. This excludes any additional financing, new partnerships or the impact of a priority review voucher should one issue in connection with the approval of our partnered Ebola vaccine candidate. As a reminder, in 2014, the company entered into a license agreement with Merck to develop, manufacture and commercialize NewLink's Ebola vaccine candidate. Merck has stated that it is making rapid progress towards the registration of the Ebola vaccine and intends to file the BLA with both the FDA and EMA in 2019. When and if the FDA approves this Ebola vaccine, this would trigger the issuance of a priority review voucher owned by Merck and in which NewLink Genetics has a substantial economic interest. Thereafter, NewLink would have the right to monetize its interest in the voucher. We can't forecast the value of the priority review vouchers in the future, but recent open market transactions have valued them at $80 million or more.

We do believe the FDA will recognize the clinical value of this vaccine and approve the drug, given the recent outbreaks and the recurrent risk this deadly disease poses to global public health.

NewLink Genetics reported a net loss of $7.4 million or $0.20 per diluted share for the third quarter of 2018 compared to a net loss of $20.6 million or $0.69 per diluted share for the third quarter of 2017. The company ended Q3 2018 with 37.2 million shares outstanding. The company ended the quarter on September 30, 2018, with cash and cash equivalents totaling $122.1 million compared to $158.7 million for the year ending December 31, 2017. Please refer to the press release we put out this afternoon for more detail on financial results.

Looking ahead, NewLink Genetics plans to participate in the Stifel Healthcare Conference on November 13 in New York City. I hope to see many of you there.

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

Charles Link

Thank you, Carl. I want to take a moment to extend our congratulations to Dr. Allison and Honjo, recent winners of Nobel Prize in Medicine for their pioneering work in immuno-oncology. These dedicated scientists and many others continue to advance the field for direct benefit of patients. As always, we deeply appreciate the efforts of our clinical investigators and patient volunteers in moving our clinical programs forward.

In summary, over the past few years, NewLink Genetics has produced promising and substantial data in numerous cancer indications suggesting that indoximod in combination therapy has the potential to improve the lives of patients with cancer. We have narrowed our clinical focus to frontline AML and malignant pediatric brain tumors where we believe we can produce validating data. We look forward to presenting additional clinical data at SITC next week and at ASH in December and at medical conference in 2019.

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

Question-and-Answer Session

Operator

[Operator Instructions]. And your first question comes from Stephen Willey with Stifel.

Stephen Willey

So just with respect to the ASH abstract release today, I'm not sure how much you can speak to this, but we just kind of be curious to know kind of ballpark range of how much additional patient data we might expect to see as part of the presentation. Secondly, I guess, it looked like a lot of the patients who were achieving MRD negativity had also received high dose ara-C within consolidation. So just kind of wondering how you're thinking about the two of those things? And then also, with respect to AML, I believe there was, at some point, the integration of the novel salt in the form of indoximod into this trial and just wondering if any of that novel salt data is reflected in the abstract or should we be waiting for the presentation to see that?

Eugene Kennedy

Steve, it's Gene. I can answer these questions for you. As to additional patients since the abstract was submitted, as you realized, it's a Phase I study at a small number of sites. So there'll be a limited number of additional patients -- we have a few more patients, which hopefully will help people interpret the data. I think the thing that some may want to focus on is looking at the comparison data because that really can sort of help put single-arm data in context. As far as the -- getting the [indiscernible] chemotherapy, if you think of MRD as an endpoint, the goal is to have as little as cancer as possible at the end of induction and consolidation whether you go into a maintenance therapy or you go on to bone marrow transplant.

So that's why we actually have the end point of the study being the MRD level at the end of consolidation, which is standard therapy at many institutions. So we believe that consolidation therapy has value that's why clinicians use it between induction and bone marrow transplant. So our goal really is to have when people finish their first treatment with chemotherapy, which includes induction and consolidation, to have them be MRD-negative, which we feel will give them the best opportunity for a good long-term outcome. As far as the salt formulation, as you know, we leveraged this trial and actually slowed it down a bit just started to incorporate some PK data from the salt formulation into it. The trial has now been completely switched over to the salt formulation. The bulk of the data that is in the abstract was, obviously, generated with the freebase, and as I said, we only have a few more patients coming out since the abstract was submitted. So I think, the ability to define the difference between the two would be limited at this point.

Stephen Willey

Okay. And then maybe just lastly from me. Can you just speak a little bit more to the ongoing Phase II NLG207 trial? I guess, just with the respect to patient numbers and perhaps what where the -- or what are the prespecified endpoints that you're going to be looking at in that trial? And I'm presuming that's single-arm?

Charles Link

Yes, that's a single-arm Phase II study that's been done in cooperation with the Gynecologic Oncology Group, the GOG. And we're in the process of doing data analysis of the trials fully enrolled. They are being evaluated of their response, and there's comparisons in that trial that will be done between platinum-sensitive and platinum-refractory patients. It's done in combination with paclitaxel given weekly, in addition to the NLG207. There were some earlier results reported a few years back by Cerulean Pharma prior to us licensing the drug showing that the drug had some activity in ovarian cancer. And I think that's one of the main reasons why we ended up in licensing the drug a few years back. Obviously, it hasn't been in the area of focus. It hadn't been as much of an area of focus, and we really were sort of waiting to get the readout analysis for this Phase II trial that we'd been conducting with the GOG. There's another investigation trial being conducted at the National Institute of Health, which is a trial that is enrolling patients with refractory cancer of various types in combination with PARP inhibitor -- the AstraZeneca PARP inhibitor. So those are sort of the two active trials that are going on with our program. We don't have a projected date yet and when that data will be presented, it obviously, has to be done in concert with the GOG investigators.

Stephen Willey

And then just in terms of patient numbers with respect to the GOG study?

Charles Link

The total enrollment target in that trial was 30.

Operator

Your next question comes from Ying Huang with Bank of America Merrill Lynch.

Jenny Leeds

This is Jenny on for Ying. In terms of AML, can you speak a little bit to your thoughts on the Phase II trial, whether or not it would be a randomized controlled trial, the endpoints, have you been in conversation with the FDA regarding MRD negativity as an end point and how viable is that? And then when thinking about your pipeline expansion, is it purely oncology? I guess, now that since evaluation might have a pulled back on it, kind of what are you guys thinking in terms of molecules that you replace in?

Charles Link

Let me start the question about licensing other molecules. There seemed to be a fair number of opportunities out there on the oncology front. We ideally are looking for things that we think can be synergistic with some of our current programs, but we don't have anything to report on what type of molecule or what kind of transaction we'll do and whether or not it would just be something as simple as a license or something more strategic. Gene, you want to sort of answer the question about the...

Eugene Kennedy

Sure. As far as next steps in leukemia, it's pretty apparent from the fact that our controlled data was not in the abstract. That is something we've gotten very recently, still working. We intend to present it during the ASH presentation. But plan of the next types of this program really has been dependent on getting that data, as you can imagine, to determine your treatment effect and the ultimate size of a trial. So I, rather than throw out some numbers that we haven't vetted yet, I would rather say that, that work's underway. We're analyzing the data. We're encouraged by where we stand now. And when we have more definitive calculations, we'll be happy to share them.

Operator

And your next question comes from Mike Ulz with Baird.

Colleen Hanley

This is on Colleen on for Mike. So for NLG802, for the data you'll be presenting at SITC, can you give us a sense of kind of how many patients and kind of what kind of data points we can expect? And could you just remind us what the bar for success would be in the Phase I study?

Eugene Kennedy

So NLG802 is a quasi-dipeptide version of indoximod that uses what appears to be an active transporter process to get the drug into mammals that can in the preclinical models and nonhuman primates could increase exposure of the drug 4 to 5 fold. We believe that there is sort of some dose ranging effects that might be possible where higher doses maybe able to have additional immunologic effects over the doses that we're getting currently with the indoximod salt. That's hypothesis at this time, but it's supported by some of the preclinical work. And so this is a dose-escalation study where we're dose escalating and then comparing the pharmacokinetics. Once the drug enters the body, it's hydrolyzed and so what you measure is just indoximod in the blood, just as you would as if you were giving the indoximod salt. So it's the assays to assess both drugs in terms of their exposure and distribution. And that data will be presented at SITC next week on the first few dose levels of that dose-escalation study.

Operator

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 everybody for their interest today, and we'll see you next week at SITC.

Operator

This concludes today's conference call. You may now disconnect.