Compugen Ltd Q4 FY2022 Earnings Call

Ladies and gentlemen, thank you for joining us today. Welcome to Compugen's Fourth Quarter and Full Year 2022 Results Conference Call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available in the Investors section of Compugen's website, www.cgen.com. As a reminder, today's call is being recorded. I would now like to introduce Yvonne Naughton, Head of Investor Relations and Corporate Communications. Yvonne. Please go ahead.

Thank you, Operator, and thank you all for joining us on the call today. Joining me from Compugen for the prepared remarks are Dr. Anat Cohen-Dayag, President and Chief Executive Officer; and Alberto Sessa, Chief Financial Officer. Dr. Henry Adewoye, Chief Medical Officer; and Dr. Eran Ophir, Senior Vice President Research and Drug Discovery will join us for the Q&A. Before we begin, we would like to remind you that during this call, the company may make projections or forward-looking statements regarding future events, business outlook, development efforts and their potential outcome, the company's discovery platform, anticipated progress and plans, results and timelines for its programs, financial and accounting-related matters, as well as statements regarding the company's future cash position. We wish to caution you that such statements reflect only the company's current beliefs, expectations and assumptions, but actual results, performance or achievements of the company may differ materially. These statements are subject to known and unknown risks and uncertainties and we refer you to the SEC filings for more details on these risks, including the company's most recent annual report on Form 20-F, filed with the SEC on February 28, 2022. The company undertakes no obligation to update projections and forward-looking statements in the future. And now, I'll turn the call over to Anat.

Thank you, Yvonne. Good morning and good afternoon, everyone, and welcome to our fourth quarter and full year 2022 update. Immunotherapy has been a revolution for the treatment of many patients with cancer. 2022 annual sales of PD-1 pathway inhibitors alone were greater than $35 billion. But still, as we all know, there remains an urgent unmet medical need for the majority of the cancer patients who are resistant to anti-PD-1. To address the needs of these patients, many drug combinations are being evaluated including IO/IO combination. Compugen is the leader in the triple IO/IO combination blocking PVRIG PD and PD-1. While TIGIT blocking antibody in combination with PD-1 inhibitor may function in PDL1 high expressing patients, our data consistently show that the addition of an anti-PVRIG may sensitize tumors to respond to PD-1 and TIGIT blockade even in PDL1 low expressing patients. As leaders in the DNAM axis space, we believe that evaluating the triple combination of our potential first-in-class anti-PVRIG COM701 with our potential best-in-class anti-TIGIT COM902 and the PD-1 inhibitor has the potential to maximize clinical benefit for patients. On this front, we have made significant progress. And I would like to share our top highlights for 2022, which we believe set us up for success in realizing our vision to transform the lives of patients by extending the reach of cancer immunotherapy to those who are resistant to anti PD-1 therapies. First in 2022, we took a strategic decision to narrow down our broad significant study to focus on two indications with high unmet medical needs and less competitive landscape, microsatellite-stable colorectal cancer and platinum resistant ovarian cancer. We believe that this focus provides us with a high probability of success for several reasons. One, these are indications where we have shown encouraging clinical benefit supported by immune activation that aligns with the COM701 mechanism of action set with the biological rationale and which we believe provides a fast route to additional meaningful data to inform the next steps in building a path to registration. Two, as a result of our decision to prioritize two indications, we concluded our collaboration with Bristol Myers Squibb, thereby enabling us to focus our time and cash on two indications, as well as switch to evaluate our own potential best-in-class anti-TIGIT COM902, as part of our triple combination going forward. And now that COM701 is no longer restricted, we also have the opportunity to advance and partner both our potential first-in-class anti-PVRIG COM701 in addition to COM902. And lastly, the decision has made us act to extend our cash runway through at least the end of 2024, which is sufficient time to complete our small proof-of-concept study aimed at strengthening the evidence and de-risk our lead assets in these two indications. Moving now to the second highlight of 2022, which was the encouraging clinical data we presented in the fourth quarter of 2022 in two indications. The first set of data we presented was in patients with microsatellite stable colorectal cancer at Citi Conference in November 2022. And the second set of data was in patients with platinum resistant ovarian cancer, which we presented at ESMO Immuno-Oncology Conference in December 2022. As far as we are aware, we are the only company reporting clinical benefit with an immune checkpoint inhibitor supported by an underlying biological rationale in this patient population with microsatellite stable colorectal cancer and liver metastasis, which makes up approximately 70% of the MSS-CRC patients in this metastatic setting. This is encouraging as this is an indication with a high unmet medical need and these patients have no approved treatment options after failure of standard-of-care therapy. In these patients with platinum-resistant ovarian cancer, there was a lot of excitement from investigators reporting durable shrinking or stabilization of tumor in some of their patients who had previously progressed on all available treatment options. The totality of the clinical benefit in these patients including a 20% response rate with several patients responding over 9 months with responses also achieved in a hard-to-treat high grade serious adenocarcinoma patients, along with a favorable safety profile is encouraging compared to current standard-of-care. The translational work which centers taken from these patients is appropriate. And we expect to share this data in one of the upcoming medical conferences during 2023. In both indications, the clinical benefit is supported by biological rationale and points to a COM701 mediated mechanism of action increasing tumor-infiltrating lymphocyte numbers, and mediated anti-tumor immunity in tumor types and in patient populations that could not be addressed otherwise. And the third highlight is AstraZeneca's rapid progress and continued expansion of their PD-1 TIGIT bispecific rilvegostomig which is derived from our COM902. This progress and continued investment by a global leader in oncology, in our opinion, exemplifies belief in the TIGIT mechanism of action and more specifically in our differentiated anti-TIGIT, COM902. Like COM902, which is a high affinity reduced Fc effector function anti-TIGIT antibody, rilvegostomig was engineered to reduce Fc effector functionality with the potential to enhance antitumor activity. With Halevy Gilead's randomized Phase 2 data with their anti-TIGIT antibody and AstraZeneca's antibody designed strategy, we believe our choice to serve reduced Fc effector function anti-TIGIT is well reinforced. Last year, AstraZeneca moved rilvegostomig into Phase 2 development in metastatic non-small cell lung cancer and since then AstraZeneca has expanded development for the treatment of non-small cell lung cancer and gastric cancer patients. AstraZeneca announced that it also plans to initiate a Phase 3 study this year and had suggested that this could be one of the 10 programs with blockbuster potential. It's great news for us as we may be entitled to receive up to an aggregate of $200 million in milestones for these products as well as royalties on future product sales. We look forward to the success of rilvegostomig. During our call today, I will provide an overview of the opportunity and path forward in our prioritized indication microsatellite stable colorectal cancer and platinum resistant ovarian cancer. I will go on to describe our next guideline asset, COM503 which is the lead asset in our early pipeline and why we're excited about this potential. Alberto will take you through the financials. I will summarize our upcoming milestones and then we will open the call up for questions.

Thank you, Anat. I'm happy to summarize our financial results. I will start with our cash balance. As of December 31, 2022, we had approximately $83.7 million in cash compared with approximately $117.8 million as of December 31, 2021 affirming our focus on capital efficiency and bold execution on our DNAM-1 axis hypothesis. During 2022, we used $41.6 million to fund our operations. And we received in the fourth quarter a $7.5 million payment triggered by initiation of AstraZeneca Phase 2 study evaluating the PD-1 TIGIT bispecific derived from our COM902. The company had no debt. Going into 2023, we expect our cash burn to be in the range of between $37 million to $39 million. We understand the importance of our cash balance, and we are financially disciplined. We are constantly monitoring our expenses but at the same time, we are targeting our extensive and unique knowledge in this space on specific tumor types and clinical strategy to increase the probability of success of our drugs to patients. Based on our current plans, we expect that our current cash will be sufficient to fund our operating plan at least through the end of 2024. On the revenue front as just mentioned, we reported $7.5 million revenue from the fourth quarter and for the year ended December 31, 2022 compared with no revenue and $6 million of revenues respectively for each of the comparable period of 2021. Our revenue in 2022 is related to the milestone payments received from AstraZeneca. Now regarding the expense front. R&D expenses for the fourth quarter of 2022 and for the year ended December 31, 2022, were $7.3 million and $30.6 million respectively, compared with $5.8 million and $28.7 million for the comparable period in 2021. The increase is mainly due to higher expenses associated with our CMC activities offset by higher BMS participation in R&D expenses. Research and development expenses as a percentage of total operating expenses were 73% in 2022 compared to 71% in 2021. Our G&A expenses for the fourth quarter of 2022 and for the year ended December 31, 2022, were $2.5 million and $10.3 million, respectively, compared with approximately $2.7 million and approximately $10.9 million for the comparable period in 2021. For the fourth quarter of 2022, we reported a net loss of $3.1 million or $0.04 per basic and diluted share compared to a net loss of $8.6 million or $0.10 per basic and diluted share in the comparable period of 2021. Net loss for the year ended December 31, 2022, was $33.7 million or $0.39 per basic and diluted share compared with a net loss of $34.2 million or $0.41 per basic and diluted share in the comparable period of 2021. I'm moving now to the 2023 outlook. Going into 2023, we expect our cash burn to be in the range of $37 million to $39 million. In 2023, we are planning to have a similar level of R&D expenses compared to 2022, mainly to support our upcoming MSS CRC and platinum-resistant ovarian cancer proof-of-concept studies, as well as our leading early pipeline assets COM503. We understand the importance of our cash reserves, and we believe we have sufficient cash to execute on our plan and guidance.

Thanks, Alberto. So to summarize upcoming milestones. In MSS CRC, we're on track to dose the first patient with our triple combination study to complete enrollment of up to 20 patients and report initial findings this year. In platinum resistant ovarian cancer, we are on track to dose the first patient with our triple combination in the second quarter of this year. We plan to complete enrollment of 20 patients and report initial findings this year and plan to complete the full enrollment in the first half of 2024. Taking a staged approach, once the enrollment of the first 20 patients in the triple is completed, we intend to evaluate the inclusion of an additional arm of COM701 and pembrolizumab in the absence of COM902 to gain more insight on contribution of components. We also continue to monitor the patients in the cohort expansion studies with Bristol Myers Squibb and expect to report findings from these studies, including longer follow-up and translational data from the platinum resistant ovarian forward expansion study in 2023. We plan to present on COM503 during the medical conference in 2023 and to file an IND for COM503 in 2024. Finally, this is a big year for TIGIT results, and we expect to see reach through to Compugen. To this end, I want to emphasize why we believe we have an edge with our differentiated clinical strategy. Firstly, we have a combination approach with a leading anti-PVRIG COM701 against a novel target, which our data suggests may sensitize tumors to respond to PD-1 and possibly TIGIT blockade. And we're being followed by others. PVRIG is gaining traction as a relevant testing in our immunology targets with more and more competitors joining these rates, including GSK, while following our triple combination approach. Secondly, we have a differentiated Fc-reduced effector function, high affinity anti-TIGIT COM902 which we believe was reinforced recently. And finally, we're targeting tumor types typically not responding to immunotherapy, where we believe that PVRIG's unique biology different than other checkpoints may be exemplified and has the potential to generate better outcomes in these patients, and we would share initial findings from our proof-of-concept study by the end of the year. With that, I will turn the call over to questions.

The first question is from Stephen Willey of Stifel. Please go ahead.

Yes, good morning. Thanks for taking the questions. I guess with the decision to add a doublet cohort to platinum-resistant ovarian cancer, will there be any attempt to try to enroll patients into that cohort that, I guess, are typically similar to the triplet cohort. And I'm just talking about perhaps an effort to try to match baseline characteristics with respect to things like histology, PDL1 expression so that you can get a better kind of apples-to-apples comparison of what triplet is buying you above and beyond doublet in the matched mutation population. And then I have a follow-up.

Henry, I guess you want to take this one?

Yes, I will take it. Yes, Steve, it's actually a very good question. And that's the overall intent because that provides us an opportunity, as you rightly pointed out, to be able to have an apples-and-apples comparison of what the triplet is doing and what the doublet will possibly do.

And Stephen, I'll add that taking advantage of the work we do on biomarkers in the studies we just completed, as well as in these new ones, is also a reason to consider including a doublet. This will help us gain a better understanding of the patient population.

Okay. That makes sense. And then just quickly, I guess, on COM503. Now you talked about how the targeting of IL-18 binding protein gives you a wider therapeutic window versus IL-18 administration alone, but I know that there's some literature out there kind of suggesting that the disruption of this pathway can lead to pathological inflammation. So I guess, just wondering if this is kind of something that you've seen within preclinical models and whether or not you've evaluated the asset in models of inflammatory disease to see if this somehow gets exacerbated?

Eran, I think that one's for you.

Yes. I think like many of the IO assets, if you take them to the other direction, they also might play a role in inflammatory diseases. There is a literature about the targeting IL-18 binding protein with an antibody or anything like that in the literature. So we're the first to show that if you tackle this pathway preclinical model, you can actually get anti-cancer activities. And yes, again, there are literature about IL-18's role in inflammatory diseases and that exactly plays to the same role that inhibiting IL-18 binding protein is effectively canceled.

Okay. Thanks for taking the questions.

The next question is from Mark Breidenbach of Oppenheimer. Please go ahead.

Hi. Good morning. Thanks for taking the questions and congrats on the progress. Just a few quick ones for me. First of all, I'm wondering if you're aware of any plans from AstraZeneca to present data this year from any of its early studies of the bispecific antibody, kind of justifying their plans to advance into the Phase III trial? And one for Alberto is if any of his guidance on operational runway includes assumptions about additional milestone payments from AstraZeneca or is the guidance completely independent from that? And then I have maybe one follow-up.

I will begin with the disclosure, as it is up to AstraZeneca to determine when they disclose information, so we cannot comment on that. Alberto, would you like to address the milestone question?

Yes, sure. As Anat said, we have no control over what AstraZeneca is going to do. So all our guidance does not include any funds whatsoever from AstraZeneca, so it's net of.

Okay. That's super helpful. And then just with respect to the biomarker data that you're planning to present later this year, is that going to be kind of actively integrated into patient selection strategies for the two proof-of-concept trials, or are those protocols kind of fixed right now with regards to what kind of patients and selection criteria that you're going to use?

At this point, our intentions and plans moving forward are set. The studies we are conducting are designed to help us collect data and enhance our understanding of whether we can utilize such a biomarker. As I mentioned in the prepared remarks, identifying a biomarker in cancer immunotherapy is not guaranteed or straightforward. However, we are well-equipped to carry out this work using advanced computational and experimental methods, especially as we are leading in the PVRIG space. Nonetheless, we are carefully designing the studies to identify these biomarkers. While the studies are currently established, we remain flexible as a company and will ensure that we respond effectively to the data we gather.

Okay. Thank you so much for taking the questions.

The next question is from Asthika Goonewardene of Truist Securities. Please go ahead.

Hi, good morning and thank you for my questions. I'm curious if the data for COM701, CRC, and ovarian cancer will be presented at a medical conference. What do you anticipate the data will show? Will you aim to have the first scan for most patients? Related to that, you provided some insights on the objective response rate, but what duration of response do you think would be significant for the CRC and PROC population? I also have a quick follow-up after that.

I will address the first question, and then Henry will discuss the duration of response in both indications. In relation to platinum-resistant ovarian cancer, there are two types of guidance. One involves an ongoing study, which includes expansion cohorts using nivolumab plus TD. We may disclose follow-up data later at a medical conference. The second type of guidance concerns a new study conducted in a staged manner, starting with 20 patients, after which we may add a doublet treatment. The initial findings may not necessarily be presented at a medical conference, as it will depend on the enrollment rate. However, full data disclosure will definitely occur at a medical conference.

Thank you for the question, Asthika. In terms of the duration of response for patients with microsatellite stable colorectal cancer and platinum-resistant ovarian cancer, some historical context might help clarify my answer. For patients with platinum-resistant ovarian cancer, the median progression-free survival (PFS) is typically around three to four months, meaning that most patients would have progressed within that timeframe. In colorectal cancer, the median PFS is about two months, which includes data from studies like IMblaze 370 that have also shown similar results. We anticipate a significant improvement based on the data we are likely to present. Additionally, I want to highlight that we previously shared data on one patient with primary colorectal cancer who remained on treatment for 18 months, notably longer than the median PFS of three to four months. If patients are responding for six months or longer, that's significant. We've also mentioned that some ovarian cancer patients have been on treatment for around nine months, which is clinically meaningful. For microsatellite stable colorectal cancer, anything over six months is also noteworthy, especially considering that the median overall survival with current standard treatments like TAS-102 or regorafenib is about six months. Therefore, patients on study treatment for this duration are likely benefiting significantly from the therapy, whether in doublet or triplet regimens. Does that address your question, Asthika?

Yes, Henry. Thank you. Maybe if you can have a quick follow-up. What do you think of the next steps in colorectal cancer, microsatellite stable colorectal cancer? Do you think there's a fast path to market with a single-arm study if you go after CRC population with liver metastasis? I know that about 70% of patients present with metastasis. Is that a viable option for you?

Yes. So all options are on the table. From the data we presented so far, I think it probably would be best to pursue what the triplet will show us, because the Dynavax appears to be very active also in several cancers, including as we think, in microsatellite stable colorectal cancer. And that's the reason for pursuing the triplet in that indication. Now depending on the results we get from the triplet, there of course will be a discussion with regulatory agencies with regards to either considering the triplet as a regimen or trying to see if we need to sort out the contribution of components with either a doublet also and then a discussion with regards to whether monotherapy should be added in this case, the monotherapy that seems reasonable to compare to the standard of care, which would be either TAS-102 or regorafenib. So at this point, the strategy we have is to pursue the triplet. And like Anat said in her prepared comments, we'll have data disclosures.

Excellent. Thanks for taking my question, guys.

The next question is from Daina Graybosch of SVB Securities. Please go ahead.

Hi, guys. Thanks for the question. Two for me. The first one is, I'd like to understand more Yvonne about your partnering conversations. So have partners been coming to you? Have you been going to partner? Which assets specifically have they been interested in, which data set? And have they advised at all on the concept study?

I will address that. Firstly, from our viewpoint on partnering strategy, we are open to collaboration opportunities. We aim to expand patent possibilities through studies conducted with partners. Additionally, we see this as a means to secure non-dilutive funding for the company. That is our primary focus. Specifically regarding COM701 and COM902, we are unable to disclose any details about potential discussions with partners. However, COM701 stands out in the field, and we are at the forefront of these testing areas, backed by significant biological evidence supporting its mechanism of action. As previously mentioned, there is interest in what PVRIG is producing. Furthermore, our goal with this new study is to enhance the clinical evidence we have, as stated in the prepared remarks, to improve our understanding of the path forward and to reinforce the distinctions we observe in difficult-to-treat tumor types, particularly in relation to PD-L1 low expressing tumors, which are of significant interest in the industry. We are distinguishing ourselves not only with the PVRIG asset but also by targeting these PD-L1 low expression tumor types. In summary, I am not commenting on specific discussions; that is our general outlook.

Thank you. My second question is about the concept study. I believe you mentioned that for both MSS-CRC and platinum-resistant ovarian cancer, you're enrolling patients who have received up to three prior lines of treatment. Does this imply that there could be treatment-naive patients included? How soon do you anticipate starting to enroll patients for these studies? Additionally, could you remind us of the average number of prior lines of treatment in the previous data you collected last year, and how do these new studies differ in terms of the number of lines from the last enrollment?

Yes. Let's focus on the ovarian cancer question first, Daina. When we talk about ovarian cancer, we are referring to the number of prior lines in the platinum-resistant setting that Anat mentioned in her prepared comments. We are not considering patients who have had platinum-sensitive disease, which means they may have received platinum multiple times. It is specifically for the platinum-resistant setting, where chemotherapy is currently the standard of care. We do have a study drug that has been conditionally or accelerated approved on EDC. That's what we mean by up to three prior lines. Regarding colorectal cancer, this does not apply to the earlier setting. It involves patients who have been treated with standard-of-care therapy, most of whom have received all the standard therapies, including FOLFOX and FOLFIRI, and have also had more than three prior lines of treatment.

Thank you.

This concludes the QA session and Compugen's investor conference call. Thank you for your participation. You may go ahead and disconnect.