Earnings Call Transcript - CRIS Q2 2020

Operator, Operator

Good afternoon and welcome to Curis' Second Quarter 2020 Earnings Call. All participants will be in a listen-only mode. After the company’s prepared remarks, all participants will have an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to the company's Chief Financial Officer, Bill Steinkrauss. Please go ahead.

Bill Steinkrauss, CFO

Thank you and welcome to Curis' Second Quarter 2020 Earnings Call. Before we begin, I would encourage everyone to go to the Investors section of our website at www.curis.com to find our second quarter 2020 earnings release and related financial tables. I would also like to remind everyone that during the call, management will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. For additional details, please see our SEC filings. Joining me on today's call are Jim Dentzer, President and Chief Executive Officer; and Bob Martell, our Head of R&D. We will also be available for a question-and-answer period at the end of the call. I'd now like to turn the call over to Curis' CEO, Jim Dentzer. Jim?

Jim Dentzer, CEO

Thank you, Bill. Good afternoon everyone and thank you for joining us today. As many of you know, our mission at Curis is to develop the next generation of targeted cancer therapies to meaningfully improve and extend patients' lives. Our novel pipeline is driven by our team's expertise and ability to identify untapped targets in oncology that we believe have significant potential to address unmet patient needs. In the second quarter, we executed against both clinical and financial goals making significant progress toward key targets for the year. We advanced dose escalation in our ongoing study of CA-4948, our IRAK4 program in patients with relapsed or refractory non-Hodgkin's lymphoma (NHL). We initiated a second IRAK4 study in patients with relapsed or refractory acute myeloid leukemia (AML) and high-risk myelodysplastic syndromes (MDS). Also in the second quarter, we received FDA clearance to proceed on our investigational new drug application for CI-8993, our monoclonal anti-VISTA antibody. Lastly, we also completed a significant financing transaction with several fundamental health care investors. It was a very eventful quarter for Curis. In aggregate, these accomplishments set us up for exciting data catalysts later this year and continued momentum as we look to 2021. We're moving full steam ahead at Curis and I look forward to building on this progress in the third quarter. With that, let's jump into our clinical development programs, starting with our small molecule IRAK4 kinase inhibitor CA-4948. As a reminder, we are currently evaluating CA-4948 in an ongoing Phase I dose escalation study for the treatment of patients with relapsed or refractory non-Hodgkin's lymphoma, including patients with diffuse large B-cell lymphoma, Waldenström's macroglobulinemia, and Oncogenic MYD88 mutations. In this Phase I study, we are currently evaluating patients being treated with 300 milligrams twice daily of CA-4948 after observing clear dose response and tumor reductions at previous dose levels. The pace of enrollment slowed in the second quarter as many clinical sites temporarily halted enrollment due to the COVID-19 pandemic. Fortunately, following new guidance and protocols, several of our Phase I study sites have reopened and are actively enrolling new patients. While the data are not yet mature enough for us to declare a recommended Phase II dose today, we are confident we will be in a position to provide updated safety and efficacy data as well as finalize the recommended Phase II dose by the end of this year. The tumor reduction data we have seen so far are very encouraging. It is with these data in hand that we are excited to announce today our plan to initiate the combination study of CA-4948 with ibrutinib, the market-leading BTK inhibitor. In preclinical models, both IRAK4 and BTK inhibition have been shown to provide significant anticancer benefit. Given their different mechanisms of action, they also appear to be highly synergistic. We and our clinical investigators are eager to see if this preclinical efficacy in combination therapy translates to the clinic as well as the single-agent efficacy data has. With today's announcement, we are initiating work with our clinical sites and the FDA and expect to begin enrollment in a Phase I study of CA-4948 in combination with ibrutinib before year-end. Now, let's move to leukemia, our study of CA-4948 in patients with relapsed or refractory AML and high-risk MDS including those with spliceosome mutations driving expression of the oncogenic long isoform of IRAK4. Last month, we announced the dosing of the first patient in our open-label Phase I dose escalation study of CA-4948 monotherapy in these patient populations. We have been eager to start this study ever since the seminal presentation of Dr. Amit Verma and Dr. Daniel Starczynowski at the ASH Conference last year in which they identified specific spliceosome mutations as drivers of disease by causing the expression of the long isoform of IRAK4. While the short isoform of IRAK4 is normal, they demonstrated that the long isoform is oncogenic. Furthermore, they demonstrated that blocking IRAK4 with treatment of CA-4948 dramatically reduced the formation of leukemic blasts. Their work changed the landscape of AML and MDS by identifying IRAK4-L as the first and only known driver of disease that affects over half the population of patients with AML and MDS. With the findings of Dr. Verma and Dr. Starczynowski in hand, as well as the preliminary data from our NHL study, we worked quickly with our clinical investigators and the FDA to design a study of CA-4948 in the AML and MDS population. We are pleased to have dosed our first patient just six months later. This Phase I dose escalation study is enrolling a minimum of three patients at each dose level starting with 200 milligrams twice daily. We are excited to be starting this study at a potentially therapeutic dose level following the FDA's sign-off, as 200 milligrams twice daily was determined to be both safe and capable of achieving encouraging biological activity and clinical efficacy in our Phase I NHL study. The primary objective of this study is to determine the maximum tolerated dose and recommended Phase II dose of CA-4948 based on safety and tolerability, dose-limiting toxicities, and pharmacokinetic and pharmacodynamic findings. We could not be more excited to have this study underway and look forward to reporting initial data by the end of this year. Now, I'd like to turn to our VISTA program and our first-in-class monoclonal anti-VISTA antibody CI-8993. This is a target we're really excited about. When activated, VISTA plays a critical role in suppressing T cell activity. Conversely, blocking VISTA has been shown in preclinical studies to prevent T cell suppression and thereby reactivate antitumor immune function. We also see potential in targeting VISTA in combination with a PD-1, PDL1, or even a CTLA-4 inhibitor, as preclinical studies suggest that blocking VISTA significantly improves the efficacy of those checkpoint regulators. As many of you remember, we previously developed a small molecule that targeted PDL1 and VISTA. While that small molecule was active, it did not produce efficacy competitive with the monoclonal antibodies in development at that time in our target population. We believed this was probably for two reasons: First, as a large molecule, a monoclonal antibody provides complete coverage of a receptor across multiple binding regions. By comparison, a small molecule interrupts only one or two contact points on a target receptor. Second, monoclonal antibodies tend to firmly wrap around a receptor almost like Velcro, compared to a small molecule which continually bounces on and off its target. For these reasons, we began a search last year for the best IP, the best library of drug candidates, and the deepest understanding of VISTA biology. In ImmuNext, we found a partner with all three. In January of this year, we entered into an option and license agreement with them for the development and commercialization of CI-8993 and went immediately to work on developing it. In June, just five months later, the FDA cleared our IND application for CI-8993, making it the only anti-VISTA antibody currently in development to enter testing in humans. We are pleased with the interest and excitement we've received from the clinical community on this program and we believe CI-8993 has the potential to be a game-changing cancer therapy. We look forward to initiating a Phase I study of CI-8993 in patients with solid tumors later this year. To wrap up, we're very excited about our clinical progress so far this year. We hope the next few months will bring us even closer to developing meaningful therapies for patients battling cancer. With that, I'll turn the call back over to Bill to review our financial results for the quarter. Bill?

Bill Steinkrauss, CFO

Thank you, Jim. For the second quarter of 2020, Curis reported a net loss of $6.7 million or $0.17 per share on both a basic and diluted basis, as compared to a net loss of $7.2 million or $0.22 per share on a diluted basis for the same period in 2019. Revenues for the second quarter of 2020 were $2.4 million as compared to $2.1 million for the same period in 2019. Revenues for both periods comprised primarily of royalty revenues recorded on Genentech and Roche's net sales of Erivedge. Operating expenses for the second quarter of 2020 were $7.8 million, as compared to $8.2 million for the same period in 2019. Costs of royalty revenues were $0.1 million for both the second quarter 2020 and 2019. Research and development expenses were $5.3 million in the second quarter of 2020, as compared to $5.6 million for the same period in 2019. The decrease was primarily attributable to reduced clinical trial costs related to CA-170 and fimepinostat. General and administrative expenses were $2.4 million in the second quarter of 2020, as compared to $2.5 million for the same period in 2019. The decrease was driven primarily by lower stock-based compensation, legal and professional services fees, partially offset by higher occupancy costs. Other expense net was $1.3 million for the second quarter of 2020, as compared to $1.1 million for the same period in 2019. Other expenses primarily consisted of imputed interest expense related to future royalty payments. As of June 30, 2020, our cash, cash equivalents, and investments totaled $23.6 million, which includes net proceeds from our $17.5 million registered direct offering that closed in June. As of June 30, 2020, there were approximately 50.6 million shares of common stock outstanding. We expect that our existing cash, cash equivalents, and investments should enable us to maintain our planned operations beyond our end-of-the-year data catalysts and into the first half of 2021. Note that our forecast does not include any potential proceeds from our stock purchase agreement of up to $30 million with Aspire Capital. With that, I'd like to open the call for questions. Operator?

Operator, Operator

[Operator Instructions] The first question comes from Alethia Young with Cantor. Please go ahead.

Alethia Young, Analyst

Hey, guys. Thanks for taking my question. A couple of questions I have here. One just on 4948 and at the end -- you have data coming out at the end of the year. I guess maybe you can help us think about how many people that might be. And what is kind of the impact of COVID, or is it just that you kind of need more data to appreciate what the dose is? And then my second question is just around the combination with ibrutinib and how you're thinking about what will be the right dose level to use there. And then my third question is, what are the rate-limiting steps related to like starting the anti-VISTA program in the second half of the year? Are there any or do you kind of expect that you're in the final stretch to doing that? Thanks.

Jim Dentzer, CEO

Sure. Hi, Alethia. Thanks for calling in. So three questions I think you updated that we said that's getting delayed by COVID the combo and then, of course, the anti-VISTA rate-limiting factors. So the enrollment in the lymphoma study, you're exactly right. We did have an impact from COVID-19. Some of the sites did shut down entirely. The good news is they've come back up and started to enroll again. While we're only looking for a handful of extra patients, we have got some new patients on. We just need to have those patients be on the drug long enough for the data to mature. We do have confidence based on the patients that we haven't been able to enroll since they've reopened that we will be in a position to finalize that Phase 2 dose by the time we get to year-end. But unfortunately, yes, the break with COVID has impacted us just like it impacted a lot of folks in the industry. On the combo study, could you remind me your second question again?

Alethia Young, Analyst

You said -- I just wanted to know how you thought about finding the right dose there for that. I know -- I thought you were using some of the 4948 work with the other sites to inform your dose?

Jim Dentzer, CEO

So it would have been a no-brainer if we had the Phase 2 dose identified in lymphoma. We would just start there. The issue with the combo study was we now know enough for sure that we're going into Phase II. We know enough about that data that it looks good. The question was really well, what dose is the right dose? We had two choices. One was to delay until we finalized the Phase II dose and let all the data mature. Or since we know we're ready to go and we know 200 works, let's just get this study up and running and get them on the dose that's therapeutic, which is 200. If they clear that dose we'll just dose escalate just as we have been doing on the monotherapy side. On VISTA, there really is no rate-limiting factor. The discussions with the FDA were more productive and effective and faster than we anticipated. We're moving at a breakneck pace to get our sites open as fast as possible. It's really now just the blocking and tackling of working with the sites now that they're also up post-COVID to get through all of their processes and start enrolling patients in that study.

Alethia Young, Analyst

Okay. Great. Thank you.

Operator, Operator

The next question is from Soumit Roy with JonesTrading. Please go ahead.

Soumit Roy, Analyst

Hello, everyone. Thanks for taking the question and congrats on pushing through the ibrutinib combo in NHL; really powering the asset. Wanted to get your sense on following this monotherapy trial with 4948. Are you seeing or are the physicians enrolling more non-GCB patient type, or is that a focus you would focus on more in the ibrutinib combo trial? And if you can give us some color of what line patients you are seeing. What percent are transplant relapse or naive? Some kind of color on the patients in NHL.

Jim Dentzer, CEO

Sure. Thank you, Soumit. First and foremost, thanks for calling in. We appreciate your interest. In terms of the patients being enrolled, I would say there's certainly a wide mix of indications. We don't yet have the data back. We will have the data back eventually, certainly by the time we report out on MYD88 mutations. We're pleased that there’s been broad sampling of patients across multiple indications in the study. They are relapsed/refractory patients. We're finding that they're on average about 3.5 lines of prior therapy before they come in. So they are pretty sick. We're encouraged that the interest level in getting them in is high and that the dose response has been so clear. We're also interested in knowing as we get the final data back on MYD88 alterations, where the data tends to correlate. Go ahead.

Soumit Roy, Analyst

The ibrutinib combo trial would you focus on non-GCB type, or would you leave it wide open to the physician's discretion?

Jim Dentzer, CEO

Yes. I think – so there's two thoughts. First, I think the intent of the study is really based on the preclinical data that we have. The preclinical data shows that as a single agent, IRAK4 and BTK inhibition are both really powerful. It’s in combination that they appear to be synergistic. With that in mind, we're really looking to target patients who would otherwise be on ibrutinib. So any indication where ibrutinib gets used, we would expect to see synergy. While it's broadly open to those populations, anybody whose tumor type is at least partially driven by the toll-like receptor pathway should have an increased sensitivity to therapy and should respond even better. We would expect based on our preclinical data that wherever we can find patients that are responding to BTK therapy, that adding 4948 to it should make it a more effective therapy, and that's really the population we're after.

Soumit Roy, Analyst

Okay. Thank you. One question on the AML front. With Takeda in the high-risk MDS population, pevo is quietly again showing fairly good response rate with a CR rate of 52%. Do you see the competitive landscape changing? And do you see the path to registration as not going to be as simple as an accelerated approval but rather be a full Phase III controlled arm trial? Do you see any change in strategy?

Jim Dentzer, CEO

Yes. Actually, Bob it might be a good idea for you to chime in on this one.

Bob Martell, Head of R&D

Yes. That's a great question. We're launching this study that's in both AML and myelodysplastic syndrome. Each of these indications excluding both high-risk and lower-risk MDS and AML does have different treatment algorithms, and we do anticipate that that's going to evolve over time. One of the unique aspects about IRAK4 is that it is a key driver of the disease that was previously unrecognized, so the drug directly targets that. We think that this is going to be a key component of treating AML and MDS. We do know that in terms of combining this drug with other drugs used in MDS, that there are potential synergies that would factor into that. So we see this evolving. But right now, there are a number of registrational pathways that we think are very viable.

Jim Dentzer, CEO

Let me add two things to that, Soumit. First, I know our phone seems to be cutting out. We did not plan the earnings call date for the day the hurricane would hit the Northeast. I appreciate your patience in trying to catch every word as our individual phones do cut. Second, yes, just building on what Bob said, I think the landscape in oncology is changing as new therapies come to light. While there are therapies that will prove effective in this space, there is only one driver of disease that impacts half the population, full stop. We have the only drug in oncology currently in the clinic that directly targets that bad actor, the driver of disease, which is IRAK4-L and 4948 targeting IRAK4-L. While I do expect that there may be other things that work in this population, the key drug that most investigators are looking to is the one that directly targets the driver of disease.

Soumit Roy, Analyst

Got it. Thank you so much, and congratulations again on pushing forward in every front.

Operator, Operator

[Operator Instructions] The next question comes from Yale Jen with Laidlaw & Company. Please go ahead.

Yale Jen, Analyst

Hi, good morning and good afternoon. And thanks for taking my question and congrats on the speedy sort of progression. A couple of quick questions here. The first one is, given the data, at the time you want to release the data on 4948, would ASH be the venue to contemplate?

Jim Dentzer, CEO

Yeah. That's a great question. Our approach to releasing data is that we would ideally like to do this at a medical conference. Whenever the data mature to a sufficient level that it merits being released, we would look to the next appropriate medical conference. If those dates coincide, terrific. If not, what we have done in the past is if data mature and there's no imminent medical conference, we may just release top line information and then follow that up with a more detailed presentation at a medical conference. We like the idea of having our investigators present the data that they've been working with in front of their peers. It's important to have a more objective view, which is always helpful. Given that all three of the data sets that we are looking at in the next five months are cutting-edge, these are novel targets. It will be beneficial to have our investigators speak to that at a detailed level. My hope is that as these data mature, a conference will be nearby. If not, look for a short top line press release from us followed by that more detailed presentation.

Yale Jen, Analyst

Okay. Great. That's helpful. For NHL at this point, is DLBCL more likely to potentially be the leading indication you may explore going forward in the combo study, or do you still want to do a broad catch-in type of study to cast the largest net?

Jim Dentzer, CEO

Good question. So first, I think the preclinical data suggests that both BTK inhibitors and IRAK4, our IRAK4 inhibitor are really looking to target NF-kappaB indirectly in all indications, whether it's DLBCL, MZL, MCL, or CLL. Whatever ibrutinib gets used today is targeting NF-kappaB. Our drug is looking to do that as well. Our goal is to pursue both as a monotherapy and as a combo therapy for any indication where ibrutinib is approved. As a monotherapy, it will provide an alternative. If someone wants to use IRAK4 as opposed to BTK, that option is there. Given the preclinical data, the synergy appears to be demonstrated, and we will pursue the clinical study to see if the preclinical data is as predictive.

Yale Jen, Analyst

Okay. Great. That's very helpful. Maybe two more quick questions. The first is that in AML and MDS – do you see that being more targeted towards AML or will you see both indications equally in terms of patient recruitment?

Jim Dentzer, CEO

Sure. So I think we treat – I'm going to answer this one briefly and then I'm going to ask Bob to jump in. We are looking at both AML patients and high-risk MDS patients. Of course, with the AML patients, we're addressing disease outright. With high-risk MDS, we want to ensure that these patients don’t transform to AML. We're looking to address both patient populations, and our study is open to enroll in both. Bob, would you like to jump in?

Bob Martell, Head of R&D

Yes. Both have different treatment algorithms. We know that 4948 can reduce engraftment in AML leukemic blasts, as published by Amit Verma. We anticipate the direct impacts on the AML population. In terms of MDS, especially high-risk MDS, you have different endpoints there. One would be transition to frank leukemia and likewise reduction in supportive care needs such as transfusions. We look at these as two different paths, and we'll see how the monotherapy results turn out, while also looking towards combinations.

Yale Jen, Analyst

Okay. Great. And maybe I switch gears a little bit to CI-8993 and you guys anticipate some data to come out late this year probably in the dose-escalation part of that. Is the key highlight we should pay attention to safety? In other words, if there's cytokine release syndromes? If that can be managed, then that will be a big win to start with?

Jim Dentzer, CEO

That's exactly right. This calendar year the emphasis is going to be on safety. Next calendar year will be on efficacy. This lead molecule has already been in the clinic. Janssen, their subsidiary originally licensed the IP from ImmuNext back in 2012. They developed an antibody, which wasn't developed by Curis. They put it into the clinic. In early subtherapeutic doses, they encountered cytokine release syndrome (CRS). They expected at the time, as we do, that you needed to get to around 0.5 to 2.0 mg per kg in exposure to get to efficacy levels. They never reached that window because both at 0.15 and 0.3, they only had one patient at 0.3. They encountered CRS, and to be fair to them back then in the early days of CAR-T, CRS was kind of scary. There were no guidelines for managing it. Guidelines weren't issued until 2018. The oncology community has learned a lot about managing CRS. We feel confident that with co-administrative therapies, steroids, tocilizumab, and additional work done at Dartmouth about how to modify this regimen to help desensitize patients, we have confidence that we’ll get to the therapeutic window. The first step is to have a solid plan to manage CRS. This calendar year is to get a few patients on the drug. We know that CRS shows up in the first few hours after treatment. We need to confirm by year-end that multiple patients have been on the drug, our CRS management plan seems effective, and we have confidence to escalate into the therapeutic window. If we can do that, we will be in a very exciting place between now and year-end.

Yale Jen, Analyst

Okay. Great. And then maybe one more quick one for Bill. As I look at the second quarter operating expenses, which were lower than the first quarter, should we anticipate operating expenses for the second half of this year will be boosted a little bit more?

Bill Steinkrauss, CFO

Yes. Thanks, Yale. I appreciate the question. Yes, from a trend perspective, remember that we did have costs related to the option and license agreement in Q1 that did not recur in Q2. We're also starting to see cost savings as we wind down previous trials related to CA-170 and fimepinostat. However, I believe we will remain consistent in the back half of the year. While we do add these programs, we're building off our existing infrastructure. From a cash burn perspective, I still think $7 million to $8 million a quarter is appropriate. Some quarters will be a little less and some a little higher, but I believe that's the appropriate range for the rest of the year.

Yale Jen, Analyst

Okay. Great. Thanks a lot again and congrats on the speedy progression.

Bill Steinkrauss, CFO

Thank you.

Jim Dentzer, CEO

Thank you very much.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference back over to the company's President and Chief Executive Officer, James Dentzer for any closing remarks.

Jim Dentzer, CEO

Thank you operator and thank you all for participating in today's call. I also want to thank the patients and families who continue to participate in our clinical trials, our team at Curis for their hard work and commitment, and our partners at Aurigene and ImmuNext for their support. We look forward to updating you again soon.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.