Corvus Pharmaceuticals, Inc. Q2 FY2023 Earnings Call

Thank you, operator. And good afternoon, everyone. Thanks for joining us for the Corvus Pharmaceuticals Second Quarter 2023 Business Update and Financial Results Conference Call. On the call to discuss the results and business updates are Richard Miller, Chief Executive Officer; Leiv Lea, Chief Financial Officer; James Rosenbaum, Senior Vice President of Research; and Ben Jones, Senior Vice President of Regulatory and Pharmaceutical Sciences. The executive team will open the call with some prepared remarks, followed by a question-and-answer period. I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements. Forward-looking statements are based on estimates and assumptions as of today and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including the risks and uncertainties described in Corvus' quarterly report on Form 10-Q, which was filed today with the SEC, and other filings the company makes with the SEC from time to time. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. With that, I'd like to turn the call over to Leiv.

Thank you, Zack. I will begin with a quick overview of our second quarter 2023 financials and then turn the call over to Richard for a business update. Research and development expenses in the second quarter 2023 totaled $4 million compared to $4.9 million for the same period in 2022. The decrease of $0.9 million was primarily related to lower clinical trial and manufacturing costs associated with the development of mupadolimab, our anti-CD73 antibody. The net loss for the second quarter of 2023 was $6.5 million, including a $1.3 million noncash loss related to Angel Pharmaceuticals, our partner in China. This compares to a net loss of $8.4 million for the same period in 2022, which included a $1.6 million noncash loss related to Angel Pharmaceuticals. Total stock compensation expense for the second quarter of 2023 was $0.5 million compared to $0.7 million for the same period in 2022. As of June 30, 2023, Corvus had cash, cash equivalents, and marketable securities totaling $37 million as compared to $42.3 million at December 31, 2022. During the quarter, the company sold approximately 2.3 million shares of its common stock through its at-the-market program for net proceeds of $7.5 million. Looking forward, we now expect full year 2023 net cash used in operating activities to be between $20 million and $22 million, resulting in a projected cash balance of between $28 million and $30 million as of December 31, 2023. As stated last quarter, we continue to prudently manage our cash burn rate by focusing on our most promising opportunities and establishing collaborations that help support the development of our product candidates. Based upon this trend and our focus on soquelitinib, formerly CPI-818, we believe our cash will provide runway into the second half of 2024. I will now turn the call over to Richard, who will discuss our clinical progress and elaborate on our strategy and plans.

Thank you, Leiv. And good afternoon, everyone. Thank you for joining us today for our business update call. We continue to focus on the significant opportunity to develop soquelitinib, our selective ITK inhibitor, as a potential novel approach for cancer immunotherapy. Over the last few months, we achieved several key advancements that further increased our confidence and broader interest in soquelitinib including: ongoing enrollment in our Phase I/Ib trial in peripheral T-cell lymphoma and presenting additional data from that trial at a major international lymphoma meeting; second, publication of a very comprehensive article in bioRXiv on the chemical properties, immunologic function, and mechanism of action of soquelitinib in preclinical models of hematologic and solid tumors; third, submission of our data package for an upcoming meeting in the third quarter with the FDA to discuss our registration strategy and proposed Phase III trial for soquelitinib in relapsed peripheral T-cell lymphoma or PTCL. And we remain on track to initiate our Phase III trial by the end of the year and plan to start a monotherapy solid tumor study within the next several months. In addition, we are accumulating exciting new data with ciforadenant or adenosine 2A receptor inhibitor. Recent highlights from this program include completion of the Phase Ib portion of the Phase Ib/II trial conducted by the kidney cancer consortium with advancement into the Phase II portion of the study in frontline therapy of renal cell cancer in combination with ipilimumab and nivolumab. Initial data from this trial is anticipated by the end of the year. Second, presentation at the Japan Cancer Association AACR joint meeting on the mechanism of action of ciforadenant and its effects on myeloid T-cell interactions. Now I will share more of the details on our progress with soquelitinib and with ciforadenant. We continue to strengthen the scientific and clinical foundation for the potential use of soquelitinib in cancer immunotherapy and importantly are progressing towards a potential registration Phase III randomized trial for T-cell lymphoma. Briefly, we feel soquelitinib is a very special medicine because of the following attributes. Number one, the ability to inhibit a precisely-defined very specific molecular target, the kinase enzyme ITK, with no other known significant off-target effects. Two, early clinical data has demonstrated multipronged effects on the immune system through its modulation of T-cell differentiation. Three, in the clinic, we have shown monotherapy antitumor activity with durable responses in very sick patients, along with an attractive safety profile with chronic dosing. We view soquelitinib as a potential novel approach to cancer immunotherapy that is distinct from checkpoint inhibitors and has the potential to complement or synergize with checkpoint blockade. We believe soquelitinib is first in class as it is the most advanced and selective ITK inhibitor in development. It has an initial opportunity to be an important new treatment option for patients with relapsed PTCL and also represents a platform opportunity across a broad range of cancers and immune diseases. We remain on track to meet with the FDA this quarter to discuss our proposed Phase III study. We anticipate that the study would be a randomized trial of approximately 150 total patients comparing soquelitinib monotherapy to standard-of-care chemotherapy agents. The planned primary endpoint is progression-free survival. The study will also include an interim analysis. Assuming our meeting with the FDA is successful, we plan to initiate the Phase III trial before the end of the year, and we have begun recruitment of potential trial sites and investigators. We anticipate up to 40 centers internationally. So far, we have enlisted premier academic and private centers that are preeminent leaders in the lymphoma field. The most recent interim data on soquelitinib was presented at the International Conference on malignant lymphoma in June. We reported that as of May 18, 2023, a total of 30 patients were enrolled in the Phase I/Ib clinical trial in patients with relapsed T-cell lymphoma at the optimum 200-milligram, two times a day dose, including 20 patients evaluable for response. To briefly recap, out of the 20 evaluable patients, there were three complete responses and three partial responses, with one of these partial responses demonstrating continued regression of the tumor. The findings showed that for patients with an absolute lymphocyte count, or ALC, above 900 per cubic milliliter of blood, objective responses were seen in six of 14 patients, with disease control in 12 of 14 patients. Correlative laboratory studies on blood and tumor tissue confirmed the mechanism of action, showing increased infiltration of tumors with cytotoxic T-cells with increased cytolytic capacity and reduction of T-cell exhaustion markers. We are encouraged by the clinical and lab results and continue to enroll patients in the study. We have submitted an abstract for the ASH Annual Meeting in December, where we plan to present additional information on this trial. Further interest in our trial has been generated by the recent publication of preclinical data on soquelitinib in bioRXiv, which highlighted the selective inhibition of ITK to enhance antitumor immune response to hematologic and solid tumors through a novel mechanism of action. Key takeaways from the publication are that soquelitinib, one, is a covalent, irreversible inhibitor that selectively binds to and inhibits ITK function while sparing other closely-related kinases, including resting lymphocyte kinase or RLK. Two, it leads to activation of cytotoxic killer cells, increasing infiltration of these cells into tumors. And three, it reduces and reverses T-cell exhaustion, resulting in a more potent and prolonged immune response. The effects on T-cell exhaustion were unanticipated and address a major limitation of current immune-based therapies. T-cell exhaustion often is a major cause of resistance to immune checkpoint therapy as well as CAR T-cell therapies. We also found that soquelitinib inhibited Th2 T-cell function in the production of Th2 cytokines, leading to Th1-skewing and the production of interferon gamma and tumor necrosis factor, which are important cytokines in tumor rejection. The publication showed soquelitinib led to in vivo antitumor activity in several mouse tumor models, including colon, renal, melanoma, B cell, and T-cell tumors. Given its multipronged effects, we anticipate soquelitinib will have monotherapy activity as well as complement or synergize with other immune therapies such as checkpoint inhibitors. We're excited by the mechanism studies and results described in the bioRXiv publication, and we are planning to initiate clinical studies to evaluate the ability of single-agent soquelitinib to enhance immune responses to solid tumors. A protocol has now been developed, and our first indication will be in renal cell cancer patients in first or second relapse following frontline checkpoint inhibitor therapy. The primary objective of this study will be to evaluate antitumor activity. We have several reasons for starting with renal cell cancer to establish proof of principle, and we are planning for other solid tumors as well. The Kidney Cancer Research Consortium has expressed strong interest in soquelitinib and will lead this trial. Finally, we continue to develop our ITK inhibitor platform for potential use in autoimmune diseases based on the findings that soquelitinib inhibits Th2 and Th17 function and their secreted cytokines. These cytokines play a crucial role in many inflammatory diseases. So, this approach represents a new idea in the treatment of immune diseases such as atopic dermatitis, asthma, fibrosis, and many other autoimmune allergic diseases. We plan to publish preclinical data on the activity of soquelitinib in autoimmunoallergic diseases soon. Turning to our partner-led programs, the Kidney Cancer Research Consortium is currently enrolling patients in a Phase Ib/II clinical trial evaluating ciforadenant, our adenosine A2A receptor inhibitor as a potential first-line therapy for metastatic renal cell cancer in combination with ipilimumab and nivolumab. The Phase Ib safety portion of the trial has been successfully completed, and patients are currently being enrolled in the Phase II portion of the trial with no change in dosing. The clinical trial is expected to enroll up to 60 patients. And based on current timelines, we anticipate initial interim data before the end of 2023. You may recall that this study is based on our 2018 publication showing that the anti-CTLA-4 antibody was the best agent to combine with ciforadenant or other A2A antagonists. In June, our team presented new preclinical data for ciforadenant at the Japanese Cancer Association and American Association for Cancer Research Precision Cancer Medicine International Conference. The presentation highlighted data supporting the synergy between ciforadenant and immune checkpoint blockade leading to a pro-inflammatory response. The data demonstrated the involvement of myeloid cells and that the combination of ciforadenant with immune checkpoint blockade leads to the production of Th1 helper cells that promoted the production of several pro-inflammatory cytokines. This confirms our published earlier work in human clinical trials that found a myeloid gene expression signature as a biomarker for response. This biomarker called the adenosine gene signature is based on measuring the expression of eight myeloid genes. We are encouraged by this preclinical data and look forward to sharing updates on our clinical trial by the end of the year. For mupadolimab, our partner, Angel Pharmaceuticals is continuing to enroll patients in a Phase I/Ib clinical trial in China with mupadolimab alone and together with pembrolizumab in patients with non-small cell lung cancer and head and neck squamous cell cancers. We made significant progress executing on our strategic initiatives in the second quarter of 2023. We remain focused on advancing ITK inhibition as a new approach to immunotherapy and look to extend the opportunity beyond lymphomas to a broad range of solid cancers and immune diseases. We have a number of key upcoming milestones for our clinical programs, which include continued enrollment in our Phase I/Ib trial of soquelitinib, meeting with the FDA this quarter to discuss a registration Phase III trial, initiation of the Phase I solid tumor monotherapy study of soquelitinib, and interim data from the ciforadenant Phase II trial in frontline metastatic renal cell cancer. Our programs provide us multiple opportunities to address significant patient needs in cancer and immune diseases. So multiple shots on goal give us significant optionality and the potential to efficiently build value for our shareholders. In closing, we look forward to providing updates on our programs in the coming quarters. I will now turn the call over to the operator for Q&A.

The first question comes from Roger Song with Jefferies. Please go ahead.

Thank you for taking my question and congratulations on your progress. I have a couple of questions, Rich. First, regarding the new data from the Phase Ib/a for soquelitinib presented at ASH, what patient numbers or follow-up should we expect to see? Are there any other new data points you would like us to pay attention to at ASH? Thank you.

So, the ASH abstracts just went in a few days ago, as you know, and the ASH meeting is not until December. So that's quite a way. I think that we'll update the data that we have at that time, which I would think would be another 10, 20 patients over what we reported on May 18. We're also doing a lot more of the, I would say, laboratory relative work, which helps us not only for T-cell lymphoma but for solid tumors as well. We'll likely update the Street before ASH on the progress of our Phase Ib trial, but I just mentioned the ASH meeting as something that most people know about. So, we've been giving updates obviously very frequently at meetings and during these calls, so we'll continue to do that. But the ASH meeting is a for sure meeting for us.

Thank you. Regarding the CIFO, by the end of the year, we will also have the Phase II RCC data. What can we expect from that, and what will be the potential next steps following the data?

Well, Roger, I'm glad you asked that question because it gives me a chance to remind people that the CIFO trial is ciforadenant, a small molecule oral A2A antagonist, which is being combined with ipilimumab and nivolumab in first-line renal cell cancer. Now the reason for combining it with ipilimumab and nivolumab is twofold. One is ipilimumab and nivolumab are showing in renal cell cancer a plateau on the curve, on the PFS curves. Early on, the PD-1 seems to be better, but there seems to be more durable, longer-term remissions with CTLA-4 containing regimens. So, we and others are interested to see if we can increase the plateau on those curves. In other words, maybe cure more people. So that's one reason. The second reason that we're excited about this program is that we showed, and we now have very, very consistent data on this, that the best agent to combine with an adenosine antagonist, an A2A antagonist, is not an anti-PD-1 but an anti-CTLA-4. And I don't have time to go into the science behind that now, but it's pretty straightforward, I would say. CTLA-4 is the best agent scientifically, and our animal data published in 2018 showed that. So, the trials we are conducting in the frontline, although an open-label study, do not have a concomitant control. But we know very well work that's been done from MD Anderson and Vanderbilt and other sites that if you use as a response criteria, what's called deep response, which is complete responses plus partial responses that are more than 50% tumor regression. So-called deep responses correlate really well with PFS. And in a couple of different trials, deep response rate with ipi/nivo is 32%. So that's the number we're looking to beat. And I suspect that by the end of the year, I don't know, we'll probably have 20, 30 patients with some follow-up in that category, who have been treated and followed long enough to make that determination. Makes sense?

Yes, absolutely. That's it. Thank you.

The next question comes from Aydin Huseynov with Ladenburg. Please go ahead.

Hi, good afternoon, everyone. Thank you for taking the question, and congratulations on the progress this quarter. So, a couple of questions for me. So, you plan to meet with the FDA this quarter, which is within the next several weeks. And the latest Phase Ib data for soquelitinib was at was May 18, so it's almost three months from now. And the kind of data that you're going to share with the FDA at that meeting is it just the data before the cutoff date of May 18? Or will there be something more than that because some time has passed over that, and you probably have some more responders or nonresponders? So, I'm just curious about the kind of data you're going to share with the FDA.

Aydin, the data that's in our package that's been submitted to the FDA contains pretty much the date to May 18. I'm not sure exactly. It might go a few days beyond that, but not very much. That package goes in significantly in advance. But this package contains data at all the dose levels. Recall that what we presented on May 18 was the 200-milligram dose, our optimum dose. But we've shared with the FDA now the entire study, the safety, efficacy, the follow-up, pharmacokinetics, biomarker data, basically everything, as well as our plans for Phase III and our plans for subsequent studies. There are still some other preclinical studies that we would have to do. So, that's what's in that package. I mean that's all pretty standard.

Understood. Given the mechanism of action for soquelitinib, which operates independently of checkpoint inhibition, how do you assess the potential for future use of soquelitinib before PD-1 and PD-L1, assuming it receives approval and subsequent studies take place?

Our primary goal is to investigate soquelitinib as a standalone treatment in renal cell cancer patients for several reasons. Firstly, renal tumors are typically recognized as being responsive to immune treatments, and these patients will initially receive a PD-1 therapy before experiencing a relapse. This gives us the opportunity to examine the efficacy of soquelitinib in cases where patients have failed PD-1 treatment. We will analyze why these patients did not respond to PD-1 and whether our monotherapy could potentially offer a solution. We expect to gain significant insights from this, which will include multiple biopsies. As outlined in our protocol, if a patient shows progression on our monotherapy, we have the option to introduce a PD-1 therapy. There is strong reasoning for combining a PD-1 with soquelitinib due to their distinct mechanisms of action and differing impacts on the immune system. Furthermore, we've identified exhaustion as a key factor contributing to resistance to PD-1 therapy, and the ITK inhibitor appears to help prevent or reverse this exhaustion, possibly by reducing tonic T-cell receptor signaling. Additionally, ITK plays a role in the negative signaling of PD-1/PD-L1, providing further justification for combining these therapies. To clarify, the PD-1/PD-L1 pathway sends a negative signal to T-cells, which is blocked by anti-PD-1 therapies. However, this negative signaling also depends on ITK, and by blocking both PD-1 or PD-L1 and ITK, we entirely eliminate that negative signal. There are numerous reasons to explore this combination with checkpoint blockade. Our previous studies in T-cell lymphoma have shown that soquelitinib can cause tumor regression and maintain this effect over time, not simply due to its presence in the tumor but rather through its influence on the immune response of the host. We believe the findings from our work in T-cell lymphoma are applicable to solid tumors as well. Is that understood?

Understood. Yes, that's good. But do you think that it is possible at all that soquelitinib will be used ahead of PD-1 in the future?

I think that's possible. I mean, I could see a scenario where you want to increase the T-cells that migrate into the tumor, and then you want to add a PD-1 to perhaps prevent any negative PD-1/PD-L1 interaction. I think that's possible. In terms of the sequence of the drugs, that's something we're now actually testing in animal models.

Okay. That's helpful. Are you aware of any other sort of earlier-stage competitors developing ITK inhibitors for either heme or solid tumors?

I am not aware of any ITK inhibitor currently in clinical trials. Shortly after my team developed ibrutinib, which has some cross-reactivity with ITK, many claimed to have drugs that block ITK. However, the real challenge is creating an ITK inhibitor that does not affect other kinases involved in T-cell differentiation, particularly resting lymphocyte kinase (RLK). To my knowledge, no ITK inhibitor exclusively targets ITK without affecting RLK or other closely related kinases. For instance, while ibrutinib weakly targets ITK, it strongly impacts RLK, which is not desirable. I believe that soquelitinib is unique due to its specificity for ITK while sparing other kinases, especially RLK. This specificity was a fundamental goal set by the Corvus team at the company's inception. We aimed to develop a selective ITK inhibitor, particularly concerning RLK, which presented a significant chemical challenge that we successfully overcame. Our objective stemmed from genetic studies conducted in mice two decades ago, demonstrating that selectively knocking out ITK leads to Th2 blockade and Th1 skewing, resulting in enhanced antitumor activity. We achieved the necessary selectivity and are now advancing it through clinical trials. We began our focus on T-cell lymphoma because ITK is present in these lymphomas, which provided a straightforward way to assess the target's occupancy within tumors. At that time, we also had limited information regarding solid tumors. Nonetheless, there is no reason to believe that the mechanism of action is exclusive to T-cell malignancies. T-cell malignancies are a good starting point due to the unmet need and the speed of endpoint occurrences in relapse settings, typically within a few months. This timing is advantageous for competitive and clinical trial considerations. We have gained substantial insights into ITK's biology and believe we have secured valuable intellectual property regarding both our drug and its methods of use. We are now in a strong position competitively, having established a significant presence in this field.

Thank you. This is super helpful. Just one last question for me. This is more like a general question. Would you consider selling your Angel Pharmaceuticals stake just to raise some capital and to be able to focus on the U.S. business? And if you do, how much would the value that stake in Angel Pharmaceuticals?

First of all, I want to start by saying we love Angel Pharmaceuticals. We have a great collaboration, and they're doing some great work over there, and it's certainly been a synergistic relationship. I mean would we consider it? Yes, of course, we would consider monetizing Angel in some way if that became necessary and if the terms were favorable. In fact, that was one of the strategies for starting Angel way back a couple of years ago when we started it. The reasons we did Angel were to facilitate our global development, to tap into rapidly emerging markets in China, to accelerate clinical development, et cetera. But it also gave us another, if you will, financing vehicle, if necessary. So yes, we could do that. By the way, we own 49% of the stock in Angel. So yes, we would consider that. But how would we value it? Well, I would value it a lot more than most folks are. But the valuation of Angel when it started, the company raised $41 million from some Chinese biotech pharma companies as well as some individuals, $41 million and had a post-money valuation of roughly $110 million, and that was two years ago. Since that time point, Angel now has 30 employees, roughly, a laboratory facility and two clinical trials with both our ITK inhibitor and with mupadolimab going on. So, we think it's a lot more valuable today than it was two years ago.

Got it. Thanks so much. Congratulations on the progress, and we look forward to the updates.

The next question comes from Li Watsek with Cantor Fitzgerald. Please proceed.

This is Rosemarie Li on for Li Watsek. Thank you so much for taking the question. So, for soquelitinib and TCL, would you be able to clarify if the meeting with the FDA has been scheduled, if they are gating steps and if you have a plan to communicate feedback to the Street?

Rosemarie, the meeting has been scheduled. A data package has been submitted. And yes, we would plan to give feedback to the Street.

Great. Thank you. And then very quickly for your plan in solid tumors. Are you going to do any biomarker selection like you're doing for TCL? Or are you going to start off broadly?

I think we'll start off broadly. We don't have ALC included in the protocol as it is currently being developed. I don't believe that's going to be an issue, though, because most of the patients represent a different disease, where the initial condition will be renal cell cancer in first or second relapse. Those patients are generally quite immunocompetent. This is quite different from our lymphoma patients, who are significantly immunosuppressed. It's a very different kind of population, which is a valid point you are making.

The next question comes from Jeff Jones with Oppenheimer. Please go ahead.

Thank you, and congratulations on the quarter, guys. Just two questions for me. How much cash do you anticipate you'll need to complete the Phase III study as designed? And then can you share your current thinking on additional indications for the ITK program but in autoimmune and allergy and how you're thinking about this?

So, Jeff, the trial designed is about 150 patients randomized trial, and we project it will be conducted in about 40 centers internationally. The total cost of the trial itself maybe $20 million, taking about two years to enroll and complete.

Okay. And in terms of autoimmunity and allergy, Jeff, we are very much into that. We are continuing to pursue various animal models. We actually have a protocol for atopic dermatitis that's being lined up. We probably wouldn't start that until early next year. There is an entire second- and third-generation program we have going on, where we're developing other ITK inhibitors with similar selectivity but with more propensity to affect, let's say, Th2 versus Th17 or Th1. We have some ideas that we could make even better compounds for allergy. And of course, we're also trying to deal with the issue of not wanting to have a cancer drug in an allergy and autoimmune drug. We are aware and concerned about those pricing issues. But we think that given the technology and the chemistry that we've established, we can make drugs, ITK inhibitors with more desired features, especially directed towards autoimmunity, particularly directed towards autoimmunity. So that's sort of our strategy. But listen, I mean as you well know, with potential upcoming Phase III trial, our ongoing ciforadenant study, solid tumor study, and mupadolimab being done by Angel, we have a lot on our plate right now. There's no question that if we had more resources, we would be in the clinic with allergy right now, allergy and autoimmunity right now. No question about that. But we just think that the cancer indications, especially for us, given that that's our expertise, we feel that that's a better investment for us at this time.

Great. Really appreciate the color, guys.

No, that's okay. I see we have no more questions. First of all, I thank everyone for participating in this call. We look forward to updating you on future developments in our upcoming calls. Thank you very much, everyone.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.