CytomX Therapeutics, Inc. Q2 FY2023 Earnings Call

Good day, and welcome to the CytomX Therapeutics Second Quarter 2023 Financial Results Conference Call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will be a question and answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Ogden, Senior Vice President, Finance and Accounting. Please go ahead.

Thank you. Good afternoon and thank you for joining us. Before we begin, I would like to remind everyone that during this call, we will be making forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in our most recent public filings with the SEC at sec.gov. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise. Earlier this afternoon, we issued a press release that includes a summary of our second quarter 2023 financial results and highlights recent progress at CytomX. We encourage everyone to read today’s press release and the associated materials, which have been filed with the SEC. Additionally, the press release, a recording of this call and our SEC filings can be found under the Investors and News section of our website. With me on the call today is Dr. Sean McCarthy, CytomX’s Chief Executive Officer and Chairman. Sean will provide a business and pipeline update before I walk through the financials for the second quarter. With that, I'm now turning the call over to Sean.

Thanks Chris, and good afternoon everyone. Thanks for joining us for an update on recent progress at CytomX. Before moving to a review of our pipeline, I would like to start by taking a moment to welcome our new Chief Medical Officer, Wayne Chu. We are thrilled to have Wayne on board as Chief Medical Officer, in which capacity he will oversee the clinical development of our diversified portfolio of probody therapeutic candidates. Wayne’s extensive drug development experience over his career to date has contributed to multiple new drug approvals and spans therapeutic modalities, including antibody drug conjugates, checkpoint inhibitors, and bispecific immunotherapies, making him an ideal fit to lead the development of CytomX's pipeline. It has been a pleasure to get to know Wayne, and the team and I are excited to work with him closely as we optimize our clinical strategy and execute towards key milestones. Additionally, I would like to congratulate Dawn Benson on her promotion to Senior Vice President of Quality and Product Manufacturing announced today. Dawn joined CytomX in 2022 as head of quality and brings more than 25 years of quality and CMC experience in the biotech industry. Dawn has been a key contributor to CytomX’s strong recent execution, and we are delighted to have her moving into this newly expanded role. During Q2, CytomX maintained highly focused and disciplined execution across all areas of our company and pipeline. This is an exciting time for us. We are prosecuting more than 15 active programs across our wholly-owned and partnered pipeline. We are well-financed. Our goals have never been clearer, and we are approaching multiple potential inflection points as we look ahead to 2024 and beyond. Before I cover this course’s progress, I would like to take a moment to provide some perspective on the evolution of our platform and pipeline, and share our optimism regarding how the current generation of CytomX programs have the potential to make a meaningful difference for patients. As oncology R&D continues to evolve towards increasingly potent formats such as antibody drug conjugates, bispecific immunotherapies, and cytokines. At CytomX, we have maintained an unwavering commitment to advancing the field of conditionally active localized biologics to improve therapeutic window. We believe that localized therapies will be the future of oncology biologics. The conditional activation field is continuing to grow and mature, and is becoming increasingly established as a novel strategy for therapeutic discovery and development. The unmatched depth and breadth of CytomX leadership and clinical experience in this field, including more than 10 years of bench-to-bedside learnings, has informed our design choices for our next-generation pipeline molecules by making judicious experience-driven decisions regarding target selection, modality, effective function, and tumor types. We believe our current programs, CX-904, CX-2051, and CX-801 are well-positioned. Moreover, our continued forward momentum with our longstanding partners and new collaborations with Regeneron and Moderna also reinforce our scientific leadership and support the view that conditionally activated localized biologics is of strategic importance broadly in the industry. Now moving to our pipeline, I would like to start with our significant current research and development activity in the area of T-cell engaging bispecifics. T-cell engaging bispecific antibodies have demonstrated impressive clinical benefit for patients with certain hematologic malignancies, and this modality holds enormous promise for the treatment of solid tumors. However, T-cell engagers are highly potent at very low doses, and the potency of this modality can lead to widespread systemic activation of the immune system in the form of cytokine release syndrome and on-target off-tumor toxicities imposing constraints on the therapeutic window. Efforts in the field to date for solid tumors by many organizations and institutions have built an important foundational knowledge base that highlights the need for strategies to improve therapeutic window. At CytomX, we believe the probody platform could be ideally suited to addressing this challenge by localizing the powerful anti-cancer activity of this class of drugs into tumor tissue. Building on our work over the past decade in conditional activation across multiple therapeutic modalities, we now have a broad program of probody T-cell engagers, both ourselves and with our partners, Amgen, Astellas, and Regeneron. Our most advanced program in this area is CX-904, a clinical-stage probody T-cell engager targeting EGFR and CD-3, partnered with Amgen in a global co-development alliance. EGFR is one of the most highly validated and broadly expressed solid tumor targets. Four monoclonal antibodies that block EGFR function as an oncogenic driver of tumor growth have been approved for the treatment of various cancer types and many targeted small molecule EGFR tyrosine kinase inhibitors are also in clinical use today given its widespread expression in tumor tissue and clinical validation. EGFR has more recently attracted interest as a target for several bispecific strategies including T-cell engagers. CytomX is ideally positioned to unlock EGFR as a T-cell engager target. Building on the seminal work we published previously that described the first protease-based probody therapeutic based on the EGFR blocking antibodies Cetuximab. Our work demonstrated that masking of an antibody based on Cetuximab substantially reduced systemic side effects commonly associated with EGFR antibody therapy while maintaining its tumor activity, opening a window to explore an empowered strategy that combines EGFR and CD-3 targeting. Our preclinical validation of this probody EGFR CD-3 strategy was also recently published in cancer research and in Q2 2022, we launched the Phase 1 clinical evaluation of CX-904. I would like to highlight a few key points from our preclinical work that set a framework for our ongoing evaluation of CX-904 in the clinic. As I mentioned earlier, unmasked T-cell engagers can be highly potent, although cross-format comparisons can be challenging owing to affinity, molecular weights, and other variables. The pharmacologically active dose ranges of unmasked T-cell engagers are generally on the order of micrograms per kilogram. In the context of this high potency, it has been difficult to date in solid tumors to show meaningful separation between doses that cause CRS, for example, and those that lead to tumor shrinkage, leaving little room to maneuver from a therapeutic index perspective. Leveraging CytomX’s probody technology to mask T-cell engagers to reduce target binding in normal tissues, therefore, has great promise. Our preclinical research strongly emphasized this point, with the masked EGFR T-cell engagers showing 60-fold higher maximum tolerated dose and 60-fold less potency for the induction of systemic cytokine release in vivo, while maintaining strong anti-tumor activity. We are now in the process of translating this preclinical research into the clinic, and our Phase 1 program is advancing well. We successfully treated our first patient in May 2022, and we continue to make excellent progress towards our goal of reaching dose levels by the end of this year to facilitate the start of enrollment into backfill cohorts in certain EGFR-positive tumors, gaining insights into the clinical activity and therapeutic window of this exciting agent. We aim to share initial Phase 1 dose escalation data for CX-904 in the first half of 2024. Also in 2024, we will be working towards the selection of the recommended Phase 2 dose and the initiation of Phase 1B expansion cohorts. These decisions will be taken in conjunction with our partner Amgen. I will move now to an update on our upcoming INDs for the next-generation programs CX-2051 and CX-801. As I have mentioned, these programs build on the company’s collective clinical experience with our first-generation molecules. Starting with CX-2051, our wholly-owned, conditionally active probody ADC targeting epithelial cell adhesion molecule, also known as TROP-1. EpCAM has been regarded as a compelling oncology target for decades and has been clinically validated by others, but has generally been limited to local administration due to systemic toxicities. CX-2051 is tailored to optimize the therapeutic window for EpCAM-expressing epithelial cancers by matching the target with payload mechanism of action and with tumor sensitivity. We have optimized protease cleavability of the mask and designed it to be paired with a topoisomerase 1 inhibitor from the tecan class. We believe that a tecan is the optimal choice for this program. Given the tremendous clinical validation we have seen from tecan-conjugated ADCs in multiple cancer types, including breast cancer and HER2-positive breast cancer. In preclinical studies, CX-2051, when systemically administered, has demonstrated a wide predicted therapeutic index along with strong activity in multiple tumor xenograft models, including colorectal cancer. We expect the IND submission for this model ADC in the fourth quarter of this year, and we anticipate advancement of this program to the clinic in 2024. As we near IND filing, we look forward to sharing more details on the early clinical development plan for CX-2051, which will initially focus on colorectal cancer in order to expeditiously demonstrate proof-of-concept and clinical relevance for this program. Before moving on from our antibody drug conjugate programs, just a brief update on our CD71 ADC program. We continue to evaluate our strategy and we remain on track to provide an update by the end of the year. Moving now to CX-801, our dually masked interferon Alpha 2B, the lead program within our efforts in the cytokine field. Interferon Alpha 2B is an approved immunotherapeutic that has demonstrated clinical activity in multiple cancer types, but that has been limited due to its systemic toxicity. We believe there’s enormous potential to harness the powerful anti-cancer activity of cytokines with our localization strategies to direct their activity towards tumor tissue and away from systemic immune system activation. Interferon alpha stimulates antigen-presenting cells that activate CytomX T-cells and may combine effectively with checkpoint inhibition, offering tremendous potential to enhance immunotherapy responses and unlock checkpoint refractory and/or resistant cancers. Interferon alpha also has direct tumor cell killing activity, providing a dual mechanism of action. Preclinically, CX-801 has demonstrated a wide therapeutic index with an enhanced tolerability profile compared to unmasked interferon, along with preferential activity in the tumor microenvironment. The preclinical profile of CX-801 was most recently presented at the CytomX-based Drug Development Summit in June. We believe CX-801 has the potential to become a differentiated combination therapy for a wide range of tumor types. As with CX-2051, we aim for IND filing for CX-801 in the fourth quarter of 2023 and to initiate clinical trials in 2024. Now, continuing with our work in the immunotherapy area and turning to our partnership with BMS. BMS continues to enroll the Phase 1/2 study evaluating the non-fucosylated anti-CTLA-4 probody BMS-986288 as monotherapy and in combination with nivolumab in solid tumors. Additionally, earlier this year, BMS opened a new study arm evaluating 288 in third line or later colorectal cancer. We continue to be encouraged by BMS's investment into 288 given their extensive clinical experience with our probody platform as leading expertise in CTLA-4 therapies. We are also busy working with BMS on several early-stage discovery programs. Finally, I would like to briefly discuss our ongoing partnerships. As a core component of our business model, we have leveraged strategic partnerships to extend the reach of our science, broaden our pipeline, and bring important non-dilutive capital into the company. The latter being particularly important in today’s challenging financial environment. These partnerships highlight the continued innovation inherent in the CytomX platform. The value that accrues to CytomX from our partnering strategy is illustrated by the scope of our work in T-cell engagers and bispecific immunotherapies. In addition to CX-904 and our work with Amgen, the Astellas and Regeneron collaborations also focus on this important modality, and our broad ongoing efforts uniquely position us to play a transformative role in this field. Over time, our partnerships are also allowing us to explore new frontiers, including the exciting work we are conducting with Moderna and mRNA-based localized biologics that also includes some focus outside of the oncology therapeutic area. We look forward to continuing to make progress across our partnered research activities, and we anticipate the translation of multiple programs to the clinic over time and potentially significant milestone flow from this work that is not currently factored into our financial guidance. With that, let me turn the call over to Chris to provide details of our financials for the quarter.

Thank you, Sean. I’m pleased to be able to share an update on our second quarter 2023 financial results with you today. As of June 30, 2023, we had $181 million in cash, cash equivalents, and investments, which does not include the $30 million received in July. As a result of the private placement financing with BBF, we expect our current cash resources to fund operations into the second half of 2025. In terms of our overall capital formation progress in the last year, the recent financing further builds upon our business development success and illustrates the company strategy and track record of funding the company through a balance of equity-based and partnering strategies. Now let me spend a few minutes on cash for the quarter and our expectations moving forward. Cash burn was $23.6 million for the second quarter of 2023. This compares to a cash burn of approximately $34 million in the second quarter of 2022, reflecting a year-on-year decrease in cash burn of approximately 30%. Looking to the company’s forward cash needs, we expect overall cash burn to continue to moderate over time for the full year of 2023 versus 2022 given the company’s restructuring in July of last year. These cash expectations also include higher expected reimbursed R&D work from collaborations in 2023 versus 2022. Now, moving to revenue and operating expenses for the quarter. For the second quarter of 2023, revenue was $24.7 million compared to $12.9 million for the corresponding period in 2022. The increase was driven primarily by a higher percentage of completion for research programs in the Bristol Myers Squibb collaboration, partially offset by a reduction in revenue from the AbbVie collaboration as a result of the termination of the CD71 agreement in the first quarter of 2023. R&D expenses decreased by $10.5 million to $20.7 million during the three months ended June 30, 2023. The decrease was primarily due to decreases in personnel-related expenses, laboratory contract services, and certain clinical study activities, partially offset by an increase in laboratory contract services related to IND enabling activities. G&A expenses were $7.4 million during the second quarter of 2023, a decrease of $4.3 million over Q2 2022. The decrease was primarily due to lower personnel-related expenses as a result of the workforce reduction in 2022, and patent-related legal expenses. With that, I will turn the call back to Sean.

Thanks, Chris. We appreciate everyone’s time in joining us for this update today. Now, well into the second half of 2023, CytomX is executing to plan and on track to deliver on key milestones as we advance towards 2024 and beyond. With the continued progress of CX-904, BMS's ongoing investment in the CTLA-4 Probody program, and our two upcoming R&D, we anticipate multiple inflection points over the next 12 to 18 months that have the potential to further solidify the importance and value of conditional activation and biologics localization in the treatment of cancer. Our exceptional highly dedicated team remains focused on our vision and mission, and as we have said before, we care for every patient. We learn from every patient, and we deeply thank everyone involved in our efforts to make the biggest difference in the treatment of cancer that we can. With that operator, please open up the call for Q&A.

Our first question comes from Roger Song with Jefferies.

So a couple from us, maybe start from the now four. So you guide towards the Phase 1 data in the first half next year. So what will be the expectations from there in terms of the patient number tumor type? And since you are going to get your dose expansion based on that data, what will be the key criteria you will look for to be able to say going forward towards the expansion cohort?

So let me just describe in a little more detail our objectives for the 904 program and how that looks over the 2023 2024 time period. So right now, as we have discussed, we are in Phase 1A. We are in dose escalation safety assessment, getting an early look at how the drug is functioning in patients principally from a safety standpoint. As I mentioned in my remarks, we all know that T-cell engagers are, of course, very potent agents, and dose escalation early. Phase 1 assessment needs to be done thoughtfully and carefully in order to meet the primary objective, which is to get to safe doses for further exploration. And we are on track there. Our goal by the end of this year, as we have communicated, is to initiate backfill cohorts. So to start expanding in a limited way, still in the context of Phase 1A in EGFR-positive tumor types to get a bit more experience of the drug in terms of its safety, likely at more than one dose level. And also be looking in the context of those backfills for early signs of clinical activity. Now taken together, that data will inform in 2024 our discussions with our partner Amgen regarding the move from Phase 1 A to Phase 1 B, which would be a 2024 event. And that would be the, the Phase 1 B being, of course, the formal expansion phase of the study. So those are our goals. You, of course, it is a continuum. So hard to say right now exactly what that data is going to look like in the first half of next year. But we would expect it to be a meaningful update and we will provide further guidance as the year goes on.

So, maybe just another question related to the CD-71. You say you will provide an update by the end of the year, and we are just curious, what have you done and maybe any learning you can share with us right now. And by the end of this year? Will that be your decision or something you will share and then make a decision later?

One of the new developments in that regard is, of course, our recruitment of Wayne. He’s just joined the team a couple of weeks ago, and as I mentioned, we are absolutely delighted to have Wayne on board. One of the many things that we are tasking him with is to do his own assessment of the CD-71 program. His evaluation, of course together with others will lead to the development of our strategy for the program on a go-forward basis. So, we will have more to say about that over the next few months.

Our next question comes from Anupam Rama with JP Morgan.

Hi guys, this is Priyanka on for Anupam. We just had a quick question if most of the preclinical work needed for the CX-801 and CX-2051 INDs completed for the 4Q 2023 timeline?

Yes, so we are right on track with IND enabling activities including, of course, CNC and manufacturing. So all of the various components are moving along well, and we remain on schedule to get these INDs in by the end of the year.

Our next question comes from Peter Lawson with Barclays.

This is Alex. Thank you for taking our questions. I wanted to revisit something from earlier this year. You received a $5 million milestone from the Astellas collaboration, and they nominated a bispecific candidate. Could you provide any information about the target and remind us of the economics from this collaboration? Also, when might you be eligible for additional milestones? Thank you.

Yes, thanks for the question. So yes, we were delighted to earn that milestone earlier this year following some really terrific work by the Astellas and CytomX teams. We are not at liberty to disclose the target identities from the collaboration, but we are really delighted to see that program now in IND enabling studies. We haven’t disclosed the structure as is typical of the milestone structure for the deal. But as the program makes its way through Phase 1, Phase 2 and beyond we would expect over the course of its natural history to receive additional payments for that, and other programs in that alliance and across of course our additional alliances as well. So I’m glad you brought it up though, because I think that milestone does reinforce a comment that I made in our prepared remarks, which is that if you look across the alliances that we have with so many partners, and as I mentioned, more than 15 active programs including partnered and wholly owned programs. I think that the milestone with Astellas, along with a significant amount of milestones that we have earned milestone flow that we have seen in past years. We do see significant potential for additional milestone payments over the next two to three years that is not currently factored into our cash runway guidance. And so, Astellas is just the latest example of the team’s productivity and our demonstrated track record in earning milestones under our collaborations.

Hey Alex, this is Chris. The other thing I would note specific to Astellas is we do have select commercial rights in the U.S. for a certain number of programs. So I think that is, again, glad you brought it up something that tends to not be a focus but could create a lot of long-term value.

Our next question comes from Depeche Patel with H.C. Wainwright.

Depeche Patel standing in for Mitchell Kapoor. When can we expect to hear more about the Phase 2 program of BMS-986288? Can you provide any additional update on what the future development timeline and scope could look like for this program?

So, no real update there in terms of timing at the moment, we are, as we mentioned, excited about the continued investments that BMS is making in 288, the non-fucosylated CTLA-4 probody. We think a very interesting and very competitive molecule in a growing field of next-gen CTLA-4 therapies out there. We are in dialogue with BMS regarding potential future communication strategies but not much more we can say today.

And then can you kind of contextualize the reason for a pivot away from the fucosylated version, which is the BMS-986249?

Yes, that is right. So just to recap then, and thanks for the question. We have had two programs with BMS and CTLA-4. One is the mass version of Ipilimumab itself, the fucosylated version, the other being 288, which is the non-fucosylated version. I think if you look at how the field is unfolding in CTLA-4, first of all, there’s continued conviction from BMS and other organizations that there’s something pretty unique about CTLA-4 blockade in terms of its immunobiology that leads to deep and durable responses, particularly in combination with other checkpoint inhibitors and maintained interest in finding ways to get more value and impact for patients in multiple tumor types leveraging CTLA-4. The second point being to try to improve efficacy, and the non-fucosylated strategy appears to be able to do that. The mechanistic hypothesis, I think, is still that it is a hypothesis, but the view is that the non-fucosylated version enhances antigen presentation, which leads to more diversity in T-cell clones that leads to deeper and more durable responses. And that is taken together with the accessory co-stimulatory effects of CTLA-4 blockade leads to a unique mechanism of action compared to IPI alone. Now, one of the challenges that has come along with that more potent version of IPI is that it is expected to be more toxic and less tolerated, hence the value of the probody platform. So yes, we are very interested to see how this all plays out with BMS. We are excited that they are focusing on 288. We think it makes sense based on the way the immunobiology is developing in the field and we anticipate their data when they are ready to share it.

Great. Thanks. I appreciate the additional color there. Just a couple more questions. I know we talked about CX-904 a little, is this on track to complete by the end of 2023? And can you discuss any current thoughts on the backfilling portion into the selected EGFR positive cohorts in ‘24?

Yes. Just to reiterate my earlier comments and restate I guess the temporal aspects of the program. So the goal that we have stated for all of this year is to by the end of this year initiate backfill cohorts. So we are exploring this drug at various dose levels. We will likely want to be in the future expanding project Optimus and just kind of best practice these days in exploring T-cell engagers and solid tumors. We will want to be exploring likely more than one dose as we move later into the program. And so, the selection of those doses is really a critical success factor for this asset. So we are being thoughtful about this. Right now, we are focused on dose escalation, assessing safety, beginning to select doses for initiation of backfills by the end of the year, and then transitioning once that backfill data is in hand, which will start to become available in the first half of next year, to use that combined data set of the dose escalation and the initial backfills to inform our Phase 1B formal expansion strategy. As I mentioned in my comments, moving to Phase 1B expansions is a decision we will take in collaboration with our partner Amgen sometime in 2024. So I hope that helps set the timeframe for the program.

Got it. Thanks so much. And then last question, can you provide an update on the Regeneron and Moderna collaborations, and when we can expect these programs to enter the clinic?

Yes, so continue to be super excited about these new partnerships and we are very busy with both Regeneron and Moderna, with Regeneron in bispecific immunotherapies for cancer and with Moderna for investigating mRNA encoded localized biologics in oncology and also outside of oncology. The programs are still relatively early, and it is really too early to comment on timelines at this stage. But thanks for the question. Really appreciate it.

That concludes the question-and-answer session. At this time, I would like to turn it back to Sean McCarthy for closing remarks.

Thanks everyone for your time this afternoon and your interest in CytomX and our progress. Certainly, hope this update in our broad pipeline has been helpful. Please feel free to reach out to our Investor Relations team should you have any additional questions, and we look forward to keeping in close touch.

Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.