Earnings Call Transcript - HOOK Q4 2021

Operator, Operator

Good day, and thank you for standing by. Welcome to the HOOKIPA Fourth Quarter and Full Year 2021 Financial Results and 2022 Outlook Conference Call. At this time, all participants are in a listen-only mode. After the speakers' 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, Matthew Beck. Please go ahead, sir.

Matthew Beck, Executive Director, Investor Relations

Thank you. I'm Matthew Beck, Executive Director, Investor Relations. A slide deck accompanying today's call is available through the webcast and in the events section of the HOOKIPA website. Please manually advance the slides as we prompt you through them. Looking at Slide 2. The HOOKIPA executive team is here with me today including Chief Executive Officer, Joern Aldag; Chief Financial Officer, Reinhard Kandera; Chief Medical Officer and Global Head of Research and Development, Igor Matushansky; Chief Scientific Officer, Klaus Orlinger; Chief Business Officer, Christine Baker, and Chief Technology Officer, Roman Necina. Slide 3. During today's call, we will be making certain forward-looking statements. These statements may include statements regarding, among other things, the efficacy, safety and intended utilization of investigational agents, our clinical and non-clinical plans, our plan to present or report additional data, the anticipated conduct and the source of future clinical trials, regulatory plans, future research and development and possible intended use of cash and investments. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve risks and uncertainties that may cause the actual events to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only made as of today's date. The company disclaims any obligation to update such statements. For today's call, Joern will provide opening remarks. Reinhard will offer high-level comments on our financials and then we’ll open up the call to Q&A. With that, I'll pass the call to Joern.

Joern Aldag, CEO

Thank you for joining us today for this conference call. 2021 was marked by significant progress for HOOKIPA. We successfully navigated challenging financial markets while advancing our scientific initiatives and financing strategy to support ongoing growth into 2024. We proved our capability to generate unprecedented levels of antigen-specific T-cells in humans. Our technology as a monotherapy has shown promising results in controlling advanced head and neck cancer, encouraging us to expand our pipeline with new oncology projects. In addition to virally driven cancers, we have also shown the ability to target self-antigens, broadening our scope to include various cancer mutations. We recognize tremendous potential in our platform, particularly when combined with other oncology treatments to address many immunotherapy challenges by supplying essential T-cell induction. We are advancing two key programs towards clinical trials: our prostate cancer candidate HB-300 and HB-700, which targets prevalent KRAS mutations. Our scientific advancements have been validated through partnerships with top pharmaceutical companies, and we made significant strides in partnering by renewing our collaboration with Gilead. We are now responsible for the Phase 1b development of an HIV project, and we have signed a supply agreement with Merck for the use of KEYTRUDA alongside HB-200. The FDA has awarded us Fast Track Designation for our trial combining HB-200 with pembrolizumab in first-line settings. Discussions with other potential oncology partners are also progressing. Gilead has experienced delays in their development processes and requested us to take charge of our HIV collaboration up to the conclusion of Phase 1b. They sought the option to regain control of the program afterward. In return, we received a non-refundable upfront payment of $50 million, plus a $4 million milestone payment, and we accessed $5 million from a $35 million equity facility that Gilead provided. This transaction enabled us to execute a well-planned financing early in 2022, securing $75 million in a follow-on offering and significantly extending our cash runway with quality long-term and new investors. As of December 31, our cash position, along with proceeds from Gilead and the follow-on, gives us a pro forma cash position of $157 million, and the additional $30 million from Gilead's facility supports our operations into mid-2024. We believe these achievements reflect the strength of our data and investor confidence in our execution capabilities for 2022 and beyond. Looking ahead to 2022, next month at AACR, we will present four poster presentations showcasing further evidence of our arenaviral platform's potential in addressing unmet cancer needs, either as a standalone or in combination with other treatments. Mid-year, we will update on HB-200 monotherapy data, presenting a comprehensive overview of the Phase 1 dose escalation program, including its safety, anti-tumor activity, and additional data for HB-201 and HB-202. We will also update the patient status in the Phase 1 program and present our selected Phase 2 dose for HB-202 and HB-201's alternating treatment. We will discuss the clinical path for HB-200 in advanced settings, but we will not provide any initial Phase 2 data in combination with pembrolizumab during the Phase 1 update. However, we will report initial safety and efficacy data results from the HB-200 Phase 2 combination trial later this year, aiming to present data on 10 to 20 patients and aiming to approximately double the current response rates for pembrolizumab monotherapy in both first-line and second-line head and neck cancers. We are also on track to file the IND for our prostate cancer program, HB-300, in the third quarter this year. Current immunotherapies target PAPP, which offers limited effectiveness for patients with castrate-resistant prostate cancer. Our versatile arena virus platform allows us to explore additional tumor targets, PSA and PSMA, to improve care for these patients. We anticipate dosing our first patient in late fourth quarter this year or early 2023. Additionally, we have initiated a KRAS program addressing KRAS mutations relevant to large tumor indications, which has drawn substantial interest from pharmaceutical companies. In our infectious disease initiatives, we are committed to filing our HIV IND in 2023, while Gilead indicates they're on track to submit the HB and Hepatitis B functional cure IND by the end of 2022. Although we don't control their timelines, these are our expectations. I want to emphasize that HOOKIPA is funded through these milestones and beyond. We have ambitious plans for 2022, and the HOOKIPA team is energized to deliver. Now, I would like to turn the call over to Reinhard for some brief comments on our financials.

Reinhard Kandera, CFO

Thank you, Joern. Good morning, ladies and gentlemen. I want to give you a few highlights of our financial results for the year 2021, which actually reflects the clinical progress that we have made in the past year. Our revenue line includes milestones and cost reimbursement from our Gilead collaboration and the continued high level of revenue is evidence of the good progress that we have been making under this collaboration as both partnered preclinical programs are now moving towards Phase 1 clinical trials. Looking at our operating expenses, we increased our investments in the oncology pipeline and internal research and development resources based on the encouraging early antitumor effects seen in our HB-200 trial. The increased spending in these areas was the main driver of the overall increase of our R&D expenses from $55 million in 2020 to $83 million in 2021. A significant portion of the 2021 R&D spending already relates to the 2022 activities for HB-200 and HB-300, so we expect to be able to maintain this spending level in the coming quarters while executing on those programs. In terms of general and administrative costs, we were able to keep this well under control in 2021 and even to slightly decrease our G&A expense year-over-year. Other operating income net, which mainly consists of grants and subsidies was partially offset by currency effects, mainly in the fourth quarter of the year 2021 and is therefore below 2020 levels. Our net loss for the year 2021 was $76 million compared to $44 million in 2020, with this 2021 increase being driven by R&D spending as a result of our clinical progress. Our cash outflow from operations in 2021 was $66 million. In addition, we made investments of $12 million in property, plant and equipment, mainly to prepare ourselves for GMP manufacturing requirements in our next growth phase. Our year-end cash was $67 million, and we were able to significantly strengthen this cash position in the first quarter of 2022 by $75 million follow-on offering and cash inflows from our Gilead transaction. These proceeds lead to a pro forma cash position of $157 million, when added to our year-end cash. With that, we see ourselves well-funded through the coming catalysts, but I would want to add that in a difficult funding environment, as we see it today, we are putting greater emphasis on non-dilutive funding sources as well and are making good progress in seeking collaborations to potentially increase our revenues. With that short overview, I would like to pass the call back to Joern for some closing remarks.

Joern Aldag, CEO

Slide 7, I'm indeed very proud of our people and their drive to support the companies and our shareholders' objectives throughout this difficult market period, and we're laser-focused to produce and present to you our clinical data updates throughout the year as we said earlier. Thanks a lot for listening. And with this, I would like to open up for Q&A.

Operator, Operator

Thank you. Your first question today comes from the line of Alec Stranahan from Bank of America. Please go ahead. Your line is open.

Unidentified Analyst, Analyst

Hi. Good morning, everyone. This is John filling in for Alec, and thank you for taking our question. I have one question that actually has two parts. It's regarding the Gilead partnership. Since you have been conducting the Phase Ib trial for HIV on your own, could you provide some insight into what you're specifically focusing on for the Phase Ib? Also, what type of Phase I trial are you considering for HIV? Additionally, can you share what Gilead is particularly looking for, and if there are any specific metrics of interest to them? Thank you.

Igor Matushansky, Chief Medical Officer

Thanks for the question. So the first part of that question is, we will be running a Phase Ib safety immunogenicity trial. The endpoints will be clearly to assure that we have safety and, as I said before, reactogenicity and immunogenicity. The patient inclusion criteria as we have previously stated, will include HIV-positive individuals who are well controlled on antiviral therapies. The patients will receive a planned limited number of doses followed by approximately six months of observation off therapy to assess how long the post-dose immunogenicity lasts. We are currently planning two doses and with a total number of patients somewhere in the 30 or 40 range that are the current plans, but they have not yet been finalized. In terms of your second question, what might Gilead be looking for? We don't have specific clarifications on that. But again, as you could see from the way the trial is designed, what they will be looking for in general is safety and the immunogenicity that actually is lasting at the endpoint of six months after our last dose.

Unidentified Analyst, Analyst

All right. Thank you.

Operator, Operator

Thank you. Your next question comes from the line of Brian Abrahams from RBC Capital Markets. Please go ahead. Your line is open.

Unidentified Analyst, Analyst

Thanks, and good morning. This is Steve on for Brian. Congrats on all the progress, and thank you for taking our questions. As you think about HB-300 targeting the tumor-associated antigens, how much of the learnings from HB-200 on dose vector combination and checkpoint inhibitors will translate to the prostate program, or do you expect similar T-cell responses and infiltration there? Do you think there are unique challenges with that antigen that might require some additional clinical testing? Thanks.

Joern Aldag, CEO

Thanks for the question. So I'd say there is a fair amount of learning from the HB-200 program that are being translated to the HB-300 program. First of all, we have discussed with the FDA whether or not we need extensive pre-IND studies or whether we can use the pre-IND specifically GLP toxicology from the HB-200 program to apply to the HB-300 program, and they do believe that as appropriate and are looking at our technology as a platform technology and where we don't have to repeat all of the or the majority of the pre-IND studies and can use the HB-200 data to actually support the HB-300 filing. In the clinic itself, we actually do believe that we will see similar immunogenicity in terms of T-cells induced for the HB-300 as we did for the HB-200. Why do we believe this? Pre-clinically, when we looked at our technology comparing viral vector antigens to mouse cell antigens, we were actually able to induce equivalent amounts of tumor antigen-specific CD8 T-cells regardless of whether that antigen comes from a virus or a mouse self-antigen. Since our data for the viral program translates so nicely from the clinic from pre-clinical to the clinical, we anticipate that the data will translate similarly from mouse self-antigens to human self-antigens. So we do expect that the kinds of CD8 T-cell tumor antigen-specific responses we observed for the HB-200 program will be seen for the HB-300 program as well. There is, I would say, no rational way it would not, because the technology that drives these T cells is the same. We have shown that pre-clinically, it doesn't matter whether it's viral or self-antigen. The questions on dosing, we do believe we actually know what is the appropriate dosing regimen as well as the appropriate, I would say, dose level that we will be starting at and escalating with, and we know the dosing schedule of Q3, we give the preferred schedule and intravenous is the preferred administration. So we do anticipate that these things, which we have learned from the dose escalation of the HB-200 program will be applied to the HB-300 program or dose escalation of that program; we anticipate should be significantly shorter. Does that answer your question?

Unidentified Analyst, Analyst

Yes, it is. Yeah. Thanks for all that color. Appreciate it.

Operator, Operator

Thank you. Your next question comes from the line of Andrew Berens from SVB Leerink. Please go ahead. Your line is open.

Andrew Berens, Analyst

Hi, thanks. I have a couple of questions. I wanted to clarify regarding the checkpoint combination that there will be no additional efficacy from the Phase 1 portion, and it seems there won't be any efficacy from Phase 2 either. It appears to focus mainly on safety and tolerability. You mentioned a benchmark regarding doubling responses in head and neck cancer compared to the checkpoint alone. Could you provide that number and how it compares to some of the best specific data we've seen, such as EGFR activity, although in a small number of patients?

Igor Matushansky, Chief Medical Officer

Hi, Andrew. Maybe I can just comment on a couple of things that were said. Let me just clarify, the 2022 update that we have previously commented on just to be clear. In the middle of the year, we will be updating the kind of monotherapy or the advanced cancer patient population focusing on updates on 201 as well as 202. This will update the November presentation that we gave where at that time, we had several patients that were still either ongoing or had not yet been on therapy long enough where efficacy scans were yet attained. So in the middle of this year, we would anticipate that there will be approximately an additional 10 patients in total that were not yet ready for efficacy determination because they have not been on therapy long enough or have since gone on therapy since our November update. The combinations with pembrolizumab in the first and second-line setting, that data will be updated at the end of 2022. In terms of the expected response rates that we are hoping to attain, we have stated before that we would like to double the response rate of checkpoint inhibitors through pembrolizumab. We believe that the reason why a checkpoint inhibitor like pembrolizumab has approximately a 23% response rate even in a pre-selected CPS or PD-L1 high patient population is because the other 77% that are not responding are missing significant tumor antigen-specific CD8 T cells. Therefore, we believe that by providing tumor antigen-specific CD8 T cells on top of pembrolizumab, we should be able to double the 23% response rate. So we have constantly projected a number that is somewhere in the 45% to 50% range based on a doubling of the 23% in the first line. In the second line, pembrolizumab has an approximately mid-teen response rate somewhere in the range of 15%, depending on which study you quote. So we would like for similar reasons to believe that the 85% that are not responding, concurrent with our understanding of biology is that they're missing tumor antigen-specific CD8 T cells. Again, we would like to bring those in and believe we can double that response rate. So in the second line, we'd like to get us somewhere in the 30% response rate.

Andrew Berens, Analyst

Okay. That would definitely be very compelling. Just to clarify, you'll have enough patients and enough data by the end of the year that could give us response rates in both lines of therapy?

Igor Matushansky, Chief Medical Officer

We are anticipating that in totality, we might have somewhere between 10 to 20 patients in total to support these expectations.

Operator, Operator

Thank you. Your next question comes from the line of RK from H.C. Wainwright. Please go ahead. Your line is open.

RK, Analyst

Thank you. Good morning and good afternoon folks.

Joern Aldag, CEO

Hi. RK.

RK, Analyst

At the ASCO conference coming up in a couple of weeks, can you give us an idea of what to expect there since you have four different presentations?

Igor Matushansky, Chief Medical Officer

Right. So as Joern already commented on, they will focus predominantly on our preclinical translational and some biomarker data from our ongoing studies. We will focus on updating on some of our prostate cancer work, and some of our HB-202 and HB-201 work, as well as additional biomarker work from our ongoing clinical trial with HB-201.

RK, Analyst

Thank you for that. And then for the HB-700 program, two questions. One, what needs to be done? And two, how are you going to kind of stage this program in the sense? Do you need to get to a certain level of development with that 200 and 300 before you start putting 700 into clinic, or is it going to get started much sooner in the sense maybe late 2022 or early 2023?

Igor Matushansky, Chief Medical Officer

So let me answer the second question first, because I didn't get to hear the first question well. The KRAS 700 program is not dependent on any additional clinical data from those programs. So that program will start as soon as we are actually ready to manufacture that product and move that forward. We believe we have sufficient data from the HB-200 program, a sufficient read-through, and sufficient preclinical data with our KRAS constructs that we are convinced that that program will have activity in the clinic. We do not need further clinical data or additional clinical reasoning from the other programs to initiate that program.

Joern Aldag, CEO

So the only point regarding your timeline, it's not going to be 2022 for the IND. It's going to be more like 2023 or beyond.

RK, Analyst

Perfect. Thank you very much for taking my questions, gentlemen.

Operator, Operator

Thank you. Your next question comes from the line of Roy Buchanan from JMP Securities. Please go ahead. Your line is open.

Roy Buchanan, Analyst

Hi. Thank you for the questions. To begin, I want to follow up on the 700 program. You mentioned in your prepared statements that it has garnered significant interest from pharmaceutical companies. Are you considering partnerships for this program, possibly outside the US, or what are your thoughts on this? I understand it's still early. Additionally, Igor, you mentioned that once you have enough, you can manufacture it. Is the timeline dependent on your manufacturing capacity at this stage, or is it mainly the usual time required to ramp up the program? Thank you.

Igor Matushansky, Chief Medical Officer

I'll answer the second question first. I mean, it's a question of standard timeline to ramp up the program combined with the CRO slots; CROs for viral vector manufacturing are always at a premium and a lot of them are currently booked up with vaccines for COVID and others. So I think it's a matter of standard ramp-up times and when we can get a time slot.

Joern Aldag, CEO

Yes. And the first part of the question, obviously, KRAS is a very interesting target that we want. We have looked at the possibility of putting together a string of beats incorporating the most common mutations that play a role in the context of KRAS-induced cancers, combined with the strong T-cell responses that we're seeing. We do have pharma companies interested in our approach. I cannot say more. It's clearly something that we're progressing internally and think is a high-value program.

Roy Buchanan, Analyst

Okay. Great. I just had a quick one on the CMV program. I know you guys are not focused on infectious disease, but are you actively seeking out partners for that program? And are you seeing any inbound interest? Thanks.

Joern Aldag, CEO

It's early stages in partnering. We have committed to not investing our dollars into infectious disease programs, and we're progressing through an outreach to pharma companies to see the level of interest in the HB-101 program.

Operator, Operator

Thank you. There are no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect.