Earnings Call Transcript - HOOK Q4 2022

Operator, Operator

Good morning and thank you for joining the HOOKIPA Pharma Fourth Quarter and Full Year 2022 Earnings and 2022 Outlook Conference Call. All lines have been muted to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. I will now pass the call over to Matthew Beck, Executive Director of Investor Relations. Please go ahead.

Matthew Beck, Executive Director of Investor Relations

Thank you. 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. Joining me today are Chief Executive Officer, Joern Aldag; Chief Financial Officer, Reinhard Kandera; and Chief Medical Officer, Katia Schlienger. 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 SEC 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

Okay. Good morning everyone. I'd like to focus first on our accomplishments in 2022 and second highlight what's coming in 2023. At HOOKIPA, we're leveraging our arenaviral platform to create therapies that deliver unprecedented antigen-specific CD8 T cells to combat disease. In 2022, we saw progress both in and toward the clinic across four different programs in areas of considerable unmet need. Please go to Slide 3, which has our portfolio site. Key developments in '22 were the progress of HPV-positive cancer drug HB-200 in a Phase 2 single arm cohort in combination with pembrolizumab, the acceptance of an IND for a prostate cancer therapeutic targeting self-antigens, a material collaboration with Roche regarding our novel approach to target shared new antigens in cancers for lung, pancreas, and colon with KRAS mutations, and achieving Phase 1 readiness for our Gilead partnered hepatitis B therapeutic vaccine. Let me give you a bit more background on these major achievements. Our Phase 1 dose escalation study showed that HB-200 was generally well tolerated, rapidly induced a high magnitude of tumor-specific T cells, and showed early anti-tumor activity in difficult to treat patients as a monotherapy. We progressed to testing HB-200 in HPV16-positive head and neck squamous cell carcinoma patients in Phase 2. We're currently enrolling patients in three dose expansion cohorts, a cohort in the non-randomized first line setting in combination with pembro, a cohort in the non-randomized second line setting and second line plus setting in combination with pembro, and a cohort of patients in the post-standard of care setting at the recommended Phase 2 dose. Regarding the HB-200 trial, I reaffirm our Q2 data guidance. We will disclose data from 10 to 20 patients each in the first and second line settings in combination with pembro and we will provide an update on our monotherapy dose escalation cohort. We will present an update on this trial and all three cohorts in a press release and an investor call in the second quarter and inform about the likely path forward. As a reminder, our HB-200 trial, which targets an oncoviral antigen, supports the first pillar of our three-part strategy in oncology. The second pillar in our oncology strategy is targeting self-antigens, which we are pursuing with our HB-300 program in prostate cancer. The trial is now open for enrollment as per our guidance to start the trial in Q1 2023. Targeting new antigens is the third pillar of our oncology strategy. In October, we announced a collaboration in this field with Roche to advance our HB-700 program targeting KRAS mutations and multiple indications, with an option to develop a second undisclosed candidate. We're pleased by the progress across our oncology portfolio as well as the acceptance by the FDA last July about the Drug Master File. The information from that master file can be used to support new IND filings using our platform, leading to reduced pre-clinical cycle times. Regarding our Gilead collaboration, much progress has been made. After restarting the HIV program HB-500 under our control to bring it to the end of Phase 1b, we're working with our academic collaborators and plan an IND filing in 2023. The hepatitis B program progressed well, as planned, we completed, we will keep the contributions for IND preparations in 2022, triggering a $5 million milestone payment. Gilead guided to start the trial, this HPV program in 2023. So what's in our plans for '23? The readout of all three HB-200 Phase 2 expansion cohorts in the second quarter of 2023 shall guide our decision to move into a randomized HB-200 trial in combination with pembro versus pembro alone. We have Fast Track designation for such a trial and a supply agreement for pembro with Merck U.S. In our HB-300 Phase 1 trial targeting prostate cancer, we are recruiting now, we will start dosing patients and expect initial data in the first half of 2024. We had a good start into 2023 with two significant milestone payments, reflecting significant progress in our collaborations. The first, $5 million from Gilead for the completion and delivery of a regulatory support package for their Phase 1 clinical trial of a therapeutic cure for chronic hepatitis B using HB-400, and the second, $10 million payment from Roche. We are starting GMP manufacturing of the KRAS Therapeutic, an important step before filing the IND, which we expect to happen in the first half of 2024. We expect to file our HB-500 HIV therapeutic cure candidate IND in 2023. We will continue our work for Roche both on the KRAS Therapeutic as well as on the option package for an additional target, which Roche may decide to exercise in 2024. In summary, we have made significant progress in 2022, and we are positioned for an exciting 2023 with material developments to come from our key programs. Finally, I'd like to highlight that we have significantly strengthened our cash balance with $113 million at year end 2022. We are well funded for many major data readouts. With that, I'll turn the call over to our CFO for more financial details. Reinhard?

Reinhard Kandera, CFO

Thanks, Joern. Good morning, everyone. So, I want to give you a few highlights of our financial results for the fourth quarter and the full year 2022. As shown on Slide 4 of our presentation, we ended the year with a strong quarter in revenues, which amounted to $7.8 million, and included a milestone payment from Gilead and the start of the recognition of the $25 million upfront payment received under the Roche collaboration. Our Q4 spending was very much in line with the average of the previous quarters, leading to a quarterly net loss of $12.3 million for Q4. For the 2022 results, I want to start by pointing out our significantly strengthened cash position, which we achieved through our $75 million capital raise in the first quarter and cash inflows from partnering, including $19 million from Gilead and $25 million from Roche. I'm also proud to report that we were able to achieve significant 2022 R&D progress that Joern has just detailed at a 17% lower spend compared to 2021. Our G&A expenses moderately increased, but the increase was more than offset by higher grant and interest income. Bottom line, we reported a full year 2022 net loss of slightly less than $65 million, which is 14% below 2021. We continue to manage our run rate tightly and to rely on partnerships to support our spending. We expect to moderately increase our expenses in 2023 as the pipeline progresses. The financial contributions from partnerships were already evident in the first quarter of 2023 by the receipt of a total of $15 million in milestone payments. With a cash balance of $113.4 million at the end of '22 plus the $15 million in partner milestone income already achieved in 2023, we consider ourselves well funded to reach beyond important upcoming pipeline catalysts. With that, I'd like to hand back to Joern for some closing remarks.

Joern Aldag, CEO

Thanks Reinhard. We're coming to the end of this call. I'm indeed very proud of our talented people and their drive to support the company and our shareholders' objectives throughout this difficult capital market environment. We're laser-focused on producing and presenting our clinical data updates throughout the year. With that, I'd like to reopen on the line for Q&A. Operator?

Operator, Operator

Thank you. We'll go first to Brian Abrahams at RBC Capital Markets.

Unidentified Analyst, Analyst

It's Leo on for Brian and congrats on another quarter and thanks for taking my question. How are you thinking about the bar for HB-200 and what's achievable? If the response rates fall in the 25% to 35% range, how are you thinking about next steps for the program? And what's your sense of where standard of care is for each line and what docs would find meaningful? I mean, would you add more patients to tease out or response? Or would you pivot and look to modify the program, depending on what you see? And maybe I'll have a follow up after that.

Joern Aldag, CEO

So in brief, if we achieve a 40% objective response rate, there's a clear go-ahead signal that we will be looking at the totality of the data in making that final decision, but because, you know that this is going to be a Phase 3 trial with a fairly significant investment.

Unidentified Analyst, Analyst

And then maybe just a quick follow-up on that. Have you talked about how much follow-up you'll be expecting for the patients that you present at the upcoming data cut? Is it going to be only patients with more than two scans? And you mentioned we'll be presenting the data in a press release. Are you still looking at a medical meeting submission around that same time?

Joern Aldag, CEO

We intended that at this point in time to have a press release and also an investor event. So, we will substantially detail the data and have the medical conference some point after the summer. Katia.

Katia Schlienger, CMO

Yes. And I think it's a bit too that we will look at the totality of the data. So if we are in the resume, it's not clear to me online. We would look at other markers of efficacy, we would look at the immunogenicity, and we will then decide if we want to start the trial or not.

Unidentified Analyst, Analyst

And then maybe just a quick follow-up on that. Have you talked about how much follow-up you'll be expecting for the patients that you present at the upcoming data cut? Is it going to be only patients with more than two scans? And you mentioned we'll be presenting the data in a press release. Are you still looking at a medical meeting submission around that same time?

Joern Aldag, CEO

We're looking at a self-antigen, clearly establishing immunogenicity against the antigens that we've chosen would be a significant win in the first half of 2024. Katia.

Katia Schlienger, CMO

No, exactly that, I think it's our readout as well as safety profile, we don't expect a lot of surprises, you know based on the excellent safety profiles that we have demonstrated with the 200 program using exactly the same vectors. So, all this information will come into 2024.

Unidentified Analyst, Analyst

And is that going to be just a press release or is that can be associated with medical conference as well?

Joern Aldag, CEO

Depends on the timing of the data availability versus a major conference, which we could represent, it's not decided yet.

Alec Stranahan, Analyst

Appreciated the additional color on the 2Q updates for the 200 program. As we're thinking through the historical controls, obviously, those are in a broader head and neck population. Is there any reason to think that KEYTRUDA monotherapy would perform better or worse than the HPV16-positive population? Just trying to think if that's an apples to apples? And then just on the capital allocation priorities next 12 months, starting a few new studies, obviously, it's got some partner funding as well. So I guess where does that sort of put you guys in terms of runway and where it's sort of your main focus in terms of capital allocation?

Joern Aldag, CEO

Katia, would you take the KEYTRUDA monotherapy question?

Katia Schlienger, CMO

Yes, absolutely. So, in terms of the randomized Phase 3 trial that led to pembrolizumab approval in first-line for patients with head and neck squamous cell carcinoma. Now, I know there's a difference between those patients with HPV positive and HPV negative head and neck tumors, but let's answer the first question.

Alec Stranahan, Analyst

No, I think that's helpful. And from the capital allocation.

Joern Aldag, CEO

Okay, so on the capital allocation, clearly the key priority at this point is moving HB-200 along. HB-300 from a strategic perspective is important because for targeting self-antigens, if we're able to generate significant T cell immune responses against self-antigens, by breaking tolerance, we are clearly in a good position. So that is our priority number two, strategically important. Clearly, also important from a capital allocation perspective is our HB-500, which is the HIV program, which we are running until after the end of Phase 1b or Gilead has an option to take it in and the very interesting KRAS program that we are running with Roche. But both these programs are basically funded through payments that we are receiving from Gilead and Roche. So your question actually addresses the key spend and that's obviously HB-200 in its progression and where we have various avenues to take it forward, including the HB-204 randomized trial and HB-300. Regarding the cash runway, I would like to have Reinhard answer that question.

Reinhard Kandera, CFO

Yes. Given the uncertainty of the business and the dependence on R&D outcomes, we don't give specific numbers, but I can provide some orientation. I've mentioned that our R&D cost is going to increase moderately. On the other hand, we have two big partnerships with Roche and Gilead that provide increasing support from partnership revenue to cover that cost. So broadly expect our net loss in the current year to be similar to the previous year, around $65 million. As I've mentioned, we have more than $113 million in cash at year end. There is another $15 million that already came in from partnerships in the first quarter. So, you can do the math for your cash runway.

Alec Stranahan, Analyst

Great. Thank you. Looking forward to the update.

Operator, Operator

We will take our next question from Arthur He at H. C. Wainwright.

Arthur He, Analyst

Hi, hello, everyone, and thanks for taking my question. Just for the HB-200 program. Regarding the randomized study, could you give us a more specific regarding the study initiation, and when could we expect data from the randomized Phase 2 study for the first line patient?

Joern Aldag, CEO

Well, the first point, obviously, a lot of preparation has been done with a manufactured HB-200 product. We have a clinical protocol in place that we can apply. We have had discussions with the relevant CROs that would support the clinical trial. And we have to make the decision and inform folks that we would make that decision based on information that is coming from our clinical trial, which is currently ongoing and running, which we will be reporting about in June. So more specific timelines, you will hear when we do the data release. And Katia maybe a flavor on initial data from the HB-200 program to randomized trial when it gets started?

Katia Schlienger, CMO

Yes. And just as a reminder, we have a first recognition of disease that we have seen from the NDA for that study. We have a disciplined agreement with Merck. We have already discussed the design of our trial with the FDA. And we just would like to have a deep look into our data from the HB-201 data, which is a single arm cohort to make the decision to move ahead. Is that helpful, Arthur or should I enter something else?

Arthur He, Analyst

No, that's helpful. Yes, that makes sense anyway. And so, for your upcoming presentation at the ACR is quite interesting for the target, could you elaborate more on that particular candidate?

Joern Aldag, CEO

We do know that a significant number of immunotherapies are sub-optimally working with regard to efficacy because they're lacking T cells at the site of the tumor. For that reason, we were claiming that we're able to drive on very high levels of antigen-specific T cells. We believe that this ability to drive these antigen-specific T cells towards the tumor could actually help a number of different immunotherapies to work. You may remember that last year at AACR, we demonstrated the combination with some 4-1BB. In this AACR presentation, you will be looking at a different immunotherapeutic IL-2, which we think has significant promise in combination with HB-200 as well. And what we're trying to show, albeit preclinical for the time being, is that with these types of combinations, we can significantly enhance therapeutic effects in cancer patients across many different diseases. We're very pleased that at AACR, we have the minisymposium going over a presentation of that data that you're referring to.

Operator, Operator

And we'll go next to Asthika Goonewardene at Truist Securities.

Asthika Goonewardene, Analyst

I want to go back to the first question asked about the bar here in the HB-200 patients with the data they're looking forward during the second quarter. You told us about response rate, but as we know I-O also shows that the denial works, you have a nice durable response. What do you think is the bar for duration of response in both those cohorts that you're planning on presenting? And I've got a couple of follow-ups on that.

Joern Aldag, CEO

Katia.

Katia Schlienger, CMO

Yes. So, we're planning on looking at a number of other efficacy endpoints like disease control rates. Indeed, sometimes, as we have shown with our vector as a single agent, we see some patients with stable disease for months. And so, we're planning to report that as well. In terms of duration of response, this will be what we will have knowing that we have started enrolling patients at the beginning of 2022. So, we will put in the maximum of data we have at this point by guiding to 10 to 20 patients in first line and 10 to 20 patients in second line.

Asthika Goonewardene, Analyst

So maybe I'll ask more directly. Do you think the duration of response data will be maturing enough to see a signal when you present this data in the second quarter? Or will you need more follow-up to really understand what the median duration of responses in these cohorts?

Katia Schlienger, CMO

Yes, we will probably need to continue to follow up here. It's quite frequent that for this kind of data. There's updates something that are regularly at each of the conferences. So, we will continue to follow up the patients no matter what. This would be a first release that we will continue to follow up the patients and provide regular updates at scientific conferences.

Joern Aldag, CEO

Yes, it's important to note that the median progression-free survival, for example, for pembro alone is very short. And while we will not have data that has fully matured across the entire patient data set, you will be able to see how we compare against the median progression-free survival from pembrolizumab.

Asthika Goonewardene, Analyst

And when you're looking at the more longer-term follow-up that either hopefully later this year or maybe early next year, what is the bar then for progression-free survival or duration of response that you would like to see, given that you said that you're looking for double the ORR? Would you want to see double the median PFS or double the duration?

Katia Schlienger, CMO

So I can take that. We know that fine oncology PFS is not necessarily the best permanent end point. We know that, for example, it's three months in first line and two months in second line plus, that does not reflect the huge advantage that is provided in first line and second line for this patient. So, I would like to just answer that yes, we will provide all the information we have. The PFS is not necessarily the right measure for immuno-oncology products. In terms of duration of response, this is measuring the timing on treatment with a progression in patients who are responding. This will take several months to assess. We will probably provide an update later on to scientific conferences, abstracts, and presentations.

Joern Aldag, CEO

I'm not sure about what you specifically want to find out here, but could you just specify your question?

Asthika Goonewardene, Analyst

Yes, I mean, I'm just wondering, do you need to you're getting the imaging response with the HB-200. You're getting checkpoint blockade with the PD-1. Is there anything else from an immunological perspective that you think would be useful to add to this combination? Maybe like, do you think like getting more danger signals for chemotherapy, but what do you think is the next logical component that you might want to add to this time of therapy here from an immunological perspective?

Joern Aldag, CEO

It may be interesting to look at the data that we will present at AACR, but I'll let Katia answer the question.

Katia Schlienger, CMO

Yes. So, certainly, as we know, we saw in monotherapy that we were able to see clinical response and stable disease in some patients. We saw huge immunogenicity injection with very high levels of CD8 T cells specific to the tumor antigen in circulation. We saw that those T cells are polyfunctional and that they do infiltrate the tumor. So, we would like to continue to develop those data in monotherapy and in combination with pembrolizumab over the next months. To tell you exactly what we will show and what it means, I think Joern and the team are looking for a general correlation between the immunogenicity and the efficacy. We recently look at that, as we report and what we find.

Asthika Goonewardene, Analyst

Awesome, guys. Thanks. I look forward to it and look forward to your updates at AACR as well.

Katia Schlienger, CMO

Thank you.

Operator, Operator

We will take our next question from Roy Buchanan at JMP Securities.

Roy Buchanan, Analyst

Hey, great. Thanks for taking the questions. Just a few quick ones. First one for Reinhard, can you just remind me, if Gilead has a timeframe they need to make the purchase of stock? I think this $30 million, they are still eligible to purchase. Is there a certain timeframe on that?

Reinhard Kandera, CFO

Yes, there is a timeframe. We have actually the choice to draw that additional equity, and it is until end of 2023.

Roy Buchanan, Analyst

Okay, great. Thank you. And then has Gilead said if the Phase 1 and hepatitis B is going to be in patients or healthy volunteers?

Joern Aldag, CEO

We don't have to disclose that yet and I don't think we can. We have to leave that to Gilead.

Roy Buchanan, Analyst

Okay. Fair enough. And then just the last one, can partners use the Drug Master File? Like can Roche use it for the KRAS program?

Joern Aldag, CEO

Yes, we can use it as we are preparing the Phase 1b and we are doing the IND work, and we can use that Drug Master File from the HB-200 and 300 in that context as well.

Roy Buchanan, Analyst

Okay, great. What about partners that are doing the Phase 1 themselves? Can they use it?

Joern Aldag, CEO

Katia, can you answer this?

Katia Schlienger, CMO

Yes. They can certainly use it, like, once they use our product, this could be something that they can use when they find an IND for projects that are related to those; the ones that are using Gilead is a bit different from the ones that we are using in oncology. So that file was done for the two-vector replicating, which is different from the 400 technology. So depending on what our partner will use, so for example, for Roche as well, this will be used for the IND submission as well.

Roy Buchanan, Analyst

Great. Okay.

Operator, Operator

And our next question comes from Suzanne van Voorthuizen at Kempen.

Suzanne van Voorthuizen, Analyst

Hi, good afternoon. Thanks for taking my question. I just wanted to circle back to the Q2 update on the HB-200 program. I'm not sure I heard it right. So can you clarify what you will include in terms of duration data in the press release? Will it include both duration of response and PFS? And what conference in the latter half of the year are you targeting to get the data presentation? And then I'll follow-up as well.

Katia Schlienger, CMO

Yes. So in terms of duration of response, the challenge will be to obtain a median on the patient. We probably will not have any agenda at that time, but I'm just speculating. The duration of response for pembrolizumab is 22 months. So, it's difficult to know if we will be able to reach anything at that time. We will disclose what we have in terms of object response rate, disease control rates and associated efficacy endpoints. We will disclose those chosen safety profile and the immunogenicity data that we have at that time. Is it helpful or?

Suzanne van Voorthuizen, Analyst

Yes, for sure. Thank you. And what conference in the latter half year are you targeting for presentation?

Katia Schlienger, CMO

So, we do not decide yet. And we will release it when we are ready.

Suzanne van Voorthuizen, Analyst

And then a follow-up is on a different topic with now Gilead and the addition of Roche as partners for HOOKIPA. How are you looking at potential 4-1BB? We'd like to hear your considerations and preferences in terms of type of deals on quality or infectious diseases, development stage, or platform deals? Yes, just some thoughts that you can share there.

Joern Aldag, CEO

Yes. So, any collaboration is actually quite a complex undertaking. Working with bigger pharma companies like Gilead and Roche triggers a lot of activity organizationally and otherwise within an organization and adding business development activities has to take account of that. So we, at this point in time would like to retain value in our programs and not partner them away. Having said that, we have a technology platform and we know that there are many different antigens that we're currently not tackling, which we could if a pharma company was interested in it. Clearly, the development of capital markets, the way we're seeing them today, may also trigger one or the other thought about interesting deal structures that provide funding capital to the Company. You're asking a complex question, but at this point in time, we're very happy with our collaborations with Roche and Gilead. We can see that as our datasets mature and the strength of the technology gets more and more proven, other people could be interested and we would not be adverse to partnering. At the same time, we do know that retaining value in the Company is important. Therefore, we would have to look at it when such partnership discussions come up.

Operator, Operator

And there are no further questions at this time. I would like to turn the conference back over to management for any additional or closing remarks.

Joern Aldag, CEO

Very briefly, I think we've had a great year in 2022. We're gearing up for some important value inflection points and milestones and are looking forward and curious to see the outcome of all of this. I would basically tell our shareholders that we're doing our utmost to keep our burn low up until better times and help the markets to progress the Company to big value inflection points that will change its valuation and with that, the future. Thanks a lot and talk to you soon. Bye, bye.

Operator, Operator

And that does conclude today's conference. Thank you for your participation. You may now disconnect.