Iovance Biotherapeutics Inc

NASDAQ:IOVA

Earnings Call Transcript 2018-Q1

[Operator]

Good afternoon and welcome to the Iovance Biotherapeutics First Quarter 2018 Financial Results Conference Call. All participants are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that this call is being recorded at the Company's request.

Now, I would like to turn the conference over to Mr. Tim Morris, Chief Financial Officer at Iovance. Sir, please begin.

[Tim Morris, CFO]

Thank you, operator. Good afternoon, everyone, and thank you for joining us today. With me on the call are Dr. Maria Fardis, our President and Chief Executive Officer; and Dr. Robert Brown, Executive Medical Director, Clinical Science. This afternoon, we issued a press release that you could find on our website at iovance.com which includes the financial results for the quarter ended March 31, 2018, recent achievements for the year, and brief updates for 2018.

Before I turn the call over to Maria, I would like to remind everyone that statements made during this conference call will include forward-looking statements regarding Iovance's goals, business focus, business plans, clinical trial plans and results, potential future applications of our technology, manufacturing capabilities, licensing and collaboration transactions, future updates, and cash balance forecasts. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time-to-time in our SEC filings. Our results may differ materially from those projected during today's call. We undertake no obligation to publicly update any forward-looking statements.

With that, let me pass the call over to Maria.

[Dr. Maria Fardis, President & CEO]

Thank you, Tim and good afternoon, everyone. We started 2018 off with a significant financing in January that left us in a strong position to advance and expand our TIL product pipeline.

Our focus remains on both, manufacturing and clinical aspects of TIL development as a viable commercial therapy and to that end, so far this year we have received also drug designation for autologous tumor infiltrating lymphocytes for treatment of cervical cancer with a tumor size greater than 2 centimeters in diameter, greatly expanded the number of clinical sites worldwide for our four company-sponsored studies, and as of early May we have had over 50 sites active in our clinical trial, activated one of the two studies as part of the MD Anderson collaboration, utilizing LN-145 for treatment of sarcomas and ovarian cancers, gained approval to commence clinical trials in 6 countries in Europe for metastatic melanoma and cervical cancers, expanded enrollment in our lead melanoma trial C14401 from 60 to 85, including enrollment of the 60 patients in cohort shoe as may wanted to use this study in support of potential registration of LN-144, and lastly, initiated collaborative research in improving the potency of TIL product via transient genetic modifications.

With respect to expanding into new indications, we initiated a new Phase 2 clinical study, 2017-0672 with MD Anderson Cancer Center. The clinical trial site is currently active and it's screening patients with soft tissue sarcoma, osteosarcoma and platinum resistant ovarian cancer. The study will treat patients with LN-145 manufactured Gen 2 manufacturing by Iovance. For the second study as part of the collaboration with MD Anderson, a different manufacturing method will be used by MD Anderson which allows for utilization of the 4-1BB agonist antibody, urelumab, to improve growth of TIL products.

Now turning to Iovance sponsored studies; we have over 50 sites active across the TIL development program and approximately half of the sites are for our lead Phase 2 trial investigating LN-144 for the treatment of patients with metastatic melanoma. As many of you know, all ongoing trials are utilizing our Gen 2 manufacturing method that last 22 days and yield the cryopreserve product. Iovance owns the associated intellectual property for the Gen 2 and this shorter manufacturing process minimizes the duration of time a patient waits to receive the TIL product. Gen 2 manufacturing also has a lower manufacturing costs than it's predecessors.

Enrollment in the melanoma study, C1-4401 was expanded from 60 patients to approximately 85 patients, the sample size in the study was increased as Iovance may want to choose the study to use the study to support potential registration of LN-144. Patient dosing is continuing for LN-145 in our Phase 2 trials for the treatment of patients with recurrent and/or metastatic lumi cell carcinoma of the head and neck, and for C1-4504, our Phase 2 trial of LN-145 for the treatment of patients with recurrent metastatic open system cervical carcinoma. We are also conducting an Iovance sponsored study in non-small cell lung cancer who have not received the prior anti-PD-1 of anti-PD-L1. In February 2018, the first cycle was activated for this study. The study is part of our collaboration with Medimmune, the R&D arm of AstraZeneca and will treat patients with TIL alone or TIL plus cervolumab [ph]. We have four active sites currently recruiting patients for this study.

We continue pursuing next-generation TIL product, both through process development, as well as research. The goal of our research work on TIL is the increased potency of TIL product. We have been working on changing the distribution of TIL product through adding different co-stimulatory factors such as OX4D [ph] or 4-1BB, and we'll continue with this pursuit as well as genetic modification works. To this end, we entered into a material transfer agreement with RXI Pharmaceutical Corporation to evaluate potential uses of SCRX-RNA compound in the development of TIL therapies for a number of cancer types. We have also obtained non-exclusive rights to uses of 4-1BB agonist including urelumab in the manufacturing of TIL for adopter cell therapy through an intellectual property license agreement with small site cancer center [ph].

Before I turn to what's ahead, I wanted to also touch on manufacturing. We are happy to report that manufacturing in EU, in Europe, is now fully operational as PharmaCell BV, a subsidiary of Lonza Group, in The Netherlands, is active. We also continue expanding our manufacturing footprint in EU to assure adequate supply for future patient enrollment.

Looking ahead for the remainder of 2018, we're planning to continue enrollment of patients in support of new indications, as well as currently ongoing studies including the studies under the collaboration with MD Anderson, expand our relationship with [indiscernible] institutions and collaboration in broadening our understanding of modified TIL, a new indication, as well as considering genetic modification of TIL or selection of more potent TIL products. We also continue our dialogue with FDA in defining our registration plan for LN-144 in metastatic melanoma.

I would now like to turn the call over to Tim for a discussion of our financials. Tim?

[Tim Morris, CFO]

Thank you, Maria. Net loss for the quarter was $26.5 million, or $0.31 per share, this compares to net loss of $20.7 million, or $0.33 per share for the first quarter last year.

R&D expenses were $19.9 million for the quarter, an increase of $4.3 million as compared to $15.6 million last year. The increase in R&D expenses was primarily attributed to $2.1 million increase in payroll related expenses and consulting fees due to higher head count and dedicated consultants as we expanded our research efforts and clinical development programs, and the $2 million increase attributable to higher clinical costs due to an increase in patient enrollment, and an increase in the number of clinical sites in the LN-144 trial for the treatment of metastatic melanoma, and the initiation of clinical trials of LN-145 for the treatment of cervical, and head and neck cancers in 2017. These increases were partially offset by a $1 million decrease in manufacturing costs due to higher costs in the first quarter of 2017 related to tech transfer activities.

G&A expenses were $7 million for the quarter, an increase of $1.7 million as compared to $5.3 million for the same period in 2017. The increase was primarily attributed to a $1 million increase in payroll related expenses due to an increase in head count, and a $0.5 million increase in professional service and legal expenses to support our filling of additional patents. At March 31, 2018, the Company held $297.1 million in cash and cash equivalents, this compares to $145.4 million at December 31, 2017. The increase in cash balance comes from the public stock offering of common stock in January 2018 which netted $162 million in net proceeds, $7.4 million from the exercise of warrants and options, offset by cash used in operations of $17.7 million. We anticipate that our year-end balance of cash, cash equivalents and short-term investments may be between $190 million and $210 million.

On the investor relations front, the Company will participate and present at the following upcoming investment conferences in New York City; the UBS Global Healthcare Conference on May 21, the Jefferies 2018 Global Healthcare Conference on June 7, and lastly, the JMP Securities Life Science Conferences on June 20.

I would now turn the call over to the operator for your questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Boris [ph] from Cowen.

[Unidentified Analyst]

First, I just want to know how did you arrive at increased study size? Was this based on discussion with the FDA or some other analysis?

[Maria Fardis]

It was not based on discussions with FDA. As we reached a predefined sample size in the protocol, we thought to increase the study enrollment because we do intend to use the study in support of registration of LN-144, so that's why we increase the cohort 2 which we believe is our manufacturing method of choice from 30 patients to 60 patients.

[Unidentified Analyst]

So you think that that would be an adequate amount or to discuss with the FDA or I guess, maybe, more broadly; what are the plan for regulatory discussion with the agency? And when would we kind of hear back a more definitive answer, how big of a study is required to get this approved?

[Maria Fardis]

It's for discussions with FDA, it's not a final thought. It's possible that we might have to increase this further, the discussion itself is planned for third quarter 2018 this year and we will certainly inform once we have had that dialogue and once the final sample size is settled.

[Unidentified Analyst]

And my last question, when can we expect additional data updates later this year for melanoma, some about head and neck and cervical studies?

[Maria Fardis]

We had disclosed that we intend to have additional follow-up for melanoma, and one other indication in the later part of the year, there is upcoming conferences that we certainly would hope to target, we could consider as small as well as 50 for example.

[Operator]

Your next question comes from the line of Mark Breidenbach from Oppenheimer.

[Mark Breidenbach, Oppenheimer]

With the expansion of cohort 2 in the LN-144 trial, what does this mean for the retreatment cohort? Is that still in the cards or are we not going to do retreatments anymore in this Phase 2?

[Maria Fardis]

They are independent of each other, the cohort 2 itself is the registration plan that we are thinking about in terms of mode of administration and the patient population. The cohort 3 is much more of an exploratory arm in trying to understand what a retreatment could offer to a patient if their original response is deteriorating. They are rather independent in that sense but they also want to clarify that patients have to qualify still for the protocol in order for them to get retreated. For a very late line patient population if they start progressing rapidly, we need to make sure that that patient still qualifies in the protocol for that cohort 3. But they are all ongoing, and they are independent of each other.

[Mark Breidenbach, Oppenheimer]

With regard to manufacturing, now that you started online or manufacturing online in the EU, can we assume that the European manufacturing facility will support all the European trial sites or the European site is also going to be fed by U.S. manufacturing? And can you comment on the capacity in the EU versus the U.S.?

[Maria Fardis]

Sure. We are intending to use EU manufacturing for EU patients. We're not intending right now to cross various oceans in order to provide drug for the patients. In terms of capacity, the capacity is certainly adequate for what supply and demand are balanced here. So we are watching what the patient population maybe, we are activating sites as we go forward, we recognize that we are heading into summer, so the capacity is adequate currently for what we project our patient population and enrollment maybe. If we have additional need, we also have backup plans for contingency in order to increase capacity, we don't have a concern on that front.

[Mark Breidenbach, Oppenheimer]

With regard to all the investigator sponsored trials that are being run, are you aware of any plans for partial or more complete readouts for many of these trials at ASCO or medical conferences later in 2018?

[Maria Fardis]

Sure. Yes, definitely their decision as to when they plan on putting the data out, we certainly review their submissions and they remain under embargo until the titles are released. So we are aware of maybe F&E [ph] that might be considering potential data release in the remaining part of the year but I won't be able to comment on it until I have confirmation that they impact proceeding.

[Operator]

Your next question comes from the line of Jim [ph] from Wells Fargo.

[Unidentified Analyst]

So just to say, you said there is a balance between supply and demand. With 50 sites online, how easy it is for you to meet the demand -- I mean, if they are all producing one patient a month, that's obviously going to be hard to meet that kind of demand. So are you at risk for having stamp [ph] patients away yet?

[Maria Fardis]

We don't project for such a low demand, we project certainly for a much higher demand just so we are ready and standby should it be necessary. We also project for being able to increase and rampup the demand very quickly. So we stay on the manufacturing front, we stay well ahead of what we're saying clinical might need, not to run into the scenario that you're talking about in turning patients away. They need a regions, that's what we are trying to do.

[Unidentified Analyst]

And can you just comment on success rates; if there have been any -- an expected barriers that you've run into supplying now what -- so a lot more patients than you've done historically?

[Maria Fardis]

Are you asking about manufacturing success rate?

[Unidentified Analyst]

Yes.

[Maria Fardis]

So we have this course -- so we actually have -- our manufacturing success rate has been around 90% and improving and a lot of that had to do with having adequate SOPs in place and being able to see what issues come up and being able to proactively address them. So the success rate remains quite high, manufacturing success rate remains quite high at the well north of 90%.

[Unidentified Analyst]

On LN-145 in the cervical, obviously good news on the orphan drug designation; can you state whether you've crossed the assignment two-stage boundary yet for cervical?

[Maria Fardis]

We have not.

[Operator]

Your next question comes from the line of Madhu Kumar from B. Riley FBR.

[Madhu Kumar, B. Riley FBR]

I'm thinking about the this third quarter discussion with the FDA; it feels like the natural question that emerges is, what line of melanoma therapy do you want to go after -- I mean, post-PD-1 and CTLA-4 [ph]? So how are you thinking about that and when will you kind of get a sense of which line you think is kind of the best line of therapy to pursue for an initial registrational study [indiscernible].

[Maria Fardis]

Certainly, not only we have thought about it but we have had some preliminary discussions and you might recall that around a year ago, we optimized and fine-tuned our inclusion criteria for our LN-144 study based on a dialogue with FDA. The current inclusion criteria that notes patients that are metastatic melanoma subsequent to therapy with anti-PD-1, as well as if they are BRAF [ph] mutant, subsequent to BRAF [ph] inhibitor. We continue with that inclusion criteria that doesn't necessarily mean that's the patient population we're going to propose the FDA. Both as part of fast-track, we also had a discussion with them about the patient population; we think we have a pretty good idea but that is definitely a subject of discussion as part of upcoming discussions with FDA.

[Madhu Kumar, B. Riley FBR]

And how does the marked PD-1 chemo data presented in the AICR affect the kind of bigger strategy in non-small cell lung cancer?

[Maria Fardis]

It certainly offer a separate option for the patients in front line. I have to say that patients who were seeing our all post anti-PD-1 and number of them have seen chemo already, so now they would be seeing them together. So I don't know if our strategy necessarily in the late line patient population would matter. In the early line, of course it offers a very good option for patients, so we recognized in late -- in early line pre-PD-1 and pre-PDL-1, that's a tough patient population to recruit and it certainly would make it more difficult, there was a lot of good options for front line non-small cell lung cancer, I recognize that.

However, we still very much firmly believe that our TIL therapy in general in all lines does quite well. We think the response rates that Rosenberg has seen are a great indication in case of melanoma when you don't have patients that have seen prior new [indiscernible] of immunotherapy, what the product can do and we remain excited about potential move of TIL into earlier lines.

[Operator]

Your next question comes from the line of Biren Amin from Jefferies.

[Biren Amin, Jefferies]

When do we get durational response data from the head and neck topline data that you've presented earlier this year?

[Maria Fardis]

So that's part of our publication strategy that we talked about, we do intend to put melanoma in one other indication and we haven't quite decided what that other indication would be for the remaining part of the year. So as part of our next data cut, whenever we put that data out, the DOR would be one of the parameters that we will report on.

[Biren Amin, Jefferies]

And then can you talk a little bit about this RXI Pharma agreement where you've accessed some of their RX-RNA compounds; what are you hoping to achieve with that?

[Maria Fardis]

Yes, certainly. As I've mentioned before under research front, we are moving into further modifying the TIL in order to gain further potency. We are looking into selection of various apostles [ph], we are looking into shifting equilibrium to get a different product from TIL growth, we are looking into genetic modification, and some of the genetic modifications maybe transient genetic modifications. So we are looking at RNAi technology in order to prepare better tools, we have considered potentially modifying the PD-1 landscape in this particular TILs. In June, a co-inhibitory receptors impacting immune regulation would be of interest to us, that's the scope of the agreement.

[Operator]

We have no more questions. So thank you all for attending today's call. The call will now disconnect.