Iovance Biotherapeutics Inc

NASDAQ:IOVA

Earnings Call Transcript 2018-Q3

[Operator]

Good afternoon, and welcome to the Iovance Biotherapeutics Third Quarter 2018 Financial Results Conference Call. [Operator Instructions]. Please be advised that the call is being recorded at the company's request.

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

[Timothy Morris, CFO]

Thank you, Operator. Good afternoon, everyone. Thank you for joining us today. With me on the call is Dr. Maria Fardis, our President and Chief Executive Officer; and Dr. Debora Barton, Senior VP of Clinical Science. This afternoon, we issued a press release that you can find on our website at iovance.com, which includes the financial results for the quarter and 9 months ended September 30, 2018, and a corporate update.

Before I turn the call over to Maria, I'd 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 or results, potential future applications of our technologies, manufacturing capabilities, regulatory feedback and guidance, licensing and collaboration agreements, future updates and cash guidance. 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.

[Maria Fardis, CEO]

Thank you, Tim, and good afternoon, everyone. We have made tremendous progress in the last several months as we continue our effort toward our mission in offering TIL to cancer patients. Highlights since the last call include: in September, we held an end of Phase II meeting with FDA after which we unveiled an anticipated fast-to-market registration path for our lead product candidate, lifileucel, for metastatic melanoma. We also announced that we've received Regenerative Medicine Advanced Therapy or RMAT designation in advanced melanoma. We have new data being presented at SITC, which we announced by press release this morning. We also conducted a successful financing in October, bringing in $252 million. This additional funding gives us a strong cash position as we continue all of our continuing ongoing clinical trials and seek to build our own U.S. manufacturing facility, utilizing our proprietary centralized and commercial process known as Gen 2.

Let me start with our lead program, C-144-01, a global Phase II multicenter study for lifileucel for metastatic melanoma. As confirmed during our FDA meeting, the agency acknowledged that a single-arm cohort could be supportive of initial registration for lifileucel. FDA also confirmed that conducting a randomized Phase III trial in post-PD-1 advanced melanoma patients may not be feasible. Based on FDA feedback, we now plan to recruit a new cohort of patients, which we refer to as Cohort 4, in support of registration. Enrollment in Cohort 4 will be initiated in early 2019 in metastatic melanoma patients post-PD-1 blocking antibody and if BRAF mutation positive, a BRAF inhibitor or BRAF inhibitor with MEK inhibitor.

The primary endpoint of this study is overall response rate, or ORR, as determined by Blinded Independent Review Committee or BIRC. We expect to fully enroll this cohort by late 2019 or early 2020, with a BLA submission expected by end of 2020.

We also announced this morning that new data from this trial will be presented at SITC this weekend. The new data will be featured during an oral presentation on Sunday, November 11, 2018, by Dr. Amod Sarnaik from H. Lee Moffitt Cancer Center, he is the lead investigator in the C-144-01 study.

The data will be shared as a poster on Saturday November 10 during the conference as well. Highlights of the presentation will include: an overall response rate of 38% from 47 consecutively dosed patients; the ORR includes 1 complete response and 17 partial responses, 4 of which are unconfirmed and pending patients' upcoming second assessment; a median duration of response, or DOR, of 6.4 months, with a range of responses from 1.3 months continuing to 14 months of continuing responses, 10 of 14 confirmed responses are ongoing in this study. This translates approximately 68% of the responding patients remaining in respond. The disease control rate was 77%, with over 72% of patients having a reduction in tumor burden. All of the patients had received prior anti-PD-1 treatment and had a mean of 3.3 prior systemic therapies.

Patients also had a higher tumor burden at baseline, including 11.2 centimeter meaningful diameters for target lesions. The most common treatment emergent adverse events observed in the cohort to date includes chills, febrile neutropenia, anemia, decreased platelet count, pyrexia and hypophosphatemia. There were 2 Grade 5 events reported. The ORR from the ongoing study in post-PD-1 metastatic melanoma patients treated with lifileucel continues to be well above the outcome from the current standard of care available for late-stage melanoma patients. In particular, the DOR greater than 6 months is very encouraging. Literature suggests that available care for these patients offers approximately 10% in overall response rate.

Turning to our next program. Patient dosing continues at C-145-03, a Phase II trial of LN-145 for the treatment of patients with recurrent and/or metastatic squamous cell carcinoma of the head and neck. In October, we announced preliminary data of 13 patients with a reported overall response rate of 31% with a duration of response ranging from 2.8 to 7.6 months. Safety findings from these studies remain consistent with previous reports. Patients in this study had a median of 3 prior therapies. These results include patients from Gen 1 and Gen 2 manufacturing process. We will continue to enroll patients in the trial who will be treated with TIL manufactured with Gen 2 process.

In C-145-04, our Phase II trial of LN-145, for the treatment of patients with recurrent metastatic or persistent cervical carcinoma, we have initiated dosing patients in Europe. We also announced that we crossed the first stage of the Simon's two-stage design. Enrollment in this study continues with the targeted enrollment of 47 patients. In October, we announced preliminary data for 15 patients with a reported overall response rate of 27%, with an early look at the DOR ranging from 2.4 to 2.5 months and continuing. Patients in the study had a median of 5 prior therapies. The safety findings from these studies remain consistent with previous reports. The protocol for this study has been amended to limit the number of prior therapies to no more than 3 and to exclude patients who have been treated with prior immunotherapy. We anticipate reporting early data from this study at an upcoming medical meeting in 2019.

We are also conducting a fourth Iovance-sponsored study in non-small cell lung cancer patients as part of our collaboration with MedImmune, allowing treatment of patients with TIL plus durvalumab. As we announced in our previous call, given recent changes in the treatment landscape for lung cancer, we've modified this study design to eliminate the TIL along cohort. Patients will now be enrolled for treatment with LN-145 and durvalumab. There are currently 9 sites active for this trial, and we look forward to enrolling our first patient soon.

Our fifth study is in PD-1 naïve melanoma and head and neck patients with TIL in combination with pembrolizumab, and LN-145 as monotherapy in non-small cell lung cancer patients who have previously report - or received systemic therapy with checkpoint inhibitors. This study, IOV-COM-202 is now open to enrollment with 2 sites active.

With respect to expanding our TIL clinical development into new indications as part of our collaboration program with MD Anderson Cancer Center, we have 2 Phase II clinical studies currently being conducted at MD Anderson. The first of the 2 studies, 2017-0672 is investigating LN-145 manufactured using our Gen 2 manufacturing process, treating patients with soft tissue sarcoma, osteosarcoma and platinum-resistant ovarian cancer. For the second study, MD Anderson has begun enrolling patients and will use TIL manufactured by that institution using 4-1BB agonist antibody or urelumab, during the manufacture of the TIL product.

Turning now to manufacturing. It is our intent to build our own U.S. manufacturing facility, utilizing our proprietary, centralized and commercial process. The site selection process for the facility is underway, and we anticipate finalization of the site selection in the first half of 2019.

Regarding European manufacturing. In October, we announced as a new three year Manufacturing Service Agreement with MaSTherCell S.A., a dedicated facility to manufacturing cell therapy product. MaSTherCell will manufacture TIL for our late-stage clinical trials in its commercial-ready GMP manufacturing suites, which allows for an increase in our capacity for manufacturing TIL in Europe.

As it relates to our IP portfolio, 2 U.S. patent applications covering therapeutic methods based on Generation 2 manufacturing which was developed at Iovance, were recently allowed and provide protection through 2038. As many of you know, all ongoing Iovance-sponsored trials are utilizing our Gen 2 manufacturing method that lasts 22 days and yield a cryopreserved product.

We continue our research efforts here at Iovance. Under a collaboration with Ohio State University, we developed peripheral blood lymphocytes, or PBLs, and PBLs can be successfully expanded from PBMCs of lymphoma and leukemia patients. This may offer treatment options for patients who are in need of new therapeutics. PBL was developed at Iovance, have a similar lytic activity in leukemia as TIL do in melanoma, which includes higher interferon-gamma release and potent activity against autologous tumor cells or CD 19. A clinical program is expected to begin to administer PBLs in chronic lymphocytic leukemia, or CLL, in 2019.

We're also pursuing next-generation TIL product both through process development as well as research. Our goal of our research and work on TIL is to increase potency of TIL products. We have been working on modifying the properties of our TIL cells through selection of better TILs from our cocktails in addition to different co-simulatory factors such as OX40 in 4-1BB agonist as well as utilization of various cytokines in our growth media. We also continue our research efforts with RXi and selected on investigation of utility of genetically modified TIL. Preliminary results from our selected TIL program will be presented at SITC as a poster.

Looking ahead, we look forward to the presentation of new melanoma data this weekend at SITC, and hosting our IR event with KOLs on Friday night, presenting and participating at several conferences this month including the Cowen I/O conference in Washington, DC. The Tumor Targeted Lymphocyte Summit in Boston, the Credit Suisse Healthcare Conference in Scottsdale, the Jefferies Healthcare Conference in London and Evercore BioPharma Catalyst or Deep Dive Conference in Boston.

Most importantly, we plan on beginning our enrollment in Cohort 4 in early 2019 and prefer for BLA filing in 2020.

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

[Timothy Morris, CFO]

Thank you, Maria. Net loss for the third quarter 2018 was $33.8 million or $0.36 per share. This compares to a net loss of $22.1 million or $0.35 per share for the third quarter last year. Research and development expenses were $27.9 million for the third quarter of 2018, an increase of $11.3 million compared to $16.7 million for the third quarter 2017. The increase was primarily attributed to an increase in clinical trial costs due to a higher enrollment and an increase in the number of sites in the lifileucel trial for the treatment of metastatic melanoma, a general increase in enrollment in the cervical and head and neck LN-145 clinical studies and the initiation of clinical studies in 2018 for new indications.

General and administrative expenses were $7.1 million in the third quarter 2018, an increase of $1.4 million compared to $5.7 million for the third quarter 2017. The increase was primarily attributed to an increase of stock-based compensation due to an increase in the number of full-time employees and higher stock prices during the quarter as compared to the third quarter 2017. Net loss for the 9 months ended September 30 2018 was $91 million or $1.01 per share. This compares to a net loss of $66.2 million or $1.06 per share for the same period ended September 30 2017. Research and development expenses were $72.4 million, an increase of $21.5 million compared to the $50.9 million for the same period in 2017. The increase was primarily attributed to increases in clinical trial costs for ongoing and newly initiated studies and an increase in payroll and payroll related expenses.

General and administrative expenses were $20.9 million, an increase of $5.0 million compared to $15.9 million in 2017. The increase was primarily attributed to an increase in payroll and related expenses again, including stock-based compensation, due to a higher number of full-time employees and higher stock prices in 2018.

At September 30, 2018, the company held $260 million in cash, cash equivalents and short-term investments. This compared to $276.1 million that we held at June 30 2018. During the third quarter, 2018, the company used $28.2 million for operating-related activities and received $12.1 million of proceeds from the exercise of warrants and stock options. In October 2018, the company received $236.6 million in net proceeds from the issuance of common stock. The company anticipates that the balance of cash, cash equivalents and short-term investments at year-end maybe between $460 million and $465 million.

With that, I'll turn the call back to the operator for your questions.

[Operator]

[Operator Instructions]. And our first question comes from Mark Breidenbach from Oppenheimer.

[Mark Breidenbach, Oppenheimer]

So Maria, assuming an accelerated approval of lifileucel in, let's say, 2020 or so 2021, have the FDA given you any indication of what confirmatory trial they would want to see run for transitioning from accelerated approval to full approval?

[Maria Fardis, CEO]

Mark, thank you for the question. No, we have not talked about a confirmatory trial, nor are we done thinking that a single arm could be supportive over full approval. There is precedence for that in the cell therapy space for single arm being supportive of full approval. So that dialogue is yet to be had.

[Mark Breidenbach, Oppenheimer]

Okay. Okay. And can you give us a little bit more color on this 2 Grade 5 events. Can you elaborate on whether you think these were related to the lymphodepleting chemotherapy or to the IL-2 or to the TIL infusions themselves?

[Maria Fardis, CEO]

Sure. So we had two events, one of them was intra-abdominal hemorrhagic event and one was acute hypoxic respiratory failure. The intra-abdominal hemorrhagic event was possibly associated with LN-144, given that it's a single-arm study that correlation could not be ruled out. The acute hypoxic respiratory failure was not related to LN-144.

[Operator]

Our next question comes from Boris Peaker from Cowen.

[Boris Peaker, Cowen and Company]

My first question is on the cervical indication. I'm just curious, what do you need to see in terms of response and durability or response to really moving this forward into a pivotal trial?

[Maria Fardis, CEO]

Yes. A good question. Thank you, Boris. So available care right now for patients that are late line, second or third line, through an accelerated approval, KEYTRUDA was recently approved in June of 2018 for cervical cancer. The overall response rate was 14% per the label. I know that they continue monitoring the patients and the DOR was not quite reached. So I think response rate, anything above 15%, is quite respectable for this patient population. By the way, KEYTRUDA was approved under accelerated approval, so a full approval is to come for that particular product as well.

[Boris Peaker, Cowen and Company]

So you don't think you need a higher margins just given the complexity of given TILs versus KEYTRUDA?

[Maria Fardis, CEO]

Not particularly. I think the patients are very late line and they're really out of options. And I think that given that there is really not a whole lot that offers patients a better response, I think the response rate bar is fairly low.

[Boris Peaker, Cowen and Company]

Got you. And my second question is on manufacturing. I'm just curious, why do you need your own manufacturing? I thought you had an agreement with Lonza that would be able to certainly support clinical development in commercial.

[Maria Fardis, CEO]

Yes. It's always nice to have control over your own destiny. I did not want to spend a lot of resources earlier on until we had a registration path defined between at least Iovance and FDA at a minimum. And also, I wanted to make sure that our patient population is defined. In other words, we know what our capacity needs to be. Both of those are now defined. And so it really allows us to move forward with our own manufacturing. There is always a certain amount of overhead that you pay a CRO in long term and that adds up quite a bit over time. So that's the reason to think about our own manufacturing facility to minimize the spend in that front.

[Boris Peaker, Cowen and Company]

And so yours is not just for clinical study, this is for commercial as well? You'd move out of Lonza if it gets approval?

[Maria Fardis, CEO]

It's actually exactly for that. It's for commercial facility and it has the capacity, of course, to be used for clinical as needed. But it is a commercial manufacturing organization that we're trying to build.

[Operator]

Our next question comes from Jim Birchenough with Wells Fargo Securities.

[James Birchenough, Wells Fargo Securities]

First question just on durability of response. As you look at the melanoma data that will be presented at SITC, how do the things you're learning in terms of what defines a short-response duration patient versus longer-duration response and anything that you can learn that could help in your pivotal study?

[Maria Fardis, CEO]

Good question. Thank you, Jim. We don't see a particular correlation right now between what could be the definitive predictor of the duration. It's possible that as we have more and more responders, we start seeing a pattern. But right now there doesn't seem to be a pattern. You've seen that in our previous course that we also have patients that the target lesions are nicely reduced but a non-target lesion appears. So the power of TIL can control only, so much that the landscape of the patient's meditation also is a determining factor. There's multiple factors that play here.

[James Birchenough, Wells Fargo Securities]

And then maybe just another question on manufacturing. Maria, could you remind us what your current Gen 2 process what the turnaround time is for a patient to get a TIL therapeutic from the time that they have the biopsy taken. And I guess, maybe remind us what things you're doing to further optimize that?

[Maria Fardis, CEO]

Good question. Thank you. So from biopsy to infusion, it's probably as short as 24 days, 22 days is manufacturing and 1 day each direction for shipment. Typically, our infusion - because the product is cryopreserved product has a flexibility with patients and site availability. So if the schedule changes is based on availability not based on product itself. The product itself can be infused in early as 24 days. We are working in our research organization in shortening the timeframe for our subsequent generation of manufacturing of the product. And in fact, we already have Gen 3 and Gen 4, for example, in the queue with shorter manufacturing process. We felt that this is adequate enough and the patient population is late line enough to address them with the existing Gen 2 manufacturing, when we certainly can optimize the manufacturing process further. We know that already.

[James Birchenough, Wells Fargo Securities]

Just a final, if you will allow. Post-SITC, you've got a lot going on. What is the - could you maybe go through the calendar of data flows, you look into 2019, when should we see the next data from cervical head and neck, lung? Maybe give us a sense of how that plays out from a dataflow perspective?

[Maria Fardis, CEO]

From a dataflow perspective, I think that the key piece that we definitely are planning on putting out is a cervical data in 2019. At some point in 2019, we are happy to update the Cohort 2 data, once it's fully enrolled with the follow up. We have not made any commitments at the what venue that would be yet. I think the rest of it is going to have to be opportunistic as we get more data and we have visibility to it. We certainly would be happy to put it out.

[Operator]

And our next question comes from Madhu Kumar from B. Riley FBR.

[Madhu Kumar, B. Riley FBR, Inc.]

So thinking about Cohort 4 in melanoma, how much better than standard of care do you all have to do in the Cohort 4 trial to kind of win with the right guider?

[Maria Fardis, CEO]

Very good question. Thank you, Madhu. So we believe that the standard of care for this patient population gives you a response rate of around 10%. It is chemotherapy and in post-PD-1 patient population with very little data, we think that ORR is around 10%. The sample size - the better the response rate in our own cohort, the lower the sample size would need to be. So depending on where we land with our final ORR in the court, the sample size can be adjusted to a smaller sample size. So the sample size is not necessarily a fixed number that says what it needs to be if we are at the higher the response rate, the sample size can go lower. Does that help?

[Madhu Kumar, B. Riley FBR, Inc.]

So at 80, what would the response - more the response rate have to be to stop at 80? What would the response rate have to be to stop at 80? What would the response rate have to be to get to 100?

[Maria Fardis, CEO]

If you're asking what confidence interval you would clear. Is that what you're asking?

[Madhu Kumar, B. Riley FBR, Inc.]

Yes, basically what is the percentage - when you're at patient 80 and you've gotten to - and you've got x percent response rate. Would you - what is the kind of - where you would stop enrolling basically?

[Maria Fardis, CEO]

Why don't I answer it slightly differently. With 80 patients, there is sufficient with the existing response rate, and assuming it also as is, with 80 patients there is ample power to enroll in Cohort 4 and be able to completely clear the two confidence intervals of our response and the point estimate of available care, which is 10%. In fact, with a much smaller sample size, you might be able to do that, and therefore, we are proposing an interim analysis FDA as well as part of our Cohort 4.

[Madhu Kumar, B. Riley FBR, Inc.]

And what is the cut out for the interim analysis? How many patients in the setting?

[Maria Fardis, CEO]

It is less than 80. We have not disclosed exactly what the number it is. We would like to get agreement from the agency before we disclose it.

[Madhu Kumar, B. Riley FBR, Inc.]

Okay. And I have a question for Tim. Thinking about the kind of cash runway, how much of the current cash position would be kind of set away towards the manufacturing facility versus the current and future set of clinical trials?

[Timothy Morris, CFO]

Yes. That's fine. Madhu, we haven't come up with an estimate for the facility just yet. We're actually looking at various sites and we can determine the actual cost for that. We will try to give an update once that's final. But I don't have an estimate for you right now. So safe to say that, I mean, the burn rate that we had this quarter is about $28 million with all these active studies. I think that's probably a decent guide for what the burn rate will be in the future for clinical studies. But then obviously, on top of that we'll have the cost of the facility and as you know, that will come later and it could come through a combination of rent and leasehold improvements and/or - some type of financing around that.

[Operator]

And our next question comes from Biren Amin from Jefferies.

[Biren Amin, Jefferies]

Maria, I just want to confirm in your prepared remarks that you stated that in Cohort 2 that you had 10 patients that are continuing with ongoing responses or 58% of confirmed responses?

[Maria Fardis, CEO]

That's correct.

[Biren Amin, Jefferies]

Okay. So that would, I guess, assume that the 6.4 month median duration response is likely going to improve over time? And if so, when will we get the next update post-SITC?

[Maria Fardis, CEO]

Yes. Great question, Biren. Thank you for that. There certainly is an opportunity. Of course, we don't know what the patient will do, but there is certainly an opportunity for the 6.4 months to improve. It certainly not mature. That I can tell you. It's not a mature median DOR. We haven't decided where in 2019 we would follow up with our data. But we are thinking about following up our data in 2019 once the full cohort is enrolled. That would be the best time to put the totality of the data out.

[Biren Amin, Jefferies]

Got it. And then just for Cohort 4, how you're thinking about patient enrollment in this cohort given you've already have the trial sites up and running? Are there any new additional sites that you need to have for this cohort?

[Maria Fardis, CEO]

Yes. Great question as well, thank you. We did have other sites planned for activation and because the Cohort 2 involvement was expedited, we did not activate them. So yes, we are in preparation for activation of additional sites, both in U.S. and EU that we could activate for Cohort 4. As I noted, we were not able to activate them because enrollment in Cohort 2 reached its predefined number more quickly than we thought it would.

[Biren Amin, Jefferies]

Got it. And then just for head and neck, with the RMAT designation that you have now which was previously not available to you with the Cohort 2 melanoma data, can you think you could go to the FDA after treating maybe, let's say, another dozen or so patients with 1 to 3 prior lines, which would enable then discussion on the regulatory path forward for head, neck?

[Maria Fardis, CEO]

Yes. We are very encouraged with that designation because, exactly as you predict, there is an opportunity to talk to the agency about other indications for LN-144. For - and 145, they are the same process. So we intend to engage them to give a full program overview in 2019.

[Operator]

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