Iovance Biotherapeutics Inc

NASDAQ:IOVA

Earnings Call Transcript 2018-Q4

[Operator]

Good afternoon, and welcome to the Iovance Biotherapeutics Fourth Quarter and Year End 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 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 today’s call is 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 fourth quarter and year ended December 31, 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, I will pass the call over to Maria.

[Maria Fardis, President & CEO]

Thank you, Tim, and good everyone. Over the past year we took great strides forward in our goal of advancing TIL therapy towards approval and bringing this onetime treatment to cancer patients, who have progressed through existing treatment options.

2018 was an excellent year for the company. Some of our highlights are the following. We reported clinical results for lifileucel, our lead program in metastatic melanoma at SITC [ph] in November. At that time 47 patients treated with lifileucel had an objective response rate of 38%.

We held that end of Phase 2 meeting with the FDA and confirmed it passed the registration with a single arm cohort for our ongoing C-144-01 study now also known as InnovaTIL 01 trial. We also received an RMAT designation for lifileucel for metastatic melanoma.

We have firmly established our optimized scalable 22 day manufacturing process and we are well financed having raised over $400 million in two rounds of public offerings just in 2018. The current cash in hand is expected to be sufficient to complete the registration enabling study for melanoma and to file the Biologics License Application or BLA in 2020 for lifileucel.

Since our last call we continue to make progress on several fronts. In the clinical area, updates include, commencement of enrollment in Cohort 4 of InnovaTIL 01 trial. The protocol for metastatic melanoma study was amended based on the feedback from FDA during the end of Phase 2 meeting and provided to the agency.

Cohort 4 is expected to enroll 75 patients. The primary endpoint for the study is overall response rate or ORR as determined by blinded IRC or independent review committee.

Since our last call the revised protocol has been provided to FDA and our clinical trials have been initiated. A few sites are now active under the new amendment. We have enrolled our first patient in Cohort 4 an anticipated study to complete enrollment in late 2019 up to early to 2020.

For Cohort 2 of the metastatic melanoma study, the last patient was enrolled in the fourth quarter 2018. The company anticipates providing a data update full [ph] cohort of patients at a medical meeting in 2019.

The protocol for cervical carcinoma now also known as InnovaTIL 04 study has been amended to limit the number of private s therapies to no more than three and exclude patients that have been treated with prior immunotherapy. The company anticipates providing a data update from this study at an upcoming medical meeting in 2019 as well.

The Basket study in PD 1 naïve patients that are melanoma or head and neck cancers with TEL in combination with pembrolizumab, and LN-145 as monotherapy in non-small cell lung cancer patients is now open to enrollment with six sites active in United States and Spain. This study has received regulatory approval to proceed in four countries in addition to the US.

As announced yesterday, in February 2019 we received fast-track designation from the FDA for LN-145 for treatment of cervical cancer patients who have progressed while on or after chemotherapy. FDA fast-track designation is a process designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need. The purpose is to get important new drugs to cancer patients earlier. Unmet medical need is defined as providing a therapy where none exists or providing a therapy which may be potentially better than available care.

During 2019 we intend to meet with the FDA to discuss the regulatory path for registration of LN-145 in cervical cancer. As part of our 2018 financing, we raised sufficient funds to be able to initiate building an Iovance owned commercial manufacturing facility. This site selection process for the location of the new commercial manufacturing facility is in the final stages. The company anticipates an announcement of the final location during the second quarter 2019.

As part of the MD Anderson collaboration, we had previously initiated two clinical studies. The first study 2017-0672 is studying LN-145 manufactured by Iovance in the treatment of patients with sarcoma’s and platinum-resistant ovarian cancer.

The second study 2017-0671 is a study of TIL manufactured by MD Anderson in patients with sarcoma’s and pancreatic cancer. Several patients have been dosed in both studies and enrollment continues.

For an update on research, I am pleased to report that we are also beginning to explore the potential of TIL therapy beyond applications and solid tumor. Ongoing collaboration that Ohio State University, Iovance has developed a product candidate called peripheral blood lymphocytes or PBL. The company anticipates filing an IND for PBL in hematologic indications in 2019.

Lastly, we are pleased to announce that our abstract title persistence of cryopreserved to tumor-infiltrating lymphocyte product, lifileucel or LN-144 in C-144-01 study of advanced metastatic melanoma was accepted for presentation at the upcoming American Association for Cancer Research or AACR meeting in March of 2019.

As an update on corporate activities. We continue to grow in anticipation of completing the registration cohort and filing the BLA for lifileucel and we have begun staffing our commercial organization starting with a commercial strategy team.

We have also continued to add staff in critical areas and overall we now have over 100 employees at Iovance. In the months ahead we look forward to presenting and participating a scientific meeting, including an encore [ph] presentation of the Cohort 2 melanoma data at the ASCO-SITC Clinical Immuno-Oncology Symposium in San Francisco. This abstract will be included in the poster watch [ph] taking place on Friday, March 1st.

And I've noted before the data for persistence of TIL after the administration in metastatic melanoma patients of our C-144-01 study trial will be presented at the upcoming ACR annual meeting at the end of March.

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

[Timothy Morris, CFO]

Thank you, Maria. Net loss for the fourth quarter 2018 was $32.6 million, or $0.27 per share, compared to net loss of $25.9 million or $0.36 per share for the fourth quarter 2017.

The increase in the net loss for the fourth quarter of 2018 was driven by higher research and development spending from increased clinical trial activity in the fourth quarter 2018 versus the fourth quarter 2017.

For the full year 2018, the net loss was $123.6 million or $1.27 per share, this compares to $92.1 million or $1.41 per share for the year 2017. Again, the increase in net loss was primarily due to increased R&D spending because of a full year of running clinical trials for melanoma, cervical and head and neck in addition to the initiation of new trials in 2018. Please refer to the press release issued earlier today for additional details on the financial results for the fourth quarter and full year 2018.

At December 31, 2018, the company held $469 million in cash, cash equivalents and short-term investments, this compares to $145 million held at December 31, 2017. For 2018 net cash used in operating activities was $101 million. At December 31, 2019, Iovance anticipates cash, cash equivalents and investments to be between $310 million and $320 million.

In March we will participate and present at the following investor conferences. First, the Cowen and Company Annual Healthcare Conference in Boston, next the Oppenheimer Annual Healthcare Conference in New York, then the Alliance for Regenerative Medicine or ARM Annual Cell and Gene Therapy Investor Day in New York. And lastly, the China Healthcare Investment Conference in Shanghai.

With that, we'll turn the call over to the operator for your questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Mark Breidenbach with Oppenheimer. Your line is now open.

[Mark Breidenbach, Oppenheimer]

Hey. Good afternoon, guys. Thanks for taking some questions. Maria, I was wondering if you can tell us a little bit more about the interim analysis that's built in to the cohort or protocol, just sort of what events need to happen to trigger the analysis and how close to full enrollment you would expect it to take place?

[Maria Fardis, President & CEO]

Hi, Mark. Thank you for the question. We are thinking about how to use that interim analysis because in all reality we would have to have the patients enrolled three months of follow-up and then a BIRC assessment in order to do anything with that data. In the meantime the cohort will be fully enrolled. So chances are high that we would not trigger it in any way because you will not be able to make a decision based on that. The cohort will be fully enrolled at that point.

[Mark Breidenbach, Oppenheimer]

Okay. So is there a chance that this will be used to revise the size of the cohort, as we'd like to – you’re going to hit 75 patients no matter what?

[Maria Fardis, President & CEO]

Yes.

[Mark Breidenbach, Oppenheimer]

Okay. And with regard to the cervical carcinoma protocol amendment, could you jus let us know what you're defining as – at prior immunotherapy and sort of give us some color on why you're choosing to exclude patients who have received greater than three prior lines of treatment?

[Maria Fardis, President & CEO]

Certainly. As we have noted we have presented data around our last round of financing in October of 2018, where we had shown an overall response rate of 27% for 15 patients worth of data and mean number of prior therapies was five. So the patient population was quite refractory and treatment experience. And we wanted to make sure that the patients had an opportunity to survive long enough to be able to benefit from the product and provide some value in terms of data.

So we limited the number of prior therapies so that the patients are slightly healthier and we are able to get reasonable follow-up from them. We are able to limit prior immunotherapy because there is not an approved, fully approved immunotherapy available for cervical cancer patients. KEYTRUDA has an accelerated approval and thus not considered available care because it does not have full approval.

So that opportunity from a regulatory perspective that door is open and from the fact that we know that the patients who are naïve to prior anti-PD1 specifically we know that those are better patients and have a better opportunity to survive a little longer and lead to better data.

So that's why we limited them, we can. The read through [ph] doors open and the patient population potentially could benefit from TIL quite a bit.

[Mark Breidenbach, Oppenheimer]

Okay. And one final one for me, on manufacturing, especially with regard to your in-house capabilities that you'll be building out. How soon might it be before we get a sense for capacity of your new facility and would this primarily support commercial products in the US only or would you expect to rely on a third party for European production?

[Maria Fardis, President & CEO]

Thank you, Mark. In terms of capacity, we are planning on building something that has flexible capacity. So there will be an initial capacity that we will build and we will perhaps disclose the later part of this year, as to what that might be. But we will certainly have an option to expand the capacity fairly quickly and its a very agile modular plan that we are putting in place together.

In terms of whether U.S. or EU could be considered. Those are considerations and location selection, so perhaps we can disclose our location, its better disclosed.

[Mark Breidenbach, Oppenheimer]

Okay. Thank you for taking the questions.

[Maria Fardis, President & CEO]

Sure. Thank you.

[Operator]

Thank you. Our next question comes from Boris Peaker with Cohen. Your line is now open.

[Boris Peaker, Cohen]

Great. My first question is on the Cohort 2 data. I'm just curious will we see a centralized review of that data. And if so when would that possibly be?

[Maria Fardis, President & CEO]

Hi, Boris. Thank you. We are just triggering the central Reid [ph] process in the next couple of months again. We had halted it because we wanted to be sure that it is aligned with our Cohort 4 Reid [ph] and the process.

So depends on when we end up presenting the data. If we end up presenting the data say around second quarter this year, likely the IRC data will not make it in time. If we end up presenting the Cohort 2 data later part of the year, there may be an opportunity. So I'm not entirely sure about where we end up presenting the data.

[Boris Peaker, Cohen]

Got you. And also then from the trial design patient enrollment perspective, if we compare Cohort 4, is there any reason to believe that the efficacy in Cohort 4 should be significantly different from Cohort 2?

[Maria Fardis, President & CEO]

We don't think so. It's an exact same patient population, the exact same sites. We haven't changed the actual selection of the patients in any meaningful way. So we don't anticipate any meaningful difference, as we anticipate that it would be the same at a minimum. So no, not really.

[Boris Peaker, Cohen]

Right. And my last question just on your novel peripheral blood lymphocyte. Just curious what specific tumors are you considering. Or is the initial study will just kind of be typical basket of advanced liquid tumors?

[Maria Fardis, President & CEO]

I think initially we probably will be thinking about CLL. There is initial data that shows that patients with CLL, particularly in their peripheral blood there is a method of priming the blood to have better T-cells and more T-cells, from a regular CLL patient it's hard to get enough T-cells to grow them with the PBL methods that we have.

But if you primed the patient with prior exposure to ibrutinib we do see that there's significantly more T-cells available and this data is published and presented at ASH of 2017. So we likely would focus on CLL initially.

[Boris Peaker, Cohen]

Great. Thank you very much for taking my questions.

[Maria Fardis, President & CEO]

Thank you, Boris.

[Operator]

Thank you. Our next question comes from Jim Birchenough with Wells Fargo. Your line is now open.

[Unidentified Analyst]

Good afternoon. Its Nick on for Jim. Congratulations on a great 2018. Just on cervical cancer then, is the 14% response rate seen by KEYTRUDA kind of the bogie [ph] we should be looking at, I mean, I know you want to see a lot more than that, but just from a competitive perspective is that the response rate that you want to beat?

[Maria Fardis, President & CEO]

Good afternoon, Nick. Thank you for the question. So I will answer it two ways. One is the regulatory bar and one would be immediate clinical or a commercial bar. From a regulatory bar, given the product has accelerated approval. That's not considered “available care”.

So available care remains whatever has full approval. And that's really chemotherapy. This is precisely why we are able to get fast-track designation for patients who have received prior chemotherapy because that's available care still.

From a regulatory perspective carrying on with that line of thinking, their response rate for available care is around 10% to 13 %. The confidence in role that KEYTRUDA clears at the low end was 7 %. So that's just historical data.

From a clinical perspective, we do know that these patients are quite unmet medical needs still and really in second line the response rate for available care as I noted before is around 13%. We clearly would like to do significantly better than that. And that's part of the reason we limited the number of prior therapies for cervical cancer patients and we limited their prior exposure to immunotherapy.

[Unidentified Analyst]

Great. Thank you. Thank you for the PBMC tool [ph]. You'll have to come up with a jazzy name for it. Does that mean again two manufacturing or is there something bespoke to cover the fact that from hematologic malignancy?

[Maria Fardis, President & CEO]

Yeah. We definitely need to come up with a smart name and if you have one send me an email. But we are - it's a different process. It's actually a very short process. A completely novel process.

[Unidentified Analyst]

And I mean, it's great that its short. Did you Gen 2 and this is a better process?

[Maria Fardis, President & CEO]

Because we are not starting with tumor. We are starting with blood. We had the opportunity to do a lot more here. So it's an entirely different process than Gen 2.

[Unidentified Analyst]

Okay. Thank you.

[Maria Fardis, President & CEO]

Sure.

[Unidentified Analyst]

And then what should we expect of updates from the head and neck trial?

[Maria Fardis, President & CEO]

We continue enrollment in head and neck and this is also one of the indications that the patients have a very poor survivable subsequent anti-PD1. So we try to limit the number of priors to assure that we are able to get patients who are able to survive long enough so we can report data.

So we are considering increasing the sites to perhaps increase enrollment and trying to expand our efforts in improving enrollment. We haven't really committed to providing that data this year. I really would like to be able to have sufficient number of patients with Gen 2 only before we report that data, that's what - what is our hold-up so far.

[Unidentified Analyst]

Great. Okay. Thanks very much.

[Operator]

Thank you. [Operator Instructions] Next question comes from George Zavoico with B. Riley FBR. Your line is now open.

[George Zavoico, B. Riley FBR]

Hi. Good afternoon. Thanks for the update and everything. A couple of questions for first, I guess for Maria regarding the PBLs. You said it comes from blood, obviously peripheral blood lymphocytes. I guess, that means that your access to potential cells to transform this is pretty much unlimited, which I imagine is why you've been able to do so much with it.

So like my question is you said it was much shorter the preparation time, is there as many steps, is it just shorter, are you growing out the cells or just modifying them and maybe it's too early for you even to answer those, but I'm just curious about that?

[Maria Fardis, President & CEO]

Hi, George. Thank you for the question. We - I think what has happened is we have learned a significant amount about how to grow T-cells over the course of time. So we have figured out how to do this better. And again, we have other generation of products even in the TIL space that we intend to bring into the clinical landscape.

That PBL just happens to be in the front of some of our other efforts. So our research pipeline has significantly more options in terms of how to grow TIL and we took advantage of that collective knowledge to date in growing the PBLs and shortening the process.

So a lot has gone into it. We haven't really disclosed the details of how we managed to do that and we are hoping to be able to provide that information in an upcoming medical conference in 2019 as well.

[George Zavoico, B. Riley FBR]

And also just as a follow to that question, by having access to the blood, this opens up a much better possibility for multiple treatments. Is that something you're considering for this as opposed to the solid tumor TILs as well?

[Maria Fardis, President & CEO]

It's certainly an opportunity that we can consider our initial, but it certainly would be a dose ranging in the sense that because it's a first in human, we are considering of course how to start the program. We can disclose a little bit more about it maybe in quarter one and Q2 timeframe in terms of details. But yes, that opportunity definitely presents itself. It's an option to consider.

[George Zavoico, B. Riley FBR]

Okay. cool. And with regard to Cohort 2, you've got - the responding patients not even including the standard of the stable disease patients, some of which may or may not have gotten into a PR [ph] since your last update.

You've got patients on the link at the chart in your presentation from two months to 17 months, are they still on therapy? So for Cohort 4, you've got ORR are as the primary endpoint, is durability of response going to play into this primary endpoint, is they're going to be a secondary endpoint? How important do you view the durability of response, because it certainly looks good in Cohort 2.

[Maria Fardis, President & CEO]

Yeah, I agree. Thank you, George for that question. Yes, you are the secondary endpoint. It's also hugely important of course commercial endpoint for us. So it is part of our protocol and we will monitor that space very closely. As you noted our patients had a pretty broad distribution in terms of timeline [ph] study within two months and 17 months exactly as you noted.

So we will be monitoring follow-up from Cohort 2 and the lessons learned from Cohort 2 certainly are very much applicable to Cohort 4.

[George Zavoico, B. Riley FBR]

Okay, great. And finally for Tim, what you're projecting for the end of 2019 is somewhere in the neighborhood of $50 million more for burn in ‘19 versus ‘18. I imagine there's a lot that goes into that, including the building out the manufacturing space.

In that regard, what fraction of that if you can say, maybe you can say it would be the potential cost for the manufacturing facility? And also how long do you think it would take to refit an existing plant for example or build one from scratch?

[Timothy Morris, CFO]

Yeah, George. So in terms of the breakdown of the potential burn for 2019 of about one $150 million, a majority that is going to be - the increase would be R&D. We now have five studies up in running and obviously with the new Cohort 4 coming on board. So I would expect the bulk of that increase to be predominantly R&D.

There is some monies in there for the new facility, mainly some engineering and some other initial moneys there. There's not a lot of bulk in there. Most of the bulk for the new facility will come next year, as we're looking just to break ground and do design this year as well.

So I don't know if that helps or not, but you know, that - we'll end up and obviously as we get closer and start talking about the facility and stuff we could probably give more details there.

[George Zavoico, B. Riley FBR]

Sure. No, that does help and I appreciate that. Thanks, Tim. That's all for me for now. Thank you.

[Operator]

Thank you. And I'm showing no more questions. So I will now like to return to Maria Fardis for any closing remarks.

[Maria Fardis, President & CEO]

Thank you, operator. We are encouraged by the progress and growth that we have seen over the past year and we would love to acknowledge the contribution of the patients who participate in our clinical trials, the investigators who support these trials and the stockholders who have provided the resources that enable us to make TIL therapy a broadly accessible treatment option. We appreciate those of you who were able to join the call today and look forward to providing you further updates in the remaining quarters of the year.

[Operator]

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude your program. And you may all disconnect. Everyone have a great day.