SOUTH SAN FRANCISCO May 8, 2020 (Thomson StreetEvents) -- Edited Transcript of CytomX Therapeutics Inc earnings conference call or presentation Thursday, May 7, 2020 at 9:00:00pm GMT

CytomX Therapeutics, Inc. - Senior VP & CFO

* Christopher S. Keenan

CytomX Therapeutics, Inc. - VP of IR & Corporate Communications

* Sean A. McCarthy

CytomX Therapeutics, Inc. - Chairman, CEO & President

* Biren N. Amin

* Christopher N. Marai

Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology

H.C. Wainwright & Co, LLC, Research Division - Associate

* Terence C. Flynn

Good day, ladies and gentlemen, and welcome to the CytomX Therapeutics First Quarter 2020 Financial Conference Call. (Operator Instructions)

As reminder, this call may be recorded. I would now like to introduce your host for today's conference, Christopher Keenan, Vice President of Investor Relations. Chris, you may begin.

Christopher S. Keenan, CytomX Therapeutics, Inc. - VP of IR & Corporate Communications [2]

Good afternoon, and thank you for joining us. Earlier today, we issued a press release that includes a summary of our recent progress and our first quarter 2020 financial results. This press release and a recording of this call can be found under the Investors and News section of our website at cytomx.com.

With me today are CytomX President, Chief Executive Officer and Chairman, Dr. Sean McCarthy; and CytomX's newly appointed Chief Financial Officer, Carlos Campoy.

During today's call, we will be making forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in our most recent public filings with the SEC at sec.gov, including our Form 10-Q filed today. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise.

I will now turn the call over to Sean.

Sean A. McCarthy, CytomX Therapeutics, Inc. - Chairman, CEO & President [3]

Great. Thanks, Chris, and good afternoon, everybody. Thanks for your patience as we were getting the call up and running. I gather there's quite a lot of call volume at the moment.

Anyhow, once again, good afternoon, and thanks for joining us. It's a pleasure to be here to provide an update on our progress during the first quarter of 2020. I'll begin today's call with a brief overview of our business operations against the backdrop of COVID-19. And then, we'll review first quarter highlights across the pipeline. I'll then turn the call over to Carlos, our new CFO, you just heard off from Chris, and Carlos will review our first quarter and financial results, and I'll wrap up. And then open the call up for questions.

Let me start by saying that all of us at CytomX hope that you and your families are well and keeping safe during the ongoing pandemic. The situation is impacting all of us in different ways, and it looks like it will continue to do so for some time. We are committed to ensuring the continued well-being of those involved with the conduct of our business. This includes the patients, the staff, physicians engaged in our clinical trials, the vendors and partners who support these trials and, of course, our dedicated employees who continue to impress with their drive and focus during these challenging times.

Despite the operational challenges presented by COVID-19, our team remains highly focused and very mindful that as the American Cancer Society has recently reminded us all, cancer is not waiting, and so neither are we.

At CytomX, we see a major opportunity to more effectively target therapeutic antibodies into disease tissues, generating new classes of anti-cancer therapies. We believe our unique Probody therapeutic platform represents a fundamental advance in the field of antibody engineering, and we are highly focused on using our platform to discover and develop a broad clinical pipeline of novel drug candidates to make a meaningful difference in the treatment of cancer. Our unique science offers the potential for new and highly effective anticancer therapies, including first-in-class molecules against novel undruggable targets, potentially best-in-class molecules against validated targets and new combination therapies.

Probody is our fully recombinant antibody prodrugs comprised of a therapeutic antibody and a mask designed to block the binding of the antibody to its target until the mask is removed. Mask removal is achieved specifically and selectively within cancer tissue by certain disease associated proteins called proteases that we know are present and active in most cancers. Proteases are in effect molecular scissors, which in the context of tumor progression, function to cut a path for invading and metastasizing cancer cells. Our Probody strategy is to leverage tumor proteases to localize antibody activity into cancer tissue, thereby decreasing target engagement in normal tissues and broadening or even creating a therapeutic window.

We have pioneered this new approach, that we believe has the potential to improve and optimize a range of antibody formats, including cancer immunotherapies, antibody drug conjugates and T-cell engaging bispecific antibodies.

Despite the emergence of COVID-19, we had a very productive and important first quarter towards the ongoing advancement of our strategy of developing innovative cancer therapies in areas of significant unmet medical need and with a particular emphasis on undruggable targets.

I'd like to start today's update with CX-2009, our wholly-owned Probody drug conjugate that targets the previously undruggable target CD166. CD166 is a tumor antigen that's expressed a high levels on most solid tumors, but it's also present on most normal tissues, ruling it out as a target for a conventional antibody drug conjugate. Our previously presented data from Phase I dose escalation in various solid cancers has shown CX-2009 to be well tolerated and clinically active as monotherapy at doses of 4 mgs per kg and above. This dose is the threshold of which drug conjugates comprising the DM4 payload, the warhead on CX-2009 have been shown by others to be active in the clinic.

Clinical activity was observed in breast, head and neck and ovarian cancers with CX-2009, and we will be presenting updated data from Phase I dose escalation for this agent at ASCO in a couple of weeks.

In the fourth quarter of 2019, we announced the initiation of a Phase II expansion study of CX-2009 monotherapy in patients with hormone receptor positive HER2-negative breast cancer at a dose of 7 mgs per kg administered every 3 weeks, with the objective of enrolling up to 40 patients. Enrollment was initiated and patients were treated during Q1, but regressively, the COVID-19 situation led us to temporarily pause new patient enrollment and new site activation in this study. Our team continues to closely monitor emerging health authority guidance at IRB/Ethics Committee recommendations and our goal is to resume the CX-2009 clinical program as soon as practical.

Now staying with the theme of undruggable targets, I'd now like to turn to CX-2029,a CD71 targeting Probody drug conjugate that we're developing in partnership with AbbVie, and for which, in Q1, we announced the achievement of a major collaboration milestone.

Long considered a high potential but undruggable antibody drug conjugate target, CD71 is known as a professional internalizer, given its role of moving iron from the extracellular space into intracellular compartments. And it does this in all dividing cells. In fact, many consider CD71 to be the gold standard internalizer to assess the in vitro activity of antibody drug conjugates.

But the presence of CD71 on normal cells has been an impediment to its use as a drug target. CX-2029 is a Probody against CD71, conjugated to the cytotoxic payload MMAE. We recently announced the achievement of prespecified dose escalation success criteria for the CX-2029 Phase I dose escalation study, resulting in a $40 million milestone payment from AbbVie to CytomX. Data from this Phase I study will be the subject of an oral presentation at ASCO 2020.

The CytomX and AbbVie teams are now actually finalizing plans for the initiation of Phase II expansions as soon as possible. CytomX has the responsibility for advancing this program through initial proof of concept, whereupon, if successful, the program will transition to AbbVie for registrational studies and ultimate commercialization. CytomX retained significant U.S. commercial rights to this asset and is also eligible to receive double-digit ex U.S. royalties, should the product reach the market.

I'd now like to move to another unique R&D strategy that we're pursuing at CytomX, which is to use our Probody technology to generate first-in-class agents against undruggable targets in the context of T-cell engaging bispecific antibodies, which I will refer to, going forward as, TCBs. TCBs are highly potent therapeutics, which directs the activity of cytotoxic T-cells to tumors. This approach has the potential to take immunologically cold tumors and make them hot, opening many new avenues for cancer treatment. While clinical advances have been made with this approach in hematologic malignancies, notably with Amgen's CD19 CD3 bispecific Blincyto. Its application in solid tumors has been challenging. The reason for this is that the high potency of TCBs can target normal tissues with low antigen expression, resulting in significant toxicities.

For several years, we've been working at CytomX to research and optimize the Probody or masked versions of TCBs with an initial focus on the EGFR-CD3 target pair. Data published by others has shown that EGFR, whilst the well-validated oncology target is undruggable in the context of a CD3 bispecific, a conventional CD3 bispecific.

After this preclinical findings have shown that Probody TCBs against EGFR could induce tumor regressions and create a therapeutic window for this cancer target. These important findings served as the foundation for our ongoing collaboration with Amgen, which I'll speak about in just a few moments.

Building on our successful research on Probody TCBs, during Q1, we announced a major strategic collaboration in this area with Astellas. Under this new agreement, CytomX and Astellas will collaborate on 4 initial programs focused on the discovery, research, development and commercialization of Probody TCBs targeting undisclosed tumor antigens for the treatment of cancer. CytomX will lead early drug discovery activities with Astellas leading preclinical and clinical development and commercialization activities. Under the terms of the agreement, CytomX received an $80 million upfront payment and is eligible to receive future preclinical, clinical and commercial milestones of over $1. 6 billion, together with tiered royalties on product sales that range from high-single digits into the mid-teens.

For certain targets, CytomX may co-fund a predetermined portion of product development costs and become eligible to receive a prespecified portion of profits in the United States. CytomX may also later elect to co-commercialize products directed towards such targets in the U.S. Research work and the collaboration is underway, and we are thrilled to have Astellas as our newest partner.

Returning now to our Amgen partnership. I'm also delighted to report that we have recently advanced a lead Probody TCB candidate against EGFR that we call CX-904 into IND-enabling studies. This is the first pro TCB from our platform to reach this important landmark. CytomX is responsible for IND filing, which is targeted for late 2021 and for early clinical development. We're very pleased with this excellent scientific progress with our Amgen alliance and with the growing excitement around the potential of the Probody TCB space, as also evidenced by our new partnership with Astellas.

Moving now to our potential best-in-class programs, CX-072, our wholly-owned anti-PD-L1 Probody and BMS-986249, the anti-CTLA-4 Probody partnered with Bristol Myers Squibb.

The CX-072 was the first Probody we advanced into the clinic, and it has provided us with crucial insights and the first clinical proof-of-concept for our platform. We'll be presenting long-term follow-up data from the CX-072 Phase I/II study as an oral presentation at ASCO.

In Q1, as part of our portfolio reprioritization, we announced the termination of the Phase II program combining CX-072 with ipilimumab, the anti-CTLA-4 antibody in patients with relapsed or refractory melanoma. This decision followed a reevaluation of the evolving clinical competitive and commercial landscape in immuno-oncology, taken together with the impact of the COVID-19 pandemic. We continue to evaluate opportunities for the further advancement of the CX-072 program and we plan to initiate combination studies with our second wholly-owned program CX-2009 later this year.

During Q1, we also announced an important pipeline milestone in our foundational oncology collaboration with BMS. The leading edge of this alliance is the anti-CTLA-4 Probody BMS-986249.

CTLA-4, the target of ipilimumab, is the prototypical checkpoint target, and blocking this mechanism has proven highly effective in the treatment of patients with melanoma and other cancer types, both as monotherapy and in combination with PD-pathway inhibitors. While a very important advance, CTLA-4 blockade can cause severe immune-related toxicities, creating a clear opportunity for a Probody version of this agent to improve tolerability, increased duration of treatment and potentially improved activity. BMS and CytomX have previously presented preclinical proof-of-concept for CTLA-4 Probodies at several major research conferences and Phase I clinical data for this Probody will be presented at ASCO.

Based on these Phase I findings, BMS recently initiated a randomized Phase II expansion study comparing the tolerability and activity of BMS-986249, plus nivolumab, to ipi plus nivo in frontline metastatic melanoma. The advancement of the CTLA-4 Probody into this study triggered a milestone payment of $10 million from BMS to CytomX.

This is an important study, that if positive, has the potential to place the ipilimumab Probody on a registrational path.

Moreover, this work is a terrific example of what we set out to do with our platform when it was first conceived of, and we're excited about its potential for cancer patients.

Additional recent progress within our BMS alliance includes the initiation of the dose escalation phase of another clinical study, a Phase I/II study for a second anti-CTLA-4 Probody. We call this BMS-986288. And this is based on a modified version of ipi.

The second clinical Probody program demonstrates BMS' ongoing commitment to our technology platform as a way to potentially unlock additional value in the CTLA-4 mechanism and across other targets.

Before handing over to Carlos, I want to also note that we continue to strengthen our executive leadership at CytomX and with the appointments in Q1 of Carlos, our CFO; and also Dr. Alison Hannah as Chief Medical Officer. Carlos and Alison bring -- each bring over 30 years of leadership experience from across their respective domains, and we are absolutely delighted to welcome them to the team.

I would now like to turn the call over briefly to Carlos.

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Carlos Campoy, CytomX Therapeutics, Inc. - Senior VP & CFO [4]

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Thank you, Sean. I'm very pleased to be here. I'd like to review the financial highlights for the first quarter ending March 31, 2020. Revenue for the quarter was $50 million compared to $29 million in the corresponding period in 2019. The increase was primarily due to the partial revenue recognition of the $40 million milestone earned from AbbVie associated with the CX-2029 project and $10 million related to the milestone earned from BMS associated with the initiation of the Phase II randomized cohort expansion of BMS-986249.

Research and development expenses were $43 million for the quarter compared to $36 million in the corresponding period in 2019. The increase was largely attributed to license and sublicense fees associated with milestones and upfront payments earned in the first quarter of 2020.

General and administrative expenses were flat compared to the corresponding period in 2019. We ended the quarter with cash, cash equivalents and investments totaling $247.9 million compared to $296.1 million as of December 31, 2019.

Our achievements in existing and new partnerships during Q1 have resulted in $130 million in milestone and upfront payments to CytomX that are not reflected in our end of Q1 cash balance. I would like to underscore the company's continued strong track record of executing strategic business development transactions to broaden our pipeline and access additional non-dilutive operating capital. We expect our strong balance sheet to allow us to comfortably meet projected operating requirements into the second half of 2022, assuming no new collaborations or financings.

With that, I'll turn the call back to Sean.

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Sean A. McCarthy, CytomX Therapeutics, Inc. - Chairman, CEO & President [5]

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Great. Thanks, Carlos.

So to wrap up, CytomX had a very strong first quarter of 2020, with many key achievements across our preclinical and clinical programs in our existing partnerships and in the formation of a major new strategic alliance. We have a strong balance sheet to advance our pipeline and weather market uncertainty. And we're looking forward to ASCO, of which we have multiple presentations that will provide important updates on all of our clinical stage programs. I am very proud of the CytomX team for staying intensely focused in these challenging times, as we drive towards making the biggest difference we can for patients with cancer.

So thanks all for your time today. We wish the very best to you and your families. And Chris, please now open the call up to questions.

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Christopher S. Keenan, CytomX Therapeutics, Inc. - VP of IR & Corporate Communications [6]

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Operator, we'll take our first question.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Our first question comes from Peter Lawson with Barclays.

Our next question comes from Peter (sic) [Chris] Marai with Nomura Instinet

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [2]

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CD166 -- Can you hear me okay?

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Operator [3]

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Yes, sir. You were muted in the beginning. You came on halfway.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [4]

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Okay. I'm sorry about that. So what I mentioned is the toxicity around the CD166 program versus the CD71. I'm just curious about the payloads being used here. And the internalization profiles of the targets, given that CD71 is very efficient in internalizing, does that impact the type of payload that you chose to use? I noticed that you 2 different payloads for these products.

Also for the CD71 PDC, I'm curious about what would some expected on target toxicities might look like versus toxicities due to the payload in general?

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Sean A. McCarthy, CytomX Therapeutics, Inc. - Chairman, CEO & President [5]

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Yes. Thanks for the questions. So first of all, with regards to the payloads, going back several years, when we designed the Probody drug conjugate strategy, we made a very conscious decision that the first 2 Probody drug conjugates to take into the clinic that we would work with, the most established warheads or payloads, if you like. And DM4 was selected for the CD166 program through an alliance with ImmunoGen and MMAE, which at the time was the second most validated payload. We were able to access that through our alliance with AbbVie via their alliance with Seattle Genetics. And so frankly, we could have used -- it could have ended up being the other way around. That's just the way it played out at the time. We considered those 2 payloads to be the most and best validated at that time.

In terms of the toxicities with DM4, we've known for a long time that the principal toxicity with DM4 is ocular tox. That's exactly what we saw at the higher doses in our dose escalation in Phase I, is something that is manageable in the form of ocular prophylaxis. So that's something that we're implementing in the ongoing Phase II study.

With regard to CD71 and MMAE, the principal toxicities with MMAE are a little bit different to DM4. They're more hematologic in nature. And that's what we saw in our preclinical studies and hematologic toxicities that we're looking out for in the clinic.

With regards to CD721 on target toxicity, it's very difficult to say. With CD166, just as an example, the target is expressed on most normal tissues and you could, therefore, infer that you may see toxicity of any kind. In fact, in the clinic, we really didn't see any evidence of on target toxicity with our reported data on CD166. We'll provide the data on CD71 Phase I dose escalation in a couple of weeks at ASCO.

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Operator [6]

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Edited Transcript of CTMX earnings conference call or presentation 7-May-20 9:00pm GMT - Yahoo Finance

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