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Harpoon Therapeutics Inc(NASDAQ:HARP)Q42019 Earnings CallMar 12, 2020, 4:30 p.m. ET

Operator

Good day ladies and gentlemen, and welcome to Fourth Quarter and Full Year 2019 Financial Results Webcast and Conference Call. [Operator Instructions].

I would now like to turn the call over to Mr. Robert Uhl from Westwicke. Sir, you may begin.

Robert Uhl -- Senior Director of Investor Relations at Westwicke

Thank you, operator, and good afternoon everyone, thank you for joining us. On the call today from Harpoon Therapeutics are Gerry McMahon, President and Chief Executive Officer; and Georgia Erbez, Chief Financial Officer. Following management's prepared remarks we will be conducting a Q&A session.

I will now turn the call over to Georgia Erbez, CFO of Harpoon Therapeutics.

Georgia L. Erbez -- Chief Financial Officer

Thank you, Robert and good afternoon. Welcome to Harpoon Therapeutics webcast and conference call for a discussion of the company's fourth quarter and full year 2019, financial results and a corporate update. Before I turn the call over to Dr. McMahon, I would like to remind you that today's call will include forward-looking statements. These forward-looking statements are based on Harpoon's expectations and assumptions as of the date of this call. Each of these forward-looking statements involves risks and uncertainties that could cause Harpoon's clinical development programs, future results or performance to differ significantly from those expressed or implied by the forward-looking statements.

Please refer to Harpoon's filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2019, which was filed today and which are also available on Harpoon's website for information concerning factors that could cause Harpoon's actual results to differ from those expressed or implied in the forward-looking statements discussed on this call. Except as required by law, Harpoon assumes no obligation to update any forward-looking statements discussed on this call to reflect any change in the expectations, even as new information becomes available.

I will now turn the call over to Dr. Gerry McMahon, President and CEO of Harpoon Therapeutics.

Gerald McMahon -- President and Chief Executive Officer

Thank you, Georgia, and thank you all, for joining us on the call this afternoon. I am pleased with the achievement of significant clinical, scientific and operational milestones during the past year. We are committed to realizing the promise of our proprietary T-cell engager platform, which we refer to as TriTAC. This T-cell activating construct platform is designed to connect and convert a patient's own T-cells to kill tumors, or other disease tissues. Try near to optimize the therapeutic index of T-cell engagers, and our goal is to bring the successes seen in liquid tumors to solid tumors.

We are currently driving multiple products forward for the potential treatment of cancers and the benefit they could provide to patients, with limited treatment options. Some of the key accomplishments for Harpoon in 2019, included the continued advancement of our lead product candidate HPN424, which is currently in the dose escalation portion of a Phase I clinical trial in patients with prostate cancer.

We are also advanced our pipeline of three other TriTAC programs, including our second product candidate HPN536, which entered the clinic in April 2019, for the potential treatment of mesothelin expressing tumors, with an initial focus on ovarian cancer. We submitted an IND for our third product candidate, HPN217 at the end of last year, and we expect an initiate Phase I/II clinical trial for multiple myeloma in the first-half of 2020. Submission of an IND and initiation of a Phase I trial for HPN328, targeting DLL3 for small cell lung cancer and other tumors, is planned for the second-half of 2020.

Harpoon also strengthened its financial position in 2019, significantly, with our successful initial public offering in February, that raised approximately $70.7 million of net cash. As part of our partnering strategy, we evaluate opportunities to enhance our assets and inflection points that can bring the highest value to our shareholders. As an example of this strategy, in November last year, Harpoon and AbbVie announced an exclusive worldwide development and option transaction for HPN217 targeting BCMA, and in addition, an expansion of our existing discovery collaboration for up to six additional targets. These transactions were a major accomplishment for Harpoon in 2019, and we were pleased to have the opportunity to expand our relationship with AbbVie, and to further align our HPN217 asset, with a partner in multiple myeloma.

Under the terms of the development and option agreement, Harpoon granted AbbVie an option to license worldwide exclusive rights to HPN217, which may be exercised after completion of a Phase I/II clinical trial. This agreement represents a potential transaction value, up to $510 million in upfront option fee and milestone payments, royalties on global commercial sales.

In December, we received a $30 million upfront payment, and we expect to receive up to $50 million as a milestone payment, upon dosing the first patient in the HPN217 clinical trial, which we expect to accomplish in the first half of 2020. In addition, the expanded discovery collaboration represents a deal transaction value of up to $1.86 billion, and in December, we received a $20 million upfront payment under this expansion deal. The financial resources from these transactions are being put to work to support our clinical development and research programs, leading to multiple potential value creating milestones for our shareholders.

Now, let me review some key aspects of our TriTAC technology and after that, I will describe our clinical development programs. Harpoon's TriTAC technology platform is a novel and proprietary approach to engage T-cells. T-cell engagers are engineered proteins that physically connect a patient's own T-cells to target cells, that express its specific proteins or surface markers. This results in the activation of T-cells unleashing their natural power to kill the target cell by releasing potent cytokines and other factors.

Our current pipeline of product candidate focuses on oncology applications of our technology. Unlike other immuno-oncology approaches, like checkpoint inhibitor products, TriTACs do not rely on the existence of tumor specific T-cells, or recognition of the tumor cell through a T-cell MHC interaction. TriTACs can reprogram any T-cell to kill in the absence of MHC recognition and provide an alternative to checkpoint drugs such as PD-1 antibodies.

The first T-cell engager, also known as a BiTE or Bispecific T-cell Engager, was approved in 2014 for the treatment of acute lymphocytic leukemia. However, this first generation technology is limited by a short-half life, and must be administered through continuous intravenous infusion. With our TriTAC platform, we set to incorporate the appealing strengths of BiTE's, such as their small size and potent killing activity at low expression levels of tumor antigen, which are ideal for application in solid tumors, while improving on the administration limitations of the short-half life. Our TriTACs are modular by design, consisting of three primary components that perform three different functions; T-cell binding, half-life extension, and tumor cell binding. To address half-life extension, we utilized a domain that binds transiently to human serum albumin. We utilized single domain antibodies for target binding and human serum albumin binding, which makes our molecules smaller and more flexible than would be possible with larger antibody derived fragments.

Furthermore, these domains are inherently very stable, contributing to a platform that potentially has very little off target activity, and therefore expected to have a therapeutic window that is ideal for applications in solid tumors. Our TriTAC products or globular proteins that can be formulated in solution, and administered to patients by intravenous delivery in about an hour, infusion every one or two weeks. A TriTAC protein is approximately 50 kilodaltons, or about one third the size of a typical antibody. We believe the smaller size and shape of TriTACs allows them to diffuse more freely into tumor tissue, compared to antibodies.

Our TriTACs are about 75% identical to each other. Since the tumor target domain is the only component that varies between different clinical candidates. In addition, our TriTAC use standard methods of conventional, antibody based manufacturing techniques, which avoids the cost and complexity of personalized or cell based therapies such as CAR-T.

Now let me review where we are with our four pipeline development programs; our lead TriTAC product candidate HPN424 targets prostate specific membrane antigen or PSMA, for the treatment of metastatic castration resistant prostate cancer. PSMA is present in 85% to 90% of patients with advanced metastatic prostate cancer. Market research shows us that prostate cancer is the third leading cause of cancer death in the United States. There are approximately 164,000 new cases and 29,000 prostate cancer deaths, in the United States each year.

HPN424 is in a Phase I clinical trial, enrolling patients with metastatic castration resistant prostate cancer. The trial was designed with an initial dose escalation phase, followed by a dose expansion phase. We continue to enroll patients in the dose escalation phase of the trial, with the goal of entering an expansion phase of the trial in the second-half of 2020. Preliminary results announced early last year, suggested that HPN424 could activate T-cells in a manner consistent with tumor target engagement. These data also provided the first clinical evidence that the TriTAC platform has sufficient serum exposure to support weekly intravenous administration. We've continued to enroll patients in the trial, and have continue to increase the dose.

We have submitted an abstract with the intent to provide a trial update at the upcoming ASCO annual meeting in late May or early June. You can expect the data to include an interim look at the ongoing dose escalation phase of the trial. This data may include the number of dose cohorts, the number and features of enrolled patients, the doses explored in the escalation phase at the time of the presentation and preliminary measurement of drug safety, evidence for target engagement pharmacokinetics, pharmacodynamics and early evidence of clinical activity. We expect that dose escalation will continue beyond the data provided in the presentation at ASCO, and anticipate entering a dose expansion phase in the second-half of 2020.

Our second TriTAC product candidate HPN536 targets mesothelin and enter the clinic in April of 2019. It is being studied initially in platinum refractory ovarian cancer, and recently we've added our first metastatic pancreatic cancer patients to this trial. Mesothelin expressed on malignant cells of ovarian carcinoma, pancreatic carcinoma, mesothelioma, non-small cell lung cancer and breast cancer among others. While mesothelin has been the focus of some CAR-T efforts, HPN536 is the first mesothelin targeted T-cell engager to enter clinical development. Patients receive weekly infusions of HPN536 and the trial is proceeding in line with our expectations. The experience we have gained from HPN424 in prostate cancer has been beneficial in our conduct of the 536 trial, and we expect to provide interim data from the ongoing dose escalation portion of the trial, in the second-half of 2020.

Our third TriTAC product candidate HPN217, targets B-cell maturation antigen, or BCMA. We submitted an IND for HPN217 in late 2019, and are planning to initiate a Phase I/II clinical trial in the first-half of 2020, in the treatment of relapsed refractory multiple myeloma. As mentioned before, under the agreement with AbbVie, they will have an option to exclusively license this program upon completion of the Phase I/II clinical trial.

HPN328 is our fourth TriTAC product and it targets delta like ligand 3 or DLL3, a protein highly expressed in a majority of small cell lung cancer tumors and other neuroendocrine tumors. We presented preclinical data at the NCI-EORTC, AACR meeting in October 2019, demonstrating potent tumor cell killing pharmacokinetic data, supporting at least once weekly dosing and supportive safety data in nonhuman primates. We plan to submit an IND for HPN328, and begin a Phase I clinical trial in the second-half of 2020.

This past year has been a strong period of pipeline advancement. We are on track to meet our previously stated goal of having four programs in the clinic by the end of 2020. We look forward to providing additional clinical data from all product candidate programs over the next couple of years. We have a unique off-the-shelf platform for T-cell engagers that reprogram a patient's own immune cells to treat a wide variety of human malignancies. Our pipeline is well positioned to generate exciting data and drive shareholder value.

With that, I'll turn the call over to Georgia Erbez, for a discussion of our financial results, for the fourth quarter and full year 2019.

Georgia L. Erbez -- Chief Financial Officer

Thank you, Gerry. I will provide a brief overview of our financial results here on the call and invite you to review our 10-K filed today for a more detailed discussion. Revenue for the fourth quarter ended December 31, 2019 was $2.2 million, compared to $1.1 million for the fourth quarter ended December 31st, 2018. Revenue for the year ended December 31st, 2019 was $5.8 million, compared to $4.8 million for the prior year. Revenue consisted of the portion of the upfront payment received from our agreements with AbbVie, that was related to research and development services performed during the period.

Research and development expense for the fourth quarter of 2019 was $12.7 million, compared to $8.7 million for the fourth quarter ended December 31, 2018. R&D expense for the year ended December 31st, 2019 was $41.6 million compared to $26.4 million for the prior year. The increase is primarily due to clinical development expenses and an increase in personnel related expenses, including conducting preclinical studies, the continuation of clinical trials for HPN424 and HPN536, and manufacturing activities for our four TriTAC product candidates in various stages of development.

General and administrative expenses for the quarter ended December 31st, 2019 were $4.3 million compared to $2.2 million for the fourth quarter of 2018. General and administrative expenses for the year ended December 31st, 2019 were $22.4 million compared to $6.1 million for the prior year. The increase was primarily due to an increase in legal fees, consulting and accounting services, and an increase in headcount and other professional services to support our ongoing operations as a public company. Net loss for the fourth quarter ended December 31st, 2019 was $14.3 million, compared to $9.7 million for the fourth quarter ended December 31st, 2018. Net loss for the year ended December 31st, 2019 was $55.6 million compared to $27.4 million for the prior year.

We ended 2019 with $155.1 million in cash and cash equivalents compared to $89.5 million as of December 31st, 2018. Net cash provided by financing activities for the year ended December 31st, 2019 was $71.4 million, primarily comprised of $70.7 million in net cash proceeds, received from our initial public offering in February 2019. Net cash used in operations for the year ended December 31st, 2019 was $69.3 million. For 2020, we are estimating cash operating expenses and capital expenditures of approximately $60 million to $70 million.

The cash balance at the end of 2019 includes the $50 million upfront payment received from AbbVie in December, associated with the development and option agreement for HPN217, and the expansion of the existing discovery collaboration. Under the terms of the agreement, we expect to receive up to another $50 million payment, which will be triggered upon the first patient dose with HPN217. We anticipate the payment will be recognized in our quarterly income statement over the next 10 to 12 quarters. As a reminder, while we will recognize the cash payments from AbbVie as quarterly revenue, as required by GAAP. The quarterly revenue is not actual cash received in a period and does not offset cash expenses incurred in the period.

With that, I will now turn the call back over to Gerry.

Gerald McMahon -- President and Chief Executive Officer

Thank you, Georgia. I am very pleased with the tremendous progress Harpoon has made during the past year, the momentum with which we have entered into 2020, and the exciting potential for all of our product candidates in the proprietary TriTAC tech platform. Two of our product candidates HPN424 and HPN536 are in the clinic, and two more HPN217 and HPN328 are expected to begin clinical trials this year. Our financial position is strong, and we have the resources in place to advance our pipeline.

Before we jump into Q&A, let me quickly review our anticipated near-term milestones. For HPN424 our Phase I dose escalation portion of the clinical trial is ongoing and we submitted an abstract, with the intent to present interim data at ASCO during the second quarter of 2020. For HPN536, the Phase I/II trial is continuing to enroll patients in the dose escalation portion of the trial. We intend to present preliminary data from this trial by the end of 2020. For HPN217, we expect to dose the first patient in the Phase I trial in the first-half of this year, which will trigger a $50 million payment from AbbVie. For HPN328, we are planning for an IND submission followed by initiation of a Phase I trial in the second-half of 2020.

So with that operator, we are now ready for questions.

Operator

[Operator instructions]. Your first question comes from the line of Mr. Jonathan Chang from SVB Leerink. Your line is open sir.

David Ruch -- SVB Leerink -- Analyst

Hi, guys, this is David Ruch on for Jonathan. Thanks for taking our question and congratulations on the progress. First question from us is with regard to HPN424, how are you thinking about the benchmarks for response rate and progression free survival in this late line setting of prostate cancer?

Gerald McMahon -- President and Chief Executive Officer

Thank you for the questions. This is Gerry McMahon. So, we of course, look toward previous treatments in late stage prostate cancer and realized that, that these patients, of course, have various features that make it difficult to assess clinical activity in a traditional way. However, what we do follow and what we feel is very relevant is the time on study for patients, which we feel reflects disease progression, we feel PSA levels is another marker of disease. And of course, evaluation of RECIST in measurable disease in a subset of cancer patients. These have been the traditional hallmarks of clinical activity assessment in this late stage patient population.

David Ruch -- SVB Leerink -- Analyst

Got it. Thank you. Second from us, any additional clarity on the registrational strategy for 536 in terms of the different subpopulations of ovarian cancer. And have you seen any trends with the study enrollment to-date that have helped from this strategy?

Gerald McMahon -- President and Chief Executive Officer

It's a little early to strategize a regulatory path for the various diseases where this product could be used. Clearly, our focus initially is an ovarian cancer. And our goal really is to establish a dose, where we believe clinical impact can be observed in this particular disease. We hope that that dose also translate into clinical benefit for pancreatic mesothelioma, non-small cell lung cancer and breast cancer, but that would have to be proven in the clinic. And of course, having multiple diseases to go after with this product gives us many different potential paths toward registration. But we're still in the early phases of our clinical trials trying to establish a proof of concept dose. And until we get there, we really can't strategize our regulatory strategy at this time.

David Ruch -- SVB Leerink -- Analyst

Great. And then just one more kind of logistical question. For 328, will this study be primarily in patients with small cell lung cancer? Or do you potentially expect to enroll other tumor types? I know you mentioned neuroendocrine on the call earlier in the prepared remarks.

Gerald McMahon -- President and Chief Executive Officer

Yes, I mean, the protocol evolution for that trial is still active and in discussion. The focus will be in small cell lung cancer for sure, but we are entertaining going into other tumor types, where we believe DLL3 is expressed. But that is our intention is to move forward with a small cell lung cancer oriented trial, but also have some flexibility to treat other patients that might express this target.

David Ruch -- SVB Leerink -- Analyst

Awesome. Thank you so much for the clarity there.

Gerald McMahon -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Mike Ulz from Baird. Your line is open sir.

Michael Ulz -- Baird -- Analyst

Hey guys. Thanks for taking the question, and congrats on all the progress as well. I just had a few questions on HPN424 and maybe you can just give us a sense of where you are in a dose escalation currently. And if I remember, I think last year at the initial update, you were through the fourth cohort. So just curious where you are currently? And then if you can overlay that with what you think that the therapeutic range is, and how far into that are you at this point? And then I have a follow-up.

Gerald McMahon -- President and Chief Executive Officer

Yes. So we haven't specifically disclosed to-date where we are. What we did mention last August, is we spent last year, spent some time evaluating the use of steroid dexamethasone to mitigate mild CRS symptoms when patients were first being given this product. And at that time in August, we were treating our seventh cohort. So what I can say today, of course, moving into a potential medical presentation in the middle of this year, is that we've exceeded that cohort. And we continue to move the dose up and have really done a very good job mitigating this first dose effect that one sees with T-cell engagers. So that's all I can say at this point. Obviously, we're going to have a nice data set describing those who's in patient cohorts, when we hopefully give our medical conference presentation, but that's all I can say at this point.

Michael Ulz -- Baird -- Analyst

Got it. And then maybe in terms of the dose expansion, you mentioned maybe starting that later this year, but you also mentioned continuing to dose escalate past ASCO. So maybe just big picture if you can talk about how you're thinking about selecting that dose for the expansion? Thanks.

Gerald McMahon -- President and Chief Executive Officer

Yes. It might be worth just describing the trial concept in general. So, the goal of the dose escalation in any study is to determine the maximum tolerated dose, and that's usually dictated by dose limiting toxicities. So, if one were to achieve a maximum tolerated dose, by increasing the dose, the expansion cohort if one was to observe efficacy would be driven off of a dose that was obviously safe enough to proceed. At this point, we have no way to know whether we will achieve an MTD by ASCO and so therefore, we would anticipate if we do not get to a maximum tolerated dose, which is our expectation, then we would continue to dose escalation past ASCO. Again, we may get to a point in the trial and this is our expectation that we're seeing a sufficient efficacy to warrant an expansion cohort to explore a particular dose and regimen, that is not being dictated by the achievement of a maximum tolerated dose. In that scenario, that expansion cohort then would be triggered and we would continue to dose escalate above that dose, because we were not limited at that point.

But yes, there was enough reason to believe that there was evidence of clinical activity to warrant testing a patient population, at a particular dose and regimen. So, what's nice about this protocol is we have lots of flexibility to do expansion cohorts and escalations to generate, quite a bit of data that could be used to guide our decision into future regulatory studies. So, that's really what's going on in this particular trial at this point. Is that helpful?

Michael Ulz -- Baird -- Analyst

Yes, that's helpful. Thank you.

Gerald McMahon -- President and Chief Executive Officer

Okay. Thanks.

Operator

Your next question comes from the line of Yigal Nochomovitz from Citigroup. Your line is open.

Yigal Nochomovitz -- Citigroup -- Analyst

Hi, Gerald, thank you very much for taking the questions. If I could just go back to one of the earlier ones on the benchmarks for 424, and maybe ask the question, but more specifically. In terms of how you're thinking about proceeding with development of this asset, could you speak a bit about how you see the bar for success there in terms of a go-no-go decision? What would you like to see ideally, on PSA responses and RECIST responses, to feel good about taking the asset forward into dose expansions, and then into subsequent studies? Thank you.

Gerald McMahon -- President and Chief Executive Officer

Yes. I think if you look at the history of development in late stage prostate cancer, it became very clear to us and to others, that disease progression is the most likely endpoint to support a registrational strategy in this particular disease. So, the most informative, I think endpoint for any trial will be how long as a patient been on study. Remember, this is a weekly therapy, patient would continue to receive therapy on a weekly basis until disease progression, because that would align to a potential regulatory path.

That being said, any ancillary data to support direct anti-tumor effect either by PSA declines or by RECIST or both, would be supportive of that particular patient who is on study progression free. So, I think the primary focus will be keeping the patient from having a disease progression which ultimately would lead to lethality, but then to have some supportive ancillary data related to PSA declines and RECIST if you could measure. Remember, in this disease, only about 20% of patients are RECIST evaluable, so not every patient will have an ability to assess that.

But that being said, this is a trial which will measure all of those potential parameters to assess clinical benefit. I should mention, in addition to that, of course, we have a suite of other translational activities that are being measured in these patients to support mechanism of action, including cytokine changes, T-cell activation, and other parameters that would also be used to support, whether or not, let's say, clinical activities associated with a mechanism of action. Since the only drug these patients are being given is our drug, there's no combination here. So, any of the activities we observe in these patients, we can attribute directly to our mechanism of action. So, it's a long answer, but it's a complicated disease.

Yigal Nochomovitz -- Citigroup -- Analyst

All right, understood. But so just in terms of specific numbers, I guess you're saying it's a bit early for you to kind of put forth specifics as far as, what might be a threshold level of response rate and things like that. Would you prefer just to see how the data evolve?

Gerald McMahon -- President and Chief Executive Officer

It typically, most physicians would argue in this disease. A patient who stays on study greater than three months is good a patient who stays on study greater than six months is very good. And if that patient is also associated either with PSA declines or with some shrinkage of measurable tumors, that would support the notion that that patient is deriving clinical benefit. But given that this is an escalation study, and not an efficacy oriented study. It's hard to put a percentage on it, but that is the type of data that we're looking to generate to support further advancement of this product. Is that helpful?

Yigal Nochomovitz -- Citigroup -- Analyst

Yes, very helpful. Thank you. Again, I had a technology question. So, you're doing once weekly dosing now as I understand it across the programs. What does the technology allow? What is the potential rather for the technology potentially to extend to say, once every two weeks. Do you have that ability with the platform, or is that that's another level of development?

Gerald McMahon -- President and Chief Executive Officer

Yes. So now, we think, based on the data that we see emerging from both these programs, that it's very feasible to think of either HPN424 or 536, being dosed either weekly or possibly every two weeks. But because we're still measuring the exposure and of course, measuring the efficacy, it's hard to know which is optimal, but conceptually, the platform could be used either way. We would hate to not allow the patient to derive as much benefit from the product as possible in this first clinical trial.

But later, if we felt that the benefit could be maintained by moving to a once every two week regimen, the platform could support it. But it's still too early to make a call on what the ultimate frequency would be. But it's not unreasonable based on what we're seeing with the platform of either being once every week or once every two weeks. But we can't say that with surety at this particular time.

Yigal Nochomovitz -- Citigroup -- Analyst

All right, understood. Thanks very much, very helpful.

Operator

Your next question comes from the line of Asthika Goonewardene from SunTrust. Your line is open.

Asthika Goonewardene -- SunTrust -- Analyst

Hi, guys. Thank you for taking my questions and I appreciate all the progress updates here. So, maybe going back to what discussing the expectations for 424 at ASCO. Totally appreciate that the therapeutic window here for 424 is really broad. So, it's kind of hard for you to -- maybe hard to put answers but maybe could you give some sort of clarity as to how many of the cohorts that you will be presenting at ASCO are in that, which you feel Gerry, is the real therapy to be relevant dose range, and that's something will be the answer right now?

Gerald McMahon -- President and Chief Executive Officer

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Harpoon Therapeutics Inc (HARP) Q4 2019 Earnings Call Transcript - Motley Fool

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