Earnings Transcript for ADXS - Q1 Fiscal Year 2018

Executives: Noelle Heber - Senior Director, Corporate Communications Tony Lombardo - Interim Chief Executive Officer Sara Bonstein - Chief Financial Officer Robert Petit - Chief Scientific Officer

Analysts: Tony Butler - Guggenheim Securities Mara Goldstein - Cantor Fitzgerald David Hoang - Jefferies Xun Lee - H.C. Wainwright

Operator: Welcome to the Advaxis Fiscal 2018 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, we’ll hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded Monday, March 12, 2018. I would now like to turn the conference over to Ms. Noelle Heber. Please go ahead, ma’am.

Noelle Heber: Good afternoon. This is Noelle Heber, Senior Director Corporate Communications at Advaxis. Thank you all for participating in today’s call. Joining me from Advaxis are Tony Lombardo, Interim Chief Executive Officer, Sara Bonstein Chief Financial Officer and Robert Petit, Chief Scientific Officer. After the close of its U.S. financial markets today, Advaxis filed its annual report on Form 10-Q with the SEC disclosing its financial results for the first quarter of fiscal year 2018 ended January 31, 2018. Before we begin, I would like to remind you that comments made by management during this conference call will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Advaxis. I encourage you to review the company’s filings with Securities and Exchange Commission, including without limitation, the company’s Form-10-K, Forms 10-Q and 8-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast March 12, 2018. Except as required by laws Advaxis undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, I will turn the call over to Tony Lombardo. Tony?

Tony Lombardo: Thanks, Noelle. Good afternoon, everyone and thank you for joining us. Advaxis made significant progress throughout 2017 to transition our company from its origins in HPV cancer therapeutics to a personalized medicine neoantigen company focusing on advancing our innovative LM-based antigen delivery platform. As noted in the press release, we are informed by the FDA Friday evening that our Phase 1/2 open-label multi-center two-part study evaluating the safety and efficacy of axalimogene filolisbac, or AXAL, in combination with durvalumab, AstraZeneca’s anti-PD-L1 inhibitor in cervical and head and neck cancers was placed on clinical hold due to our Grade 5 adverse event that was reported to the FDA by the company on March 7, 2018. We continue to work with the regulators as we learn more about this event and we will update you as you work on a path forward. We continue to make progress across a number of areas, including corporate, clinical and financial. We remain committed to our mission to advance our novel LM technology platform to design and develop our portfolio of safe and effective cancer treatments in areas that offer the best opportunities for reaching the most patients in both the near and long-term in order to realize our technologies’ powerful potential and create substantial shareholder value. One of our key accomplishments in Q1 was the filing of our application for conditional approval to the European authorities which occurred in February. This was followed by the successful completion of our capital raise on February 26, 2018 through which we raised $20 million in gross proceeds. We were pleased to have attracted several new key biotech investors into the Advaxis investor community through this raise. Looking to the future, we anticipate that strategic management team appointments for both the CEO and CMO positions will be finalized by mid-2018. Before I provide an update on our pipeline programs and clinical plans and speak a bit more about the clinical hold, let me turn the call over to Sara Bonstein, our CFO for a review of our fiscal 2018 first quarter financial results. Sara?

Sara Bonstein: Thanks, Tony and good afternoon everyone. As we have noted, 2018 will be a year of execution for execution for Advaxis and I am pleased to report that we are making meaningful progress towards our strategic objectives. Fiscal ‘18 has gotten off to a strong start as we strengthened our balance sheet, filed our first submission for a product approval in Europe, and continued to make progress advancing our clinical development pipeline. We are pleased with our performance this quarter and look forward to continuing to execute our strategy to reach a number of key inflection points throughout the balance of this year. Let me now turn our discussion to our balance sheet and cash flow. Our cash equivalent and investments totaled $59.4 million as of January 31, 2018, which included receipt of $4.5 million related to our previously announced participation in the New Jersey NOL program as well as the receipt of $2.7 million pursuant to our controlled equity offering sales agreement. During this first fiscal quarter, we used $12.7 million in cash to fund our operating activities, which was mainly for our development programs and related personnel as well as for infrastructure to support the company’s progress. Following the close of our first fiscal quarter, we raised gross proceeds of $20 million in a public offering of 10 million shares of common stock at $2 per share. We were pleased to have the transaction oversubscribed by well-known and respected biotech investors. This relatively modest capital raise was undertaken at this time to strengthen our cash position and allow us to reach a number of near-term inflection points. We believe our current cash position, including the proceeds received from our underwritten public offering, which was closed on February 26, 2018 will be sufficient to fund our business plan into the second calendar quarter of 2019. We continue to invest in our core clinical franchises and remain opportunistic regarding investigator-sponsored trials and licensing opportunity. We have already incurred the cost associated with the MAA filing and we continue to be highly disciplined regarding the utilization of our capital and anticipate our cash burn to decrease from fiscal ‘17 levels. Now, let’s turn to the results of operations. The net loss for the first quarter ending January 31, 2018 was $20.5 million or $0.49 per share based on 41.4 million shares outstanding. This compares with a net loss for the first quarter of fiscal ‘17 of $17.1 million or $0.43 per share based on 40.1 million shares outstanding. Research and development expenses for the first quarter of fiscal ‘18 were $17.1 million compared with $13.6 million for the same period in ‘17. The increase was primarily due to our continued investment in R&D to support both our preclinical and clinical development programs. The increase reflects higher headcount versus the first quarter of ‘17 to support the company’s research and development initiatives, primarily for the NEO and HOT programs. Going forward, we expect headcount to continue to remain flat throughout fiscal ‘18. In addition, we had higher third-party expenses specifically related to the HPV franchise. These were associated with the support of our AIM2CERV clinical trial as well as cost associated with technical operations supporting the MAA filing. As I mentioned earlier, the MAA filing has now been submitted and we anticipate any remaining cost to be immaterial. General and administrative expenses for the first quarter of fiscal ‘18 were $5.5 million compared with $7.3 million for the same period in ‘17. The decrease was largely attributed to a non-cash stock-based compensation expense recorded in the prior year period for past officers. With that financial overview, let me turn the call back to Tony for a discussion of our clinical programs.

Tony Lombardo: Thank you, Sara. Let me begin with a few more comments on the announcement of the clinical hold. As you know, the Phase 1/2 open-label multi-center two-part study is evaluating the safety and efficacy of AXAL in combination with durvalumab, AstraZeneca’s anti-PD-L1 inhibitor in cervical and head and neck cancers. The first part of this study is complete and enrollment in dosing in the expansion phases have been placed on hold, while a serious adverse event is being investigated. On the evening of March 9, 2018, we received notification from the FDA that this trial was placed on clinical hold. The clinical hold pertains to the recent submission of a safety report to the FDA regarding a Grade 5 serious adverse event that took place on February 27, 2018 involving respiratory failure, which occurred following the 6 combination cycles in the trial. Over the course of the treatment cycle, this patient received 11 doses of AXAL and 21 doses of durvalumab. It should be noted that over 250 patients have received AXAL and approximately 700 doses have been delivered across multiple trials in HPV-associated cancers to-date and that this is the first time we have seen this type of event. As mentioned, we are working closely with the site investigator, the FDA, our partners to review this event in detail and to resolve this clinical hold. We care deeply for our patients and for their safety as we work to research and develop new treatment options for advanced cancers. We believe in the potential of our LM technology to provide new advancements in the area of cancer care. At this time, the clinical hold does not affect any of our other clinical current clinical trials or programs, nor any of AstraZeneca’s current trials. We continue to advance our HPV-related cancer franchise. Last month, we were delighted to announce the submission of a conditional marketing authorization application through the European Medicine Agencies for our lead LM technology product candidate, AXAL, for the treatment of adult women who progressed beyond first line therapy for persistent, recurrent or metastatic cervical cancer. This is a significant milestone for Advaxis as it represents our first marketing application for a product approval of our LM technology. This is an exciting opportunity for Advaxis and we look forward to potentially bringing this lifesaving therapy to women suffering with metastatic cervical cancer. Despite advances in diagnostics and preventative vaccines, 24,000 women in Europe die each year from metastatic cervical cancer. The MAA package, we have prepared for EMA evaluation includes the totality of the data, including Phase 2 results from GOG-0265 as well as supportive data from other clinical trials evaluating AXAL. This will be a 13-month review process. As previously noted, we continue to evaluate commercialization strategies, including potential partnership opportunities for the HPV franchise. We also continued to enroll patients in our Phase 3 global AIM2CERV study of AXAL to treat higher risk locally advanced cervical cancer. We are enrolling patients in 13 countries and look forward to providing an update on this program midyear as planned. In addition to providing clinical data to U.S. and other international regulatory approvals, this study may serve as the post-marketing study should receive conditional approval in Europe. Further supporting our submission is the upcoming publication of Phase 2 results evaluating AXAL for the treatment of recurrent metastatic cervical cancer in the May issue of the International Journal of Gynecological Cancer. This peer review article summarizing a Phase 2 trial the company completed in 2014 in India demonstrates that treatment with AXAL resulted in an overall 12-month survival rate of approximately 35%. 38 out of 109 patients and the majority of the AEs or adverse events were mild-to-moderate in severity, 566 of 704 reported AEEs, which is 80.4% and when not related to study drug 539 of 700 reported AEs, which is 76.6%. Let me turn now to our clinical collaboration agreement with Bristol-Myers Squibb, which will evaluate their PD-1 inhibitor, Opdivo in combination with AXAL in the advanced trial. This is a global randomized registrational quality trial to evaluate this combination in women with recurrent metastatic cervical cancer who have failed at least one prior line of systemic chemotherapy. We expect to initiate the study by calendar year 2018. As you may recall, we recently announced our decision to align and simplify our clinical strategy by using AXAL in all ongoing and planned HPV-related cancer clinical trials, including the upcoming advanced trial previous plan with AXAL-DUAL. The strategic decision to harmonize all trials to AXAL is based on its clinical profile to-date in over 250 patients and its demonstration of similar activity in both HPV 16 and 18 subtypes in GOG-0265. We believe that harmonizing to a single product candidate for HPV-related programs will streamline our developmental, regulatory and commercialization strategies. While we are not investing in new programs in the head and neck or anal cancers in order to focus our resources on our other clinical priorities for our LM technology platform, we continue to evaluate alternative funding sources in collaborations to further develop these programs and plan to announce that investigator-led study at an academic institution in head and neck cancer this year. In addition, we were pleased to report the publication of Phase 1 data evaluating AXAL with chemo radiation as a treatment for high-risk locally advanced anal cancer in the International Journal of Radiation Oncology. These data showed that all patients who completed treatment had a complete response. As with head and neck cancer, we hope to advance this promising therapy for anal cancer only through investigator-led studies. Turning now to our neoantigen franchise, which is partnered with Amgen, ADXS-NEO was a highly targeted patient specific treatment approach designed to activate a patient’s immune system to respond against the unique mutations or neoepitopes, identified with each individual patient’s tumor. The initial tumor types of the planned Phase 1 trial, our non-small cell lung cancer, Microsatellite Stable colorectal cancer and head and neck cancer. We have filed an IND amendment, which was mainly related to enhancements to the manufacturing and antigen selection process and continue to expect to initiate Phase 1 study with this promising technology in the first half of the calendar year. Both Amgen and Advaxis remain committed to the program and are excited to be advancing NEO to first-in-human study shortly. Turning now to our disease-specific hotspot cancer and antigen therapies franchise known as ADXS-HOT, we have designed more than 10 off-the-shelf products in our HOT program that target multiple shared hotspot neoantigens, cancer/testis antigens and oncofetal antigens specific to a disease, which we believe maybe capable of generating potent tumor-specific and high-strength killer T-cells. As the off-the-shelf treatments, HOT products will be available for patients to start treatment immediately. Our products will be manufactured in both and have low cost of goods compared to patient-specific products. The HOT technology has strong IP position with protection into 2038 and an IP filing strategy that provides for broad coverage opportunities across multiple diseases in combination therapies. We continue to plan to file multiple INDs in our HOT franchise in 2018 and have selected non-small cell lung cancer as our initial indication. We expect to initiate first-in-human studies in non-small cell lung cancer by the end of 2018. Moving now to an update on our prostate cancer franchise, we have also made meaningful progress advancing our ADXS-PSA clinical development program in prostate cancer with our ongoing Phase 1/2 study evaluating ADXS-PSA as a monotherapy and in combination with Merck’s checkpoint inhibitor, Keytruda. This trial is focused on metastatic castration resistant prostate cancer, which is associated with deterioration in patient’s quality of life and has an average survival of only 9 to 13 months. There are currently few therapeutic options available to patients with the stage of prostate cancer. Throughout 2017, we reported encouraging immunological data on the monotherapy arm of the study, which demonstrated distinct immunological and gene expression patterns correlated with stable disease. We also demonstrated evidence of antigen spreading and increasing numbers and strength of T-cells targeting PSA. We completed enrollment in the combination arm of the study of ADXS-PSA with Keytruda and have submitted an abstract for presentation at ASCO in June. We look forward to reporting these preliminary data from the combination arm of the study. We continue to be encouraged by the progress of our clinical programs, especially as we move into the clinic with both NEO and HOT. In order to support our growth strategy for 2018 and beyond, we have several key issues before our stockholders for a vote at our 2018 Annual Shareholder Meeting scheduled for March 21. The proxy includes 4 proposals to shareholder consideration, namely first, the election of our proposed slate of directors to serve on our board; the second, the approval for an increase in the number of authorized share; third, the approval for our 2018 employee stock purchase plan and four, the ratification of our independent registered public accounting firm for our fiscal 2018. To support the company and focus on increasing long-term shareholder value, Board of Directors and management believe it is proven to increase the number of authorized shares of common stock to obtain a reserve of shares to meet business needs properly as they arise such as strategic acquisition opportunities or equity offerings. As we look to the remainder of calendar 2018, we will continue to execute to our plan and expect to achieve a number of important milestones that will advance our technology in a number of oncology indications. Resolving the clinical hold will be a focus for the company, but at the same time, we will continue to progress the inflection points that we feel have the potential to create value for our shareholders. To summarize in calendar 2018, we expect one to dose the first patient in NEO program in partnership with Amgen in the first half of 2018; second, file multiple INDs for our HOT program and initiate a first-in-human study with this off-the-shelf program by the end of 2018. Present preliminary data from the combination study of ADXS-PSA with Keytruda in metastatic castration resistant prostate cancer, initiate the advanced study of AXAL in combination with Opdivo in metastatic cervical cancer by year end and initiated an investigator-led study at an academic medical center in head and neck cancer. We will continue to evaluate commercial strategies for Europe and also pursue other business development opportunity to support our business. We have an exciting year ahead on behalf of the Advaxis management team and Board of Directors. I thank you for your support as we continue to go Advaxis into an immunooncology – a leading immune oncology company. With that overview, operator, we are ready to take questions.

Operator: [Operator Instructions] Your first question comes from the line of Tony Butler with Guggenheim Securities.

Tony Butler: Yes, thanks very much. Tony, just a couple of questions on the IMFINZI combination if I may, can you say how many total patients have been enrolled into trial before or let’s say Friday and who had been – and how many of those had actually been dosed? That’s question one. And number two is there anything else you can say about the pathology of this particular individual, in other words, do you know if they had some preexisting infection, some other underlying disease etcetera? Thanks very much.

Tony Lombardo: Yes, hi, Tony. So, as you know, Robert is with me also. So, I think we will try to answer this as a team. So, in terms of the total number of patients, it’s about 25 in total have been enrolled, 20 in the combo arm and 5 in the mono arm makes up that population. As to the pathology, I will ask Robert to sort of sketch the landscape for this at this stage of what we know, Tony.

Robert Petit: Right. Hi, Tony. So, this particular patient is a cervical cancer patient who has got advanced refractory metastatic cervical cancer, who had progressed from prior therapies. She has actually been on the trial almost a year and had been doing relatively well as Tony mentioned, she had received something like 21 doses of durvalumab and 11 doses of AXAL and really had no problems up until this point. However in this particular case, she received in this trial both durvalumab and AXAL are given on the same day when they are treatment. So in this particular case, she received her first drug which was durva. She started developing some medical problems in between that were managed, then she started to receive the second dose. Afterwards, she received the second drug, which was AXAL. She was being managed for hypotension aggressively and was subsequently hospitalized. While she was hospitalized, she developed our respiratory failure and subsequently expired despite methods to stop the progression of her disease. That’s really all the information we have at this point. There is an active investigation ongoing with the investigator and us and MedImmune as we gather all the details that are necessary to try to figure this out. What I can say is that certainly as Tony mentioned, we have given over 700 doses of AXAL to patients with HPV disease in late stages and not seen any side effects like this in monotherapy or either in any other combinations as well. Durvalumab has seen some other problems as well, but this is an atypical presentation for what they are used to seeing as well. So, we are still trying to get to the bottom.

Tony Butler: Thank you very much, Robert, Tony. Appreciate it.

Operator: Your next question comes from Mara Goldstein with Cantor Fitzgerald.

Mara Goldstein: Thanks so much for taking the question. Can you just remind us there was a prior hold early on in the clinical trial program and if there are any similarities between that and this current hold?

Robert Petit: Yes, hi, Mara, this is Robert. So, the short answer is no, the clinical hold before was really around the isolation of Listeria, something almost 3 years after patient had been treated and that was worked through. This was specifically related to this side effect that was seen that resulted in fatality that was seen with this combination in this particular patient, so it’s really not at all related.

Mara Goldstein: And if I could just ask the combination NEO study, has that begun yet and is there any read-through in terms of just dealing with FDA from where you are on hold here with that study?

Robert Petit: So, first, we have not begun that study yet. And I think that it’s too early to speak about whether or not there is any potential read-through we are still trying to gather all the medical facts of the case to try to discern what happens here and whether or not it was just a patient-specific issue or was something that needs a more broad attention.

Mara Goldstein: Okay. And I just had two other things and one is just on NEO to ask when the company will be in position to be able to discuss in a little bit more detail what that Phase 1 initiation will look like just in terms of sort of indication and timing and whatnot?

Robert Petit: Right. So, as we have communicated that trial with NEO will be looking at three different disease groups and they will be mixed together in the first part of the study. Those diseases include non-small cell lung cancer, head and neck cancer as well as Microsatellite Stable colorectal cancer. And so the first part of the study will evaluate just safety and feasibility and then there will be expansion cohorts for each of this patient groups based on the first part of the study.

Mara Goldstein: Okay. And then if I could just ask on the European filing, can you just sort of walk us through sort of procedurally what happens from at this point now in terms of the discussions you are having with the regulators?

Tony Lombardo: Hi, Mara. It’s a pretty standardized process. So, since the submission, the agency goes through its review for completeness. And then once they initiate the review of the submission at about Day 120 which will occur sometime this summer is when you get your first series of questions. Their clock stops in terms of review and your clock starts in terms of answering those. Once you submit your answers to that, their clock starts again and subsequently that entire process takes around 13 or 14 months. So when you look at that process running from our submission date, in February 12, 2018, you are looking at that March-April timeframe of 2019.

Mara Goldstein: Okay, great. Thank you.

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

David Hoang: Hello. This is David on for Biren. Just maybe a couple of questions around additional questions or color around the clinical hold, can you comment at all on what kind of background rate you might see for durvalumab in terms of respiratory failure. I know you mentioned it was bit uncommon and also can you comment on the dose of durvalumab that was used in the trial?

Tony Lombardo: It’s the standard dose of durvalumab, that’s been used along with the standard dose of Advaxis. Again, this woman had been treated for nearly a year and have received a lot of doses of both and really haven’t had any problems like this previously. So as far as the background incidence of this event, I think that’s first of all, we are still trying to discern precisely what the event is that we are talking about and then subsequent to that based on gathering additional information to characterize it, we will be able to relate that to how frequently previous things like this have been seen.

David Hoang: Great. Thank you.

Operator: Your next question comes from the line of Xun Lee with H.C. Wainwright.

Xun Lee: Good afternoon, guys. Thank you for taking my questions. My first is on commercialization plans in Europe, where are the discussions now on that front?

Tony Lombardo: So, those discussions continue and to some degree they will accelerate now more as we made the conditional filing. So, that process is in place. So, we continue to progress those discussions across several fronts. The likelihood is that some of those dialogues may extend beyond Europe in terms of folks’ interest in platform.

Xun Lee: I see. My second question is on ADXS-NEO, since you filed an IND has there been any major changes from the previously announced manufacturing and composition for the NEO. Since I think previously you mentioned it could – the payload could be anywhere between 10 to 20 or even more targets and the manufacturing process took about 3 weeks?

Tony Lombardo: Well, okay. So, we have not and will not disclose the capacity of the vector or the number of targets that we are going to put in there. That’s proprietary and very much a hot topic of competition between companies in the NEO space. So, you will have to wait and see how that works out. And I think that what we have been trying to do is to expedite the turnaround time from biopsy to the patient’s first treatment as much as possible, but understanding that we are really literally up against the very cutting-edge of technology for a variety of things, including DNA sequencing as well as DNA synthesis and we still maintain that we have – we are confident in our ability to turn this around within 8 weeks for certain and that’s what we anticipate going forward with as we enter very soon into clinical testing.

Xun Lee: I see. Thank you for answering my questions.

Operator: There are no further questions at this time. Please proceed with your presentation or any closing remarks.

Tony Lombardo: Again, I’d like to thank you for participating on today’s call. We look forward to making continued progress, executing our business strategy and to providing timely updates on our achievements. We appreciate your continued interest in Advaxis and look forward to reporting our progress in our second quarter 2018 business update conference call. Have a good evening and thank you.

Operator: Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.