Earnings Transcript for ADXS - Q3 Fiscal Year 2018

Executives: Miriam Miller – LHA Investor Relations Ken Berlin – President and Chief Executive Officer Andres Gutierrez – Chief Medical Officer Molly Henderson – Chief Financial Officer

Analysts: Jim Molloy – AGP Swayampakula – H.C. Wainwright Martin Saltzman – AFM Investments

Operator: Welcome to the Advaxis Business and Clinical Development Update Call. All lines have been placed on mute. At this time all participants are in listen-only mode. Following management’s prepared remarks, we will hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded today, November 2, 2018. I would now like to turn the call over to Miriam Miller. Please go ahead.

Miriam Miller: Good morning. This is Miriam Miller with LHA, the Investor Relations Agency for Advaxis. Thank you for participating in today's call. Joining me from Advaxis are Ken Berlin, President and Chief Executive Officer; Molly Henderson, Chief Financial Officer; Dr. Andres Gutierrez, Chief Medical Officer; and Dr. Robert Petit, Chief Scientific Officer. Before the market opened this morning, Advaxis issued a press release highlighting changes to the company's clinical development strategy. If you have not received this news release or if you would like to be added to the company's e-mail distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran. Before we begin, I'd like to remind you that comments made by management during this 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 SEC filings including, without limitation, the company's Form 10-K for the fiscal year ended October 31, 2017 filed on December 21, 2017 and other periodic reports filed with the SEC including Form 10-Q and 8-K. These filings identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements and other risk factors related to its business operations. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the day of the live broadcast, November 2, 2018. Except as required by law, 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’d like to turn the call over to Ken Berlin. Ken?

Ken Berlin: Thanks, Miriam. Good morning, and thank you for joining us. During the five-month period since our last investor call, we've been hard at work advancing the direction of our clinical pipeline programs, and I plan to share an update on where this stands today. Before I do that, though, I will share with you why I joined Advaxis. My initial assessment of the opportunities presented by Advaxis resulted in me not only being excited about the company's prospects but also intrigued about what we could become. My conclusion at that time was that the science, people, the company's immune-oncology assets and its collaborators all together presented a tremendous opportunity to create value for shareholders and impact the lives of people fighting cancer. It has been six months since I joined Advaxis, and it has been a very busy period at the company. I've spent my time immersing myself in data as we continually receive new information relating to our drug candidates and have had multiple discussions with key opinion leaders in the field. I can honestly say that while we still have some work ahead of us, these data and KOL inputs have made me more bullish on our platform's potential than I was six months ago when I joined the company. You'll recall that this past June, we stated that if Advaxis could not secure a partner for axal, axalimogene filolisbac, Advaxis would wind down the Phase 3 AIM2CERV trial, which is evaluating axal in high-risk locally advanced cervical cancer. That decision was due in part to the fact that a data readout was not expected to occur until 2022, and the total estimated cost to get to that readout would be at least $60 million. In addition, we have a broad portfolio of new product candidates in our neoantigen-directed programs, Advaxis NEO and Advaxis HOT, that require funding. Over the past several months, we've engaged in extensive conversations with a number of experts in the field that made us increasingly optimistic about the prospects for AIM2CERV. We have determined that continued investment in AIM2CERV for cervical cancer, in addition to certain other product candidates, is the best path forward to demonstrate the effectiveness of our Lm-based therapies. We believe this path provides us with an interesting and diversified product pipeline across drug constructs, cancer types, combination therapy modalities, stages of cancers and stages of development, positioning us well for the future. Now I will discuss with you how we plan to move forward with AIM2CERV. We are in the process of revising the AIM2CERV study in order to provide an earlier and meaningful milestone, namely a more informative interim analysis, potentially as early as 2020. The amended protocol would include an interim analysis that would be expected to take place earlier than what we currently have, as well as certain other changes that we believe to be beneficial. These changes, if approved by FDA, would reduce the investment required to reach this important milestone and shorten the time to provide a futility assessment and hopefully provide certain other benefits to us. Over the next couple of months, we will work with FDA to finalize the revised trial design. If FDA accepts our proposed revisions to the AIM2CERV study, we anticipate having a recommendation from the data monitoring committee to stop or proceed the trial based on the interim analysis as early as the fourth quarter of 2020. We are continuing to enroll patients as we work to amend the study amend the study protocol and secure permission from FDA to proceed with the revised interim analysis. We continue to plan for a sample size of about 450 subjects, which is sufficiently large to maintain adequate statistical power over a broad range of survival outcomes. We estimate that the cost to bring AIM2CERV to the point of the revised interim analysis would be approximately $25 million to $30 million. In parallel, we will continue to explore partnerships for axal and believe that an earlier interim readout that supports the continuation will drive further interest in the program from potential partners. In addition to continuing the AIM2CERV trial with axal, we plan to initiate an investigator-sponsored trial with a major research center using axal in head and neck cancer in early 2019. We look forward to sharing more information about that study as soon as it becomes available. To date, we have treated over 400 patients with our axal drug, and it has shown to be well tolerated and has demonstrated a manageable safety profile. The company has also been able to establish a robust management guideline for relevant adverse events based on this experience. Now let's turn to our other programs. We are continuing to follow subjects in our Phase I/II study of Advaxis PSA in combination with KEYTRUDA through a drug collaboration with Merck in metastatic, castration-resistant prostate cancer. Intriguing early data from 37 patients in this study presented at ASCO earlier this year suggested a prolonged overall survival in subjects with PSA decline from baseline of 50% or greater in nearly 20% of all treated subjects in the combination arm of the study. We expect to provide an update on overall survival for this study, along with correlative biomarker data, in the first quarter of 2019. Now I will discuss our neoantigen-directed programs. The emergence of neoantigens as a critical new tool in the fight against cancer drives both Advaxis NEO, which are constructs that express personalized tumor antigens, and Advaxis HOT, which are constructs that express public or shared antigens. We believe neoantigens have the potential to transform cancer care and that our Lm-based neoantigen products can help us achieve a leadership position within the category. A few unique aspects about our neoantigen approach are that it activates a patient's immune system by creating a targeted T-cell response to neoantigens based on unique, patient-specific mutations in the case of Advaxis NEO, and on off-the-shelf-based approach in the case of Advaxis HOT. Both of these platforms enable a high capacity approach which target a large number of neoantigens, which we believe are among the highest capacity vectors in development today. Another intriguing aspect about both Advaxis NEO and Advaxis HOT platforms is their broad applicability. In fact, each of these platforms can be directed towards nearly all tumor types, creating the potential for us to significantly impact a broad range of cancer patients. As we previously announced, Advaxis NEO is being evaluated in a clinical trial for several cancer types in collaboration with Amgen. We are enrolling patients in this trial and anticipate providing safety, tolerability and immune correlative data from our initial patients in the first half of 2019. I'll now cover our plans for our Advaxis HOT off-the-shelf drug candidates. Let's begin with Advaxis 503, our leading HOT drug candidate. We plan to study Advaxis 503 both as monotherapy and in combination with KEYTRUDA in non-small cell lung cancer. We expect to have the first subject enrolled in this Phase 1/2 study for Advaxis 503 by the end of this year, and anticipate a readout of safety, tolerability and immune correlative data from this first cohort in the first half of 2019. We will delay until early 2020 the clinical testing of our Advaxis HOT constructs in prostate cancer and bladder cancer in order to ensure adequate funding for these aforementioned programs. At the corporate level, we are taking additional steps to ensure financial support for the clinical development plan I've outlined today. First, we will not continue enrollment in our Phase 1/2 study of axal in combination with durvalumab for the treatment of patients with advanced recurrent or refractory cervical cancer and HPV-associated head and neck cancer. We will also not initiate our advanced study for the treatment of women with persistent, recurrent or metastatic carcinoma of the cervix. Note that these are different indications than what we are seeking with the AIM2CERV study. Second, we have continued to take a hard look at our costs over the past several months. As a result of our cost control measures, we now anticipate that our annual net cash burn will be approximately $45 million. This is down from over $80 million earlier this year. With the changes to our development program that I've outlined today, coupled with our cost control efforts, we believe we have sufficient cash to fund our strong portfolio of drug candidates for at least the next 12 months. I also want to reiterate what I said back in June, and that is, we believe we are uniquely positioned to succeed in the neoantigen-directed treatment segment based on our experience, expertise and technology platform. To date, more than 470 patients have been treated with our Lm product candidates in multiple clinical trials, and we've assembled a body of data that demonstrates a manageable safety profile, induction of immune responses and clinical activity. We strongly believe that our Lm constructs differentiate Advaxis from others in this space by our unique ability to mimic a natural infection and redirect a potent immune response against cancer. Our vectors provide enhanced antigen presentation, which activates multiple pathways and alerts and trains the immune system, thereby mobilizing and generating cancer-specific T-cell response to attack the tumor, and reducing tumor-protective cells such as Tregs and MDSCs in the tumor microenvironment that shield the tumor from the immune system. This unique approach, coupled with our robust range of programs, created a diversified portfolio of assets at various stages of development, and we look forward to moving ahead on these diverse programs. Ultimately, we believe that the opportunity for a nearer-term readout for AIM2CERV, in conjunction with the pursuit of our earlier-stage programs, both internally and in conjunction with partners, provides a portfolio from which we have multiple opportunities for monetization and commercial success, and the potential to help many people who stand to benefit from our drug candidates, which in the aggregate target an extremely broad range of tumor types. Before we take questions, I want to reiterate our team's commitment to the meaningful creation of shareholder value. We believe that moving forward with a more diversified portfolio supports this goal. The last six months have been both challenging and rewarding, as we have made some difficult but important and necessary changes to position the company for success. I am more optimistic today about our prospects that I was immediately prior to joining the team here at Advaxis. We are excited about our future and have a number of potential near-team catalysts, including data readouts on several of our programs during the first half of our programs during the first half of 2019. Furthermore, we firmly believe the path I’ve outlined today is the best way to demonstrate the strength and versatility of our Lm platform and to further monetize it. We look forward to continuing to share our progress with you. On behalf of the Advaxis management team and board of directors, I thank you for your support as we continue to build Advaxis into a leading immuno-oncology company. With that overview, Molly, Andres, Robert and I are ready to take questions. Angela?

Operator: [Operator Instructions] Our first question is from Jim Molloy with AGP.

Jim Molloy: Hey guys, thanks for taking my question. I just had a quick question on some of the ADXS-HOT/-503 program, the non-small-cell lung interim look here, first half 2019. Assuming that goes well, when would you – you’re still – I think the last expectation had been to wrap that trial up first half 2020. Is that still on track, or does that get pushed out at all?

Ken Berlin: Hi Jim, good morning. Thanks for your question. I just want to clarify what you’re asking, right? So I want to make sure we don’t get the dates confused across programs. So Advaxis HOT, particularly Advaxis 503, which is our non-small-cell lung cancer drug candidate within the HOT program, we expect to dose our first patient, certainly, soon. We’ll have the first patient in by the end of this year and he’ll be dosed soon thereafter. And we anticipate having data from the first cohort of patients from that Phase I/II study by the first half of next year, by the first half of 2019. And that data will consist of safety, tolerability and, importantly, the immune correlative biomarker data that we’re assembling or will assemble as we test those patients as they come through this study. In terms of completion of that study, well, that depends on a number of things. What Andres and his team in clinical operations have done is designed a very flexible study that could take us into different directions, and depending upon what we see in the early stages of the study, we also are talking about working in combination with KEYTRUDA for this patient population, and Andres can talk a little bit about that, too. But hopefully that clarifies your question.

Andres Gutierrez: Yes, so the goal – the study has been designed to have three parts. Part A is dose escalation monotherapy, Part B is dose escalation in combination with KEYTRUDA, Part three is a dose expansion part in combination with KEYTRUDA as well, in a different indication, in non-small-cell lung cancer. So again, it depends. The dose escalation parts most likely will be completed sometime in – early in 2020.

Ken Berlin: Jim, does that answer your question.

Jim Molloy: Yes, it does. Thank you very much. Yes, I know that these trials are – it’s hard to describe when they’re sort of growing as they go, so I appreciate that very much. Then on the Phase – the IND for prostate and the – and sort of the other INDs, will you still file the – for HOT, will you still file the IND this year, or another – now you’re saying 2020 on the rest of those trials. Will the IND get pushed out as well? Everything sort of gets moved out to 2020?

Ken Berlin: So, Jim, that’s a really good question. So as we stated, we are pushing off the commencement of the clinical studies for our prostate cancer drug candidate and our bladder cancer drug candidate from our HOT program, which really helps enable to fund this revised clinical path forward. As it relates particularly to the IND submission around prostate, that’s something we’re still assessing internally. It’s very possible we’ll still go ahead and file that IND; for various reasons, it may make sense to do so. And so I know the team is working hard to be in a position to be able to file it, and ultimately we’ll decide whether it makes sense to file it when the time comes.

Jim Molloy: Okay, the last question, and I’ll hop back in queue. On the AIM2CERV for cervical, can you walk through what were the key drivers on expanding that trial? Is it fair – obviously, with limited resources, although recently augmented resources, that the HOT trials have been sort of pushed out to make way for the AIM2CERV to continue? Can you walk through what was the key drivers on the data that you saw that said, let’s go forward on that?

Ken Berlin: Sure, Jim. I’ll try to answer the question. But as with everything, it’s never really black and white. You look at a number of different factors, so it’s really a multifactorial analysis to determine what the best path forward is, especially when you have so many different portfolio items or so many different drug candidates within your portfolio, right? So as I said in my prepared statements, that over the past five months, we’ve looked at and talked to a number of folks, and rather than get into the details of those discussions, which are confidential, I could say that we’ve become more optimistic about the AIM2CERV study and we believe that the portfolio that we are now moving forward with gives the company the best chance of success to demonstrate how effective our Lm-based drug candidates are, right? So it’s important to remember, we’ve had clinical trial success in the past. We’ve had positive Phase II studies for axal in cervical cancer, and therefore we have reason to believe – we also have a lot of preclinical data around some of our earlier drug constructs, which also make us optimistic about those. We believe, as we take into account all these factors and all these inputs, that this portfolio, as we described it today in the press release and in my prepared comments, is the best constellation of product candidates for positioning the company’s success going forward.

Jim Molloy: Oh, I did, actually – one last question, too, just to clarify bookkeeping. When you guys reference the first quarter 2019 and fourth quarter 2020, is that – that’s calendar fourth quarter 2020, as opposed to your fiscal quarter, which are obviously off a little bit?

Ken Berlin: Correct, right. So when we talk about financials and financial reporting, that’s on our financial calendar, but when we talk about data readouts like the ones you’re describing, those are all calendar quarters.

Jim Molloy: Thank you very much.

Ken Berlin: Thank you, Jim. Thanks for your questions.

Operator: Your next question is from Swayampakula with H.C. Wainwright.

Swayampakula: Good morning, Ken. Thanks for the update. I have a couple of quick questions. Just on the AIM2CERV program, it was initially designed within FDA, so then now you’re changing – making changes, does that have any impact on the FDA part of it, or is it still on with the FDA?

Andres Gutierrez: So because we have enough data to support the redesign of the interim analysis, we believe that we are – the FDA is going to be able to approve our proposed redesign. And pretty much, again, what’s establishing before is just to set up a more stringent futility boundary that allows us to have a better kind of a turning point earlier in the course of the study.

Swayampakula: Thank you. And then, I’m just trying to understand what led to the termination of the study with the durva [indiscernible]. Is there anything that you can provide us just to understand what made you decide not to continue with that study?

Ken Berlin: Thanks, RK. So I know we’re trying to make it as clear as we can. As I tried to explain, in answer to the first question, it’s not black or white, right? It’s a number of factors we look at. I’ll give you this quote, right? So a smart guy named Winston Churchill, I think, said, strategies are a good thing, but every once in a while you’ve got to look at results, right? And so, while we had intended to partner AIM2CERV or wind it down if we didn’t find a partner, we kept our eyes open as to everything that’s going on external to the company, internal to the company, talking to a bunch of key opinion leaders. And based on all those factors, we believe that especially with this redesigned interim analysis, that we’ve been able to encapsulate the risk, get the costs down to a certain degree, to get to this revised interim analysis, which will be more meaningful than what we had before. So that, plus all these other factors that we’ve considered, make us believe that this portfolio is the best one to proceed forward with to position the company for success, right? And that’s what we believe is the right path forward. And we think it’s a very interesting portfolio, starting with the Phase 3 asset. We have a Phase 1/2 asset in prostate cancer, as you know. The Phase 1 asset in NEO. We’ll have our – a new Phase 1 program with our HOT lung drug candidate and an IST, which will be a Phase 1/2 study, hopefully, early next year with a major cancer research center with axal in head and neck cancer. So we think that’s a very intriguing portfolio, and importantly, we’ve reduced our burn rate substantially. So when you look back, when we had a greater than $80-million annual cash burn rate going against the same portfolio, we’ve brought that down almost by 50% to $45 million against a pretty broad portfolio. So I think there are multiple opportunities for inflection points as it relates to data readouts, as well as for monetization and/or commercialization. And we think with all these shots on goal and with our cash runway and our cash burn adjusted the way we have, we think it positions us for success as much as possible going forward.

Swayampakula: Thanks for providing that segue, Ken, because I was not sure if this – if I can ask a financials question on this call. The $45 million you have at this point, so what kind of a run rate should we expect from this? How far can you go before you need to go back to the market?

Ken Berlin: So I will – you can ask finance questions because Molly’s here to answer them. So I’ll turn it over to Molly.

Molly Henderson: Hi, sure, yes. So as Ken mentioned in his prepared remarks, we anticipate that our current cash will take us for at least the next 12 months. Certainly we anticipate that as we look for expanding our programs and looking on past 2019 and into 2020 and beyond, we want to make sure that we're financially positioned appropriately. So we're looking at all opportunities. We'll certainly be mindful of where our equity currency is at in relation to dilution, but the key point is, let's give ourselves runway, which we've done, and let's get the data readouts, which we believe will solicit a lot of interest, both from the markets and potential partners. So that's our path forward, and we continue to be mindful, again, of the stock price, but we also want to make sure we've got enough runway to really demonstrate what we think exists here.

Ken Berlin: And if I can, RK, can I just underscore some of what Molly mentioned, and just want to talk about business development for a second, right? Because I know a lot of our shareholders are curious to know if business development is part of our strategy, and the answer is, of course it is. And it takes time, it takes effort, and we are very mindful of the fact that nondilutive financing, particularly at the valuations we're at today, would certainly be preferred. So we have a number of discussions going on. We can't guarantee the outcomes of those discussions, but I just want to – I want people to be – rest assured that business development is very much a prominent feature in things that we're doing, because we do have a lot of assets, and frankly, partnerships would help accelerate the development of those assets. And so it's something that, obviously, we are working at, and it takes a bit of time. And the data readouts that are coming in the first half of next year will help that, we believe. So I just wanted to sort of underscore the point, because it does relate back to financing and cash runway.

Swayampakula: Yes, Ken, talking about the partnerships, Amgen relationship is up and running for a couple of years, I think, now. And with data coming up, the early part of – or in the first half of 2019. So should we – is there any milestones associated with this? And how do you anticipate that relationship maturing into something bigger than what it is now?

Ken Berlin: So I will try to address both of those questions. So we haven't publicly disclosed the milestones other than that they aggregate to $475 million and relate to development progress, regulatory success and sales-based items. So I don't want to get into more detail on those, but obviously those are milestones that are out there, and certainly we'd love to achieve every single one of them and collect the $475 million in addition to the royalties that are part of the agreement. I can't speak on behalf of our partner Amgen other than to say they've been a terrific partner, very engaged in what we do, offer very helpful insights and input. Now, of course, we're the experts on the Lm products, and I think we're both excited to see the data as it relates to these first patients that are on the NEO drug candidates, the personalized drug candidates for each patient in our NEO program, and look, if the data looks anything like we've seen in the preclinical work that Robert and the Amgen folks have done, where we've seen a high level of immunogenicity, then I think we'll all be very pleased.

Swayampakula: Thank you, Ken and thanks for taking all my questions.

Ken Berlin: Right, okay.

Operator: [Operator Instructions] Your next question is from Martin Saltzman with AFM Investments.

Martin Saltzman: Hi, thank you guys for taking my call. Ken, I just wanted to ask, because there were several things brought up that have already been answered for me, but I wanted to ask more specifically about how you feel about the company's valuation today, if you could just expand upon that.

Ken Berlin: Good morning, Martin, thanks for the question. I’m going to try to avoid an Elon Musk moment and not talk about short-sellers or manipulation of the stock, but I'm going to talk about the fundamentals. There are several things that we need and needed to do that we believe -- to help change the valuation of the company, so we're focused on what we can control. And these are the things that we've done and are doing. So one thing that was important for us to do was to bring clarity around AIM2CERV, right? That was certainly some uncertainty surrounding a Phase III asset that a lot of people are focused on, and I believe we've taken a big step bringing clarity around what our plans are for AIM2CERV and our overall portfolio, which is important. Second thing, obviously, for a company that's burning through cash, is giving clarity around what our cash runway is and our cash burn, right? And we made some progress. It's pretty significant when you think about where we've been and where we are. We were at an $80- million annual cash burn rate with a pretty similar portfolio to what we just described this morning, to one that's at $45 million, right? Still, we've got some work to do, but nevertheless, we've brought the burn rate down significantly, and now we have a cash runway that allows us to get to these important catalysts, which I'll turn to next. Because at the end of the day, it's really about catalysts that will drive the valuation. And those catalysts really relate to three things

Martin Saltzman: It answers it, but does that mean that the valuation is undervalued today? Reasonably valued today? Overvalued? I'm still trying to figure that one out. I know where I've come from. We've come from a company that was trading north of $1.40 prior to our secondary offering and now here we are where are. So I'm just trying to crunch that and figure out if I have to be even more aggressive than I've been.

Ken Berlin: Right. So Martin, good question, and my lawyers may kick me, but look. I think the way to look at it is, we've got a pretty exciting portfolio. And yes, the stock price has come down since we announced the financing back in September. If you look at October, for all biotechs, it was a bad month for most biotechs, so, have we gone down more than most biotechs? We have. So I guess I would summarize it by saying, it's a pretty cheap entry point in the company today with a Phase III asset, the Phase I/II program in prostate and the Phase I NEO program and the soon-to-be Phase I HOT lung program with data readouts around the corner. So we think that it's a pretty good entry point. I can't advocate people to buy the stock, but that's not my job. My job is to execute. So yes, I think there's opportunity for improvement to our valuation, and I think the plan that we've outlined today with the catalysts that are coming potentially from the data readouts position the company well for success going forward.

Martin Saltzman: Massive, that's a fair answer. I’m just curious

Ken Berlin: So Martin, that's a good question. I think we're willing to explore different avenues for funding in these programs, and we think they're worth funding. As I said, we have over 12 months of cash right now, so we don't need to do anything imminently. So we're exploring the least dilutive approaches to raising capital, which could include debt, other means to bring capital in the door. I think we'd all love to do a nondilutive financing through some BD effort, but again, that can't be guaranteed to happen. But obviously we're exploring all avenues, and the least dilutive approach, we certainly agree, would be the best approach right now given current valuation.

Martin Saltzman: Also, I was on your website, and I was looking at your presentation and events. I noticed the events calendar, it doesn't seem like you're going to be present at, let's say, SITC or ASHE. Do you plan on attending some of these other conferences or presenting?

Ken Berlin: So Martin, good question. The website is in need of updating. Yes, we're going to be at SITC, and we'll be talking more about that soon. And we'll be at other important conferences like the neoantigen conference that's also taking later this month in Boston. And hopefully we'll be at AACR and ASCO as well coming up next year. And other conferences we're looking at where we can share the progress we're making on our different programs. So very observant of you, but yes, we will be at SITC, among other conferences, and I'll be presenting at different investor conferences coming up even as soon as next month so we can continue to tell the story and so people can understand where we're going and why we are excited about overall.

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

Ken Berlin: Again, I'd like to thank you all for participating on today's call and for your questions. Our Advaxis associates are working diligently in collaboration with our partners to execute the clinical development plan we laid out today. We will provide updates on our progress as warranted. We appreciate your continued interest in Advaxis. Thanks again.

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.