Earnings Transcript for ADXS - Q4 Fiscal Year 2018

Operator: Welcome to the Advaxis Fiscal Year 2018 Financial Results and Business Update Conference Call. At this time, all participants are in 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 today, January 15, 2019. I would now like to turn the conference over to Miriam Miller. Please go ahead.

Miriam Miller: Thank you. Good morning. This is Miriam Miller with LHA, the Investor Relations Agency for Advaxis. Thank you all 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, Executive Vice President and Chief Medical Officer; and Dr. Robert Petit, Executive Vice President and Chief Scientific Officer. Last Friday, Advaxis filed its annual report on Form 10-K with the SEC and last Thursday the company issued a press release providing a business update and disclosing its financial results for the fiscal year 2018. If you have not received this news release or if you would like to be added to the company's e-mail 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, 2018 and other periodic reports filed with the SEC, including 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 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 this live broadcast, January 15, 2019. 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 will turn the call over to Ken Berlin. Ken?

Ken Berlin: Thanks, Miriam. Good morning, and thank you all for joining us. 2018 was an eventful year for Advaxis. We brought on an almost entirely new management team, worked to right size the company to suit the depth and breadth of the programs we are pursuing, reduce the annual cash burn from about $80 million down to about $50 million, and advanced several of our programs. The result is, we now have a robust pipeline with products at various stages of development from our pivotal Phase 3 AIM2CERV trial evaluating AXEL in high-risk locally advanced cervical cancer to our off-the-shelf neoantigen directed treatment for lung cancer, Advaxis 503, or HOT lung. We are committed as a management team to advancing our corporate goals and full-filling our mission, which is to improve the lives of people suffering from cancer and their loved ones. It is also worth noting that we raised capital to support the achievement of our goals. In fiscal 2018, we raised gross proceeds of approximately $40 million in the aggregate through two underwritten public offerings. At the heart of all that we do are the cutting edge scientific and technical advancements relating to and ensuing from our proprietary Lm platform. We strongly believe this platform is a key differentiator for Advaxis in immuno-oncology space through its unique ability to mimic a natural infection and redirect an immune response against cancer cells, along with a number of other important effects on the immune system. The platform is diverse as we have demonstrated its ability to generate a number of different drug candidates. As more than 470 patients have been treated with drug candidates from our Lm platform, we have a well-understood and manageable safety profile for our products. In November 2018, we confirmed our intention to continue the AIM2CERV trial. Cervical cancer, especially in its advanced stages is a terrible disease with high mortality rates across the globe and few treatment options available to patients. We have made significant progress in this trial, which is scheduled to enroll 450 patients. We are currently in dialogue with FDA to amend the study protocol to provide for interim analysis that if approved would give us a first look at the data as soon as 24 months from now. A trial this large takes a long time and interim analyses would provide early valuable insights into our progress that would inform our future plans for AXEL, including potentially the ability to stop the study early based on positive efficacy results and proceeding towards an earlier filing for approval. It is important to note that these discussions with FDA had not yet been concluded and there can be no assurance that we will reach agreement with FDA on these interim analyses. Our Phase 1/2 trial evaluating Advaxis-PSA in combination with Merck’s KEYTRUDA is also ongoing targeting late stage prostate cancer patients, those with metastatic, castration resistant disease. We saw some intriguing early data from a subset of seven patients of the 37 patients in the combination on with this trial and reported those outcomes at ASCO in 2018. The data demonstrated approved survival on patients with PSA declines from baseline of 50% or greater and an acceptable safety profile. Most adverse events were considered mild or moderate and included symptoms such as feverish, chills, rigorous, hypotension, nausea, and fatigue. All of these are clinically manageable and are consistent with immune activation. Our neoantigen programs, Advaxis-NEO and Advaxis-Hot also progressed in 2018. Neoantigens are emerging as a powerful tool in a fight against many kinds of cancers. And our Lm platform provides us with many competitive advantages, including having a large capacity for the number of antigens that can be loaded into the Lm vector. We’ve been able to generate a portfolio of constructs capable of targeting more than 30 neoantigens for evaluation across a range of cancer types in both the Advaxis-NEO and Advaxis-HOT programs. In 2018, we launched a Phase 1 dose escalation study for Advaxis-NEO. This is our personalized neoantigen program featuring drug constructs that express neoantigens personalized for each patient. This ongoing trial will treat a variety of tumor types and we are excited to evaluate outcomes as we work to bringing truly personalized medicine to the market. Last month, we announced that Amgen has terminated our collaboration in this program. This will take effect on February 8, 2019. Although it’s still early in the program, Amgen provided the following three reasons for their termination. First, portfolio rationalization. Based on their internal portfolio review they did not feel our program was in-line with the direction they were taking. Second was cost of goods. Our Advaxis-NEO product is personalized to each patient. Therefore, it inherently has a higher cost of goods to manufacture then other non-personalized cancer therapies such as checkpoint inhibitors. And the third reason they provided was that it is high-risk and far from commercialization. We are still early in the development cycle for Advaxis-NEO and therefore by definition it’s a high-risk proposition, which we are working to de-risk. And it will be several years before products from our Advaxis-NEO program can be launched. Although Amgen was an important partner for the company, there are some aspects of the termination that benefit us, including the freedom to present data generated from the study where and when appropriate. As a result, we are now in the process of gathering and reviewing the safety, immune correlative and early clinical information from our first cohort and anticipate releasing these data within the next two months. 2018 also saw FDA allowance of our IND for a Phase 1 study of Advaxis-503 or HOT lung as we would like to call it for the treatment of all types of non-small cell lung cancer. Advaxis-503 is part of our Advaxis-HOT program. Advaxis-HOT constructs are drug candidates that express public or shared antigens and other tumor associated antigens and have the potential to meet the treatment needs of numerous patients across multiple cancer types. Our HOT programs address one of the issues raised by Amgen cost of goods. While we’ve made good progress on identifying ways to reduce the cost of manufacture our Advaxis NEO constructs, a significant enhancement of our Advaxis-HOT drug construct is that it is off-the-shelf, meaning the drug construct for each cancer type is universal to all patients with that type of cancer, and therefore the cost to manufacture is a fraction of what it cost to manufacture Advaxis-NEO, plus there is no waiting time. The drug is ready when the patient is ready to be dosed. We are excited to begin dosing patients with our first HOT construct and our first site is now active and ready to begin enrolling patients. Based on certain enrolment assumptions we anticipate having safety, tolerability, and immune correlative data from the first cohort of this study late in the first half of 2019. 2018 was transforming, productive, and eventful for Advaxis on almost every level. As we look ahead to 2019, we believe 2019 will be the year of key data generation from our neoantigen directed and other programs. We are excited by the progress we’ve made to advance these programs in 2018 and eager to demonstrate the benefit of our neoantigen directed platform. We believe that the early data from our studies will accelerate partnership and collaboration discussions with parties that have expressed interest in these programs in the past, as well as new parties. It is our belief that our suite of therapies represents a unique portfolio of drug candidates with the potential to transform the cancer treatment landscape. Now, I’ll turn the call over to Molly Henderson, our CFO, who will discuss financial results for the fiscal year. Molly?

Molly Henderson: Thanks, Ken. At the end of our fiscal year on October 31, 2018, Advaxis had cash and cash equivalents of 44.1 million. The company used approximately 62.1 million in cash to fund its operations during fiscal 2018, mainly attributed to funding our research and development and general and administrative activities. Throughout fiscal 2018, the company completed an in-depth review of all programs and cash expenditures, and as Ken mentioned, we estimate our annual net cash usage to be approximately 50 million. Research and development expenses for fiscal 2018 were 57 million, compared with 70.5 million in fiscal 2017. The 13.5 million decrease was primarily attributable to a decrease in laboratory costs, drug manufacturing process validation, and drug stability testing. The lower spending in these areas were a result of cost control measures taken to reduce non-essential cost throughout fiscal 2018. General and administrative expenses for fiscal year ended October 31, 2018 were 19.5 million, compared to 40 million in fiscal 2017. The 20.5 million decrease was primarily attributable to a decrease in stock-based compensation of approximately 18 million, as well as the greater fiscal discipline [in sales] during the second half of the fiscal year 2018. The net loss for fiscal year 2018 was 66.5 million or $1.29 per share based on 59.5 million weighted average shares outstanding. This compares with a net loss for fiscal 2017 of 93.4 million or $2.31 per share based on 40.5 million weighted average shares outstanding. As Ken mentioned, 2019 will be an important year for Advaxis in terms of data readout and key events in support of demonstrating the potential of our Lm platform. As a result, we are working diligently to ensure the company is sufficiently capitalized. A key component of ensuring we have an adequate amount of capital is increasing the amount of shares we have available for issuance. Currently, the company has 3 million shares remaining that are authorized, but unissued. Therefore, included in this year's proxy statement is the proposal to increase our share authorized by 75 million. We believe this will provide us sufficient amount of shares to enable us to pursue additional financing for the company over the next couple of years. This is an important step in achieving our goals for 2019. We’ve recognized the cost of capital as high for the company due to our recent stock price declines. So, we are looking to balance this along with our cash needs in order to determine the most efficient way to finance the company. We are looking at multiple sources of financing, including strategic licensing and we will continue to strive to ensure the company has the resources it needs to deliver on our plans. Also included as a proposal on this year's proxy is the ability for our Board of Directors to effectuate a reverse stock split; if needed, to regain compliance with the NASDAQ continued listing requirements. We believe maintaining our NASDAQ listing is important for our stockholders and our company. We will continue to work hard to drive awareness of the company to both institutional and retail investors. [However,] in the event we are not able to regain compliance with the dollar minimum bid price continued listing requirement, we feel it’s important to have other mechanisms available to the company to ensure we are in compliance with the NASDAQ requirements. And doing a reverse split of our stock will provide that ability. It is important that we build the capital structure that will allow us to fund the company and advance our critical programs to help improve the lives of people suffering from cancer and our loved ones. This is our mission and this is what we're focused on. With that overview, I will turn it back over to Ken for concluding remarks before we open up the call to questions.

Ken Berlin: Thank you, Molly. Before we take questions. I’d like to extend my thanks and appreciation to our shareholders for your support during the 2018 fiscal year. As I said at the opening, the entire Advaxis executive team has worked hard to position the pipeline for success in 2019 and we are highly committed to this goal. I look forward to updating you on our progress throughout 2019. With that overview, operator, we're ready to take questions.

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

Jim Molloy: Hi, good morning. Thanks for taking my questions guys, and had a question on the NEO data, you mentioned with the Amgen walking – giving back the program the opportunity to present the data at a relevant meeting, you guys just have – you come around any thoughts on what that meeting might be or exact timing on that?

Ken Berlin: Hi, good morning, Jim. Thanks for your question. Yes, we are honing in on a specific meeting and we will be publicizing that in due course. As I mentioned in my prepared comments, we expect that meeting to occur within the next two months and so we will issue a press release regarding that upcoming meeting and ultimately, we will issue a press release that details the output of what we will be sharing at that conference, and our hope is that one of our investigators will be presenting the data. And as we mentioned, the data will include safety data, as well as immune correlative data and the clinical picture of each patient and how they’ve done on therapy and post therapy.

Jim Molloy: Excellent. And then, you mentioned that potentially in a dilutive versus nondilutive source of cash, obviously licensing out a – some of your relicenses and your compounds are the obvious way to nondilutively get some cash. And the recent JPMorgan conference having just concluded was that a fruitful area of discussion among your meeting?

Ken Berlin: Yes, thanks Jim. Of course, we are talking about business development and in particular licensing. So, we think there are licensing opportunities throughout our portfolio. Our portfolio consists of essentially four different programs, our AXEL program, which is really bound up in our Phase 3 study or AIM2CERV study for high-risk locally advanced cervical cancer. We’ve got our NEO program, which we now have the ability to re-partner and we are in discussions with folks that have expressed interest in that asset in the past, but which we couldn’t talk to them about because it was encumbered by Amgen, and now it’s no longer encumbered by Amgen. And then we’ve got the HOT program, which is entering the clinic. We believe the data that we are gathering on the NEO program will be presenting and have been sharing with potential partners under CDA, does provide some good information about the potential for our HOT program because there are similar programs in some respects and some of the data that we’ve generated to date from the NEO program does read well and pretend well for our HOT program. And then there is the prostate cancer program for which we will be presenting data on earlier this year as well. So, to answer your question more succinctly, we had a number of business development meetings leading up to JPMorgan. Regarding NEO and HOT and had additional meetings on those programs and have had discussions on AXEL and cervical cancer as well, and we are having some discussions with folks and have generated some term sheets are relating to partnering both the prostate cancer as well as the AXEL asset.

Jim Molloy: Great. Thanks. I’ll hop back in the queue.

Operator: Your next question is from Michael Brcic with National Securities.

Michael Brcic: Hi, good morning. Thanks for taking questions. I missed a little bit at the beginning. I have more of a question on the NEO program, I mean obviously Amgen walked away from it. Can you maybe put some color on why you think they walked away and at the same time why it is still a worthwhile project?

Ken Berlin: Sure. So, we did provide that color in the prepared remarks, you probably missed it. So, there were three reasons provided to us. One is, they have a big and growing portfolio in oncology, particularly in early stages of clinical development. So, the first reason given was portfolio rationalization that can't take everything forward, although they would like to. Second was cost of goods. When you are making a bespoke product or a personalized product for each individual patient by definition it is more expensive than a one-size-fits-all approach, which frankly, is what our heart program has, a one-size-fits-all for each major cancer type. And then the third was, it’s an early stage asset and by definition it is higher risk and a number of years away from commercialization. So – but that’s by definition an early Phase 1 asset, by definition high-risk, and a bit of a ways from market. As I mentioned, in response to one of the questions from our previous questionnaire, we have now generated data from our first neoantigen directed treatment program NEO that we plan to share publicly as I have stated within the next couple of months, that we’ve been able to share under CDA with a number of potential partners. That data obviously was not available when we were seeking partners for this program, a couple of years ago. Now, it’s available and the folks have expressed interest in the past or have expressed interest in our HOT program in the past are good candidates for us to go back to with these data. So, these discussions are at early stages, but again, we are actively talking to companies about potentially re-partnering the NEO program in answer to your specific question. We think there is a good chance of that happening although there is no guarantee for that happening, plus we now have the ability, the package, the NEO program with perhaps one or two of our HOT constructs for folks who are interested in specific aspects of our HOT program.

Michael Brcic: Got it. Just on that data, can you go a little further into the nature of that data? Is it efficacy, is it safety, what are we talking about or what can you talk about?

Ken Berlin: So, it’s Phase 1, right. So, what are we looking at? We're looking at safety data, we're looking at what is the best dose for Phase 2 and importantly we’re looking immune correlative data, right. So, this is the first time that we’ve put multiple antigens in this case, sometimes 30 or more antigens or a NEO antigenic, in the case of our NEO program in one of our vectors. And so, we're looking to see if we're generating T-cells against the key new antigens we’ve selected to go into these constructs. And, while we don't expect that we're going to have a dramatic impact in terms of efficacy because these are late stage patients, so very difficult to treat patients, we do plan to present clinical data in terms of how these patients have done on therapy and since moving on to other treatments.

Michael Brcic: Got it. Now the deal with Merck, you guys are funding there, right? They are just providing the KEYTRUDA to you? Or how does that work?

Ken Berlin: Correct. There is not much work to be done there. We are following some patients, we are doing immune correlative data looking at potential biomarkers and so there is not a lot more that we are spending on that. There is a minimal spend, but yes that’s correct. Merck provided KEYTRUDA and we continue to monitor patients to see what the overall survival data looks like from this combination of patients.

Michael Brcic: Okay, and finally, sorry if you’ve already mentioned this, but the ADXS deal on the high-risk locally advanced cervical, have you started Phase 3 or about to start, where are you on that?

Ken Berlin: Yes. So, Michael we…

Michael Brcic: I’m looking at the presentation, so I couldn’t tell it’s already started or not?

Ken Berlin: That’s okay. Yes. We’ve been in Phase 3 for 15 months to 18 months. So, we’ve enrolled a number of patients, we still have some ways to go. Once we’ve concluded our discussions with FDA on our proposed revisions to the protocol, namely to seek two interim analyses, one of which is accepted by FDA could give us an early efficacy readout and lead to an earlier application for approval. Once we have those discussions finalized, we will provide an update on exactly where we stand in terms of enrolment. What our projected enrolment rate will be and when we expect to get to these interim analyses, should FDA sign off on those interim analysis.

Michael Brcic: Great. Thank you very much.

Ken Berlin: You’re welcome.

Operator: Your next question is from Andy Vitek with Janney Montgomery.

Andy Vitek: Yes. Hi guys, thanks for taking my question here. Over the past few calls, we haven't heard any updates on the canine osteosarcoma data or updates on that and I was curious about the arrangement with – the ongoing arrangement with Aratana? Thank you.

Ken Berlin: I'm going to turn this one over to Dr. Petit who’s been involved in this program in certain respects.

Robert Petit: Right. So, thank you for your question. As you mentioned, we’ve licensed our HER2 construct to Aratana for using canine osteosarcoma. That has been approved in an expedited form by the USDA and our last conversation with Aratana, they are engaged in a large sort of conformity trial that they believe will get them a full approval for that product in osteosarcoma and that program that they are conducting according to what they’ve informed us is progressing on schedule and as expected and doing just fine. So, we are sort of, it’s their product now, they are moving it forward and looking to extend that sort of expedited approval into full approval with their ongoing work.

Andy Vitek: Okay great, thank you.

Ken Berlin: And I think it’s helpful to explain to people the relevance of that study to our other programs, right. Because it’s one of the studies that gives us some promise and belief that working in the earlier stage settings is the best place for our various drug constructs, right. In that study, we demonstrated as Robert mentioned, significant data to prevent recurrence in these dogs. And likewise, in adjuvant settings in anal cancer in humans and this is obviously very relevant to what we’re doing with AXEL in cervical cancer. Again, we’re able to demonstrate prevention of reoccurrence in the adjuvant setting. So, that’s what we are aiming to do with AXEL in our AIM2CERV study and we have those two supportive studies as well as a couple of supportive trials in metastatic cervical cancer that give us a strong belief in the probability of technical and regulatory success in that drug construct AXEL in that setting. So, thank you for asking the question.

Operator: [Operator Instructions] The next question is from Swayampakula Ramakanth with H.C. Wainwright.

Swayampakula Ramakanth: Thank you. This is RK from H.C. Wainwright. Most of my questions have been asked, but I was just wondering, if you can add some additional color on the HOT program, especially when the HOT program is closely related with the NEO, as far as how things are progressing there, what sort of patients are you seeking to get rolled into that program? And also, what’s the timeline for some initial data, just like the one that you’re trying to talk about with regards to the NEO program?

Ken Berlin: Sure. RK, good morning and thanks for your question or questions. So, we are very excited about the HOT program for the reasons I mentioned in my prepared comments. We have data from NEO that again we think pretends well or gives us some confidence that we will be able to generate T-cells against the antigens that we’ve put in our HOT lung construct, Advaxis-503 drug candidate. So, we’ve got our first site up and running, we’ll have a number of other sites up and running. What everyone should understand is, it’s very competitive to get patients in the lung cancer setting. There are number of agents on market and looking to come to market in the lung cancer setting in the immunooncology and so it’s a very competitive area. The good news is, we’ve lined up a number of key opinion leaders at key investigator sites that we’ll be bringing up, but nevertheless it does take time. We do believe based on our own assumptions on enrolment and sites coming up and enrolling patients that we will be able to generate data, similar to the data that I described that we will be presenting on NEO, but this time for HOT lung namely safety, tolerability, immune correlative data and some clinical data in the first half, by the end of the first half of 2019. And so, we’re excited to do that and it’s very possible we’ll be able to generate data from our NEO program that reads directly our HOT program, but more to come on that as we work to gather the final pieces of data from our first patients from our NEO program and we’ll be presenting that data as I mentioned within the next two months.

Swayampakula Ramakanth: Thank you, folks. Thank you very much for taking my questions.

Ken Berlin: Thank you R.K.

Operator: And your next question is from the line of David Hoang with Jefferies.

David Hoang: Hi, this is This is David on for Biren. Yes, maybe just a question on Advaxis- PSA, what are the next steps there? What kind of data are we looking at, looking for and how soon? And then will Merck have an option to codevelop into Phase 3 and potentially co-commercialize something like that?

Andres Gutierrez: Right. This is Andres Gutierrez, Chief Medical Officer. So, we have been waiting for updated survival data from the combination arm study with KEYTRUDA and PSA construct. We have an arrangement with Merck in which we have to wait at least 18 months of follow-up to have a final read-out on the survival. So, as we present at ASCO, we haven't reached the median overall survivals after 10 months in the combination arm. So, in a meeting that we’re going to be attending soon, we’re going to be updating median overall survival for that particular combination arm, but as we were mentioning it all – we will have to continue the follow-up of these patients, the remaining patients in the study to see the follow-up and the final survival data from these patients. And based on that we will discuss with Merck what are our next steps.

David Hoang: Great, thanks. And then maybe just one more question for both NEO and HOT immune correlative data, what kind of a signal would we be looking for there? Is there a magnitude of T-cell induction that would be supportive of further development?

Robert Petit: Hi David, this is Robert. So, of course when you vaccinate someone, you want to – the intention of the vaccine is to generate T-cells against the targets that you’re presenting and so that’s very much what we’re going to be looking at. We look at – is there general activation of the immune system, is there a proliferation of T-cells in the immune system as observable through the peripheral circulation? And then, later we drill down and say okay, let's look and see objective T-cell responses to the NEO antigens that were included. And as Ken mentioned, there are a good number of them and so there is a lot of data to be generated there and to look at. And that’s a very important aspect. So, I think that’s the primary goal. Are we getting T-cells against the neoantigens that we put in there primarily? I think a secondary question that remained of the field is, if you target a certain number of neoantigens are you also going to get immunogenic cell death that can result in antigen spreading or an expansion, or extension of the primary immune response, and we also will be evaluating some data that would be indicative of potential for antigen spreading if we see it.

David Hoang: Great. Thanks a lot.

Robert Petit: You know antigen spreading is a very important aspect of our vector. We’ve now seen clear evidence of antigen spreading in three different clinical trials with different agents and almost everything that we look at. So, that’s one of the advantages we feel that comes from this vector that’s based on a live pathogen. Once the immune system starts doing its job then in the immunologic context the vector creates, it's very conducive to antigen spreading.

David Hoang: Thanks.

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

Ken Berlin: Again, I like to thank you all for participating on today's call and for your questions. We look forward to making continued progress on the programs we discussed today and to providing updates on our achievements. We appreciate your continued interest in and support of Advaxis and look forward to providing updates throughout the year. Thank you, and enjoy the rest of your day.

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