Earnings Transcript for NLTX - Q4 Fiscal Year 2021

Operator: Good afternoon and thank you for joining us today for Neoleukin Therapeutics Conference Call. At this time, all participants are in listen-only mode. Following the conclusion of the prepared remarks, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, today’s conference call is being recorded. I would now like to turn the call over to Julie Rathbun, Communications for Neoleukin Therapeutics. Julie, please go ahead.

Julie Rathbun: Thank you. Good afternoon and welcome to Neoleukin Therapeutics year end 2021 conference call. Joining me on the call today from Neoleukin are; Jonathan Drachman, CEO; Priti Patel, CMO; and Sean Smith, Vice President, Finance. Today’s call is being recorded. It will be available for replay on the Investor Relations section of the Neoleukin website approximately two hours after the call for at least 30 days. Before we start, I’d like to remind you that today’s call will include forward-looking statements based on current expectations. Such statements represent management’s judgments, intentions, beliefs and expectations about future events, strategies, product candidates and operating plans. All forward-looking statements included in this presentation are made as of today, and involve assumptions, risks and uncertainties and actual results could differ materially from those anticipated in the forward-looking statements. Neoleukin undertakes no obligation to update or revise any forward-looking statements. Please refer to the company’s filings with the SEC which are available from the SEC or in the Neoleukin website for information concerning the risk factors that could affect the company. I’d now like to turn the call over to Jonathan Drachman.

Jonathan Drachman: Thank you, Julie and good afternoon. I’d like to begin with a few recent transitions at Neoleukin. First, I’d like to take a moment to acknowledge that Bob Ho will be leaving Neoleukin after two years as our CFO to pursue another opportunity. He has built a strong finance department in his time with us and leaves us with an excellent team that will be led by Sean Smith who is joining me on the call today. Sean has been with Neoleukin since 2019 as our Controller and will now lead the Finance Team and be our Principal Accounting Officer until we appoint a new CFO. I’m very pleased to announce that we also have a new Member of our Board of Directors, Rohan Palekar, who is currently the CEO of 89bio. Rohan has decades of experience in biotechnology in both small and large companies, and has held key leadership positions at J&J and Medivation before becoming CEO of Avanir and subsequently 89bio. I look forward to working with Rohan on the Board. Rohan will be replacing Rusty Williams, who will be stepping off the Board after three years. Rusty has been a terrific Board Member and we have benefited greatly from his wisdom and experience. And now I’d like to recap our progress in 2021 and look ahead to milestones expected during 2022. As a reminder, Neoleukin was founded at the end of 2018, went public in August of 2019 through a merger. We submitted our first IND at the end of 2020 and began a Phase 1 clinical trial in May of 2021. During our three-year history, Neoleukin has built a state-of-the-art computational and protein engineering research organization. The science underlying our technology has been published in the prestigious journals, Nature and Science. And we have assembled the talented team of more than 90 scientists, clinical developers and biotech professionals to advance our science and develop novel therapies to help patients with serious medical illnesses. Today, I’d like to discuss our progress with the first-in-human Phase 1 clinical trial of NL-201. Our plans for further development of this program and our early stage pipeline that we are advancing toward potential future clinical evaluation. 2021 was a busy year for Neoleukin. For starters, we added several key leaders to our Executive Team. In May, Dr. Priti Patel joined us as Chief Medical Officer. Priti previously served as Vice President, Head of Hematology Clinical Development at AstraZeneca and brings extensive experience in clinical development strategy and trial execution of investigational therapeutics with a specific expertise in oncology and hematologic malignancies. And last to fall, Bill Arthur joined us as Vice President and Head of Research. Bill was previously at Seagen, where he served most recently as Senior Director and Head of Cancer Biology and was previously at Merck and Rosetta – Inpharmatics, leading the discovery of oncology targets, predictive biomarkers and synergistic drug combinations. Bill is a skilled research leader who has guided research efforts on therapeutic candidates from discovery through clinical development utilizing novel platform technologies. Both Priti and Bill are great additions to our Neoleukin team and are making significant impacts, leading our clinical and research efforts. In May of last year, we treated our first patient in a Phase 1 clinical trial for NL-201, officially making the transition to become a clinical stage company. We also moved into our new headquarters in Seattle, with expanded lab and office space for our team. While the COVID pandemic has impacted our pipeline development, we now have the space and scientific expertise to make rapid progress. Although our rate of growth slowed somewhat during 2021, we finished the year with more than 90 full-time employees. And finally, in the second half of 2021, we presented preclinical data at multiple scientific conferences on topics ranging from NL-201 and its effects on the tumor microenvironment to initial data about a novel IL-2 and IL-15 inhibitor molecule. Looking forward, we expect a number of upcoming milestones in 2022. First, we expect to report interim Phase 1 dose escalation data on NL-201 in the second half of the year. We believe this will be the first data of a fully de novo protein in patients. Next, we plan to initiate a combination of NL-201 and pembrolizumab in patients with advanced solid tumors. In addition, we plan to use information obtained from our solid tumor trial, as well as preclinical data to begin evaluation of NL-201 in hematologic malignancies. And finally, we anticipate providing further information on progress with the research pipeline. And now turning to our clinical program NL-201. NL-201 is a highly potent de novo protein that stimulates both the IL-2 and IL-15 receptors. NL-201 was designed using computational methods and then refined through directed evolution and extensive testing in the laboratory. It is thermodynamically hyperstable, more potent than native IL-2 and preferentially stimulates naive CD8 T cells and NK cells versus immunosuppressive T regulatory cells at low concentrations. Because a portion of the protein scaffold that normally interacts with the alpha subunit, also known as CD25, has been completely replaced. There is no residual or potential bias towards T-regs and no other high affinity sites that need to be saturated in order to activate potential cancer-fighting immune cells. I will now ask Priti to talk about our clinical plans. Priti?

Priti Patel: Thanks, Jonathan. I’m pleased to share an update on our clinical program. The first-in-human clinical trial of NL-201 is being conducted in patients with relapsed or refractory solid tumors. This trial will evaluate two different schedules, an ascending dose levels of NL-201 in order to assess safety, pharmacokinetics, pharmacodynamics and antitumor activity. After our recommended Phase 2 dose and schedule is identified, we plan to enroll indication-specific expansion cohort, including patients with renal cell carcinoma and melanoma. The open label Phase 1 trial of NL-201 is currently active at 8 sites in the United States, Australia and Canada. We have good investigator engagements – and are enrolling patients quickly. We plan to present interim dose escalation data at an appropriate time in the second half of 2022. In January of this year, we announced a clinical trial collaboration and supply agreement with Merck. The agreement allows for the evaluation of safety and efficacy of NL-201 in combination with Merck’s anti-PD-1 therapy, KEYTRUDA or pembrolizumab in our ongoing Phase 1 trial. Patients with relapsed or refractory solid tumors will receive a standard dose of pembrolizumab combined with ascending doses of NL-201 in order to define a recommended dose and schedule for the combination regimen. The NL-201 pembrolizumab combination will be tested as a separate arm of the ongoing Phase 1 trial and is expected to begin enrollment by mid-year. Last year, we presented preclinical data demonstrating that NL-201 has synergistic activity when combined with anti-PD-1 therapy, even in checkpoint refractory cancer models. In addition, we showed that an NL-201 can turn cold tumors hot, expanding both the absolute number and clonal diversity of tumor-infiltrating T cells and increasing the amounts of interferon gamma and granzyme B produced in the tumor microenvironment. We hypothesize that this combination will enable a greater percentage of patients to benefit from immunotherapy and have the potential to move into earlier lines of therapy as a chemotherapy-free regimen. During 2022, we plan to initiate a new Phase 1 dose escalation trial testing NL-201 monotherapy in patients with relapsed and refractory hematological malignancies, including multiple myeloma and B cell-derived non-Hodgkin lymphoma. We expect to be able to use information from the solid tumor trial to guide the starting dose and initiate dose escalation plan. At the American Society of Hematology Meeting in December, two abstracts reported on preclinical NL-201 antitumor activity, one in non-Hodgkin lymphoma and one in multiple myeloma. The data is a preclinical model, multiple myeloma model demonstrate the ability of NL-201 to delay or prevent relapse following autologous stem cell transplant. Experimental results indicate that NL-201 causes expansion of cytotoxic memory CD8 T cells and a decrease in T-regulatory CD4 cells in the murine bone marrow. Furthermore, T-cells in the murine bone marrow had an increase in granzyme B expression and a decrease in the exhaustion phenotype after NL-201. Finally, the potent effect of IL-15 stimulation on NK cell has the potential to increase ADCC activity in future combinations with the rituximab, daratumumab and other monoclonal antibody. Our preclinical data suggests that NL-201 could benefit patients broadly across many indications and in combination with a wide variety of standard of care agents. We look forward to generating clinical data in patients with a variety of indications during 2022. Jonathan will now provide a brief update on our pipeline effort.

Jonathan Drachman: Thanks, Priti. Throughout the past year, we’ve made strides in our research efforts as we explore the range of opportunities that Neoleukin’s de novo protein technology platform has to offer. Our approach of designing de novo proteins to improve on native sequences represents an important shift in the way new biological drugs could be developed. By – creating completely new molecules, we can optimize multiple parameters, including potency, affinity, stability, size and exactly which parts of the target receptors are engaged. In November of 2021, we disclosed Neo-5171 at the American College of Rheumatology Annual Meeting. Neo-5171 is a potent and hyperstable computationally designed protein that blocks signaling by endogenous IL-2 and IL-15 with potential applications in inflammatory and autoimmune disorders. We showed that Neo-5171 can withstand acidic environments and is resistant to degradation by common proteases, including pepsin and trypsin. We also demonstrated that Neo-5171 can be fused to a life – half-life extending domain and administered systemically with improved survival of immunosuppressed mice in a graft versus host disease model. At this time, we are still testing different disease models and modes of administration. We’ll provide future updates regarding the status of Neo-5171 and potential development plans. In addition to Neo-5171, our current discovery stage pipeline includes a T-reg agonist program targeting autoimmune and inflammatory conditions and a next-generation IL-2, IL-15 agonists for oncology indications. We designed and NL-201 to be a potent activator of IL-2 and IL-15 responsive cells, without preferentially binding to cells expressing CD25. Our future efforts are focused on modifying the biodistribution of this molecule via targeting and/or conditional activation. With that, now I’m going to turn the call over to Sean Smith to discuss our year end 2021 financials. Sean?

Sean Smith: Thanks, Jonathan and good afternoon, everyone. We ended 2021 with cash and cash equivalents of $142.5 million, compared to $192.6 million at the end of 2020. Research and development expenses for the year were $39.2 million, compared to $24.3 million in 2020. The increase in R&D expenses in 2021 was primarily due to increased expenses incurred from clinical trial activities related to our lead product candidate, NL-201, personnel-related costs and in connection with the advancement of other Neoleukin technologies. The increase was also due to facility-related costs associated with the build out of Neoleukin’s new laboratory and headquarters in Seattle, Washington. G&A expenses for the year were $21.5 million, compared to $17.2 million in 2020. The increase in G&A expenses in 2021 was primarily due to increases in personnel-related costs. Net loss in 2021 was $60.7 million, compared to $33.3 million in 2020. The increase in net loss, as mentioned, is primarily driven by increased clinical trial expense related to NL-201, increase in personnel costs and costs related to the build out of our headquarters in Seattle, Washington. Our operating cash burn for the year was approximately $50 million after adjusting for non-cash items. And based on our current operating plan, we believe our cash on hand will be sufficient to fund operations into the second half of 2023. And with that, I’ll turn the call back over to Jonathan for some concluding comments.

Jonathan Drachman: Thanks, Sean. We’re looking forward to the coming months as we progress NL-201 through dose escalation and gather information to help us guide optimal dosing and schedule based on tolerability, pharmacokinetics and pharmacodynamics. This will be an important year for Neoleukin, as we learn about how our lead molecule performs in patients and continue to focus on extending the potential of our technology. We’ve enjoyed connecting virtually with members of the investment and scientific community over the past year and look forward to meeting in person when the opportunity permits. We appreciate the dedicated efforts of our talented team at Neoleukin and remain focused on our overriding goal to advance our de novo protein technology platform to benefit patients with serious diseases, including cancer, inflammation and autoimmune diseases. Operator, we can now open the call up for questions.

Operator: Thank you. Our first question comes from Greg Harrison with Bank of America. Your line is open.

Mary Kate: Hi there. Good afternoon. This is Mary Kate on for Greg, thanks for taking our question. In regards to approaching the NL-201 monotherapy readout expect in the second half of this year. What level of monotherapy activity for NL-201 in solid tumors would be clinically meaningful to you?

Jonathan Drachman: Thanks for the question. So the question was, when as we look at our readout, what are we looking for in terms of activity and why don’t I have Priti take that question?

Priti Patel: Sure. So as we discussed NL-201 is currently in a Phase 1 clinical trial with all-comers in solid tumors, relapsed and refractory. We are testing two schedules, day 1 every three weeks and day 1 and 8 schedules as monotherapy. And the initial data that we plan to present in the second half of 2022, which is what we’ve guided to, we’ll focus on safety and tolerability, mostly and in addition, we’ll look at PK/PD from that dose escalation data. I think you know at the end of 2022, there will be some preliminary efficacy for monotherapy that we’ll take a look at. Our goal is to show you know to have some monotherapy activity as we think about potential combination strategies.

Jonathan Drachman: And just to add a little bit to that, because the interim data will be based on dose escalation and not indication-specific cohorts, it’s going to be hard to have a real estimate of activity. So as Priti mentioned, we’re really going to be looking for what is the balance of tolerability and activity and how does that start to influence the way we think about this moving forward into the expansion cohorts.

Operator: Thank you. Our next question comes from Joe Catanzaro with Piper Sandler. Your line is open.

Joe Catanzaro: Hey, guys thanks for taking my questions and congrats on the progress. I want to follow-up on the last question, maybe I’ll ask it in a slightly different way and one – I wonder whether you see as some PD markers being more predictive of potential clinical activity, whether that’s overall CD8 expansion or CD8 to T-reg ratio. And sort of you know what we’ve seen historically in this space, whether there has been good correlations between some of these PD markers and ultimately the monotherapy clinical activity that’s observed. Thanks and I have a follow-up.

Jonathan Drachman: Sure. Well, I’ll start with the answer. I think it’s really hard to look at biomarkers, because although we have a good sense of what a – our molecule can do pre-clinically there isn’t good correlation with high dose IL-2 or prior experiments or prior studies to predict pharmacodynamics with clinical outcomes. I think one of the things that’s exciting about NL-201 is that, at low doses, it is immune activating. And so we may not have to go to the very high doses that for example, Aldesleukin does in order to have a favorable immune activation versus immunosuppressive ratio. And so I think that it’s something that we’re going to learn during the – during this process. But we are thinking that potentially, there may be a difference with this molecule, because of the favorable benefit to immune activation at low doses. Priti, anything that you’d add to that?

Priti Patel: No, nothing further.

Joe Catanzaro: Okay, got it. That is helpful and I think I understand that. Maybe as a follow-up, I’m wondering at the moment, where do your plans stand for potentially exploring intratumoral delivery? And how is the current systemic trial informing whether that’s an approach that’s worth pursuing?

Jonathan Drachman: That’s great question. Priti, you want to take that?

Priti Patel: Sure. You know I think we’re really interested in the scientific approach of intratumoral dosing and this is what we’re hoping to learn. We’re looking for further opportunities to explore this. We know there are other companies in the space are looking, for instance, at the intravesical approach in bladder cancer. And so it’s a method of delivery that we think could be suited very well for our drug and we’re exploring opportunities to look at – to look at that.

Jonathan Drachman: Yeah. And there is a long history of people using IL-2 as intratumoral treatment, local treatment for melanomas and other accessible tumors.

Joe Catanzaro: Okay, great. Thanks. Thanks for taking my question.

Operator: Thank you. Our next question comes from Charles Zhu with Guggenheim. Your line is open.

Charles Zhu: Good afternoon, everyone and thanks for taking my questions. I guess also as a bit of a follow-up to some of the prior questions that have been asked. How should we think about where you are in your dose escalation relative to where the potential efficacious window may lie? And similar to that, how should we also think about the potential patient follow-up that you’ll have, especially given that immuno-oncology approaches? Perhaps you know like we have this extreme clinical benefit longer-term, but may not be as obviously observed early on in something like in early – response? Thanks.

Jonathan Drachman: Thanks for the question, Charles. So just as a reminder, the first patient was dosed in May of last year. And as we’ve mentioned previously, due to the pandemic, particularly in 2021, there was some delays at some of the sites in getting it opened. So there it took a little while to get up and running. Now, as Priti mentioned in our prepared comments, things are going really well, we got 8 sites open across three countries. And so we’re having a good enrollment and investigator engagement. The – so you know our dose escalation is going as we would predict, we haven’t commented on exactly where we are in terms of dose escalation, but given the potency of the molecule, we would not expect to have to go very far through the process to start seeing at least pharmacodynamic effects of NL-201. And as far as the follow-up goes, you’re right you know that for immuno-oncology products you know one of the benefits is to have a long-lasting benefit. And that requires a lot of follow-up. So I would really think about the data we’re going to be presenting this year as preliminary and early and really informing what is the potential for NL-201. But it’s not going to be a complete story, because we’re not going to have that long follow-up with large numbers of patients with specific indications.

Charles Zhu: Understood, that makes sense and thanks for that color and detail. Perhaps just one more, if you don’t mind. As you look towards potential single agent expansion cohorts, I think you mentioned in RCC as well as melanoma. Now obviously the selection of RP2D will be you know multifactorial base off of safety. I’m also kind of wondering, though, to what extent just given based on the inclusion criteria of your dose escalation, will you – might you also have you know empirical data specifically within those patients heading into expansion cohorts? Thanks.

Jonathan Drachman: So you’re asking specifically about renal cell and melanoma within our dose escalation and that sort of mix of patients. I let Priti comment on that.

Priti Patel: So I think you know it is – we are trying to get a dose and schedule as quickly as possible and as a result, it’s all relapse and refractory tumor types in this trial. There will be some renal cell and melanoma in that mix but there’s a wide variety of tumor types in dose escalation. I think you know the purpose of the expansion as we get to RP2D is to select validated tumor types or you know IL-2 has activity, so we get – we can get a better sense as what efficacy looks like in those disease phase.

Charles Zhu: Great, thanks for that color. And thanks again for taking my questions.

Jonathan Drachman: You’re welcome.

Operator: Thank you. Our next question comes from Mara Goldstein with Mizuho. Your line is open.

Mara Goldstein: Great, thanks so much. Hey, I wanted to ask a question about the combination trial with pembrolizumab and sort of enrollment in that trial, enrollment dynamics and what you expect you know in that versus the monotherapy trial, just given the timing issues associated with a monotherapy trial? And you know press release says that trial will enroll up to I think it was 123 patients or something like that. And you know do you – how close do you think you’ll get to that before you have data to speak of?

Jonathan Drachman: Priti, you want to comment about the plans for the pembrolizumab combination?

Priti Patel: Sure. So we’re opening that trial as part of the monotherapy trial. We’ll be utilizing the sites that we have opened already, 8 plus sites will be open with investigators that are already engaged and familiar with the compound. You know we expect dose escalation to start at a dose level, and these are learnings from what we’ve learned in monotherapy. So maybe not having to start at the very beginning of dose escalation, there’s a lot of interests among investigators to start this combination in various tumor types. You know the patient number is really based around some expansion groups that we may want to look at in this setting, renal cell, melanoma, et cetera. But those expansions will really be further defined once we get to an RP2D in the combination with KEYTRUDA.

Mara Goldstein: Okay. And I – I’m going to ask maybe a question not so much about a competitor, per se, but, you know there is a fair amount of data on due out you know over the next weeks and months, and I’m curious as to sort of any type of contingency plan for enrollment that you might make depending on what that data is?

Jonathan Drachman: As far as – well first of all, we’re excited to see the data. We’re excited for patients and also for the concept of trying to improve upon a proven mechanism of action in IL-2. So with – there’s a lot of interest obviously in this space. And I think that’s because IL-2 is one of the few immunotherapy drugs that has actually been shown to work. So, we are hoping for positive results. And I don’t think at this point that we feel that those data would have an immediate impact on our enrollment or plans. We’ll – we would have to see how that goes. But we’re not expecting that to have a big impact at this point.

Mara Goldstein: All right. Thank you for taking the questions.

Jonathan Drachman: Sure.

Operator: Your next question comes from Benjamin Burnett with Stifel. Your line is open.

Unidentified Participant: Good afternoon. This is on for Ben. Thanks for taking our question. Do you plan on developing NL-201 as a monotherapy in hematologic malignancies? Or do you have a plan maybe an agent in mind that you think makes sense alongside as part of a combination?

Jonathan Drachman: Well, I think that NL-201 could be a really interesting monotherapy in both in solid tumors and in hematologic malignancies. And we’ve seen that in our preclinical data. The fact that we have such potent IL-15 activity on NK cells suggests that NL-201 could work really well with monoclonal antibodies. And also the potent effect on T cells could work really well with things like cellular therapy. So we actually see the opportunities is very broad and we’re starting off with monotherapy activity to see what the data look like. And then we would start to explore a number of different combinations. But I think that many of them – many of standard of care agents could work very nicely with a very potent IL-2/IL-15 agonists.

Unidentified Participant: Great, thank you.

Operator: Thank you. As there are no more questions, I’d like to turn the call back to Jonathan Drachman for closing remarks.

Jonathan Drachman: Great. Thanks, everybody for joining our call today. We look forward to sharing our progress with you in the months ahead. Bye.

Operator: This concludes the conference call. Thank you for participating. You may now disconnect.