Earnings Transcript for ONCS - Q1 Fiscal Year 2016

Executives: Punit Dhillon - President and Chief Executive Officer Richard Slansky - Chief Financial Officer Robert Pierce - Chief Scientific Officer Mai Le - Chief Medical Officer

Analysts: Rahul Jasuja - Noble Life Science

Operator: Hello and welcome to today's conference call for OncoSec’s First Quarter Results. My name is Vince and I’ll be your operator today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded today. An archive of this call will be available on OncoSec’s website following the meeting. It is now my pleasure to turn the call over to Mr. Richard Slansky, Chief Financial Officer at OncoSec. Mr. Slansky, the floor is yours.

Richard Slansky: Thank you, Vince. Good afternoon everyone and welcome to our first quarter financial results conference call Before we begin, I would like to inform you that today’s call may contain certain forward-looking statements relating to our business, including but not limited to our plans to develop DNA immunotherapies and delivery technologies. Any statements about our goals, expectations, beliefs, plans, designs, objectives, assumptions or future events or performance are forward-looking statements. Please keep in mind that actual events or results may differ from the expectations discussed as a result of different factors, including outcomes of clinical trials and product development programs, evaluation of potential opportunities, the level of cash consumption, the assessment of OncoSec’s Technology by potential corporate partners, capital market conditions, timing of events and other subjects. We believe our statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual results to be materially different from any future results expressed or implied by such statements. Important factors which could cause actual results to differ materially from those in these forward-looking statements are detailed in our filings with the Securities and Exchange Commission. We disclaim any duty to update forward-looking statements. Now I'm pleased to introduce our President and CEO, Punit Dhillon who will lead us through our call today. Punit.

Punit Dhillon: Thanks Richard. Good afternoon everyone and thank you for joining. I’d like to take a moment to review the agenda for our call. First I’ll share an update on key milestones since our last conference call. Then Richard will provide an overview of our Q1 financial results from the 2016 fiscal year. I will then close with a brief overview of how our recent achievements fit into our corporate strategy and upcoming milestones, and afterwards Dr. Robert Pierce, our Chief Scientific Officer, and Dr. Mai Le, our Chief Medical Officer will join us in opening the floor for a Q&A session. In the first quarter of our fiscal year 2016 we continued to advance our clinical pipeline to demonstrate that OncoSec lead program ImmunoPulse IL-12 is a rational choice for a combination therapy with anti-PD-1 agents and may increase the number of patients who will benefit from anti-PD-1 therapy. As you may know, ImmunoPulse IL-12 employs intratumoral electroporation to enhance the local expression of interleukin-12 or IL-12 as it’s commonly known. We’ve seen that ImmunoPulse IL-12 can generate an initial local immune response, as well as a systemic effect, laying the groundwork for expansion into combination approaches, new tumor indications and future therapeutic candidates. The fundamental goal of ImmunoPulse IL-12 treatment is to promote a systemic, tumor specific immune response. We believe this holds the greatest potential to provide meaningful clinical benefit to patients and investment value of OncoSec’s programs. During our last conference call we outlined three key achievements that we set out to accomplish in the near term. They include enroll the first patient into the triple-negative breast cancer study, enrolled 10 patients into the Phase II metastatic melanoma IST combination trial by the end of January and consolidate all of our research and administrative activities under one roof in our new facility. I’d like to now provide an update on how we are tracking against each milestone and the progress we’ve achieved. We have enrolled the first patient into our triple-negative breast cancer pilot trial on October 29, meeting our first milestone as outlined in our previous call. As we continue to enroll additional patients into the trial, we are happy to report that patients have tolerated the treatment well so far. This study is particularly important in demonstrating that ImmunoPulse IL-12 can enhance the tumor immunogenicity, leading to increased tumor-infiltrating lymphocytes or TILs. We anticipate that ImmunoPulse IL-12 will drive a tumor specific inflammatory response and increase the number of patients who may benefit from the treatment when combined with anti-PD-1 therapy and our collaborators at Stanford University, Dr. Melinda Telli and Irene Wapnir have expressed their excitement about the study to the OncoSec team and we could not be more pleased to work with them on this trial. Based on the data, we anticipate that the next clinical trial after completion of the study will combine ImmunoPulse IL-12 with anti-PD-1 or PD-L1. Now I’d like to touch upon our combinations trail of ImmunoPulse IL-12 with Merck's approved anti-PD-1 agent, KEYTRUDA in patients with metastatic melanoma. The goal of this trail is to demonstrate that ImmunoPulse IL-12 can convert non-inflamed low-TIL tumors into ones that have an inflammatory microenvironment or high-TIL, which will prime the tumors for therapy with KEYTRUDA. We are pleased to report that our patient enrolment is on track according to our clinical development timelines. We believe that the combination of OncoSec intratumoral cancer immunotherapy and checkpoint inhibitors has the potential to be a powerful approach in the fight against cancer and we look forward to sharing these data with you at a significant scientific conference in 2016. Lastly, I’d like to provide an update on our third near-term milestones, to consolidate all of our discovery research clinical and administrative activities under one roof. As a result of our growth over the past year, we’ve moved into a new office space in November and it consolidates our three locations into one San Diego headquarters with a state of the art laboratory to house all of our discover research, clinical, engineering and administrative teams. Our expanded headquarters has enough space to accommodate our entire workforce of over 50 employees and is well equipped to further our development capabilities and objectives. Now I’d like to switch gears and provide an important update from this past quarter. As you may know we closed the $7.5 million registered financing with two healthcare focused funds on November 9. There were a few critical reasons why this strategic financing was executed. First, the support from these institutions provides us with extra runway and added security to achieve the upcoming milestones that our outlined in our previous conference call. These include identifying a new lead candidate for our ImmunoPluse platform, announcing a new key academic or a industry collaboration; having preliminary clinical and biomarker data from our Phase 2 clinical trials, providing updates on our preclinical program including studies with our existing industry collaborators and continuing to expand our R&D pipeline. We believe these milestones will take us to the next inflection point and support the long term success of OncoSec. So it’s crucial we provide the appropriate runway and focus necessary to achieve them for our shareholders. With these funds at hand we estimate our cash will last at least through Q1, 2017. However we always need to be opportunistic to continue to fund developments. As an additional benefit, this deal broadens institutional coverage, the smart healthcare funds active in the markets. Secondly, there are always external forces out of our control, such as the potential volatility of the biotech market and the overall fundraising climate. Having financial stability is paramount in our efforts to build long term value for all of our shareholders, especially when we are trying to execute and focusing specifically on clinical milestones that we believe are value drivers for the company. Investors who are excited about OncoSec’s capabilities and perspective milestones came to us in poor market conditions with an opportunity to extend our runway and many considerations were weighed in our decisions to secure this additional capital. Ultimately we believe a stronger balance sheet, better positions OncoSec to deliver new clinical data and execute on our milestones and build long term value. In addition to completing a fundraising, we have taken additional measures to manage our growth, control our bun rate and implement immediate cost efficiencies. Specifically we’ve taken measures in focusing our pre-clinical programs to indentify a new candidate molecule and focusing our clinical pipeline to develop ImmunoPulse IL-12 in combination with anti-PD-1 or anti-PD-L1. Our recent financing and budgetary controls allows us to better manage our resources appropriately, while executing our strategy and programs. Our goal is to further details on our corporate strategy, but for now I’d like to turn the call back over to Richard Slansky to provide the financial results for Q1 of 2016. Richard.

Richard Slansky : Thanks Punit. We filed our Form 10-Q earlier today in conjunction with our issuing our financial press release. For the first quarter of fiscal 2016 we reported a net loss of $7 million or $0.47 per share. This is compared to a net loss of $4.1 million or $0.33 per share for the same three months period last year. The increase in net loss for the quarter ended October 31, 2015 compared to the same period in fiscal 2015 resulted primarily from cost to support our development of next generation device prototypes and clinical studies through third party vendors and consultants; reagents lab supplies to support our various discovery research programs and clinical supports efforts; legal and audit fees to support our public company platform and non-cash stock based compensation expenses, primarily related to our increased headcount and incentives to attract and retain an outstanding technical scientific and support team. There were no revenues for the quarters ended October 31, 2015 or October 31, 2014. Research and development expenses were $3.7 million for the first quarter of fiscal 2016, compared to $2.5 million for the same period in fiscal 2015. Our research and development expenses consist of a mix of clinical and discovery research costs. The increase in research and development expenses was primarily the result of engineering consulting and clinical development expenses, reagent and lab supplies and lab space to support our expanding our R&D efforts; salary expenses related to additional R&D headcount and various clinical trial expenses. We expect research and development to continue to account for a significant portion of our total expenses in the future, as we continue to focus on advancing and developing novel therapeutic product candidates and electroporation technologies. Generally and administrative expenses were $3.4 million for the first quarter of fiscal 2016, compared to $1.6 million for the same period in fiscal 2015. The increase in general and administrative expenses was primarily the result of non-cash stock based compensation expenses due to hiring additional personal to support our corporate infrastructure internally and an incremental increase in legal and audit fees. We expect general and administrative expenses related to certain consulting and professional services to decline in the future, at least as a percentage of our total G&A expense as we leverage our internal capabilities and increase productivity. Now with respect to our cash position, at October 31, we had $26.9 million in cash and cash equivalence as compared to $32 million of cash and cash equivalence at July 31, 2015. As Punit mentioned, in November 2015 we closed the public financing, which netted us $6.9 million of additional cash. This increased our cash balance to just under $34 million. Also, as I announced our net loss for the quarter was approximately $7 million or an average of $2.3 million per month. However, without the non-cash charges, for example stock base compensation and depreciation, our average monthly cash burn in the first fiscal quarter was $1.8 million. We expect to continue to manage our cash burn rate to be less than $2 million per month for the foreseeable future, enabling us to focus our clinical and discovery research programs and we anticipate that our funds will be sufficient to allow us to continue to operate our business through Q1 of calendar 2017. We also held our Annual Shareholder meeting on December 4, of this year. We are pleased to share that all of the proposals passed and we are moving forward with the implementation of the employee stock purchase plan in early 2016. Finally, in November we also completed our move and consolidation into our new headquarters in San Diego that we believe will allow for greater efficiencies and interactions among our talented and dedicated teams. A short formal ribbon cutting ceremony related to the opening of this new facility is scheduled for December 17. We expect local political and business leaders to be in attendance, thereby providing greater exposure to OncoSec and our exciting technology. With that, I’ll turn the call back over to our CEO for a further look at our corporate strategy. Punit.

Punit Dhillon: Thanks Richard. Let me end with my point of view on the broader significant of our recent accomplishments and how they fit into OncoSec’s corporate strategy. Our mission is to develop and commercialize DNA based intratumo immunotherapies to fight cancer. This progress we have seen with immunotherapy in general, particularly with checkpoint inhibitors validates the important role of enhancing patient response to these treatments by driving TILs. It’s one of the largest unmet needs. Our clinical programs and R&D activities are aligned to capitalize on a combination of growth with anti-PD-1 or anti-PD-L1 agents and we continue to evaluate all opportunities to initiate combination clinical trials, with a partner or through other mechanisms. From an R&D perspective we are exploring new candidate molecules beyond IL-12 to expand our ImmunoPluse platforms. Our technology can generate a multitude of products and we seek to maximize our Gene Electro-Transfer platform to deliver new DNA encoded molecules. By continuing to validate our technology both clinical and preclinical, we expect to be in a stronger position to advance our product development towards commercialization and generate even more value for our shareholders, and I think we have done a great job of pulling together a team that is executing on our strategy. The completion of our recent financing extends our runway and provides added security while we work to achieve our next set of milestones. All right, before closing I’d like to reemphasize the upcoming milestones that support the long term success of OncoSec. In the next four months, we plan to announce a new lead candidate for our ImmunoPulse platform, as well as announce a new key academic or industry collaboration and in the next eight months we plan to have preliminary clinical and bio marker data from our Phase 2 clinical trials. These data will be presented at key scientific conferences and we also expect to provide updates on our preclinical programs, including studies with our existing industry collaborators, as well as the continued expansion of our R&D pipeline. We have completed a solid first quarter that will allow us to execute on our strategy to develop and commercialize DNA based intratumoral cancer immunotherapies. At this time we are happy to address some of the questions from our listeners.

Operator: [Operator Instructions]. Our first question is from Mark Breidenbach of H. C. Wainwright. Your line is open sir.

Unidentified Analyst: Hey guys, this is Matt [ph] on for Mark, thanks for taking the questions. Could you maybe give us a little bit more color on what your plans are for the next generation concepts and whether these may include other cytokines or modulators or any combinations there?

Dr. Robert Pierce: Yes, so this is Dr. Pierce; I’ll take that question. I think we’ve talked a lot in the past about one of the unique aspects of our technology as a platform is the combination of multiple molecules and that’s something that we are certainly going to leverage with our next generation approach. And we plan on building on the success we’ve already had with pro-inflammatory cytokines, but it want be limited to pro-inflammatory cytokines. So that’s about all I can say, except that our programs are moving forward expeditiously and we are excited about the progress we are making and we are looking forward to announcing that new combination in the future.

Unidentified Analyst: Great and then may be also a comment or two on the development of the next generation electroporationdevices. I know you are working on and maybe what implications we might see with those and maybe some of the timelines.

Punit Dhillon: So, as you know we presented sort of the technical breakthroughs that we’ve had at this dilemma of First World Congress on Electroporation and that was really well received. What we are currency doing is working on transitioning from the prototype to a clinical ready device and we are – I hesitate to get more granular on the timelines, but we are making good progress.

Unidentified Analyst: Okay. And then maybe finally you know we’ve seen some interesting new data on the T-vect combination with [Indiscernible], I believe. Kind of what are your thoughts on that and is this kind of a good indicator of the potential of that combination therapies can have?

Punit Dhillon: Yes, that’s a really good question. Obviously our relationship with T-vect is an interesting one. We certainly applaud T-vect for kind of validating the approach of an intratumoral therapy and I think that’s been really valuable to the field on the whole, to really put intratumoral approaches on the map, and it also puts out there a metric for us to try to beat. We’ve discussed in many previous presentations why we think electroporation is a platform that has utility beyond those of oncologic viruses, specifically the lapse of neutralizing antibodies, the ease of CMC and my personal favorite is the ability to combine multiple payloads in a way that your standard viral platform is incapable of doing. So as we moved forward in a world of common arterial [ph] approaches, I think that will be a real benefit to our platform.

Unidentified Analyst: Okay, great. Thanks for taking the questions. Congratulations again on the milestone.

Punit Dhillon: Thank you.

Operator: Thank you. Our next question is from Rahul Jasuja of Noble Life Science. Your line is open.

Rahul Jasuja: Hey guys, thanks for taking my call, my question rather. A couple of questions here and I think they are probably more for Robert here, for Rob. So you got the approach, wherein you’re looking at CD8 tilled as a patient selective biomarker. My question pertains to, when you’re running your work internally and clinical trials and planning bills, are you also looking not just for a patient selective biomarker, but looking for an efficacy biomarker that you can get an early readout from your Phase II studies when you have combination studies or even with the current single agent studies; something that is beyond just IL-12 expression; maybe an effecter function like perfornashes [ph] or granzymeses [ph]. Is there any plan to do that?

Mai Le: Hi Rahul, this is Mai Le and we are in fact looking at multiple biomarkers that would indicate or herald a response. The first and probably what I would call the gold standard are paired biopsies. For all of our studies we seek to get paired biopsies from pre treatment baseline and then at approximately one month following the start of ImmunoPulse IL-12 therapy and what we’re doing is we’re comparing those biopsies when we have adequate samples to determine, has the tumor become infiltrated with the tumor infiltrating lymphocyte. We are also collecting serum samples and whole blood samples, also seeking biomarkers that indicate that we are – that ImmunoPulse IL-12 is inducing an anti-tumor and tumor specific pro-inflammatory response and then of course obviously following patients forward for the clinical outcome of actual reduction in tumor size.

Punit Dhillon: Yes, and if I could amplify on that a little bit, clearly what we’re aiming to do with ImmunoPulse IL-12 is an in-situ vaccine and so we’re looking at developing biomarkers that will allow us to look for a specific vaccine effect and in particular a vaccine effect targeting tumor neoantigens; so that’s work in progress.

Rahul Jasuja: Great. And then my second question sort of, kind of relates to vaccines in a sense. Obviously with IL-12 you’re able to induce tumor antigens and the recognition of those in the immune system. But my question really is beyond combination with PD-1, is there any thinking to use a vaccine approach with IL-12. I know the vaccine approach in terms of the IP probably belongs to your mother or sister company Inovio, but there’s a lot of data coming out now that combination approaches in immuno oncology are reviving the vaccine approach, not just new antigens, but using the vaccine in conjunction with IL-12 or something. Is that thought of at all?

Punit Dhillon: Yes, so you’re absolutely right that IL subsectors in a large degree driving a vaccine effect and that we know from a variety of studies and that’s why it’s such an – it’s a lynchpin cytokine to drive a TH1 immune response. Whether you use it like Inovio in the peripheral vaccination manipulation or like we’re doing in an in situ vaccine intervention. I think the really salient difference between those approaches is that by killing off the tumor cell and allowing it to dump antigens to be exposed to the immune system, we can expose the immune system to all of those neoantigens and also those shared antigens, but we don’t have to rationally sort of in advance try to kick the best antigen. We could kill the tumor and let the immune system sort it out. So we are in fact reviving the vaccine approach, what we’re doing it through in-situ vaccination, which I think is going to prove to be a very effective approach.

Mai Le: And I just want to add to that. So Rahul, I really like where you’re going with that and we’ve been thinking about that actually for a while and really from a clinical trial perspective, the constraints really are the size of our company and both our personnel and financial bandwidth. Because in terms of seeking to thoroughly understand the degree to while IL-12 ImmunoPulse leads to a vaccine effect, a true vaccine effect, what we’d really be looking at would be in a neoadjuvant setting, which would be a great trial to do and then you follow patients forward and look at the time to recurrence. Unfortunately that is – those are going to be larger trials because you need to have the statistical power in terms of following the investigations forward to see if you have actually effected and prolonged that time to recurrence. Now we do have in our dog study, the dog study is a neoadjuvant study, so we will be exploring that, but it is not specifically powered to look at time to recurrence. But we’ve been thinking about ImmunoPulse IL-12 in exactly that way and it’s really a matter of continuing to achieve proof of concept in our current trials until we get to the point where we can do those neoadjuvent studies.

Punit Dhillon: And we should probably mention the Merkel cell data as an example of the vaccine.

Mai Le: Oh yes, that’s a very good point. So back in September we presented our Merkel cell data and one of the key features of the data that were presented showed a patient where we did actually in fact have this vaccine effect in a patient who had a very deep partial response. We were able to obtain the serial biopsy and in the serial biopsies, particularly of one of the lesions that were specifically left, not directly treated, what we saw were tumor specific T-cells that were actually specific for the neoantigen of the polymer [ph] virus. So we do have clinical evidence of this vaccine effect.

Rahul Jasuja: Great, that’s very interesting and thank you for the added information. Great, thanks guys. That’s all I had.

Operator: Thank you. If there are no additional questions, we will turn the call back over to Mr. Dhillon for his closing comments. Mr. Dhillon.

Punit Dhillon: Well, thanks for the Q&A. Thank you again for participating in our Q1 conference call everyone. On behalf of our Board of Directors and the entire dedicated team at OncoSec, we truly appreciate your ongoing support and confidence in OncoSec as we continue to advance our immune oncology pipeline. If you have any further enquiries or any clarification on topics we’ve discussed today, please don’t hesitate to contact us at investors@oncosec.com. I’ve truly had the pleasure of speaking to many individual investors since the last conference call, so I want to continue to support that activity. We would like to also take this opportunity to wish you all a happy and healthy holiday season and we look forward to further updating you in the New Year. Thank you for your time and attention this afternoon and we’ll see you soon in the next quarterly conference call.

Operator: This concludes our teleconference. You may now disconnect. Have a good day.