Earnings Transcript for ONCS - Q1 Fiscal Year 2017

Executives: Richard Slansky - Chief Financial Officer Punit Dhillon - President and Chief Executive Officer Sharron Gargosky - Chief Clinical and Regulatory Officer

Analysts: Kumaraguru Raja - Noble Financial Jason McCarthy - Maxim Group Yi Chen - Rodman & Renshaw

Operator: Hello and welcome to today's conference call for OncoSec Medical Incorporated Fiscal First Quarter 2017 Financial Results. My name is Jonathan and I will be your Web event specialist 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 Web-site 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, Jonathan. Good afternoon and welcome to our fiscal first quarter 2017 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 platform 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, which would include; the success and timing of our product development activities and clinical trials; our ability to develop and commercialize our product candidates; our plans to research, discover, evaluate and develop additional potential product, technology and business candidates and opportunities; our and our partners' ability to develop, manufacture and commercialize our product candidates and to improve the manufacturing process, and the size and growth potential of our markets for our product candidates and our ability to serve those markets; the rate and degree of acceptance of our product candidates; our ability to attract and retain key scientific or management personnel; the anticipated timing of clinical data availability; the anticipated timing of commercial launch of ImmunoPulse IL-12; our ability to meet our milestones; our expectations regarding our ability to obtain and maintain intellectual property protection; the level of our corporate expenditures; the assessment of our technology by potential corporate partners; and the impact of capital market conditions on us. We believe our statements are based on reasonable assumptions. However, these statements are not guarantees of performance and involve known and unknown risks as well as 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 Chief Executive Officer, Punit Dhillon. Punit 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 today. First, I will share an update on corporate achievements since our last conference call. Then Richard will provide an overview of our first fiscal quarter 2017 financial results. And then I will close with a brief update on our key corporate activities and developments, our corporate strategy and upcoming milestones. Finally, Dr. Sharron Gargosky, our Chief Clinical and Regulatory Officer, will join us in opening the floor for a Q&A session. Now, onto the discussion of the progress we have achieved this past quarter. We are delivering on our commitment to address an unmet medical need in melanoma with ImmunoPulse IL-12. We are pleased with the early clinical response data presented from the melanoma combination trial, and we are focused on advancing our lead program, ImmunoPulse IL-12 in anti-PD-1 non-responders in advanced melanoma patients. Based on our current cash runway, we are positioned to meet our value-driving clinical and regulatory milestones into calendar 2018 and have a clear strategy for expanding our therapeutic platform. Our primary focus for the next year is to initiate a melanoma registration-directed clinical study. We believe we will generate meaningful data in 2017 and 2018 to support the discussions with the FDA and a future biologics license application, or BLA, to attract a partner who is ready to advance this innovative therapy. I want to switch gears and like to share with you some details on the data related to our pipeline development. The first is referring to SITC data on the combo study. So as you know, we recently – or we have an ongoing investigator sponsored trial being conducted at the University of California, San Francisco and at the Huntsman Cancer Institute in University of Utah with principal investigator, Dr. Alain Algazi. He is a Clinical Instructor at UCSF. For this IST, we have been assessing the combination of OncoSec's ImmunoPulse IL-12 and Merck's KEYTRUDA in melanoma patients who are predicted to not respond to anti-PD-1 monotherapy. We are pleased to report that the interim data was accepted for an oral poster presentation at this year's Annual Meeting of the Society for Immunotherapy of Cancer, SITC, and this provided an early look at clinical response data for the first 15 patients enrolled and treated in the clinical trial. As well, this also provides preliminary translational biology data and we look forward to sharing more detail at subsequent meetings. In brief, the combination of ImmunoPulse IL-12 and KEYTRUDA in melanoma patients who are predicted to not respond to anti-PD-1 monotherapy using a novel biomarker profile was associated with a 40% overall response rate based on the response evaluation criteria in solid tumors, or known as RECIST criteria. The preliminary biomarker analysis continues to demonstrate that ImmunoPulse IL-12 can increase tumor-infiltrating lymphocytes or TILs. We believe this increase in TIL is an important component of our therapy as it may be critical in rescuing patients who might not otherwise respond to anti-PD-1 therapy alone. These results provide a compelling signal on our therapeutic hypothesis for the ability of ImmunoPulse IL-12 to improve the response rates in advanced melanoma in combination with the anti-PD-1 checkpoint inhibitor therapy, and we're really grateful to the investigators and patients for their continued participation in this study. We're working diligently to advance this agent towards a registration-directed clinical program. So let's talk about that. As I mentioned before, we are focusing our near-term clinical development strategy on patients who do not respond to anti-PD-1 therapy. So we are committed to developing those therapies for that critical unmet need, because they don't have any alternative treatment. With regard to our melanoma registration-directed clinical plan, we've been building on the support of clinical data for ImmunoPulse IL-12 as a monotherapy in advanced melanoma patients that's characterized the technology, safety and tolerability profile and is shown to be favorable in antitumor activity and now we're advancing this data with the ongoing combination trial with anti-PD-1 antibody and then intratumoral IL-12. The favorable early signal of the clinical response and safety data from the first 15 patients garnered from the Phase II combination clinical trial provides us with additional confidence to move this program forward with key regulatory, clinical and commercial related efforts aimed at achieving an initial marketing approval for ImmunoPulse IL-12 in the anti-PD-1 non-responder patient population in advanced melanoma. So we touched on this on the November 17th Investor & Analyst Day event. It's available online for you to listen into. But what we outlined on that [indiscernible] with the FDA demonstrating their willingness to support early adoption of a novel therapy that can show that it provides the benefit to patients with a significant unmet medical need. And by focusing our next registration-directed clinical trials in the anti-PD-1 non-responders with this unmet critical need with the appropriate supporting data, we can take advantage of all regulatory pathways available to us, including those that may garner us early approval. In the registration-directed study, we are providing a potential rescue option for patients that don't have any remaining treatments proven to be effective after failing the checkpoint therapy. Within the patients treated with anti-PD-1 therapy, there's approximately 65% of them that we are anticipating to be non-responders. This is potentially over 10,000 patients with advanced melanoma that could be eligible to have ImmunoPulse IL-12 therapy in conjunction with the checkpoint inhibitor. This is a very attractive place to start for initial approval of ImmunoPulse IL-12 and we anticipate that we could be able to expand in other non-responder population and also in advanced melanoma, with the possibility of moving into earlier lines of therapy. So, as you can see, the melanoma opportunity alone for ImmunoPulse IL-12 is quite significant, and that's where OncoSec is focusing our energy. We are anticipating that by Q2 of 2017, we will have our first patient enrolled, and I want to switch gears from the registration-directed study to briefly discuss the other critical milestones related to our – for our critical development plan. As you may recall, we are in the stage of data cleaning and preparing our database log for our OMS-I100 melanoma monotherapy study, the Phase II monotherapy program that we're referring to. We expect data analysis completed by the second half of 2017 and that to be submitted for a manuscript. Given the positive interim data from our ongoing combination trial, we intend to amend the clinical protocol to enroll patients that are now refractory to anti-PD-1 therapies without the need for pre-screening phenotypic assay. This clinical trial is active and will resume enrollment as we continue to execute on our initiatives to begin our registration-directed study. So we'll have both programs running in parallel. The focus of our near-term business strategy and R&D expenditures is predicated on the belief that the market opportunity for ImmunoPulse IL-12 in PD-1 non-responder patient population in melanoma, followed by subsequent cancer patients who are then progressing on PD-1, it holds immense value for the value proposition of what we're working on. This is demonstrated by the safety and tolerability profile observed thus far [indiscernible] area. And that's why we believe that there is a clear pathway for ImmunoPulse IL-12 in the current market and we are going to continue to advance our melanoma trials towards registration in order to address this great unmet medical need in oncology. Now, I'm going to go further into details on our upcoming milestones for the remainder of the 2017 fiscal year, but for now I'd like to turn the call over to Richard Slansky, our Chief Financial Officer, to provide the financial results for Q1 2017. Richard, over to you.

Richard Slansky: Thanks, Punit. We issued our financial results via press release earlier today and filed our Form 10-Q after the market closed. For the first quarter of fiscal 2017, OncoSec reported a net loss of $5.6 million or $0.29 per share, compared to a net loss of $7 million or $0.47 per share for the same period last year. The decrease in net loss for the quarter ended October 31, 2016 compared with the same period in fiscal 2016 resulted primarily from the completion of the melanoma monotherapy extension clinical trial, decreased engineering and lab supplies costs due to the completion of our next-generation electroporation prototypes, and decreased outside service fees due to leveraging in-house capabilities, and finally, decreased stock compensation costs. There were no revenues for the quarter ended October 31, 2016 or October 31, 2015. Research and development expenses were $3.1 million for the first quarter of fiscal 2017, compared to $3.7 million for the same period in fiscal 2016. General and administrative expenses were $2.5 million for the first quarter of fiscal 2017, compared to $3.4 million for the same period in fiscal 2016. At October 31, 2016, OncoSec had $24.4 million in cash and cash equivalents, as compared to $28.7 million of cash and cash equivalents at July 31, 2016. Our team continues to seek cost-effective ways to achieve our goals while maximizing efficiency and prudent spending of our cash resources. We believe these cash funds to be sufficient to allow us to continue to operate our business for at least the next 12 months and into Q1 of 2018. In addition, on October 7, OncoSec Medical Australia Pty, Ltd., or OncoSec Australia, was created as a wholly-owned subsidiary of OncoSec Medical Incorporated, and we did this to facilitate the enrollment of our clinical trials principally in Australia where there is a high rate of melanoma cases. Although we incurred a small expense to establish the subsidiary in October, you will notice that we have begun reporting on a consolidated basis and we have added a statement of comprehensive loss to our filings, as required under Generally Accepted Accounting Principles. We maintain our subsidiary in Australia in Australian dollars and convert to U.S. dollars for consolidation purposes, with an adjustment for foreign currency translation. We believe our clinical trials in Australia will generate very cost-effective clinical trial data for our registration study. Now with that, I'll turn the call back over to Punit Dhillon for a review of some of our upcoming milestones. Punit?

Punit Dhillon: Thanks, Richard. Before closing, I would like to reemphasize OncoSec's upcoming development milestones. First, as I touched upon earlier, we plan to move into a registration-directed clinical trial of our ImmunoPulse IL-12 technology, and if it's successful, it would become the first approved therapy for patients who do not respond to anti-PD-1. Next, an area that I see has been underappreciated in my opinion with regards to the investment that we have made and the significant advancement that we have made on the platform, we are going to continue to build the value on the platform and the pipeline in a very stepwise fashion and advance our gene transfer and gene construct innovation. This includes specifically implementing our tissue-based, real-time, adaptive controlled electroporation or TRACE technology. We also are going to focus on gaining access to a variety of new tumor types and locations by innovation of new applicators that can reach [indiscernible] as well as developing a multi-gene plasmid and allowing us to continue having additional plasmid after that. We are really focused on proliferating our technology through our technology access programs and strategic partnerships. In terms of specifically on pipeline expansion for OncoSec specific products, we're focused on securing a new investigational new drug application for our novel multi-gene combination ImmunoPulse candidate. And lastly, we're going to continue to expand research collaborations with key opinion leaders in the field. We believe ImmunoPulse IL-12 has two broad mandates for licensing and partnering. One is the U.S. focus with a big pharma, and that specifically partners in the melanoma space as well as other indications. The other area is the ex-U.S. for indications that are geographically high unmet medical need, such as head and neck cancers or other oral cancers in Asia. Our primary motive to enhance value for our shareholders is to have a clear and focused clinical development strategy for the ImmunoPulse IL-12 program and to seek a validating commercial partnership. In an effort to help us achieve these objectives, we intend to be optimistic about raising capital to fund our registration trial, and this includes efforts to procure a non-dilutive opportunity. However, we have the capital and the development plan and we are really focused on establishing the long-term value for our shareholders. We believe that the near-term inflection points for the Company rest on the success of the ImmunoPulse IL-12 clinical development strategy in melanoma. As such, we're focused initiating the registration-directed study and continue to generate the supporting data for our regulatory pathway. Ultimately, this is all for the commercial launch of ImmunoPulse IL-12 with a partner that is committed to the development and commercialization of new therapies for melanoma patients. So, in conclusion, we have made and we are continuing to make significant progress that will allow us to execute on our strategy to develop and commercialize DNA-based intratumoral cancer immunotherapy. Now at this time, I would be happy to address some of your questions, and as a reminder, Dr. Sharron Gargosky, our Chief Clinical and Regulatory Officer, will join us for the Q&A.

Operator: [Operator Instructions] Our first question comes from the line of Kumar Raja from Noble Financial. Your question please.

Kumaraguru Raja: So my first question, so for this investigator sponsored trial where you presented data from the 15 patients, how many patients did you have to screen to have the specific CTLA4 and PD-1 phenotype? And also for the TNBC trial, can you give more color on what are the plans [indiscernible], will this be in patients who have already been treated with immunotherapy, and what are the plans after ImmunoPulse, will they be treated with some other drug after that?

Punit Dhillon: Sharron, you want to take that one?

Sharron Gargosky: Yes, certainly. So first of all, I think your first question was with regards to the IST study and the first 15 patients that we have reported on. We actually have a much larger enrollment group but the 15 are the first cohort that we have clean data in. We have probably screened 2-to-1 to get the right patients who were willing to participate and be part of the trial. I think it would be a [indiscernible] ratio to provide you there in what we’ve been looking at for that study. The second part of your question was with regards to triple negative breast cancer was what I heard, and I wasn't quite sure if I understood the full question about the patient population there.

Kumaraguru Raja: Yes, I'm trying to get a sense there, will this be in patients who have already undergone immunotherapy and failed, and also once they are treated with ImmunoPulse, what is the strategy there? Like obviously they're going to have some immune response there, so once the ImmunoPulse is done, will they go back on immunotherapy or what type of treatment will they go on once they complete the…?

Sharron Gargosky: No, I understood. So I can tell you about some individual case studies of what we have experienced so far in these patients, and yes, these triple negative breast cancer patients that we're treating are coming in with a myriad of different medical backgrounds. Some of them had multiple lines, three or four lines of chemo and immunotherapies to try and attack their disease. They are coming into our trial and they're just getting a single cycle. You'll remember, this was originally designed as a biomarker safety evaluation type of trial to make sure we were not causing any harm in this patient population. And interestingly enough, what we have seen, one particular patient had had three lines of prior therapy, had never attained a remission, and she came into the trial and got a single cycle of the IL-12 therapy, started showing a nice immunological response, and then the investigator chose to put her onto Nivo after the fact, and that patient for the first time in her life after three years went into a complete remission and has been showing a really great profile there. So, a very interesting site case study. So yes, the doctors are still following up on these patients trying to treat them with any combination of therapies that are out there that may show some effect, but that particular patient with the IL-12 and the Nivo has been particularly interesting to us, especially in light of the PD-1 non-responders in melanoma that we've been looking at. So, we are following more down that line right now.

Kumaraguru Raja: Okay, great. And any update on any collaboration discussion, and also like have you had interactions with FDA and have you received whatever feedback you can share with us?

Punit Dhillon: Kumar, I'll let Dr. Gargosky answer the regulatory question. In regards to the question relating to collaborations, what the Company is actually focused on is two-fold. So, on the platform side, we are very excited about making that technology available more broadly. So on the Investor & Analyst Day, we did talk more broadly about our technology access program where you can, if you are an industry partner or an academic partner, you can look at potential collaborations using TRACE enabled technology. That can come in many different shapes and forms, but there you can expect some new collaborations that are stepwise value-creating events for us in terms of proliferating the technology. On the other side of the spectrum is where we believe is a more validating or value creative event related to the IL-12 program, and that is looking at licensing opportunities for the melanoma program specifically, also looking at how we are going to support this registration-directed study, and then secondly, looking at ex-U.S. opportunities where we take the IL-12 opportunity and we can look at many different indications or other territorial opportunities that are more specific to the unmet need in those geographies. Dr. Gargosky, you want to take the regulatory question?

Sharron Gargosky: Yes, I'll speak to the regulatory strategy. So, I think Kumar, as you are well aware and from our Investor & Analyst Day, I spoke to the different regulatory strategies that are available to us when you are looking at a patient population with an unmet medical need such as these PD-1 non-responder patients who have no other therapies or anything else that they can go to. And within the agency, there are of course the classical breakthrough designations or accelerated approval pathways that you can proceed down, accelerated approval being the pathway whereby you can use a surrogate endpoint such as overall response rate, the outcome in your primary endpoint, whereas breakthrough designation really tends to require more clinical efficacious endpoint like progression-free survival or overall survival. So, I guess I can say, yes, we are very aware of these regulatory pathways. We are actively proceeding and exploring them with the agency, and very positive and informative conversations so far, but nothing to officially report on yet.

Kumaraguru Raja: Okay, great. Thank you so much for taking my queries.

Operator: Our next question comes from the line of Jason McCarthy from Maxim Group. Your question please.

Jason McCarthy: Just a couple of questions about the potential registration study. If you're looking – I'm curious about your interactions with regulators. Would you need to have a study where you have KEYTRUDA or PD-1 failures and have a combination arm versus KEYTRUDA alone? And I guess a follow-up to that would be, how many cycles of therapy would a patient need to have failed prior to enrollments in a [indiscernible] type study?

Sharron Gargosky: This is Sharron. So let's take your second question first about how many cycles would a patient have to have failed. The pembrolizumab is dosed at three-weekly intervals and it's been suggested by our key opinion leaders in the area that you'd really want to make sure that those patients have had at least eight to nine weeks of cycles and that you do a four week scan after that. So you are looking at about 12 weeks to see if that patient has truly showed progression or failure and is truly showing a non-response. So it's going to be somewhere between 12 weeks and probably up to about six months, 24 weeks, with the patients that we are going to be looking at that PD-1 non-responder group, and they are defined [indiscernible] by resistance or refractory or those who acquire resistance during that kind of time. So that's the group that we're looking at. And then your question with regards to how the agency would look at this type of program, so the study is designed, you are right, it's a single arm, open label trial with just looking at these non-responders who have failed the therapy, and then we keep them on the therapy and supplement in the IL-12. We can do it this way because if you have known this patient has already failed the PD-1 therapy, you can't leave them on it ethically and say, we're going to keep watching you on this therapy that you have already failed. It's just not possible. So, we are able to do a single arm study here in these patients who are already a zero or a 5% baseline of failed possible positives and look at what their overall response rate is going to be over that. But I think the second part of where you are going is, what will the agency eventually ask or maybe there is an accelerated approval pathway, but then there is the full approval and the full approval will require a more randomized controlled study where you are comparing active against your treatment, and that will come with time.

Jason McCarthy: Okay. Punit, if you think about like what [indiscernible] has been doing in [indiscernible], it looks like they're going to get through with just about 50 to 60 patients for a single arm study when you have I guess refractory patients who are just not responsive. Is that about the number of patients you might expect for a registration study?

Sharron Gargosky: Yes.

Punit Dhillon: Yes. I was just with, I was listening to a panel today from [CDAR] [ph] about the number of companies that are submitting for breakthrough applications and the bar here in terms of how the FDA is looking at the data. So, in this trial, what Dr. Gargosky and our regulatory experts have laid out is looking and working through the regulatory framework where we are going to be able to observe the events and then submit the data accordingly. So, we feel pretty confident about the approach that we are taking and we have the supporting data in how to continue down this path.

Jason McCarthy: Okay. And one more quick one, just forgive me if I missed it, the follow-up data, you had the interim data, looked really good in November, when will we see additional data from that combination?

Sharron Gargosky: We're actually actively submitting it right now for presentation both as the extension of the clinical science's work as well as the larger cohort that we hope to have ready by the middle of next year, at maybe like an ASCO type presentation if we are so successful. So we are hoping to have a good cohort of data and a very comprehensive story by then.

Jason McCarthy: And how many patients total or just be the 15 or would it be more?

Sharron Gargosky: This will be more. This should be somewhere in the range of 20 to 25 patients.

Jason McCarthy: Got you. Okay, perfect. Thank you so much for taking the questions.

Operator: Our next question comes from the line of Yi Chen from Rodman & Renshaw. Your question please.

Yi Chen: Just to clarify, the ongoing trial from which you have reported the data for the first 15 patients will continue to move forward, and of course that trial is sponsored by University of California, San Francisco, but OncoSec [indiscernible] start an additional trial and for that trial you will enroll patients only – you only enroll patients that have failed the PD-1 therapy and you will use that trial for registration purpose. Is that correct?

Sharron Gargosky: That's summarized perfectly, yes.

Yi Chen: Okay. So, could you also let us know how many patients you will enroll for that trial and how much will that trial likely cost?

Sharron Gargosky: So that trial being the current IST trial?

Yi Chen: The new trial that you are about to – that is funded by – the trial that is going to be funded by OncoSec.

Punit Dhillon: The registration trial.

Sharron Gargosky: The registration trial. Right. Richard, do you want to speak to those numbers?

Richard Slansky: You want to hear those numbers? Those are not public numbers right now.

Sharron Gargosky: I didn't know, yes.

Yi Chen: So, do you think you currently have enough capital to fund let's say the first cohort of patients that will – from which you can report a certain interim data analysis?

Richard Slansky: Right, I see where you're getting at here. So first of all, in terms of – we don't have the final registration trial budget finalized because we're still working through the site contracts and CROs and so forth, but by the next conference call we should have and we should be able to provide a little bit more clarity on that. But based on our preliminary [indiscernible] and based on capital that the Company has at the moment, we feel confident about being able to deploy our resources to get to a meaningful inflection point related to that registration-directed study. So, that means, having cash estimates going into Q1 of 2018 is in line with our enrollment targets.

Sharron Gargosky: Yes, correct.

Yi Chen: Okay. Can you remind me, when likely you will initiate this trial and what is the expected timeframe for the first cohort of patients to be enrolled and you can report a potentially [indiscernible]?

Sharron Gargosky: Can I speak to that, Punit?

Punit Dhillon: Yes.

Sharron Gargosky: Okay, so we are in clinical readiness right now. We are anticipating our first patient in our Q2, if not before that, with enrollment going through 2017. And the first inflection point will be a cohort of those patients on 12 weeks of therapy and reading out the objectives, overall response rates at that point in time. So we are anticipating the end of 2017, probably Q1 of 2018 right now. [Indiscernible] caveats of site enrollment in that, but that's what our target is.

Yi Chen: Okay, thanks. Final question, so for the investigator sponsored trial, the ongoing Phase II trial, do you still expect the top line data within 2017?

Sharron Gargosky: Yes, I really do expect that to still come through. The sites are very motivated, very keen with the data that we are seeing. So, I really do hope so, yes.

Yi Chen: Okay, got it. Thank you.

Operator: Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to Mr. Dhillon for any closing comments.

Punit Dhillon: Thank you and I apologize for this back-and-forth where all three speakers are in different locations, but thank you again for your patience with us. Thank you again for participating in our first quarter 2017 conference call. On behalf of our Board of Directors and our dedicated team, we really appreciate your ongoing support and confidence in OncoSec as we continue to advance our immuno-oncology pipeline. If you have any further inquiries or need clarification on the topics we discussed today, please don't hesitate to contact us. We look forward to providing additional updates at our next conference call, which is scheduled on Thursday, March 16, 2017, and thank you for your time and attention this afternoon.

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