Earnings Transcript for ONCS - Q4 Fiscal Year 2017

Executives: Punit Dhillon - Co-Founder, President and CEO Richard Slansky - CFO Chris Twitty - Head of Clinical Science Sharron Gargosky - Chief Clinical and Regulatory Officer

Analysts: Jason McCarthy - Maxim Group Yi Chen - H.C. Wainwright

Operator: Hello, and welcome to OncoSec Medical Incorporated's Fourth Quarter and Fiscal Year-end 2017 Financial Results Conference Call. My name is Lian 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 website following the meeting. I would now like to turn the conference over to Mr. Richard Slansky, Chief Financial Officer at OncoSec. Mr. Slansky, please go ahead.

Richard Slansky: Thank you, Lian and good afternoon. After the market closed today, OncoSec issued a press release providing details of the company's financial results for the fiscal year ended July 31, 2017 in addition to a corporate update. The press release can be accessed on our website at www.oncosec.com. Leading the call today will be Punit Dhillon, our President and Chief Executive Officer, who will provide a summary of our recent clinical and corporate developments, including a brief summary of the updated data from our Phase 2 monotherapy and combination trials with the ImmunoPulse IL-12 that was recently presented at the Society for Melanoma Research Congress. Afterward I will provide an overview of the financial highlights for the full year ended July 31, 2017. I will then turn the call back to Punit for concluding remarks before we open up the call for questions, where Dr. Sharron Gargosky, our Chief Clinical and Regulatory Officer, and Dr. Chris Twitty, our Head of Clinical Sciences will join us for the Q&A portion of today's call. However, before we get to that, I would like to remind you that today's call may contain certain forward-looking statements. These may include statements regarding the success and timing of our ongoing clinical trials, regulatory filings, future research and development, drug substance and device manufacturing, commercial development objectives including licensing opportunities, forecast for commercialization, our cash burn and other 2018 financial guidance among other things related to our business including, but not limited to, our plans to develop nucleic acid asset-based immunotherapies and delivery technologies. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risk factors are described in our periodic filings made with the Securities and Exchange Commission, including our Form 10-K for the 12 month period ending July 31, 2017. You are cautioned not to place undue reliance on these forward-looking statements and the company disclaims any obligation to update such statements. With that, I'll turn the call over to Mr. Punit Dhillon, President and Chief Executive Officer of OncoSec Medical, Punit?

Punit Dhillon: Thank you, Richard, and thank you, everyone for joining us. We're pleased to hold this call today to discuss a number of important updates and highlights across our DNA-based intratumoral cancer immunotherapy portfolio, in addition to our updated Phase 2 data in metastatic melanoma that was shared last week at the Society of Melanoma Research Conference. First I would like to address our recent clinical and data milestones. ImmunoPulse IL-12 is our lead program under development for patients with metastatic melanoma and consists of intratumoral plasma encoding IL-12 or is also known as tavokinogene telseplasmid or tavo and this is delivered by electroporation. Earlier this month we initialed our registration directed clinical trial PISCES as known as KEYNOTE-695 an ImmunoPulse IL-12 in combination with Merck's KEYTRUDA or pembrolizumab. This marks the achievement of an important milestone for the company this past quarter. The Simon 2-stage study will enroll approximately 48 patients with Phase 3/4 melanoma who have progressed or are progressing on either pembrolizumab or nivolumab treatment with the primary end point of best overall response rate. The global study in the United States and Australia is currently open and enrolling patients. We anticipate enrolling patients from up to 9 sites in the U.S. and 3 to 4 sites in Australia and expect to share initial data by mid 2018. Furthermore we're conducting the study under our clinical trial collaboration with Merck, known as MSP outside of the U.S. and Canada, where we sponsor and fund the study with Merck providing KEYTRUDA. Merck has been involved throughout the design and planning of the study, providing clinical input along the way and this has included introductions to trial sites, clinicians and key opinion leaders who have been instrumental in the successful initiation of our pivotal clinical trial earlier this month. To learn more about this study please visit www.clinicaltrial.gov via NCT 03132675. Now briefly just as a background on melanoma. Melanoma is a type of skin cancer that begins in skin cells called melanocytes, as the cancer progresses the disease becomes increasingly difficult to treat as it spreads beyond the skin including the [robotic] system. This is also known as a metastatic disease. Given melanoma's occurrence in young individuals, the potential years of life lost to the disease can be higher when compared with other cancers. Although melanoma is a rare form of skin cancer, it accounts for 75% of skin cancer death and the American Cancer Society estimates that approximately 87,000 new melanoma cases and 10,000 deaths from the disease will occur in the United States in 2017 alone. Additionally the World Health Organization estimates that approximately 132,000 new cases of melanoma are diagnosed around the world every year. While check point inhibitors and immunotherapy have transformed the treatment of melanoma bringing new hope to patients with the disease, currently approved therapies do not help all patients and may continue to have side effects. In fact the majority of patients with solid tumors nearly 70% of late stage melanoma do not respond to anti PD-1 therapy and the published response rate to CTLA-4 products in anti-PD-1 refractory melanoma is only 10% to 13%. So there remains a significant amount of unmet need despite the availability of novel therapies. Last week we presented positive Phase 2 data that we believe highlights the potential for ImmunoPulse IL-12 to provide clinically meaningful benefit in patients with metastatic melanoma. Our Phase 2, OMS-I100 monotherapy and the Phase 2 OMS-I102 combination study with pembrolizumab included 51 and 22 patients, respectively. Monotherapy patients were treated with ImmunoPulse IL-12 alone and patients in the combination study also received pembrolizumab every three weeks per the protocol. The combination study patients were selected based on their baseline biomarker data, which predicts the patients that would not respond to anti-PD-1 therapy. The combination data was presented at the 2017 Society of Melanoma Research Congress and is built on the data we shared at ASCO and SITC earlier this year. And like many immunotherapy products, it's continued to evolve and improve over time. In fact, we showed a 50% or 11 out of 22 patients having a best overall response rate observed at 24 weeks. That's 42.9% or 9 out of 21 patients that achieved response based on RECIST version 1.1 best overall response, with 41% of patients or 9 out of 22 patients achieving a complete response and 9% or 2 out of 22 patients having a partial response. 9% that's 2 out of 22 patients showed stable disease for a total disease control rate of 59%. That also can be looked as 38.1% or 8 out of 21 that achieved RECIST durable complete response in the predicted anti-PD-1 non-responder melanoma patients at 24 weeks. Now you can follow along what I just gone over in the press release that the company made last week. In addition, comprehensive immune monitoring data demonstrated that the combination of ImmunoPulse IL-12 and pembrolizumab can convert cold tumors to hot tumors, priming a coordinated innate and adaptive immune response suggesting a synergistic relationship with anti-PD-1. We now have a better appreciation for the kinetics and magnitude of the adaptive resistance and how this combination is likely reshaping the tumor microenvironment. This also includes the data we shared at the Second World Congress of Electroporation and Pulsed Electrical Fields in Biology, Medicine and Food and Environmental Technologies earlier this month. This was another conference. Up to this point, we have used biomarker data to identify patients who are unlikely to respond to anti-PD-1 therapies, and this thoughtful and unique approach was used to understand the molecular signature in order to best tailor the patient's therapeutic regimen. We believe we provided some of the most comprehensive biomarker analysis in this non-responder patient population underscoring the potential for ImmunoPulse IL-12 to generate both a local and systemic immune response that potential results in improved response rates when you combine this with pembrolizumab. The monotherapy data also presented last week further supports the potential of ImmunoPulse IL-12 in metastatic melanoma with a total disease control rate of 65% to 69%. Importantly we showed that the expression of certain critical genes, are regulated in the tumor microenvironment with the use of IL-12. And these effects in the combination setting are enhanced when you add a checkpoint inhibitor. Notably, fewer than 10% in both studies reported treatment related serious adverse events. It was roughly 9.8% in the monotherapy study and 8.7% in the combination study. Most adverse events were unrelated to the treatment and the key attribute that resonates -- and there's a key attribute that resonates with both patients and clinicians is the safety profile. Collectively, these findings reinforce the combination of ImmunoPulse IL-12 and pembrolizumab in our global open label registration directed PISCES/KEYNOTE-695 study to address a significant unmet medical need in melanoma patients who are unlikely to respond to anti-PD-1 therapy. Now as a reminder we also received fast track and orphan drug designation from the FDA for the treatment of melanoma patients who have previously failed OPDIVO or KEYTRUDA therapies as well as the dual checkpoint of OPDIVO plus Yervoy, with a combination of ImmunoPulse IL-12 and KEYTRUDA. Each path offers multiple opportunities to engage with regulators early and throughout the development of the program, but it includes financial and marketing incentives to companies attempting to address rare diseases. Of note as this study progresses we will have a real time understanding of how the data will evolve and we will be able to leverage these finding for future engagement and dialog with the FDA and the regulators, keeping the channels open as we prosecute an accelerated approval pathway. Finally on the clinical front, we look forward to presenting additional data from our ongoing Phase 2 combination study at the Society for Immune Therapy of Cancer Annual Meeting next month in National Harbor, Maryland. This update will include additional durability data for the ImmunoPulse IL-12 in combination with pembrolizumab in metastatic melanoma. We also plan to present initial pre clinical data from our novel multi gene expression platform at SITC. This is termed polycistronic interleukin-12 immunomodulator or PIIM. The PIIM platform builds upon our existing plasma based cancer immunotherapy platform, coupling improved expression levels of individual proteins with the ability to combine multiple therapeutic molecules in a single DNA plasmid. The PIIM technology platform offers an expedited design and molecular cloning of these molecules individually or fused with tailor effect or functions and tunable relative to expression levels. We will continue to share updates from our exciting next generation platform over the coming year. The achievements of these important milestones continues to reinforce our strategy to combine our ImmunoPulse IL-12 program with checkpoint inhibitors to advance the care of patients and I would like to thank the patients, clinicians and the entire OncoSec team for their hard work in progressing our portfolio to where it is today. On the corporate side we've had a number of exciting developments as well. The first of which, was the addition of industry veterans' Dr. Annalisa Jenkins, and Daniel O'Connor to our Board of Directors. Both bring core oncology drug development and commercialization expertise, helping us to advance our key development milestones that will provide a meaningful benefit to patients and our shareholders. Earlier this year we also initiated a technology access program collaboration with Jounce Therapeutics. This collaboration focused on the utilization of OncoSec's gene delivery technology for preclinical purposes to evaluate in vivo efficacy in murine models in Jounce's intratumorally-delivered therapeutic candidates. The pre-clinical agreement includes the GENESIS or trace enabled research generator and proprietary applicators developed for research use. Finally this week we raised and obtained commitments for 8.1 million in offerings, priced at or above market. Richard will provide additional details, however we believe the raise speaks to the confidence among our investors to continue to support our ongoing clinical development and research activities. I will now turn it over to Richard who will give you a brief update on our fourth quarter and yearend financials. Richard, over to you.

Richard Slansky: Thank you, Punit. In addition to the financial press release that we issued after market closed today, we also filled our annual report on Form 10-K for the 12 months ended July 31, 2017. For the fourth quarter of fiscal '17 and the fiscal year ended July 31, 2017, we reported a net loss of $5.8 million and $21.4 million or $0.28 per share and a $1.06 per share respectively. This is compared to a net loss of $6.6 million and $26.9 million or $0.39 per share and $1.63 per share respectively for the same periods for last year. This represents a $5.5 million year-over-year reduction in cash spend, due in part to our decision last year to focus on PISCES. The decrease in net loss for the year ended July 31, 2017 compared with the same period in '16 resulted primarily from; first, a $2.2 million decrease in our non-cash stock based compensation expense caused by an overall lower stock price and the company's tender offer which was an exchange in December 2016 of certain then outstanding stock options for a lesser number of new options with a lower price to exercise. So in other words, the company and its stockholders benefited by having fewer options outstanding and the OncoSec team members benefited by having a lower exercise price on the options that remained. The net loss was also decreased due to about $1.8 million decrease in the cost of our research and development programs caused by our efforts to refocus our resources on PISCES and a $1.4 million decrease in personnel costs due to reduced headcount in various areas of the company. There were no revenues for the fiscal years ended July 31, 2017 or July 31, 2016. Research and development expenses were $3.2 million and $12 million for the fourth quarter of fiscal '17 and the fiscal year-end July 31, 2017, respectively, compared to $3.6 million and $14.7 million for the same periods in 2016. Our general and administrative expenses were $2.6 million and $9.5 million for the fourth quarter of fiscal '17 and the fiscal year ended July 31, 2016 and this was compared to $3 million or $12.1 million for the same periods in 2016. So the $5.5 million reduction or lower spending was split fairly evenly between the reductions in research and development and reductions in our overall general and administrative expenses. At July 31, 2017 OncoSec had $11.4 million in cash and cash equivalents as compared to $28.7 million of cash and cash equivalents at July 31, 2016. Today, we close a registered public offering and sale of approximately 5.3 million shares of our common stock at a purchase price of $1.34375 per share, for gross proceeds of about $7.2 million and net proceeds of about $6.2 million pursuant to the terms of the security purchase agreement that we entered into with certain accredited investors. These investors also received a non-registered warrant to purchase up to an aggregate for 4 million shares of our common stock. Each investor warrant provided them with the right to purchase up to 75% of the number of shares that they purchased in cash. The exercise price of a warrant was a $1.25 per share and the warrants remain exercisable until April 25, 2023. We also announced today that we entered into another purchase agreement with an accredited institutional investor to purchase 800,000 shares of our common stock at the same purchase price of $1.34375 per share. This investor will receive an above market warrant to purchase up to 600,000 shares of our common stock at an exercise price of $1.25 per share with terms of 5.5 years. This warrant is not exercisable for the first six months. The second offering is expected to close this Friday, October 27, 2017 subject to the satisfaction of certain customary closing conditions. Finally we terminated our equity distribution agreement with Oppenheimer related to our ATM or at the market program that we announced in July. We did however raise approximately $1.1 million under the ATM. We anticipate that based on the amount of cash we have on hand, taking into account the net proceeds from these financing and other current rate of cash consumption we could continue operations into the third quarter, the third calendar quarter of 2018 without a significant change in our business plan or reduction in spending. For more information on our financings, I would direct you to our website or our various recent SEC filings. Now with that, I'd like to turn the call back over to Punit for some concluding remarks, prior to opening the call for questions-and-answers. Punit?

Punit Dhillon: Thank you, Richard. And thanks to everyone for taking the time to join us on today's call. As always we appreciate your interest and support in OncoSec. Let me just close by reiterating that we are pleased with the progress we have made in 2017 and recognize that 2018 is an important year of execution for the company. We feel well positioned to drive forward and will update you as our program progresses through the important milestones that we laid out this afternoon. By incorporating real time feedback from the FDA and our regulatory experts in combination with fast track and orphan drug designations in hand, the strong monitoring data, showing the responder and non-responder differences and the impressive clinical outcome data to-date, we believe the company is uniquely and favorably positioned for a potential accelerated approval in the anti-PD-1 non responder population based on the outcome of PISCES or KEYNOTE-695. In addition with the support of Merck, our collaborators, CROs and the FDA we are confident in our approach to address the significant unmet medical need in melanoma providing a potential treatment option in difficult to treat melanoma. We look forward to continuing our execution throughout 2018 including sharing initial data from our registration directed study, named PISCES or KEYNOTE-695 and we look forward to providing that guidance in mid 2018. We've also remained focused on our mission to lead the field in tumor targeted delivery of genes, so that we can build on the success of ImmunoPulse IL-12 by making available safe and effective technologies that can deliver a combination of genes to deeper and more difficult to reach tumors. In conclusion, we've made and are continuing to make significant progress that will allow us to execute on our strategy to develop and commercialize DNA-based intratumoral cancer immunotherapies addressing a significant unmet medical need in oncology. I will now turn the call back over to the operator, so we may take your questions.

Operator: [Operator Instructions] Your first question is from Jason McCarthy with Maxim Group. Your line is open.

Jason McCarthy: Couple of questions, I want to walk back to the monotherapy data, I think it's been overshadowed by the great data from the combination studies. Punit can you talk a little bit about, you had a 25% to 34% response rate, BORR. Can you talk about the patient characteristics and tumor characteristics? Because I remember Dr. [Dodds] did some great work showing different levels of PD-L-1 and PD-1 and how they are used to predicting [indiscernible] responders or non-responders. And may be you can discuss if some of that work was done in this monotherapy study?

Punit Dhillon: Thank you very much Jason and it's always a pleasure to have you on the line. So thanks its interesting how the combination study has really overshadowed the monotherapy data that we presented to-date. And this presentation that we made last week helped to really identify how the IL-12 monotherapy really sets up the immune profile for having a synergistic effect with the combination therapy. We have done a fair amount of biomarker work but we haven't -- I just want to make sure that we don't confuse the matter with the biomarker that was used for enrollment in the combination study. So I'm going to turn it over to Chris, who is going to just quickly go over the differences and what are the key biomarker characteristics that we use in the monotherapy study.

Chris Twitty: Yes, that's a great question, directly to your point, really the detailed analysis of IL-12 wasn't really approached in the 100 study but I would point out that one of the most really key biomarkers that relates to that concept of that resistance and employing PD-L-1 in the intratumoral micro environment was performed and that was highlighted in the SMR presentation by Dr. Algazi and what we saw was a significant increase in that melanoma score that's what the 22-C3 antibody that Merck headed off with their lung study. And similar to the combination we did see that increase relatively diminished compared to the combination as you would expect but certainly that significant increase was observed in the monotherapy.

Punit Dhillon: So if I could just add one -- two comments, one is that it's really clear that in the monotherapy that immune response is blunted by the checkpoint but together the combination data really it enhances the synergistic effect of individual therapies, the individual drugs working together. The other comment I'm going to make is that on our website, we actually made the SMR presentation available. It's under the publication section of our website and it's roughly about 17 slide deck that is available for further review.

Jason McCarthy: Great. And just one question, it's very exciting that the PISCES/KEYNOTE study is ongoing. It is registration directed. As you've previously discussed, are there X number of patients where you'll get data from where you can convert that trial to a registration study? What's the timing of that data? And how quickly once you get the data, could you meet with the FDA and discuss transitioning the trial to registration?

Punit Dhillon: Yeah thanks again Jason. So we are -- as we have indicated in today's call, we are actively enrolling in that trial. We are enrolling in the U.S. and Australian sites. We've given guidance that our target date for -- target estimation for discussing initial data from the trial is middle of 2018. Our internal development strategy does include regulatory milestones and making sure that we upon completion of stage 1 of the trial we will discuss the data with the Agency. But we haven't given guidance about where we are specifically with enrollment or anything else is really being referred to in your question at this point in time. But the key thing is that we do believe that this trial is designed to reach those endpoints and what we've already achieved with the FDA with the fast track designation where the Agency looked at the protocol design and that was discussed with Merck and incorporated Merck's input and we have confidence around execution of this trial meeting the accelerated approval requirements and right now we're executing against that plan.

Jason McCarthy: Great, thank you. And just forgive me if I missed it. One more question, when do you think we'll get an update on kind of next gen intratumoral plasmas that you're going to be delivering? You talked about multi-gene delivery. Can you give us a sense of when we might expect the next candidate to move into the clinic?

Punit Dhillon: Yes. So we're looking forward to now we refer to it in today's call with this exciting name that we refer to as PIIM which is acronym that we're using. It's going to be first discussed at SITC. We're excited about presenting the initial data from this next construct at the SITC meeting, so this will be a preclinical presentation. In terms of our development objectives, this really symbolizes or is a very key component of showing what the platform's capability is in terms of its versatility and [tenability] of incorporating multiple genes. So this is one construct example of many different opportunities. And what we are doing internally as a company is continuing to refine our development focus of which target makes sense for the next development or next IND. Right now, our priority is executing on the PISCES/KEYNOTE-695 study, and then we will continue to advance as a future candidate into the clinic as we really evaluate our bandwidth and what we feel is a key value drivers for the company at this point in time.

Jason McCarthy: Thank you for taking the questions guys.

Operator: [Operator Instructions] Your next question is from Yi Chen with H.C. Wainwright. Your line is open.

Yi Chen: Thank you for taking my question. My first question is that for the investigator sponsored combo therapy. The BORR is 50% but the BORR by RECIST 1.1 is 43% as previously reported. Can you remind us again the difference between these two numbers 50% and 43%?

Punit Dhillon: Yeah thanks Yi for joining the call again and appreciate the question. So Sharron -- Dr. Gargosky is on the line. So Sharron, would you like to take that question?

Sharron Gargosky: Yeah sure, hi Yi. Simply a change in the denominator, as we're cleaning and scrubbing this data and getting it ready for look, you start evaluating things more closely of course. And we found one patient who had a lesion of 0.7 and she wasn't 1 and though she went to a complete remission after her therapy which Dr. Algazi said that's fabulous right for a patient to be in complete remission and looking really good. She doesn't by the pure research criteria and meet the size of her lesion being 1. So, if we go on clinical responses and clinical impression, he would call her a complete responder and include her in the BORR, which is very valid. If you go by pure research definition that's why she would not be included and she would be listed as not a valuable.

Yi Chen: I see thank you Sharron and the RECIST to standard is the primary efficacy end point in the PISCES trial if I recall.

Sharron Gargosky: Exactly right, exactly.

Yi Chen: And also Punit, I think previously the company mentioned that there is going to be a interim analysis for the first 15, 16 to 20 patients from the PISCES study, is that still the plan or that has been changed?

Punit Dhillon: Thank you so much. What we've given guidance for is that we're looking forward to doing and presenting top line data by middle of 2018. As for specific numbers of patients and targets we haven't given any guidance. I will say that our focus right now is completing enrollment in stage 1 and the design of the program is a [final] two stage design. So as we've indicated in our presentation, if we see the response rate in stage 1 it moves to stage 2, so we're looking forward to sharing that data by middle of 2018.

Yi Chen: So the top line data you indicated at the expected in middle 2018, does that include clinical Phase 1 or clinical Phase 1 and 2.

Punit Dhillon: Yi, as I indicated we haven't given guidance on either. Also what we're doing is really focused on executing on the trial, and we're open -- we have -- like we said, we have nine sites in the U.S., three to four sites in Australia. Our current objective is enrollment seeing the data mature and then we will -- our modus operandi here is continuing to discuss data at key scientific meetings as you've seen do before. The next important kind of inflection point we believe that helps support the PISCES program is the durability data that will be presented at SITC on the combination study that really will highlight in a similar patient profile what would be potentially the expectations in the PISCES/KEYNOTE-695 study.

Yi Chen: Thank you. My final question is can you give us some idea of the expected cash burn for the coming quarters?

Punit Dhillon: Let me address that question to our CFO, Richard.

Richard Slansky: So as we can see from the financials that we've presented, the financials indicate that we brought our cash burn down, considerably over the last year. We're going to be investing in the PISCES trial and the cash, you can pretty much see a slight ramp as we start to enroll patients and I indicated that it will -- the cash will last until the third quarter, calendar quarter of 2018. So with a slight ramp you could get pretty close to your estimate.

Yi Chen: Okay thank you very much.

Punit Dhillon: Thank you, Richard. Thank you, Yi. So we're really committed right now to unlocking value here with the current cash and the current capital rates that we have just announced today. So if there are no additional questions, we're going to turn the call back over to our operator.

Operator: If there are no additional questions, we will turn the call back over to management for additional comments.

Punit Dhillon: Sorry about the confusion Lian. All right, thank you all for participating in our fourth quarter conference call. We look forward to the months ahead and continuing to share our progress going forward.

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