CG Oncology, Inc. (CGON) Earnings Call Transcript & Summary

Okay. Good morning, everyone, and welcome to Morgan Stanley Global Healthcare Conference. I'm Sean Laaman, Head of U.S. SMID-Cap biotech equity research at the firm. Before we begin, for important disclosures, please see Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have the pleasure of hosting from CG Oncology, CEO, Arthur Kuan; and President and Chief Operating Officer, Ambaw Bellete. Welcome, gentlemen, and thank you for your time today.

Thank you.

Thank you having us.

Yes. What we're doing with all of our companies. We've got some macro questions to begin with, and then we'll dig into the [indiscernible] CG. So first one, with China's rise in biotech innovation, how you think about CG Oncology's competitive position here? And will this influence your R&D and business development strategy?

Yes. We pay attention to the China landscape very closely. In fact, in 2019, we partnered out cretostimogene to a Chinese pharma called Lepu Biopharma. They are ones who actually have out-licensed a lot of their global rights to U.S. companies. So I think through that relationship, I think we continue to stay close to the developing landscape over there. And I think, ultimately, for U.S. companies, we really need to focus on the novel disruptive innovation that serves a large U.S. population that's largely untapped. I think those are opportunities that we want to continue to focus on.

Wonderful, Arthur. And how are you currently leveraging AI or thinking about AI's disruptive potential?

Sure. I can kick us off and Ambaw will comment too. Outside of CG, all I think about is AI, robotics and automation. I think I'll just briefly touch on some of the repetitive tests that we see in our supply chain whether it's testing, filling. Those are the things that we're thinking very closely, about how to leverage AI today, but we're also thinking about what we could do in the future as well.

Yes. I mean I think one of the other areas that we focused on is how it can be an enabling activity for us internally, how we can increase efficiency such as even small things like meetings and how we create notes, follow-up, those types of action steps, document writing, large volume document writing and comparisons for correlation as well. So we're employing those types of activities in addition to how we show up to the customer, really trying to put models into place such as avatars, for example, in physician engagement and how we can utilize key opinion leaders and those kind of aspects of it. So those are some of the areas that we continue to explore to move on.

Thank you, Ambaw. And I guess on the regulatory side, what's been the most impactful? Has it been FDA changes? Has it been concerns around MFN or tariffs? What's been the most impactful?

Yes, I can start and Arthur can definitely chime in. I would say probably FDA, that's near and dear to us just because our first BLA is going to be submitted to the agency. We are keeping track of all the changes that are happening within the division. We've been really very actively engaged with the agency as well and happy to really see that. Our review team as a whole has been relatively stable compared to other teams. So we're within the CBR organization. And our review team has been relatively stable, so that's an aspect of it. Obviously, there are other pieces, tariffs, macroeconomics. We make cretostimogene in the U.S. from a tariff perspective, we feel very little exposure from that vantage point. From an MFN perspective, obviously, that's a future state, but we're not partnered in Europe nor have we started activities in the European markets and other OCD type of markets right now. So -- but that's something that we will continue to look at, but FDA I would say out of the three.

Wonderful. Thank you. Now to get CG specific. So starting with creto in high-risk BCG-unresponsive NMIBC with CIS or without Ta/T1 disease, which is the population that you intend to file in later this year. You presented the BOND-003 cohort C results at AUA. And then you've had the most recent durability data update last week. Can you remind us of what we saw here, Arthur?

Sure. So just a quick recap. At AUA, we still had 9 patients pending CR assessment. So essentially, we had 34 out of 101, about 33% evaluable for the landmark at 2 years, right, 2 years from the start of treatment. Our Kaplan-Meier projections at 2 years at that time was 42%, so it's had [indiscernible] of those who are CR but not discontinued. And what happened was last Friday, we reported a 42% complete response rate at 2 years. This is actually observed. So effectively, we added 9. So 9 out of 9 CRs all converted. And then we have 3 additional CRs who we booked at as nonresponders at AUA. And basically, they were central review adjudication and 2 were in CR who basically discontinued treatment, but stayed on study. So per protocol, they still got followed up and all 3 were in CR. So very pleased to share with the public that we now have 46 out of 110 patients in the CR at 2 years. So that really represents the highest 24-month CR rate, and it tracks really closely with our KM estimate. And I think I want to point out that competitors actual versus KM may not track that closely because some patients who are in CR may discontinue or withdraw from the study due to AEs, right? So this points to cretostimogene's tolerability and also durability, right? In context, KEYTRUDA is 9% at 2 years, nadofaragene is probably in the 19% or lower, right? And then that really kind of helps you frame that, hey, we're at least 2x or more better than the competitor that's already approved on the market.

Sure. Yes, we thought the data was the best possible outcome what he could have had. Can you frame creto's durability, duration of response and safety with what has been observed with approved therapies and competitors in development?

Sure. So for the 3 approved therapies, you see durability from the first CR in the 40% to 50% range. That's across nado, pembro and ANKTIVA. Our current 12-month DoR from the first CR is in the 62% range. Our 24-month DoR from the first CR is in the 60% range. So that gives you an idea of how not only at 12 months, but also there's long tail. Once you hit a CR at 12 months, you continue to have a very durable response rate into 24 months. And we're still tracking these patients. They have to come back follow-ups every 3 to 6 months. So in the near future, potentially, we could provide another update even beyond that time point. Because ultimately, the end goal here is patients don't want to just save their bladders for 3 months. They want to be able to keep their bladders for years. So we're really trying to move the goalpost here.

Awesome. And you expect to initiate the BLA submission in 4Q. What are you planning to include in the submission? And are there any aspects that remain outstanding?

Yes. I'll start off first. So we've guided early on that we are very focused on improving the administration steps of creto at the site level. We used to do a 5-step administration, which takes about 20 minutes more than a 2-step administration. So we discussed with the FDA our game plan. They said, run a 50-patient trial, right, you don't have to do a noninferiority analysis. So we'll be expecting to report those results and submitting that result to the FDA to compare the 2 versus 5-step. And we're very confident that scientifically, we don't see any reason why there'd be any difference there. But that saving 20 minutes for a high-volume center really means a lot, right? Other aspects include kind of important stability information. And recently, we purchased a fill and finish facility that fills creto into vials. We are heavily investing in that facility and upgrading its infrastructure to make sure they're inspection ready.

Right. Got you. Thank you. And recent news in the space concerning single-arm studies, how do you think about the FDA's stance here as it relates to your upcoming BLA?

Yes. Maybe I can take on that question. There have been 3 approved products already under that guidance. It was first proclamated in 2018, followed up with another update in 2024 and August of 2024. We also have a pending approval for TAR-200 using the same guidance. So we believe that really the pathway for approval is solid based on already existing precedent of other therapies that have gone through that process. And we also will see another one very soon as well. That should continue to give us confidence about the pathway there. In terms of our regulatory engagement, I would say we've got Breakthrough Therapy designation as well as Fast Track designation. It's part of our filing strategy. We've had multiple interactions with the agency on our submission strategy and really, based on that particular pathway, the single-arm design pathway. So that's why our confidence remains strong vantage point.

Thank you. And I guess sort of prior to new therapies, treatment with BCG then on to cystectomy, but now the availability of new therapies, it may be post failing BCG attempt 2 or 3 different strategies to preserve the bladder. How do you position creto in that dynamic?

Yes. I would say we do see, especially post our best-in-disease data at the last AUA meeting. We've had really a number of interactions with clinicians. And they do see post-BCG for the patients that -- who BCG has failed. We do see 2 or 3 additional lines of therapy in those patients. And our goal has been to make cretostimogene backbone therapy within the space. If you look at our cross-section of our clinical trials, they cover really the gamut of intermediate risk disease, high-risk disease and all points in between, really working to make a backbone therapy as monotherapy and also potentially in the combination area as well. So earlier this year, for example, we initiated a trial of cretostimogene plus gemcitabine, cohort CX, and that trial is looking at patients that are both BCG exposed as well as BCG-unresponsive patients in that trial, really thereby adding on to the preponderance of evidence, clinical evidence for the management of those patients.

Thank you, Ambaw. And I guess we saw J&J's TAR-200 granted Priority Review by the FDA, I think, in July. Market is assuming that it'll get to market first. How do you think, given different routes of administration and data that you've seen so far, how would you paint the picture of physician and ultimately patient preference if indeed it does get to market first?

Yes. I mean I would say the following things. In the patient physician discussion with their caregiver as well as the patient, the dialogue they have is around probably 3 major things. Does it work for me? Is it going to work? So how efficacious is it? Is it safe? Is there some changes in my lifestyle that I need to experience by taking on this product? And then the last and really very important question is how long is it going to work for me, the durability. Arthur spoke about that durability earlier as well, showing that, for example, if you're in CR at month 12, 9 out of 10 patients will be in CR at month 24. It's really a compelling patient dialogue and discussion that clinicians can have about it. Really, patients ultimately do not want to lose their bladder. The bladder you're born with is the best bladder that you can live with. And we believe that cretostimogene will help to expand that. In terms of TAR-200 coming on to the market, really, their success is actually good. We do believe that their success is a good barometer of what the opportunity is for cretostimogene. And with the best in disease data, the best safety profile and the long duration of response with cretostimogene, we have a unique opportunity to put it in its right place, as being backbone therapy within this landscape.

And I'll just add a few points to that. I think with the potential J&J approval in the near term, I think it will tell investors 2 important message. One is that the single-arm trial using CR as an endpoint and DoR as a secondary endpoint, could potentially gain full approval even in this environment. Number two, the pricing information will be very valuable to all investors, including us. And I would say, from a competitive perspective, it's actually great to have pharma kind of priming the market for us to drive up reimbursement confidence. That's a key topic that many sites continue to discuss because this is a market that's new to buy and bill. But it doesn't mean that it won't happen. It's just -- it's an early innings. And the last one I'll say is creto is the only asset that's been tested in BCG-unresponsive heavily pretreated with chemo. So up to 40% of our trial in BOND-003 had prior chemotherapy, including Gem/Doce. We can't say the same for the TAR-200 trial. So we're certainly going to be leaning hard into that because, as you know, many urologists still give a lot of chemotherapy, GEM mono or Gem/Doce. So that is a unique advantage that we're going to have in our data set that they won't.

Yes. And maybe one thing I could also add, you asked about kind of how is this product used. TAR-200, for example, is administered into the patient directly using a cystoscope. So it's actually manipulating the patient's bladder. You're instrumenting the patient's bladder, putting a scope in to deliver the TAR-200 device into the patient's bladder up to 8x the first 6 months and 2 additional times for the rest of that year. So first year, 10x manipulation of the bladder placement and pull out of the bladder. Patients are already anxious about what potentially you could see and also the manipulation of that patient's bladder, it really is done by urologists, the most part, versus cretostimogene which could be administered by a nurse or a medical assistant, same really method as BCG. What they have undergone for BCG, the 6 weekly installations, same similar process for cretostimogene. So from a workflow perspective, it's something they're used to. It's something that can be easily adapted into their clinical practice, especially with our 2-step process now, therefore, efficiency and throughput has also increased.

Got you. Thank you. We touched a little bit on manufacturing early, but what manufacturing and supply considerations should investors have? And how do you think about the launch? Like how will the rollout happen? What volume do you think you can serve out of the gate?

Sure. I'll touch on those. So I think for investors looking into this space, which is an exciting space, there's been a couple kind of CRLs that occurred in our space, right? 3 out of 4 BLA submissions have had CRLs. And if you look at them carefully, they all fall into a few categories, right, within the CMC risk category. Some players have changed the process of making the product from Phase III to commercial, some have changed the site of manufacturing from Phase III to commercial, some have changed the scale because they have yield issues, and again, the fourth category would be a preapproval inspection failure. That largely has to do with quality management systems, SOPs. So quality related, right? So those are the kind of general buckets I would consider from a CMC perspective as it relates to the risk. And we're focused on, number one, we did not change the site of where we make creto. It's going to be the same site in the U.S. that will supply for the commercial launch. Number two, we did not change the process. We did not change the scale. Because if you think of our cretostimogene, it's a replication competent adenovector. It makes more copies of itself. So yield is never an issue for us, right? So from that vantage point, we're very focused on the last part, which is the inspections. This has to do with upgrading the facilities' quality management systems, making sure they're following and having the right SOPs in place. If they deviate from those, do they correct them, right? These are some of the details that we're really working hard through. We've hired ex-FDA inspectors to help us with that, right? So from a capacity and scale perspective, as evidenced by how fast we've enrolled in our recent second Phase III in intermediate-risk frontline adjuvant setting. That trial is 10 months ahead of schedule. So I think investors can tell that we do have drug supply. Otherwise, that trial, even if the patients were there, we wouldn't be able to supply them. So at this moment, what we're saying is with the current scale we have, we can do up to 40,000 to 50,000 vials a year. And the beauty about creto is that we can store this at minus 80 -- minus 60 to minus 80, and it could be stable for up to 5 years and more, right? So we can actually build inventory as we anticipate future demand. So with PIVOT-006, our IR trial pulling forward 10 months, we're already thinking about possible strategies to get that on to NCCN sooner and that will be ahead of our competitors by a couple of years.

Got you. And how do you think about the access to physicians during the rollout?

Yes. I mean, I think that's one of the areas where we've made a lot of investments in. If I can just give you kind of a look into some of those examples. All of our clinical trials that are currently being deployed out are really in the top centers throughout the country. They're in the top 10 deciles, 9, 7 and 8, that will be our future really most important customer base. One unique piece about this area in this disease state is that there's such a huge concentration of clinicians that manage these patients and really the top 300 centers generating well north of 50-plus percent of the opportunity that exists out of 7,000 plus, for example, centers throughout the country. So that has allowed us to really penetrate and really look into those. We have the team already of medical science liaisons that are already interfacing with those customers, having engaged discussions, scientific exchange discussions already today. And we've been really driving on those prelaunch activities, both on the field perspective as well as payer perspective as well, learning insights about the patient journey, what's happening to patients vis-a-vis our clinical trials as well as what's happening to other patients on other therapies as well. And really, we've developed a team that is in place, for example, our leadership team, our commercial leadership team has well north of over 60 years of experience in bladder cancer, specifically. So they know the customers, we know the customers. We are actively engaged with them on an ongoing basis, talking about cretostimogene, talking about the landscape and what's happening within that landscape. In fact, I do believe that's one of our value drivers. Our customer intimacy and engagement, the ability to know where the customers need and what the patient needs. So we're also spending quite a bit of time in understanding and working with advocacy as well as patient groups, patient ambassadors as well to really help and inform our launch strategies.

And just maybe to push a little bit on price. So you mentioned that TAR-200, if they do come to market first, one of the value propositions that you'll get some insight on price. So could you frame that a little bit more and maybe some expectations on price or think about the goalpost?

Yes. I can start and tackle on that question. Currently, today, if you look at the landscape, the pricing is somewhere between $200,000 in the case of pembrolizumab per year to over $600,000 in the case of ANKTIVA. So that's really the price band. Nadofaragene is somewhere around the mid-$200,000s, so to speak, per year. When we look at this landscape, really, these are the following metrics from a pricing perspective. Number one, what's kind of your target product profile, okay? What's the expected length of treatment that a patient would be on? Those are some of the inputs in there. And the third element of it is really what's the current existing landscape pricing that helps to inform what your pricing could look like and should be. And the next piece is really from an access perspective, both at the patient level as well as the account level, how would they access that particular price. So I think we look forward to seeing where they will land. But based on what has been publicly available in terms of what's been communicated at least publicly, really of what their targets are for the next coming years in front of us you have 2 drivers, either you penetrate or you have price or you have a combination. So we do believe that those will be the important aspects of how we will evaluate it. We are just kicking off our pricing studies now to really look at the landscape. And that's the formula we're going to be using.

Wonderful. Wonderful. I’ve now got some questions on upcoming data. So I believe there's BOND-003 cohort P data is set for Q4. Can you remind us of the early data that you presented at AUA and what do you hope to present in Q4?

Sure. So cohort P is for the papillary cohort or the Ta/T1 BCG-unresponsive cohort. This will not be on our label, but we intend to file this -- publish this data quickly and get on NCCN. There's already 2 precedents ahead of us. pembro as well as nado have both made it into NCCN. So their data around 12 months is about 50% or so RFS, right? So these are patients who have completely resected their tumor and the drug is given adjuvantly, right? So from our data sets, we showed about 14 patients worth of data at AUA this year. And the current RFS rate is about 90% at 9 months. So there's obviously more to come later this year. We hope to report a more mature data set later on and hopefully beating the benchmark of what's already out there in the guidance right now.

Wonderful, thank you. And the data in HR BCG-unresponsive patients with Ta/T1 without CIS, otherwise known as papillary disease. Can you remind us how that population differs in terms of both patient market size opportunity from the CIS population with or without papillary tumors?

Yes. And that market is about, in our view, about 60% of the pie, right, the Ta/T1. And then CIS with Ta/T1 is about 40%. So that's certainly a very important segment for us to go after.

And we've also got the Phase II CORE-008 data in BCG-naive patients. What is the patient size and the commercial opportunity there?

Yes. So BCG-naive is probably about 25,000 patients in the U.S. incidence wise. We don't view it from a prevalence perspective because pretty much all of those patients will get some form or dose of BCG. And they all turn into BCG exposed right away, right? And then if you have received 5 plus 2 doses with recurrence within 12 months, you then become BCG-unresponsive. So in our view of the market is BCG-exposed is going to be the largest share of the market in the future, right? So CORE-008, we've got a few cohorts there. Cohort A is where we're going to read out data this year. This is in the BCG-naive high-risk NMIBC cohort. We never intended this to be one where we believe it's going to beat BCG, but it's very important for us to show monotherapy data there. And most importantly, we're generating the 2 versus 5-step information for FDA. But from there, we do have Cohort B and CX. B is in BCG-exposed monotherapy. We do want to establish creto as a monotherapy there in about 150 patients. And that is -- that market in BCG-exposed, people have asked us how to think about that market. The way we think about it is if the naive market is 25,000 patients a year, and they all turn into exposed that same year, right? We think it's at least twice of that from an eligibility perspective, right? And from a BCG-unresponsive market, our current view is it's about 25,000 patients that we can address, right? So Cohort B, again, monotherapy and exposed cohort CX is, as Ambaw mentioned, creto plus gemcitabine in both BCG-exposed and BCG-unresponsive, right? And the motivation there really is we have demonstrated creto plus pembrolizumab as an add-on, could boost our response rate and durability. However, we recognize the issue of pembro being sold to [indiscernible] and creto is staying within the urology practice. We want something that the urologists can administer at the same time together, right? So Gem is something that urologists routinely give. We have preclinical studies that's not published, where we have demonstrated the synergies between Gem and creto in the right doses and right combination. So we're very excited about that trial.

Cool. We've seen some recent data in the space from the PD-1 inhibitor, sasanlimab. Could you contextualize that for us?

Sure. So that trial, the CREST trial was done in a BCG-naive high-risk population globally. It was sasanlimab plus BCG versus BCG. BCG in the control setting showed about an 85% CR rate in the CIS population. The combo showed about an 89% CR. And then the kind of EFS curve probably only separated at year 3. So really, it did hit its endpoint. However, we do question whether the 4% upfront CR spread is meaningful enough plus all the Grade 3 side effects from the 10% to 30% range that you don't get with BCG. There's also a small chance of myocarditis that led to death in one of the arms of that combo. So the risk reward is not entirely clear to us. And as I've mentioned, you're selling this product to different call points, right? Can you convince urologists to give checkpoints that's to be determined.

Wonderful. I guess sort of moving on a little bit. For intermediate-risk NMIBC enrollment recently completed in the Phase III PIVOT-006 study. Can you remind us of the current treatment landscape for these patients?

Yes. I mean, the current treatment landscape for these patients and intermediate-risk by guidelines is TURBT is really first-line therapy in this patient, followed by chemo, 1 dose, single dose chemo from a neoadjuvant perspective as well, right, prior to the operation. So now we've got -- if you look at intermediate-risk NMIBC, there's been a recent approval, for example, in low-grade intermediate risk in lieu of TURBT that requires really a change from a clinician how they manage these types of patients. So -- and again, if you look at it from really a patient population perspective, the largest and broadest patient population is really what's addressed by PIVOT-006, which is based on AUA SUO guidelines, both low-grade intermediate risk and high-grade intermediate risk, less than 3 centimeters, Ta disease, that's part and parcel of our PIVOT-006 trial. Compared, for example, to the MoonRISe trial, which requires FGFR alterations where the patient has that or not, that's kind of a subset of population that probably cuts that patient population by 25 or so percent if not higher. So really, our trial, which really rapidly enrolled over 200-plus patients just this year were enrolled into that trial well 10 months ahead of what we had projected in advance of it really shows the robustness of the data as we were releasing more and more data on cretostimogene in terms of our BOND-003 data that we've been releasing, physician interest, PI interest, patient interest continue to grow. And that's really what facilitated that trial's enrollment so rapidly and so quickly within that landscape. And as Arthur indicated, we intend to really quickly move forward and potentially file for that indication right behind our BCG-unresponsive first indication in advance of that after we publish the data, once you have an FDA approval in your first indication and have a publication get on the NCCN guidelines and then once you have a follow-on product in advance of an FDA approval, once you have a publication a peer review journal, you can seek the addition of that into the NCCN guidelines. And that's the path that we're going to follow for PIVOT-006. And we think from an opportunity perspective, when you look at that intermediate-risk patient population, we think it's probably around 2x of the BCG-unresponsive marketplace, the 25,000 or so patients that we mentioned earlier. So we think that opportunity is that -- even that much higher for this patient population to access creto.

Got it. And what about muscle invasive bladder cancer? And how are you thinking about creto's potential in that opportunity?

Sure. So in that setting, we've run a trial called CORE-002. This was an IIT trial where we combine creto with nivolumab, given neoadjuvantly prior to radical cystectomy. So about 6 doses of creto and then 2 doses of nivo. And then at week 10, you resect the bladder. And we were looking for a pathological CR, right? So nivo alone in this setting is about 7% PCR. The combo showed about north of 40% PCR. So again, we're obviously looking at the space very carefully because the elephant in the room is EV plus pembro. I think until that kind of works itself out, we're not in a rush to make any moves in that setting right now. But it's good to know we already have some efficacy and safety demonstrated in that setting.

Okay. All right. I have one final formal question. But just your cash on hand, your -- where does that give you runway to the funding requirements for the launch? When do you hope to get to cash flow positive?

So we currently have about $660 million cash on hand, and we've guided this will be into first half of 2028 in terms of runway. So covering many kind of milestones that we talked about this morning.

Wonderful. And is there any question that I didn't ask or something that I should have asked today?

Comprehensive, yes.

Yes. And you covered a lot of ground. Thank you for the opportunity.

Wonderful. Thank you, gentlemen, for attending.

Thanks for your time.

Take care.

Thank you.