Curis, Inc. (CRIS) Earnings Call Transcript & Summary

Thanks for joining us for Curis' earnings call covering the fourth quarter and full year of 2019. To start, I'd suggest heading over to the Investors Section on our site, www.curis.com, where you can access our earnings release for Q4 and year-end 2019, along with the related financial tables. I also want to note that forward-looking statements will be made by management throughout this call. Those are grounded in what we currently expect and believe. Such statements carry certain risks and uncertainties, and actual outcomes could differ materially. For more information, please refer to our SEC filings. On the line with me today are Jim Dentzer, our President and Chief Executive Officer, and Bob Martell, who leads R&D. We'll be taking questions during Q&A at the conclusion of the call. At this point, I'll hand things over to Curis' CEO, Jim Dentzer. Jim?

Thanks, Bill. Hello, everyone, and I appreciate you being with us this afternoon. For Curis, 2019 was a year of formation. We shared encouraging clinical results from our CA-4948 program, which set the stage for significant expansion and additional advancement in 2020; we reworked how we tackle a significant oncology target, VISTA, by bringing our CI-8993 into the portfolio. We also formed valuable collaborations that place Curis for lasting momentum far into the future. As a lot of you know very well, the growing COVID-19 pandemic brings unparalleled difficulties to individuals around the world; it has additionally highlighted the significance and need for medical innovation. Here at Curis, we are more committed than ever to our goal of delivering our targeted cancer treatments to patients. We are tracking COVID-19-related developments closely, and we stay committed to operating our business as efficiently and smoothly as possible. Now let's move into our clinical development programs for next-generation targeted cancer drugs. I want to begin with our IRAK4 program. At the ASH Conference in December, we shared thrilling initial results from our ongoing Phase I dose escalation trial of CA-4948, an IRAK4 kinase inhibitor, for treating patients who have relapsed or refractory non-Hodgkin's lymphoma, including those with DLBCL, Waldenström's macroglobulinemia, and Oncogenic MYD88 mutation. This data offered the very first proof that hitting IRAK4 in this patient group leads to anticancer activity. It also highlights the possibility for CA-4948 to act as a new therapeutic choice for such patients. The trial continues to be ongoing; yet we were happy to announce at ASH that the study has moved into the therapeutic dose range. At dose levels of 200 milligrams twice daily and above, 5 of 6 evaluable patients saw a decrease in tumor burden. The average reduction among these patients came to 29%. One such patient, someone with Waldenström's, gave a truly excellent single patient illustration of the robust dose response we are seeing in the trial; this individual entered the study at 50 milligrams twice daily. And was escalated in dose to 100 milligrams twice daily, then escalated once more to 200 milligrams twice daily. With every dose increase, this patient is experiencing additional reduction in tumor burden. That this individual's dose response aligns with the overall dose response observed across the group as a whole is quite thrilling. Right now we are assessing patients at the 300-milligram twice daily dose, and we will keep escalating the dose until the maximum tolerated dose and/or the recommended Phase II dose is established. We anticipate sharing updated safety and efficacy data from this trial later this year. Additionally, during December's ASH Conference, presentations were made featuring data that underscored CA-4948's promise as a treatment option for individuals battling AML/MDS — acute myeloid leukemia or myelodysplastic syndrome — whose spliceosome mutations produce the oncogenic long-form of IRAK4, which CA-4948 directly targets; our plan is to launch this trial during 2020's first half; put simply, CA-4948 faces a packed year ahead, and we eagerly anticipate fresh efficacy results while looking forward to investigating what CA-4948 might achieve clinically for AML/MDS patients carrying particular spliceosome mutations. Shifting to fimepinostat. This morning we shared that our Phase I trial combining fimepinostat with venetoclax is being halted. While no drug-drug interaction emerged from that combination, neither did we detect an efficacy signal strong enough to justify pushing it into the next development phase. With today's market circumstances shaped by the COVID-19 pandemic, our choice is to direct resources toward CA-4948 and CI-8993. Continuing analytical work alongside DarwinHealth aimed at characterizing biomarkers and aligning tumor subtypes should inform whatever clinical development possibilities arise for fimepinostat down the road. Our 2019 clinical momentum has been matched by recent corporate-side strides. During the last several months, we've struck several partnerships and collaborations that we feel leave Curis favorably positioned over the longer horizon; this past February, we revised our collaboration deal with Aurigene, our partner, concerning development and commercialization of CA-170, an oral dual inhibitor targeting VISTA and PDL1. Under this revision, Aurigene may finance and run a sizable randomized Phase IIB/III trial of CA-170 paired with chemo radiation for nonsquamous, non-small cell lung cancer patients. In exchange, Aurigene gains rights to develop and commercialize CA-170 across Asia, adding to what it already holds in India and Russia. Curis stands to collect royalty payments from future CA-170 sales in Asia, all while retaining full commercial rights to CA-170 throughout the U.S., EU and remaining territories outside Asia. This collaboration update lets us back CA-170's clinical progress while drawing on Aurigene's know-how and assets for late-stage CA-170 development. Our conviction remains that VISTA constitutes a significant target within oncology; this January, we signed an option and license agreement with ImmuNext covering development and commercialization of an anti-VISTA antibody, among them its lead compound CI-8993, a clinical-stage monoclonal antibody built to antagonize the VISTA signaling pathway. This partnership prospect genuinely excites us. It hands us yet another chance to chase the VISTA pathway as a cancer treatment approach; we aim to apply what CA-170 taught us toward advancing CI-8993 and intend to kick off a Phase IA/IB dose escalation trial for CI-8993 before this year ends. And in January as well, we put out word about a research partnership with DarwinHealth focused on characterizing biomarkers and tumor subtype alignments for fimepinostat. Our view is that this partnership is going to expand what we know about how the MIC mechanism works, and it could also help us spot any potential development opportunities for fimepinostat down the road. And finally, I'd like to mention the $30 million transaction with Aspire Capital that was announced in February. Bill is going to take everyone through the specifics, but broadly speaking, through this deal we gain access to an efficient and flexible source of capital from a long-term institution focused on health care, which will back the clinical development of our candidate. Extending our cash runway through this transaction makes us happy, given the important year that lies ahead. At this point I'll hand the call over to Bill so he can summarize our financial results for the year and the fourth quarter. Bill?

Thanks, Jim. For the year that closed on December 31, 2019, our net loss came in at $32.1 million, or $0.97 per basic and diluted share, versus a net loss of $32.6 million, or $0.98 per basic and diluted share, in 2018. During the fourth quarter of 2019, the net loss we recorded was $8.6 million, or $0.26 per basic and diluted share, compared with a net loss of $5.9 million, or $0.18 per basic and diluted share, in that same 2018 period. Revenue for the year that ended December 31, 2019, totaled $10 million, versus $10.4 million in the comparable 2018 period. In both periods, revenue mainly consisted of royalties booked on Genentech and Roche's net sales of Erivedge. Fourth-quarter revenue for 2019 and 2018 came to $3.3 million and $2.8 million, respectively. Operating expenses for the year that ended December 31, 2019, reached $34.4 million, versus $39.8 million in the comparable 2018 period. Operating expenses in the fourth quarter of 2019 totaled $10.6 million, versus $7.9 million in that same 2018 period. Cost of royalty revenue, mostly sums owed to third-party university patent licensors tied to Erivedge sales by Genentech and Roche, amounted to $0.5 million for the year that ended December 31, 2019, versus $0.6 million in the comparable 2018 period. Cost of royalty revenue totaled $0.2 million in the fourth quarter of 2019, versus $0.1 million in that same 2018 period. R&D expenses reached $22.3 million for the year that ended December 31, 2019, versus $24.4 million in the comparable 2018 period. That decline stemmed mainly from reduced employee-related costs following a headcount cut made during the fourth quarter of 2018. Partly offsetting that decline were higher clinical, manufacturing, and consulting costs tied to our ongoing Phase I clinical trial. R&D expenses totaled $7.5 million in the fourth quarter of 2019, versus $4.7 million in that same 2018 period. General and administrative expenses reached $11.6 million for the year that ended December 31, 2019, versus $14.8 million in the comparable 2018 period. That decline stemmed mainly from reduced personnel and stock-based compensation costs, along with lower legal and professional service costs. G&A expenses came to $3 million in the fourth quarter of 2019 and $3 million in the fourth quarter of 2018, respectively. Net other expense reached $7.8 million for the year that ended December 31, 2019, versus $3.2 million in the comparable 2018 period. Net other expense mainly comprised a $3.5 million loss on extinguishment of debt tied to the March 2019 repayment of the loan obligation owed to Healthcare Royalty Partners. There was also imputed interest of $4.1 million stemming from the sale of a portion of Erivedge royalties to Oberland Capital. In the fourth quarters of 2019 and 2018, net other expense came to $1.3 million and $0.8 million, respectively. By the close of business on December 31, 2019, the total of our cash, cash equivalents, marketable securities and investments stood at $20.5 million. We believe that amount will let us keep our planned operations going into the second half of 2020. To lengthen our cash runway, we said in February that we had signed a $30 million common stock purchase agreement with Aspire Capital. Per the terms of that arrangement, Aspire put in an initial $3 million and agreed to buy as much as $27 million more in common shares over a 30-month period, within certain limits. Those later purchases will happen from time to time when we ask, priced off the market at the moment of each sale. No warrants, derivatives or other share classes come with this agreement, and we determine when and how many additional common shares get sold to Aspire. Through this facility we gain a reachable source of capital tied to market pricing; in our view it is a great deal for Curis and for our shareholders; with that, I'd like to open the call for questions. Operator?

One brief question regarding the IRAK4 inhibitor. Is that mutation a driver mutation in AML or MDS? And should we expect that you will reposition 4948 into the AML/MDS setting?

Yeah. Thanks, Soumit. Appreciate you joining the call; let me begin with that, then I'll pass it to Bob for a bit more detail; so the drug is an IRAK4 inhibitor, and at first we went into the non-Hodgkin's lymphoma area and the results we've generated to date have been outstanding. Very enthusiastic about it. So naturally, I think that's a pretty substantial commercial opening, because it seems to follow any place a BTK can go, and our preclinical data show they combined well together—that market sits at $5 billion right now. The AML/MDS chance is smaller, but from a regulatory standpoint it's in a distinctive spot. People have long viewed it as a heterogeneous illness, and there's brand-new research, just put out, that a physician from Einstein presented at ASH, which has identified particular spliceosome mutations responsible for an over-expression of IRAK4 in that condition. That's an area BTKs are unable to get to. In that use case, we'd argue his findings show that half of the AML/MDS population carries this overexpression of the long-form of IRAK4. When you're dealing with the short form, it's fine, but the long form is what drives cancer. If we're able to go after those patients, we can present a case to the FDA in which we point to a highly defined group—one that can be picked out through particular genetic mutations that our drug is uniquely suited to address. That ought to give us a very fast route through the regulatory process. So that's the approach we're taking. With non-Hodgkin's lymphoma, it becomes really clear that this drug is effective, that we can achieve anticancer activity and affect the tumors the way we observed in preclinical work, and beyond that, it can do all of this in a commercial market that's very large. In AML/MDS, we're capitalizing on newly released research and have pinpointed a possible accelerated pathway through the regulatory process. Bob, is there anything you'd like to say on top of that?

Yeah. Thank you, Jim. That's a very significant thing to ask. For a good while now, folks have been aware of these spliceosome mutations in AML/MDS, but only lately — exactly like Jim pointed out, within the past 12 months — has it come to light how they truly control AML/MDS. And as it happens, the main regulator tied to worse long-term outcomes for such patients turns out to be this expression of the long form of IRAK4. This version of the protein stays constitutively active and pushes — essentially pushes a block on the leukemia cells differentiating through traffic, and it also genuinely hits the NF-kappaB pathway, which these leukemia cells need to survive. And with CA-4948, we're able to switch that pathway off rather effectively. So yeah, it is a driver mutation. And yeah, we will certainly pursue that as a registrational path going forward.

To wrap up, regarding the NHL front, what we've seen in the data thus far appears outstanding. By the time of the ASH data cutoff, we had already reached therapeutic dose levels at 200 milligrams and above, with 5 or 6 patients experiencing tumor shrinkage. Among those individuals, we're observing an average decrease of 29%. Clearly, additional data has built up afterward that we're eager to share later this year; nonetheless, the NHL opportunity strikes us as a very compelling commercial prospect; when it comes to regulatory matters, we anticipate leveraging the newly released development, since we believe commercial approval could arrive considerably faster. Although this represents a smaller market, our drug appears to hold a distinct position that ought to generate enthusiasm at the FDA; we're aware it generates enthusiasm among clinicians.