NextCure, Inc. (NXTC) Earnings Call Transcript & Summary

Hey, Hello, everyone. Welcome to day 3 of the 2020 Bank of America Health Care Conference. My name is Alec Stranahan, and I am an analyst on the biopharma team here at BofA. This session with NextCure will last approximately 30 minutes and will include some prepared remarks and slides by the company, followed by some brief Q&A. If you are accessing the event through the Veracast platform, please note that you will be advancing the slides on your own, and you will have the option to submit questions at any time throughout the session. Your questions will be kept anonymous. And with that, it's my pleasure to introduce Dr. Timothy Mayer, Chief Operations Officer; and Steve Cobourn, Chief Financial Officer of NextCure. Tim and Steve, are you there?

Yes, we are. All right. Thank you.

Perfect. Great. We'll -- Tim, I'll turn the floor over to you, and then once you're done, we can jump into questions at this time.

Great. Thank you very much, Alec. I would like to thank BofA Securities for the invitation and the opportunity to present today. And again, to Alec for hosting this session. Slide 2 is our forward-looking statement. Slide 3. I'd like to start by saying that NextCure is focused on discovering and developing next-generation immunomedicines to treat cancer and other immune-mediated diseases by restoring normal immune function. Today, I'll start by presenting our recent highlights, which are summarized in the 3 Ps, the pipeline, the platform and the people. Our lead program, NC318 is a novel humanized monoclonal antibody that recognizes Siglec-15 or S15, as we call it. We will come back to this, but we [Audio Gap] Phase I data at the SITC Conference last November, where we reported single-agent activity. The program is currently in Phase II. Our second program, NC410, focuses on the LAIR pathway to restore immune function. We filed an IND last quarter and have received FDA clearance for clinical studies. Quite uniquely for a young company, we also have our own GMP manufacturing facility to support further development of our pipeline. Currently, we are working at the 1,000-liter level. The next P is our discovery platform, which we call FIND-IO, an acronym for Functional, Integrated, NextCure Discovery in Immuno-Oncology. We are identifying and validating novel cancer targets that modulate immune cell activity. The platform has versatility that can also be leveraged to identify targets for autoimmune diseases. And finally, we have an experienced leadership team with considerable experience in building companies around novel drug candidates. We have a multiyear collaboration with our founder, Dr. Lieping Chen at Yale University, who used an early form of FIND-IO to previously discover PD-L1 and more recently to discover the immunomodulatory properties of Siglec-15. Moving on to Slide 4. NextCure's vision is to focus on novel targets and new biology to address the unmet medical needs of patients, including those patients not responding to current therapies, those patients who progress while on current therapies and those patients with indications where there are limited or no existing treatment. Basically, we need new solutions. At NextCure, we are applying state-of-the-art immunology tools to arrive at new therapeutic options, which provide positive clinical responses to ultimately improve the quality of people's lives. On Slide 5, you'll see our pipeline, which has been created in a little bit more than 4 years. I will walk you through our lead program, NC318, targeting S15 and its impact on T cells and macrophages. It also has nonoverlapping expression with PD-L1 opening the opportunity to address nonresponders. It is currently in Phase II. Given the enrollment slowdown due to the COVID-19 pandemic, initial data from the Phase II portion of the Phase I/II monotherapy trial is expected to be delayed. We will continue to support ongoing activities for patients enrolled in the trial, and we will work with our clinical sites to enroll new patients as appropriate. We are also planning a combination study with standard-of-care chemotherapies in non-small cell lung cancer patients. Due to the COVID-19 pandemic, we have decided to temporarily delay starting the combination until matters improve. However, we look forward to starting that trial. Our second program, NC410, a novel fusion protein intervenes in the LAIR pathway and stimulates T cells and dendritic cells to restore immune function. We filed an IND in the first quarter of 2020. We received FDA clearance for clinical studies, and we're prepared to start the Phase I portion of a Phase I/II clinical trial in March. However, due to the COVID-19 pandemic, we have decided to temporarily delay initiating the trial. We also have additional programs advancing through the pipeline. And finally, we are leveraging FIND-IO to identify future programs in oncology. I should highlight that we retain full global rights to all of our pipeline candidates. On Slide 6, NC318 targets Siglec-15, which has a duality of expression on both tumor cells and M2 macrophages. Functionally, it blocks S15-induced immunosuppression. The program is currently in the Phase II part of a Phase I trial in multiple indications. Slide 7. A few basic facts about Siglec-15. First, it has a unique expression profile, being expressed on both tumor cells as well as M2 macrophages. It potently suppresses T cell function. And finally, we've observed nonoverlapping expression with PD-L1, opening the opportunity to treat patients not likely to respond to PD-1, PD-L1 therapies. Slide 8. Before sharing clinical data, I'd like to first walk through our understanding of the mechanism of action. S15 is expressed on tumor cells and M2 macrophages where it induces a distinct class of highly suppressive myeloid cells. This distinct population of suppressive myeloid cells increases pro-inflammatory and pro-tumorigenic cytokines to further promote immune suppression. On Slide 9, we show how NC318 counteracts S15-mediated immune suppression by stopping the differentiation of the suppressive myeloid cells, decreasing the pro-inflammatory and pro-tumorigenic cytokines and most importantly, promoting T cell proliferation and restoring immune function. On Slide 10, we show some preclinical data supporting the mechanism of action cartoons. We just reviewed with respect to inhibiting myeloid cells in the top row, decreasing pro-inflammatory, pro-tumorigenic cytokines like IL-1beta, IL-6 and TNF-alpha in the middle row and most importantly, promoting T cell proliferation and interferon-gamma production to kill tumor cells in the bottom row. Moving on to Slide 11. We presented our Phase I data at the SITC conference in November of 2019. I will review the enrollment, safety and observed responses as of that date. We enrolled 49 patients, including 15 tumor types with patients being heavily pretreated. The trial included all-comers in this dose-escalation, safety and tolerability study. From a safety perspective, we observed no DLTs through 800 milligrams and 1 grade-3 pneumonitis at 1,600 milligrams. We also observed multiple immune-related adverse events, often seen with other immune modulators, such as diarrhea, rashes, vitiligo and arthralgias. There are also 2 patients with grade-3 pneumonitis and 1 patient with a grade-3 [Audio Gap] These are not normally seen as part of the normal course of disease and are unique immune-related adverse events only seen with approved IO therapies. So we believe this [Audio Gap] effect NC318 has on the immune system. From an efficacy perspective, we observed 1 complete response, 1 partial response and 14 stable diseases. As shown on Slide 12, this is a swimmer plot and was presented at the SITC conference to show the various tumor types, the different dose cohorts and the durability of responses. Most of these patients were very heavily pretreated. And as reported at SITC, 1 patient demonstrated a complete response and was still on study beyond 55 weeks. One patient demonstrated a partial response and was still on study at 28 weeks, and 14 patients had stable disease for greater than 16 weeks. I should highlight that about 25% of the patients in this Phase I study had non-small cell lung cancer patients. As shown on Slide 13, this is a more focused swimmer plot that highlights the non-small cell lung cancer patients, all of whom failed prior PD-1 and PD-L1 therapies. Our observed complete response, partial response and 1/3 of our stable disease patients were all non-small cell lung cancer patients. The main highlight here is that we observed single-agent activity for NC318 in highly pretreated patients, which appears to be durable in multiple cases. Moving on to Slide 14. Here we show scans from the complete response, the partial response and patients at 16 -- I'm sorry, the CR and PR patients at 16 weeks. Our CR patient was a 56-year-old non-small cell lung cancer patient with multiple lesions. Her PD-L1 TPS score was less than 50%. She was enrolled in the 8-milligram cohort. Her prior therapies included 3 rounds of chemotherapy and a round of nivolumab, where her best response was stable disease, then progression. She had 2 target lesions measuring 10 millimeters each and multiple nontarget lesions, including a lytic bone lesion. All target and nontarget lesions were gone by 6 months. Our PR patient was a 74-year-old non-small cell lung cancer patient. His PD-L1 TPS score was less than 50%. He was enrolled in the 400-milligram dose cohort and his last prior therapy included a combination of LAG-3 and PD-1, where his best response was stable disease, then progression. He had larger target lesions measuring about 2.5 centimeters each at baseline. At 16 weeks, 1 of the lesions was gone and the other lesion was reduced by approximately 70%. On Slide 15, a few words regarding our ongoing Phase II monotherapy study, which was initiated last fall. We are pursuing 4 tumor types, non-small cell lung cancer, ovarian cancer, triple-negative breast cancer and head and neck cancer, all of which were shown to express S15 in our preclinical IHC studies. The recommended Phase II dose is 400 milligrams. We will be collecting screening and on-treatment biopsies and enrolling patients with a PD-L1 TPS score of less than 50%. S15 expression will be evaluated retrospectively as well as other biomarkers. Given the enrollment slowdown due to the COVID-19 pandemic, initial data from the Phase II portion of the Phase I/II monotherapies trial is expected to be delayed. However, we will continue to support ongoing activities for patients enrolled in the trial, and we'll work with our clinical sites to enroll new patients as appropriately. Moving on to Slide 16, I'd like to segue into our second program, NC410. This is a human IgG1 fusion protein that acts as a decoy in the LAIR pathway to prevent immunosuppression and activate T cells and dendritic cells to restore immune function. We filed an IND in Q1 of 2020, received FDA clearance for clinical studies, and we're prepared to start the Phase I portion of a Phase I/II clinical trial in March. However, due to the COVID-19 pandemic, we have decided to temporarily delay initiating the trial. On Slide 17, LAIR1 is a membrane-bound receptor expressed on T cells and dendritic cells and binds to either collagen, expressed on the tumor or C1q, which is part of the complement pathway, such effects inhibit immune function. Quite interestingly, mother nature, somewhere along the way, created a gene duplication with about 70% homology, which we call LAIR2. LAIR2 differs in 2 respects when compared to LAIR. First, it's soluble; and second, it has a higher affinity for the collagen in C1q ligand compared to LAIR1. Hence, LAIR2 acts as a decoy to restore immune function. Basically, LAIR2 modulates LAIR1-mediated immune inhibition to activate T cells and dendritic cells to restore normal immune function. On Slide 18, at NextCure, we took full advantage of what mother nature created to develop a bio-mimic of LAIR2, which we call NC410. This molecule is dimeric and provides greater avidity and affinity to block LAIR1-mediated immune suppression and activate T cells and dendritic cells to restore normal immune function. On Slide 19, we show some brief data to support the proposed mechanism where we demonstrate in the left panel, the ability to block immune suppression of T cells in a dose-dependent manner and in the right panel an in vivo model that demonstrates antitumor activity also in a dose-dependent manner. As summarized on Slide 20, NC410 promotes T cell function and dendritic cell activity. IND-enabling studies are complete, clinical material is in inventory, the IND has been filed, and we received FDA clearance for clinical studies. We have temporarily delayed initiation of the Phase I trial until matters improve and look forward to starting this trial. Finally, on Slide 21, let me describe our powerful discovery engine we call FIND-IO, Functional, Integrated, NextCure Discovery in Immuno-Oncology. We use a cube as a representation to outline the various elements associated with our platform. First, we have our gene libraries, now representing over 9,000 membrane expressed and soluble proteins. Next, we have various cell types that we can evaluate in our screens. In the case of cancer, we can take a look at cell lines, lymphoid cells, myeloid cells and other cell types. Finally and most importantly are the functional readouts we observed through our discovery screen, which provides important insight in defining novel targets that impact immune system activity. On Slide 22, this is the methodology describing our system, which entails individually transfecting each library gene into a host cell, which then expresses the protein on the surface of the cell. We combine the transfected cell expressing the single gene with an immune cell that has been engineered with a reporter gene linked to a fluorometric tag, such as green fluorescent protein, or GFP. This enables us to measure and quantitate signaling activity. In addition, we have incorporated red fluorescent protein, or RFP, into the transfected cells to measure bidirectional effects. Moving on to Slide 23. In our labs, our scientists can measure the GFP expression over background, as shown here on the right. Those proteins displaying an increase in GFP readout may indicate a stimulatory effect on the immune system. Conversely, decreased GFP expression might indicate a co-inhibitory function. On the left, we call this our cloud. In a single experiment, we can map each dot representing a known protein in our library. And with this, we can look at outliers and comparisons to controls to select genes which could impact immune function. Once we do this, we put the gene through what we call the 3 Rs, reproducibility of our findings; robustness with additional functional validation; and finally, relevancy as it relates to specific cancer types. On Slide 24, we show our anticipated near-term milestones. So moving forward, the NC318 is the initiation of a combo study with standard of care chemotherapies in non-small cell lung cancer, which, again, we've decided to temporarily delay until matters improve. In addition, given enrollment slowdown, the reporting of initial data from the Phase II monotherapy study is expected to be delayed. Initiation of our NC410 Phase I clinical trial, again, has -- we have temporarily decided to delay until matters improve. And last, we'll continue identification and validation of novel targets to build our pipeline. And in summary, on Slide 25, I hope I've provided an update on our focused immunology approach to develop novel, first-in-class candidates. We have significant momentum, an innovative platform and an experienced team to deliver on our objectives and provide future deliverables to help patients. Thank you.

Okay. Perfect. Thanks, Tim.

So we've got maybe 10 minutes for some questions. And again, if anyone on the line would like to weigh in with a question that they have, there is a function to do that through the Veracast platform. So maybe just to start, I think many who are following your story are eagerly awaiting the publication of the NC318 biomarker abstract at ASCO this evening. I understand there are embargo policies in place, but what should we expect? And I guess, what shouldn't we expect in terms of contents of the poster? I recall that you were not able to get both pre- and post-treatment biopsies from all patients on the study, particularly the patients that enrolled earlier in the study. So any color on the extent of the biopsy information you will have? And also the average number of blood draws we could expect would be great?

Yes. Great. Thanks, Alec. So as we've said in the past, we've collected some biopsy samples, both screening and on treatment for patients that were enrolled in the Phase I trial. And those samples have been analyzed for both Siglec-15 expression as well as PD-L1 expression. So to the extent we have biopsies, we'll be able to report on the status of the S15 and PD-L1 markers. In addition, we've collected a lot of blood samples at various time points through the course of treatment and those blood samples, again we've said are being analyzed from an immunophenotyping analysis. We're looking at cytokine expression profiles through the course of treatment. We're looking at TCR clonal analysis to see how the T cell receptors change through the course of treatment. So that's the types of data that are expected to be reported.

Perfect. And then which of the biomarkers that you highlighted, do you think are the most interesting to look at in the context of correlations drawn to individual patient responses to NC318? Or should we really be waiting for the Phase II study to read out for a more comprehensive view?

Yes, Alec, again, that's a great question. And again, I'll remind listeners that this is a Phase I study that was designed to assess safety and tolerability. We enrolled all-comers into that trial, and it was not stratified or patients were not selected based on PD-L1, S15 or anything else, it was all-comers. So I think the most interesting biomarker data, I would reserve for a Phase II readout. I think this will show some interesting snippets of biomarkers in the Phase I population. But again, I would caution about drawing conclusions based on NC318 treatment given the fact that it was multiple doses and all-comers in the trial.

Great. And last question on the Phase I. So at the time of the last data cut at SITC of last year, there were a few patients still continuing on NC318 that hadn't made it to the first 8-week check-in. Presumably, these patients have now exceeded this time point. And also many others on the Phase I may have updated outcomes and durability data available. So anything you can say on your plans for presentation of extended follow-up data would be great.

Okay. Again, we've said that this data update is really going to be focused on the biomarker readout of the patients in the Phase I trial. So that's really going to be the focus of the poster and the data presentation.

Okay. And then turning to the Phase II. So you've highlighted the COVID-19 impact to your clinical studies and data release time lines, which is really something all of the companies we cover, regardless of their size, are being faced with currently. So given that the Phase II portion of the NC318 study began enrolling patients in October of last year, how much of the study would you say has accrued prior to the COVID-19 crisis? And what about the Phase II trial design may sort of better your chances of seeing a response?

Yes. So just as general matter of policy, we don't comment specifically on the enrollment status other than to say before the COVID-19 pandemic, enrollment was accruing at rates that were largely expected for the time frame. Now again, we saw a slowdown in the enrollment due to the COVID pandemic. So I'll refrain from giving specific numbers as far as enrollment status is concerned. And to your second part of that question about Phase II trial design, again, what we announced at SITC last year is that we were moving forward with the 400-milligram dose. We would be enrolling patients with a PD-L1 TPS score of less than 50% and looking at Siglec-15 expression retrospectively as well as other biomarkers. And again, this is a monotherapy study moving forward in those 4 dose cohorts.

Okay. And then would you say that the delay in the timing of the readout of the study is sort of step-wise with the COVID crisis? For example, for every additional month that the COVID pandemic is an issue, we should tack maybe a month onto the 4Q readout that was guided previously? Or is enrollment going to be a bit slower to start back up once things subside? And is there a chance that the study could maybe have longer follow-up data for the patients that have enrolled previously?

Yes, again, so we have not provided any specific guidance on a delay from a timing perspective due to the COVID pandemic other than to say that the Phase II data are expected to be delayed. Now with that said, we have 5 sites in our Phase II study, and they're located at various geographical regions around the United States. And we're working very closely with each one of our sites to provide the best care for the patients that are currently on study and enrolling new patients where appropriate. And again, we'll work hand-in-hand with our sites for the -- getting past this COVID pandemic and ramping back up.

Okay. So looking more broadly to your early pipelines, what kind of preclinical activities are still going on for the additional target discovery and drug candidate selection?

Yes. So from a preclinical pipeline perspective, again, as we walk through in the discovery portion of the presentation when we identify a target out of the library, we walk through the 3 Rs, and that's reproducing our findings, really finding the robustness of the data set and then, of course, looking at relevancy and moving on to looking more at the mechanism of action of a particular pathway and then working on the biology from there.

Okay. And on the COVID-19 pandemic, I know it's a very fluid situation, but in your current guidance, it isn't entirely clear when we might expect trial starts for NC410 or NC318 plus chemo. So I understand that this is a very fluid situation. I'm sure you're assessing this with your clinical partners almost daily. So -- but could you outline the gating around when you'd feel comfortable beginning these studies?

Yes. We've not provided any specific guidance on gating requirements are required. Suffice to say that we are working very closely to look at both initiating and opening the NC410 Phase I study as well as the NC318 combination study.

Okay. And then maybe lastly, turning to the FIND platform. So could you detail for us progress that's being made for the FIND platform, not just in IO, but also in neuro and autoimmunity? And since you ended 1Q with over $300 million in cash and equivalents, additional capital requirements maybe aren't as pressing for you as it is for some of your peers, but do you see areas of your platform that you would like to seek additional partnership to drive forward? And I guess, along those lines, what is your overall BD strategy in 2020?

Yes. So from the FIND platforms, again, as we outlined, the platform is very versatile and to looking at not only immuno-oncology indications, but the other end of the immune spectrum from an autoimmune or inflammatory disease perspective as well as looking outside of that and where -- into spaces where immunology intersects with other discipline, for example, neuroinflammation. So it's an area that we're very interested in looking at the platform from those perspectives. As far as our BD strategy, we don't provide comments on looking at our strategy other than to say that we have a very proactive group, and we remain poised to be opportunistic to look for the right partnership at the right time to initiate a collaboration.

Perfect. Thank you. Unfortunately, I think that's all the time we have. So we'll have to leave it there. But we wanted to thank you for the comprehensive overview of your business and for taking the time to participate in our conference.

Great. Thank you very much, Alec.

All right. Great. Thanks, Steve, Tim. And thank you to those on the line for your interest. Take care.