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

Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analysts. Before we start, please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you are a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have from NextCure, Michael Richman, CEO; Steve Cobourn, CFO; and Tim Mayer, COO. Welcome, guys.

Thanks, Jeff.

So for those who may not be familiar with NextCure, can you provide an introduction?

Yes. Thanks, Jeff, and thanks, Morgan Stanley, for providing us the opportunity to present today. I thought prior to getting into the Q&A, we'd make a brief introduction based on the slides we've prepared to introduce NextCure. For those who may not be familiar with us, NextCure is focused on next-generation immunomedicines. The second slide is just our outline on forward-looking statements. But let me quickly jump to Slide 3, which highlights some of the ongoing activities at NextCure today. We'll discuss the 3 Ps: our pipeline, our platform and our people. We'll get into a little more detail on our pipeline, our lead program, NC318, is a [Audio Gap] S15 currently in Phase II clinical trials in cancer. Our second program, NC410, focuses on a unique pathway known as LAIR1, which impacts the extracellular matrix, and that program is currently in Phase I. And we also are -- just to point out, we're a fully integrated organization that can take novel targets that have been discovered here at NextCure and we can take it through our own independent manufacturing operation into clinical development. Our platform, we call FIND-IO, that's an acronym for Functional, Integrated NextCure Discovery in Immuno-Oncology. This is a screening platform that enables us to identify novel and functional targets that impact the immune system. And we're currently [Audio Gap] have a number of these targets in oncology. And the platform also has applications beyond in other therapeutic areas, such as autoimmunity. We have an experienced leadership team taking responsibility for advancing these programs. The company was founded by Dr. Lieping Chen, currently at Yale University and who discovered PD-L1. And we're building the company based on a very strong foundation of our immunology capabilities and tools. Advancing to Slide 4. This slide outlines our product development pipeline. We've touched on NC318, currently in Phase II clinical trials. And we'll be updating the community on that Phase II clinical trial by the end of this year. We're also planning on pursuing certain combination studies that are currently underway with respect to planning the implementation of such trials pending the outcome of our biomarker studies. NC410 is currently in Phase I. I'll tell you a little bit about that target and why we're so excited about it. And we also have multiple programs that are advancing through our discovery pipeline into the preclinical IND-enabling phases as well as our FIND-IO platform, where we're seeking the identification and validation of novel targets. So Slide 5, let me segue into NC318. This is a humanized monoclonal antibody, as I mentioned, targeting Siglec-15, which is uniquely expressed on both tumors and [Audio Gap] And it's this unique duality of expression that enables S15 to induce an immunosuppressive environment in the tumor microenvironment. And we're currently developing the monoclonal activity -- monoclonal antibody to alleviate this immunosuppression currently focused on a number of solid tumor indications, such as head and neck, triple-negative breast, lung and ovarian cancers. Slide 6 gives you a brief historical perspective of some of the data that we presented at SITC last year as part of the Phase I clinical trial for NC318. This was a dose escalation and safety and tolerability study. We enrolled 49 patients, 15 different tumor types, with a median of 3 prior therapies in these subjects. It was an all-comers trial. And during this study, we looked at safety, where we saw no DLTs through 800 mg. We saw 1 DLT at 1,600 mg, a grade 3 pneumonitis. And we also observed a number of immune-related adverse events common in looking at immunomodulators, such as diarrhea, rashes, vitiligo and arthralgias. Quite interesting, in that Phase I trial, we saw one confirmed response, one partial response and a number of stable disease. In particular, the CR and the PR patients were in the non-small cell lung cancer cohort. So based on that early Phase I data in lung cancer, we designed a Phase II Simon 2-stage study. And as of July 13, we were pursuing 4 tumor types, non-small cell lung cancer, ovarian, head and neck and triple-negative breast cancer. This was designed as a monotherapy study at our recommended Phase II dose of 400 mgs every 2 weeks. We selected these patients based on PD-L1 low scores, which we thought would enrich for S15 positivity. We required biopsies as part of the trial, and we're currently looking at S15 expression retrospectively [Audio Gap] program with respect to evaluating biomarkers. This summer, we reported some interim results. And based on the [Audio Gap] enrollment criteria, we decided not to advance non-small cell lung cancer and ovarian cancer to stage 2 of the Simon 2-stage trial. And this was based on not seeing any clinical responses. With that said, we did see 1 PR in head and neck, and that did advance to stage 2. We continue to enroll triple-negative breast cancer patients. And as I mentioned, S15 expression is currently being determined retrospectively, and we'll be providing an update on this Phase II trial by the end of the year, including biomarker data. Let me move into our second program, NC410, and I'm happy to say that in a little over 4 years, we've taken 2 novel proprietary first-in-class targets into the clinic. NC410 is a fusion protein that works through a novel decoy mechanism. It targets LAIR1, leukocyte-associated immunoglobulin-like receptor protein. And LAIR1 is expressed both on dendritic cells and T cells. And it's this expression combined with binding ligands known -- binding ligands such as collagen expressed on the tumor and C1q as part of the complement pathway, it creates an immunosuppressive environment by signaling through entering -- through LAIR1. And what we're currently doing is part of this Phase I safety tolerability study, we're looking at all-comers as part of this trial. Slide 9 gives a little bit of a brief background on the design of the study. This is a traditional 3 by 3 dose escalation study where we're looking at safety and tolerability, but we've also built in significant components with respect to evaluating a number of biomarkers. We're looking at different tumor types that [Technical Difficulty] LAIR1, and our goal is to deliver an update on the Phase I clinical trial in the second half of 2021. Slide 10 just briefly outlines the illustration describing our FIND-IO platform. This is quite unique in the industry today since it's based on looking at the entire human proteome and evaluating functional responses to the immune system. And we're currently evaluating almost over 10,000 genes in our library. We're able to evaluate different types of immune cells. And by looking at functional readouts, we can determine whether or not a given protein may have stimulatory or inhibitory activity on the immune system. So Slide 7 outlines our anticipated near term milestones. As briefly reported, NC318, we'll be reporting the clinical update on the Phase II monotherapy trial, and it's coupled with this biomarker data by the end of this year. We're evaluating a Phase II combination trial. NC410, we'll be reporting initial Phase I data in the second half of 2021, and we maintain an ongoing discovery effort with respect to identifying novel targets and validating those targets to advance into our pipeline. So in summary, NextCure is committed to addressing the unmet needs of patients with new solutions and new targets. We've taken a very focused approach on target discovery, translational research and advancing candidates through development and manufacturing. And you'll be hearing a lot about NC318 and NC410 and future candidates as we continue to advance the company. So thank you.

Great. Well, let's start with NC318. Previously, you indicated that Siglec-15 and PD-L1 have limited overlap. But more recently, you've seen signs that Siglec-15 and PD-L1 may be dynamic. Can you talk about what you have observed in humans? And what is your latest thinking?

Sure. Thanks, Jeff. It's a great question. So Siglec-15 has a unique expression profile based on being expressed both on the tumor and the infiltrating macrophages. Early on in our research, when we were looking at expression profiling, we noticed that there was this nonoverlapping expression between Siglec-15 and PD-L1, as you mentioned. And to date, that still holds out. What we found out when we were evaluating some of the biopsies in the Phase I trial, we noticed that there seemed to be some increased expression of PD-L1 in the pre-biopsies we had evaluated. And this becomes important because the criteria for enrollment in the Phase II trial was based on a PD-L1 low level of expression. But the testing was done on historic or archival tissue samples, which were PD-L1 low. When we reevaluated the PD-L1 expression profile on the pre-biopsies, we noticed that some of those PD-L1 levels had increased in those patients. Such an increase would kind of enrich for Siglec-15 low instead of Siglec-15 high patients. So what we determined at that time and reported in our ASCO poster was that there could be some dynamic nature in the changing of expression of PD-1 -- PD-L1 levels over time. With that said, we still believe, based on our historic data and even our current findings that there is a nonoverlapping expression of PD-L1 and Siglec-15. And now we're working through this dynamic change to make sure that we've developed the appropriate testing to select for S15-positive patients that we think will be most responsive to NC318 therapy.

Great. You touched upon this briefly but just -- I just wanted to clarify. So based on the early data on the Siglec-15 status, how are you thinking about targeting patients for NC318 going forward? Is low PD-L1 sufficient to enrich for likely responders?

Yes. We believe that's going to be an important component with respect to looking at low PD-L1 expressers, which we believe could enrich for S15 high. With that said, we've built a test based on a monoclonal antibody that specifically binds Siglec-15, and we've developed and validated an immunohistochemistry tool that now enables us to actually go into the biopsies and measure S15 expression. So we're currently in the process of validating that test, but that will be used moving forward in addition to looking at PD-L1 expression levels to give us greater certainty that a patient is expressing S15 as a screening tool prior to administering NC318.

Okay. And then for the Phase II trial, how are you thinking about the different tumor types?

Yes. So in the Phase II trial, we're currently looking at non-small cell lung cancer, ovarian, head and neck and triple-negative breast. As I mentioned in the interim results, we did not see clinical responses in the patients that we had administered in lung and ovarian. So those cohorts have been stopped. We did see a PR in head and neck, and we have advanced to the Simon 2-stage study. And we're still enrolling in triple-negative breast. So we're not ruling out either lung or ovarian at this time. But we -- what we're ruling in is the need for developing a test to select for those patients that we know are S15 positive. So as a reminder, when we designed the Phase II trial, we did, as you mentioned, look at PD-L1 low, and we were going to retrospectively look for S15 expression. And we're in the process of now evaluating those biopsies for both PD-L1 and S15 expression. And based on that data set, we hope that will provide us greater insight, but more importantly, a tool to then select patients moving forward that we think will be most responsive to NC318. And this would go beyond head and neck and triple-negative breast but even perhaps backtrack into lung and ovarian, if that made sense.

Yes. And you mentioned actually for head and neck that you saw one partial response and that you advanced it to the next stage. Are there any other factors or evidence that gives you confidence advancing head and neck? Just curious how you're thinking about that. And then maybe a kind of related tangential question, but how should we think about -- I know that you're not advancing lung. But how should we think about the CR and the PR that you did see?

Yes, it's a great question. So with respect to head and neck, I think what gives us some comfort is, in our preclinical studies, we were able to determine that S15 is expressed in head and neck cancer patients. So we know that it's a tumor type that does overexpress S15. So that gives us confidence that we could potentially see responses and certainly validates the PR that we've observed in the Phase II. Regarding the CR and the PR that we observed in the Phase I in lung cancer, we continue to believe those responses are indicative of what we might potentially see in lung cancer as we move forward if we could identify and select S15-positive patients.

And so just curious, are there any updates on those 2 responders in lung? Are they still receiving drug? Or will we hear any more updates on them in the future?

Yes. So as of ASCO, we did report that both the CR and the PR patient are still receiving drug. They're still doing quite well. And we will, as deemed appropriate, provide updates in our Phase II update towards the end of this year on those patients.

Okay. And you mentioned this in your prepared remarks at the beginning, that you're planning on providing an update in the fourth quarter. I guess, what should we expect from that update? And then should we expect to get an update in triple-negative breast as well?

Sure. So by the end of this year, we'll be providing an update on all patients that have been enrolled and treated in the Phase II study. We'll also -- and that will include, from a clinical perspective, both safety data and any clinical data we were to generate. Coupled with that, we'll be providing an extensive biomarker data set and analysis with respect to looking at blood in the periphery with respect to immunophenotyping, cytokines, chemokines. And then based on the pre-biopsies we took, as required in the Phase II, we'll be looking at providing expression data both on PD-L1 and Siglec-15.

And then what do you need to see in triple-negative breast to advance that to the next stage? Do you need to see a response or a certain number of responses?

Yes. So based on how the Simon 2-stage study is designed, there are certain number of patients that we enroll. And from a statistical perspective, we have to see a certain level of responses to advance to stage 2. So the way the study is currently designed, if we weren't able to see a response in triple-negative breast, we wouldn't advance that to stage 2.

Okay. And then maybe let's move on to NC410. Can you talk a little bit more about the preclinical data you've seen? And what gives you confidence in LAIR1 as a target?

Yes. So LAIR1 is becoming a very excited target -- exciting target. LAIR stands for leukocyte-associated immunoglobulin-like receptor 1. It's expressed on T cells and dendritic cells and quite uniquely binds to 1 of 2 ligands. It binds to monomeric collagen expressed on the tumor or alternatively can bind to C1q in the TME, which is part of the complement pathway. And it's through this signaling event of LAIR1 where you create this immunosuppressive environment, and this enables the tumor to grow. And what we've been able to demonstrate in our preclinical work is we can -- through developing NC410, we've been able to counteract that immunosuppression. So how does that work? Well, quite interesting, mother nature duplicated the LAIR1 gene somewhere through the evolutionary chain of events. And LAIR2 differs from LAIR1 in 2 respects. One is it's soluble, unlike LAIR1, which is membrane bound. But more importantly, it has higher affinity for both collagen and C1q. And what this enables you to do is then activate T cells and dendritic cells to restore immune function and to kill the tumor. So we've demonstrated preclinically in a lot of our in vitro testing that we can [Audio Gap] of immunosuppression and activate T cells. But I think more importantly, as what we've seen in vivo, both in monotherapy and in combination with PD-L1, where when NC410 is combined with -- in a number of these syngeneic tumor models or in combination with PD-L1, we're able to see a significant decrease in tumor burden and overall increase in survival. And I should add that NC410 is basically biomimicry at its best. It's basically a -- it's a dimer form of LAIR2. So it gives you now greater avidity and affinity for the ligands collagen and the C1q that enables you to activate the immune cells to restore immune function. And that's exactly what we've seen preclinically. And now most recently, we've just started the Phase I clinical trial.

Great. And yes, like, as you just mentioned, in July, you started that trial. How is enrollment going? And what should we look for when the data from the Phase I portion are announced in the second half of next year?

Yes. So we filed the IND earlier in the year. We got clearance from the FDA in actually less than 30 days. [Audio Gap] enrollment or initiation enrollment was fairly slow. So it's just starting to pick up. We're in the early stages of the dose escalation cohorts in the safety and tolerability study. But what we plan to present in the second half of next year will be a clinical update on those patients receiving NC410. We've also learned a lot through the NC318 process, and we'll be conducting a lot of biomarker work with respect to looking at tumors as well as the periphery and blood to look at those types of readouts that would be indicative of the mechanism of NC410 in patients.

Great. And then how are you thinking about which tumors to target in the Phase II portion? Or how will you make that decision?

Yes. So that's going to be based -- right now, we're looking at all-comers as part of the Phase I. So based on the data that we generate in various tumor types and based on the preclinical expression work that we've done looking at LAIR1, those will be the determinating factors on which tumor types we ultimately pursue and enroll in the Phase II study. So it's going to be a combination of our understanding of the expression of LAIR1 coupled with data that we read out from the trial itself. And then also, biomarkers may come into play with respect to understanding what tumor types we think will be most preferential in looking for NC410 responses.

Got you. Well, maybe one last question that -- in terms of partnerships. Earlier this year, Lilly ended the R&D collaboration. Did you ever get additional color on that decision? And then do you have plans to structure another similar partnership?

Yes. So obviously, very disappointing to lose a quality partner such as Eli Lilly, but we certainly understand -- understood the changes they were going through with their acquisition of Loxo and kind of the recalibration of their strategy with respect to moving in a different direction. With that said, we have not lost a beat with respect to our internal and ongoing effort on target discovery. The FIND-IO platform continues to advance quite nicely, where we've identified a number of novel targets that are now going through the validation phase, and we believe could potentially be very important additions to our pipeline moving forward. With respect to business development, that's always kind of in our DNA here at NextCure. We're always open and willing and being opportunistic to the right types of partnerships that would enable us to accelerate and advance our pipeline and/or discovery effort. So moving forward, I think business development will certainly be a very important component in building the company.

Well, great. Well, thanks so much for your time, everyone. I really appreciate it.

Thank you very much, Jeff.

All right. Have a great day.

Thank you. You too.