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

Everyone, welcome to day 1 of the 2022 Bank of America Healthcare Conference, and thank you for joining this session with NextCure. My name is Alec Stranahan. I'm Vice President and senior biotech analysts covering NextCure at BofA. It's my pleasure to be joined by Michael Richman, President and CEO of NextCure. And I believe Michael is going to run through some slides upfront to get started, and then we'll go into Q&A after that. So with that, Michael, over to you.

Thank you very much, Alec, and it's a real pleasure to be here. I'd like to thank BofA for the opportunity to present NextCure. NextCure is a company in Beltsville, Maryland. We're celebrating a little over 6 years at really building a fully-integrated organization focused on next-generation immunomedicines is our forward-looking statement. I always like to start with this slide. This is our 3 Ps where really sets the stage for how we're building NextCure. We will walk through today quickly is our pipeline, and the progress we've made. This is a newsworthy year for us since we have 4 ongoing clinical trials and a fifth based on an IND, we'll be filing later this year. I'll walk you through our 2 Phase II studies, both in monotherapy and in combination for NC318. We've got 2 Phase I studies that will also be updated second half of this year, outlining the safety and clinical effects we've observed as well as our plans for moving forward into a Phase II. And then also our fourth program, which will be our fourth IND pretty much in a 6.5-year period focused on an anti-LAIR1 antibody, and we'll be entering the clinic later this year in AML. Beyond the pipeline, as I mentioned, we're fully integrated. So we have a platform that really sets the stage for building an IND engine and sustainability and value creation for the organization moving forward. We've also spent a lot of time modifying how we're developing products and how we're differentiating our candidates, which are novel first-in-class and proprietary in this very competitive immuno-oncology space. And this really focuses on patient selection making sure that we're identifying those subjects that we believe will be most responsive to our therapy. We've invested quite heavily in biomarkers looking at critical reagents, assays and analytics that really supports the mechanistic studies that we're observing in patients and the correlative effects that we'll see in clinical responses. And we're also extensively looking at combination therapies that we think will synergize with our targets moving forward. We have a discovery platform, we call it FIND-IO. It basically walks through the entire human proteome looking at those proteins that either stimulate or suppress the immune system. And then finally, the third P, people. We have an experienced team. We've been doing this a long time. We've navigated through troubled waters such as today's economy and we really feel very confident in the programs that we're advancing. We have a lot of significant momentum, and I'll talk a little bit about some of the milestones that we'll be hitting this year. NC318, NC410 and NC762. All of those programs are -- the stage has been set for updates on those programs second half of this year. The pipeline continues to build momentum. As I mentioned, we have an experienced team. And as of last quarter, we have about $201 million on the balance sheet, which provides more than enough runway to execute on our plan and to advance these programs forward. This is our pipeline slide. I'll walk quickly through each of the programs. But more importantly, let me kind of just point you to the box on the right. The box on the right really outlines the second half of this year as it relates to providing an update on our lead program, NC318, both in a monotherapy setting and in a combo setting. We'll provide an update on our plans moving forward for NC410 also second half of this year. Similarly, NC762 also will be updated this year. And then finally, we'll be providing an IND on our fourth program, fourth quarter of this year. As I've just pointed out that we own worldwide rights to all of our programs. So it sets the stage for not only with respect to building a valuable pipeline of partnership opportunities. So let me tell you a little bit about NC318. This target is Siglec-15. S15 is expressed both on tumors and on macrophages. It creates an immunosuppressive environment that allows the tumor to grow. And what we've done in the case of NC318 is to develop a novel antibody that shuts down that immunosuppression and allows the T cells to be activated to kill the tumor. Currently, we're in a Phase II study looking at lung, breast and head and neck cancer. We've demonstrated important evidence of disease control based on the Phase I and Phase II studies we've done to date. And now we're moving forward in selecting patients using a novel CLIA-validated immunohistochemistry test that selects for those patients that are S15 positive, and that we think will be most responsive to therapy. Our second program, NC410, is really kind of a paradigmatic shift. This particular protein focuses on LAIR2. LAIR2 is a fusion protein. It acts as a natural decoy to activate the immune system. So mother nature is already headed at this particular target. What we've done in creating NC410 is create a bio-mimic of the LAIR2 fusion, which enables us to activate T cells and restore immune function. And this particular candidate basically binds collagen within the ECM, not through equity capital markets, our extracellular matrix. And by remodeling collagen within the ECM, we're actually changing the architecture of the tumor. So why is that important? We're changing the architecture of the tumor. It allows the T cells to come in, attack the tumor, kill it -- to restore immune function. And we've presented a lot of the initial clinical data at SITC last year, also with respect to a lot of biomarker data. Our third program, NC762, is a humanized monoclonal antibody against B7-H4. This is a co-inhibitory molecule overexpressed on many different tumor types. In particular, you see it in gynecological cancers like breast and ovarian cancer. We're working our way through the Phase I dose escalation studies, and we'll also be providing an update on this unique mechanism of action of this molecule later this year. And then finally, our fourth program, NC525. We've learned a lot about the layer pathway in the context of NC410. This is an antibody targeting LAIR1. This is a diversification away from solid tumors into the hematological malignancy space, and we'll be taking this program forward and looking at AML. So just wanted to give you that -- some of those brief comments and a highlight with respect to the pipeline and the 4 assets that we're currently pursuing. We have a discovery pipeline supporting that coming behind that. And then finally, I should add, are being fully integrated. We have our own GMP manufacturing facility. So we have 2,000 liters of scale. So while many companies are looking to outsource to CDMOs, all the clinical trials that we're pursuing today are being supported by clinical material manufactured at NextCure. So thank you for listening. And Alec, I'll turn it back to you.

All right. Thanks for that intro, Michael. So we'll jump into the Q&A now. And obviously, a lot going on in the pipeline.

So maybe we can just start with NC318 since that's been your lead asset. And we saw some early responses in the Phase I unselected population, obviously. And I guess the Phase II is continuing to enroll. Can you maybe talk about the S15 patient selection? Has this been implemented? And is this really your go-forward program -- or go-forward approach not only for NC318, but also for your other programs as well?

Yes. Great question. So we've learned a lot. We've been in this business a long time, and we have to get 3 things right as a company. We have to get the target right, the candidate whether it's an antibody or fusion protein. I think just as importantly, the patients, we have to go into the right patients that we think will be most responsive. So yes, we have developed a CLIA-validated immunohistochemistry test that recognized as Siglec-15 on biopsies from patients. And what we've learned from our 49-person Phase I study and our 47-person Phase II study was that we seem to be having an effect on looking at disease control. And what we're trying to do in the case of this amended Phase II is kind of acts as a tipping point to advance those programs or advance those patients into more formal responses. So with the redesign study now is we're selecting patients based on biopsies that they've provided with consent. They go through a central lab where we do the immunohistochemistry testing, and those that are S15 positive, will now be included in the study and will be treated with NC318. To your question, yes, we're taking those learnings as a young company. We're always learning. So we're taking that information and we're applying it to NC410, where we've also developed a test that's been CLIA-validated. We'll be able to select for those patients of expressing LAIR1. And then similarly, in our third program, NC762, we're also developing a similar immunohistochemistry test. With that said, is we're also developing extensive biomarker tools that will enable us to get a better understanding of how these drugs are functioning on patients.

Right, right. And one of the unfortunate downsides, I guess, of being a trailblazer with unique targets is that sometimes you need to make your own assays for detecting those proteins. So just sort of walk us through maybe the challenges of building this out in-house? And are you going to become a diagnostic company at some point?

Yes, great question. So we've invested quite heavily in bioanalytical tools as well as biomarkers. So we -- by having our own manufacturing, we develop all the critical reagents. We spend about -- we -- let's see, generate about 100 different proteins a year. So we generate reagents. We develop the assays and now we're building all the analytics. And the analytics become important because we could cross-fertilize data sets from each of our clinical trials within given tumor type. So we're learning a lot. I don't think we'll be going into the diagnostic world. But certainly, some of these assays may have applications not only in diagnosing disease, but actually monitoring disease. So when we start looking at modulating the immune system, we can look at maintenance therapy and some of these assays that we develop may play into that. We're now in the process. I think it comes on in August, our GMP Lab. And so usually, when samples are taken from patients, they're sent to a central lab. They do the tests based on what we've created, and they send us the data. The problem with that is we've already enrolled a lot of patients. So the biomarker data is always trailing. So what we're doing now, we're constantly modifying how we're doing product development. So now the samples will come directly from the sites after they come out from the patients. They'll be sent to NextCure. We have the test available. We'll run the test, we'll do the analytics and then they'll just walk down the hall to the clinical group and provide them that data in real time. So we're going to get pharmacokinetic data in real time, pharmacodynamic data in real time, biomarker data in real time. And all that plays into really helping the clinicians adapt their trial into going into the right patients in the right way. So it's been -- yes, it's been a real kind of learning curve at a very short period of time.

Right, right. And then I guess in terms of S15 expression, you'll be selecting patients based on the baseline expression. Is your expectation that expression could change following therapy? And I guess, how would you monitor that and address it?

Yes. So I think just looking at expression and gene regulation, these targets are constantly changing. It is a dynamic process, as we've seen in the case of PD-L1 and PD-1. I'm not sure we have enough data with respect to changes of expression of S15. Those individuals that have responded, no longer express S15. So they've been taken out of the equation. But I do believe by detecting at least S15 on the tumor and also the infiltrating macrophages, we could come up with certain -- an understanding of expression levels within a given tumor type. Over time, we'll be able to correlate that, hopefully, with responses and we'll also be able to evaluate the dynamic changes, if any.

Right. And you're preemptively addressing those through your combos too, right?

Exactly. Yes. So the NC318, you're right, we're doing a combination study in collaboration with our founding institution at Yale University. This is in lung cancer, where they're combining NC318 with Keytruda. Merck is kindly providing the drug free of charge, which is good for a biotech company. So that study is currently enrolling. We're working very closely with them to determine whether or not there are certain synergistic effects with NC318 and Keytruda. And while we're looking at the combination, what's important to note is that we're not treating at the same time. So we're now looking at NC318 weekly and then every 3 weeks, the patients will get Keytruda. And that provides a real important insight into understanding not just an immune target for the immune system. And it is a sequence of events in the system on what needs to be triggered first and what needs to be triggered second. So in our combination studies, we're spending a lot of time not just throwing 2 things together. We're really understanding the immunological effects of what needs to come first. So we're learning a lot through that process.

Are you going to -- I guess, what sort of resolution in the study do you get in terms of monitoring the patient? Is it weekly? Or is it every 3 weeks when they get Keytruda?

Yes. So in this particular case, obviously, these patients are always being monitored based on samples that we collect. Sometimes it's weekly as we continue to treat progressives. In the combination, we're taking more samples more frequently because of that separation and dosing.

Right, right. Very exciting. Looking forward to seeing that data as well.

Me too.

Better this year. Exactly. Exactly. Well, maybe we can move on to 410. This is your LAIR1 targeted therapy. Could you maybe talk about LAIR1, its involvement in ECM and your preclinical observations sort of supporting its activity?

Yes. So LAIR1 is a really exciting molecule. And it's expressed on T cells and other myeloid cells. And it finds predominantly collagen within the tumor, which makes us someone unique in its profile. But what happens somewhere along the way, mother nature duplicated the LAIR1 gene called LAIR2. And this is only found in higher human primates. So you don't find in a lot of other animals. So it's a very high order of modulating the immune system. And what LAIR2 does is it acts as a natural decoy to bind collagen and to shut down that immunosuppressive environment. So in other words, it's activating the T cells. So what we've done in NextCure is just copy what mother nature has already given us. We created a bio-mimic of LAIR2. We've figured if LAIR2 is good for the system, more LAIR2 would even be better. And this is exactly what's been played out in our preclinical studies and now what we're observing clinically. So in our preclinical studies, we actually can activate T cells. We can kill tumors. We've been fairly proactive on building biomarker tools to understand this mechanism of action. I think the most exciting data is the combination data that we've generated with Jeff Schlom's Group at NCI, the National Cancer Institute, where they've looked at bintra, which is a PD-L1 TGF-beta trap molecule. With NC410, they've also looked at it in context of just PD-L1. And you basically flatlined the tumor growth in mice. In fact, if you go back and challenge those mice, the tumors don't come back. And having been in this business for 15 years, very rarely do you see such an important effect. So what does that mean clinically? Well, we started the Phase I study and we updated the Phase I clinical trial, at least through the first fifth -- 5 dose cohorts at SITC last year. We've seen some stable disease in a small number of patients. But most importantly, it was the biomarker evaluations that we did. Alec. We looked at soluble LAIR1, soluble LAIR2, T cell cytokines, chemokines, et cetera. But what we saw was exactly what correlates with what we've observed preclinically where we're seeing a lot of changes in some of these biomarkers that we hope will ultimately correlate with disease. I think the most important finding was knowing that it binds collagen. In NC410 remodeling collagen, what happens to all that collagen? Well, it comes into the bloodstream as collagen degradation products, we call CDPs. And you could actually measure this in the blood. And in some of the early patients that we looked at, you can see this increased level of these collagen degradation products. So mechanistically, the drug is doing what we need to do. The challenge moving forward will be how we design the trial. Do we go on monotherapy? Do we go in combination studies? But the combination data has been pretty exquisite.

Right. Right. And I guess just level setting ahead of the next interim update, should we expect higher doses? Maybe a deeper look on the efficacy point as well.

Yes, it's a great question. So well, we're working our way through the dose escalation cohorts. We haven't hit that DLT or MTD, maximum tolerated dose. So we're probably going to be somewhere in the middle with respect to our dose selection. Currently, we're going every 2 weeks. We'll probably continue to stay with that. If we do a combination, we'll probably modulate what that regimen looks like. But the purpose of the update later this year will to talk about safety and, obviously, clinical observations we've made in the Phase I. But most importantly, that recommended Phase II dose what patients or tumor types we'll be embarking on and how we design the trial on the context ever, as either mono or combo study.

Right. I was going to ask you, does the Phase II portion already include a combo arm? Or is that something you may add post?

Yes, of course, again, we're learning a lot. In the old days, we would just do a Phase I monotherapy and then we would kind of segue into a combination study. Because of the preclinical data being so strong in the case of NC410 and PD-L1, we may kind of jump the gun a little bit and maybe start with the combo and then add in a model arm later on. So we're changing our thinking a little bit, and this is being driven, first and foremost, by the science; second, the clinical data that we're generating; and then third, probably the balance sheet, where do we want to basically invest to get the maximum effect in outcomes for the program in the patients.

Right. Right. And your pipeline is expanding as well. You recently added 525 for AML. So maybe we can transition there since it's another layer targeted therapy. I guess could you just walk us through the mechanism of NC525? I think one unique aspect is that it can spare the more stem-like cells of the hematopoietic system. So is the thought that LAIR1 is primarily expressed on the LSC and is that -- did that go into your design remarkably?

Yes. So this is, again, through our knowledge and the building and know-how of understanding the LAIR1, LAIR2 pathway. It was quite a surprise when we started looking at hematological malignancies and the expression profile of LAIR1. And as you mentioned, you see it highly expressed on blast cells and leukemic stem cells. But through a lot of the animal studies, we've looked at certain CDX models, PDX models and quite surprisingly and promising is we could kill those blast and leukemic stem cells and, like you said, preserve the hematopoietic stem and progenitor cells. So that's really exciting. That's one of those programs, the data just keeps getting better and better. Lots of times, you're doing experiments and you're generating more and more questions and trying to get some understanding of the answers. But we're really excited about this program. In fact, it's -- the candidates already in the 200-liter bioreactor. I think it's going into a 1,000-liter bioreactor. I think later this week, so that sets the stage for producing clinical material that will support the Phase I that will be started either at the end of this year, beginning of next year.

And I guess, what's left to the IND filing? Is it just getting the manufacturing to a good level to support the clinical study? Or are there some other preclinical experiments you want to do?

Yes. So it's usually -- why is it take so long to get into patients? It's usually the tox studies. The tox studies are pretty straightforward with respect to rodent and nonhuman primate studies. The challenge comes in is all the report writing. I think toxicologists maybe take a little bit extra time to write the disease reports, but it takes a long time. But the IND is currently being drafted. We've got the clinical section that's being put together. We've got the CMC section that is coming together as we manufacture. And then obviously, the tox component, which is always kind of somewhat of the last item to check off on the critical path. But so far, all is good.

Great. Great. And we're flying through the pipeline. So let's do NC762 next, additional data, clinical data back half of this year, right? What can we expect sort of around the scope of that data?

Yes. So NC762 is our anti-B7-H4 program. And so this is a traditional 3x3 Phase I safety and tolerability design study. So we'll be reporting on all the dose cohorts. We may backfill some of the dose cohorts, if we want to generate some additional safety or more meaningful information. So we'll provide an update on the demographics, safety, tolerability, any clinical outcomes that we observe and then some biomarker studies and will probably be included in that data set. And then most importantly, the plan is moving forward into Phase II as we kind of advance into some of the gynecological tumor types.

Okay. That was going to be my next question. In terms of the literature, your preclinical work, B7-H4 as a target, are there any tumors that sort of jump out as maybe being more amenable?

Yes. So it's expressed on a lot of different tumor types, but at different levels. If you look at it in the context of ovarian cancer, it's like 90% is just really, really high. Breast cancer is high. Fallopian tube cancer is high. Even in looking at prostate cancer. So maybe some of hormonal related. We're still learning about that. But it's in lung cancer and all the other tumor types. So in the Phase I, we're looking at a whole basket of indications. But as we always do, as we advance in the Phase II, we'll probably take maybe 3 or 4 of those indications. And I think ovarian and lung will probably be at the top of the list.

Okay. Just on the balance of expression and then addressable market probably, right?

Exactly. Correct. Correct.

Got it. Got it. And obviously, B7-H4 has been implicated in other disease areas outside of oncology as well. And I think the FIND-IO platform, you've always had sort of a lens to applying your target discovery to indications outside of oncology. Would there be any plan to take 762 or another asset to say autoimmunity or something, to say?

Yes. So we do have a discovery program, and we're always looking at the Yin-Yang of modulating the immune system. It's kind of like anti-CTLA-4 for cancer and CTLA for fusion proteins, Orencia for autoimmune disease. For B7-H4, we know it well. Our last company, we actually developed a B7-H4 fusion protein. We actually took it into the clinic in RA. But when the company got sold, unfortunately, the program was kind of put on the back burner. But B7-H4 fusion protein makes a lot of sense. We're currently not pursuing it, but we looked at the opportunity, too. The preclinical data set for B7-H4 Ig was pretty phenomenal in diabetes, rheumatoid arthritis, MS, lupus, Sjogren's. So it does have definitely immune properties. So we'll see how that develops in the future.

Right. Right. And you said in your prepared remarks, the whole pipeline currently is wholly owned, which is great from an economic standpoint. You get all of the upside if they hit. And you have said that you would intend to file maybe one IND per year that's sort of the aspirational goal. I guess at this point, are you sort of satisfied with the scope of your pipeline? Or obviously, there's tons of potential targets that could come out of FIND-IO that you could pursue? And I guess, would you seek to partner for the development of those targets?

Yes. No. So we have a pretty extensive business development effort. We can't do everything. We have a lot on our plate right now. And as we advance these programs from a clinical development perspective, obviously, the costs go up. So with that said, we can still file one IND per year. But I think we're going to be much more selective in raising the bar. These are novel targets. There's a correlative risk that comes along with novelty. But we're also in the field of looking at combination therapies. So some of our earlier targets were already in discussions with potential partners. A lot of companies out there interested in feeding their own pipeline. They don't want to look at another PD-1, so they're looking at things that are different. But yes, right now, we have a lot on our plate, but we constantly -- we're driven by science. We're fully integrated, so we could do things in a much more capital-efficient manner because we have the manufacturing. So it's not a constraint like a lot of companies have. So as soon as we have a candidate, we're making a master cell bank internally. Now we could freeze it for budget reasons or we could partner it or would we have a slot in our manufacturing schedule, we could just make enough material because then we can do some tox work on the side. So there's a lot of flexibility. Obviously, if any of our clinical stage programs go forward, as a young company, we're going to need that global clin reg infrastructure. So I think that's going to really set the stage for entering into a partnership that provides those capabilities.

Right, right. And I mean, given the current biotech landscape, having a strong cash balance is becoming increasingly important, right? And you mentioned that you have just over, I think, $200 million on hand at the end of last year, and your OpEx is below your peers, at least from what we've seen. So I guess, how do you prioritize investment into the pipeline and driving those forward versus maybe bringing new assets forward?

Yes. So right now, the clinical programs are getting pretty much the majority of the financial support. But I think what we've done in NextCure, and I think I wish a lot of other companies did it, is you hire a lot of smart people, these scientists, these chemical engineers, they can do a lot. And so they're on the critical path and the money is going in the direction where we're going to build value to shareholders and patients alike. But there's some downtime very so often. And you can just sit and read before you could actually move some of these other programs forward. So pretty much NextCure is about 90 CEOs, and each of them is well focused on the deliverables in hand, which we talked about, but a lot of them have a lot of side programs that are moving along, but at different rates.

Right. Right. Okay. Well, with that, I think we're up for time. So I really want to thank you and the team for coming out to Vegas and joining the conference and for running through your company. Really appreciate it.

Well, thank you very much, Alec. I appreciate it. Thanks.

Thanks, everybody.