Compugen Ltd. (CGEN) Q1 2019 Earnings Call Transcript

Compugen Limited (NASDAQ: CGEN) Q1 2019 Earnings Call May 20, 2019, 8:30 a.m. ET

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Compugen's first quarter 2019 results conference call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available in the Investors section of Compugen's website, www.cgen.com. As a reminder, today's call is being recorded. I would now like to introduce Elana Holzman, Compugen's Director of Investor Relations and Corporate Communications. Please go ahead.

Elana Holzman -- Director, Investor Relations and Corporate Communications

Thank you, Operator. Thank you for joining us today. With me from Compugen are Dr. Anat Cohen-Dayag, President and CEO, Dr. Henry Adewoye, Chief Medical Officer, and Ari Krashin, CFO and COO. Before we begin, I would like to read the following regarding forward-looking statements. During the course of this conference call, the company may make projections and other forward-looking statements regarding future events or future business outlook, anticipated progress on Compugen's pipeline programs, and financing-related matters, as well as statements regarding its corporate restructuring and anticipated reduction in expenditures and savings.

We wish to caution you that such statements reflect only the company's current expectations, and that actual events or results may differ materially. You are kindly referred to the risk factors and cautionary language contained in the documents the company files with the Securities and Exchange Commission, including the company's most recent annual report on Form 20-F, filed March 21st, 2019. The company undertakes no obligation to update projections or forward-looking statements in the future. I will now turn the call over to Anat.

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Anat Cohen-Dayag -- President and Chief Executive Officer

Thank you, Elana, and good afternoon, everyone. I would like to welcome you to our first quarter 2019 corporate and financial update. As Elana mentioned, with me today are Dr. Henry Adewoye, our Chief Medical Officer, who will update you on our COM701 Phase 1 clinical study, and Ari Krashin, our CFO and COO, who will review our financials.

On today's call, I will discuss the progress we have made during 2019, which continues to be marked by strong execution and positive development. We continue to be encouraged by the advances made in the Phase 1 study of COM701, our leading immuno-oncology candidate, and we anticipate reaching additional key milestones in the second half of the year.

In parallel, we also continue to invest in the company's long-term value drivers. These are our innovative earlier-stage immuno-oncology pipeline to follow behind COM701 and COM902 and our computational discovery capabilities, which are focused on addressing key challenges in the field of immuno-oncology.

Turning to COM701, we're very pleased with the execution thus far of our Phase 1 trial. The monotherapy dose escalation arm is advancing on schedule, and we expect to complete enrollment by the end of the third quarter. The completion of this stage will allow us to begin enrolling patients in the monotherapy expansion cohorts later this year.

Based on the progress we have made in the COM701 monotherapy dose escalation arm, we recently dosed the first patients in the combination arm of the study, in which we're evaluating escalating doses of COM701 with a fixed dose of Opdivo, Bristol-Meyers Squibb's CD1 inhibitor. The combination arms of our study are conducted under the clinical trial collaboration with Bristol-Meyers Squibb, which we announced last October. We expect to complete enrollment for this arm of the study this year.

Our Phase 1 trial is receiving considerable interest from the trial's investigator. This has enabled us to add new leading medical centers and high-profile immuno-oncology investigators, reaching to a total of 10 centers. We believe this interest stems from the fact that the COM701 program, the only anti-PVRIG gene inhibitor currently in clinical testing, is backed by solid scientific rationale, as is the biomarker strategy and drug combination approach, which is not prevalent among many other immuno-oncology combination trials.

In addition, we recently strengthened our intellectual property position with respect to COM701 with two new U.S. composition-of-matter patents covering COM701 and anti-PVRIG antibody having CDRs of COM701, which are the fragments of COM701 antibody that specifically bonds to PVRIG, known as complementarity-determining regions. These two composition-of-matter patents provide exclusivity on COM701 in the United States for any purpose and extend Compugen's intellectual property protection for COM701 beyond the therapeutic use patent we received in 2017. We are pursuing additional patents in the U.S. and elsewhere to further broaden our intellectual property position for our lead program.

And now, turning to COM902, our next most advanced program, which is on track for an anticipated IND filing later this year, our plans to advance this program to the clinic are still being formulated based on the competitive landscape and our plans under the Bristol collaboration. We will update you about our plans as these will be formulated. While COM701, our near-term value driver, continues to advance, we are, at the same time, advancing our long-term core value drivers, our early stage immuno-oncology pipeline, and proprietary computational target discovery infrastructure.

These two core value drivers of the company are focused on identifying new therapeutics for patients who are refractory to current cancer immunotherapies or are relapsing following such treatments. These patients represent the majority of patients across all cancer indications. As with our COM701 program, our earlier-stage pipeline and ongoing discovery efforts are aimed to address these significant medical needs.

Our earlier-stage pipeline is focused on a novel target, modulating the immunosuppressive cells in the tumor microenvironment with a goal of targeting the immune inhibition processes occurring within the tumor microenvironment. These programs are addressing mainly immune cells from the myeloid lineage, which possess strong immunosuppressive environment. Targeting such immune cells may inhibit the immunosuppressive mechanism and offer the potential for efficacy in patients with cancers not responding to current cancer immunotherapies.

We're working on a number of target candidates within our early stage pipeline, performing various studies to allow for the selection of drug targets that we believe have the best potential to serve for the development of first-in-class cancer immunotherapy drugs. We're fortunate to have the dedicated support of our highly engaged SAB members, who are key leaders in the immuno-oncology field, to help us advance and prioritize our programs in this highly complex field of myeloid biology.

As these are early stage programs, we have opted not to disclose these drug target programs. We believe in obtaining a thorough scientific understanding of these candidates with respect to their ability to serve for the development of cancer immunotherapy drugs, as we did for PVRIG in COM701. We will share more information on these programs as the science behind them deepens, when we have a robust package for preclinical development, and when we feel it is the right time to do so in terms of the competitive landscape.

As for our discovery efforts, we have recently expanded these to include the discovery of drug targets involved in driving mechanisms of immune resistance to PD1 blocker. In many cases, anti-PD1 antibodies are rendered ineffective due to the patient developing adaptive immune resistance following treatment. Therefore, with the increased use of PD1 blocker in various cancer indications, we're starting to see many patients relapsing following treatment.

Discovering new therapeutic solutions for these patients has become an area of high interest with extensive competition, but with no breakthrough so far. To this end, we are in the process of developing a new discovery platform to identify proteins and pathways which are driving immune resistance mechanisms to PD1 therapy. With the platform, we attempt to overcome certain challenges in the field, namely the limited publicly available data derived from cancer patients with clinical annotations as to their PD1 response as well as the certain molecular signals seen in many analytical approaches differentiating responders and non-responders to PD1 treatment. We aim that the new platform in development will provide us with new insight into such immune resistance mechanisms to enable the discovery of new potentially worthy drug targets. We will provide more information about this platform as we progress.

With COM701 progressing toward clinical data and COM902 nearing our IND filing, our goal is to generate a substantial pipeline to ensure we have additional high-potential assets following behind these two programs, both for internal development as well as for additional partnering opportunities on top of the two programs being advanced by our partners, Bayer and AstraZeneca. As such, we remain committed to our strategy and continue to pursue collaborative arrangements for our programs at various stages of development.

At this time, I'd like to take this opportunity to thank Kirk Christoffersen for his contributions while at Compugen and wish him much success, as he decided to pursue a new opportunity. We are in the process -- supported by the network and experience of our board members -- of finding the right person to lead our business development activity and expect to successfully complete this soon. With that, I would like to turn the call over to Henry for a more detailed update on the COM701 trial. Henry?

Henry Adewoye -- Chief Medical Officer

Thank you, Anat, and good afternoon and good morning, everyone. Our team has remained focused and worked very diligently to execute on our clinical development strategy over the last several months, and I am very pleased to share good news and positive development with you. First, the ongoing Phase 1 clinical trial remains on track with enrollment of patients and opening of new clinical trial sites.

In the first five months of the year, we added seven new sites, all leading centers with extensive experience in conducting oncology clinical trials in general and in the field of immuno-oncology in particular. In total, we now have 10 sites participating in the study. These new sites include Columbia University, MD Anderson Cancer Center, Cleveland Clinic, University of California Los Angeles, and START Midwest. Having these 10 sites participate in our study going forward will help us meet our patient enrollment projections for the dual combination arm and expansion cohorts.

Secondly, there's keen interest and engagement by all the investigators involved in a clinical trial, including thought leaders in the field of immuno-oncology. This is understandable. As you're all aware, there's a high unmet medical need for novel agents for the treatment of patients with cancer who suffer a relapse following treatment with currently approved checkpoint inhibitors or checkpoint inhibitors undergoing clinical testing. Our expectation is that our ongoing Phase 1 clinical trial with COM701 will hopefully meet that need.

Thirdly, our publication strategy to inform and educate our shareholders and members of the healthcare and scientific communities remains on track. So far this year, we have presented two posters in the "trials in progress" category at two scientific conferences: The ASCO-SITC Clinical Immuno-Oncology Symposium in San Francisco in January and the AACR Annual Meeting in Atlanta, Georgia in early April.

While no clinical data were presented in keeping with the guidelines of these conferences, we provided information on the status of the ongoing Phase 1 clinical trial, the COM701 monotherapy dose escalation study, and disclosed that we had observed no dose-limited toxicities in the trials. In our last trial-in-progress poster presentation at AACR, we disclosed that the fifth dose-level patient cohort of COM701 monotherapy has been completed with no dose-limited toxicities reported. We also disclosed that clinical and laboratory assessments for safety and tolerability are ongoing for these and earlier dose-level patient cohorts. Enrollment of patients into this arm of the study is ongoing, and as Anat mentioned, we expect to complete enrollment soon.

As COM701 is a novel, first-in-class checkpoint inhibitor of PVRIG, our TIP presentations drew a significant audience at these scientific meetings. Our next TIP presentation is scheduled at the 2019 ASCO Annual Meeting, which will take place in Chicago in the next few weeks. Our poster presentation is scheduled for June 1st.

As Anat has mentioned, we recently initiated the combination dose escalation arm of the study, in which escalating doses of COM701 will be combined with a fixed dose of Opdivo using a three-plus-three study design. As previously indicated, we project completion of this arm of the study later in the year and plan on providing periodic updates through trial-in-progress abstract presentations at scientific conferences. As a reminder, the combination arm of this ongoing Phase 1 study is sponsored by Compugen in collaboration with Bristol-Meyers Squibb.

In the second half of 2019, we project initiating enrollment of patients in the COM701 monotherapy dose expansion cohort at the recommended dose of COM701 monotherapy based on the clinical and laboratory data from the dose escalation arm of the study. The expansion arm will enroll patients with relapsed lung, ovarian, breast, and endometrial cancer. As we have previously disclosed, these tumor types were selected based on our preclinical data demonstrating high expression of PVRL2. COM701 inhibits PVRIG and its interaction with PVRL2, a member of the DNAM axis, leading to activation of T cells in the tumor microenvironment, generating an anti-tumor immune response, leading to tumor growth inhibition.

There's still a lot of work to be done on behalf of patients as we at Compugen and the clinical investigators advance this clinical trial. The good news is that Compugen is up to the task, and we will remain focused on the execution of our clinical trial strategy. I look forward to seeing you in the next few weeks in Chicago at our poster. My sincere thanks to all our patients, family members, and investigators, who have been instrumental for the progress of this clinical trial. We are excited about our ongoing clinical trial and the collaboration with BMS and look forward to sharing with you more good news and positive developments in the coming months ahead. I'll hand the call over to Ari.

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

Thank you, Henry. Good morning and good afternoon to everyone. Our financial results for the first quarter of 2019, released this morning, reflect the initial effect of the restructuring process we underwent at the end of the first quarter. The reduction in expenses will continue over the course of 2019, with the full effect of the savings expected to be reflected in 2020. As of March 31st, 2019, we had approximately $38 million in cash and cash-related accounts, compared with approximately $46 million at the end of 2019. Our total cash expenditures for the full year of 2019 are expected to be in the range of $27-29 million. This amount includes estimated restructuring-related expenses of up to $1.5 million over the course of 2019.

Our R&D expenses for the first quarter of 2019 decreased by 10% and totaled $6.3 million, compared with $7.1 million in the comparable period of 2018. The reduction was offset by expenses associated with the progress of our ongoing Phase 1 trial. R&D expenses for the quarter also reflect approximately $0.4 million of restructuring-related expenses. General and administrative expenses for the first quarter of 2018 decreased by 6% and totaled approximately $2 million, compared with approximately $2.1 million in the comparable period of 2018.

During the first quarter of 2019, we had a net loss of approximately $8.4 million, or $0.14 per basic and diluted share, compared with a net income of $0.1 million, or $0.00 per basic and diluted share, for the comparable period of 2018. The net income in the comparable quarter of 2018 was attributed to the revenues in the amount of $10 million from the license agreement with AstraZeneca during that quarter.

Before ending my prepared remarks, I would like to note that we remain committed to allocating the necessary internal resources to the planned expansion of the ongoing Phase 1 study for COM701 as well as advancing our other programs. We expect that the overall reduction in our expenses will enable us to become a more financially stable company with sufficient cash resources through mid-2020. Thank you, and with that, we will now open the call for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press *1. If you wish to decline from the polling process, please press *2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Please stand by while we poll for your questions. The first question is from Mark Breidenbach of Oppenheimer. Please go ahead.

Mark Breidenbach -- Oppenheimer & Company -- Executive Director

Good afternoon, guys. Thanks for taking the questions. First of all, congrats on getting the combination dose escalation cohort started. A couple questions on that. Are you expecting most of these patients to have previous PD1 exposure, or are you expecting most of them to be PD1-naïve?

Anat Cohen-Dayag -- President and Chief Executive Officer

Henry, would you take this question?

Henry Adewoye -- Chief Medical Officer

Thank you, yes. Mark, glad to take the question. So, we project we'll have a mixture of both kinds of patients -- both previous treatments with PD1 inhibitors and patients who have relapsed or patients who are actually naïve with treatment with PD1 inhibitors.

Mark Breidenbach -- Oppenheimer & Company -- Executive Director

Okay. And, are you looking for any particular efficacy threshold before advancing into the dose escalation cohorts -- sorry, the dose expansion cohorts -- both in monotherapy and the combination dose expansion, or would the decision to move into the dose expansion cohorts purely be based on safety?

Henry Adewoye -- Chief Medical Officer

Mark, that's a very good question. So, for the purposes of this Phase 1 clinical trial, the decision to go into the expansion cohorts will solely be based on safety.

Mark Breidenbach -- Oppenheimer & Company -- Executive Director

Got it. And finally, I know there was the possibility of Bristol-Meyers Squibb running a triplet combination with its anti-TIGIT antibody in addition to COM701 and Opdivo. Do you have any updated indication or clarity from Bristol-Meyers on what their timing might be like in terms of getting that trial started? What would they want to see from your dual combination data before testing a triplet combination? Thank you.

Anat Cohen-Dayag -- President and Chief Executive Officer

So, Mark, we cannot say a lot about that Bristol collaboration. The only thing is that we're reinforcing the interests of the two companies, they're aligned, and obviously, the strategies of how to address it are aligned, but we cannot say more than that and need more data about this collaboration.

Mark Breidenbach -- Oppenheimer & Company -- Executive Director

Okay. You can't even tell me if you expect that to potentially start this year or next?

Anat Cohen-Dayag -- President and Chief Executive Officer

No, we cannot relay the timelines at all at this stage.

Mark Breidenbach -- Oppenheimer & Company -- Executive Director

Okay. Thank you for taking the questions.

Operator

The next question is from Ted Tenthoff of Piper Jaffray. Please go ahead.

Edward Tenthoff -- Piper Jaffray -- Managing Director

Great. Thank you very much. Hi, Anat, hi, Ari. How are you guys?

Anat Cohen-Dayag -- President and Chief Executive Officer

Thank you.

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

Good, Ted. How are you doing?

Edward Tenthoff -- Piper Jaffray -- Managing Director

Very well. So, I want to go back to the platform a little bit, and then, just a high-level question, if I may, with Bayer. So, with respect to all of the emerging targets, how do you prioritize -- and, this may be a bigger question, but at a high level, how do you prioritize which targets to pursue, and really, how they work in combination with others?

Anat Cohen-Dayag -- President and Chief Executive Officer

Very good question. In general, we related to three different buckets. The first bucket is the different checkpoints that we decided to focus on. It's the PVRIG, obviously, the ILDR2 that was licensed to Bayer, and the TIGIT. The second bucket is myeloid, and when we are -- as I mentioned in the call, when we're looking at prioritization, it really relates to the science, the drug ability in terms of does this protein not only function as a protein that would inhibit immunosuppressive processes within the tumor microenvironment, but also, would they serve as good drug targets? That's a whole different story, which you obviously know all over the world, success is very low. That's the second bucket.

The third bucket is what I mentioned today. These are related to new platforms that we'll actually address next week, which we believe would be the next wave. Each has its own resources in the company, but obviously, we have periodic analysis internally in the company of all the programs in the company alone -- I mean the managers and the management in the company, but also in the scientific advisory board, and obviously, clinical advisory committees.

Edward Tenthoff -- Piper Jaffray -- Managing Director

That's helpful. And then, at a high level, just with Bayer in the headlines all the time because of this Roundup stuff, have you sensed a loss of focus? How are things progressing from the Bayer Pharma side? Thank you very much.

Anat Cohen-Dayag -- President and Chief Executive Officer

So, obviously, I leave it to Bayer to comment on their organizational restructuring, but from our perspective, this program is moving forward. Bayer is committed to this program, investing resources. We're getting period updates about the status of the program, so we're happy with the collaboration.

Edward Tenthoff -- Piper Jaffray -- Managing Director

All right, good. Thanks for the update, and good luck at ASCO.

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

Thank you.

Anat Cohen-Dayag -- President and Chief Executive Officer

Thank you.

Operator

The next question is from Lucy Codrington of Jefferies. Please go ahead.

Lucy Codrington -- Jefferies -- Analyst

Hi there. Thanks for taking my questions. Just a quick one about -- you mentioned for 902 that you'd be watching the competitive landscape for deciding how to proceed with the program. I just wonder if there are any particular programs that you are watching that will influence your decision. And then, secondly, is there anything that you expect to see at ASCO that can perhaps influence go or no-go decisions for the earlier-stage pipeline? Thank you.

Anat Cohen-Dayag -- President and Chief Executive Officer

Very good question, Lucy. So, with respect to COM902, I did say that it is on track for IND filing, and that we're formulating our strength forward. When I was referring to the competitive landscape, it's actually relating to two different aspects. First, obviously, we don't want to follow -- first, I'll remind you this program is really in our pipeline in order to complement COM701. That's the first goal for this program.

But, having said that, obviously, this is near IND filing, it is going to be a clinical-stage asset soon, and in that respect, we cannot ignore the fact that it may have its own potential as a clinical-stage asset even not relating to COM701. So, when we look at the competitive landscape, on one hand, we do not want to follow others and just join the rest of the crowd. There are a lot of clinical-stage assets as well as preclinical-stage assets, and basically, I'm not referring to any specific company. We look at all as competitive assets, and we look at how they decide to move ahead their programs and how they perceive this opportunity.

That's one aspect of the competitive landscape. The other one is our own data. Obviously, we have our own preclinical data on COM902. Part of it is how we keep supporting a combination of COM701, but the other part is insight about target TIGIT in general, so we are trying to understand how we should move ahead, and yes, I didn't mean any specific company, but as a whole, the competitive landscape. When you were asking the question about progress at ASCO, you meant with respect to TIGIT or any other programs? I didn't get your question, sorry.

Lucy Codrington -- Jefferies -- Analyst

Yeah, TIGIT, and to be honest, all the pipelines, but with the appreciation there of the targets not being disclosed.

Anat Cohen-Dayag -- President and Chief Executive Officer

So, obviously, you probably understand that we are having a lot of interest, and understanding the clinical data that is being published -- the one that was published at SITC, and in any additional conferences going forward, including ASCO -- that, on one hand, allows us to verify our assumptions with respect to COM902/COM701 combination or, to say it better, a TIGIT/PVRIG combination, but also, as I said, for the program on its own in this competitive landscape. So, yes, for sure.

With respect to other programs, you were asking the question about ASCO, but I have to say that as a company, it has discovery capabilities and discovery in new programs who are always on top of what's going on in the industry with the new programs and the data that is being disclosed. It is a very important piece of information to us to make decisions. It is even complementary to what Ted was asking me with respect to how we prioritize. That's one of the parameters as to how we prioritize.

I will not say that if we see that there is a certain asset that is being advanced by another entity, we will give up on this. It doesn't mean that we'll give up on this, but maybe it will be factored into our decisions, whether we're differentiated, and how early or late-stage is compared to [inaudible], so yes, definitely, at ASCO, we are...we usually have teams at these conferences, and we take care to learn about what's going on in the industry.

Lucy Codrington -- Jefferies -- Analyst

That's really helpful. Thank you.

Operator

This concludes our Q&A session. I will now turn the call back to Compugen's President and CEO. Dr. Cohen-Dayag, would you like to make your concluding statement?

Anat Cohen-Dayag -- President and Chief Executive Officer

Thank you, operator. 2019 continues to be marked by strong execution. We successfully added seven sites to our study in 2019, and now have 10 leading sites participating in our study. The monotherapy dose escalation arm is advancing as planned, and we expect to complete enrollment by the end of the third quarter, which will be followed by initiation of the expansion cohort. We recently dosed the first patient in the combination dose escalation arm of the study, and we expect to complete enrollment in this arm later this year. In parallel, we're also advancing our early stage programs and expanding our discovery efforts. We're very pleased with the progress of our COM701 Phase 1 study, and I hope to be able to share with you additional timelines later this year. Thank you all for joining us today, and I look forward to continue updating you on our progress throughout 2019. Thank you.

Operator

Thank you. This concludes the Compugen Ltd. first quarter 2019 financial results conference call. Thank you for your participation. You may go ahead and disconnect.

Duration: 37 minutes

Call participants:

Elana Holzman -- Director, Investor Relations and Corporate Communications

Anat Cohen-Dayag -- President and Chief Executive Officer

Henry Adewoye -- Chief Medical Officer

Ari Krashin -- Chief Financial Officer and Chief Operating Officer

Mark Breidenbach -- Oppenheimer & Company -- Executive Director

Edward Tenthoff -- Piper Jaffray -- Managing Director

Lucy Codrington -- Jefferies -- Analyst

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Contents:

Prepared Remarks:

Questions and Answers:

Call participants: