CytomX Therapeutics, Inc. (NASDAQ:CTMX) Q1 2023 Earnings Call Transcript May 9, 2023

Operator: Good afternoon, everyone. Thank you for standing by. Welcome to the CytomX Therapeutics First Quarter 2023 Financial Results Call. Please be advised that today’s call is being recorded. I would now like to hand the call over to your host today, Chris Ogden, CytomX Senior Vice President, Finance and Accounting. Please go ahead.

Chris Ogden : Thank you. Good afternoon, and thank you for joining us. Before we begin, I would like to remind everyone that during this call, we will be making forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties and risks that are difficult to predict and many of which are outside of our control. Important risks and uncertainties are set forth in our most recent public filings with the SEC at sec.gov. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise. Earlier this afternoon, we issued a press release that includes a summary of our first quarter 2023 financial results and highlight recent progress at CytomX.

We encourage everyone to read today’s press release and the associated materials, which have been filed with the SEC. Additionally, the press release, a recording of this call and our SEC filings can be found under the Investors and News section of our website. With me on the call today is Dr. Sean McCarthy, CytomX’ Chief Executive Officer and Chairman. Sean will provide a business and pipeline update before I walk through the financials for the first quarter. With that, I’ll now turn the call over to Sean.

Sean McCarthy : Thanks, Chris. Good afternoon, everyone. Thanks for joining us for an update on recent progress at CytomX. On today’s call, I’ll provide an update on the company’s pipeline progress and the continued execution towards our key priorities for 2023 before opening up the call to Q&A. At CytomX, we believe that as biologic anticancer therapies become more and more potent, the need for localizing empowered modalities such as antibody drug conjugates, T cell engagers and cytokines into cancer tissue becomes increasingly important as a way to improve therapeutic window. Indeed, we believe that localization will be the future of biologics. CytomX vision is to transform lives with safer, more effective therapies. We aim to realize our vision for the benefit of patients by leveraging our Probody platform to create high-impact therapeutics that are localized to disease tissue, thereby reducing systemic toxicities and maximizing overall benefit.

Our versatile platform for protease-based conditionally activated biologics has strategically positioned our company and pipeline at the intersection of some of the most promising areas of oncology research and development, and I’m excited to walk through the progress of the company during the first quarter of 2023. Throughout Q1, we continue to advance our diversified portfolio of innovative Probody therapeutic candidates for the treatment of cancer while ensuring disciplined resource allocation. CytomX entered 2023 with robust financial resources, positioning the company to execute towards multiple milestones over the next 12 to 24 months. We remain intensely focused on executing towards these milestones with CX-904 continuing to progress in Phase I and IND-enabling activities for CX-2051 and CX-801 remaining on track with IND filings projected for Q4 this year.

With more than 15 internal and partnered programs, we are well positioned to deliver meaningful value to patients through the continued progression of our pipeline. Before moving to a review of our pipeline, I’d like to start by taking just a moment to congratulate Dr. Marcia Belvin on her promotion to Chief Scientific Officer of CytomX announced today. Marcia joined CytomX in 2018 as Head of Oncology Research and has since played a vital role in the translation of key learnings from our first wave of clinical programs into the next-generation Probody candidates that make up our current pipeline. Marcia is a key driver of our research, drug discovery and translational strategies and has also been central to our continued business development success.

My colleagues and I look forward to continuing to work closely with March as we maintain our leadership position in biologics localization through conditional activation. Now moving to our pipeline, I’d like to start with our significant R&D activity in the area of T-cell engaging bispecifics. T-cell engagers hold enormous promise for the treatment of solid tumors. However, the very potency of this modality can lead to widespread activation of the immune system, imposing constraints on therapeutic window. Localization of the powerful anticancer activity of this class of drugs could unlock great potential for patients by enhancing therapeutic window, and we CytomX teams with the support of our partners believe that the Probody platform could be ideally suited to addressing this challenge.

Our lead program in this area is CX-904, a clinical stage Probody T-cell engager targeting EGFR and CD3, partnered with Amgen in a global co-development alliance. EGFR is a highly validated and broadly expressed cancer target, and we see a compelling opportunity to leverage EGFR target expression as an address to localize and harness antitumor T cell responses preferentially to the tumor microenvironment. Our previous work on EGFR published in Science Translational Medicine demonstrated that marketing of the EGFR therapeutic antibody, cetuximab, substantially reduced side effects commonly associated with EGFR therapy. This work opened a window to explore empowered anti-EGFR strategies and CX-904 leverages this approach. We’re making steady progress with CX-904 in the clinic.

We successfully treated our first patient in May 2022, and the dose escalation portion of the study continues to advance. We have completed the initial accelerated dose titration phase of the study, which allowed for a single patient cohorts, and we’re now enrolling into the 3s 3 phase. The primary goal of dose escalation is to assess safety and reach dose levels and exposures by the end of 2023, which enrollment into backfill cohorts in certain EGFR positive tumors can begin. In 2024, a key milestone will be the determination of our Phase II dosing strategy and potential initiation of expansion cohorts. This decision will be taken in collaboration with our partner, Amgen. We look forward to providing additional CX-904 updates later this year.

Continuing our work in T cell engagers. We were also delighted to share recently that our partner, Astellas, nominated the first clinical candidate under our collaboration, triggering a $5 million milestone payment to CytomX. This program is advancing to IND-enabling activities at Astellas. CytomX and Astellas are also collaborating on additional T cell engager programs, and CytomX is eligible to receive future preclinical clinical and commercial milestones across these programs and also retains the option to certain U.S. development and commercial rights. We look forward to providing additional updates regarding the Astellas collaboration as these programs progress. We’ve also been busy recently kicking off our collaboration with Regeneron in bispecific immunotherapies.

Regeneron, of course, brings tremendous scientific depth to our alliance, and we’re excited to be combining our technologies with the goal to widen the therapeutic window for potentially paradigm-shifting next-generation immunotherapy. We look forward to continuing to make expeditious progress in this new alliance. Moving now to our upcoming INDs for the next-generation molecules, CX-2051 and CX-801. These programs incorporate the continuing evolution and advancement of our science and platform, building on our prior work in the clinic. Starting with CX-2051, our wholly owned conditionally active Probody ADC targeting epithelial cell adhesion molecule or EpCAM, also known as TROP-1. EpCAM has been regarded as a high potential target for decades and has been clinically validated by others in oncology.

However, clinical activity has only been achieved with local administration, for example, in non-muscle invasive bladder cancer. CX-2051 is tailored to optimize the therapeutic window for Abcam expressing epithelial cancers by matching the target with payload mechanism of action and tumor sensitivity. We’ve optimized protease cleavability of the mask for this molecule and selected a counter these in derivative as the payload for the program, a topoisomerase 1 inhibitor from the TCAM class. The TCAM payload class has showed exciting clinical results with ADCs, including HER2 and Trodelvy, and we think this payload is an optimal choice for this program. In preclinical studies, CX-2051 when systemically administered has demonstrated a wide predictive therapeutic index and strong activity in multiple tumor xenograft models, including colorectal cancer.

We anticipate filing an IND for this novel ADC in Q4 this year and advancing the program into the clinic in 2024. Moving to CX-801, our July mask interferon alpha-2b, the lead program within our broad efforts in the cytokine field. We believe there’s enormous potential to harness the powerful anticancer activity of cytokines by using our localization strategies to direct their activity towards tumor tissue and away from systemic immune system activation. Interferon alpha-2b is an approved immunotherapeutic that has demonstrated clinical activity in multiple cancer types. Interferon alpha stimulates antigen-presenting cells to activate cytotoxic T cells and may combine effectively with checkpoint inhibition, offering tremendous potential to enhance immunotherapy responses and unlock checkpoint refractory and/or resistant cancers.

Interferon alpha also has direct tumor cell killing activity, providing a dual mechanism of action. However, the powerful anticancer activity of Interferon alpha has thus far been difficult to harness due to its systemic toxicity. Pre-clinically, CX-801 has demonstrated a wide therapeutic index with an enhanced tolerability profile compared to unmasked interferon, along with preferential activity in the tumor microenvironment. We believe CX-801 has the potential to become a unique centerpiece of combination therapy for a wide range of tumor types, and we aim to rapidly advance this potentially best-in-class program towards clinical evaluation with an IND filing targeted for Q4 of this year and clinical initiation in 2024. We’ll be providing an update on our preclinical evaluation of CX-801 at the international cytokine and interferon Society Guest Symposium at AAI this weekend in Washington, D.C. during which we will also be introducing our exciting work on a new wholly owned cytokine program focused on conditionally active localized versions of Interleukin-15.

Turning now to our partnership with BMS. In February of this year, BMS announced that they would be prioritizing and advancing from Phase I to Phase II, the anti-CTLA-4 non-fucosylated promote BMS-986288. BMS continues to enroll into the Phase I/II study evaluating 288 as monotherapy and in combination with nivo in solid tumors, and they recently opened a new study arm evaluating the triplet of 288, nivo and regorafenib in third line or later colorectal cancer. We continue to be excited to have the Probody platform as a leading edge of their CTLA-4 strategy as well as to continue to collaborate on several earlier stage ongoing research programs. Let me now to briefly to our work on CD71, the transparent receptor. At CytomX, we’ve had a long-standing interest in leveraging the unique molecular properties of CD71 as an anticancer target due to its rapid internalization rate and ability to transport ADCs and other therapeutic modalities into cells.

Our CX-2029 program, a Probody ADC previously partnered with AbbVie has shown encouraging clinical activity, including a 21% overall response rate in late-stage metastatic squamous esophageal cancer. CytomX recently regained full rights to the CD71 target from AbbVie and has an exclusive option to reacquire the full rights to CX-2029. We’re assessing next steps for our CD71 program, including potential partnering and additional clinical studies for CX-2029 and also next-generation strategies for targeting CD71. We’ll provide further updates in due course. Finally, I’d like to briefly discuss our partnership with Cytovix’s newest partner, Badr. As a core component of our business model, we’ve leveraged strategic partnerships to extend the reach of our sites, broaden our pipeline and bring important non-diluted capital into the company.

This collaboration is yet another proof point of the validation of CytomX scientific expertise and platform breadth, which has now been extended to mRNA. Work is well underway with this important new partnership, which includes programs both in and outside of oncology. We look forward to making progress with Moderna in these novel areas of R&D. With that, let me turn the call over to Chris to cover the financials for the quarter.

Chris Ogden : Thank you, Sean. I’m pleased to be able to share an update on our first quarter 2023 financial results with you today. Having completed our restructuring in 2022 and initiated the new research collaboration with Regeneron and Moderna, CytomX entered 2023 in a strong financial position with $204 million in cash, cash equivalents and investments as of March 31, 2023. Based on our current expectations and corporate objectives, we expect our cash resources will fund company operations to mid-2025. Our cash runway expectations do not include potential milestone payments from existing collaborations or any new business development. The cash balance of $204 million as of March 31 compared to $194 million as of year-end 2022.

Cash received in the first quarter of 2023 included $35 million as a result of the upfront payment received from the Moderna collaboration and a $5 million clinical candidate milestone payment earned under the Astellas agreement. These collaboration payments are examples that underscore our continued ability to access nondilutive capital as well as earn ongoing cash flow through research funding and milestones. Now let me spend a few minutes on cash for the quarter and our expectations moving forward. Normalizing for the Moderna and Astellas cash inflows in the quarter, cash burn was approximately $30 million for the first quarter of 2023 compared to approximately $42 million in the first quarter of 2022. The reduction in cash burn versus the first quarter of 2022 was primarily driven by the corporate restructuring as well as pipeline prioritization.

As we execute towards our 2023 and long-term objectives, we continue to maintain focus on prudently managing costs, including the execution during Q1 of a sublease for a portion of our facilities that will reduce rent expense starting in the second quarter of 2023. Looking to the company’s go-forward operational cash needs, we expect overall cash burn to continue to moderate down from 2022 and the first quarter of 2023 as we move through the balance of this year. Now moving to revenue and operating expenses for the quarter. For the first quarter, revenue was $23.5 million compared to $9 million in 2022. The increase in revenue was driven primarily by higher percentage of completion for projects under the company’s collaboration with Bristol-Myers Squibb, the milestone earned under the agreement with Astellas and the completion of the company’s obligations under the CD71 collaboration agreement with AbbVie.

R&D expenses decreased by $9.4 million to $21.2 million in the first quarter of 2023 compared to $30.6 million for the corresponding period of 2022, primarily due to a decrease in personnel-related expenses as well as winding down activities related to the CX-2009 and CX-2029 programs. G&A expenses decreased by $2.6 million in the first quarter of 2023 to $8 million compared to $10.5 million for the corresponding period in 2022, primarily due to a decrease in personnel-related expenses from the workforce reduction in 2022 as well as patent-related legal expenses. With that, I’ll turn the call back to Sean.

Sean McCarthy : Thanks, Chris. In closing, I would like to again emphasize the terrific execution by the CytomX team so far this year. Our scientific depth in biologics localization through conditional activation positions the company at the forefront of potential breakthroughs with potent biologic modalities such as ADCs, T cell engagers and cytokines. True innovation takes time. CytomX’s current pipeline and financial strength has resulted from the continued execution of our long-term strategy in which we invest in big ideas and continuously learn from the translational cycle of bench to bedside to bench in order to deliver meaningful benefit for patients. We are intensely focused on driving towards key inflection points in our pipeline with particular focus on our U.S. programs.

We remain well on track with the CX-904 Phase I study and our IND-enabling studies for CX-2051 and CX-801. Additionally, our scientific leadership has continued to attract valued new partners, allowing us to broaden our pipeline and maintain balance sheet strength. We look forward to continuing our work and providing future updates. With that, operator, please open up the call for Q&A.

Q&A Session

Operator: . Our first question comes from Mitchell Kapoor with H.C. Wainwright.

Mitchell Kapoor: Just wanted to ask on CX-809. Once the IND is filed, what can we kind of expect for trial design and strategy? Would we be able to see you look towards tumor types on the label of approved interferon alpha-2b or is it too soon to say?

Sean McCarthy: Yes, thanks for the question. It’s a little too soon to say. I mean, as you rightly allude to interpret Alpha 2B has shown clinical activity in a variety of settings, including renal, melanoma, certain leukemias, hairycell, leukemia, follicular lymphoma. And more recently, in fact, quite recently, the approval of the gene therapy targeting interferon alpha 2 being non-muscle invasive bladder cancer in the VPG nonresponsive setting, where local administration clearly is highly active in that indication. So there are a number of places where we know interferon alpha is active, and we’re currently evaluating the optimal strategy. One of the things that we’re giving a lot of thought to is, of course, the long-term objective with this program given the potency of interferon alpha is to move into the area of cold tumors, I/O unresponsive tumors, but at a stepping stone, we’ll likely be starting our work in tumor types where there’s known to be more immune responsiveness, at least initially, teeing up potential combination strategies.

So it will be a stepwise approach, and we’ll have more to say as we get closer to filing the IND and initiating the clinical study.

Mitchell Kapoor: Okay. Great. And then on 904, could you help us characterize what encouraging activity could look like? What would the threshold of activity need to be to trigger an expansion into a particular cohort?

Sean McCarthy: Yes. Great question. And we are continuing with Phase 1. And I think we need to keep in mind, it’s a Phase I study that we’re running and the goal of Phase I with T-cell engagers is first and foremost, about evaluating safety and really trying to figure out doses to further explore further down the road in the expansion stage. So our goal for the program, as we’ve stated previously, is to continue to make progress with dose escalation this year to initiate enrollment into backfill cohorts by the end of the year in certain EGFR positive tumor types. And then as we move into 2024, we’ll sit with our partner, Amgen, and talk about potential expansion strategies. Now of course, moving into formal expansions next year with this program in collaboration with our partner, Amgen.

I think it’s fair to say we’re obviously going to want to see an attractive tolerability profile and also some evidence of tumor shrinkage, of course, as a monotherapy. But this is a Phase I study. And our expectations are principally to show the weighted doses to look at in later-stage studies in the expansion phase.

Operator: Thank you. And we’ll move to our next question — our next question comes from Roger Song with Jefferies.

Roger Song : Great. Maybe just 2 quick ones from us. The first one is now for understanding you will provide some updates later this year. Just curious what are the nature of the updates you will provide? And understanding you will start to backfill in the EGFR tumor type. But in terms of that data portion, what should we be expecting for the later this year update in terms of dose level or maybe a follow-up. And the second question is related to the CD71 given you have analyzed the data for some time, what are the current thinking around the next-generation strategy or what you’re going to do to the current program in 2029?

Sean McCarthy: Yes. Roger, thanks for the questions. I’ll take the second one first, if I may. Not a whole lot of new updates today on CD71. We’re in discussions with AbbVie regarding getting the license back to 2029. Those discussions are progressing well. And we’ll have more to say about our CD71 strategy a little later in the year. Regarding 904, as I’ve already mentioned, our goal for this year, the operational goal for the program is to initiate enrollment into backfills by the end of this year. So that’s the objective that we have. We’re not ready at this stage to guide towards timing of any data presentations. We want to make more progress, get these backfills underway, continuing close dialogue with our partner, and we’ll be issuing further guidance as the year progresses.

Operator: One moment for our next question. Our next question comes from Mara Goldstein with Mizuho.

Unidentified Analyst: This is for Mara. Congrats on the progress. On CX-2029, I know that it’s still a work in progress. But I’m just curious, what can you — if you can elaborate on the gating factors on the consideration to reacquire the license back from AbbVie versus developing a next generation or are both options on the table?

Sean McCarthy: Yes, everything is still on the table. And as I said, I think that we’ll have more to say about it once we’ve completed our internal evaluations and there are multiple potential ways forward, we think. So I think this is kind of a stay-tuned moment for the CD71 program.

Unidentified Analyst: Got it. And then for the next-generation CD71, if you maybe can elaborate on what features do you hope that you can incorporate to make it a better compound versus the previous GENCI29?

A –Sean McCarthy: Yes, I think simply put, our next-generation strategies that we’ve been working on internally over the last couple of years would be aimed at further increasing the therapeutic window. We’re – it’s clear that we’ve shown that we have opened a window for CD71 with 2029. We are the first company to achieve therapeutically active levels of an ADC targeting CD71 with activity across several tumor types. We have reason to believe we can do better in terms of further opening the window. And again, we’ll have more to say about that in due course.

Operator: And we have a question from Anupam Rama from JP Morgan.

Malcolm Kuno: This is actually Malcolm Kuno on for Anupam. So when should we expect to learn more about which indications are going to be prioritized for CX-251? And then kind of what characteristics will you be looking for in making that determination?

Sean McCarthy: Yes. Thanks, Malcolm. So one of the things that we really love about EpCAM as a target for 2051 is the breadth of its expression across epithelial tumors. Now, if you look into the databases, there’s a ton of information available regarding the expression of EpCAM in tumors. And of course, one that really jumps out is CRC. So we’re very likely to include CRC as one of our lead indications once we get into the clinic. The payload has also been selected. The payload, the TOP1 inhibitor has also been selected with this in mind. However, there are multiple other tumor types where EpCAM is highly expressed, including gastric, ovarian, endometrial, lung, prostate. It’s a long list. And so there’s a lot of ways we could potentially go.

I think what we’re thinking through is the right balance of focus in Phase 1 versus breadth. And we haven’t made a firm decision on that yet, but very likely to include CRC, potentially other indications. And in the long run, there’s a ton of potential for this drug candidate that we see.

Operator: Thank you. And I’m showing no other questions in the queue. I’d like to turn the call back to Sean McCarthy for closing remarks.

Sean McCarthy : Great. Well, thanks, everyone, for your time this afternoon and for your interest in CytomX. I hope this update on our broad pipeline progress has been helpful. And please feel free to reach out to CytomX Investor Relations should you or your teams have additional questions. Thanks very much.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.