CytomX Therapeutics, Inc. (NASDAQ:CTMX) Q4 2022 Earnings Call Transcript

CytomX Therapeutics, Inc. (NASDAQ:CTMX) Q4 2022 Earnings Call Transcript March 27, 2023

Operator: Good day and thank you for standing by. Welcome to the CytomX Therapeutics Fourth Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference call over to your speaker for today, Chris Ogden. Please go ahead.

Chris Ogden: Thank you. Good afternoon and thank you for joining us. Before we begin, I’d 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 2022 full year financial results and highlights recent developments at CytomX.

We encourage everyone to read today’s press release and the associated materials, which include the 2022 10-K and 2021 amended 10-K, which have been filed today with the SEC. Please also note, the comments made in this call regarding the company’s financials reflect restated financial statements as outlined in our most recent SEC filings today. The adjusted financial statements reflect changes in the timing of certain revenue recognition in the years from 2019 to 2022. 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’s Chief Executive Officer and Chairman. Sean will provide a business and pipeline update before I walk through the financials for 2022.

With that, let me turn the call over to Sean.

Sean McCarthy: Thanks, Chris, and good afternoon, everyone. Thanks for joining us for an update on recent progress at CytomX. On today’s call, I’ll provide an overview of the company’s therapeutic pipeline, including status updates for our emerging programs, CX-904, CX-801 and CX-2051. I’ll also cover recent developments within our CD71 targeting program and additional updates on our corporate partnerships. 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 diseased tissue, thereby reducing systemic toxicities and maximizing overall benefit. 2022 was an important year of transition for our company in which we restructured and repositioned CytomX for future success by prioritizing our earlier stage portfolio that incorporates learning from our experience with the first wave of Probody therapeutics that we pioneered and advanced into the clinic. Since our early years, CytomX has pursued a consistent strategy focused on long-term company build around the Probody platform and maximizing impact for patients.

Our substantial investments to date have allowed for broad clinical evaluation of our platform, have resulted in a uniquely strong scientific foundation and a deep pipeline of therapeutic candidates positioned to deliver significant near and long-term value. We currently have more than 15 active Probody therapeutic programs, including three clinical stage molecules and we expect to file two new INDs for wholly owned programs later this year. Additionally, through our collaborations, we have substantially extended the reach of our science. CytomX entered 2023 with robust financial resources and funding into 2025, positioning the company to execute towards multiple milestones over the next 12 months to 24 months. Moving now to our pipeline. I’d like to start with T-cell engaging bispecifics and our company is expanding efforts with this modality.

T-cell engagers hold tremendous 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 enormous potential for patients by enhancing therapeutic window. CytomX and our partners believe the Probody platform to 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 this target to localize anti-tumor T cell responses preferentially to the tumor microenvironment.

Our published preclinical data show that a localized bispecific EGFR CD3 Probody has a widened therapeutic window compared to its unmasked counterpart. These preclinical data led to the advancement of CX-904 and we’re now well underway with Phase 1 dose escalation. The Phase 1 study has advanced from initial single patient cohorts into the 3+3 phase of dose escalation. The primary goal of dose escalation for this drug candidate is to assess safety and we aim to reach dose levels and exposures by the end of 2023, which we can start enrollment into back law cohorts in certain EGFR positive tumors. Looking ahead to 2024, a key milestone on the horizon will be the selection of recommended Phase 2 dose and the potential decision to initiate Phase 1b expansion cohorts in EGFR positive tumors.

This decision will be taken in conjunction with our partner Amgen. CytomX would then be responsible for the execution of expansion cohorts and upon the conclusion of the expansion phase, Amgen will take over global development with CytomX retaining certain co-funding, co-development and co-commercialization rights. We look forward to providing additional CX-904 updates as the program advances. Staying with T cell engagers, we were delighted that in January 2023, our partner Astellas nominated the first collaboration clinical candidate triggering a $5 million milestone payment to CytomX. CytomX and Astellas are also collaborating on additional T cell engagers and CytomX is eligible to receive future preclinical, clinical and commercial milestones across these programs.

We also retain the option to select U.S. development and commercial rights within the Astellas collaboration. Continuing with T cell bispecifics. In November 2022, CytomX has had a multi-target R&D collaboration with Regeneron to discover and develop new bispecific immunotherapies. Regeneron has considerable efforts in T cell bispecifics and both companies see opportunities to broaden the reach of T cell engagers by utilizing CytomX platform to localize these highly potent agents to tumor tissue, widening therapeutic window. This shared vision formed the basis of our discussions last year, leading to the deal we announced in November. Given Regeneron’s acknowledged high bar for external innovation, this collaboration is yet another point of validation of CytomX scientific and platform expertise.

Moving now to our upcoming INDs for next generation molecules CX-2051 and CX-801. Starting with CX-2051, our conditionally active Probody ADC targeting EpCAM. EpCAM has been regarded as a high potential target for decades and has been clinically validated by others, but clinical activity has only been achieved with local administration. CX-2051 is tailored to optimize therapeutic index for EpCAM expressing epithelial cancers by matching the target with payload mechanism of action and tumor sensitivity. We have optimized masking, protease cleavability, and we have selected a camptothecin derivative, topoisomerase 1 inhibitor in the class as the payload for this program and with a drug antibody ratio of 8. The EpCAM (ph) payload class has shown exciting clinical results with ADCs, including N HER2 and Trodelvy, and we really think this payload is an optimal choice for this program.

Although locally administered anti-EpCAM therapeutics have shown promise, efforts to generate systemic anti-EpCAM therapeutics have to date not been successful. CX-2051, however, when systemically administered has demonstrated a wide predicted therapeutic index and strong preclinical activity in multiple preclinical models including colorectal cancer. We anticipate filing an IND for this novel ADC in the second half of 2023. Turning now to CX-801, our dually masked interferon alpha-2b, the lead program within our broad efforts in the cytokine field. We believe there’s enormous potential to harness the powerful anti-cancer 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, and we believe provides a potentially superior approach to activating anti-tumor immune responses than cytokines such as IL-2, IL-12 and IL-15. Interferon alpha stimulates antigen-presenting cells to activate cytotoxic T cells and combines effectively with checkpoint inhibition, offering tremendous potential to 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 anti-cancer activity of interferon alpha has thus far been difficult to harness due to its systemic toxicity. In data presented at 16, 2022, we demonstrated that CX-801 has a wide therapeutic index and an enhanced tolerability profile compared to unmasked interferon.

Our data have highlighted CX-801’s preferential activity in the tumor microenvironment as well as the potential for synergistic effects when combined with checkpoint inhibitors. 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 the second half of 2023. Let me turn now to our CD71 program. At CytomX, we have had a long-standing interest in leveraging the unique molecular properties of CD71, the transferrin receptor as an anti-cancer target. Our goal is to use our Probody platform to open a therapeutic window for this high potential, but previously undruggable target.

And as such, we have developed an antibody drug conjugate to CD71 that we call CX-2029. We partnered the program with AbbVie, back to 2016 and that was focused on the advancement of CX-2029 into IND-enabling and clinical studies. Under the collaboration agreement, CytomX was responsible for early development up to the completion of cohort expansions and with AbbVie being responsible for later-stage development. We have made substantial progress since this alliance started, and in January this year, we announced updated results from the cohort expansions, which included encouraging clinical activity in unselected heavily pretreated patients with tumors of squamous histologies, including a 21% confirmed response rate in squamous esophageal cancer.

Grade 3 anemia remains the most common treatment-related adverse event. Strategies for management of anemia have included transfusions, dose delays and dose reductions. And patients who have responded to CX-2029 have been actively managed through the use of anemia mitigation measures. Our January data update for CX-2029 essentially marks the conclusion of CytomX’s responsibilities for execution of the clinical program within the AbbVie alliance, and the data has been under evaluation at AbbVie in recent months. AbbVie informed us on March 21 that they do not plan to advance CX-2029 into further clinical studies for strategic portfolio reasons, and the alliance will conclude. CytomX regains full rights to CD71 and has an exclusive option to reacquire full rights to CX-2029, and these discussions are underway.

While we are disappointed with AbbVie’s decision, in our work to date on CD71, we have pushed new scientific boundaries and demonstrated for the first-time that targeting CD71 with an antibody drug conjugate can lead to tumor shrinkage in late-stage cancer patients. Going forward, CytomX will be evaluating next steps for CX-2029 while also continuing to pursue next-generation strategies to targeting CD71. We would like to thank AbbVie for their partnership in helping us bring CX-2029 and our CD71 program to this stage in its development. I’d like to now briefly update on our collaborative work with Bristol Myers Squibb and Moderna. Our alliance with BMS has continued to make progress, and I would like to take a few minutes to cover the latest updates on the CTLA-4 program.

We have worked with BMS on two CTLA-4 Probody approaches. The first is a Probody version of ipilimumab that’s called 249. We’re also working with BMS on a Probody version of their non-fucosylated anti-CTLA-4 antibody designed to be a more potent version of ipi. This Probody named 288 is designed to be a safer, more effective version of the non-fucosylated ipi. At their earnings call a few weeks ago, BMS announced their prioritization and advancement of the non-fucosylated Probody, 288, which is now the leading edge of their next-generation CTLA-4 program. At SITC in 2022, BMS presented Phase 1 data on 218, which is the non-fucosylated antibody that underlies 288, showing intriguing activity, including in microsatellite-stable colorectal cancer.

The 288 Probody is being advanced to Phase 2, and we look forward to future updates from BMS. Lastly, I’d like to reemphasize our most recent collaboration with Moderna, which highlights CytomX’s continued innovation, breadth and pioneering efforts in the field of conditional activation and also our continued ability to leverage partnering as a financing vehicle for our company. We’re excited to have already kicked off this collaboration, which brings together two leading platforms to research and develop mRNA-encoded conditionally activated biologics. CytomX and Moderna share a vision of investing at the intersection of biology and technology to transform the lives of patients in oncology and also in non-oncology therapeutic areas, and we look forward to doing great things together.

Let me now turn the call over to Chris to provide you with a financial overview for the quarter.

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Chris Ogden: Thank you, Sean. I’m pleased to be able to share an update on our 2022 financial results with you today. CytomX entered 2023 with a strong balance sheet with $194 million in cash, cash equivalents and investments as of December 31, 2022, which we project will fund the operations of the company into 2025. This amount includes the upfront payment received as part of the Regeneron collaboration but does not include the upfront payment of $35 million received in Q1 2023 from Moderna. We continue to operate from a position of financial strength, and our recent collaborations continue to highlight CytomX’s ability to leverage its differentiated science to bring capital into the company and build long-term value. Moving to the financials for the full year 2022.

I would like to note that my comments regarding the financial statements refer to our most recent SEC filings, which include restated financial information from 2019 to 2022 as a result of a change in our revenue recognition accounting method for certain collaboration agreements. The restatement impacts the timing of certain revenue recognition and does not impact total revenue that will be recognized for each collaboration. Also, the restatement has no impact on the company’s current cash position or cash flows. Revenue in 2022 was $53.2 million compared to $37.3 million in 2021, driven by higher estimated percentages of completion for research and development programs in the company’s collaborations with AbbVie and Bristol Myers Squibb. R&D expenses decreased by $2.5 million to $111.6 million in 2022.

The decrease was primarily due to lower clinical trials and lab contract services, partially offset by $5.3 million of restructuring expenses. G&A expenses increased $3.6 million in 2022 to $42.8 million, driven primarily by $2.4 million of restructuring expenses. Overall, full year 2022 expenses related to the company’s restructuring, which was announced in July of 2022 were $7.7 million. The restructuring is substantially complete as of the end of 2022. With that, I’ll turn the call back to Sean.

Sean McCarthy: Thanks, Chris. In summary, CytomX has begun 2023 with strong execution across the pipeline and with considerable momentum. This will continue to be a year of focused execution by the company across our partnered and wholly-owned pipeline. Our progress with CX-904, taken together with our exciting collaborative efforts with Regeneron and Astellas positions the company with significant ongoing efforts in T cell engagers and an opportunity to make an important impact in one of the most promising areas of oncology R&D. We also continue to invest in cancer immunotherapy strategies through our work on CX-801, our conditionally active interferon alpha, which is on track for IND filing this year. As we assess potential next steps for the CX-2029 asset and our CD71 program more broadly, we’re also excited to advance our latest ADC, CX-2051 targeting EpCAM towards IND filing.

The translational cycle of bench to bedside to bench has continued to teach us where the highest impact applications of our technology lie for the benefit of people with cancer and we remain strongly committed to our patients. I would like to extend my sincere thanks to the CytomX team for their ongoing dedication and commitment to our vision and mission. Operator, let’s now open the call up for Q&A.

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Q&A Session

Operator: Thank you. The first question we have is coming from Roger Song, Jefferies. Your line is open.

Roger Song: Great. Thank you for taking the question. Many thanks for the update. A couple of questions from us, maybe start from the 904. Sean, you mentioned you potentially will go through the dose escalation by the end of this year and moving into the expansion next year. So, can you just give us some kind of comment around what should we expect to see in terms of the data update from that program and what are the key criteria for you to move into the tumor specific expansion? Thank you.

Sean McCarthy: Yeah. Hi, Roger. Thanks for the question. So, as I mentioned, we’re pleased with the progress in the early program for 904. And the goal is, the dose escalation that we’re engaged in right now is really to assess safety of this very novel T cell engager. And we do believe we’re on track to — or our goal is to reach doses by the end of the year that should enable us to start backfilling cohorts as it’s fairly common in early Phase 1. With an agent like this really, like, any T cell engager, the stepwise dose escalation, these are highly potent molecules and the selection of doses to move forward. I think these days, we need to be even more thoughtful about this, given FDA’s guidance with Optimus and how to think about MTD, how to think about RP2D. So, we’re going to be thoughtful here and not ready to guide to when we’ll have data, but we are making good progress.

Roger Song: Okay. That’s fair. And then so in terms of your upcoming R&D for 801 and 2051, can you just let us know what the status of the IND-enabling studies are, in terms of the EpCAM (ph) and paths that you are doing? And also, what are the initial indications for those two, the potential INDs? Thank you.

Sean McCarthy: Yeah. Thanks for the question. So very excited about these two new INDs. As I’ve mentioned, they have broad potential across multiple tumor types. And as you mentioned, Roger, the team is very busy right now with IND-enabling activities for both of these programs. We’re pleased with the progress. We’re on track with manufacturing steps with toxicology programs, and everything remains on track for our guidance for these INDs being filed this year. In terms of tumor types, let’s take EpCAM first. One of the things we love about this target is just how broadly expressed it is on epithelial tumors. I did call out CRC in my comments a few moments ago, as this is the tumor type where EpCAM is the most highly expressed, is very highly expressed in CRC.

And that’s one of the reasons that we’ve selected the camptothecin payload, which we think is well matched to that tumor type, given the high target expression as well. But there are many other tumor types that we could potentially move into, including pancreatic, ovarian, to name just two. So many, many different areas to go. We’ll be guided by what we see in Phase 1, of course. With regards to 801, interferon has been approved in several tumor types in the past. We already know it’s an active drug, it’s an approved drug. Our strategy there with 801, given the potency of interferon alpha as an immunotherapy is to work in the area of increasing antitumor immunity, turning colder tumors into warmer tumors, turning warmer tumors into hot tumors and there will be several opportunities to pursue there.

But again, we’ll be guided by the Phase 1 dose escalation data once we get that up and running.

Roger Song: Great. Thanks for the comment. Maybe just one last question, and I will hop back on the queue, is for the CD71. Since you are regaining the rights for this target and potentially for the entire 2029, so you talk about the next generation for CD71, and that we know the anemia is on target kind of probability finding you have been observing. So, can you just let us know what are the key strategies for the next generation, and how you’re going to apply from the learning, from the previous clinical data to the next generation? Thank you.

Sean McCarthy: Yes. Thanks. Great question. And so, with regard to — let’s maybe start with the 2029 data. So just to give, I guess, our holistic view of the drug. We have an active drug. This is an ADC, a very novel ADC that has shown antitumor activity in several tumor types, and most recently, this really intriguing signal in squamous esophageal. We’ve learned more about anemia over the last year or so. We still have more work to do to further understand how to potentially manage and mitigate anemia. If we were to move 2029 forward ourselves, assuming that, that was something that we ultimately decide to do. So, I think we’ve learned a lot with 2029 over the last couple of years. There is a therapeutic window for the drug.

I think it’s fair to say that we believe with next-gen we could broaden that therapeutic window. And different ways to do that would be to increase the antitumor activity, find ways to decrease the incidence of anemia, and we have several ideas as how to do that. And I would anticipate we’ll have more to say about this science as we go through the year.

Roger Song: Great. Thanks. That’s it for now (ph).

Operator: Thank you. One moment while we prepare for our next question. And our next question is coming from Mara Goldstein of Mizuho Group. Please go ahead. Your line is open.

Mara Goldstein: Great. Thanks for taking the question. So just maybe to clarify a little bit on CX-2029. You have rights to CD71, but you would then have to acquire the CX-2029 molecule if you chose to do that. Is that correct?

Sean McCarthy: That’s right, Mara. Yeah. So, the target — the program broadly, as far as the target is concerned, reverts to CytomX. 2029 as a Phase 2 asset, we have an exclusive right to negotiate full rights back from AbbVie and those discussions have been initiated.

Mara Goldstein: Okay. And €“ okay. Fair enough. And then under the AbbVie — the original AbbVie agreement, they had chosen a second target a couple of years ago. Is that still ongoing or is that also no longer active?

Sean McCarthy: Yeah. So, we had two separate collaborations that were initiated at the same time with AbbVie. One was the CD71 R&D agreement and the other was a research discovery agreement. And that’s the collaboration under which a couple of additional targets for ADCs were selected. And that agreement is also coming to a conclusion as well.

Mara Goldstein: Okay. Fair enough. And then I wanted to ask, on the Moderna collaboration, I certainly understand it’s at an early stage, but can you talk to us a little bit about the sort of visibility from your perspective in terms of what you may or may not be able to speak to, particularly as it relates to where the benchmarks are for CytomX to, A, participate not just financially but also potentially clinically?

Sean McCarthy: Well, the — just again to reiterate just how excited we are about the science that we’re doing with Moderna that we’ve just kicked off. So just to recap, the goal of the alliance is to leverage their mRNA platform to encode and express conditionally activated biologics in oncology and non-oncology. We’re not ready to disclose additional details of the research program at this point. But the collaboration is structured such that we are responsible for certain discovery and lead authorization efforts, and Moderna will be responsible for development and commercialization with milestones and royalties coming to CytomX. And so, we do not expect to be involved in the development activities with Moderna, unlike, for example, the relationships with AbbVie or even Amgen on 904. This is, in some ways, a more traditional discovery relationship in which Moderna will be conducting the development of the programs as they mature and move forward.

Mara Goldstein: Okay. All right. Thanks so much. I appreciate it.