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

CytomX Therapeutics, Inc. (NASDAQ:CTMX) Q4 2023 Earnings Call Transcript March 11, 2024

CytomX Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the CytomX Therapeutics Fourth Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only-mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that, today’s conference is being recorded. I would now like to turn the conference over to your speaker today, Chris Ogden, 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 2023 full year financial results and highlights recent progress at CytomX.

We encourage everyone to read today’s press release in 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’s Chief Executive Officer and Chairman. Sean will provide introductory comments on CytomX’s progress and key milestones before we cover our pipeline progress and financials for the fourth quarter and expectations for the year ahead. With that, I will now turn the call over to Sean.

Sean McCarthy: Thanks, Chris and good afternoon, everyone. Thanks for joining us for an update on CytomX continued progress. The promise of masking and conditional activation strategies to improve the therapeutic window for potent biologics like ADCs, T-cell engagers and cytokines continues to be an important and exciting frontier in cancer R&D and our leadership in this field at CytomX derives from more than a decade of innovation with the Probody therapeutic platform. Our foundational clinical work with the Probody platform has achieved many firsts in demonstrating how marketing strategies could be effective in cancer patients, and we have opened a broad field in which progress continues to accelerate. The CytomX team is highly focused on delivering on the promise of conditional activation for the benefit of patients.

We’re currently advancing a generation of product candidates that span multiple modalities, leveraging validated oncology targets, potent effective mechanisms and tailored masking strategies. Each of our candidates is designed to address large commercial markets and major unmet medical need in cancer. We’ve had a highly productive start to 2024. We remain on track for initial CX-904 Phase 1a dose escalation data in the second half of this year, and we are busy launching Phase 1 clinical trials for our newest therapeutic candidates CX-2051 and CX-801 with initial Phase 1a data anticipated in 2025. Let me now provide additional context and detail for our lead programs. I’ll start with our — with CX-904, our Probody T-cell engager targeting EGFR and CD3.

T-cell engaging bispecific antibodies have enormous potential for the treatment of cancer and first demonstrated meaningful clinical benefit in hematologic malignancies. Looking across the T-cell engager landscape for solid tumors is taken time to see meaningful clinical results, but we’re now starting to see important breakthroughs generating great excitement. Successes include Immunocore Tebentafusp in Uveal Melanoma, the first approved T-cell engager for solid tumors, and more recently Amgen’s Tarlatamab targeting DLL3, which has demonstrated impressive results in small cell lung cancer. The development of these and other programs has not only provided long awaited proof-of-concept, but this important work has also helped to increasingly define a roadmap and key considerations for how to optimally develop this emerging class of potent therapies including optimization of dosing paradigms.

However, for this modality to fully breakthrough in solid tumors, there are still significant challenges to overcome. T-cell engages bring very high potency, and this potency can lead to toxicities in normal tissues where the tumor oxygen of interest may also be present. In fact, this is very often the case, a normal tissue target expression is widely acknowledged to be a limitation on the development of T-cell engages for solid tumors. Furthermore, another well acknowledged limitation for T-cell engages is cytokine release syndrome resulting from systemic binding to CD3 on T-cells. At CytomX, we have a broad-based program focused on masking T-cell engagers to decrease tumor antigen binding in normal tissues and CD3 binding in the periphery, thereby improving therapeutic index.

We are working with partners Amgen, Astellas, Regeneron, and Bristol-Myers Squibb in this exciting space. Our lead program is CX-904 that targets the tumor antigen EGFR and CD3 on T-cell. CX-904 is designed to address the principal challenges of developing an EGFR CD3 T-cell engager with the goal of delivering anti-tumor activity at tolerable systemic doses. This program is partnered with Amgen and a global co-development collaboration. The market opportunity for CX-904 is broad. There are hundreds of thousands of EGFR positive patients with metastatic tumors across a wide range of cancer types that could potentially be addressed by this therapy. CytomX is currently conducting an ongoing Phase 1a study in late-stage unselected patients with advanced solid tumors generally known to have EGFR expression.

Our principal goal for this Phase 1a study is to evaluate safety and to identify doses and schedules for detailed evaluation in specific EGFR positive cancer types in Phase 1b. More specifically on safety, we’re looking to keep CRS and the typical EGFR mediated toxicities at manageable levels in order to achieve doses in the predicted therapeutically active range. The selection of Phase 1b tumor types will be driven by a combination of factors including observations from Phase 1a, unmet medical need and commercial potential, including fit with our partners’ strategic interests. We are making steady progress in the clinic, having now advanced through multiple dose cohorts at above dose levels that would be expected to be tolerated with an unmasked EGFR T-cell engager.

In late 2023, we also began to backfill certain dose levels to more fully explore the profile of this drug candidate. We expect to share initial Phase 1a dose escalation data in the second half of 2024 with our partner Amgen, and also to present these data in an appropriate setting externally. These data will inform a potential decision to initiate Phase 1b in 2025. Moving now to our continued work in the antibody drug conjugate space. There has been tremendous progress in ADCs in the past few years and the impact for patients has driven significant strategic interest in this field. CX-2025 is our first-in-class EpCAM-directed Probody ADC. Our IND application for CX-2051 was cleared by the FDA in January, clinical study start-up activities are in progress and we expect to initiate Phase 1 dose escalation in solid tumors generally known to have EpCAM expression including colorectal cancer in the near-term.

EpCAM is a high potential oncology target due to its high cell surface expression in many cancer types. Indeed, EpCAM was one of the first tumor actions to be characterized more than three decades ago and it has since been implicated in many roles in cancer progression. Anti-EpCAM therapeutic strategies have shown potent anticancer activity in pre-clinical models and this has been translated into clinical activity, but to-date, clinical success has been limited to local administration because EpCAM is present in so many normal epithelial tissues. Efforts to generate systemically administered anti-EpCAM therapeutics have not been successful to-date due to toxicities in epithelial tissues, including the GI tract. Our innovative drug candidate, CX-2051, and is tailored to optimize the therapeutic index for EpCAM-expressing epithelial cancers by marking the antibody to reduce binding in normal tissues but to allow activation in tumor tissue.

We have armed the antibody with a cytotoxic payload based on camptothecin, a topoisomerase I inhibitor, a class of drug that has shown potent clinical anticancer activity in the ADC context for multiple targets, leading to dramatic advances for patients. CX-2051 has demonstrated a wide predicted therapeutic index and strong preclinical activity and tolerability in multiple preclinical models, including colorectal cancer. Like EGFR I discussed previously, CX-2051 could also potentially address a large patient population as EpCAM is highly expressed across many indications, including colorectal, gastric, endometrial and ovarian cancers. Our Phase I trial will follow an adaptive design and is intended to demonstrate rapid clinical proof of concept to inform a potential decision to move into dose expansion studies in 2025.

We’re really excited to see what this unique and first-in-class ADC can do for patients. Turning now to CX-801, our duly masked conditionally activated interferon alpha-2b, which we believe has the potential to become a cornerstone of combination immunotherapy for a wide range of tumor types. The IND for CX-801 was cleared by the FDA in January, and we expect to initiate Phase I dose escalation in solid tumors, including melanoma, renal cancer and head and neck squamous cell carcinoma in the first half of 2024. Interferon alpha is a powerful cytokine with the ability to potently drive tumor antigen presentation and activate antitumor immunity. It has demonstrated clinical activity and gained regulatory approval many years ago in multiple cancer types, including melanoma, renal cancer and bladder cancer.

However, interferon therapy is well known to be associated with significant systemic side effects and its use has been superseded by checkpoint inhibitors and other therapeutic approaches. It’s also been shown that interferon could potentiate the clinical effects of PD-1 in metastatic melanoma. But again, this approach has been limited by systemic toxicities. Interferon therapy has recently returned to focus with Ferring Pharmaceuticals’ approval in 2022 of Adstiladrin, an interferon alpha-2b encoding gene therapy indicated for the treatment of localized BCG nonresponsive non-muscle invasive bladder cancer, reaffirming that this potent cytokine could indeed achieve robust antitumor responses in patients. Based on the preclinical profile of CX-801 as well as prior clinical experience with interferon therapies, we see 801 as a potential new centerpiece of combination cancer immunotherapy.

Our preclinical data most recently presented at 60, 2023 demonstrates synergy for our masked interferon alpha with PD-1 inhibition, both in terms of antitumor activity, and in activation of the tumor inflammatory microenvironment. Moreover, we’ve also shown that systemic activity of our masked interferon is significantly reduced and overall tolerability is markedly improved compared to the unmasked cytokine in animal models. We anticipate that the opportunity for CX-801 will be in combination with checkpoint inhibition, where it could serve as a potent immune modulator to both increase the frequency and durability of responses in IO sensitive tumors potentially to establish or restore efficacy in IO resistant or cold tumors. Our Phase I dose escalation trial being initiated in the first half 2024 will utilize an adaptive design to evaluate safety and signs of clinical activity for 801 monotherapy and advance rapidly to combination with checkpoint inhibition.

Before moving to financials, I’d like to provide updates on our partnerships, and starting with an update on our long-standing collaboration with Bristol-Myers Squibb. We were informed on March 6 of BMS’s intention to discontinue BMS-986288, the CTLA-4 program. This unexpected decision followed a broad internal portfolio review at BMS. We continue to work with BMS to gain more visibility on the data from this program and the factors that led to this decision. Moving forward, the BMS collaboration continues to be very active and will now focus primarily in the field of T-cell engagers, where, together, we have initiated several new programs over the last 2 years. Notably, this shift in focus within the BMS alliance now means that the majority of our partner programs are now focused on T-cell engagers, reflecting strong strategic interest in this area and showing that this modality is emerging as a key application of masking and conditional activation.

Continuing the T-cell engager theme, given our ongoing progress with enrollment of the CX-904 Phase 1a study, I’d like to outline some of the key terms of our strategic alliance with Amgen. Under the terms of our agreement, CytomX and Amgen are co-developing CX-904. CytomX is responsible for early-stage development and Amgen will be responsible for late-stage development, with the transition occurring after completion of Phase 1b by CytomX. Within the CX-904 agreement, CytomX has an option to participate financially in the global co-development of CX-904 with Amgen. If we exercise our co-development option, we opt in to a significant U.S. profit share and we are eligible for up to $460 million in development, regulatory and commercial milestone payments and ex U.S. royalties in the low double-digit to mid-teen percentage.

We see this collaboration as having substantial potential to build long-term value for CytomX, and we look forward to making additional progress with our partner on this program. Moving now to our other drug discovery stage partnerships. We continue to make progress in our alliances, including with our newest partners, Regeneron and Moderna. Across our alliances, we have more than a dozen active discovery programs. CytomX holds significant commercial rights on a number of these assets, and we have multiple near- and long-term milestones that we’re working towards. Chris will review in a few moments the financial benefits that continue to accrue to us from our partnerships as we run the company in a very capital efficient way. With that, I’ll hand over to Chris to provide a financial update.

Chris Ogden: Thank you, Sean. I’m pleased to be able to share an update on our 2023 financial results with everyone today. CytomX entered 2024 with a strong balance sheet, with $175 million in cash, cash equivalents and investments as of December 31, 2023, compared to $194 million at the end of 2022. We expect our cash balance will fund the operations of the company well into the second half of 2025. This cash guidance does not assume any additional milestones from existing collaborations or any new business development, both of which CytomX has a strong track record of obtaining. Our cash position reflects our focus on controlling costs and efficient capital allocation, as well as our consistent track record of funding the company through a mix of both strategic business development and equity financing over time.

Our partnerships have consistently been a strategic pathway for value creation and financing opportunities that allow us to generate non-dilutive capital while increasing the reach of our platform. Our partnerships continue to advance and have generated more than $500 million of incoming cash to date, and we see near-term opportunities for additional milestone payments in 2024 and 2025. Despite a challenging macro environment in 2023, we maintained a strong balance sheet position and executed efficiently to position the company to create potentially significant value inflections that will be realized over the next 12 to 18 months. Now moving to revenue and operating expenses for the year. Total revenue was $101.2 million for 2023, compared to $53.2 million for the corresponding period in 2022.

We saw an increase in revenue due to a higher percentage of completion for research programs in the Bristol-Myers Squibb collaboration and the recent collaborations with Regeneron and Moderna. Operating expense for Q4 2023 was $27.2 million, compared to $29.6 million in the fourth quarter of 2022. R&D expenses decreased by $34.3 million from last year to $77.3 million, compared to $111.6 million in 2022. General and administrative expenses decreased by $13.1 million for the year ended December 31, 2023 to $29.8 million, compared to $42.8 million for the corresponding period in 2022. Overall, our prudent financial management of the company and focused capital allocation priorities has resulted in continued balance sheet strength as we progressed our pipeline.

Now, I’ll hand the call back to Sean for closing remarks.

Sean McCarthy: Thank you, Chris, and thanks, everyone, for your time this afternoon and for your interest in CytomX. 2024 promises to be an exciting year for us and the longer-term outlook for 2025 and beyond is also very compelling as we make progress across our multimodality pipeline. The field of antibody masking and conditional activation is continuing to accelerate, and we remain very well positioned to build on the depth of our experience as a leading innovator in this area. We are leveraging our multimodality Probody therapeutic platform to discover and develop new cancer therapies based on T-cell engagers, ADCs and cytokines, each of which represents a highly relevant and timely area of strategic interest across the industry.

The CytomX team is intensely focused on delivering an innovative pipeline for the benefit of people living with cancer. And I’d like to close by thanking everyone involved for their commitment to our vision. With that, operator, let’s go ahead and we can open up the call for Q&A.

Operator: [Operator Instructions] Our first question today will be coming from Peter Lawson of Barclays.

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Q&A Session

Chris Ogden: Operator, maybe we could put Peter back in the queue and go to the next question.

Operator: Yes. Thank you. Our next question will be coming from Joe Catanzaro of Piper Sandler.

Joe Catanzaro: Hey, everybody. Hopefully, you can hear me okay. Thanks for taking the questions and the update here. So I know we saw recent data from a competitive masking program, and they showed look like near zero detectable unmasked antibody in circulation. Just maybe can you remind us what you’ve historically seen with Probody programs around this metric, whether you’re tracking it for 904 and what your expectations would be? And then maybe my follow-up question is on the safety side. So in preclinical tox work for 904, I know you’ve reported some data around CRS. But in GLP work, was it CD3-mediated tox or EGFR-mediated tox that showed up first and which was dose-limiting?

Sean McCarthy: Joe, thanks for the questions. Yes. So we’re tracking, obviously, all innovations in the field and all progress. I think we can conclude from multiple recent data sets from several companies that, first of all, something that I think we’ve shown quite some time ago, is that masking works. Masking antibodies and other modalities is clearly having — showing the ability to decrease systemic target engagement, and depending upon target and format, to also improve tolerability. So we’re excited to see this progress across the field. What we’ve shown over the years pretty consistently with multiple programs, whether it was our PD-L1 Probody or 2009 [indiscernible] some of our earlier programs from which we’ve learned so much, we’ve shown that the vast majority of the circulating entity, the Probody therapeutic, is in masked form.

And that, again, has translated into what we interpret as a successful decreasing of target engagement. So the field has come a long way, and we’re excited to see now in the hands of others these types of approach is also beginning to gain some traction. In terms of our work on EGFR-CD3 and 904, we have presented — quite honestly, we haven’t presented a lot of data on this program for various competitive reasons, but we did share an early iteration of our EGFR-CD3 program with pretty extensive characterization in syngeneic animal models and in Sino. And we focused in large part on the cytokine induction in those monkey studies showing a dramatic shift with the masking, dramatic shift in terms of the ability to induce cytokines. But we haven’t shared a whole lot of data on the actual CX-904 molecule yet.

That will come in the future.

Operator: Our next question will be coming from Anupam Rama of JPMorgan.

Malcolm Kuno: This is actually Malcolm Kuno on for Anupam. So what is the size and scope of the Phase 1 dose escalation data that we should be thinking about in 2H ’24 for CX-904? And on that, when should we get a better sense of a more granular time line?

Sean McCarthy: Yes. Thanks for the question. So we remain on track with 904 to share data in the second half, as I mentioned in my prepared remarks. Our principal objective at this moment in time is to build the data set to share with our partner, Amgen, in the second half of the year. And then that would result in presentation externally in an appropriate setting. We’re not guiding to any specifics at this point in time. Obviously, what we’re looking for though in Phase 1a is to demonstrate the — and really fully explore the safety profile of 904 in terms of CRS, in terms of EGFR-mediated toxicities, obviously, look for any early evidence of antitumor activity. I would expect the update in the second half. It would be a meaningful number of patients, but that’s really all that we’re ready to say at this moment in time.

Operator: [Operator Instructions] There are no more questions in the queue. Thank you so much for joining the conference call today. Everyone may disconnect.