Compugen Ltd

NASDAQ:CGEN

Ladies and gentlemen, thank you for joining us today. Welcome to Compugen's Fourth Quarter and Full Year 2023 Results Conference Call. [Operator Instructions]. 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 Yvonne Naughton, Head of Investor Relations and Corporate Communication. Yvonne, please go ahead.

Thank you, operator, and thank you all for joining us on the call today. Joining me from Compugen for the prepared remarks are Dr. Anat Cohen-Dayag, President and Chief Executive Officer; and Alberto Sessa, Chief Financial Officer; [ Dr. Michelle Miller, Chief Medical Officer; and Dr. Eran Ofer, Chief Scientific Officer], will join us for the Q&A. Before we begin, we would like to remind you that during this call, the company may make projections or forward-looking statements regarding future events, business outlook, development efforts and the potential outcome, the company's discovery platform, anticipated progress and plans, results and time lines for our programs, financial and accounting related matters as well as statements regarding our cash position. We wish to caution you that such statements reflect only the company's current beliefs, expectations and assumptions, but actual results, performance or achievements of the company may differ materially. These statements are subject to known and unknown risks and uncertainties, and we refer you to the SEC filings for more details on these risks, including in the company's most recent annual report on Form 20-F. The company undertakes no obligation to update projections and forward-looking statements in the future. And with that, I'll turn the call over to Anat.

Thank you, Yvonne, and thanks to everyone for joining our call today. Before we discuss the full year and fourth quarter highlights, I want to start by welcoming the new addition to our management team, [ Michel Maller], who took over the role of Chief Medical Officer on March 1, 2024. I'm really excited to welcome [ Michel], an oncologist by training with extensive experience in leading clinical development in both biotech and pharma companies in and outside of the U.S. [ Michelle ] is an excellent fit for Compugen and will be a great partner to me in the collaborator to the whole team as we work together on executing our programs to accelerate value creation. I would like to take this opportunity to thank Henry for his major contributions and commitment to Compugen and his leadership. Henry has been instrumental for the successful transition of Compugen from a preclinical to clinical stage company and creating the growth opportunities in front of us. Moving now to the highlights of 2023. Our successes in 2023 and in the last quarter, in particular, position us well as we advance into 2024 and are expected to play an important role in the exciting future and vision for Compugen. Firstly, at the end of the year, we executed a preclinical licensing deal with Gilead for a total deal value of up to $848 million including a $60 million upfront payment and $30 million near-term milestone payment and with additional single-digit to low double-digit royalties on future net sales. Delighted by Gilead of COM503, for which we are expected to lead Phase I development further validates our computational discovery, research and development capabilities. It is also a testament to the differentiation of our antibody program targeting the IL-18 binding protein. The deal process was competitive, which reflects the significant interest in the IL-18 space and highlights the potential of our contactor differentiated antibody approach. As a reminder [ COM503 ], a potential first-in-class anti-IL-18 binding protein antibody represents a novel way to harness IL-18 pathway biology for the treatment of cancer by using an antibody against IL-18 binding protein and therefore, potentially avoiding the challenges presented by [indiscernible]. Secondly, focusing on execution and advancing the development of our clinical stage assets, we initiated true proof-of-concept clinical studies with our differentiated COM701 combination in platinum-resistant ovarian cancer and metastatic microsatellite stable colorectal cancer. We completed enrollment in the ongoing MSS CRC study and we significantly ramped up the enrollment of our ongoing [ POC ] study with enrollment of at least 20 patients expected by the end of the first quarter of 2024. In addition, we presented new data at scientific conferences throughout 2023, including preliminary evidence supporting the association between the biomarker, PVRL2 and clinical benefit intended to guide the next step in our development path for COM701 combination. Thirdly, in the fourth quarter of 2023, our partner, AstraZeneca, [indiscernible] their PD-1 TIGIT bispecific, the digit component of which is derived from Compugen COM902 into Phase III development in biliary tract cancer. Dosing of the first patient in this Phase III trial entitled us to a milestone payment and brings Compugen one step closer to a potentially marketed drug. AstraZeneca's broad clinical investigation of this asset across multiple indications and across various lines of treatment and combination increases on probability of realizing future milestone payments and royalties. Finally, the cash received from our licensing deal with Gilead and milestone met by AstraZeneca in 2023 allow us to move into 2024 with a solid balance sheet. The additional cash we received and the cash we expect to receive upon IND clearance of COM503 is expected to extend our cash runway from the end of 2024 into 2027, and potentially accelerate value creation by enabling us to invest in enhancing our discovery capabilities and advancing our diversified portfolio, including our differentiated COM701, COM902, IO combination strategy, the Phase I development of COM03 and our early-stage innovative pipeline. This is an expecting time for Compugen. This is a good segue for me to move to what to expect from us in 2024. 2024 is planned to be a catalyst-rich year for us with multiple data readouts and update expected from our diversified portfolio. In 2024, we plan to share data from our ongoing proof-of-concept study, NSCLC and platinum-resistant ovarian cancer. These are particularly challenging indications to treat and have historically failed to respond to neurotherapy. While we believe that these indications represent a very high bar, we have previously presented encouraging clinical data supported by immune activation, suggesting that the unique biology of PVRIG enables anti-PD-1 activity in this challenging indications. The goal of these studies is to further substantiate our clinical findings including our initial biomarker results to potentially enable us to move forward with the biomarker and reach development strategy. Regarding NSCLC, in the first cohort of 22 patients treated with COM701 in combination with nivolumab, we showed an encouraging overall response rate of 12% and stable diseases in patients with liver metastases, a patient population, which historically has not responded to other drugs. For the ongoing proof-of-concept study, our objective is to understand if there could be an additional benefit of adding an anti-TIGIT to the dual combination and further evaluate the combination in the liver metastasis patient population which represents approximately 70% of the patient population in the evaluated line of treatment. The ongoing study fully recruited in 2023 at a speed which we believe reflects the significant unmet need. Data presentation from this ongoing study is planned for the first half of 2024 with the aim to be presented at a medical conference. You can expect to see baseline characteristics, including safety, over response rate, disease control rate, duration of response and translational data. In patients with platinum-resistant ovarian cancer, based on the data from the first cohort of 20 patients treated with triple combination, there was a last excitement from investigators reporting durable shrinking or stabilization of tumors in some of their patients who had previously progressed on all available treatment options. We believe the totality of the data reported in these patients is encouraging compared to the current standard of care. We presented a 20% overall response rate with patients responding for over 16 months, which is favorable considering median duration of response for single-agent chemotherapy is around 3 to 4 months and in ADC is around 6.9 months. Responses were also achieved in the hard-to-treat high-grade serous adenocarcinoma patients, along with a favorable safety profile. For the ongoing study in platinum-resistant ovarian cancer, we are delighted to report that our investigators are active on recruitment and we expect to complete recruitment of at least 20 patients this quarter and plan to present in the fourth quarter of 2024. Again, our preference will be to present at a medical conference. For this ongoing study, you can expect to see baseline characteristics and data for at least 20 patients, including safety, overall response rate, disease control rate, duration of responses and preliminary biomarker data. Moving now to COM503. Rapid execution on both COM503 IND clearance and Phase I development is a priority for us and were intensified by Gilead on this priority. We greatly value the partnership with Gilead. And together, we're well advanced on the Phase I trial design and feel confident that we can initiate Phase I shortly after we gain IND clearance. We are on track for IND submission in the second half of 2024 with subset point initiation of the Phase I study following IND clearance. Finally, in the second half of 2024, AstraZeneca expects data from their Phase I/II [ OTIMIZE-I ] trial in [ nonsmall-cell ] in cancer in frontline setting in the Phase II GEMINI trial in hepatobiliary cancer. Before handing over to Alberto to go through our financials, I want to emphasize that we will continue to be financially disciplined while benefiting from our solid cash position to enhance and advance our company. We're strategic with how we deploy our resources, and this will include 2 main priorities: one, advancing our clinical stage programs, COM701 and COM902 combination and COM503 upon initiation of its clinical study; and two, investing in Compugen's core competitive advantage, the integration of our computational discovery platform with innovative research and drug development capabilities. In terms of COM701 combination, advancing our ongoing studies will be data and biology driven. In [ PARP ], we believe data showing durable responses and additional biomarker correlation are expected to allow us to move ahead employing a predictive biomarker enrichment strategy. As a result of the evolving platinum-resistant ovarian cancer treatment landscape, we see the opportunity for COM701 combination to be used in the treatment option in 2 patient populations, those progressing on ADCs and those ineligible for ADC. In MSS-CRC, the bar is very high due to the many failures and the nonresponsive nature of the liver metastasis patient population. We believe the data showing an overall survival advantage over standard of care would be encouraging. Our study in MSS-CRC is still ongoing as some of the patients enrolled only in September '23. And based on data from the overall and deliver metastasis, patient population, we will determine the next steps. Based on the encouraging safety and efficacy data generated to date, with our COM701 combination across indications, we believe there is an opportunity to collaborate with potential partners to bring COM701 combination to patients across a broad range of indications, generating a potentially large opportunity. For the second main priority, we will continue to invest in the engine powering our core competitive advantage. We're skilled and highly experienced in integrating cutting-edge computational capabilities with groundbreaking immuno-oncology research and drug development expertise to discover novel drug targets. Investing to enhance our computational discovery platform from computer prediction to early-stage programs, we believe, will enable us to progress the generation of novel drug candidates, the next COM503. And finally, our focus remains on non-diluted funding for which we have demonstrated in 2023, we can successfully execute on. With that, I turn the call over to Alberto.

Thank you, Anat. I'm delighted to say that we advanced into 2024 with a solid balance sheet. This is a result of competent accomplishments on the collaboration front in 2023, securing non-dilutive funding, which was always our priority. With cash at end to date and the milestone payment we expect to receive upon IND clearance of COM503, we expect to extend our cash runway to support our operating plans into 2027. Going into the details, I will start with our cash balance. As of December 31, 2023, we had approximately $51.1 million in cash, cash equivalents, restricted cash and cash investments compared with approximately $83.7 million as of December 31, 2022. The cash balance at the end of 2023 does not include the receipt of $60 million upfront payment from Gilead for our COM503 preclinical license and $10 million milestone payments from AstraZeneca on dosing the first patient in the Phase III trial. In addition, in 2024, we expect to receive from Gilead, an additional $30 million milestone payment upon COM503 IND clearance. I would like to remind you that all payments from Gilead are subject to 15% withholding tax. The company has no debt. As Anat mentioned, we understand the importance of our cash balance, and we are financially disciplined. Based on our current plans, we expect that our current cash, together with the milestone payment able upon COM503 IND clearance will be sufficient to fund our operating plan into 2020. The cash run rate reflects the planned development of our clinical assets and continued investments in our early [indiscernible] pipeline. On the revenues front, we reported approximately $33.5 million in revenues for the fourth quarter of 2023 and for the year ended December 31, 2023, compared to $7.5 million in revenues for each of the comparable periods in 2022. The revenues for the year ended December 31, 2023, include the portion of the upfront payment from the license agreement with Gilead allocated to the license and the clinical milestones from the license agreement with AstraZeneca in the amount of $10 million. Now moving to expenses. R&D expenses for the fourth quarter of 2023 and for the year ended December 31, 2023, were $10.9 million and $34.5 million, respectively, compared with $7.3 million and $30.6 million for the comparable period in 2022. The increase in 2023 is mainly due to lower amortization of the deferred participation in R&D expenses following the termination of the agreement with BMS, offset by decrease in head count return expense. Research and development expenses as of the percentage of the total operating expenses were approximately 78% in 2023 compared to 73% in 2022. Our G&A expenses for the fourth quarter of 2023 and for the year ended December 31, 2023, were $2.5 million and $9.7 million, respectively, compared with approximately $2.5 million and approximately $10.3 million for the comparable period in 2022. Finally, on net loss. For the fourth quarter of 2023, we report a net profit of $9.7 million or $0.11 per basic and diluted share compared to a net loss of $3.1 million or $0.04 per basic and diluted share in the comparable period of 2022. Net loss for the year ended December 31, 2023, was $18.8 million or $0.21 per basic and diluted share compared with a net loss of $33.7 million or $0.39 per basic and diluted share in the comparable period of 2022. With that, I will hand back to Anat to summarize.

Thanks, Alberto. To summarize, 2023 was a very successful year for Compugen, both on the execution front and the validation of our computation discovery and development capabilities, including the exciting preclinical license deal with Gilead for our IL-18 [ IBP ] immunology program, the initiation of 2 proof-of-concept studies in presentation of preliminary predictive biomarker data with our unique and innovative [ triple ] IO combination and progress by our partner at [ Saverica], initiating a Phase III trial with [indiscernible]. Our accomplishments in 2023 position us well for catalyst to reach 2024 and with an extended cash runway expected into 2027, which we believe will support the development of our clinical assets and novel early-stage pipeline. Partnering remains an important part of our strategy and we'll continue to focus on collaborating to extend the reach of our potentially first-in-class medicines to cash the patients and to accelerate value creation. I would like to thank all our colleagues here as confidence for their passion and commitment to our success in 2023 and their dedication and readiness to drive for success in 2024. With that, I will turn the call over to questions. Operator?

[Operator Instructions]. The first question is from Ashtika Goonewardene of Truist.

Congrats on all the progress that have been made. So agreed, looking forward to seeing how the catalyst play out this year, this will be a very interesting year for the company. I just wanted to check in on the colorectal cancer data, which I'm sure I think everyone on the call is probably assuming that we could see that around [ ASCO]. Perhaps I missed this, will you have biomarker data in that presentation? I know you said you have some translational data, but I just want to specifically clarify if there will be biomarker data that you can tie to response?

So it's a very good question. And we did say that it will relate to translational I want to remind you with the prior cohort of 22 patients where we disclosed the data already in '23, we did not share biomarker correlation. We did not see biomarker correlations in CSC with the prior cohort. If you will have anything to report with the next cohort, we'll do that. But I think that it's fair to say to mention that up until now, we did not see in the par cohort biomarker correlation. Eran, is there anything that you want to add on this front?

No. As always, we're doing a lot of efforts in all fronts to analyze both correlation to response and pharmacodynamic markers. And then whatever will be relevant by the time of the presentation will be shared.

Got it. And then with -- with the platinum-resistant ovarian cancer data that will be presented later on this year. At the time of the presentation, I know you will have some preliminary biomarker work. But can you talk about what -- maybe your plans are the next steps then in terms of developing a potential companion diagnostic?

I think that it's fair to say that we're now at the stage that we're looking -- as we said last time, we're optimizing the [ SA ] while we're testing the samples that we have in place, those that we already tested and new ones. The aim is to be able to set a cutoff and to have an [ assay ] that we can use. It does not necessarily need to be a companion diagnostic level in terms of the assay itself is in order to be used in clinical trials. So we will -- if the data will repeat itself, and we'll see correlation. We'll make sure that we have an assay that can be used to select patients in a clinical trial. Not necessarily, this will be the assay that will be used eventually if everything goes well as a companion diagnostics in the market just to make sure that this is clear. But if data looks good, we'll make sure that we have the state to select patients ready.

The next question is from Daina Graybosch from Leerink.

I have a follow-up to Ashtika there. And that to my ear, it sounds like not you're emphasizing the biomarker enrollment strategy much more in this earnings call than you have in many quarters. So what changed, data or strategy-wise, that's leading to that change in emphasis?

So I think, first, I don't know that we emphasize more, but at least I'll say how we see path forward in light of potential data and in light of the competitive landscape. I think that we all recognize how the competitive landscape -- competitive treatment landscape is changing over time with nivatuximab, but also maybe additional ADCs and we understand that with the biomarker, we may have an edge. And having a biomarker ethane place will allow us to go into a study that is well designed, gives us a higher probability of success, maybe a smaller study. We believe that a biomarker will give us an ad. So not implying anything with respect to potential data outcomes. And as you know, we're still enrolling patients, we are only anticipating to complete enrollment by the end of the quarter. I think that it's natural for us looking at the competitive landscape to try to look for places where we can see an edge to ourselves. I will also add other than the biomarker, we also understand that there are now 2 populations that we may target. This is those that are progressing on ADCs and those that are not eligible for ADCs. And we're also looking to see where we may have an add just on these 2 populations. So maybe that would give some more color on the focus of this call.

And then maybe one follow-up. I heard you say at the end in your wrap up that you're looking to partner COM701 with other companies potentially in other novel combinations? Are you thinking any specific novel combinations? Or can you talk more about that strategy?

I think, look, partnering COM701 and COM902 -- and/or COM902 was always something that we took into consideration, and that's because we're not intending to take the program alone to the market. And I think that today, with the data that we have in place, which is kind of broad across indications, all of these indications that we show data is really how to treat 2 more types that where we were able to show durable responses that then with the patients that responded, good tolerability that allows for combinations. We're thinking not only on what we're doing internally, but we are also thinking about how to broaden the opportunities for our drugs. And we recognize the fact that there is -- obviously, as a small biotech company, there is a limit to what we can do and for us, broadening the opportunities through collaborations is a priority. So that's it. I will let Eran relate more to the mechanism of action, potential combination strategy based on this mechanism of action and the toll [indiscernible] safety profile. Eran, maybe you want to add a few things about it.

Yes. So we've shown quite extensive with the [indiscernible] unique checkpoint then that block in [ piverogene ] did conciticize tumors to TIGIT and PD-1. So and this is what we're testing, right, the triplet combination, which is an IO, pure combination, extremely safe, very good [ reliability ] profile and hope to see the signals mature, and we'll share it later this year. But of course, the potential is out there. It could be combined with chemotherapies, we combine in earlier lines of therapy. I mean this mechanism of action of PVRIG could be relevant also in many other aspects providing a relatively safe approach that could drive T cells into the tumor, and we believe this could be combined also in regardless of the triplet combination we are pursuing.

The next question is from Stephen Willey of Stifel.

I think you may have mentioned it on the call, but can you just maybe speak to, I guess, the efficacy metrics. I know there's a lot of talk about the biomarker strategy. But can you speak a little bit to the efficacy data that you're going to be kind of using out of the colorectal trial to make a decision. And I guess I asked the question because the historical disconnect here that tends to exist between response rate and event-driven data in this tumor. And then, I guess, there's obviously a lot of different IO-based regimens that are pursuing the non-liver met population. Is that something that is interest to you to look at as a potential development opportunity? Or do you think that, that landscape has kind of become a bit crowded?

So I think that it's fair to say that when we're looking at what -- how we will judge our data, it's really with respect to the benchmarks and what would what would be relevant based on the standard -- based on standard of care, but also based on other clinical trials -- I think that -- and let me share relate to it, but I think that it's a fair point that you raised the data that we were seeing in the data that we've disclosed already is really data within the liver met population that was intriguing for us because really, this is a very hard to treat patient population. Really, there are no agents there that are really targeting this patient population. And I think that when we would have our data in front of us, we will look at the overall population, but we will also take a close look at the liver mass, where we believe that we have an ad. So I'll let [ Michel ] speak about how we may look at our data as compared to benchmarks.

Great. Thank you. Thanks for the question. I think that you made a very good point, and we think about the data quite similarly. So in early stage clinical trials, as you know, we often look at overall response rates as a way to test whether there's a proof of concept. And it's often seen as a target for other end points that are related to progression-free survival and overall survival. But I think also in these hard-to-treat populations, we cannot ignore the sustained stable disease responders, keeping in mind that once a lot of these drugs go on to Phase III registration studies, the primary endpoints are no longer overall response rate. And many times, they're reporting out a primary endpoint of overall survival. So when we look at single-arm studies, we have to interpret survival endpoints with the limitations that we have, knowing that our data sets are small, single-arm studies, but we also have to keep in mind the big picture in terms of what are the registration end point. And so I think it's important not to ignore the patients that have sustained responses of stable disease, and that's where the disease control rate becomes relevant in looking at the data. So we will look at the totality of the data to be able to make these go/no-go decisions and we will also look at it with an eye towards what will be the survival benchmarks as the landscape is evolving. And with that, I think happy to elaborate if you have additional questions.

And I just guess any interest specifically in maybe looking at the non-libermat population more granular detail? I know you probably only have a handful of these patients represented in the [indiscernible].

So I just want to clarify that you're talking about the patients without liver metastases because that data is actually targeted to the most difficult-to-treat patient population. So in the data that was previously presented, 75% of the patient population had liver metastases.

There's obviously a subgroup of [ nonlibermab ] patients that are now being pursued by a variety of companies with a various number of IO-based [ regimens ].

Okay. So given what we're seeing and what we've presented in our patients with [indiscernible], it still remains an area of focus for us. Yes, I think just -- Steve, I'll just add that we recognize the fact that there is not a lot of data there for [ LiveMe ] at all. I think that there is some data maybe by relating to overall survival, median overall survival of 8.7 months, et cetera. We're taking all of this into consideration and an overall response rate is not there at all for [ liver met ] and we will look at our response rate. We do expect that in our patient population, we have the same representation of the population in terms of the [ liver met], most of the -- more than 70% of the patients in this line of treatment that we are enrolling are having liver met. So we expect that we have the same representation in this and we will take a careful look at this patient population because we do think that we may have an edge there.

Okay. And then I guess just on the partnering optionality front, can you just remind us, are you exclusive with Astra on COM902? Or is that just specific to the use of bispecific antibodies incorporating the [indiscernible] domain? And I guess I just asked the question because I mean, obviously, Gilead just made a fairly strong lotto confidence in a silent digit. I know that there's probably some scarcity value around that.

So totally, the latter, the latter. So AstraZeneca has the right to use the COM902 segment in their bispecifics. So they got the rights to develop bispecific based on our COM902. We own COM902. We also kept ourselves right for sudden bispecifics that we have an interest in. So for example, the [ TIGIT ] PVRIG or TTP variant with our COM902 is our -- we do -- we totally relate to COM902 as an asset. It's nice to say that you noted that you mentioned the FDA question, which we were always saying always that it either do not matter does not matter or that if it matters, then it should be a silent one. And we're happy to see that there is data now supporting it. We own COM701 and COM902. We believe that these are good partnering opportunities. We have our own plans to move ahead with these assets internally, obviously, in a data-driven manner, in a biology-driven manner. But we do think that these are drug assets that can generate collaboration opportunities for us. And we will intend to proceed because we believe that with partners, we can broadly test them. And as I answered today in -- but I think that one of the key things that should be mentioned. We tested COM701, COM902 combination in the most hard-to-treat patient population it gives us an edge. You can test it in single-arm studies, but one cannot ignore that these assets have a potential in the inflamed tumor type and this is a great opportunity based on the data that we have and the data that we have in supporting COM701 driven effect, we believe that it could serve as good partnering opportunities. And hopefully, the TIGIT data that is out there and that will be out there by the companies that are leading this field will allow us to clear the air for TIGIT at least to understand that there is a benefit by adding TIGIT to PD-1 and that there is a third component that is needed. And I think that the word start to say that there is a third component that is needed, and we believe that it's PVRIG. So yes, on partnering front, that's how we think about it.

This concludes the Q&A session and Compugen's Investor Conference Call. Thank you for your participation. You may go ahead and disconnect.