Neoleukin Therapeutics, Inc. (NLTX) Q4 2020 Earnings Call Transcript

Neoleukin Therapeutics, Inc. (NLTX)
Q4 2020 Earnings Call
Mar 25, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and thank you for joining us today for the Neoleukin Therapeutics conference call. [Operator instructions] As a reminder, today's conference call is being recorded. I would now like to turn the call over to Julie Rathbun, communications for Neoleukin Therapeutics. Julie, please go ahead.

Julie Rathbun -- Investor Relations

Thank you. Good afternoon, and welcome to Neoleukin Therapeutics year-end 2020 conference call. Joining me on the call today from Neoleukin are Jonathan Drachman, CEO; and Bob Ho, CFO. During today's call, Jonathan will provide an overview of recent events and update on the company's progress and upcoming milestones.

Bob will then provide a summary of financial results. Today's call is being recorded. It will be available for replay on the investor relations section of the Neoleukin website approximately two hours after the call for at least 30 days. Before we start, I'd like to remind you that today's call will include forward-looking statements based on current expectations.

Such statements represent management's judgment, intentions, beliefs, and expectations about future events, strategies, product candidates, and operating plans. All forward-looking statements included in this presentation are made as of today and involve assumptions, risks, and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements. Neoleukin undertakes no obligation to update or revise any forward-looking statements. Please refer to the company's filings with the SEC, which are available from the SEC or on the Neoleukin website for information concerning the risk factors that could affect the company.

I'd now like to turn the call over to Jonathan Drachman.

Jonathan Drachman -- Chief Executive Officer

Thank you, Julie, and good afternoon. I'm pleased to have this opportunity to review our recent progress, as well as look ahead to our priorities for 2021. 2020 was a remarkable year for Neoleukin Therapeutics. It was our first full year as a public company.

And despite the challenges of the pandemic, we grew significantly, doubling the size of our team and establishing our new headquarters in Seattle. Our key scientific accomplishments for the year include: first, completing preclinical development of NL-201, our lead de novo protein program and submitting regulatory applications in the U.S. and Australia; second, presenting new preclinical data demonstrating potent monotherapy activity and combination data across a broad range of tumor types; and third, designing and testing NL-CVX1, a de novo protein decoy for SARS-CoV-2, which has demonstrated the ability to protect rodents after intranasal prophylaxis. 2021 will be another exciting year for the company as we anticipate transitioning to clinical development.

Our priorities this year are: first, we're working diligently to address the clinical hold for NL-201 and initiate what we believe will be the first clinical trial with a fully de novo protein; second, we're focused on our pipeline, developing future IND candidate using the de novo protein platform to address unmet medical needs; and third, we'll continue to invest in our people and culture as we believe this is critical to long-term success and achieving our ambitious goals. It's been over a year since we were first impacted by the COVID-19 pandemic. We instituted work-from-home guidelines last March and other safety protocols intended to keep our workforce safe and healthy. We've been able to gradually bring a portion of our research staff back to work without any work-related infections.

In February of this year, we were able to occupy our new headquarters facility in Seattle with greatly expanded office and lab space, enabling more research personnel to work on site. As the rollout of vaccines proceeds, we will continue to monitor guidance from Washington State and the CDC and refine our policies as appropriate. Throughout 2020, we remain focused on advancing our lead immunotherapy program, NL-201, toward clinical testing. NL-201 is a potent de novo agonist of both the IL-2 and IL-15 receptors, which expands cancer-fighting effector T cells and NK cells.

Unlike other approaches in development that are modified forms of native IL-2 or IL-15, NL-201 is designed as a completely new protein with no potential binding of the alpha subunit or CD25 and increased potency on both T cells and NK cells compared to native IL-2. In November, we submitted a clinical trial notification or CTN application for NL-201 in Australia. In December 2020, we submitted an investigational new drug or IND application with the U.S. Food and Drug Administration.

On January 7, 2021, we received a clinical hold letter from the FDA requesting that we develop a new assay for methods of use testing to increase precision and to demonstrate the dose preparation and administration procedures will accurately deliver the intended dose of NL-201. We are working to address the FDA's questions as quickly as possible and currently expect to resolve the clinical hold, as well as to begin enrollment of patients in the first half of 2021. We will provide notification when the clinical hold is lifted. Our first-in-human clinical trial of NL-201 will focus on intravenous monotherapy administration in up to 120 patients with relapsed or refractory solid tumors.

The trial will include the evaluation of multiple schedules and dose levels of NL-201 in order to assess safety, pharmacokinetics, immunogenicity, pharmacodynamics, and antitumor activity. After a recommended dose and schedule is identified, we plan to enroll indication-specific expansion cohorts, including patients with renal cell carcinoma and melanoma. In addition to our systemic trial, we're planning to begin a study evaluating local administration of NL-201 in order to achieve higher drug concentrations in the tumor microenvironment and to decrease the potential risks of systemic exposure. The company expects the local administration trial to begin by the end of 2021.

We continue to expand our knowledge of NL-201 and its anti-tumor activity through the evaluation of a variety of syngeneic tumor models and novel regimens. In November 2020, we presented preclinical data on NL-201 at the Society for Immunotherapy of Cancer Annual Meeting. These data highlighted multiple experiments of NL-201 in combination with immunotherapies and demonstrated that NL-201 has additive or synergistic activity when combined with checkpoint inhibitors and tumor-targeting antibodies in preclinical models. We believe that NL-201 could work broadly across many indications and in combination with a wide variety of standard-of-care agents.

Turning now to our pipeline. We're just beginning to explore the range of possibilities that the Neoleukin de novo protein technology platform has to offer. Our approach represents a revolutionary shift in the way new drugs are developed using computational algorithms to build proteins that fit specific binding sites using high-resolution structural information. By creating completely new molecules, we can optimize multiple parameters, including potency, affinity, stability, size, and exactly which part of the target receptor is engaged.

The development of NL-CVX1, our de novo protein designed to prevent or treat COVID-19, demonstrates both the broad applicability and speed of de novo design to tackle serious biological problems. As reported and published in science this past November, our optimized protein acts as an ACE2 decoy binding to the SARS-CoV-2 spike protein with high affinity, preventing association with the viral receptor ACE2 and blocking cellular entry. NL-CVX1 has been shown to prevent infection of multiple human cell lines in vitro and to protect hamsters from serious consequences of SARS-CoV-2 infection when administered intranasally. Our team was able to develop this molecule in under three months, highlighting the speed of our de novo protein platform.

We're currently evaluating the resiliency of this molecule against new variants of SARS-CoV-2 and planning for a potential first-in-human trial. We will continue to evaluate the program as the SARS-CoV-2 landscape evolves. I'd now like to discuss our ongoing research and pipeline activities. We're focused on expanding the capabilities and sophistication of our computational methods to remain leaders in de novo protein design.

Our research priorities include: first, choosing high-impact targets for activating or suppressing specific immune cells that would benefit from a de novo approach to increase specificity, stability, or conditional activation. Understanding the biology of the target receptors will enable us to have the greatest impact to help patients with cancer and inflammatory diseases. Second, widening the therapeutic index of potent immuno-oncology therapy by modifying the biodistribution and developing conditional activation strategies such as the split technology that was featured at AACR in 2020. And third, increasing our understanding of de novo proteins so that we can continue to focus on therapeutic candidates that are hyperstable, well behaved in vivo, and minimize the risk of immunogenicity.

These efforts will enable us to remain leaders in the emerging field of de novo protein design. We anticipate presenting data on one or more of our research programs during the second half of this year. All of these accomplishments and ambitious goals are made possible by our dedicated and talented employees. Our team has grown significantly in the past year.

At the end of 2020, we had approximately 70 full-time employees. The majority of this growth occurred in research and clinical. We expect to continue to grow during 2021. I'd like to highlight a few specific additions to our team during the latter part of 2020.

In October, we announced the appointment of Holly Vance as General Counsel. Holly previously served as Associate General Counsel at the Bill & Melinda Gates Foundation and brings a wealth of legal experience in corporate and transactional matters. And in September, Martin Babler joined our board of directors. Martin is former president and CEO of Principia Biopharma, where he helped advance the company's platform of therapeutic candidates for immune-mediated diseases.

We've assembled an experienced, dedicated team at Neoleukin and are committed to fostering an environment of diversity, equity, and inclusion. With that, I'd now like to turn the call over to Bob to discuss our year-end 2020 financials. Bob?

Bob Ho -- Chief Financial Officer

Thanks, Jonathan, and good afternoon, everyone. We ended 2020 with cash and cash equivalents of $192.6 million compared to $143.1 million in 2019. The increase year over year was primarily driven by the completion of a common stock offering in July 2020 for net proceeds of $71.3 million. Research and development expenses for the year were $24.3 million compared to $4.4 million in 2019.

The increase was primarily driven by expenses incurred from IND-enabling activities related to our lead product candidate NL-201 and investments in connection with the advancement of other technologies in our de novo protein platform. G&A expenses for the year were $17.2 million compared to $18.8 million in 2019. The higher G&A expenses in 2019 are a result of one-time expenses incurred in the merger between Aquinox and Neoleukin. G&A expenses in 2020 also reflect increases in personnel and facility-related costs, as well as professional service fees.

In 2020, we also sold our Canadian subsidiary, Aquinox Canada. The sale resulted in a one-time gain of $7.8 million that reduced our operating loss for the year. As such, net loss in 2020 was $33.3 million compared to $69.4 million in 2019. The higher net loss in 2019 is primarily due to the acquired in-process research and development expense from the Aquinox-Neoleukin merger.

In summary, our operating cash burn for the year was approximately $35 million after adjusting for the one-time proceeds from the Aquinox Canada sale. Based upon our current operating plan, we believe our cash on hand will be sufficient to fund operations into 2023. And with that, I'll turn the call back over to Jonathan for some concluding comments.

Jonathan Drachman -- Chief Executive Officer

Thanks, Bob. Neoleukin has evolved significantly in just over two years since the company's formation. I'm excited about the transformational activities that are planned during the remainder of 2021. We look forward to the start of clinical trials for our lead oncology product candidate, including both systemic and local administration.

We will continue to progress our de novo protein research, and we will be expanding our development pipeline by creating new product candidates for cancer and inflammation. We've enjoyed meeting virtually with many members of the investment community over the past year and look forward to times when we can meet again in person. We're thankful for our dedicated team at Neoleukin and for the support of our shareholders. Throughout it all, we remain focused on our overriding goal to advance our de novo protein technology platform to benefit patients with serious diseases, including cancer, inflammation, and autoimmune diseases.

Operator, we can now open the call up for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Tyler Van Buren with Piper Sandler. You may proceed with your question.

Tyler Van Buren -- Piper Sandler -- Analyst

Hey, guys, good afternoon, and congratulations on all the progress. I guess the first one is the statement in the release and the prepared remarks where you said that you expect to resolve the clinical hold, as well as begin enrollment of patients in the first half of the year, I guess, another three months last year. So that sounds pretty promising. I guess, could you say anything about the nature of the FDA's questions? And maybe what you've resolved since the original hold was put into place that gives you guys confidence that you'll be able to do that? And then the second part is on the trial that we'll be initiating with NL-201.

Understand, obviously, safety, PK initially will be important. But is it possible that we could have kind of initial biomarker data by year-end? And specifically, what biomarkers are you most focused on?

Jonathan Drachman -- Chief Executive Officer

Great, thanks. Thanks for the question, Tyler. So first, as far as the clinical hold goes, since we were notified by the FDA of their questions, we've been working really hard at addressing those specific issues. And they're really related to methods of use testing, not assays or anything that would be used as part of the clinical trial.

Fortunately, there were no issues that would require long time periods to go back and repeat things like manufacturing or toxicology or anything like that. And we really felt like the -- what was being asked was fairly straightforward and that we would be able to do this in a number of months. So we are not going to be providing more details other than reaffirming our timeline. And just as a reminder that we are looking at initiating the trial both in Australia and in the U.S.

As far as the clinical data and when we could present information, I think that we will present data as soon as it makes sense from having enough information to really be meaningful. I think that most likely that would be in 2022 and that would be my guidance at this point.

Tyler Van Buren -- Piper Sandler -- Analyst

OK.

Jonathan Drachman -- Chief Executive Officer

And obviously, in terms of biomarkers, it's the usual things, looking at PK immunogenicity and obviously, changes in proliferation of target cells, as well as what's happening at the tumor and the tumor microenvironment.

Tyler Van Buren -- Piper Sandler -- Analyst

OK, perfect. Thank you so much.

Jonathan Drachman -- Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Greg Harrison with Bank of America. You may proceed with your question.

Unknown speaker

Good afternoon. Thanks so much for taking our question. This is Jason from Greg's team on the line. Congrats on the progress and for the color thus far.

I was hoping you could provide a little bit more commentary on how the delay for the 201 trial affects the overall R&D approach? Is this something that's going to impact other programs down the line? And is this something that you can see is getting out of the way or is this unique to 201, any sort of insight would be very helpful? Thanks.

Jonathan Drachman -- Chief Executive Officer

Thanks for the question, Jason. I don't see this -- the issues that were raised on review as having any impact on the rest of our portfolio or program. This was really focused on the fact that this is a very potent immune agonist that is going into people for the first time and just having a level of precision that might be greater than what you would have with other mechanisms of action was something that the reviewer wanted to see. I don't see that as having an impact on the other things that we're doing or necessarily on future programs.

Unknown speaker

Got you. So in terms of maybe validating the platform at all with the precision of the molecule, do you think that has any impact at all?

Jonathan Drachman -- Chief Executive Officer

Not in terms of the assay that we're working on. That was really about how we wanted to measure very small quantities of protein. So I think that from the precision standpoint, that has to do with the mechanism of action and how the protein is designed. And that's not anything that's in question.

Unknown speaker

Perfect, fair enough. Thank you so much for the color. I appreciate it.

Jonathan Drachman -- Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Arlinda Lee with Canaccord. You may proceed with your question.

Arlinda Lee -- Canaccord Genuity -- Analyst

Hi, guys. Congrats on the progress, and I had a couple of questions. One, can you maybe talk about how you expect to develop the local administration versus the IV administration? Are you planning to go into similar indications or not? And how do you think about that? And then secondly, on your COVID competitors. I'm wondering -- I think in the science article, you talked about how this might help to address variants and I'm curious how that was engineered into the program? Thank you.

Jonathan Drachman -- Chief Executive Officer

Sure. Let me -- I'll start with the local administration question and then go -- move to the COVID molecule. With local administration, various cytokines have been used locally for years. And one of the rationale to look at that is that it enables you to get much higher local concentrations without getting the high systemic concentrations.

There's a lot of different ways that you can administer an immune activator locally. It could be directly injected into or around the tumor. It could be given in an intravesical form as an IL-15 agonist is being done into the bladder. It could be used in inhaled or other formats.

And in all of those cases, the goal would be to get a very strong local response, and then there's a possibility that, that would also create activated immune cells that could go to other parts of the body and have an abscopal effect. And so either by itself or in combination with other systemic therapy, it could result in better results. It's -- I think that it's very important to understand whether -- whenever you have a very potent molecule, if the activity is being driven more by the local activation or the systemic activation and then cells moving to the tumor. And this will really help us to understand that and help us to plan future molecules that might be either systemic or targeted.

So I'm really excited about that trial and learning a lot more about NL-201. I think it will complement what we learned systemically in many ways. As far as the COVID molecule goes, when it was designed using the de novo platform, the goal was to exactly -- or as exactly as possible to mimic the portion of the angiotensin-converting enzyme 2 or ACE2 protein that interacts with the receptor-binding domain of the spike protein. And the reason that that was important and not just to bind the spike protein anywhere was we wanted to have an exact interface that looked like the human receptor for entry of the virus.

And the reason was even a year ago, we were thinking if the virus were to mutate or evolve as RNA viruses do, it still needs to bind to ACE2 to get into human cells. And by making something that would compete with ACE2, we felt that it would be almost -- it would be very difficult for the virus to mutate in such a way that it could still get into human cells and would not be blocked by this protein. So we -- that still needs to be empirically tested as variants evolve. But if a new variant evolves, that can -- is more infectious, it should also be binding to the NL-CVX1 protein more tightly.

So there should be a correlation between the -- any mutation of the virus, and it shouldn't be able to evade our protein and still bind to ACE2. Does that make sense?

Arlinda Lee -- Canaccord Genuity -- Analyst

Yes, thank you very much.

Jonathan Drachman -- Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Michael Schmidt with Guggenheim. You may proceed with your question.

Bob Ho -- Chief Financial Officer

Michael, are you on mute?

Jonathan Drachman -- Chief Executive Officer

Operator, we're not hearing Michael.

Bob Ho -- Chief Financial Officer

Josh, are you still there? So it seems like we lost our operator. I'm not sure if there are any other questions, but happy to follow up with those as needed. Jonathan, do you want to close it out?

Jonathan Drachman -- Chief Executive Officer

Sure. Well, I'd like to thank everybody for joining our call today, and we look forward to sharing our progress with you in the months ahead. Thank you very much.

Bob Ho -- Chief Financial Officer

Hey, Julie, are you there?

Julie Rathbun -- Investor Relations

[Operator signoff]

Duration: 27 minutes

Call participants:

Julie Rathbun -- Investor Relations

Jonathan Drachman -- Chief Executive Officer

Bob Ho -- Chief Financial Officer

Tyler Van Buren -- Piper Sandler -- Analyst

Unknown speaker

Arlinda Lee -- Canaccord Genuity -- Analyst

More NLTX analysis

All earnings call transcripts