Compugen Ltd.

Ladies and gentlemen, thank you for joining us today. Welcome to CompuGen's fourth quarter and full year 2023 results conference call. At this time, all participants are in a listen-only mode. An audio webcast of this call is available in the investor 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 Communications. Yvonne, please go ahead.

Thank you, Operator, and thank you all for joining us on the call today. Joining me from Compogen for the prepared remarks are Dr. Anatko Ndiaye, President and Chief Executive Officer, and Alberta Sessa, Chief Financial Officer. Dr. Michelle Mahler, Chief Medical Officer, and Dr. Iran 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 will make projections or forward-looking statements regarding future events, business outlook, development efforts and their potential outcome, the company's discovery platform, anticipated progress and plans, results and timelines for our programs, financial and accounting-related matters, as well as statements regarding our cash positions. We wish to continue 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 the company's most recent annual report on Form 20F. 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, Michelle Mahler, who took over the role of Chief Medical Officer on March 1st, 2024. I'm really excited to welcome Michelle, an oncologist by training with extensive experience in leading clinical developments in both biotech and pharma companies in and outside of the U.S. Michel is an excellent fit for CompuGen and will be a great partner to me and a 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 CompiGen 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 I envision for Configen. 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. The license by Gilead of COM543, for which we are expected to lead phase one 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 DEEP process was competitive which reflects the significant interest in the IL-18 space and highlights the potential of our COMFY4-3 differentiated antibody approach. As a reminder, COMFY4-3, 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 administration of therapeutic cytokines. Secondly, focusing on execution and advancing the development of our clinical stage assets, we initiated two proof-of-concept clinical studies with our differentiated COM701 combinations 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 PROC 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 advanced revagostamine, their PD-1 TGIC bispecific, the TGIC component of which is derived from Compugen's COM902, into phase 3 development in biliary tract cancer. Dosing of the first patient in this phase 3 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 combinations increases our 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 receive and the cash we expect to receive upon IMD clearance of COM 543 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 I-O combination strategy, the phase one development of COM503, and our early stage innovative pipeline. This is an exciting 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 updates expected from our diversified portfolio. In 2024, we plan to share data from our ongoing proof-of-concept studies, MSS-CRC, and platinum-resistant ovarian cancer. These are particularly challenging indications to treat and have historically failed to respond to immunotherapy. 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 NTPD-1 activity in these 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 a biomarker-enriched development strategy. Regarding MSS-CRC, 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 metastasis, 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-TG 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 needs. 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, overall 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 cohorts of 20 patients treated with triple combinations, there was a lot of 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 ADCs 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 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 COM543 IMD clearance and Phase 1 development is a priority for us, and we're incentivized by Gilead on this priority. We greatly value the partnership with Gilead, and together we're well advanced on the Phase 1 trial design and feel confident that we can initiate Phase 1 shortly after we gain IMD clearance. were on track for IMD submission in the second half of 2024 with subsequent initiation of the Phase I study following IMD clearance. Finally, in the second half of 2024, AstraZeneca expects data from their Phase I-II Artemide I trial in non-small cell cancer in frontline setting and their 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 two main priorities. One, advancing our clinical stage programs, COM701 and COM902 combinations, and COM503 upon initiation of its clinical study, and two, investing in COMPIGEN's core competitive advantage, the integration of our computational discovery platform with innovative research and drug development capabilities. In terms of COM701 combinations, Advancing our ongoing studies will be data and biology driven. In PROC, we believe data showing durable responses and additional biomarker correlations 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 combinations to be used as a treatment option in two patient populations, those progressing on ADCs and those ineligible for ADCs. In MSS-CRC, the bar is very high due to the many failures and the non-responsive 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 the liver metastasis patient populations, we will determine the next steps. Based on the encouraging safety and efficacy data generated to date with our COM701 combinations across indications, we believe there is an opportunity to collaborate with potential partners to bring COM701 combinations 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 immunology research and drug development expertise to discover novel drug targets. Investing to enhance our computational discovery platform from computer predictions to early-stage programs we believe will enable us to progress the generation of novel drug candidates the next come 5.3. And finally, our focus remains on non-dilutive funding for which we have demonstrated in 2023 we can successfully execute on. With that, I turn the call over to Alberto.

Thank you, Anastas. 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-delusive funding, which was always our priority. With cash at end-to-date and the milestone payment we expect to receive upon IMD clearance of COM 503, we expect to extend our cash runway 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 patients in the phase three trial. In addition, in 2024, we expect to receive from Gilead an additional $30 million, milestone payments, upon COM 503 IND clearance. I would like to remind you that all payments from Gilead are subject to a 15% withholding tax. The company has no debt. As Anad 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 payments payable upon COM 503 IND clearance, will be sufficient to fund our operating plans into 2027. The cash flow rate reflects the planned development of our clinical assets and continued investment in our early innovative 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 31st, 2023, compared to $7.5 million in revenues for each of the comparable periods in 2022. The revenues for the year ended December 31st, 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 31st, 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 decreasing headcount related expenses. Research and development expenses as a 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 and 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 head back to Anat to summarize.

Thanks, Alberto. To summarize, 2023 was a very successful year for Compuget, both on the execution front and the validation of our computational discovery and development capabilities. including the exciting preclinical license deal with Gilead for our IL-18BP immunology program, the initiation of two proof-of-concept studies, and presentation of preliminary predictive biomarker data with our unique and innovative triple IO combination, and progress by our partner AstroZeneca initiating a phase 3 trial with rilvogastamide. Our accomplishments in 2023 position us well for a catalyst-rich 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 pipelines. 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 cancer patients and to accelerate value creation. I would like to thank all our colleagues here at Configen 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?

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to decline from the polling process, please press star 2. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Please stand by while we poll for your questions. The first question is from Ashtika Gunwarden of Truist. Please go ahead.

Hey, guys. Good morning, and thanks for taking my questions, and congrats on all the progress that have been made. Totally agree. Looking forward to seeing how the catalysts play out this year. This will be a very interesting year for the company. And I just want 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 we'll relate to translational. I want to remind you that with the prior cohort of 22 patients where we disclosed the data already in 23, We did not share biomarker correlations. We did not see biomarker correlations in CRC with the prior cohort. If we will have anything to report with the next cohort, we will do that. But I think that it's fair to say, to mention that up until now, we did not see in the prior cohort biomarker correlations. Iran, 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 whatever will be relevant by the time of the presentation will be shared.

Got it. And then 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 please talk about what maybe your plans are for next steps 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 DSA 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, assay in order to be used in clinical trials. So we will, if the data will repeat itself, And we'll see correlations. 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 assay to select patients ready.

Great. Thanks so much, guys. Thanks for taking my questions. I'll hop back in queue.

Thank you, Chika.

The next question is from Diana Graybosh of Learing. Please go ahead.

Hi. I kind of have a follow-up to Ashika there in that to my ears, it sounds like 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 our 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 nivratuximab and also maybe additional ADCs. And we understand that with the biomarker, we may have an edge. And having a biomarker essay in 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 edge. So not implying anything with respect to potential data outcomes. And as you know, we're still enrolling patients. We're 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 two 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 edge also on these two populations. So maybe that would give some more color on the focus of this call.

And then maybe one follow-up. I think I heard you say at the end in your wrap-up that you're looking to partner Comp 701 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 was always something that we took into consideration, and that's because we're not intending to take the program seriously. 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 tumor types, where we were able to show durable responses with the patients that responded, good tolerability, that allows for combinations, we're thinking not only on what we're doing internally, but we're 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. That's it. I will let Iran relate more to the mechanism of action, potential collaboration, potential combination strategy based on this mechanism of action and the tolerable safety profile. Iran, maybe you want to add a few things about it.

Yeah, so we've showed quite extensively that PVLG is a unique checkpoint, and that blocking PVLG indeed can synthesize tumors to TGIT and PD-1. And this is what we're testing, right? The triplet combination which is an IO, pure combination, extremely safe, very good tolerability profile, and we 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 chemotherapy. It could be combined 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 regardless of the triplet combination we are pursuing.

Great, thank you.

The next question is from Steven Wiley of Stifel. Please go ahead.

Yeah, good morning. Thanks for taking the questions. 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-directed 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 no-go decision. And I guess I asked the question because of the historical disconnect here that tends to exist between response rate and event-driven data in this tumor type. And then I guess there's obviously a lot of different IO-based regimens that are pursuing the non-LiverMet population. Is that something that is of interest to you to look at as a potential development opportunity, or do you think that that landscape has kind of become a bit too crowded?

So I think that it's fair to say that when we're looking at how we will judge our data, it's really with respect to the benchmarks and what would be relevant based on standard of care, but also based on other clinical trials. And I'll let Michelle 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 mass population that was intriguing for us because really, 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 will 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 population where we believe that we have an edge. So I'll let Michelle speak about, you know, 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 surrogate for other endpoints 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 three 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 endpoints. 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.

Let me just guess, any interest specifically in maybe looking at the non-liver mat population in a bit more granular detail? I know you probably only have a, handful of these patients represented in the proof.

I just want to clarify that you're talking about the patients without liver metastases because our 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 non-Livermet 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 Livermets, it still remains an area of focus for us.

Okay.

Yeah, I think I'll just, Steve, I'll just add that we recognize the fact that there's not a lot of data there for liver mets at all. I think that there is some data maybe by a genus that is relating to over survival, median over survival of 8.7 months, etc., We're taking all of this into consideration. I mean, overall response rate is not there at all for liver mass. And we will look at overall response rate. We do expect that in our patient population, we'll have the same representation of the population in terms of the liver mass. More than 70% of the patients in this line of treatment that we are enrolling are having liver mass. So we expect that we'll 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 TIGIT domain? And I guess I just ask the question because, I mean, obviously Gilead just made a fairly strong vote of confidence in an FC silent TIGIT. 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 COM-902 segment in their bispecifics. So they got the rights to develop bispecifics based on our COM-902. We own COM-902. We also kept to ourselves rights for certain bispecifics that we have an interest in. So for example, the TGP-VRIG or TGP-VRL2 with our COM-902 is ours. we totally relate to COM902 as an asset. It's nice to see that you noted, that you mentioned the FC question, which we were always saying, always that it either 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 to Dana, but I think that one of the key things that should be mentioned, we tested. COM701, COM902 combinations in the most hard-to-treat patient populations. 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 is supporting COM701-driven effects. We believe that it could serve as good partnering opportunities. And hopefully the TGIT 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 TGIT at least to understand that there is a benefit by adding TGIT to PD-1 and that there is a third component that is needed And I think that the world starts to see 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.

Okay. Thanks for taking the questions.

Thank you. This concludes the Q&A session and CompuGen's investor conference call. Thank you for your participation. You may go ahead and disconnect.