Jounce Therapeutics, Inc.

Ladies and gentlemen, and welcome to the Jones Therapeutics third quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct the question and answer session, and instructions will follow at that time. As a reminder, this call is being recorded at the company's request. I will now turn the call over to your host, Eric Loft, with Jones Therapeutics. Please go ahead.

Thank you, operator.

This is Eric Laub, Vice President of Investor Relations at Jounce Therapeutics. Good morning and welcome to the Jounce Therapeutics third quarter 2022 financial results conference call. This morning, we issued a press release which outlines the topics that we plan to discuss today. The release is available in the investors and media section of our website at www.jouncetx.com. Speaking on today's call will be our CEO and President, Dr. Richard Murray, who will review our pipeline progress and key milestones, followed by our COO, Hugh Cole, who will provide an update on business development activities. Our CMO, Dr. Beth Trehu, will provide an update on our clinical activities, and our CSO, Dr. Dimitri Biedersheim, will then discuss our discovery programs. Lastly, our CFO, Kim Drapkin, we'll review our third quarter financial results. We will then open the call for your questions. Before we begin, I would like to remind everyone that today's discussion will include statements about our future expectations, plans, and prospects that constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including the risk factors discussed in our SEC filings. In addition, any forward-looking statements represent our views only as of today, November 10, 2022, and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, We specifically disclaim any obligation to do so even if our views change. With that, I'll now turn the call over to Rich.

Thanks, Eric. Good morning, and thank you for joining our call today. As disclosed in our press release this morning, we have a number of updates to discuss on our call. We continue our progress and execution through the third quarter as we advance our proof-of-concept innate clinical trial and build our pipeline of oncology candidates. Our goal is to strive for a meaningful immunotherapy for patients who have few options. This is at the heart of our approach to novel mechanisms guided by biomarkers. To achieve this goal, our near-term focus remains on our JTX8064 or LLRB2 ILT4 program and the ongoing innate clinical trial in various cancer types. We look forward to sharing details of our ongoing innate trial today. Although we intended to present Phase 1 and Phase 2 innate data at ESMO-IO, we will present Phase 1 data at the meeting and will share observations on Phase 2 on our call today. We recently made this decision after reviewing the most recent data for ESMO-IO and based on our stated goal to present a complete and interpretable picture of the Phase 2 data, which we have now determined we will not have by year-end. Beth will expand upon the reasons for this and give you an overview of the data we have seen to date. Turning to our discovery efforts, we have two preclinical posters at the CITSE meeting being presented today in Boston, which Dimitri will highlight. At this time, I'd like to briefly turn the call over to Hugh to discuss our recent milestone achievement. Hugh?

Thanks, Rich. As recently announced, we earned a $15 million clinical milestone under our GS1811 license agreement with Gilead, which highlights the progress of this program. As a reminder, this program is an antibody targeting CCR8 and is aimed at depleting T regulatory cells in the tumor microenvironment. It was discovered using our translational science platform and is another nice example of how we've been able to bring forward therapies across different immune cell types. With GS1811 and other Treg targeting programs now in the clinic, we are looking forward to seeing whether the strategy of Treg depletion becomes a successful part of biotherapy in the future. To date, we have earned a total of $40 million of the $510 million in development and regulatory milestones possible under the Gilead License Agreement. Partnerships have always been an important part of our strategy and capital sources at Jounce, and we expect that to continue as we advance our pipelines. With that, I'll turn the call over to Beth to discuss our clinical programs in more detail.

Thanks, Hugh. I'm pleased to be able to provide an update for you this morning on our ongoing innate study. As a reminder, we completed the Phase I dose escalation for both monotherapy and in combination with pimavelumab, PIMI, our PD-1 inhibitor, selected 700 milligrams as the recommended Phase II dose, and initiated the Phase II expansion cohort. for both monotherapy and combination treatment in seven different indications. We have announced that the innate phase one data will be presented as a poster at this year's ESMO I-O conference in December. Dose escalation data will include safety, PK, receptor occupancy, and preliminary efficacy data. We continue to execute well on the innate study, and investigators remain very engaged. We have completed enrollment of the first 10 patients in Stage 1 of all current Phase 2 combination cohorts and are nearing completion of enrollment in Stage 1 of the Phase 2 monotherapy cohort in ovarian cancer. While the ovarian combination cohort was enrolling, patients were not being enrolled in the monotherapy arm, and we were pleased to see this enrollment quickly pick up again after we completed the ovarian combination enrollment. We are announcing today that we have met the criteria to expand an additional cohort in second and third line PD-1 inhibitor resistant head and neck cancer, in addition to our previously announced tumor types of PD-1 inhibitor naive ovarian and PD-1 inhibitor resistant renal cancer. In addition, the PD-1 inhibitor resistant non-small cell lung cancer and announced today PD-1 inhibitor naive sarcoma cohorts did not meet the criteria to advance from stage 1 to stage 2. The remaining two combo cohorts still in stage 1, in first-line PD-1 inhibitor-naive head and neck cancer and PD-1 inhibitor-resistant cutaneous squamous cell carcinoma, along with the ovarian monotherapy cohort, still have the potential to meet criteria to advance from stage 1 to stage 2. Furthermore, we started enrollment in October in stage one of a new combo cohort in PD-1 inhibitor resistant biliary tract cancers, or BTC, based on a clinically meaningful and durable confirmed response in a PD-1 inhibitor resistant patient in phase one in combination with PIMI. Duralumab has recently been approved in combination with chemotherapy in first-line BTC, and we see PD-1 inhibitor resistant BTC as a potential differentiated opportunity for JTX8064 plus PIMI. In response to frequent questions, we would like to provide more details on our internal criteria for cohort expansion. In Assignments 2 stage design, our goal in the first 10 patients is to avoid rejecting a potentially active drug. So, as typical in the first stage of Assignments 2 stage, we set the bar on the low side. Our internal criteria to expand from stage 1 to stage 2 for each combo cohort is a 10% or greater response rate, confirmed or unconfirmed, with the exception of the first-line head and neck cohort, which requires at least a 20% response rate. We believe our decision criteria are appropriate given the small sample size and the fact that the expected response rate for PD-1 inhibitor monotherapy in most cohorts is in the single digits. In addition to meeting the numerical response criteria, we consider additional factors, such as the duration and best response to prior therapy, the time elapsed since prior therapy, the tumor size at baseline, and the overall quality of the response in innate. For example, although we have met the numerical response criteria in the second and third line head and neck cohort, We are waiting for additional qualitative data before deciding whether to expand. Proof of concept is based on confirmed responses in the full 29 patients in an expanded cohort and requires a response rate with a confidence interval that excludes the PD-1 inhibitor benchmarks. Moving on to the ovarian and renal cancer cohorts that previously met our Stage 1 criteria for expansion, The ovarian combination expansion over enrolled to 35 patients and renal expansion is near completion with 26 out of 29 patients enrolled. An important observation in the innate study so far is the time that it is taking for efficacy data to mature. Consistent with data from Merck's MK4830 data published in January 2022, We have seen patients with stable disease with tumor reductions less than 30% at week 9 become responders at week 18, which means potential confirmation then has to wait until at least 27 weeks. In addition to confirmed responses, we have seen patients with partial responses at 9 weeks develop progressive disease at 18 weeks due to new lesions. and have observed one pathologically confirmed case of pseudoprogression in PD-1 inhibitor-resistant non-small cell lung cancer. As a result of these observations, we aim to ensure that the data we report includes enough time for responses to be confirmed and to mature. We believe any new mechanism may have its own inherent kinetics, especially in patients with significant prior therapy history. In summary, in the preliminary data in over 80 patients across all combination cohorts, we believe we have seen signs of clinical activity of JTX8064, but not broad activity leading to rapid proof of concept. These results to date raise the possibility that the efficacy of a LIL-RB2 inhibitor in combination with a PD-1 inhibitor may be more tumor specific or may require biomarker enrichment or selection and also reflect the importance of waiting for additional data. We expect to be able to assess and share clinical and biomarker data in the following way. We would first emphasize that the timing of data from any of the innate cohorts, whether the initial eight cohorts or subsequent additional cohorts, such as those we have described today, will depend on when enrollment begins in stage one and then stage two. and will require the data to be sufficiently mature for full interpretation. This is consistent with prior guidance that we want the data that we present to be meaningful and interpretable. We will continue to provide updates on the progress of the study on our quarterly earnings calls. We expect to be in position to share additional results from the phase two portion in the first half of 2023. The specific timing and forum for this will be determined as the study proceeds and more data becomes available to us. I would also like to remind you that we will present the complete SELECT data at ESMO-IO. SELECT is a randomized Phase II study evaluating two different Boprotelemab doses in combination with PIMI versus PIMI alone. The two doses under investigation have different patterns of pulsatile target engagement, which we believe may be important for an agonist antibody. We believe the results for the low-dose cohort are encouraging, with a 40% response rate versus 27.8% for PIMI alone, and 80% six-month landmark progression-free survival versus 36% to date for PIMI alone. by independent central radiology review, as will be presented at ESMO-IO. In addition, there is preclinical data and biological rationale for improved activity with pulsatile target engagement by an agonist. As the PFS and OS data continue to mature, we plan to pursue a partnership to enable further development of Vopra 0.03 mg per kg in combination with a PD-1 inhibitor. This remains an important year of execution and key milestones for Jounce, and we would not be here without the dedication of our team, our valued investigators, and most importantly, the patients who put their trust in our drugs to make a difference in their lives. We look forward to reporting on our continued progress as we focus on the collection of high quality clinical and biomarker proof of concept data to guide our programs. I will now turn the call over to Dimitri. Thanks, Beth.

Later today, our teams will be presenting two preclinical posters at CITSE here in Boston, and I encourage you to stop by. One poster will focus on preclinical characterization of JTX1484, our LULRB4 ILT3 inhibitor, and the other will highlight characterization of the expression and function of LLRB1, 2, and 4 on human immune cells in tumor and blood samples across different cancer types. We believe our work highlights multiple combination opportunities as well as multi-targeted approaches that could be deployed for this important family of immuno-inhibitory receptors. We're excited to be adding to the growing body of data that points to LLRB-positive myeloid cells including tumor-associated macrophages, and their contribution to resistance to PD-1 or L1-directed therapies. JTX8064, our most advanced blue LRB blocker, which targets immunosuppressive macrophages and other myeloid cells in the TME, serves as an example of our patient-centric, biomarker-driven approach in discovery and through development. This approach is key to the value-generating programs we are pursuing. Our newest development candidate, JTX1484, is advancing through IND-enabling studies towards the goal of submitting an IND next year. As mentioned earlier, JTX1484 binds to and inhibits LULAR B4, or ILT3, a LLRB family member that is highly expressed on some of the key myeloid cells, including myeloid-derived suppressor cells and telogenic dendritic cells that orchestrate immune suppression in the TME, including resistance to checkpoint inhibitors. As our CITC poster helps demonstrate, the LLRB4 target is distinct from other LLRB family members. with respect to its ligand specificity, as well as temporal and spatial pattern of expression on immune cells. Therefore, we see this program as complementary to our ongoing efforts to target LRRB2 with JTX8064. Additionally, our pipeline of monospecific LRRB-targeted antibodies is further strengthened by the ongoing efforts to develop potent and specific blockers of LLRB1, an inhibitory receptor that is expressed not only on myeloid cells, but also on certain subsets of T and NK cells. Having these high-quality building blocks to target three important LLRB family members has enabled us to explore both combinations and multispecific approaches preclinically by leveraging our knowledge and growing expertise in LRRB biology. We're confident that the LRRB family, as well as other targets that we're currently pursuing, represent attractive opportunities in immuno-oncology with the potential to improve upon and restore responsiveness to PD-1 or L1 inhibitors. In addition to our efforts in the LRRB family, we continue to add to and diversify our discovery pipeline into other exciting areas of immunobiology. Lastly, I am pleased to share with you today that our manuscript describing preclinical development of GS1811, our CCR8-targeted antibody for selective depletion of intratumoral T regulatory cells, which is now licensed to Gilead, has been published in the peer-reviewed journal Oncoimmunology. We are proud to have collaborated with our Gilead colleagues on this publication. I will now turn the call over to Kim for a discussion of our third quarter financial results. Kim?

Thank you, Dimitri. As we reported in this morning's press release, cash, cash equivalents, and investments as of September 30, 2022 were $130.3 million compared to $220.2 million as of December 31, 2021. The decrease was due to cash burn from operating expenses incurred during the period. The $15 million milestone earned under the Gilead License Agreement in October is expected to be received in the fourth quarter of 2022. Turning to the P&L, no revenue was recognized during the third quarter of 2022 or 2021. During the third quarter of 2022, we incurred $23.8 million in research and development expenses compared to $23.3 million for the same period in 2021. The increase in R&D expenses was due to increased manufacturing activities and lab supply purchases to support research activities partially offset by decreased external clinical and regulatory costs for our Vopratelemab development program. General and administrative expenses were 7.7 million for the third quarter of 2022 compared to 6.9 million for the same period in 2021. The decrease in G&A expense was attributable to increased compensation costs due to increased headcount. Net loss for the third quarter of 2022 was 31 million, resulting in a basic and diluted net loss per share of 60 cents as compared to a net loss of 30.1 million for the same period in 2021, resulting in a basic and diluted net loss per share of 59 cents. The increase in net loss is attributable to increased operating expenses in the third quarter of 2022 as compared to 2021. We continue to look for opportunities to contain costs in this difficult market environment. While investing in both our clinical and discovery programs, We work to identify areas in which we can continue to create value but also decrease expenses. We are reiterating our guidance that cash is expected to provide runway into the first quarter of 2024. Based on our current operating and development plans, we continue to expect to be on the lower end of our growth cash burn guidance for the full year 2022 of approximately $115 million to $130 million. I'll now hand it back to Rich for some final words.

Thanks, Kim. At Jounce, we're driven by science and are motivated to address the growing unmet medical need of cancer patients today. It is exemplified by the extraordinary effort behind our research, discovery, and development. I would like to take a moment to thank the Jounce employees, clinical investigators, and patients for their unyielding commitment and continuing efforts to bring the right immunotherapy to the right patients. With that, we'd like to now open the call for your questions. Operator?

If you would like to ask a question, please press star 1-1. Our first question comes from Steve Seedhouse with Raymond James. Your line is open.

Hey, good morning. Thanks so much. Obviously, my questions are all innate. It just didn't sound like... sound like it, but is any part of this decision for competitive reasons or can we just take sort of the statements basically implying the data is still immature at face value?

Yeah. Go ahead, Rick.

Yeah. Hi, Steve. Yeah, that's right. The way Beth laid that out, that's really, you know, what we see and that's what we wanted to communicate today on the call.

Okay, and the confidence interval that you mentioned for stage two exceeding the relevant PD-1 comp, I was hoping you could just put some numbers on that to sort of help us understand the buffer in the stats there. So, like, if the PD-1 precedent is a 5% response rate, I mean, what do you need to see in 30 or 35 patients to meet what you would call PO, you know, proven concept criteria in stage two? Yeah.

Yeah, so it really depends. We have to wait till we actually see the data. It depends on the variability in the data. So the confidence interval is, you know, it's a number that comes once we have all the data. And when we see what the 95% confidence interval is, the idea is it's got to be above that 5% response rate. So I can't give you any more specifics than that. But our feeling is any response rate with a confidence interval that excludes that PD-1 inhibitor benchmark is something that could potentially be used, you know, to inform a registration path. And that's our goal, to find, you know, efficacy that could support registration.

Okay. And so to be clear, I mean, it seems like you don't precisely have that in hand yet, but you believe that that may be forthcoming from one or more of these cohorts, which is why you're waiting to present the data.

Is that fair? Correct. Absolutely. It's still possible for the two cohorts that have already expanded. And then we think it's encouraging that we've met criteria to expand another cohort. We've started a new cohort in biliary tract cancers based on really encouraging response that we saw in phase one. So, we still think there's a lot of potential. It's just, you know, it's just too early, and we need more time for the data to mature.

Okay. Last question from me, just on predictive biomarkers. I'm wondering if you've done any work there, or if between now and when you present the data in the first half of 2023, if that work will be important for just clarifying like in responders versus non-responders across the tissue types that there's some phenotype or profile in the biomarkers that's showing a trend that could be another path forward. So if you're not going forward in a specific tumor type, maybe on predictive biomarkers. Thanks for taking the question.

Yeah, absolutely. And actually, our team has done a fantastic job. We have all the predictive biomarker data on the patients. By the time we get their clinical data, we have the biomarkers. It's just, again, the biomarkers need to be interpreted in the context of mature clinical data. So we absolutely will do an analysis of the biomarker correlation with the clinical outcomes once we have the mature clinical data set. And I think it is one of the strengths of the study that we have multiple predictive biomarkers that we're analyzing in correlation with the efficacy. We just need to wait for the efficacy data to mature. before we can do a really good analysis there.

Thank you so much.

Our next question comes from Boris Peeker with Cohen. Your line is open.

Great. I have two questions. First, I don't know if you can make any comments on the timing of Merck's Competitor 4830 data. I'm sure we'll be expecting it. Since you completed the stage one portion for all indications at this point, is it reasonable to expect that on the next update, whenever that next update comes around, some of these indications will be discontinued?

So first of all, regarding Merck, no, we don't know when they will be presenting data next. We continue to be encouraged by the breadth and depth of their program and this target and the fact that they have added some some phase two studies where there is a control arm. So they're randomized studies. With respect to your second question, again, because the data takes longer to mature, I mean, sometimes, as I mentioned, we don't see the first response till 18 weeks. Then we have to wait for 27 weeks. Sometimes we have people who are stable for quite some time. We will, if any cohorts close or meet the criteria to expand, we will certainly announce them on our next earnings call. But I can't be sure that we will know that more cohorts are closed by that time.

Great. Thank you for taking my questions.

You're welcome.

Our next question comes from Edward Tenthoff with Piper Sandler. Your line is open.

Great. Thank you very much, and congrats on the progress. Appreciate all the detail and the update. Looking forward to seeing the presentation or the poster over at CITI a little bit. I wanted to get a sense, kind of, you mentioned partnering in the past and partnering in the future. Would you consider partnering different components of the LittleRB family, or is that something where there's really more of an opportunity to maybe keep those assets to do future internal combination? I know it's early to be kind of thinking through that, but just maybe at a high level you can share your thoughts. Thank you.

Hi, this is Hugh. So I think the answer is all of the above to some extent. I mean, we do always think strategically about our programs and what would be good partners for our programs and what would be the right time point for those partnerships. The little RV family is, of course, a very interesting group of targets in that one could think about partnerships that would include more than one of those potentially, but it is early to get into any more specifics like that. We always think ahead about partnerships, and we're always out there talking to potential partners about different types of opportunities. So that's really all I would say for now. Great.

Thanks so much.

Our next question comes from David Day with SMBC. Your line is open.

Hey, great. Thanks for taking my questions, and also kind of congrats on the progress so far. So I have two questions. One is just on the ovarian cancer patients. Clarifying just around the enrollment of these patients, are you enrolling mostly plant-resistant ovarian cancer, or are you also including the plant refractory population in the stage 1 and stage 2?

So the requirement is that they be platinum resistant. We're not requiring platinum refractory, so we have a mix of patients, but it's second, third line ovarian cancer that has progressed on a, that is platinum resistant.

Got it. That's helpful. And then another question on the response you see in the biliary tract cancer. Could you share some additional color on the depth of response and durability of response with that patient?

Sure, sure. So that patient actually had failed both, had had a best response of progressive disease to first-line chemo and then to second-line nivolumab in combination with chemo. So the patient came into our study never having had responded to anything. And then the patient had, by nine weeks, had a partial response. The other important thing, and that was then confirmed on the subsequent scan, but the important thing is when this patient entered the study, they had liver and bone metastases and were very cachectic with really terrible bone pain requiring narcotics. By nine weeks, All of those things were getting better. And by 18 weeks when the partial response was confirmed, the patient had gained 30 pounds and was off pain medications. And this patient was able to return to work as a farmer. So not someone who sits on Zoom calls all day like us. So he had a really, really meaningful clinical response. He remained in a partial response for a little over six months. At that point, he had one new lesion. and the decision was made to allow him to remain on treatment and radiate that lesion, and he remains on study doing well.

Thanks so much for the support here.

You're welcome.

Our next question comes from Arthur He with HC Wainwright. Your line is open.

Hey, good morning, everyone. This is Arthur on 4RK. Most of my questions on the inmate has been asked. So I just want to follow up on the selector program. So for these 0.03 cohorts, could you tell us how is the baseline characterization for the patient compared to the TIMI cohort?

Yeah, that's an excellent question, Arthur. Thank you. We saw really no differences across the cohorts, across the monotherapy and either of the vopracombo cohorts. They were very well balanced. So we've looked very hard to see if there's a reason why that low dose cohort did so much better aside from the fact that it's a lower dose. We don't see any other reasons. And we really do believe there's a good biological rationale why a lower dose result in constant target engagement is a good thing for an agonist antibody.

Yeah, and also, there'll be a lot more information on our poster at ASMO.io on all that.

Okay, awesome. So, I guess on the ASMO poster, we're also talking about the duration of the response as well, or...

Correct, yes. We'll report on the duration of response, I guess, where there was really a very, very nice improvement in PFS for the patients in the low-dose arm. And we're also seeing that borne out by the number of patients who are remaining on study. And all of that will be included at ESMO-IO. Awesome.

And for the, I guess, Regarding the milestone getting from the Gilead, I don't think you guys break down the milestone previously, but just curious, for this one is related to what kind of achievement? Can you guys disclose?

Hi, this is Hugh. No, we can't disclose any more details than that. As we said, it is, you know, the program is in the clinic. It's a clinical milestone. We have disclosed that there's a total of $510 million in development and regulatory milestones, and we've now achieved $40 million of those. So, you know, we'll obviously keep a close eye on the program, and as it continues to move along, there's the opportunity for further milestone payments. Got you.

Thanks for taking my question, and congrats on the progress.

Thank you.

Our next question comes from Colleen Cousy with Baird. Your line is open.

Hi, good morning, and thanks for taking our questions. Can you clarify, were your original plans for the data at ESMO to have follow-up of 18 weeks for all patients, but based on a better understanding of the mechanism and what you're seeing so far, The rationale is really you need 27 weeks to have a more meaningful data set. And then another question, just based on the mechanism and the data that you've seen so far, do you have any comments on the potential of adding chemo to JTX8064 and PD-1 or any other combination regimens? Do you see a role for that? Thank you.

Sure, sure. So to your first question, we expected chemo And we do have 18 data on the majority of the patients. And yes, it's really needing to wait for 27 weeks to really get a really full picture. We always knew we would have some patients who still had just nine-week data, but that the majority would have 18-week data. So really, yes, it's primarily this need to wait longer to make sure that responses that appear at 18 weeks are confirmed. And to your second question, that's a great question. We have done preclinical work, and we've done a lot of thinking about other potential combinations, including chemotherapy, combining with standard of care. Our number one priority is to first demonstrate that JTX8064 is adding benefit over what you would expect with a PD-1 inhibitor alone. And once we have the final data and we know the magnitude of that difference, then we'll be able to think about other combinations to make sure we'll do whatever we think is the best thing for registration path. So we certainly could combine with chemo. And given the excellent safety profile of the combination, we think that will be very, very doable.

Great. That's helpful. Thank you. And then a quick follow-up. Just on the preclinical data that you'll present at CITC for JTXT, Can you tell us, should we keep in mind, what should we keep in mind as we compare the profile for that drug versus some of the other ILT3 assets that are in development?

Hey, Colleen, this is Dimitri. Thanks for the question. Yeah, I mean, first and foremost, we believe that the LULARB4 target is quite interesting, potentially distinct from other LULARB family members with respect to ligand specificity and also pattern of expression on immune cells. You know, we continue to study the mechanism of action of our molecule. We believe there are signs of molecular differentiation that are emerging on JTX1484 and look forward to presenting these data when it matures.

Great. Thanks for taking your question.

There are no further questions. Thank you for your participation. This does conclude the program, and you may all disconnect. Everyone have a great day.