Good day, ladies and gentlemen and welcome to the Second Quarter 2018 Calithera Biosciences Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference Ms. Jennifer McNealey, Vice President of Investor Relations. Ma'am, you may begin..

Thank you, Joel. Good afternoon, everyone. Welcome to our second quarter 2018 conference call. Joining me today are Susan Molineaux, our Founder, President and CEO; Stephanie Wong, Senior Vice President of Finance; and Keith Orford, Senior Vice President of Clinical Development.

We've issued a press release and it could be accessed through our website at calithera.com.

Before we begin, I would like to remind you 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 those in the risk factors discussed in the Risk Factors section of our quarterly report on Form 10-Q be filed with the SEC.

In addition, any forward looking statements represent our views only as of today 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.

Please note that this call is being recorded. And with that, I'll turn this call over to Susan..

Thanks, Jennifer. Good afternoon, everyone, and thank you for joining us today on our second quarter 2018 conference call. At Calithera, we are building an integrated biotechnology company that develops novel small molecule onco-metabolism drugs.

Drugs that are targeting tumor and immune cell metabolism pathways for the treatment of cancer and other diseases.

By building a pipeline of novel therapeutic product candidates, we are creating multiple opportunities to positively impact clinical outcomes for patients and drive the development of each of our clinical candidates towards commercialization.

In the second quarter, we continue to execute our clinical development plans for our glutaminase inhibitor and arginase inhibitor programs, while deepening our pipeline with two novel programs entering clinical development.

Our fully integrated drug discovery team continues to produce novel drug candidates with the potential to be highly differentiated new therapies in the areas of unmet need. We are pleased to announce today that we've advanced two new internally developed programs into clinical development.

First, CB-280 is a novel arginase inhibitor in development for the treatment of cystic fibrosis. Under our collaboration agreement with Incyte, we retain the rights to develop arginase inhibitors in specific non-oncology rare disease indications, including cystic fibrosis.

Arginase has been proposed to be critical in the pathophysiology of cystic fibrosis and several other non-oncology diseases. CF patients have neutrophil infiltrates and high levels of secreted arginase in their lungs. This reduces the level of arginine.

Reduced arginine, in turn, is thought to exacerbate pulmonary disease in CF by impairing production of nitric oxide from arginine. Reduced airway nitric oxide has been observed in the bronchial airways of patients with CF and correlates directly with worsened lung function and increased colonization with pathogens.

Based on this scientific rationale, we have selected CB-280, a unique, orally bioavailable inhibitor of arginase, and we plan to file an investigational new drug, or IND, application for CB-280 with the U.S. FDA and initiate a Phase I clinical trial in the first half of 2019.

Our team has also been focused on building a pipeline of tumor and immune metabolism therapeutics. And we're excited to announce today, our next onco-metabolism drug candidate, CB-708, an orally bioavailable small molecule, CD73 inhibitor.

CD73 is an enzyme in the adenosine pathway that plays a critical role in converting extracellular ATP into adenosine. Adenosine is a powerful inhibitor of immune cell activity in tumors.

Anti-CD73 antibodies are currently in early clinical trials, but to our knowledge, there are no small molecule CD73 inhibitors in the clinic, thus some are in preclinical development.

CD73 has a soluble extracellular form and a cell surface bound form, and we believe that a small molecule inhibitor may be preferable to an antibody due to the potential to dose orally, and because the small molecule that binds directly to the active site of the enzyme can efficiently inhibit both soluble and self-surface forms of CD73.

We have identified the compound CB-708 as a clinical candidate and plan to file an IND and initiate clinical studies in 2019.

In 2018, we are also executing our development plans for our two lead programs, our glutaminase inhibitor, CB-839, which is fully owned by Calithera; and our arginase inhibitor, INCB001158, which is being developed with our partner, Incyte.

The CB-839, we are continuing to enroll two randomized placebo-controlled trials for the treatment of patients with renal cell carcinoma; one, in combination with cabozantinib and the other in combination with everolimus.

The trial with CB-839 in combination with cabozantinib has fast-track status and is successful, may have potential to serve as a registration trial.

INCB001158, or 1158, an inhibitor of arginase, is actively enrolling in two ongoing Phase I, II trials in a broad range of solid tumor types, as a monotherapy, in combination with a PD-1 inhibitor and in combination with three different chemotherapy regimens.

The second quarter also included the successful presentation of an investigator-sponsored clinical trial of CB-839 in PIK3CA mutant Colorectal cancer patients at the ASCO meeting in June. And the presentation of preclinical data, highlighting the potential of CB-839 with CDK4/6 inhibitors and PARP inhibitors at AACR in April.

We are committed to developing CB-839 for the treatment of renal cell carcinoma and we are executing on that strategy. In parallel, we have assessed the activity of CB-839 with other standard-of-care therapies in other solid tumor types.

We recently have made the strategic decision to deprioritize the development of CB-839 plus paclitaxel in triple-negative breast cancer based on a combination of factors. This includes the recent changes in the competitive landscape and our Phase II efficacy results to date.

As a result, we will now be enrolling additional patients into the Phase II TNBC trial at this time. We continue to enthusiastically support other trials with CB-839, both are own as well as investigator-sponsored trials.

Based on our preclinical and clinical data, we remain interested in combination to CB-839 with anti-PD-1 antibodies, a PARP inhibitor and a CDK4/6 inhibitor. We also have continued interest in developing CB-839 in biomarker-defined patient population, including those with PIK3CA mutations and mutations in the nerve to keep 1 pathway.

And with that, I will turn the call over to Keith for an update on the pipeline..

Thank you, Susan. Let's begin with a more detailed update on CB-839, our glutaminase inhibitor and our most advanced product candidate. We are currently focused on forging a clinical commercial path for CB-839 in renal cell carcinoma.

On the basis of the efficacy and safety data presented earlier this year at ASCO GU, we are conducting two Phase II randomized clinical trials of CB-839 for the treatment of RCC, renal cell carcinoma. The Phase II ENTRATA trial of CB-839 in combination with everolimus in late-stage patients was initiated in August 2017.

The randomized double-blind placebo-controlled trial is designed to evaluate the efficacy and safety of CB-839 in combination with everolimus in approximately 65 clear-cell RCC patients, who have been treated with at least two prior lines of systemic therapy, including a VEGF receptor targeting tyrosine kinase inhibitor.

Patients are being randomized in a 2:1 to either CB-839 plus everolimus or placebo plus everolimus. The primary endpoint is progression-free survival, overall survival will be assessed as a secondary endpoint. The multicenter study is being conducted at sites in the United States.

We expect the trial to enroll by the fourth quarter of 2018 or early 2019 and remain on track to reach the primary endpoint analysis in 2019. Enrollment has been a bit slower than expected, due to the reduction of the use of everolimus in the U.S.

We are also actively enrolling CANTATA, a global Phase II trial of CB-839 in combination with cabozantinib in second and third line RCC patients, which was initiated in April 2018. CANTATA is a randomized placebo-controlled Phase II trial with registration potential.

It is designed to evaluate the efficacy and safety of CB-839 in combination with cabozantinib versus placebo plus cabozantinib in approximately 300 clear-cell RCC patients, who have previously received one or two prior lines of therapy, including at least one prior anti-angiogenic agent or the ipilimumab-nivolumab combination.

Patients are being randomized in a 1:1 to either CB-839 plus cabozantinib or placebo plus cabozantinib. The primary endpoint is progression-free survival by independent review. Overall survival will be assessed as a key secondary endpoint. Patients will be stratified by IMDC risk category and prior treatment with anti-PD-1, PD-L1 therapy.

The study has 80% power to show a 35% improvement in progression-free survival. In support of the CANTATA trial, Exelixis has entered into a material supply agreement with us for cabozantinib. Moving on to Colorectal cancer.

At ASCO, the results of an investigator-sponsored clinical trial were presented by Doctors, Jennifer Eads and John Wang, from the Case Western Comprehensive Cancer Center.

The Phase I portion of the trial is designed to determine safety and the recommended dose of the combination of CB-839 and capecitabine in patients with advanced treatment refractory solid tumors, while the Phase II portion of the trial is designed to evaluate activity of the regimen in patients with late-line PIK3CA mutant Colorectal cancer.

As of the data cutoff used for the presentation, 16 patients had been enrolled, including 12 patients with Colorectal cancer. Colorectal patients must have progressed on prior fluoropyrimidine-containing therapy.

In the dose escalation phase of the trial, there were no dose-limiting toxicities, and CB-839 plus capecitabine was well tolerated at full doses of both drugs. The recommended Phase II dose for the combination, CB-839 at 800 milligrams twice a day with capecitabine at 100 milligrams per meter square twice a day.

All late-line Colorectal cancer patients had progressed on at least one prior fluoropyrimidine-containing regimen, the median PFS for the 7 colorectal patients with PIK3CA mutated Colorectal cancer was 26 weeks. And the median PFS for the 5 patients with PIK3CA wild-type cancer was 16 weeks.

These results compare favorably to historical data and third-line Colorectal cancer patients, receiving standard-of-care therapies where the median PFS is approximately two months. The Phase II dose expansion portion of the study is in patients with PIK3CA mutant Colorectal cancer is ongoing. Next, the arginase program.

INCB001158, also known as 1158, is the first-in-class immuno-oncology metabolic checkpoint inhibitor, targeting an - targeting arginase in immunosuppressive enzyme, utilized by myeloid-derived suppressor cells, or MDSCs, responsible for T-cells suppression.

1158 is being co-developed with Incyte in a co-development, co-commercialization collaboration we announced in January of 2017. The program is progressing well, and we are actively enrolling two 1158 trials.

The first trial is evaluating 1158 as a monotherapy and in combination with pembrolizumab, the recommended Phase II dose has been selected for both the monotherapy and for the pembrolizumab combination and expansion cohorts are now enrolling.

For the pembrolizumab combination, cohorts are enrolling patients diagnosed with non-small cell lung cancer, melanoma, urothelial cell carcinoma, Colorectal cancer, Gastroesophageal cancer, squamous cell, head and neck cancer and Mesothelioma.

A second clinical trial is designed to evaluate 1158 administered orally twice daily in combination with each of 3 chemotherapy regimens, FOLFOX, the gemcitabine/cisplatin doublet or paclitaxel. Primary endpoints include safety and objective response rate.

We are accumulating a great deal of patient experience with 1158 this year, and we look forward to future updates on this program. With that, I'll pass it over to Stephanie for an update on our financials..

Thank you, Keith, and good afternoon, everyone. Detailed financial results for the second quarter 2018 were included in today's press release. I will briefly review our results on this call. Calithera ended the quarter well capitalized, which enables us to drive our clinical programs to meaningful value inflection points.

Cash and investments were $152.2 million at June 30, 2018. Collaboration revenue was $17.1 million for the quarter ended June 30, 2018, compared with $7.3 million for the same period prior year.

We completed our manufacturing services and technology transfer under the Incyte agreement, which satisfied the performance obligation under ASC 606 and as a result, our remaining deferred revenue was recognized in the current quarter.

Research and development expenses were $17.3 million for the quarter ended June 30, 2018, compared with $10.1 million for the same period prior year.

The increase was due to our 3 clinical development programs, CB-839, including for a Phase II CANTATA trial, which opened in 2018, 1158 and CD-280 as well as investment in our early-stage research programs.

General and administrative expenses were $3.5 million for the quarter ended June 30, 2018, compared with $2.8 million for the same period prior year. The increase was primarily due to increases in personnel-related costs. Net loss from operations for the quarter ended June 30, 2018, was $3.1 million or $0.09 per share.

And with that, I will now return the call back over to Susan..

Thank you, Stephanie, and with that, operator, we are happy to open the line for questions..

Thank you. [Operator Instructions] Our first question comes from Jonathan Chang with Leerink Partners. Your line is now open..

Hello, everyone. Thank you for taking our call. This is actually John Barrett on for Jonathan Chang.

Can you elaborate on any of the results you're allowed to discuss related to the discontinuation of TNBC? And do you still plan to present any of that data in the upcoming - for the rest of this year?.

So yes, we do remain on track to present the data later this year, and - but further development, at this time, is a lower priority for us. We continue to follow patients and data will be updated as we approach the end of the year. But at this time, there is no current plan to develop further in TNBC..

Great. And one more.

You are now going to be developing these new drugs in cystic fibrosis, can you talk just a little bit more about the idea and the rationalization for going out for that?.

Yes. So cystic fibrosis patients have highly inflamed lungs, and that includes infiltration by neutrophils as well as granulocytic MDSC, the same cells we talk about in cancer patients and infiltrating tumors are infiltrating these patients' lungs, releasing large quantities of arginase.

The arginase is - you can find it at very high levels in patient sputum, which also leads to arginine levels being greatly reduced in patient sputum. And then arginine, it turns out is critical for the production of nitric oxide, so arginine is the key substrate for the NOS, nitric oxide synthase enzymes.

And therefore, these patients cannot produce NO sufficiently in their lungs. And this has been demonstrated in clinical trials previously, where the exhaled nitric oxide is greatly reduced in cystic fibrosis patients.

So the idea for the program is we can replenish or replete the arginine levels in the lung, allowing iNOS to produce nitric oxide in the lung, which has 2 effects, it bronchodilates and it also is an important component of the immune function to fight off bacterial infections. So that's the basic rationale.

I should note, there is other - the use of NO as a therapy has been validated recently, and we see this as another approach to replete the lungs' ability to produce NO as well as other, what we think will be useful functions of arginine in the lung..

Great, thanks. I look forward to the R&D day..

Thank you. Our next question comes from Robyn Karnauskas with Citi. Your line is now open..

Hey, guys. This is Kripa on for Robyn. Thank you for taking my questions. So for the CB-839 in TNBC following the data that you've seen in TNBC in particular, are there any lessons learned in terms of how you think these drugs that target metabolic pathways in oncology and have the glutaminase, you have the arginase.

I know you've talked about how they have lower cytotoxic effects, but do you think that it might be better to target either a master regulator of these metabolic pathways if one such exists? Or at least use these inhibitors in combination to actually have better efficacy? Thank you..

This is Susan. We have not changed our basic thesis. We believe that contamination addition in combination with several different therapies has effects in the clinic and they match, by and large, the preclinical data.

Triple-negative breast cancer has become a more crowded field, and with the recent data presented showing that a taxane combined with PD-1 inhibitor in frontline may be poised to become standard of care.

It has changed our clinical development thinking in TNBC since we were testing taxane with CB-839, and we will be planning - we plan to present our data before the end of the year.

So it's not that the data are making us change our thesis about the biology, it's that we have concluded that there is no easy way forward at this time for designing a randomized trial and going forward in TNBC. So we have chosen to put our efforts in renal cell carcinoma, colorectal and other indications..

Okay, great. Thank you.

And a quick question on will we see any further updates from the nivo-839 combo trial?.

Yes, so that's a study that's being developed in combination with Bristol-Myers Squibb. And so we continue to evaluate the data from the ongoing 004 study, where we've combined those agents together. And we are working with BMS to determine what the best path forward is for that combination.

So we haven't provided guidance on a specific time that we'll present data but that's an ongoing effort. And that strategy is being actively discussed..

Okay, great. Thank you so much..

Thank you. Our next question comes from Matt Phipps with William Blair. Your line is now open..

Thanks for taking my question. Just a couple on the CB-708, the adenosine pathway, definitely intriguing, but have been a little bit complicated, so just kind of your thoughts on the target. There are multiple ways to target this pathway CD73, A2a receptor.

So I guess, just wondering the rationale for small molecule versus CD73? Some of the initial date, we've seen at the A2a receptors is, I guess, been a little mix or underwhelming? So I guess, just any thoughts you have ongoing after CD73?.

Yes. So absolutely. I mean, we believe that this is a very important pathway, and we are - we think we've got a unique way to target it. And there are - as you will likely know challenges with the approaches that have been used to date. I think that jury is still out on those.

But the - for CD73, the approach has been generally with antibodies, which there are questions about the ability to fully inhibit enzyme activity within the antibody, and we are very confident that the small molecule that we have developed will very potently inhibit the CD73 enzyme. I think A2a 828 receptor has also, obviously, a different approach.

There are challenges with fully inhibiting those receptors, given the local concentrations of adenosine. And so I think there are number of challenges there as well. So we think this is an important approach that we think will bear fruit.

And again, being an orally administered agent gives us the ability to - for a more convenient approach to targeting this pathway..

Thanks. And if I could follow up with another on CB280. The kind of, new advance into a triplet regimen from some of the leaders in the cystic fibrosis space, is going to kind of alter really the treatment landscape here likely in the next couple of years.

So how do you incorporate that into development plan for CB280? I assume this is something that you look to do on top of some of the potentiators of small molecules?.

Yes. So we see this as absolutely independent of mutation status. So we think that this mechanism will have activity across the range of patients. And we believe, that will be applicable on top of whatever corrector therapy they may be on. So this is - there are other agents being developed in this way.

But we do think this gives us a broad opportunity within the space. There is likely to be a ceiling on the activity of corrector therapies, and from our discussions with key opinion leaders, there's clearly a need for other mechanisms that you - that target other approaches or other aspects of the disease.

So while we fully recognize that these new corrector therapies will - the important components of therapy moving forward, that there's plenty of room for further improvement in these patients..

Thank you..

Yeah. Thank you..

Thank you. Our next question comes from Konstantinos Aprilakis with JMP Securities. Your line is now open..

Thanks for taking my question.

So, Susan, you mentioned that a number of other companies are developing antibodies against CD73 and review the potential advantages of pursuing a small molecule approach, as exemplified by CB-708, I was wondering if you could discuss the challenges of developing a small molecule against CD73? And perhaps how your platform and approach overcame those hurdles?.

It is quite difficult to develop a small molecule for CD73. And we have been very fortunate to have the same chemistry team that allowed us to develop the first glutaminase inhibitor and the first arginase inhibitor to go into the clinic. We had a goal of making sure it was an orally bioavailable molecule.

And we've been very happy with what we've been able to do. But it certainly has been a concerted effort to make a molecule that's extremely potent and that is orally bioavailable and can be dosed twice a day and is safe.

So we are very pleased with the progress that we've made, and we certainly have had our challenges developing this particular molecule. I'm really pleased we got to where we got..

Thanks..

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Susan Molineaux for any closing remarks..

Thank you, Joel, and thanks all for joining us today. I want to remind you, again, that we have an R&D Day planned on October 5 in New York City. We, at this meeting, will be focused on the company's research and development programs, and in particular, CB-280 and CB-708, we hope to see you there.

We welcome your follow-up calls with any additional questions you may have that we weren't able to address on today's call, and thank you..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. And you may all disconnect. Everyone, have a great day..