James Dentzer - Chief Financial Officer, Chief Administrative Officer, Treasurer, Secretary Ali Fattaey - President, Chief Executive Officer, Director.

Adnan Butt - RBC Capital Markets Brian Skorney - Robert W. Baird Peter Lawson - SunTrust.

Good morning and welcome to the Curis first quarter 2016 earnings call. At this time all participants are in a listen-only mode. After the speakers' remarks, we will conduct a question-and-answer session and instructions will follow at that time.

I would now like to introduce your host for today's conference, the Chief Financial and Chief Administrative Office of the company, Mr. James Dentzer..

Thank you, operator and welcome to Curis' first quarter 2016 earnings call. Before we begin, I would like to encourage everyone to go to the Investors section of curis.com to find our earnings press release and related financial tables.

I would also like to remind everyone that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties and our actual results may differ materially. I encourage you to consult our SEC filings for additional detail.

Now I will turn the call over to our President and CEO, Dr. Ali Fattaey..

Thank you, Jim and I just want to note that this is Jim's first quarterly earnings call with us. So welcome, Jim, to the company as our new Chief Financial and Chief Administrative Officer as well. And good morning everyone and thank you for joining us today.

It is a pleasure to provide an update on Curis and our progress in developing innovative drugs for patients with cancer, including our two most advanced programs, CUDC-907 and CA170. Allow me to begin. Our most advanced program is CUDC-907 and it is being tested in an ongoing Phase 2 clinical trial to treat patients with relapsed refractory DLBCL.

As a reminder, last December at the ASH Conference, we presented results from our Phase 1 study of CUDC-907 as monotherapy where we enrolled 22 patients with relapsed refractory DLBCL and reported seven objective responses out of the 16 evaluable patients.

As of today, we have now completed the enrollment in the monotherapy arm of the Phase 1 and of the total 25 patients in this arm of the study, eight patients have experienced an objective response out of the total 19 response evaluable patients.

Note that this does not include the one complete response that we reported at the ASH Conference for patients with DLBCL that was treated with CUDC-907 in combination with rituximab in a separate expansion arm of the study.

In addition, a retrospective analysis by us of the Phase 1 data indicates that the clinical benefit that we observed may be related to an inhibition of MYC oncogene as there was a correlation between patients who reported objective responses and their DLBCL tumors harboring alterations in the MYC oncogene.

These alterations included MYC gene copy number gains or elevated levels of MYC protein in the tumor cells per criteria that have been set in the field.

This clinical analysis is very exciting and is consistent with our preclinical findings, which showed that CUDC-907 treatment of DLBCL models, either in culture or in vivo, eliminates MYC protein levels in a dose dependent manner and at low nanomolar concentrations.

In light of these findings, we designed our Phase 2 study of CUDC-907 to specifically treat the roughly one-third of DLBCL patients who have MYC alterations based on the criteria that we indicated. We expect this patient enrichment to increase the probability of a successful Phase 2 clinical trial for us and that study is ongoing.

Finally, examination of CUDC-907 for treatment of patients with solid tumors in our independent Phase 1 trial is ongoing and we have now limited enrollment in this study to patients with solid tumors that harbor alterations of the MYC oncogene or to patients with NUT midline carcinoma.

Our second less advanced best program is CA170, the first orally administered small molecule checkpoint antagonist.

With the significant clinical benefit and the incredible launch trajectory of the first two PD1 pathway targeting drugs to hit the market and those are on track for a multibillion-dollar this year, the immunooncology treatment paradigm has certainly become very exciting.

Several companies have also announced new programs targeting checkpoint proteins, however, all of these programs employ monoclonal antibody biologics that are administered intravenously, including Optivo and Keytruda, the anti-PD1 antibodies that are approved.

CA170 establishes a new class of immunooncology therapy by using oral administration of small molecules. Later this quarter, we expect CA170 to become the world's first orally administered checkpoint targeting immunooncology drug candidate to enter the clinic.

CA170 targets PD ligands including PD-L1 and PD-L2 and VISTA which are members of the B7 immunoglobulin super family of immune regulators that share structural similarity in their extracellular domain.

Within the tumor microenvironment, the PD ligands appear to be expressed predominately on tumor cells whereas VISTA expression is restricted mainly to the hematopoietic cells including myeloid drive cells within the tumor environment.

CA170 has been shown to selectively rescue T-cell proliferation and function specifically inhibited by PD ligands or VISTA but not by other checkpoint regulators suggesting the specificity of CA170's mechanism of action.

Our Phase 1 study of CA170 is expected to enroll patients with advanced solid tumors and will include those that are naive to immunotherapy as well as patients that are refractory or have relapsed on anti-checkpoint pathway based therapies.

Finally, I will turn to Erivedge which is commercialized globally by our collaborative partners Genentech and Roche for the treatment of advanced basal cell carcinoma. We are pleased to note that Roche has initiated enrollment in two clinical studies with Erivedge outside of BCC.

One study in patients with intermediate or high risk myelofibrosis where Erivedge is being studied in combination with ruxolitinib, a JAK inhibitor and a second study in idiopathic pulmonary fibrosis patients or IPF where Erivedge is being investigated in combination with pirfenidone, the standard of care for these patients.

With that, I will turn the call over to Jim Dentzer for a discussion of our financial results after which we will open the call for question-and-answer..

Thank you Ali. For the quarter ended March 31, 2016, we reported a net loss of $9.4 million or $0.07 per basic and fully diluted share as compared to a net loss of $31.8 million or $0.30 per basic and diluted share for the comparable prior year period.

The net loss for the prior-year period includes a one-time charge for in process research and development expense of $24.3 million associated with the issuance of 17.1 million shares of Curis common stock to Aurigene as partial consideration for the rights granted under the terms of our January 2015 collaboration agreement.

Revenues were $1.7 million for each of the first quarters of 2016 and 2017. Revenues for both periods are comprised primarily of royalty revenues recorded on Genentech and Roche's net sales of Erivedge. Operating expenses were $10.5 million for the first quarter of 2016 as compared to $32.7 million for the same period in 2015.

As noted earlier, we recorded a one-time charge in 2015 for in-process R&D of $24.3 million associated with the issuance of common stock to Aurigene. No such expenses were recorded for the three months ended March 31, 2016. R&D expenses were $6.8 million for the first quarter of 2016 as compared to $4.7 million for the same period in 2015.

The increase in R&D was primarily due to increased direct spending related to outside services supporting the ongoing clinical activities of CUDC-907, including initial costs for the Phase 2 trial that was initiated in January 2016 and direct costs for programs under the Aurigene collaboration over the prior-year period.

Finally, employee related expenses increased over the prior-year primarily due to increased headcount. General and administrative expenses increased to $3.6 million for the first quarter of 2016 from $3.5 million for the same period in 2015 due to increased personnel costs.

Other expense was $635,000 for the first quarter of 2016 as compared to $827,000 for the same period in 2015. Other expense primarily consisted of $740,000 and $867,000 in interest expense for the quarters ended March 31, 2016 and 2015, respectively, related to the loan made by BioPharma-II to Curis royalty, a wholly-owned subsidiary of Curis.

As of March 31, 2016, Curis' cash, cash equivalents, marketable securities and investments totaled $73.1 million and there were approximately 129 million shares of common stock outstanding. With that, we will open the call for questions..

Our first question comes from Adnan Butt from RBC Capital Markets. Your line is now open..

Good morning. Thanks for the question and welcome to Jim. First on 907.

Ali, have you discussed any response thresholds with the agency at this time? And then, could something emerge from the combination data that could alter your plans for monotherapy?.

Thank you Adnan and thanks for calling in as well. In terms of thresholds for responses, first of all, we think the Phase 1 data that we have discussed based on the 25 patients as I just outlined, certainly represents a very good response rate and a solid response rates in this population of patients, relapsed refractory DLBCL in that regards.

With the agency, since we are going after a selected patient population, we have presented that that's what we are going after and once we have more data, we will go back to them to present that information, as we have discussed what we think are the right threshold associated with this, but I will also want to draw your attention that we think the response rate we have seen so far in the Phase 1 monotherapy is a very healthy clinical benefit threshold.

In the context of the combination treatments, as we discussed, we see the monotherapy path for CUDC-907 in this relapsed refractory population as our primary regulatory path and that's the basis of our discussions with the FDA. Potentially, we would go for accelerated approval based on that information.

The combination treatment strategy, we view that as we have discussed for the required Phase 3 or the randomized trial that we would have to run and that's where we look at certainly the combination treatment strategy. So I think we are very comfortable with the monotherapy strategy right now as our primary regulatory strategy going forward..

Okay. And if I can ask one on CA170. What's the rationale for expecting or actually enrolling patients who might of failed checkpoint inhibitors already in the Phase 1? And congrats on getting it to Phase 1, by the way..

Based on the mechanism of action of the drug, targeting both the PD ligands as well as VISTA, we view that certainly patients that are eligible for immunotherapy based on PD eligibility should be enrolled in the study and we view that as one of the populations.

Based on some information that have come out over the last period of time in publications, certainly at the moment of the preclinical setting, we view this as a possible mechanism, an independent mechanism for patients that may not necessarily respond to PD based therapy and therefore, based on the VISTA inhibitory mechanism of our drug, we view that in a sense an independent population of patients, which may include patients that have already had checkpoint based therapies, including PD based therapies at this point..

But just to be clear, you do see value as an alternative to antibodies, right, even in naïve patients or patients new to therapy?.

Yes.

We view our drug as having both mechanisms of action targeting patients that can be treated with PD based therapies based on whether it's based on PD-L expression or not, patients that can be treated with PD based therapies, PD1 or PD-L1 therapies, should be eligible and we see that mechanism of action in our drug and then separately, the VISTA inhibitory mechanism that can be an independent mechanism for it.

So yes..

Okay. Just lastly, before I get back in line.

Any update on the IRAK4 inhibitor?.

We continue to progress the program very nicely. We have been looking at multiple different indications besides diffuse large B-cell lymphoma, where we have had our focus based on the mutation rates of that. And I think this has been fairly exciting on the preclinical side examining that target and that pathway in other indications besides DLBCL.

And I think we had a presentation on that at the AACR is what I would draw your attention to that, at this point..

Our next question comes from Brian Skorney from Robert W. Baird. Your line is now open..

Hi. Good morning guys. Thanks for taking the questions. Two quick ones. I guess first one on CA170.

Do you [indiscernible] in terms of what you saw in the animal studies in [indiscernible]?.

Thank you Brian. So you broke up a little bit. If you can repeat your question, that would be great, Brian..

Yes.

I was just asking about what you saw in terms of animal study bioavailability and what would you anticipate to see in humans for a therapeutic dose? How many dose escalations that might require before we start seeing PD1 inhibitions? And then just in terms of any update in terms of a timeline for opt-in to [indiscernible] for the PD-L1 temporary program?.

Sure.

So I think the basic summary from the animal preclinical studies for IND enabling studies, certainly on CA170, in addition to seeing the clinical, not clinical I would say preclinical benefit in animal models in multiple different models melanomas and colorectal carcinomas that we have presented as well as the safety studies that we indicated, the GLP toxicology studies in both species were completed at up to 1000 milligram per kilogram per day.

Oral availability has been tested in multiple species. In the mice setting, we presented that in the range of 60% to 90% depending on the dose in terms of oral availability and it had very nice oral availability in PK in multiple models including the monkeys that was the second species for the toxicology studies that we have completed.

In the case of dose ranging and starting dose and expected doses, as you well know, Brian, we will wait to see what the pharmacokinetics, at least in the initial set of patients, in the clinic looks like in oral availability.

Although I would say that we certainly sense that both our starting dose and assuming low to moderate even bioavailability in the humans, we certainly expect that we are starting at a fairly healthy dose for the drug in the clinical setting.

Allow us to get there in the context of when we would expect to see PD1 inhibition or targeting at this point is fairly difficult to say before we have gone into patients.

In the context of PD-L TIM3, we presented some of the data at AACR for that and at the moment, those compounds have had very nice both, potency, have been very selective, a series of compounds that we presented the data on and they have also had very nice in vivo activity as we presented especially in models, in preclinical models that don't have a response to anti-PD1 antibodies and those are selected for us to be able to see the activity beyond PD1 based therapy as well.

Our expectation is that we would exercise in the second half of this year with regards to licensing that program. So it's fairly well on track for us to exercise our license in the second half.

Operator?.

Our next question comes from Peter Lawson from SunTrust. Your line is now open..

Morning.

Just with regards to management changes, where are we at, is there anything else that's required or needed?.

Hello Peter and thank you for calling in as well. Obviously, I recognized Jim Dentzer having joined us in this quarter and of course Dr. David Tuck, who is our recently appointed Chief Medical Officer in the organization.

David has been growing the organization in terms of clinical development, including additional MDs that have recently joined him and I think majority of our increased headcount or increased expertise, I should say and the talents coming into the company is all in the clinical development area.

The other areas that we certainly look at bolstering our expertise, whether it's internalizing those talents or continuing to use external, we certainly see us heading fairly heavily into the diagnostic arena, both for CUDC-907 with MYC altered tumors, but also CA170, both wanting to immuno profile the patients but also look at our target expressions.

That's an area of expertise that we certainly look at very strongly in the organization to continue to bolster. So I would say, majority in clinical development and in diagnostic arena are the two areas that we are growing the organization..

Got you. Thank you.

And then just on 170, when do we expect the next readout or the first readout from patients? And I guess how fast could we see response rates?.

Yes. It's a good question, Peter. Obviously, as we have noted this quarter or this first half of the year, basically this quarter is when we are expecting it to be in the clinic. So be patient with us. It will be a dose escalation study. As we said, we think we are starting at a good dose, but we will evaluate that.

I think the most likely, if we were going to pick a time to imagine clinical data coming out, it would have to be at ASCO of next year unless we present data outside of the medical conference. We expect to go into patients with solid tumors for this trial.

So the most likely clinical setting would be at ASCO next year for a potential data update, unless of course, as I mentioned, based on the emerging data should they come, we would do it sooner than that..

Perfect.

And then, when could we see Phase 2 MYC positive data? Is that second half? And what venue could that be?.

We potentially can have some data in the second half. As you know, the ASH abstracts are, of course, due in August. So as our trial is ongoing, we will continue to evaluate whether ASH this year is an appropriate time for us or not.

So we can't really commit to that one and then opportunities potentially in 2017 for dissemination a more information for that.

We do have ongoing trials in progress at ASCO this year that will be an update on basically describing the Phase 2 trial and then potentially giving some update as we discussed just today and then we will evaluate whether ASH is an opportune time for us for CUDC-907 this year or not..

Perfect. Thank you so much..

[Operator Instructions]. And I am showing no further questions. I would now like to turn the call back over to Ali Fattaey, President and CEO for any further remarks..

So thanks everyone for joining the call today. I would especially like to thank all of our employees for their hard work and bringing the progress of Curis to this point. I also want to thank our partners including Genentech and Roche and Aurigene for all the work that they do in collaboration with us.

But specially, I want to thank all patients and their families for participating in our clinical trials and allowing us to further progress our drugs for treatment of patients with cancer. Thank you..

Ladies and gentlemen, thank you for participating in today's conference. You may all disconnect. Everyone have a great day..