Jack Henneman - Chief Financial Officer Charles Link - Chairman and Chief Executive Officer Nicholas Vahanian - President and Chief Medical Officer.

Mara Goldstein - Cantor Fitzgerald Stephen Willey - Stifel, Nicolaus Eric Criscuolo - Mizuho Securities Biren Amin - Jefferies & Company Elson - Robert W. Baird.

Good day, ladies and gentlemen, and welcome to the NewLink Genetics Incorporated Fourth Quarter 2014 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, today's conference is being recorded. I would now like to introduce your host for today's conference call, Mr. Jack Henneman, Chief Financial Officer. You may begin..

Good morning and thank you for joining me, Dr. Charles Link, Chairman and Chief Executive Officer and Chief Scientific Officer. Dr. Nicholas Vahanian, President and Chief Medical Officer; and Brian Wiley, Vice President and Business Development to the NewLink Genetics fourth quarter 2014 earnings conference call.

Earlier this morning we issued a press release announcing our financial results for the fourth quarter and yearend 2014. Certain statements made during this call are forward-looking and actual results may differ materially from those projected in any forward-looking statements.

Additional information concerning factors that could cause actual results to differ is contained in our periodic reports filed with the SEC. The forward-looking statements are made only as of the date hereof and the company undertakes no obligation to update or revise the forward-looking statements. I will now turn the call over to Dr. Link..

Thank you, Jack. Thank you for joining us today to discuss our fourth quarter results and yearend 2014 results. Over the next 20 to 25 minutes or I'll review our licensing partnership accomplishments for the quarter and the full year and Dr.

Vahanian will update our proprietary late stage clinical trials referring the IMmunotherapy for Pancreatic RESectable cancer Study which we call IMPRESS, and the PILLAR study which is pancreatic immunotherapy with algenpantucel-L for locally advanced non RESectable cancer. As well as Indoximod clinical program.

Lastly, Jack will provide an operational and financial update. As you know NewLink Genetics is primarily focused on cancer immunotherapy advancing multiple cancer vaccines and checkpoint inhibitors through preclinical and clinical development.

We have two complimentary immune oncology platforms, HyperAcute immunotherapy technology which features a wholesale vaccine approach to cancer immunotherapy and IDO pathway inhibitors. Our mission to bring treatment options to cancer patient and need a promising alternative continuous and we are building our organization based on the backlog [ph].

As the year unfolded, 2014 was pivotal in our development.

On October 16, we and Genentech entered into an exclusive worldwide license agreement for the development and commercialization of NLG919, a clinical stage IDO pathway inhibitor and a cloud ratio for the discovery of next generation IDO/ TDO inhibitors to be developed and commercialized under the collaboration agreement.

The Genentech alliance brought us an upfront payment of $150 million more cash than we have spent in the entire history of NewLink Genetics, the opportunity to receive milestone payments in excess of $1 billion based on achieving a certain development regulatory and sales objective, escalating double digit royalties, the option to co promote drug product in United States that are nurturing [ph] the program with enhanced royalties.

And ongoing financial support for NewLink Genetics works in the collaboration. The Genentech alliance also put our IDO/ TDO pathway inhibitor program on the map. The Genentech alliance is the first important step in a realization of our original scientific vision as it applies to deploy immune system to fight cancer.

The research collaboration is structured to permit the development of IDO/TDO pathway inhibitor concurrently with other drug including PDL1 and OX40 in combination as well as our own HyperAcute platform. Realizing the potential of these combinations has been our own true north since we founded the company.

The second clinical program which is our proprietary HyperAcute cancer immunotherapy faces a significant milestone this year when we will learn the result of the second interim outlook in the IMPRESS trial. The pivotal clinical trials for patients with resected pancreatic cancer study algenpantucel-L are lead HyperAcute immunotherapy candidate. Dr.

Vahanian will speak more about that in a moment. As most of you know NewLink Genetics is primarily focused on cancer immunotherapy advancing multiple cancer vaccine and checkpoint inhibitors through preclinical and clinical development.

That has led us to develop a 13 expertise in vaccines that in turn has led to one of the few clinical stage vaccine to gauge the Ebola virus, routine License [ph] via us from the Public Healthy Agency of Canada.

As we said on the third quarter call in early November, our goal has been to advance this Ebola candidate with the help of our partners in an attempt to add the current humanitarian crisis in West Africa. We insisted that this be done in a thorough, ethical and scientifically sound clinical development plan. But accelerated to an unprecedented speed.

We also knew that our Ebola candidate would benefit from the expertise and capacity of a multinational vaccine company. So we told you in the third quarter call that we are exploring opportunities to enter into collaboration for the vaccine. On November 24, we were delighted to announce we entered into a licensing collaboration agreement with Merck.

The transaction resulted in an upfront payment of $30 million which we received in December, a milestone payment of $20 million which we earned last week with initiation of pivotal clinical trials in Africa. In the opportunity to earn royalties on the sales of the vaccine, if it is approved in specified countries based on certain economic criteria.

Finally, we announced in December that we have received significant funding from the Biomedical Advanced Research and Development Authority known as BARDA and the Department of Defense to support the manufacturing the vaccine at various dose levels.

The early clinical trials and important ground work needed to move the candidate to effecting this trial. We also recruit one of the top vaccine experts in the world Dr. Thomas Monath to lead our infectious disease initiative. All of this background work is to help advance Merck NewLink candidate Ebola vaccine to the clinic in multiple trials.

Now I'll turn the call over to Dr. Vahanian to update you on our clinical program including our expectations for the timing of the second interim look at the IMPRESS trial..

Thank you, Chuck. We continue to be fully invested in our HyperAcute cancer immunotherapy program, which may prove a broad potential across a spectrum of cancer indications. We have multiple HyperAcute vaccine program in a various stages of clinical development including algenpantucel-L also known as HyperAcute pancreas.

Tergenpumatucel-L also known as HyperAcute lung, through Dorgenmeltucel-L also known as HyperAcute melanoma and HyperAcute renal. Of these the most important and new term target pancreatic cancer and lung cancer.

Today, we revised our prior expectation on the timing of IMPRESS second interim analysis which we now expect to be reported in the first or second quarter of 2015. The possible outcomes for the second interim analysis include confirmation of continued study as designed to the preplanned and point order 444 event [ph].

The alternative outcome is in the best case a decision to move forward towards filing with FDA on the basis of the interim data due to an improvement in overall survival. Recognizing that we have no basis for knowing which of these alternatives may arise from the second interim analysis. We note that study was designed for the full 444 events.

Please draw no conclusions one way or the other from display in our timing expectations. The 330 event has occurred in the IMPRESS trial. We are now into process for preparing for analysis.

Over the past several years, clinical investigators and statisticians have suggested that some current statistical methods maybe more optimal to evaluate cancer type drug.

After internal discussions with both our clinical teams and our external statistical consultants, we have decided to assess within such alterative statistical methods should be employed in the IMPRESS trial. We and our statistical consultants who are advising us on this method remain blinded to the data.

We do not know whether a change in the statistical methodology if one of them to be employed will affect the outcome of the analysis. Otherwise, we are not going to comment any more on this process until we release results.

In addition, we expect to complete enrollment for our pivotal trial study studying efficacy algenpantucel-L in patients with locally advanced pancreatic cancer by the second half of 2015. Later this year as the enrollment nears completion and we know more about the details of events we plan to give guidance for reporting of the preliminary analysis.

Finally, Tergenpumatucel-L our HyperAcute lung vaccine is being tested in a randomized Phase 2b study in advanced lung cancer. We remain excited about the role of Tergenpumatucel-L in the treatment of patients with lung cancer.

We expect to provide a more comprehensive update regarding this trial and to Tergenpumatucel-L program in the second half of 2015. Clinical development in the NLG919 and pipeline IDO/TDO program will henceforth be driven primarily by our collaboration with Genentech. So we do not expect to report milestones except in cooperation with our partner.

We do plan to continue studies of Indoximod, including in combination with HyperAcute product candidates. There are four trials you should know about and we expect to complete enrollment of them by the first half of 2016.

They are an NLG2101 which is a randomized Phase 2 trial testing Indoximod in combination with docetaxel or papitaxel [ph] in patients with metastatic breast cancer. You may recall that we double the number of patients enrolled in this study from the original 85 patient study.

We are now expanding this trial internationally and expect interim results by the end of 2015. An NLG2102 which is Phase 1b2 trial testing Indoximod in combination with temozolomide in patients with progressive or refractory glioblastoma, we expect to report top line results from the Phase 1b component in the second half of 2015.

An NLG2103, a Phase 1b2 trial testing Indoximod in combination with ipilimumab in patients with advanced melanoma with Phase 1b top line results expected by the end of 2015 and lastly NLG2104 which is a Phase 1b2 trial testing Indoximod in combination with gemcitabine plus abraxane in patient with metastatic pancreas cancer with Phase 1b top line results expected by early 2016.

Now I'd like to turn the call back over to Chuck to update on you on the organizational development. .

Thanks Nick. Addition to our clinical and scientific progress, 2014 was the year we truly began the important transformation of NewLink Genetics into a commercial biotechnology company.

We established a new office in Austin, Texas, have hired leaders in medical affairs, market access, marketing and financial planning analysis there, and expect to add important roles and other function this year. Jack Henneman, who joined us in October, is based in the Austin office.

We also established expanded operations for our infectious disease group in a new office just outside Boston, Massachusetts led by Dr. Tom Monath and have a team of people there supporting the collaboration with Merck in our contracts with BARDA, the Biomedical Advanced Research and Development Authority and the Department of Defense.

This infrastructure will enhance our capabilities within the infectious disease realm. We've also added new facilities Iowa and are recruiting senior leaders in quality systems and regulatory affairs to prepare for the potential commercialization of the HyperAcute program.

In addition, we are recruiting more senior leadership in research to work our new joint discovery, a priority of mine in my capacity as Chief Scientific Officer. In short, it is an exciting time to be at NewLink Genetics. Now I'll turn the call over to Jack for a brief discussion of our results and financial expectations for the coming year.

Jack?.

Thank you, Chuck. Before we move to the Q&A I want to touch in just a few items in the numbers. We finished the quarter with $203 million in cash and equivalents compared to $61.2 million at the end of 2013 and $67 million at the end of the third quarter.

The increase was distributable primarily to the upfront payment for the Genentech and Merck alliances, net of taxes, and amounts received under government contracts. We used around $12 million in cash on our core operations in Q4, a bit faster in Q4 and the second half of 2014 than in the first half of the year.

Much of the increase was attributable to the items that we do not expect to persist including investments in R&D and manufacturing capability for above or that we will recruit to a significant degree and access G&A to cover the CFO transition and legal fees in connection with the Genentech and Merck collaborations.

We are also however spending more aggressively than has been our tradition in order to support future growth. Some investors have asked how we will account for the Genentech and Merck payments. In each case most of the upfront payments were recognized this revenue. $166 million of $180 million received.

The balance is deferred to future period to reflect work still to be completed under the alliances. Recognizing that we are confronting a great many variables in forecasting at least until we know the results of the second interim work, we expect to finish 2015 with approximately $160 million in cash.

Our assumptions include among other things, no new financing other than approximately $12 million in new equity under our outstanding at the market program. The receipt of the recently announced milestone payment from Merck net of taxes.

No other milestone payments in new alliances, no new government contracts or incremental funding under the existing contracts, a significant increase in capital expenditures to develop the manufacturing for the HyperAcute immunotherapy program.

A significant increase in clinical trial expense for the HyperAcute programs and Indoximod, increase spending for people and actions that are under critical path for commercialization and finally no new acquisitions or end licensing.

With all of these assumptions, we expect to spend approximately $65 million in cash on operations net of government contracts, and $5 million to $6 million on capital expenditures. Of course if these assumptions change our spending will change especially if the second interim look at the IMPRESS trial results in a positive finding.

In that event we will develop new plans to reflect the much faster path to BLA submission approval and commercialization. We are well financed in a near and medium term and have no current plans to raise more money.

However, we will shortly file a new short [ph] registration statement to give us the option to react quickly to market conditions recognizing that if the IMPRESS trial hauls for effectiveness we will need to accelerate our organizational development and our outside spending well beyond the current case. With that we will open for questions. .

[Operator Instructions] Our first question comes from Mara Goldstein with Cantor Fitzgerald. .

Thanks very much for taking the question. Can you hear me? Great, thanks.

I wanted to ask the question about the idea of using alternative statistical method to evaluate the trial and how that coexists with the current statistical plan that you anticipating using and how the FDA might view that? If you could may be express that for us that will be helpful?.

We are not going to make any comments with regard to any discussions that we had with FDA. As you are aware the current statistical plan in the special protocol assessment is a log rack analysis based on certain event rates and based on certain hazard based, so they have to meet certain key value and we review those and published those previously.

I think what you are seeing is the reflection of an internal discussions with the clinical team and with our external experts statistical consultants that suggest that immunotherapy trials maybe more optimally analyzed by an alternative statistical method.

Since we are discussing different types of methodologies and that sort of thing, we are not going to comment in any other specificity until we conclude what the methodology is and we reply to the second interim analysis, when and if it does change..

Okay.

But as it relates to the first interim that occurred, have you look at alternative methodologies, reapplying those to direct in retrospect to that analysis that occurred in the first interim?.

We are not going to comment in any other internal analysis that we have doing more than what I just said. .

Our next question comes from Stephen Willey with Stifel..

Hi, good morning, thanks for taking the questions. Just a follow up on the statistical question.

I know some of these I guess alternative methodologies that are available require -- essentially require sponsor to predefine what the initial period of delayed separation might be and then I guess what the expediential hazard rate might be post that period of separation and so I am just curious if you feel that there is enough data out there or enough of guide to kind of serve as an appropriate benchmark to which you might be able to make some of these assumptions.

.

Steve, if you heard this morning. As you are aware there is a large and expanding literature regard to -- with regard to immunotherapy trials and how they might be optimally statistically analyzed.

Since we are blinded to the data and remain blinded to the data both us and the statistical consultants that we have been using for this advice in order to keep the experiment not interfered with, we don't really have any comment as to what functions we will or won't be making with regard to how those statistical test are applied..

Okay. And maybe just kind of bit of theoretical question but I think as you think about PILLAR and that being studied in locally advanced patients, I am just kind of wondering what you think the localized level of immuno suppression in a locally advanced patient versus patient post surgical resection..

I think it is a really important question. One of the key barriers to the effectiveness of cancer vaccines certainly is not just single checkpoint inhibitors but multiple checkpoint inhibitors overlapping to create immune defense at tumor bed.

And experiment of seems to suggest that the more overlapping checkpoint inhibitors you have, the more profound the immuno suppression is first in the local tumor environment and subsequently to systemically in the patient as their immune system is eroded biology as effective immune suppression.

Our view point and one of the reasons after we did our initial pilot study in non small cell lung cancer that we decided to go into two additional directions as our next steps were melanoma as you are familiar with about the consider going immuno responsive tumor and secondly a minimal disease stage that was the most lethal.

Pancreatic cancer when is surgically resected the way you define pre-resected patient is to do a CT scan after surgery we can't show any residual disease. Despite that 85% to 90% of those patients recur and die because they do in fact have residual disease that's underneath the resolution of the CT scan.

Our viewpoint has been another very -- another way that you can fight checkpoint blockade is to reduce significantly the size of the tumor so that there is less checkpoint blockade in the small amount of cancer cells that are left in the patient's body.

So in some ways a pancreatic cancer population gives you a couple of advantageous when they are resected, the first is there is very rigorous screening by surgery that gives you a healthier patient to be begin with, who doesn't have a lot of other -- can't commit any ailments or extreme age because they would have too much problem with this very intense surgical procedure that takes 4 to 6 hours and it has mortality structure of the procedure.

So we think that gives you better sort of group of patients to begin with in terms of immunity because they are healthier.

The second is complete surgical resection of the tumor minimizes the effect we believe a checkpoint blockade and gives you more optimal situation to allow the immune response trigger by the vaccine to be effective in preventing recurrence. .

And then I guess just quickly on IDO, I know there is kind of a bit of growing interest that's been there for a while I guess, it is kind of becoming a little bit more published upon is a notion of China leverage IDO and some of these other kind of non oncology applications and I guess kind of specifically with urology, I understand you can't make comments as to whether or not that is part of towards aspiration [ph] at some point but I am just kind of curious if you having wholly underwrites Indoximod would be willing to explore that kind of biology to some kind of collaborative arrangement.

.

We've always considered IDO blockade to be something more than just a cancer project. You have to remember the entire IDO pathways that create T-cell immuno suppression up regulates to the number of T regulatory cells that is a natural physiologic process that occurs in response basically any information or any introduction in the human body.

So there have been a number of different chronic infection, wide variety of them now that have been shown to be able to induce TDO -- sorry IDO or IDO/TDO combination.

The most proactive of those probably are some of the data on HIV infection and some of the hepatitis viruses, Hepatitis C in particular and but it also applies to multiple other infectious diseases. So we've always felt that important potential application of IDO blockade could also be in some of the chronic infectious disease realm.

I remember reading there was a very interesting paper that was published by a group that took not get mice with transplanted human marrow and they created an infection chronic HIV infection in macro phases have been migrated to the brains in the animals and as they did the macro phase is expressed high levels of IDO in response to the chronic HIV infection, and it seems like it maybe an important point to creating a local immuno suppressive environment in the macro phase which then in fact could allow HIV to express them protein and survive without being destroyed by the immune system in addition to the effects of just destroying T-cell itself as a disease progresses.

In that experiment when they gave IDO inhibitor, they reduced the viro count; I don't remember the exact figures but approximately 90% reduction in HIV load in the animal as a single agent just inhibiting IDO.

So it has been conceived and has been discussed scientifically as something that maybe bale to help in certain anti viro regiment where if you have to scoop up the last remaining virus maybe you could have expect. We don't know -- no human clinical trials have occurred in this space to my knowledge.

But certainly it is the kind of thing that has been discussed as a possibility when we talk about Indoximod work..

Our next question comes from Eric Criscuolo with Mizuho..

Good morning. Just filling in for Peter Lawson.

I was wondering if you could share your thoughts on the recent flexes BMH deal, how it affects your outlook for the space and maybe how you think it might have affect the competitive landscape as well?.

So I mean our view is that the flexes deals I think represent the value creation related to groups that are developing effective IDO/TDO inhibitors and thinking about this particular checkpoint space.

I also think that you are seeing recognition between some terrific expert immunotherapy groups from large pharmaceutical companies recognizing that this category of inhibitors, this category checkpoint inhibitor is probably one of the central one.

Although there is probably been 30 or 40 different molecules that can be targeted protein or protein interaction as potential checkpoint blockade target, there is probably only a few of them that are really central pathways and our view point is always been that IDO is sort of more of railroad switching yard type checkpoint inhibitors specially with the fact that things like CTL4 can induce IDO that IDO can induce PD1 that makes I think a very central importance and that there has been shown now terrific synergy between IDO blockade and blockade with CTL 4, terrific synergy between IDO blockade and PD1 and PDL1 blockade, discussions of terrific synergy with OX40, I think you see that reflected in the initial news that Genentech has said in terms of planning which is to use our IDO NLG, IDO inhibitor NLG919 in combination with PDL1 and OX40 with a desire of some of other large companies do in combination with PD1.

So we think that what you are seeing is an assessment by some of the best minds in the field and what some of the -- the more important tier of checkpoint inhibitors are..

Thank you for that.

And I guess on the -- after the upcoming interim analysis, what program do you think and when do you think we will see next data update?.

As we gave in -- hi, Eric, this is Nick Vahanian. As we did during the call, there are a multiple programs that throughout the year we will be giving updates including the combination trials with Indoximod or lung cancer program with Tergenpumatucel-L and others that we touched on the call..

Did you handicap -- [multiple speakers].

I beg your pardon. .

Can you handicap which one first?.

I think I went through the timelines during the call that if we go through the list the Phase 1 NLG2102 which is Phase 1b2 trial testing in Indoximod in combination with temozolomide in the second half of 2015.

And then by the end of 2015, NLG2103 which is Phase 1b trial testing Indoximod in combination with ipilimumab and also we said that we will review data and the trial for the Tergenpumatucel-L trial for the lung cancer towards the end of the year. .

Okay, thank you for clarifying that.

And then just one last thing on the HyperAcute lung updates, would that be a data update or would that just is an update on the timing or the strategy of the year, of the trial?.

All that is possible. We are not making any specific comments about the what update we are going to give but we will give an update on the Phase 1b, Phase 2b for the Tergenpumatucel-L program. .

Our next question comes from Biren Amin with Jefferies. .

Yes, thanks for taking my question. May be I just wanted to get some clarity on the statistical methodology that being used and perhaps, is the current methodology, is this proportional hazard model that companies evaluating and what other types of models are out there that has been evaluated by other immunotherapies. .

Sure. Hi, Biren. Thank you for the question. Nice to hear you.

We've taken this with great consideration with our advisors and at this point it is not prudent for us to comment any further about specific of which statistical methodology but you can be sure that we are giving great considerations for different statistical methods that are most relevant and they are strong being considered for immunotherapy trials and those are the ones that we are specifically focusing on..

And so I guess what parameter will you evaluate to identify the correct methodology..

Immunotherapy relevant statistical methods which have been discussed in various publications.

What are the statistical methods that are more relevant to immunotherapy trials as opposed to more statistical drugs in the statistical methods that are traditionally being used, that are older in the last decade or so as the immunotherapy field has as you know has been making a lot of progress has been in parallel get all in statistical methods and more commonly used for the various uses you can -- I am sure you can point as well..

As you know a lot of that has to do with the differences in the way that patients' respond to immunotherapy versus the way they respond in terms of timing to small molecule inhibitors and to chemotherapy. And so those create different consequences to what the shape and survival curve looks like.

It is obviously been a number of reviews and reports written on this subject matter. And after some serious thoughts and discussion, we decided that we certainly should be paying attention to this and considering this as an option for our current clinical trial..

Okay. And given that in process under our special critical assessment, would you think that dose for the status of the --.

We are not going to comment on anything related to the regulatory pathway here or at any discussions that we may or may not have with the FDA at this point..

Our next question comes from Chris Raymond with Robert Baird. .

Good morning. Hi, this is Elson [ph] back on for Chris today. Thanks for taking the question. So I wanted to ask about the PILLAR study. So you have got to enrollment completion by second half of this year.

How should we be thinking about timing for subsequent enrollment final analysis and when will we learn more about statistical hurdles in PILLAR? Then you indicated historically that typical survival on this population has been around 12 months so how has this metric changed over the years? And then lastly how should we be thinking about potential redo from impacts the PILLAR?.

So thank you for the question, Elson. Our expectations fundamentally have not changed in regards to the study. And we expect final enrollment in the second half of 2015. Since it is an event driven study, it is not prudent at this point to make any fundamental projections.

But as we-- events and events made as well as the enrollment continue we will give an update second half of the year regarding the update on the study. And I think you asked about historical survivals.

As you know only significant drug that came into market in the study which was in metastatic not in locally advanced or broader line of resectable patients. So it is not directly relevant but GemAbraxine and foltinxare [ph] are being used in our study.

I would also comment that as you know, GemAbraxine benefited about little under two months in survival in metastatic patients. Furthermore, if you look at some of the details of that study, patients with high chronic scores or high performance -- high performing patients were only admitted to the study.

In our study there are no such exclusion inclusion criteria. As a result broader patients are included so if there was a benefit that benefit included it will be minimal and when we design the study, we actually included that potential benefit on our projections. .

And I am not showing any further questions at this time. I'd like to turn the call back over to our host. .

Thank you, all. This is Jack. Thank you all very much for listening in to our fourth quarter and full year 2014 and earnings call. And we look forward to seeing many of you at conferences over the next few months and in the earnings call for the first quarter at the end of April. Thank you very much..

Ladies and gentlemen, thus concludes today's presentation. You may now disconnect. And have a wonderful day..