Good day, ladies and gentlemen, and welcome to your NewLink Genetics Fourth Quarter 2018 Earnings Call. [Operator Instructions] As a reminder, today's conference will be recorded..

I would now like to turn the call over to Lisa Miller, Director of Investor Relations. You may begin. .

Thank you. I would like to remind everyone that certain statements made during this call are forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.

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 made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements.

Information presented on this call is contained in the earnings release we issued this afternoon and in our Form 8-K, which may be accessed from the Investors page of the company's website..

I will now turn the call over to Dr. Link. .

Thank you, Lisa. Good afternoon, and thank you for joining Dr. Eugene Kennedy, Chief Medical Officer; Mr. Carl Langren, Chief Financial Officer; and me, for the NewLink Genetics Fourth Quarter and Full Year 2018 Conference Call..

After the market closed, we issued a press release outlining 2019 priorities and reviewing clinical highlights for 2018 and fourth quarter and full year financial results..

With the start of 2019, NewLink finds our corporation well positioned with a strong set of opportunities to extend this year into areas of great unmet need for unfortunate patients with cancer.

Initial studies across a range of different, troublesome clinical situations in both children and adults with advanced cancer suggest that our portfolio candidates may provide significant benefits for these patients.

We believe this year of clinical development across these product candidates may allow for progress into trials that might provide the required data to move these candidates forward in the registration strategy. This, in turn, hopefully, will allow these potential beneficial agents to help a much larger population of patients.

As 2019 unfolds, NewLink finds itself in a well-financed situation for our clinical goals planned through 2021..

On this call, I will provide an overview of clinical programs, corporate activities and goals. Dr. Kennedy will review highlights of our clinical development programs, and Mr. Langren will wrap up with the financial results and comment on our cash position..

In 2018, NewLink Genetics presented clinical data at key oncology meetings, including AACR, ASCO, SITC and ASH, supporting both indoximod's potential as a immunotherapeutic agent and the advancement of clinical development programs for indoximod and its prodrug, NLG802.

We enter 2019 featuring results for an additional drug candidate in our pipeline, NLG207, in ovarian cancer and anticipating further data from our indoximod trial as well as anticipated completion of Merck's rolling biologic license application submission to the FDA for the Ebola vaccine.

Data represented through our 2018 showed encouraging results for indoximod in combination treatment regimens for patients with frontline DIPG, recurrent pediatric brain tumors and acute myeloid leukemia, or AML.

In addition, data presented at SITC in November revealed enhanced pharmacokinetic properties of NLG802, our indoximod prodrug, in first-in-human trials.

At AACR in April, we presented data further detailing the differentiated mechanism of action for indoximod compared to direct enzymatic inhibitors showing that indoximod acts to reverse the effects of low tryptophan by increasing proliferation of effector T cells, directly reprograms T regulatory cells into helper T cells and also downregulates IDO expression in dendritic cells..

Specifically, results for indoximod plus radiotherapy in frontline diffuse intrinsic pontine glioma, or DIPG, presented in April at AACR and updated in July at the International Symposium of Pediatric Neuro-Oncology Annual Meeting showed symptomatic improvement and marked radiographic responses in the small cohort of DIPG patients.

Additional data presented in 2018 showed promising activity for indoximod in both advanced melanoma and pancreatic cancer..

Final Phase II results for indoximod plus checkpoint inhibition in advanced melanoma were presented at ASCO in June, showing encouraging overall and complete response rate compared to historical PD-1 monotherapy data.

Final Phase II results were also presented at ASCO for indoximod plus gemcitabine, nab-paclitaxel in metastatic pancreatic cancer, indicating potentially promising activity that correlated with a measurable immune response..

Biopsy data on melanoma patients and pancreatic patients from these Phase II trials were presented in November at SITC showing indoximod's immunogenomic impact on the tumor microenvironment in both of these cancers.

In the melanoma tumor microenvironment, data suggested indoximod contributed separately to immunologic and metabolic changes and acutely appeared markedly different for indoximod plus PD-1 inhibitor combination than for PD-1 alone..

Phase I data for NLG802, a prodrug of indoximod, were also presented at SITC showing significant enhancement of pharmacokinetic properties for this prodrug compared to equivalent indoximod dosing supporting similar preclinical findings.

The improved PK properties and consistent safety data thus far demonstrated for NLG802 suggests the ability to evaluate higher-dose ranging effects of indoximod mechanisms, either alone or in combination with other immunotherapy agents..

Finally, in November of 2018, our partner, Merck, announced they have begun a rolling BLA filing for the Ebola vaccine and stated that it expects rolling submissions to be completed in 2019.

This is the same vaccine that is currently being used in the Democratic Republic of the Congo, and for which data from a large randomized trial have been published in a peer-reviewed article in The Lancet indicating 100% efficacy rate among those vaccinated..

In 2019, we plan to advance our core clinical programs and expect to publish additional data supporting these research efforts..

This year, we anticipate presenting updated Phase I data for indoximod in both frontline DIPG and recurrent pediatric brain tumors; an updated Phase I data for indoximod prodrug, NLG802..

We have also expanded our development program beyond indoximod with NLG207, a nanoparticle formulation of the topoisomerase 1 inhibitor, camptothecin, which we acquired 2 years ago. A Phase II trial evaluating NLG207 plus Paclitaxel for patients with recurrent or persistent ovarian cancer has been completed by the Gynecologic Oncology Group.

That trial enrolled patients with both platinum-resistant and platinum-sensitive disease. As announced today, data from that trial has been accepted for presentation at the AACR Annual Meeting in early April..

Finally, in parallel, we have been spending considerable time and effort evaluating other licensing or acquisition opportunities to further expand our pipeline. We currently believe that NewLink is well positioned financially, with resources that will take us through 2021.

These resources will allow us to develop our pipeline of indoximod in NLG207, as well as potentially work on new projects that could be added to the pipeline..

Now I will turn the call over to Dr. Kennedy who will discuss our clinical programs in greater detail.

Gene?.

Thanks, Chuck. I would like to begin by expanding upon our NLG207 program that Chuck mentioned earlier..

We are delighted to be able to present the first Phase II clinical results in ovarian cancer with NLG207. Ovarian cancer remains an important clinical problem. The majority of patients present at an advanced stage and therefore, have a poor prognosis. While many respond to therapy, the majority relapse.

This leads to a pattern of therapy followed by a relapse, and patients ultimately succumb to disease. For these patients, there is a great unmet need for additional lines of therapy that are well tolerated and can prolong survival.

Our goal is to develop NLG207 in ovarian cancer where multiple lines of therapy, including platinum-based therapies, have failed. Preclinical data has suggested that NLG207 has strong anticancer activity, matched with less bone marrow toxicity, which supports the original conceptualization and design of the drug.

NewLink originally was drawn to the in-licensing of NLG207 because of encouraging initial data in ovarian cancer, and the announced presentation expands upon those data.

The Gynecological Oncology group, or GOG, conducted this single-arm Phase II study where patients were treated with NLG207 every 2 weeks in combination with weekly Paclitaxel in 28-day cycles until progression or toxicity. The primary objective was overall response of the [ ovary cyst ].

Progression-free survival, duration of response and safety were also addressed..

Additionally, an investigator-initiated trial led by the group at Massachusetts General Hospital that included a single-agent NLG207 arm for patients with recurrent ovarian cancer has been completed and data analysis is underway. We believe the drug also has potential in a number of cancer indications where topo1 inhibitors have shown activity.

These results will guide our development plan for NLG207..

To review our specific indoximod programs. We continue to evaluate indoximod in combination with standard-of-care radiotherapy, followed by indoximod plus maintenance chemotherapy for pediatric patients with frontline DIPG, a distinct subtype of pediatric brain tumors with the most dire prognosis and significant unmet need.

While a rare tumor with an estimated 300 new cases a year in the U.S., the prognosis for DIPG patients is especially poor, with approximately 20% survival at 2 years and 1% survival at 5 years. Currently, for DIPG, radiotherapy represents the only standard-of-care therapy used in the front line setting.

To date, neither radiotherapy nor any experimental therapeutic approach has been shown to meeting fully prolonged survival for these children. But radiotherapy does provide some degree of symptomatic relief..

NewLink's Phase I DIPG trial evaluated indoximod plus radiochemotherapy continues to enroll, and we are increasing the number of sites for improved access for patients who may find it difficult to travel to our initial locations.

Updated data last presented at ISPNO in July 2018 demonstrated symptomatic improvement in all patients in the cohort and evidence of deep radiographic responses. Our DIPG trial is a single-arm study.

Standard-of-care therapy has not changed significantly however, and we therefore believe historical data may serve as an appropriate comparison to evaluate the potential for indoximod to improve patient outcomes in this setting..

To that end, we have developed a DIPG control data set, and we'll evaluate data from our DIPG trial in comparison as the survival data matures. We anticipate presenting results from the DIPG cohort later in 2019..

We are also continuing development of NLG802, a prodrug of indoximod. Preclinical data showed 4- to 6-fold increased drug exposure for NLG802 compared to a similar dose of indoximod.

Initial Phase I data from our first-in-human dose escalation trial were presented at SITC in November of 2018 and are promising with confirmation of a similar increase in exposure in human subjects. A 4-fold increase after a single dose and a 5- to 6-fold increase after continuous twice daily dosing.

The drug was well tolerated at these exposure levels. The trial continued to enroll, and we expect drug exposure levels higher than that which have been achieved with indoximod. These results will be updated in 2019..

We also continue to evaluate indoximod plus chemo radiotherapy for patients with recurrent pediatric brain tumors. While the majority of pediatric brain tumors are associated with a 70% 5-year survival rate for patients who relapse, conventional therapy has limited benefit and outcomes are uniformly fatal.

Early data from our Phase Ib trial for pediatric patients with refractory malignant brain tumors presented in November 2017 were encouraging. This trial continues to enroll, and we anticipate presenting updated data in 2019..

In addition, we continue to evaluate indoximod plus standard-of-care chemotherapy for younger, healthy patients with newly diagnosed AML in a Phase I trial. Currently, we are accepting the feasibility of a registration strategy using minimal residual disease, or MRD, as an approvable endpoint for drug development in frontline AML.

This is based upon our presentation this past December at ASH of encouraging updated Phase I results indicating that indoximod plus standard-of-care 7+3 chemotherapy appears to produce a high rate of MRD negativity after consolidation therapy in AML patients..

There has been increasing acceptance by regulatory authorities of MRD negativity as the basis for clinical development, with the FDA MRD guidance report published October 2018 as the latest indication of the likelihood of an even broader application.

Currently, MRD negativity has been excepted for pediatric leukemias and more recently, adult acute lymphoblastic leukemia, or ALL. Given this trend, we believe that a regulatory strategy based on MRD and AML can be successful..

In summary, we believe NLG207 in ovarian cancer is promising, and look forward to presenting results at AACR in April.

We continue to be encouraged by our indoximod data produced thus far in DIPG, recurrent pediatric brain tumors and frontline AML, and look forward to presenting additional results in DIPG and recurrent pediatric brain tumors at upcoming medical conferences in 2019..

Finally, early data for indoximod prodrug, NLG802, look encouraging and we anticipate presenting updated results for that drug candidate later this year..

Now, I will turn the call over to Carl to discuss the financial results for the quarter and our cash forecast.

Carl?.

Thank you, Gene. Before we move to the Q&A, I will comment on our cash guidance and provide an overview of key financials for Q4 and full year 2018..

We ended 2018 with cash and equivalents of $120.7 million compared to $158.7 million at the end of 2017. We anticipate a cash use of approximately $10 million per quarter, which allows our cash runway to extend through 2021.

This excludes any additional financing, new partnerships or the impact of a priority review voucher, should one issue in connection with the approval of our partnered Ebola vaccine candidate..

As a reminder, in 2014, the company entered into a license agreement with Merck to develop, manufacture and commercialize NewLink's Ebola vaccine candidate.

Merck has stated that it is making rapid progress toward the registration of the Ebola vaccine, and announced in November 2018 that it had started the submission of a rolling BLA with the FDA and expects this to be completed in 2019.

When and if the FDA approves this Ebola vaccine, this would trigger the issuance of a priority review voucher owned by Merck, and in which NewLink Genetics has a substantial economic interest. Thereafter, NewLink would have the right to monetize its interest in the voucher.

We can't forecast the value of priority review vouchers in the future, but recent open market transactions have valued them at $80 million or more.

We do believe the FDA will recognize the clinical value of this vaccine and approve the drug, given the high efficacy seen previously in a randomized trial, the recent outbreaks and the recurrent risk this deadly disease poses to global public health..

NewLink Genetics reported a net loss of $10.6 million or $0.28 per diluted share for the fourth quarter of 2018, compared to a net loss of $13.7 million or $0.37 per diluted share for the fourth quarter of 2017.

For the year ended December 31, 2018, the company reported a net loss of $53.6 million or a loss of $1.44 per share compared to a net loss of $72 million or $2.30 per diluted share for the year ended December 31, 2017..

In Q4 of 2018, we received a tax refund of $6.9 million as a result of filing amendments for certain tax refunds..

The company ended Q4 2018 with approximately 37.25 million shares outstanding. Please refer to the press release we put out this afternoon for more details on financial results..

Looking ahead, we hope to see many of you at investor conferences throughout the year..

Now I would like to turn the call back over to Chuck before we open up the call to questions.

Chuck?.

Thank you, Carl. In summary, we continue to progress our clinical development pipeline from the position of considerable financial strength.

We've expanded our clinical program to include NLG207, a nanoparticle formulation of topoisomerase 1 inhibitor, camptothecin, which is being evaluated in patients with refractory and recurrent ovarian cancer who have failed multiple lines of therapy..

We look forward to presenting Phase II results for NLG207 at AACR in April..

We're in the process of evaluating and developing our clinical plans for NLG207, and look forward to communicating these plans to you in the future..

Over the past year, NewLink Genetics produced encouraging indoximod data in a number of cancer indications, including DIPG, AML, and advanced melanoma, and presented data showing indoximod's unique mechanism of action and its immunogenomic activity in the tumor microenvironment.

Additionally, we presented early clinical results from our indoximod prodrug, NLG802, which showed enhanced PK properties and consistent safety data in humans..

We look forward to presenting additional clinical results on indoximod, NLG802 and NLG207 at medical conferences during the remainder of 2019..

We also continue to evaluate potential acquisitions or in-licensing opportunities to broaden our pipeline..

We are deeply grateful to the patients, physicians, and other health care professionals who participated in our clinical programs. Without their myriad contributions, none this work would have been possible..

With that, we will open up the call for questions.

Operator?.

[Operator Instructions] And our first question comes from Stephen Willey with Stifel. .

I guess, just with respect to the upcoming AACR presentation. I think there was a comment made that patients in this trial, I think there were -- it's a 30-patient trial that there was some that were platinum-sensitive, some that were platinum-resistant.

Can you break down the proportion of those that would have been platinum-resistant in that trial?.

Yes. I think it was roughly equal proportions. But I think all the specific data will have to wait for the release of the abstract. .

Okay.

And I believe the same asset was evaluated in another Phase II recurrent ovarian cancer trial in combination with bev? And just curious if that data has ever been presented? Or if, I guess, you know what the directionality of that response or the efficacy data might look like?.

That's the data from the Mass. General IIT. So that has single agent and combination data. And as I said, the group is working to get that data into the public realm quickly. .

Understood.

So that includes the bev combo arm in that Mass General trial?.

That's the bev combo arm that you've seen on clinicaltrials.gov, would come from that IIT. .

Understood.

And then just with respect to AML, can you just kind of walk us through the time line with respect to what needs to happen, and when you think those things might happen with respect to getting clarity on a registration [ of a ] program in newly diagnosed patients using MRD as an endpoint? And I guess you kind of provided timelines for data disclosures on the other programs in 2019.

I guess we didn't hear anything on AML.

Should we not be expecting anything incremental on the AML front from a data perspective this year?.

So we're not projecting that we're going to do an incremental update in the AML program this year at this time. I think that our approach is going to be to spend some time with key opinion leaders, reviewing the data that we have. The trials are still open to enrollment so there will be more patients coming in over time in the trial.

And then, I think based on that, a decision will be made about how we might have a dialogue in the future with the regulatory agencies. But I think we have to have more input from the experts and sort of more review of what we're doing before we make a decision to prioritize that relative to the other programs. .

Understood. And maybe just a quick follow-up or housekeeping question on the Ebola vaccine.

Can -- so outside of the PRV, can you just remind us if you have any additional economic claim to that asset? I know that there was some discussion when the licensing transaction was initially done that you guys wouldn't be collecting royalties, I think, on sales of product or distribution of product to third-world countries. Just curious if... .

So in the third world, essentially, both Merck and ourselves are doing things at the cost. So the cost of production related to everything. And there is no profit of any kind that are being sought out of the Third World. This is really being done really to help the crisis and the situation that's there.

In the event that there was a stockpile order or something else that were happening in the United States, the -- there would be royalties potential. And it really depends upon the size and scope of the order, whether that would have a meaningful financial impact on NewLink or not in the future. .

And our next question comes from Mike Ulz with Baird. .

This is Colleen Hanley on for Mike. Sorry about that.

So in AML, are you still collecting historical control data? And do you have any update on when we could see that optimized natural history data in AML?.

Yes. So we have a number of different data sets that we've been trying to evaluate, some of which we summarized when we did some of the presentations last year. If you look at ASH con's presentation, we had some of that data in there. One of the issues with the historical data here is that different MRD assays are used in different universities.

So some are PCR-based, some are facts-based. And the best one for comparison for our purposes are ones that are facts-based since that's how our assay is done. When you do PCR-based assays, often you can only do the measurement on subsets or fractions of patients with specific genetic abnormalities if that's what's being used for the measurement.

So you really have to sort of dig in to the differences and how the different MRD assays are done. As part of the confusion in the field, we have different data sets showing different rates of MRD, MRD negativity.

Our belief is looking at our data that it looks encouraging for the facts analysis that's being done through our collaborators, who are the same group that helped get this assay approved in the pediatric setting to use as an endpoint in pediatric leukemia trials.

So we think it's -- I don't want to say gold standard, but it's a standard I think has been through the rigorous review process on the pediatric side. And we're hoping that, that will allow us to line up well on the adult side someday. .

Okay.

And then can you just give us a little more color on how you're thinking about business development and potential in-licensing in terms of just maybe would it be a complementary oncology indication or some -- an area that you're already in?.

So the vast majority of things that we've been looking at and evaluating are oncology products and the majority of those are within the realm of immuno-oncology, in stuff that we have a lot of experience with. We have been doing significant diligence on a number of different projects.

And if one of those matures to the point that we make it public, you'll be one of the first to know. .

I'm showing no further questions in the queue at this time. I would now like to turn the call back to Chuck Link, the CEO, for closing remarks. .

Well, we thank you for your interest and appreciate you taking time out of your busy schedule to dial in today. We look forward to seeing many of you at conferences during the year, and hopefully everyone has a nice spring that hopefully will be here shortly. .

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