Jennifer McNealey - Senior Director, IR Susan Molineaux - Founder, President and CEO Stephanie Wong - VP of Finance Keith Orford - SVP of Clinical Development

Jonathan Chang - Leerink Partners Greg Harrison - Citi

Good day ladies and gentlemen, and thank you for standing by. Welcome to the Calithera Biosciences, Inc. Q1 2017 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 be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Jennifer McNealey. Ma’am you may begin.

Thank you. Good afternoon everyone, and welcome to the first quarter 2017 conference call. Joining me today are Susan Molineaux, our Founder, President, and CEO; Stephanie Wong, Vice President of Finance; and Keith Orford, Senior Vice President of Clinical Development. 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 discussed in the Risk Factors section of our quarterly report on Form 10-Q which is on file with 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. With that, I will turn the call over to Susan.

Good afternoon. This is Susan Molineaux. Thank you for joining us today on our first quarter 2017 earnings conference call. At Calithera, we are building an integrated biotechnology company that develops novel small molecule drugs targeting tumor and immune cell metabolism pathways for the treatment of cancer and other diseases with unmet needs. Tumor metabolism and immuno-oncology have emerged as promising new fields for cancer drug discovery, and recent clinical successes with therapeutic agents in each field have demonstrated the potential to create fundamentally new therapies for patients. Our drug is designed take advantage of the unique metabolic requirements of tumor cells and cancer-fighting immune cells, such as cytotoxic T-cells. By building a pipeline of novel therapeutic product candidates, we believe we are creating multiple opportunities to positively impact clinical outcomes for patients and drive the development of each of our clinical candidates towards commercialization. During the first quarter, we significantly strengthened our financial position, and we believe we are well positioned to execute on our strategy. Our license and collaboration agreements with Incyte Corporation, signed in January, maximizes the clinical and commercial potential of CB-1158, and we are pleased to have already achieved the first milestone in this agreement. Looking forward, in 2017, we are on track to highlight new data from each of our clinical programs at scientific meetings, including an oral presentation of CB-1158 Phase 1 data at the American Society of Clinical Oncology or ASCA, in June, and multiple clinical updates on CB-839 in renal cell carcinoma, or RCC, triple negative breast cancer, or TNBC bothin the second half of 2017. We also plan to present the initial results of CB-839 dose in combination with Bristol Myers Squibb's Opdivo in the second half of 2017. I would like to highlight that in this quarter we successfully financed Calithera through its secondary public offering in our at-the-market program. In March, we completed an underwritten public offering of common stock raising gross proceeds of $80.5 million. And in the quarter, we also received approximately $38 million in gross proceeds from the sale of common stock pursuant to the at-the-market offering program. Under the terms of the collaboration and license agreement with Incyte announced in January, we received an upfront payment of $45 million from Incyte in addition to an $8 million equity investment. In March, we also achieved a $12 million pharmacokinetic and pharmacodynamic milestone that was received in the second quarter. With that, I will turn the call over to Keith for an update on our clinical pipeline.

Thanks, Susan. Let's begin with a more detailed update on CB-839, our most advanced product candidate. We are currently focused on forging a clinical development path for CB-839 in RCC and TNBC. We are also studying the development of CB-839 in combination with immuno-oncology therapies, and are pleased to be working with Bristol Myers in a drug collaboration for Opdivo, the approved anti-PD-1 antibody. First, RCC, in a prior session at the EORTC-NCI-AACR symposium, in November, new data was presented with CB-839 in combination with everolimus. As you'll recall, we presented data on 15 RCC patients who were treated and available for response; 93% had disease control, one patient had a partial response, one patient had progressive disease, and 13 patients had stable disease. The median progression-free survival was 8.5 months, and for the majority of patients their time on CB-839 and everolimus therapy was longer than the time on their prior therapy. In the clear cell population, the disease control rate was 100%. We have continued to enroll RCC patients in this combination cohort as well as a cohort of RCC patients dosed with CB-839 in combination with cabozantinib. We plan to update you on the everolimus combo trial later in 2017. A randomized Phase 2 trial of CB-839 in combination with everolimus is planned, and expected to initiate in the second half of 2017. In August 2016, we initiated the CB-839 + nivolumab combination trial. Checkpoint inhibitors like nivolumab, promote the activation and tumor-killing properties of patients' own immune system by activating cytotoxic T-cells. Our preclinical combination data suggests that CB-839 could have dual action in the treatment of cancer by first starving the tumor cells, and second facilitating the activation of T-cells in the nutrient-deprived tumor microenvironment. This Phase 1/2 study is assessing the safety, pharmacokinetics, and pharmacodynamics of CB-839 and nivolumab. This study is enrolling patients with clear cell RCC who are either naive to checkpoint inhibitors or who are treated with prior nivolumab and then had disease progression. We also have a cohort of RCC patients who have disease progression on nivolumab or are failing to respond to nivolumab, who then receive CB-839 as an add-on to their ongoing nivolumab therapy. There are add-on cohorts of non-small-cell lung cancer and melanoma patients as well. We continue to be pleased with the enrollment on this trial, and we anticipate that the first data from this trial will be presented in the second half of 2017. Next, an update on our TNBC trial in combination with paclitaxel. New data were presented at the 2016 San Antonio Breast Cancer Symposia in December on TNBC patients treated with CB-839 in combination with paclitaxel. We observed 38% response rate and 50% disease control rate in patients who received prior taxanes in metastatic setting. Several of these robust responses occurred in African American patients. We plan to start a Phase 2 study in the second half of 2017 in metastatic TNBC patients that will enroll a balanced population of African American and non-African American patients in both the early line setting where patients have no prior taxane treatment as well as the later line setting. The initial stage of this study will enroll patients in single arm cohorts, but we will have the flexibility to amend the protocol. We expect additional data from the ongoing study to be reported in the second half of 2017. Next, the arginase program, in January, Incyte and Calithera announced the global collaboration and license agreement for the research, development, and commercialization of the first-in-class small-molecule arginase inhibitor, CB-1158. CB-1158 entered clinical trials in September 2016, and pharmacodynamic and pharmacokinetic milestone was met in March 2017. Data from the Phase 1 solid tumor trial has been accepted for oral presentation at the 2017 ASCO Annual Meeting. Clinical results to be presented in an oral presentation on June 5, 2017 include monotherapy data from our Phase 1 trial in solid tumors. With that, I'll pass it over to Stephanie for an update on our financials.

Thank you, Keith, and good afternoon everyone. Calithera finished 2016 in a well-capitalized position which will enable us to drive both our clinical programs to meaningful value inflection points. Our cash, cash equivalents, and investments totaled $207.1 million at March 31, 2017, compared with $51.8 million at December 31, 2016. In March, we achieved the $12 million milestone under our agreement with Incyte, and payment will be received in the second quarter. Revenue was $4.2 million for the three months ended March 31, 2017, and represents a portion of deferred revenue recognized this quarter from our agreement with Incyte. Research and development expenses were $6.6 million for three months ended March 31, 2017, compared with $7.1 million for the same period prior year. The decrease of $500,000 was primarily from the CB-1158 program, including Incyte's co-funding of development costs, partially offset by an increase in the CB-839 program, including per se due [ph] startup activities, as well as investment in our early stage research programs. General and administrative expenses were $3.3 million for the three months ended March 31, 2017 compared with $2.6 million for the same period prior year. The increase of $700,000 was primarily due to costs associated with the Incyte agreement, and non-recurring expenses for the sublease of our office and lab space in March. Net loss from operations for the quarter ended March 31, 2017, was $5.6 million or $0.22 per share. We are revising our financial guidance to reflect our public offering and recent Incyte milestone. We expect our cash, cash equivalents, and investments will be between $180 million and $190 million at the end of 2017, exclusive of any funds arising from new collaborations or partnerships, achievements of additional milestones, additional equity financings, or other new sources. And with that, I will now turn the call back over to Susan.

Thank you, Stephanie. And with that, operator, we're happy to open the line for questions.

Sure. [Operator Instructions] And our first question comes from Jonathan Chang with Leerink Partners. Your line is open.

Congrats on the progress, and thanks for taking my questions. First on the upcoming 1158 data at ASCO, can you help set expectations in terms of what investors should expect to see?

So, we are presenting an oral presentation on Monday, June 5, and it will have in it the current data which will cover dose escalation monotherapy clinical trial information on a set of patients who've been dose-escalated from the opening of the trial to very recently, so it will have monotherapy data only. Dose escalation data will include safety, efficacy, and biomarker data on those patients.

Okay. And then second, as we approach ASCO, given the interest in the upcoming epacadostat IDO data, can you remind us of both the similarities and differences between IDO and arginase. And also, what lessons could be potentially learned from the upcoming epacadostat data that could be applied to the 1158 development strategy?

Sure. So, arginase and IDO1 are both enzymes that are involved in the metabolism of key immunoassays, and those immunoassays are known to be required for optimal T-cell proliferation and function. So, in both cases, these enzymes appear to have been co-opted by tumor cells to avoid immune surveillance. Enzyme inhibition of course can be easily monitored and gives us a very robust pharmacodynamic marker in the clinic. There is data from us indicating that an IDO inhibitor plus an arginase inhibitor has synergy together in animal models, and in terms of where you would go with an arginase inhibitor right now is based on the fact that there is a set of tumors that have high myeloid-derived suppressor cells or MDSCs present in their tumor infiltrates and those particular tumors which include lung and a series of GI tumors including colorectal as well as bladder and head and neck are the areas of highest [indiscernible] for to us to pursue particularly in combination with the PD-1 antibodies which we will be going on in the second part of this current ongoing study. Obviously, there is a scientific rationale to consider mixing an arginase inhibitor and IDL inhibitor together and combining them in clinical trial, and Incyte has interest in doing programs such as that and there should be data upcoming in the future on what new studies will be going on.

Okay, great. And then on the Incyte earnings call, the Incyte management spoke about an active pre-clinical research effort that includes evaluating 1158 in combo with the number of other IL agents and even chemo regimens. Any color you can provide here regarding the pre-clinical work that's being conducted and how this is guiding the 1158 development strategy?

Sure. And I will turn that question over to Keith.

Yes, so there is an ongoing effort both here within Calithera and as well as at Incyte to run preclinical studies to inform our future clinical development. I don't think we can add too much in terms of specific combinations that are ongoing but it is a coordinated effort between both companies and will impact those future studies that we run.

Great. And just last question, how should we be thinking about your cash runway at this point?

Sure. We're currently expecting our cash balance [indiscernible] operating plan through the end of 2020. That's going to be enough to allow [indiscernible] candidate for CB-839 as well as in development for CB-1158 with Incyte.

Great, thanks very much.

Thank you. [Operator Instructions] And our next question comes from Greg Harrison from Citi. Your line is open.

Hi, thank you for taking the call. Just had a modeling question, was curious if you can give us any guidance on how you're treating the upfront payment and the recent milestone payment going forward?

Right. We look at the milestone payment and the upfront as well as the technology tech transfer of money into the county, and so we are amortizing all that through the end of 2019, which is our estimated period of performance, which [indiscernible] seeing about $40.2 million in revenue and the remaining $52.8 million was deferred.

Great, thank you.

Thank you. And I'm showing no further questions at this time.

Okay then, thank you, and we look forward to seeing you at ASCO and at other Investor conferences.

Ladies and gentlemen, that does conclude today's call for today. Thank you for your participation. And you may all disconnect. Everyone have a great day.