NewLink Genetics Corporation reported consolidated financial results for the second quarter of 2016

“We have streamlined our operations and focused development efforts on the clinical validation of indoximod, our proprietary IDO pathway inhibitor program, which is being studied in multiple cancers,” said Charles J. Link, Jr., M.D., Chairman, Chief Executive Officer and Chief Scientific Officer. “Additionally, we continue the clinical advancement of GDC-0919, with our partner Genentech, and look forward to progress in this program.”

“We have the financial resources to realize the potential of our product development pipeline as well as opportunities for the development of other potentially synergistic therapies that could provide benefit to patients with cancer,” commented Nicholas N. Vahanian, M.D., President and Chief Medical Officer.  

Program Updates

Indoleamine 2,3-Dioxgenase (IDO) Checkpoint Inhibitor Programs

The IDO pathway regulates immune response by suppressing T cell function and enabling local tumor immune escape. NewLink Genetics is developing two distinct IDO pathway inhibitors, indoximod and GDC-0919, which are small-molecule product candidates having the potential to disrupt mechanisms by which tumors evade the immune system. Indoximod and GDC-0919 have different mechanisms of action within the IDO pathway and are in Phase 1 or 2 clinical trials for a range of cancers, including breast cancer, melanoma, pancreatic cancer, and other malignancies. 

Indoximod

NewLink Genetics reported on two clinical studies in two posters highlighting the combination therapeutic potential of indoximod at the 2016 American Society of Clinical Oncology Annual Meeting in June. Data reported included:

• Updates on Phase 1b/2 trial of the IDO pathway inhibitor, indoximod, plus checkpoint inhibitors for the treatment of unresectable stage 3 or 4 melanoma. The trial design allows for the combination of indoximod with either ipilimumab or one of the PD-1 checkpoint inhibitors, pembrolizumab or nivolumab. The combination of indoximod with other checkpoint inhibitors has been well tolerated thus far with no increase in toxicity noted in this Phase 1b/2 study. Overall, 40 patients had been enrolled in the combined Phase 1b/2 study long enough to have response data available at the time of data cut off. The poster data presented at ASCO were based on data via site reported RECIST criteria available from 28 subjects, the objective response rate, comprised of complete response plus partial response, for these patients is 36 percent (10 of 28) with three complete responses. Interestingly, the subset of 15 patients who received indoximod in combination with pembrolizumab had an objective response rate of 53 percent (8 of 15) with two complete responses (13 percent). The trial continues to enroll, with 55 patients currently enrolled in Phase 2.
   
• Interim analysis on a Phase 2 trial of the IDO pathway inhibitor, indoximod, plus gemcitabine/nab-paclitaxel for the treatment of metastatic pancreatic cancer. The combination of indoximod and gemcitabine/nab-paclitaxel continues to be well tolerated by patients with metastatic pancreatic cancer. These data come from the Phase 1/2 trial in which treatment-na?ve patients with metastatic pancreatic cancer were treated with the combination therapy in continuous four week cycles. As of the data cut off for the analysis, a total of 45 patients (Phase 1 and 2) were enrolled in the trial long enough to potentially have cycle 4 imaging available by the ASCO presentation. Data via site reported RECIST criteria were available on 31 patients. At the time of this analysis, objective response rate was 45 percent (14 of 31) and multiple durable responses ?6 months were observed. Two patients achieved a complete response (6 percent), both at Cycle 8, showing delayed kinetics that may indicate an immune based mechanism. The trial continues to enroll patients and a biopsy cohort expansion is underway.

“These promising data continue to demonstrate the potential of combination therapies with other checkpoint inhibitors and with chemotherapies for different cancers,” added Dr. Vahanian. “We believe that these data further support the IDO pathway as one of the key immune checkpoint targets.”

Restructuring

The company also announced that it has implemented a significant restructuring program following the May results of the IMPRESS Phase 3 study of algenpantucel-L. The objective of the restructuring is to focus the company’s financial resources on the following priorities:

• Progress and accelerate the development of indoximod;
• Continue the alliances with Genentech (GDC-0919) and Merck (Ebola vaccine candidate);
• Advancing other drug discovery programs, including both PTEN and Zika virus; and
• Evaluate external opportunities to expand our pipeline.

The restructuring includes the following initiatives:

• Winding down HyperAcute Cellular Immunotherapy clinical trials that do not include a checkpoint inhibitor combination;
• Winding down commercial manufacturing capacity for algenpantucel-L;
• Consolidating the Company’s facilities footprint from 133,000 square feet to approximately 66,000 square feet;
• Reducing headcount from approximately 230 to approximately 130; and
• Focusing capital spending to primarily support drug discovery and development.

We recorded $12.3 million in restructuring expenses in Q2, including severance expense, the impairment of fixed assets, and the costs of terminating certain contracts. In Q3, the Company expects to record small additional charges relating to the closing or reduction of leased facilities.

Financial Results for the Three-Month Period Ended June 30, 2016

Cash Position: NewLink Genetics ended the quarter on June 30, 2016, with cash and cash equivalents totaling $160.5 million compared to $197.8 million for the year ending December 31, 2015.

R&D Expenses: Research and development expenses in the second quarter of 2016 were $27.4 million compared to $16.1 million during the comparable period in 2015. The increase was primarily due to the R&D expenses related to the restructuring initiatives of $11.8 million.

G&A Expenses: General and administrative expenses in the second quarter of 2016 were $9.1 million compared to $7.3 million during the comparable period in 2015. The increase was primarily due to an increase in medical affairs and marketing expenses along with G&A expenses incurred due to the restructuring initiatives of $0.5 million.

Net Loss: NewLink Genetics reported a net loss of $32.4 million or ($1.12) per diluted share for the second quarter of 2016 compared to a net loss of $14.1 million or ($0.49) per diluted share for the comparable period in 2015.

NewLink Genetics ended the quarter with 28,962,296 shares outstanding.

About NewLink Genetics Corporation

NewLink Genetics is a biopharmaceutical company at the forefront of discovering, developing and commercializing novel immuno-oncology product candidates to improve the lives of patients with cancer. NewLink Genetics’ portfolio includes small molecule immunotherapy product candidates intended to treat a wide range of oncology indications. NewLink Genetics’ product candidates are designed to harness multiple components of the immune system to combat cancer. 

NewLink Genetics Corporation
Condensed Consolidated Statements of Operations
(unaudited)
(In thousands, except share and per share amounts)
	Three Months Ended June 30,								Six Months Ended June 30,
	2016				2015				2016				2015
Grant revenue	$	1,262			$	3,280			$	5,600			$	12,929
Licensing and collaboration revenue	750				4,165				2,120				33,711
Total revenue	2,012				7,445				7,720				46,640
Operating expenses:
Research and development	27,410				16,130				49,347				34,111
General and administrative	9,130				7,257				18,294				15,623
Loss from operations	(34,528		)		(15,942		)		(59,921		)		(3,094		)
Other income, net	60				22				99				33
Net loss before taxes	(34,468		)		(15,920		)		(59,822		)		(3,061		)
Income tax benefit	2,079				1,829				3,713				160
Net loss	$	(32,389	)		$	(14,091	)		$	(56,109	)		$	(2,901	)
Basic and diluted loss per share	$	(1.12	)		$	(0.49	)		$	(1.94	)		$	(0.10	)
Basic and diluted average shares outstanding	28,891,827				28,661,588				28,874,385				28,408,474

NewLink Genetics Corporation
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands)
	June 30,				December 31,
	2016				2015
Assets
Current assets:
Cash, cash equivalents and certificates of deposit	$	160,527			$	197,800
Prepaid expenses and other current assets	7,228				10,342
Income tax receivable	4,259				—
Total current assets	172,014				208,142
Property and equipment, net	7,435				10,400
Total assets	$	179,449			$	218,542
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	21,380			$	12,422
Unearned revenue	838				892
Other current liabilities	327				667
Income taxes payable	—				859
Total current liabilities	22,545				14,840
Long-term liabilities:
Royalty obligation payable	6,000				6,000
Notes payable and obligations under capital leases	395				368
Deferred rent	1,109				1,153
Unearned revenue	56				407
Total long-term liabilities	7,560				7,928
Total liabilities	30,105				22,768
Stockholders' equity:
Common stock	290				288
Additional paid-in capital	286,300				276,610
Treasury stock, at cost	(784		)		(771		)
Accumulated deficit	(136,462		)		(80,353		)
Total stockholders' equity	149,344				195,774
Total liabilities and stockholders' equity	$	179,449			$	218,542