Overview

NewLink Genetics Corporation (NLNK) is a clinical-stage immuno-oncology company focused on developing novel immunotherapeutic products for the treatment of patients with cancer. The company's leading small-molecule product candidates currently in clinical development target the indoleamine-2, 3-dioxygenase, or IDO, pathway, which is one of the key pathways for cancer immune escape. These lead product candidates, indoximod and NLG802 (a prodrug of indoximod), are IDO pathway inhibitors with mechanisms of action that center around breaking the immune system’s tolerance to cancer.

Based on early clinical data from its Phase 1b clinical trials, its indoximod clinical program is focused on front-line acute myeloid leukemia (AML) and malignant pediatric brain tumors. These targeted indications are those with great unmet need where indoximod has produced encouraging early data. The Company plans to provide data updates at medical conferences in fourth quarter of 2018 for AML and in the first half of 2019 for malignant pediatric brain tumors. The company also have a Phase 1 clinical trial for NLG802, the prodrug of indoximod, and the company plan to present data in the fourth quarter of 2018 relating to this trial.

IDO Pathway Inhibitors

In cancer, the IDO pathway regulates immune response by suppressing T-cell activation, which enables cancer to avoid immune response. IDO is overexpressed in many cancers, both within tumor cells as a direct defense against T-cell attack, and also within antigen presenting cells in tumor-draining lymph nodes, thereby promoting peripheral tolerance to tumor associated antigens, or TAAs. When hijacked by developing cancers in this manner, the IDO pathway may facilitate the survival, growth, invasion and metastasis of malignant cells whose expression of TAAs might otherwise be recognized and attacked by the immune system.

The IDO pathway refers to a series of reactions initiated by the IDO enzyme that result in the reduction of the amino acid tryptophan in the local tumor environment. The company believe the local presence of tryptophan in adequate concentrations promotes antitumor T-cells, and the local reduction of tryptophan combined with the presence of the break-down product of tryptophan metabolism, kynurenine, is understood to suppress the activation of T-cells. Preclinical data has suggested that IDO pathway inhibitors may also enhance the anti-tumor effects of other immunotherapies, chemotherapies and radiation when used as a combination therapy for patients with cancer.

NewLink Genetics Corp has a clinical development program focused on the IDO pathway. The company's small-molecule IDO pathway inhibitor product candidates in clinical development include indoximod and NLG802. The company's product candidates are designed to counteract immunosuppressive effects of the IDO pathway, a fundamental mechanism regulating immune response. Indoximod targets the IDO pathway through different mechanisms of action from enzymatic IDO inhibitors and therefore could represent a differentiated clinical and commercial opportunity. The company believe indoximod acts as a tryptophan mimetic, thereby signaling the activation of antitumor T-cells by the up regulation of mTOR, acts directly on T-cells, and modulates AhR-mediated effects.

NewLink Genetics Corp has observed an encouraging safety profile for its IDO pathway inhibitors. They are orally bioavailable and the company believe they offer the potential to be synergistic with other therapies such as radiation, chemotherapy, vaccination and immunotherapies involving other checkpoint inhibitors such as anti-PD-1, anti-PD-L1 or anti-CLTA4. Clinical data suggests an increase in activity without adding significant toxicity.

Indoximod

Indoximod, its lead IDO pathway inhibitor, has been studied in more than 800 patients to date and has been generally well-tolerated, including in combination with PD-1 checkpoint inhibitors, various chemotherapy agents and a cancer vaccine. Indoximod has a differentiated mechanism of action (MOA) which may demonstrate clinical benefit for patients compared to direct enzymatic inhibitors. Indoximod is currently in clinical development in combination with other cancer therapeutics for patients with AML and pediatric brain tumors.

NewLink Genetics Corp has finalized the dose for the salt formulation of indoximod for adult patients. Data from recent clinical trials suggest that the maximum plasma concentration levels and half-life observed after oral dosing of the new salt formulation of indoximod are modestly higher than those observed with the free base formulation.

A U.S. patent covering salt and prodrug formulations of indoximod was issued to it on August 15, 2017 providing exclusivity until at least 2036. NewLink Genetics Corp is currently pursuing international patent coverage for these formulations.

NLG802

NLG802 is a prodrug of indoximod. NLG802 is intended to increase bioavailability and exposure to indoximod above the levels currently achievable by direct oral administration. The company filed an Investigational New Drug application, or IND, with the U.S. Food and Drug Administration, or FDA, in the first quarter of 2017 and the first patient was dosed with NLG802 in a Phase 1 clinical trial in July 2017. The purpose of this Phase 1 trial is to assess preliminary safety and to determine the recommended dose for subsequent Phase 2 evaluations. NLG802 is a new chemical entity with patent coverage into 2036. NewLink Genetics Corp is also pursuing international patent coverage for NLG802.

NLG919

NLG919, a direct enzymatic inhibitor, was previously in clinical development as part of its collaboration with Genentech. NLG919 seeks to inhibit the IDO enzyme directly and thereby prevent the metabolism of tryptophan into kynurenine. In October 2014, the company entered into an exclusive worldwide license and collaboration agreement with Genentech, or the Genentech Agreement. The Genentech Agreement provided for the development and commercialization of NLG919. On June 6, 2017, the company received a formal notice of Genentech’s intent to terminate the Genentech Agreement with respect to NLG919, and such termination was effective December 6, 2017. As part of the partial termination, worldwide rights to NLG919 reverted back to the Company and Genentech granted it a license under certain of Genentech’s intellectual property to develop and commercialize NLG919.

Under the Genentech Agreement, the company conducted a two-year pre-clinical research program with Genentech to discover novel next generation IDO/tryptophan-2,3-dioxygenase, or TDO, inhibitors. The research program ended in November 2016, and the company received notice on May 9, 2018 that Genentech would not continue the collaboration with respect to next generation IDO/TDO inhibitors identified through the research program. The Genentech Agreement will terminate in its entirety no later than November 6, 2018.

Additional Product Candidates

Additional clinical-stage product candidates in its pipeline include two small molecules the company acquired in 2017 from Daré Bioscience, Inc. (previously Cerulean Pharma Inc.) and two product candidates that utilize its HyperAcute® Cellular Immunotherapy technology. The company's small molecule product, NLG207 (formerly CRLX101), is being evaluated in early clinical development for patients with advanced solid malignancies. NewLink Genetics Corp has substantially reduced its financial commitment for CRLX301, the second asset acquired from Daré Bioscience, Inc., and have no future plans for the development of CRLX301. Additionally, NewLink Genetics Corp has substantially reduced its financial commitment for the HyperAcute Cellular Immunotherapy product candidates and have no plans to conduct additional clinical trials for such product candidates.

Ebola Vaccine Candidate

In November 2014, the company entered into an exclusive, worldwide license and collaboration agreement, or the Merck Agreement, with Merck to develop and potentially commercialize its rVSV∆G-ZEBOV GP vaccine product candidate and other aspects of its vaccine technology. The rVSV∆G-ZEBOV GP vaccine product candidate was originally developed by the Public Health Agency of Canada, or PHAC, and is designed to utilize the rVSV vector to induce immunity against Ebola virus when replacing the VSV glycoprotein with corresponding glycoproteins from filoviruses. Under the Merck Agreement, the company received an upfront payment of $30.0 million in October 2014, and in February 2015 the company received a milestone payment of $20.0 million. NewLink Genetics Corp has the potential to earn royalties on sales of the vaccine in certain countries, if the vaccine is approved and if Merck successfully commercializes it. rVSV∆G-ZEBOV GP is also eligible to receive a priority review voucher and NewLink Genetics Corp is entitled to a portion of the value of the voucher if it is granted. In addition to milestone payments from Merck, the company were awarded contracts for development of the rVSV∆G-ZEBOV GP from the U.S. BioMedical Advanced Research & Development Authority, or BARDA, and the Defense Threat Reduction Agency, or DTRA, totaling $52.1 million during 2016 and $67.0 million during 2014 and 2015. Funds of $2.1 million were de-obligated from the DTRA grant awards in 2017. NewLink Genetics Corp has received total awards of $118.8 million.

On April 26, 2018 the company entered into an agreement with Merck, DTRA and BARDA to transfer the government grants from BARDA and DTRA to Merck. The transfer was completed in June 2018 and Merck has replaced it as the prime contractor on all such grants. As a result its grant revenues for the three and nine months ended September 30, 2018 have decreased as compared to the three and nine months ended September 30, 2017 and the company expect to recognize no additional revenue from government contracts for the development of the rVSV∆G-ZEBOV GP vaccine product candidate subsequent to September 30, 2018.

Restructuring Charges

In July 2018, the Company completed an organizational review of its clinical programs and reduced its headcount by approximately 30% as compared to June 30, 2018 and made several changes to senior leadership effective July 26, 2018 in order to conserve its resources. Restructuring charges of $1.3 million were recorded during the three and nine months ended September 30, 2018 relating to this reorganization.

The company's organizational realignment in July 2017 included a reduction of its workforce by approximately 50%, which consisted primarily of clinical and research and development staff, as well as stopping additional research on the Zika virus. Refer to Note 9 of the “Notes to Condensed Consolidated Financial Statements” of this Form 10-Q for more information.

Corporate Information

Founded in 1999, its principal executive office is located in Ames, Iowa, with additional offices located in Austin, Texas and Wayne, Pennsylvania. NewLink Genetics Corp has a clinical, research and development team dedicated to its pipeline of product candidates for patients with cancer and other diseases.

The company incurred a net loss of $43.0 million for the nine months ended September 30, 2018. The company expect to continue to incur losses over the next several years as the company incur expenses to complete its clinical trial programs for its product candidates, develop its pipeline and pursue regulatory approval of its product candidates.