CymaBay Therapeutics, Inc.
Q1 2017 Earnings Call Transcript

Published: 12 May 2017

[Operator:]

Good day, ladies and gentleman, and welcome to the CymaBay First Quarter 2017 Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised that the call will be recorded at the company’s request. It is also being webcast live on the Investors section of CymaBay website at www.cymabay.com. Now, I would like to turn the call over to Mr. Dan Menold, Vice President, Finance at CymaBay. Mr. Menold, please proceed.

[Dan Menold:]

Thank you, operator, and good afternoon everyone. Earlier today, we issued a press release announcing our first quarter 2017 financial results and business updates. You can access that release on our website under the Investors tab. Leading the call today is Sujal Shah, President and CEO of CymaBay, who will provide an update on our clinical programs and review upcoming milestones. I will then summarize the company's financial results. After our prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that statements made during this conference call, including the Q&A session relating to CymaBay’s expected future performance, future business prospects, or future events or plans are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, actual outcomes, and results are subject to risks and uncertainties and could differ materially from those forecast due to the impact of many factors beyond the control of CymaBay. The company assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise. Participants are directed to the risk factors set forth in today’s press release, as well as the risk factors set forth in CymaBay’s Quarterly and Annual Reports filed with the SEC for factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. This conference call is the property of CymaBay and any recording or rebroadcast is expressly prohibited without the written consent of CymaBay. At this time, I would like to turn the call over to Sujal.

[Sujal Shah:]

Thank you, Dan, and good afternoon everyone. I’m excited to be speaking with you today for the first time in my expanded role at CymaBay. Having worked with the team here for the past five years, I am honored and excited to step in as President and Chief Executive Officer after the retirement of Hal Van Wart in the first quarter. On behalf of our entire team here at CymaBay, I would like to thank Hal for his leadership and contributions over the years that were integral in advancing our programs to where they are today. Today CymaBay is a clinical stage biotech company highly focused on developing therapies for liver disease. We believe we are well positioned to advance the development of seladelpar for patients with the autoimmune liver disease, primary biliary cholangitis or PBC and to subsequently implement a broader strategy to expand the development of seladelpar in other liver diseases, including NASH. As we’ve discussed previously, seladelpar is a potent and selective agonist of the nuclear receptor PPAR delta. We believe this seladelpar’s mechanism is well suited for the treatment of cholestatic liver diseases such as PBC. Proof of concept data from our first phase 2 study demonstrated seladelpar provided significant reductions in key cholestatic biomarkers to patients that did not fully benefit from first-line therapy, without causing or worsening pruritus, the intense itching experienced by many patients with PBC. We also believe seladelpar's ability to improve various metabolic parameters, including increasing insulin sensitivity, lowering LDL-cholesterol, and lowering triglyceride along with its anti-inflammatory and anti-fibrotic activities make it ideally suited for the development in NASH. Let’s begin with updates on where we are with the program today. We are well underway in our second phase 2 study of seladelpar for the treatment of patients with PBC. PBC is a chronic serious disease that can lead to a need for liver transplant or death. The goals of this study are to identify the dose or doses to be used in phase 3, and to gather additional safety data to support registration. The current study is enrolling patients who have had an inadequate response or are intolerant to first line therapy ursodiol. The primary endpoint in this phase 2 study is the change in the biochemical marker Alkaline Phosphatase or ALP from base line. Recall that reduction in ALP is a biomarker for anti-cholestatic activity and it was the most important component of the surrogate composite endpoint used to support the recent accelerated approval of Ocaliva at second-line treatment for PBC in the US and Europe. Our goal in this study is to achieve greater efficacy and improved tolerability over Ocaliva, the only second-line treatment alternative currently approved for PBC patients. Enrolment in this study is progressing extremely well. We have been encouraged by the level of enthusiasm displayed by investigators and patients involved in the study and I’m excited to announce that in the second quarter we enrolled our target of 24 patients for the planned interim analysis of the initial 5 mg and 10 mg dose groups. We remain on track for announcing interim results in early third quarter. We view the announcement of these data as a significant milestone for the company and a key event to trigger planning and launch of a phase 3 program for seladelpar and PBC. The interim data will also be reviewed to assess whether to initiate a third higher dose group in this study. I’ll remind you that the study is designed to provide safety and efficacy data, including pharmacokinetic assessment in order to select a dose or doses for a pivotal phase 3 study. We believe these interim results together with the data collected from an extension phase, which includes the option to adjust doses based on patient response will provide us with the robust data package needed to move forward to phase 3. In addition to making significant progress enrolling our second PBC phase 2 study, we began regulatory discussions with the EMA in the first quarter through the prime access program. As a reminder, in October of last year, we announced that seladelpar received the EMA’s priority medicines or prime designations for the treatment of PBC. The program, which is the equivalent to the FDA's breakthrough designation enhances regulatory support by the EMA for the development of medicines that target an unmet medical need with a focus on medicines that may offer a major therapeutic advantage over existing treatments. The designation offers earlier and more frequent communications with the EMA, which we will continue to leverage as we advance the developments of seladelpar in PBC. Last month, we presented additional analysis of clinical data from our first phase 2 study, highlighting the mechanism of action of seladelpar in PBC at the European Association for the study of liver diseases or EASL conference that took place in Amsterdam. EASL is the premier European liver meeting attended by liver experts from around the world, including thought leaders in PBC, as well as many investigators from our studies. The new analysis has characterized changes to individual bile acids, in the bile acid metabolic pathway and it confirms an extended our understanding of seladelpar’s potent inhibition of bile acid synthesis. Further, it highlighted some new mechanistic differences from those of FXR agonist such as the observation that seladelpar treatment decreased rather than increase circulating levels of FGF19. We continue to invest in the science of understanding the action of seladelpar and its differentiation from other agents. Proof of concept data to date has demonstrated that seladelpar has the potential to dramatically improved reductions in ALP and other cholestatic markers of the disease, without causing or exaggerating pruritus, giving us reasons to believe that it may have advantages over existing therapies. If that view is confirmed in our ongoing study, we believe that it would position seladelpar as the preferred second-line treatment option for PBC patients, should the program successfully progress to registration. We look forward to completing the first step in our ongoing study and sharing data with you in the early Q3. As I mentioned earlier, we also believe seladelpar is well suited for the development of NASH. Preclinical proof of concept data were presented at the American Association for the study of liver diseases or ASLD in November 2016 showing that seladelpar decreased by fibrosis, information, hepatic lipids, and reverse insulin resistance in a diabetic obese mouse model of NASH. We continue to explore strategy to quickly advance the program into NASH and look forward to discussing plans with you later this year, after our next phase of development in PBC is solidified. Before I ask Dan to review our financials, let me say a few words about our phase 3 ready gout program or Arhalofenate. In January, we announced we had signed an exclusive license agreement with Kowa Pharmaceuticals America for the right to develop and commercialize Arhalofenate in the US, its territories and possessions. Through this licensing deal Kowa assumes all responsibilities to conduct and fund phase 3 development and commercialization. We received an upfront payment of $5 million from Kowa in the first quarter and expect to receive potential near term milestone payments of up to $10 million, based on the initiation of specific development activities. Additionally, we are eligible to receive up to $190 million, upon the achievement of specific longer-term development and sales milestones and tier double digit royalties on net sales in the US. Kowa is a committed partner and we are encouraged by their focus and passion in moving the program forward. We retain full development and commercialization rights for Arhalofenate outside the US, where our focus has now shifted towards completing partnerships in other geographies. We have ongoing discussions and continue to believe we can create further value for the company with additional partnerships for Arhalofenate. In closing, I believe that 2017 has the potential to be the most pivotal year thus far in the company's history. With the successful licensing deal around Arhalofenate, we have turned the corner to truly become a pure play liver focused company. With key interim data expected in our second phase II study of seladelpar and PBC, we believe we are on the verge of a significant value creating transformation at CymaBay. I’d now like to turn the call over to Dan to review our financial results for the first quarter. Dan?

[Dan Menold:]

Thank you, Sujal. In the first quarter, we received $5 million upfront payment related to our licensing deal with Kowa Pharmaceuticals America for rights to commercialize and develop Arhalofenate in the US, its territories and possessions. Of this amount, we recognized collaboration revenue of $4.8 million for the three-months ended March 31, 2017. No revenue was reported in the comparable period of 2016. For the quarters ended March 31, 2017 and 2016 research and development expenses were $4 million and $4.4 million, respectively. R&D expense in the first quarter of 2017 was largely in line with the prior year period as expenses associated with the conduct of our second phase 2 study in PBC were similar to those from our first PBC study conducted in 2016. General and administrative expenses for the quarters ended March 31, 2017 and 2016 were $3.7 million and $2.5 million respectively. The increase in the first quarter of 2017 as compared to the prior year period was largely due to severance expenses associated with the announced retirement of our former CEO on March 29, 2017. For the quarters ended March 31, 2017 and 2016 the net loss was $5.4 million or $0.20 per diluted share and $6.8 million or $0.29 per diluted share respectively. While our ongoing operating expenses were consistent quarter-over-quarter, net loss was $1.4 million lower in Q1 2017, as compared to Q1 2016, primarily due to the recognition of collaboration revenue in 2017 offset by one-time severance related expenses and a non-cash mark-to-market loss on the revaluation of our warrant liability. In February, we completed a public share offering, which brought in net proceeds of approximately $9.2 million after deducting underwriting discounts, commissions, and other operating expenses. We ended Q1 2017 with approximately $23.4 million of cash, cash equivalents and short-term investments, which we believe is sufficient to fund our operations to at least the next 12 months.

[Sujal Shah:]

Thank you, Dan. I’d now like to turn things over to the operator and we’d be happy to take your questions.

[Operator:]

Thank you. [Operator Instructions] Our first question is from Ed Arce with H.C. Wainwright.

[Ed Arce:]

Hi guys, thanks for taking my questions and congratulations Sujal on the appointment.

[Sujal Shah:]

Thank you, Ed.

[Ed Arce:]

So, a couple of questions, it looks like probably July you will have your interim data on the second phase 2 with 24 patients on 5 or 10 mg and now the overall goal is to improve upon the profile of Ocaliva and obviously how fast is the key marker there, but wondering if you could just discuss how you view the data you are expecting to come out and what in particular you are looking for. And then perhaps also with regards to safety, any ideas around differential dosing titrating up to kind of get around the ALT and AST and safety that you saw in the previous study?

[Sujal Shah:]

Yes, thank you for the question Ed, and I’m going to give you some color around many of the aspects of what we hope to see at the interim data point and ultimately through the overall phase 2 study. Note that I’m also joined here by Pol Boudes our Chief Medical Officer and Chuck McWherter as well, our Chief Scientific Officer and we will all provide the real key color and benefits and information to each of these. You pointed out obviously with respect to the interim announcement, we expect to share topline interim results from 24 patients with 5 and 10 mg dose groups. At the end, I think you can expect us to announce a summary data from the primary analysis, which is changes in alkaline phosphatase relative to baseline of course we will be looking to share key secondary endpoints as well, including responder analysis that has been used as a registration endpoint for second line therapy in PBC recently. Of course we will also be focused on providing a general overview around safety, including a profile around transaminases given what we had seen in our prior study. I would like to make sure I point out that remember the goal of this study is ultimately for us to select one or more doses for phase 3. The efficacy and safety from the interim analysis, as well as the overall analysis itself will really provide us the first segment that we are progressing and moving forward into a phase 3. So in the end, as you mentioned, it is in fact our goal to have a benefit risk profile that significantly differentiated from existing therapies today and so that includes in it significant efficacy with good tolerability and safety overall. Pol do you want to comment a bit on how we think a little bit around titration and the extension phase?

[Pol Boudes:]

Yes, thanks Sujal. So just to remind you in the extension phase there is a possibility for patient to up titrate or down titrate based on their clinical picture and particularly on the safety profile, and we have also in this study, algorithm for individual safety parameters and they deal with safety monitoring, those adjustments eventually those interruptions. So this is also an open label study, so we along with the PI’s involved in the study we are able to very closely monitor patients, especially in order to manage their safety throughout the oral study.

[Ed Arce:]

Okay, great thank you. Another question if I may, and this is really open for the team, in terms of the data that you just recently presented last month around the lower circulating levels of FGF19, I was wondering if you could comment on how you viewed that competitively? Thanks.

[Chuck McWherter:]

Thank you Ed, this is Chuck McWherter. I think it’s kind of early to say, I think one of the things that we feel confident with is that the PPAR delta mechanism is able to address bile acid synthesis without an increase in FGF19 just to remind you that FXR agonist has a mechanism in which they don't regulate bile acid synthesis through, directly through elaboration of FGF19. So I think, what we feel is we are neutral with respect to FGF19, what the implications of that are not entirely clear, you are probably aware that FGF19 is associated with mechanisms that lead to increases in LB and of course there is a broad literature, as well as competitors that have used FGF19 analogs to get around its potential for mitogenic activity and it potential relationship to tumorigenicity. I think we are very cautious, we are not trying to push very hard. Whether this is going to be meaningful or not, it is too early to say, but we can at least say that we don't have that affect.

[Ed Arce:]

Okay great. Thanks again, and I will get back in queue.

[Sujal Shah:]

Thank you, Ed.

[Operator:]

Our next question is from Sa’ar Yaniv with Roth Capital Partners.

[Sa’ar Yaniv:]

Hi guys, thanks so much for taking the call, I appreciate it. We are pretty up to speed and seladelpar’s development and I guess we are mostly waiting for the data in the third quarter, potentially an initiation of the next does and so wanted to know what are the plans for NASH, if there is also a table and Sujal, I would love to hear your view on your new role as the CEO and how is that different from Hal, how do you see yourself leading the company and what directions you are looking to take the company?

[Sujal Shah:]

Well, thank you Sa’ar. I’ll perhaps address your second question and then turn things over to Chuck to talk a little bit about how we view NASH, since Chuck has been involved in a number of different conversations and conferences here as we think a little bit about the strategy and the next phase of development for seladelpar beyond PBC. In terms of the opportunity here, as I mentioned, I am extremely excited to continue to work with this team the team that I have worked closely with for the past five years. As you have seen even in today's call it is a team that is highly collaborative and our decision-making reflects that in terms of our near-term strategy, as well as our longer-term strategy. I have had a good relationship I think with our shareholders and investors, and a again my goal individually is to just continue to work with this highly qualified team and extract the most value we can as we address potential treatment alternatives for patients and continuing to build long-term value ultimately, and the environment I’d say that we created here at CymaBay is one that can flourish and the times that I’m here, and the times that I'm not here and nearly every individual on the team has a very significant role and a significant set of experiences. So, I appreciate the opportunity and continue to be extremely excited about it. And Chuck will perhaps I’ll let you talk a little bit about our excitement here around the potential as we think about strategies for NASH.

[Sujal Shah:]

Thanks Sujal and Sa’ar thanks for your question. I mean thinking about value creation, I mean NASH is really out there and there is obviously a lot of interest in this therapeutic area both in the medical world and the drug development world. Sa’ar I think I know that you attended the liver meeting we had a presentation that Sujal alluded to earlier where in this diabetic obese mouse model seladelpar really provided us with a data set that was very intriguing in the sense that it suggested the potential as a foundational therapy in NASH, in the sense that it reduced metabolic load insolent sensitizing, reduced lipids, and hepatic lipotoxic lipids in the liver, as well as being anti-inflammatory and reducing fibrosis. So it kind of covered the waterfront if you will of the issues and patients with NASH. And so our current focus has really been developing plans and thinking about what a clinical plc would look like. And I think those on the call that are familiar know that this is a rapidly evolving area where there is options and trade-offs that are being explored for design of studies for POC. There is an endpoint trade-off, should you use histology or biopsy, which is kind of a gold standard, but challenging versus non-invasive approach is where you look at the liver fat with PDFF or liver stiffness with MRI elastography and then there is this whole trade-off looking at studies that some sponsors are using for shorter signal generating studies, kind of phase 2a studies, the shorter duration or the endpoint tells you, you’ve got a signal, but it may not be the registration signal, versus longer studies like the FLINT or the Golden 505 studies that are more expensive and more traditional and could allow a direct transition to phase 3, but costs a lot more money. And then there is this whole layered over the top of this or strategies that focus on different disease populations. The more traditional non-cirrhotic populations that are being looked at companies like [indiscernible] versus looking at a cirrhotic population like Kinetics or Gilead, and so we are trying to work through these issues. Now the way we are approaching it is, understand the science, knowing what developments are going on, trying to understand what the FDA and regulators are thinking, but we have engaged some real thought leaders names that you would be familiar with to work through these options and make the decision that makes the most sense for us. We continue to do some preclinical science in areas relative to better bolster that and we have opportunities as well with our dataset to interact with companies that are also active in the space. So, we have a lot of sources of external information and we think with the solidification of the data and our PBC space and the opportunity to interact with FDA on this issue we will be in a position to talk later this year about exactly how we are intending to move forward in the clinical development plan.

[Sa’ar Yaniv:]

Okay. And that’s actually very helpful and so thank you for the overview. Sujal when looking at that for the entire company, you just filed a shaft today, so wanted to know if you can talk about that and how you look at your future cash needs going forward?

[Sujal Shah:]

Yes, thank you for that Sa’ar and as I discussed earlier, we believe our existing cash is sufficient to fund our operations through at least the next 12 months. In fact not only that we are confident that we have an adequate to run rate and sufficient cash on hand to run the company well beyond our upcoming milestones in 2017. So to know our existing shelf was actually set to expire later this year and this filing, the new 100 million shelf replaces that, it puts us effectively in a position to be prepared for success and prepared to fund phase 3 development in PBC. So, the sold the data from the ongoing phase 2 study be positive. So this was mostly around housekeeping and being in a position of success post the interim data readout and post the completion of this phase 2 study. We continue to be very confident in our existing balance sheet today.

[Sa’ar Yaniv:]

Great, thank you so much.

[Sujal Shah:]

Thank you, Sa’ar.

[Operator:]

[Operator Instructions] Our next question is from David Bouchey with IFS Securities.

[David Bouchey:]

Hi guys, how’s everybody doing?

[Sujal Shah:]

Hi David, we are well thank you.

[David Bouchey:]

Good. I have a couple of - let's do a couple of quick housekeeping questions first. So out of the $5 million milestone that you got from Kowa, you recognized 4.8 million and that’s all associated with certain deliverables, will you be getting another $200,000 plus is that associated with delivery of Arhalofenate drug?

[Chuck McWherter:]

Yes, I can address that. So we received the full $5 million of course with [indiscernible] we recognized just the 4.8. There is some final activities associated with the transfer of drug product that will really make up that small incremental difference.

[David Bouchey:]

All right. And so when you recognize that money, how close well that recognition be the starting of the phase 3 trial? Would you recognize that like the quarter before you started, the quarter that you do started, can you give us any color on that?

[Sujal Shah:]

Well if you are referring to the additional 200,000, it is independent of the start of clinical development activities on the basis of Kowa. We expect that final piece to be fully recognized before year-end and that’s more relative to the overall final pieces of technology transfer. So, again the full 5 million came in, in January and is reflected in our cash balance, but under GAAP, again that final 200,000 will actually be recognized when that final piece of tech transfer if you will is met.

[David Bouchey:]

Okay so that is a technology transfer associated deliverable?

[Sujal Shah:]

Correct.

[David Bouchey:]

All right. Next, I was wondering if you guys wanted to make any comment on the part of the launch, I know you probably don't want to do a trash talking, it will free if you want to, but what I am kind of looking for is what you think about how hard it is to actually educate physicians in patients in this market given that there hasn't been anything new for so long and how much of the heavy lifting do think Intercept is going to have done for you by the time you get to market?

[Sujal Shah:]

Well first of all let me say that I think Intercept in Kowa specifically is that tremendous advance for a patient population that are inadequately responding to [indiscernible] today. So, I think the advancement of that program is significant for patients, it is significant to drive broader awareness of PBC and treatment options for patients overall and so frankly I applaud Intercept not only for blazing this past, but also for effectively, truly educating the population of patients around additional alternatives they have today. We of course followed their initial sales ramp and I think at the end of the day these are early days for their launch. Obviously, challenging in an orphan disease market ultimately, but I think they have actually made some good progress and so we do believe that the work they are doing is continuing to educate the population of PBC patients that need additional therapy. We certainly believe that’s also important for us down the road. We have, I will tell you ongoing conversations with all the key experts in this field, many of which are enrolling patients in our study. So our interactions with not only the KOLs, but investigators in our study continues to put up closer to patients themselves as we advanced seladelpar not only through this phase 2, but as we ultimately hope to prepare for a phase 3 study. So, I think the work that intercept is doing, the work that we're doing in this space, I think it is all valuable and we continue to see significant advancement in the overall education and the overall opportunity for patients to be better served by new agents.

[David Bouchey:]

All right, great thank you. The one last question and this is kind of a follow-up from Ed's question and that then you are reporting the interim data from the phase 2 for seladelpar, are we going to see any patients, any data from the 18-week extension period or is it just going to be from the 8-week period?

[Sujal Shah:]

Well this is an evolving process. Obviously this study has an extension phase on it. The intention from our standpoint was really to be able to share the 24 patient data from 5 mg and 10 mg as we had preplanned. Of course, we believe that set of data itself will provide us an insight into the potential competitive benefit risk over the existing therapies today. So harkening back to the that you had asked around intercept and Ocaliva and how that the launch is going, you know our eyes are firmly focused on advancing seladelpar to have a significant differentiation around efficacy, improving the response in patients and the number of patients that responded second-line treatment, as well as tolerability. We know that Ocaliva has the effective causing or exacerbating pruritus in some patients and not something we expect to see or have you have seen to date with seladelpar and so better understanding that profile we believe is something that will have an opportunity to share with you when we share just the 24 patients worth of data even if 5 and 10 mg.

[David Bouchey:]

Excellent. Thanks a lot Sujal.

[Sujal Shah:]

Thank you.

[Operator:]

Ladies and gentlemen we have reached the end of the question-and-answer session, and I would like to turn the call back to CymaBay management for closing remarks.

[Sujal Shah:]

Thank you, operator, and thank you all for joining the call today. As I mentioned at the beginning of the call, all of us here at CymaBay are extremely excited about the focus we have today in liver disease, and specifically on our ongoing development of seladelpar in PBC. The team here, we have an extremely experienced and talented team broadly that I’m honored to be a part-off and we all look forward to advancing treatment options for patients and building long-term value, and continuing to have this dialogue with you all. Thank you.

[Operator:]

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.