CymaBay Therapeutics, Inc.
Q2 2017 Earnings Call Transcript

Published: 12 Aug 2017

[Operator:]

Good day, ladies and gentleman, and welcome to the CymaBay Second Quarter 2017 Conference Call. [Operator Instructions]. 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 second 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 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. We appreciate the opportunity to review our second quarter 2017 financials and provide you with an update of our progress and accomplishments. It has been a busy quarter and we have made progress on many fronts including our announcement in July, of positive interim data from our ongoing Phase 2 clinical study of Seladelpar in patients with Primary Biliary Cholangitis or PBC and the successful completion of our public stock offering. The additional financing positions us well to execute on our strategy to advance our exciting development pipeline. With our Seladelpar program we announced positive interim result in our open label Phase 2 study which demonstrated PBC patients treated with 5 or 10 milligrams of Seladelpar once daily experienced robust reductions in alkaline phosphatase. The interim results showed mean % reduction of 39% and 45% from baseline to 12 weeks for the 5 and 10 milligram groups respectively. Additionally 45% of the patients in the 5 milligram Seladelpar group and 82% of the patients in the 10 milligram Seladelpar group had alkaline phosphatase values less than 1.67 times the upper limit of normal. Alkaline phosphatase is an established [indiscernible] marker of disease progression in PBC and reaching a level of less than 1.67 times the upper limit of normal is a key component in the composite endpoint used for regulatory approval. Also of note there was no signal for drug induced pruritus, no serious adverse events and no safety transaminases signal observed at either dose. These encouraging results represent a major step forward towards advancing Seladelpar as a potential new treatment alternative for patients with this serious chronic liver disease and are suggestive of the potential for superior efficacy with better tolerability relative to the only approved second line therapy available for patients today. Importantly the FDA agreed to allow continuation of Seladelpar treatment beyond six months for patients in both the 5 and 10 milligram dose groups. This key regulatory decision lists the PPAR class restriction necessary to advance Seladelpar into Phase 3. As we prepare for the Phase 3 program we are incorporating some notable changes into our ongoing open label Phase 2 study. First as we announced in July we will be extending the treatment duration in the study to 52 weeks. Second, in order to ensure an adequately sized safety database at the time of a potential and NDA submission we're announcing today that we will keep the 5 and 10 milligram dose groups open to enrolment as we progress to an end of Phase 2 meeting with the FDA in early 2018. Finally as previously communicated we are enrolling a smaller number of patients in a 2 milligram Seladelpar dose group in order to provide information regarding a potential minimally effective dose. These changes represent an improved and efficient program strategy in several ways including by providing a larger interim data set for the end of Phase 2 meeting, obtaining 12 months efficacy and safety prior to completion of Phase 3 and more fully characterizing the benefit risk profile of Seladelpar. For clarity, I want to emphasize that these changes are not expected to impact our planned timing for either the end of Phase 2 meeting in early 2018 nor the initiation of Phase 3 in the second half of 2018. I also want to reiterate that we are not planning for a higher starting dose group since we believe 5 and 10 milligram doses have the potential to offer patients a superior profile of efficacy with better tolerability than what is available for patients today. As we actively developed Seladelpar for PBC we are also evaluating the development of Seladelpar for non-alcoholic Steatohepatitis or NASH in 2018. We continue to discuss potential development plans with thought leaders and other sponsors in the field and will provide an update in the future once our plans are concluded. In preparation for our maturing clinical development program we recently announced the appointment of Klara Dickinson to the role of Senior Vice President of Regulatory Affairs and Quality Assurance. Klara brings a wealth of experience and will be integral to our development program. At the same time we also announced the promotion of Dan Menold to Vice President, Finance further enhancing our senior management team. Not to be overlooked as are our Arhalofenate development program. Earlier this year Kowa Pharmaceuticals America assumed all responsibility for the Phase 3 ready program in gout, as for the terms of our licensing agreement. We retained full development and commercialization right for our Arhalofenate outside the U.S. and continue to focus on completing partnerships in other geographies which we believe has the potential to generate additional value for the company. In closing 2017 is developing into a pivotal year in our transformation into a liver focused company. With the recent announcement of encouraging Phase 2 interim data for Seladelpar and PBC regulatory progress in discussions with the FDA, an additional development milestones to come we believe we are just at the beginning of our transformation at the company. I would like to now turn the call over to Dan for an update of our second quarter financial results. Dan?

[Dan Menold:]

Thank you, Sujal. Our cash, cash equivalent and marketable securities totalled $16.7 million at the end of the second quarter of 2017 as compared to cash, cash equivalents and marketable securities of $17 million as of December 31, 2016. In July 2017 we completed a public share offering which brought in net proceeds of approximately $91.1 million after deducting underwriting discounts, commissions and other operating expenses. We believe these funds in addition to cash on hand at the end of the second quarter are sufficient to fund the company through at least the next 12 months as we begin Phase 3 development of Seladelpar and PBC and look to explore development in a proof of concept Phase 2 study in NASH in 2018. Turning to our operating results, research and development expenses were $4 million for the second quarter 2017 compared to expenses of $4.1 million in the prior year quarter. R&D expenses in the second quarter of 2017 and 2016 were largely in line and consisted primarily of ongoing Phase 2 PBC clinical trial expenses and drug manufacturing expenses for Seladelpar. General and administrative expenses were $3.6 million for the second quarter of 2017 compared to $2.2 million in the prior year quarter. The increase in expenses was largely due to onetime non-cash stock based compensation charge associated with the retirement of our prior CEO in April 2017. I will also note that other income and expense net was $1.1 million for the second quarter of 2017 compared to $358,000 in the prior year quarter. These amounts represent non-cash charges associated with the quarterly revaluation of our warrant liability. In summary our net loss was $8.9 million or $0.31 per diluted share in the second quarter of 2017 as compared to a net loss of $7 million or $0.30 per diluted share in the second quarter of 2016. The increase in our Q2 2017 net loss was primarily due to the recognition of noncash severance expenses and an non-cash charge from the revaluation of our warrant liability.

[Sujal Shah:]

Thank you, Dan. Let me close by sharing with you how energized we are here at CymaBay about our future prospects. We have a tremendous asset in Seladelpar which we believe has the potential to meaningfully improve patient life. We have the financial positioning to execute on our strategy and move forward in our clinical studies and we have the support of our Board and Shareholders. It is a very exciting time for us and we would like to thank you for listening in today. I would also like to thank all those involved in our development of Seladelpar to-date We have tremendous and very dedicated employees here at thing CymaBay and I'm proud of all of their efforts. I thank them for the many hours they put into getting us to this point. As we extend and expand the ongoing Phase 2 study of Seladelpar and PBC and as we prepare to initiate Phase 3 development in 2018 we look forward to providing additional updates at key upcoming medical meetings. We would now be happy to take your question. Operator?

[Operator:]

[Operator Instructions]. Our first question is from Edward Tenthoff of Piper Jaffray. Please go ahead.

[Edward Tenthoff:]

One kind of higher level question on Seladelpar, certainly it was PBC plans on track you know this seems to be well within the company's abilities but NASH is a bit of a different story on a larger indication so maybe you can lay out sort of what your longer term plans are for partnering or seeking either overseas or may be more broadly in NASH and retaining PBC, just trying to think kind of higher level sort of how you think about partnering Seladelpar and how partner may play a role in that.

[Sujal Shah:]

I will give you some color on the way we think about broadening the development strategy here CymaBay for Seladelpar and you're absolutely correct. First of all let me say that we remain highly focused on now transitioning the program in PBC. from Phase 2 to Phase 3 in 2018 and that will of course remain a principal activity here and a principal focus here at CymaBay over the course of the next 12 to 18 months. We've always believed that there's a significant potential opportunity to expand development of Seladelpar into NASH, much of that comes from some of the work we've already done with the asset in clinical studies and other populations of course much of it also comes behind what we believe to be the advantages of the mechanism of people, our delta agonist and we've talked in some level of detail around the fact that we believe that PPAR Delta and in particular Seladelpar has the potential to have beneficial effects across the progression of the pathology of NASH and including a beneficial effect on the metabolic element inflammatory elements and even the fibrotic element of the disease progression. Now you're absolutely correct that you know with respect to NASH it's the longer and more expensive development plan so far our thought here from a strategic perspective is really to be more measured and thoughtful around our progression now there are some things we can do to really start answering questions in two parallel paths and the first set of questions is to better understand the single agent activity of Seladelpar in particular better understanding the differentiation of Seladelpar in a highly selective potent PPAR delta agonist relative to the many other targets that are being studied today. That's a set of activities that we're continuing to have conversations with both thought leaders as well as others in the field as we think about activities that we can start in 2018 and we believe that we can start answering that side of the question on our own with respect to balance sheet that we carry today. The other question that we want to really be able to answer as we think about NASH longer term is what are the other potential targets that could be complimentary to combine with Seladelpar and so again there we're having conversations with many of the folks in this field that are developing assets and targets for NASH. Most of whom also believe that longer term NASH is likely to be addressed by combining different targets that address the multi-factorial elements of NASH and there is an opportunity potentially to think about again combination or collaboration that can start answering questions around what might be a longer term that will keep benefit for patients in NASH. And so we want to be able to progress each of these in parallel. We will again be very thoughtful about our balance sheet and how we progress along these lines, you know you talk a little bit about alternatives that could allow us to advance the NASH via geographic being out license we do believe that the value of Seladelpar is best intact without out licensing one indication versus another and so we do believe we'll have a number of different alternatives with respect to advancing both in PBC and NASH here at CymaBay.

[Operator:]

The next question is from Jay Olson of Oppenheimer. Please go ahead.

[Unidentified Analyst:]

This is [indiscernible] on for Jay Olson. Could you please remind us what work remains to be done in order to file an IND for Seladelpar and NASH?

[Sujal Shah:]

Yes, so again as we sit here today in fact there's nothing gating other than our own diligence in terms of what we believe is the right path forward in terms of filing an IND. So between now and the end of the year a number of conversations that has been in fact ongoing are progressing with respect to as again as I mentioned both thought leaders as well as other sponsors in the field and as we've pulled together the information we believe we need to put forth the right program the right way, the right Phase 2 development and NASH will be prepared to file an IND in the appropriate fashion, in a timely manner in order to be able to initiate activities in 2018.

[Unidentified Analyst:]

And just sort of drill down a little bit more about your NASH potential. If you look at it from a value perspective do you think you can probably or your current balance sheet can support you are looking at the asset alone first and then maximize partnering that way by partnering latter after having complete [Technical Difficulty] data or are you - do you not care about that?

[Sujal Shah:]

It's a very thoughtful question. So I think with respect to where we sit today we feel very encouraged, we feel the financing that took place on the heels of the interim data announcement really put us in a driver seat frankly till then to be able to start answering some of these questions around the potential for Seladelpar and NASH in a meaningful fashion. Of course we continue to be very thoughtful around the various strategies that can advance the program more efficiently and continue to drive value but we do have some thoughts around activities that we're continuing to explore that could again unlock some of the key differentiators around PPAR delta as a target, Chuck McWherter, our CFO is here and perhaps I'll let Chuck talk a little bit about how some of our conversations and our thoughts are progressing here.

[Chuck McWherter:]

So just to kind of put a little bit of a framework around it you know the range of development option for Phase 2 is really undergone a lot of transformation recently and I'm sure you know it began with paired biopsy studies like Flint and Gold 505 [ph], it progressed a little bit, became a little more innovative if you looked at Gilead's open label study with ASK-1 inhibitor where they had you know a read out earlier on at six months which also included biopsy and then there's just a whole range of newer entrants who began to incorporate non-invasive method, their imaging methods or markers transaminases is responsive, metabolic responses as well. So if you kind of pull that all together we think that you know the possibilities are to be a little bit more ingenious about how we approach it more kind of contemporary to dose ranging study perhaps something that we could build in some of the newer developments that are beginning to have emerging correlations histopathology, we haven't taken a position yet you know what's the appropriate thing to build Empathology or not - our advisors are helping us to work through that issue as well as conversation with other pharma sponsors in the space. And I think it's really just an intriguing time, in fact I just draw your attention to an article that just appeared online in Hepatology Communication new ideas around adaptive design in NASH which included lead authors from not only [indiscernible] but from FDA, [indiscernible] on that paper as well and I think it really kind of points to if you'll just at least glance at this article really what you know some exciting new ways forward that can kind of balance being able to be confident to good drug developments. selected dose, find features that are likely to correlate with but pathology and yet move directly into the larger, more expensive and higher risk registration study. So it's a pretty exciting time and we think there's a lot of opportunity for us and I think the kinds of studies we're thinking of at least the initial studies are well within the capabilities of a small biotech company you know when we get to the later stage well that that's something that we have to step back and think about can we access to capital and is there something we need to do together with someone else.

[Unidentified Analyst:]

And last question, how large do you expect the ongoing Phase 2 study to be before your end of Phase 2 meeting?

[Sujal Shah:]

As we announced the interim data several weeks ago in fact and originally announced expanding that study to include a target of approximately 18 patients in the 5 and 10 milligram dose groups as well as a smaller six patient dose group at 2 milligrams, at that point in time we had announced that we had already fully enrolled up to that expanded number and as we progress towards an end of Phase 2 meeting discussion with the agency in early 2018, several factors have convinced us that the right thing to do and in fact to continue to keep enrolment open. First of all we continue to see significant demand particularly based on the early results of this study for patients that continue to have a need for second line therapy and so we have patients that continue to look towards coming into the study and so that's one specific reason for continuing and we have opened enrolment as we progress through that discussion. I'll also say that based on our planning it looks as though we know we will need a larger safety database and it's potentially likely to be in the Phase 3 program so that's really a key factor in leaving enrolment open. If I had to give you an approximation I'd say that somewhere around a hundred patients total in the 5 and 10 milligram dose group is an upper of us leaving the ongoing Phase 2 study for but again we have the ability to be flexible until we will continue to enrol patients to the degree that we feel it benefit the longer term objective. The other thing, let me just make sure I highlight that again you know we don't see this ongoing open label as gating for having both the end of Phase 2 meeting discussion early 2018 nor is it a gating item for actually starting Phase 3.

[Operator:]

[Operator Instructions]. The next question is from David Bouchey of IFS Securities. Please go ahead.

[David Bouchey:]

First I want to say congratulations raising $97 million for a company with your market size is an incredible feat and I think you're setting everybody up to expect the incredible from you guys from now on, it's going to be hard to live up to what you've already done. I do have a couple of quick questions and the first is I know that there is another company that is not based in the U.S. and that has a Phase 2 going on in PBC with a different type of PPAR inhibitor and when I look at the structure of their Phase 2 I'm concerned that they may be pretty significantly over dosing patients. Do you guys have any comment on that?

[Sujal Shah:]

You know it's hard for us to say David so you know I think the company you're referring to is likely Genfit and really there's no way for us to really know, you know Seladelpar as you know is that highly potent in selective PPAR delta agonist so it has some key differentiators versus Elafibranor but not really something that we can really attach to whether or not their doses are adequate or not.

[David Bouchey:]

Do you have any idea if they're going to if their drug will have the same pathways that allow them to accumulate in the bile duct?

[Sujal Shah:]

Again you know I think it's hard for us to be able to comment. This is the first study that I believe they're doing in PBC and so once those results come out I think we'll have a better opportunity to be able to comment.

[David Bouchey:]

Okay. And I do want to ask you a quick question on the timeline for Arhalofenate, I'm expecting a Phase 3 trial could start sometime in the first half of next year. Is that kind of on track or do I need to adjust my expectations?

[Sujal Shah:]

Well let me say a couple of things about the partnership we continue to believe Kowa is a fantastic partner for us in advancing our Arhalofenate and gout, we continue to believe that their commitment level to this program is significant. We have had ongoing conversations in JACs and the program continues to progress. I will remind you though David now that Kowa owns the rights now to both develop and commercialise in the U.S. all specific communications with respect to their development program are solely in their hands. I can only tell you that we continue to be very positive about them as a partner and our conversations and their activities continue to progress well.

[David Bouchey:]

There is still a small portion of the upfront fee that has not been accounted for, isn't that correct?

[Sujal Shah:]

That's correct. The agreement includes an additional 10 million in total of milestones that we would receive as they begin clinical development activities.

[Operator:]

The next question is from George Zavoico of JonesTrading. Please go ahead.

[George Zavoico:]

Just to be clear about one thing, you mentioned a 100 patients in the 5 and 10 milligram is the max do you mean a 100 for both 5 and 10 or 100 for each 5 and 10?

[Sujal Shah:]

No, a 100 in total so again these are just benchmarks in terms of us leaving enrolment open I consider these to be numbers up to about 50 patients in each group.

[George Zavoico:]

Now your cash use planned you said in the call and on the press release that you have at least 12 months based on your current burn on an annual basis you'd have to ramp up your expenses at least three fold or so 2.5 to 3 fold to spend it all in the year, year and half. It is just sort of a number to be conservative or where do you really want to end up and how long is your own runway do you think?

[Sujal Shah:]

That's a great question, George, of course what's been indicated in our SEC filings and the press release is not meant to be a specific time line with respect to cash burn we have at least 12 months of cash. We continue to believe that we are adequately funded to transition from Phase 2 into Phase 3 initiating a Phase 3 program for PBC in 2018 and as we talked a bit about today we believe that we can actually begin Phase 2 development activities in NASH based on again being thoughtful around the development strategy along that indication. So we will see some moderate uptick in cash burn between now and the end of the year as that Plan A activity begins and really most of the proceeds as we think about the overall runway will go into making sure that we do some of the key work that's needed for an NDA filing ultimately even outside of the Phase 3 program but the bulk of the capital will go towards both the CMC and clinical development to initiate a Phase 3 program in the second half of next year. So we will see - because there is some specifics around the final design of the Phase 3 program and the final design of what we do in NASH we will continue to provide better guidance as we approach the conclusion of those activities and having specifics around each of those two programs but we feel very well capitalized I'll say and what you're seeing in terms of the SEC guidance is frankly what we call conservative relative to having at least 12 months of cash.

[George Zavoico:]

Okay, good, need to see you go through $100 million in a year. Now regarding actually the trials now. You are now able to treat patients for a year in the PBC trial, but this is going to be chronic, the patients are going to need more than a year. In terms of registrational trial will one year be enough for registration and then maybe have to do some follow-on to get a longer term safety for the PBC indication?

[Sujal Shah:]

Yes, so as you've correctly pointed out that of course what we've done here is extend dosing to 52 weeks but we're not limited simply to 52 weeks of dosing. The 52 week time point in Phase 3 is the registration end point with respect to efficacy and safety but of course we'll continue to have a long term safety extension that will continue on for patients whether they come from both the Phase 2 or Phase 3 program.

[George Zavoico:]

And turning briefly to NASH, it's a different indication and since it's a different set of patients with perhaps different within pathology. Does the part of clinical hold apply to moving to a NASH an indication, so you will be first limited to a six month trial period?

[Sujal Shah:]

It's a good question, George, in fact at the interim data announcement on the call we did announce that we actually have had that class restriction lifted for NASH development as well.

[Operator:]

[Operator Instructions]. The next question is from Joseph Schwartz of Leerink Partners. Please go ahead.

[Joseph Schwartz:]

I was wondering if you could talk a little bit about when we can expect future updates from this trial from the existing low dose group was whilst the next one that you're adding?

[Sujal Shah:]

I appreciate that. That's another great point that you bring up because the ongoing Phase 2 study actually allows us to continue to have some news flow, a more robust data set as that study progresses even as we plan for a Phase 3 start in 2018 in PBC. We're going to look towards the key medical meetings as opportunities to continue to share data, expanded sets of data as well as additional analytics from the data already presented to-date. So the next opportunity for us is an opportunity to present at AASLD in October, that's the key liver meeting in the U.S. and then we would also look to have a presence at the key liver meeting in Europe at Esel in the spring and we'll do so at other meetings that we think are really key and relevant. We certainly firmly believe that continuing to grow the awareness in the medical community Seladelpar and PBC will be important and we think that these meetings will allow us to continue to share additional data from these ongoing studies.

[Joseph Schwartz:]

Okay. And then how do you think the dosing might differ if at all in NASH relative to PBC?

[Sujal Shah:]

Yes. I'll ask Chuck to give you some color around some of our thoughts here early on.

[Chuck McWherter:]

I think the full answer is that we're just going to have to determine that by looking at responses in patients and we haven't studied it yet in NASH patients but I think we are certainly encouraged by the pharmacodynamics that we've seen in PBC. We know that a lot of the parameters that we're looking at are coming directly from the liver, a parasite [ph] inhibiting bile acid synthesis that low dose as well as anti-inflammatory effects which we presumably would be from inflammatory [indiscernible] cooper cells or macrophages are the most reasonable targets to think about. So again I would just say we're encouraged by the doses low dose effects we see in PBC, I think that would warrant exploring at least some of those doses in NASH but we think good drug development would encourage us to explore a wider goes range in NASH with relevant markers from both the liver as well as metabolic inflammatory and try to leverage some of the non-invasive methods around fibrosis as well.

[Joseph Schwartz:]

That actually leads into another question, it's been nice that you've been able to see an effect that with lower doses. Are there any PD markers that you're able to or PK markers even that you're able to correlate with the data in terms of the patients that respond to more or less degrees or is it just purely empirical?

[Chuck McWherter:]

Well I think that that is pretty rich set of data that comes out of these studies. We evaluate numerous laboratory as well as clinical parameters and that's something that we're very committed to doing a complete analysis and I think Sujal mentioned it's something that we would be quite interested in you know finding the right medical venues either meetings as well as publication, I think are a very good place for us to begin to share that and get some external feedback and criticism and input on what we're finding.

[Operator:]

Thank you. There are no further questions in the queue at this time. I would like to turn the conference back over to management for closing remarks.

[Sujal Shah:]

Thank you, operator and thanks again for everyone today participating on the call. Again I couldn't emphasize any more that we are extremely encouraging and excited here at CymaBay. This is certainly a new chapter for the company, the financing and our balance sheet is really a validation from our perspective in terms of the strategy that we've employed and our focus here in liver disease and again underlying all of this is really our desire to advance these programs so ultimately we can see real clear benefits for patients that continue to have a need. So thanks once again and we look forward to talking to you on future calls.

[Operator:]

Thank you. Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.