CymaBay Therapeutics, Inc.
Q1 2016 Earnings Call Transcript

Published: 11 May 2016

[Operator:]

Good day. Ladies and gentleman and welcome to the CymaBay Therapeutics Inc. First Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will be opening the call for your questions. Please be advised that the call be recorded at the Company's request. It is also being webcast live on the Investors section of the CymaBay website at www.cymabay.com. At this time, I would like to turn the call over to Mr. Sujal Shah, Chief Financial Officer at CymaBay. Thank you. You may now proceed.

[Sujal Shah:]

Thank you, operator, and good afternoon everyone. Welcome to the CymaBay financial and operating results conference call for the first quarter of 2016. Earlier today we issued a press release announcing our first quarter 2016 financial results and you can access that release on our website under the Investors tab. Leading the call today, is Hal Van Wart, President and CEO of CymaBay, who will provide an operational update covering our clinical program. I will return to review the company's financial results and then pass the call back over to Hal for a summary of our upcoming milestones. We will open up 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. Actual outcomes and results are subject to risks and uncertainties and could differ materially from those forecasts due to the impact of many factors beyond the control of CymaBay. CymaBay expressly disclaims any duty to provide update to its 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 a property of CymaBay and any recording or rebroadcast is expressly prohibited without the written consent of CymaBay. With that, let me turn the call over to Hal.

[Hal Van Wart:]

Thank you, Sujal. Good afternoon everyone and thank you for joining us on today’s call during which I will provide an update on each of our three clinical programs. Let me begin with MBX-8025, our potent, selective, PPAR delta agonist, which has potential therapeutic applications in several rare diseases including primary biliary cholangitis or PBC. This was previously called primary biliary cirrhosis. PBC is an orphan, autoimmune disease of liver characterized by inflammation and destruction of the intra-hepatic bile ducts liver leading to a condition referred to as cholestasis, a reduction or blockage of bile flow. Patients with PBC have elevated levels of biochemical markers of cholestasis, including alkaline phosphatases, gamma glutamyl transferase and total bilirubin. Cholestasis causes harmful substances to build up in the liver leading to irreversible scarring and potentially progressing to cirrhosis and hepatic failure. In addition to liver damage, many patients with PBC experience a clinical symptom of fatigue and pruritus or intense itching. The only drug currently approved for the treatment of PBC is ursodiol, approximately 40% of patients have an inadequate response to ursodiol and additional therapies are needed for these patients. There has been some significant activity in the PBC space that we believe can have a positive effect on CymaBay’s development of 8025 with PBC. So I’ll - briefly to summarize it. Intercept Pharmaceuticals is developing a novel, FXR agonist in bile acid analog called Obeticholic acid referred to as OCA or Ocaliva for the treatment of PBC. Like 8025, OCA is intended to used in patients who are inadequate responders to ursodiol, or for patients that cannot tolerate ursodiol. Intercept has completed a Phase III program with OCA and is seeking approval in both the US and Europe. Because PBC is a slowly progressive disease that will require very long studies to establish direct clinical benefits, Intercept uses a composite surrogate endpoint of changes in alkaline phosphatase and bilirubin in their Phase III studies. Data from the global PBC study group has shown that this endpoint meets the FDA’s criterion of “reasonably likely to predict clinical benefit” thus Intercept has requested accelerated approval from the FDA based on this surrogate endpoint. The NDA for OCA was reviewed by an advisory committee on April 7, and there was a unanimous recommendation for approval based on the composite surrogate endpoint of alkaline phosphatase and bilirubin. If the FDA agrees with the advisory committee and grants accelerated approval for OCA, there will be precedence for using this surrogate endpoint to other sponsors provided that their therapy can show a “meaningful advantage of other therapies” which we believe retains the 8025. We have consistently observed significant reductions in markers of cholestasis including alkaline phosphatase, gamma glutamyl transferase and bilirubin in our clinical studies at 8025 in different patient populations. This includes studies in healthy volunteers, as well as patients with dyslipidemia and homozygous familial hypercholesterolemia or HOFH. PPAR delta regulates the variety of genes involved in bile acid synthesis and transport. This enables PPAR delta agonists who observed a choleretic effect that is an improvement in bile flow that we believe explains the decreases in cholestatic markers. In addition, PPAR delta agonist exhibit anti-inflammatory and anti-fibrotic activity that may inhibit the destruction of the bile ducts and that will arrest progression of the disease. We are – that these activities would be beneficial to patients with PBC, hence our rationale initiating a Phase II study in this disease. While the clinical data for OCA clearly show that it produces improvements in biochemical markers of cholestasis, there is still room for improvement. The Phase III studies showed a non-responder rate of about 30% and on the safety and tolerability side, OCA caused an exacerbated pruritus and also worsen the lipid profile in some patients. In studies to-date, 8025 has not been shown to cause pruritus. In addition, it has demonstrated improvement in the lipid profile of patients including reductions in LDL cholesterol triglycerides and free fatty acids, as well as increases in HDL cholesterol. Thus, we believe that 8025 may have meaningful advantages over OCA and that its development for PBC is warranted and could get to the market with an accelerated approval pathway. Our ongoing Phase II study has a placebo-controlled, dose ranging design and is being conducted in PBC patients who have had an inadequate response to ursodiol. Patients are being randomized to receiving the placebo or MBX 8025 at doses of 250 or 200 milligrams once-daily for 12 weeks. The primary endpoint will be a change in alkaline phosphatases. A variety of secondary outcomes will also be studied including changes in gamma glutamyl transferase, bilirubin, lipid parameters and the incidence of pruritus. We expect to enroll approximately 75 patients in the US, UK, Canada, Germany and Poland and to complete this study in late fourth quarter of this year. Next, I’d like to provide an update on our program in homozygous familial hypercholesterolemia that I’ll refer to as HOFH. Last quarter, we announced top-line data from our pilot Phase II study. HOFH is an ultra orphan genetic disease caused primarily by loss of function mutation in the low-density lipoprotein or LDL receptor gene, resulting in markedly elevated LDL cholesterol and increased risk of serious cardiovascular events. Despite currently approved therapies, most patients do not reach their LDL targets and there remains a need with new ways to lower LDL cholesterol. The pilot study was an open-label dose escalation study examining doses at 8025 of 50, 100 and 200 milligrams. It was a 12 week study in 13 patients with genetically confirmed HOFH who despite being on maximum conventional lipid lowering therapy had an average baseline LDL cholesterol of 368 mg per deciliter. In-patients would also undergo a concomitant apheresis on a weekly or bi-weekly schedule. Current vertical analysis of the average and maximal changes in LDL cholesterol during the treatment period was performed and shown mean decreases of 10% and 19% respectively. In the respondus analysis, seven of 12 patients or 58% exhibited a greater than a rate over 15% decrease in LDL during one of the treatment periods including one patient that was LDL receptor negative. By contract, five of 12 subjects or 42% had a less than 15% decrease. An important observation in this study was that treatment with 8025 raise PCSK9 levels by an average of 43%. Since PCSK9 levels are inversely correlated with LDL cholesterol levels, this suggests that the elevation in PCSK9 may have limited the LDL cholesterol lowing. This raise is the question of whether treatment with 8025 on background PCSK9 inhibitor therapy would neutralize PCSK9 and therefore increase the LDL cholesterol lowering benefit of 8025. It is very likely that in the next few years, most patients with HOFH will be on background PCSK9 inhibitor therapy that this would make sense as the therapeutic strategy. The company is currently exploring the feasibility of conducting such a study which we believe could be carried out cost-effectively and without a need to raise additional capital. We will update investors once this assessment is complete and the path where it’s finalized. An oral presentation of the results when this pilot study has been accepted and will be given at the European Atherosclerosis Society to be held in Innsbruck, Austria on May 31. Last, let me turn attention to arhalofenate, our oral, once-daily dual-acting drug candidate for the treatment of gout. Arhalofenate is a dual-acting investigational drug that simultaneously addresses the two major unmet needs in gout, namely the need for better control of serum uric acid level and better control of painful flares. CymaBay believes that Arhalofenate could be the first entry into the new class of gout therapy that we refer to as Urate-Lowering Anti-Flare Therapy or ULAFP. In studies today in over 1100 patients Arhalofenate has not shown evidence of renal toxicity that is observed with some uric acidic drugs. We have completed a Phase II clinical program in which we demonstrated clinically meaningful and statistically significant reduction in both serum uric acid and gout flares. A paper describing the results of our Phase II b flare study has now appeared in the journal Arthritis and Rheumatism, together with an editorial commenting very favorably on the data. In January 2016, we completed our end of phase II discussions with the FDA and have come to agreement on all of the elements of the planned Phase III program including the endpoints to be used to support indications for the management of hyperuricemia and flare prophylaxis, the two parts of the ULAFP mechanism. We believe Arhalofenate is now a highly de-risked and highly differentiated Phase III ready asset that can address major unmet needs in the growing gout market. Our strategic plan is to secure a partnership for Arhalofenate with one or more companies that have a presence in the primary care market. Discussions with potential partners continue to progress. At this point, I would like to hand the call back to Sujal to go over our financials.

[Sujal Shah:]

Thank you, Hal. In today's press release, we reported cash, cash equivalents and short-term investments at March 31, 2016, of $35.3 million. Based on our current operating plans, we believe our existing cash is sufficient to fund operations through at least the second quarter of 2017. Research and development expense for the three months ended March 31, 2016 was $4.4 million compared to $4.2 million for the prior year period. The small increase in R&D was related to slightly higher clinical expense in Q1 2016 related to the development of MVX 8025 in HOFH and PBC, compared to the clinical expense from the completion of Arhalofenate Phase II development in gout in the first quarter of 2015. General and administrative expense for the three months ended March 31, 2016 was $2.5 million compared to $2.6 million for the prior year period. Net loss for the three months ended March 31, 2016 was $6.8 million compared to $2.3 million for the prior year period. The increase in net loss for Q1 2016 versus Q1 2015 was almost entirely related to a $4.3 million decrease in non-cash gain from the mark-to-market valuation of the company’s warrant liability. Hal?

[Hal Van Wart:]

Thanks, Sujal. Let me close by highlighting our recent accomplishments and upcoming milestones. Top-line data from our dose ranging placebo-controlled Phase II study of 8025 and PBC are expected in late fourth quarter of this year. We remain encouraged by the consistent reductions in markers of cholestasis observed in a variety of previous clinical studies including our most recent study in patients with HOFH. The top-line data from our pilot Phase II study in HOFH have been obtained and will be presented at the EIS meeting next month. We believe that we should conduct a second pilot study of 8025 on top of the PCSK9 inhibitor before making a decision on how or whether to advance the program for this indication. We are currently investigating the feasibility of such a study. Last for Arhalofenate, we’ve had a positive conclusion to our end of Phase II discussion with the FDA. The program is now phase III ready and we are in active partnering discussions. Now we’d be happy to take your questions and I’ll turn the call over to the operator.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Ted Tenthoff from Piper Jaffray.

[Ted Tenthoff:]

Great, thank you very much. Question about the opportunity for combination in PBC with Intercept is kind of leaving the way of raising the trial here. Where do you see the opportunity as for 8025? Is this for patients would it be the non-responders, would it be used in combination? How should we be thinking about that? Thanks.

[Hal Van Wart:]

Yes, thanks, Ted. It’s a good question. So, I think the – we first of all, only advance 8025 for indications in which we believe we could become best-in-class based on our differentiating features and we would envision the primary market opportunity to be in inadequate responders to ursodiol very similar to the strategy taken by Intercept where we believe we may have the ability to produce a data profile to the patient based on the fact that we’ve don’t cause or exacerbate pruritus and that we have very – effects on the lipid profile. There are a very small number of patients about 5% who apparently don’t tolerate ursodiol and that would be an additional very small group that we could also include in that profile.

[Operator:]

Your line is alive.

[Ted Tenthoff:]

Okay. I was going to go back to the queue, but, second question that I had would have to do with respect to the Arhalofenate partnership. What [Indiscernible] think for a partner?

[Hal Van Wart:]

Yes, well, sorry, you cut-off a little bit there, Ted, but I assume you are asking what specifically we are looking for. As you know, and as most folks know, having followed our story, gout is a predominantly primary care market. So, first and foremost we are looking for a single party or potentially multiple parties that this ends up being a deal where we carve out right to different geographies that has the capability to commercialize the primary care assets such as Arhalofenate as it gets through Phase III and potentially towards approval. We certainly want to have a partner that hears our enthusiasm for the compound and where we believe it has significant differentiations or many things currently on the market and potentially even this is be on the market ahead of us. We talk a lot about the fact that we believe Arhalofenate is vastly differentiated from existing therapies and we continue to believe. So, both around its safety and tolerability profiles seen to-date in clinical studies as well as the differentiation with respect to the fact that it’s the one compound that displayed the ability to lower uric acid as well as lower the incidence of flares.

[Operator:]

Does that answer your question?

[Ted Tenthoff:]

Thank you.

[Hal Van Wart:]

Thanks, Ted.

[Operator:]

We will go to – our next question comes from Ed Arce from H.C. Wainwright.

[Ed Arce:]

Hi, guys. Thanks for taking my questions. I have three, one for each of the current programs. First is, have you had – are you seeing any significant higher interest and how do you advance perhaps in advanced discussions around partnering for arhalofenate since you’ve received the FDA agreement on the potential labeling? Two, what are gating factors that precedes you from going with a second proof-of-concept study for 8025 and HOFH since it’s – is not planning anything. And, third is, could you discuss how the enrollment is going for the PBC study and what degree of effect that you are looking for they to allow you to advance that program? Thanks.

[Sujal Shah:]

Yes, so let me answer the first question. Thanks for those questions around the partnership process for arhalofenate. Certainly, I think, as you pointed out, when we came to the conclusion at the end of Phase II meeting discussions with the agency, it gave us the ability, in our opinion to put our best foot forward on what we believe is a very robust meaningful Phase III program for arhalofenate to obtain a potential dual-acting label as we’ve described already. So those were certainly accelerators in our process towards discussions with parties as well as new parties coming to the table. I think mostly, after the end of Phase II meeting discussions. Where we are today is very similar to the update that we gave just about a month ago when we had our year end earnings call at the end of March frankly. The process continues to involve parties that are looking at different geographies. So we in fact have folks that could potentially be global partners as well as parties involve that are specifically looking at either just the US, just Europe, or just the Far East. So it is an evolving process. We continue to have the discussions and diligence is ongoing from the last update we provided at the end of the last earnings call. And again, I think with the conclusion at the end of Phase II meeting process, and more of I think the excitement around a recent publication, the editorial that was also written in that journal Arthritis and Rheumatology, we are continuing to message to parties involved that our goal is to try to get to a deal by the middle of this year as that would potentially enable the start of Phase III before the end of 2016. Those are our driving factors that’s all been communicated to parties involved and the progress continues to move forward.

[Hal Van Wart:]

So, Ed, I’ll take your second question which I believe was what are the issues that might be holding up us making a decision on the second pilot study in HOFH. We are very interested in conducting that study. We’ve already developed a protocol which we think is appropriate or a study in 8025 of top of patients taking Repatha and what we are in the process of doing now is establishing the feasibility of doing such a study which we would – which obviously would require a bolus of patient preferably at a single site who are already on background Repatha therapy. Hopefully not on apheresis as that complicates things. And finally, to understand what the regulatory hurdles might be, in terms of using these two drugs in the particular county where those patients maybe available. And that’s just taking a little bit of while to sort through. So, your third question, I believe was about enrollment in the PBC study and all I can tell you – the only thing that we are willing to comment on is that, we continue to believe that we will be able to complete this study according to the public guidance which we’ve been giving which is late fourth quarter this year.

[Ed Arce:]

Okay, guys. Thanks for answering the questions.

[Hal Van Wart:]

You are welcome. Thank you, Ed.

[Operator:]

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

[David Bouchey:]

Hi, guys. How are you doing?

[Sujal Shah:]

Hey, David.

[Hal Van Wart:]

Hi, David.

[David Bouchey:]

First, Hal, I want to thank you for that answer to Ed’s question about exactly what you have to do to develop and you’ve already have a protocol developed for a study with MBX 8025 in combination with Repatha. Do you have any timeline for when you might announce the next step being taken?

[Hal Van Wart:]

I think we are probably going to be able to know where we stand with – during the next quarter by our next quarterly update, I am fairly certain that we will have gone all the research on a feasibility that we need. That’s not to say that we could spud it immediately, because that will be governed by the regulatory timelines in the countries where we will conduct this study. But again, we do believe that it will be a pilot study with only you got to say another dozen or so patients. So, that’s what I can tell you at this time.

[David Bouchey:]

In terms of partnership discussions that are ongoing, can you give us any color on how recent developments with the Zurampic may have affected those discussions, now that AstraZeneca has kind of sold it off?

[Hal Van Wart:]

I think a couple of things I would, in my commenting about. First let me just take a step back and say, in our opinion, the approval or Zurampic really highlights the fact that regulatory agencies both in the US and in Europe recognize that there remains a significant need for additional SUA lowering drugs for patients, particularly, given the fact that about 60% of patients on the most commonly prescribed doses of current therapies never reach their serum uric acid goals. So, one, the approval itself certainly underscores the fact that agencies recognize the needs. Fundamentally, the deal between AZ and Ironwood, I think also represents the fact that there is a significant opportunity not only for larger pharma companies that typically have large primary care sales forces, but also smaller commercial-stage biotech or even specialty pharma companies frankly, that remain hungry and remain in search for opportunities in what are large inadequately served patient populations. So, I think that’s been a positive that I’d certainly like to highlight is, is seeing somewhat outside the box non-typical large pharma company in this deal just highlights the fact that there are players in the space, particularly those that are already commercial hungry and looking for assets. So, I think this is just another one of the data points I the past six months or so, in this gout space that continues to highlight the fact that gout remains a relevant opportunity and continues to be a high unmet need given the lack of efficacy and for many patients of existing therapy. So, from our perspective, we think there remains considerable improvement among existing therapies now in the market including Zurampic once it’s launched and in the end, I think the most important thing for Arhalofenate that I believe partners that are in – potential partners that are in discussions with us now recognize is that Arhalofenate really does have the potential to be the most differentiated gout therapy for patients certainly from what we believe remains a big opportunity for a lot of patients that don’t respond well.

[David Bouchey:]

Great. Thank you very much.

[Hal Van Wart:]

Thank you, David.

[Sujal Shah:]

Thanks, David.

[Operator:]

Thank you. That’s all the time we have allotted for today’s call. I would now turn the call back over to management for closing comments.

[Hal Van Wart:]

Well, thank you very much everyone for calling in today. I hope that you share our enthusiasm with the progress we made in our programs and with that we’ll sign-off now. Thank you everybody.

[Operator:]

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