CymaBay Therapeutics, Inc.
Q4 2016 Earnings Call Transcript

Published: 24 Mar 2017

[Operator:]

Good day, ladies and gentleman, and thank you for joining today's webcast CymaBay Fourth Quarter and Year End 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks from the company, we will open the call for your questions. Please be advised that the call will be recorded at the Company’s request. It’s 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. Sujal Shah, Chief Financial Officer. Thank you. You may begin.

[Sujal Shah:]

Thank you, operator, and good afternoon, everyone. Earlier today we issued a press release announcing our fourth quarter and year end 2016 financial results. 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 update on our clinical program and review up coming milestones. I will then summarize the company's financial results. After our prepared remarks, we'll open the call for Q&A. 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 for the risk factors set forth in today’s press release and in CymaBay’s Quarterly and Annual Reports filed with the SEC 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. Now I'll turn the call over to Hal.

[Hal Van Wart:]

Thank you, Sujal. Good afternoon, everyone and thank you for joining us on the call today. Since our last quarterly conference call, we've made significant progress in advancing our two clinical programs. Seladelpar, formerly known as MBX 8025 for the treatment of primary biliary cholangitis or PBC, and arhalofenate, for the treatment of gout. Let me begin today's update with Seladelpar. Last year we reported results from our first Phase 2 study in subjects with PBC which established proof of concept to Seladelpar in treating the serious and progressive cholestasis disease. The study shows substantial evidence of efficacy as demonstrated by marked improvement in biochemical markers of cholestasis. But due to a treatment emerging signal of transaminase elevations we ended it early. At study termination data for 38 subjects who still going treatment for between 2 and 12 weeks for available for analysis. There were marked reductions in alkaline phosphatase or ALP for all subjects in a notable finding with that Seladelpar treatment normalized ALP level in many of the subjects. Data from this study will be reported as a late breaking all our presentation at the AASLD meeting in November of last year. The very significant reduction in ALP observed in this first study suggested that lower doses of Seladelpar may retain efficacy while avoiding transaminase elevation which will not observed in earlier clinical studies in other patient population. Since Seladelpar is cleared by the biliary system in subjects with PBC have impaired bile flow, the exposure to the liver might have been greater in these subjects. So with guidance from the FDA, we initiated a second Phase 2 study in PBC using lower doses. The goals of this study are to identify the doses to be used in Phase 3 and to gather additional safety data to support registration. The study is enrolling patient who have an inadequate response to or/are intolerant to ursodiol. The primary endpoint is to change in ALP. It is open label study being conducted at sites in the US, Canada, Germany and the UK. Initially, 24 patients will be randomized 1 to 1 to receive 5 or 10 mg of Seladelpar for eight weeks. Based on the review of the eight weeks data from these two groups, a new cohort of 12 subjects maybe initiated that will receive the higher dose of 25 mg. The study also has an extension phase in with subjects any of the dosing group may continue treatment for an additional 18 weeks. During which it will be possible to adjust the dose of Seladelpar. There is considerable enthusiasm of the clinical trial to this study and enrollment is going very well. We expect to report top line data from eight weeks of treatment with the 5 and 10 mg doses of Seladelpar in early third quarter of this year. Data for eight weeks of treatment with the 25 mg dose should be available in fourth quarter. We are pleased to note several other positive developments to this program. First, Seladelpar has been granted orphan drug status in US for the treatment of PBC. Second, it has received a US method used patent for the treatment of PBC. And third, the drug has received European Medicines Agency PRIority Medicines or PRIME designation for the treatment of PBC. PRIME is the European equivalent of breakthrough therapy in the US. We've already held our first meeting with the PRIME review team and will be receiving ongoing regulatory guidance for this program. Based on our previous Phase 2 results in patients with mix dyslipidemia, and available data from other PPARδ agonist, we believe Seladelpar may have utility in treating patients with NASH, nonalcoholic steatohepatitis. Recently in collaboration with Geoff Farrell at the Australian National University, Seladelpar was evaluated in a metabolic model of NASH that we believe closely resembles to human disease. Seladelpar will start to decrease the nonalcoholic steatohepatitis activity score NAS significantly while at the same time reducing fibrosis and reversing insulin resistant. These data will reported at an oral presentation at the AASLD meeting in November and were very well received. We've also received a US method of used patent for Seladelpar for the treatment of NASH. These data support a rationale for developing Seladelpar and NASH and we are now evaluating a potential mean we are initiating a proof of concept study in this disease. Now let me switch gears and provide an update on our Arhalofenate for the treatment of gout. As outlined on previous call, our strategy for Arhalofenate has been to first establish a differentiated and commercially attractive product profile in Phase 2. Second, negotiate a Phase 3 registration program with regulatory agency. And then seek a partner to fund and conduct the Phase 3 program and ultimately commercialize the drug. Now the Phase 2 program consisting of five study with a variety of primary and secondary endpoint has been completed and support a highly differentiated product profile. In these studies, Arhalofenate consistently demonstrated the ability to reduce gout flares as well as reduce serum uric acid. Arhalofenate has the potential to become the first drug in a new cause of gout therapy that we refer to a Urate Lowering Anti-Flare Therapy or ULAFT. It has established the favorable safety profile and clinical trial involving more than 1,100 patients to date. We believe that the potential for Arhalofenate to prevent or reduce flares while also lowering serum uric acid will significantly differentiate it from currently available therapies for gout. Over the last year, we have obtained agreement on the Phase 3 program with both the FDA and the EMA and the program is now Phase 3 ready. Finally, we are pleased to announce that at the end of last year, we entered into an exclusive licensing agreement with Kowa Pharmaceuticals America to develop and commercialize Arhalofenate in the US. Kowa will be responsible for all development and commercialization costs. And we will assume responsibility for all future development activity. CymaBay received an up-front payment of $5 million in January, and will receive potential near term milestone of up to $10 million based on the initiation of specific development activities. As well as being eligible to receive up to an additional $190 million in payments based on the achievement of specific development and sales milestones. We will also receive tiered, double digit royalties on future sales of Arhalofenate products. CymaBay retains full development and commercialization rights for the rest of the world. And we intend to partner Arhalofenate in geographies outside the US. As we noted during our conference call in January, Kowa fulfills all the criteria that we are looking for in a partner. Kowa has a record of success in the clinical development, manufacturing, marketing and distribution of its product. They have the financial resources and development infrastructure needed to complete the Phase 3 registration trial. And importantly, they have an established and experienced primary care sales force that can market a drug with the profile of our Arhalofenate. The transfer of the Arhalofenate program to Kowa is well underway and we look forward to working with Kowa to ensure the success of the product. Having completed the partnership of Arhalofenate with Kowa, the company will continue to shift its resources on to the development of Seladelpar for orphan and special diseases in the lipid and liver space with an emphasis on programs that we can take all the way to the market ourselves. Now turning to other news, we continue to restructuring our Board of Director. In the fourth quarter, we announced the appointment of appointments of Robert Booth and Caroline Loewy as directors. Each of them brings significant strategic and operational experience in drug development and the biotechnology industry. Robert has spent more than 20 years in the industry including 12 years in Roche where he was a member of the Global Research Management Team and Business Development Committee. He was also CSO at Celera Genomic, CEO of Virobay and founder of Ab Initio Biotherapeutics and CuraSen. He has a deep knowledge of science and drug development. Caroline has been CFO of both public and private biopharma companies including Tobira, Corcept and Poniard Pharmaceutical. She was also a senior biotechnology equity research analyst at Morgan Stanley and Prudential Securities for 11 years. Finally in February, we completed a public share offering which brought in net proceed of approximately $9.2 million after deducting the usual underwriting discounts, commissions, and offering expenses. We have grateful for the support of our investors who participated. I'd now like to hand the call back to Sujal to go over the financials.

[Sujal Shah:]

Thank you, Hal. On December 31, 2016 we had $17 million in cash, cash equivalent and short term investment compared to $41.5 million on December 31, 2015. CymaBay believes that these funds, together with additional proceeds of approximately $14.4 million received from the Kowa licensing agreement and financings in January and February of 2017, will allow CymaBay to continue operations through at least the next twelve months. Research and development expense for the three and twelve months ended December 31, 2016 was $3.8 million and $15.9 million respectively. This compared to R&D expense of $4.1 million and $17 million for the three and twelve months ended December 31, 2015. Research and development expense in 2016 was modestly lower than the prior year, as phase 2 clinical development activity shifted from arhalofenate to Seladelpar. General and administrative expense for the three and twelve months ended December 31, 2016 was $2.8 million and $9.6 million respectively, compared to $1.8 million and $8.9 million for the three and twelve months ended December 31, 2015. G&A expense in the fourth quarter of 2016 was higher than the prior year period as a result of higher labor cost and consulting expenses associated with the licensing agreement with Kowa Pharmaceuticals America. Our net loss for the three and twelve months ended December 31, 2016, was $7 million, or $0.30 per diluted share and $26.7 million, or $1.14 per diluted share, respectively, compared to $6 million, or $0.26 per diluted share and $15.5 million, or $0.83 per diluted share for three and twelve months ended December 31, 2015. The increase in net loss for the fourth quarter and full year 2016 compared to the prior year period were largely due to a decreases in non-cash gain from the mark-to-market valuation of our warrant liability. Hal?

[Hal Van Wart:]

Thank you, Sujal. While we had a very productive 2016 and thanks to a talented team, a new corporate partner and supportive investors, we are now in a much stronger position to advance our clinical stage product candidate. Looking ahead to upcoming milestones, during the third quarter we plan to report result from the Phase mg Seladelpar product study in patients with PBC who will receive the either 5 or 10 mg doses for the initial eight weeks treatment period. During the fourth quarter, we plan to report similar results with the 25 mg dose group. Now that we have secured a development and commercialization partner for Arhalofenate in the US to our agreement with Kowa, we are diligently seeking one or more partner to license the drug in territories outside the US. That concludes our prepared remarks. Now I'd like to turn the call over to the operator for Q&A.

[Operator:]

[Operator Instructions] Our first question comes from Ed Arce from H.C. Wainwright. Please go ahead.

[Ed Arce:]

Hi, guys. Thanks for taking my question. So first one just for you Sujal, I just want to get a sense if you could perhaps just qualitatively how you see the operating expenses over 2017?

[Sujal Shah:]

Sure, Ed. Thanks for the question. I think our burn is consistently over the past couple of years as we've been involved typically in a single Phase 2 study as we are today with our Phase 2 study in PBC has been around $6 million a quarter, that's a pretty good proxy I think as you go forward. In the remarks, I mentioned that we have confidence that our existing cash including the cash that we brought in January and February of this year in addition to what was reported at the end of 2016 will take us forward at least 12 months. So at least for the end of Q1 of 2018.

[Ed Arce:]

Right, okay. And then turning to your ongoing Phase 2 in PBC, perhaps Hal you could give us a little bit more details around how enrollment is going? I know you said a number of sites throughout the country and up in Canada. And then also I was wondering if in the protocol of the study there are any stopping rules either for efficacy or Phase 3. Thanks.

[Hal Van Wart:]

Yes, thanks Ed. This is Hal here. So I said in my update, enrollment is actually going very well. It is on target for us to be able to announce top line results from the 12 patients in each of the 5 and 10 mg cohort in early third quarter. And I think this is largely due to the fact that we gone back to a lot of the same site from the first study where the investigators and many of the participants in the study saw that there were very good movement in the efficacy market. There is no efficacy stopping point in the study but of course all studies have stopping point to safety whether they be an accumulation of number of advance in particular category of toxicity and that's standard for all of our clinical trials.

[Ed Arce:]

Right, of course. And then actually just one more if I may. Around your partnering discussion, I was just wondering if you could give us a little more detail around some of the criteria that you have is it broadly similar to the criteria that led to you Kowa or if there is any meaningful differences at US? Thanks.

[Sujal Shah:]

Yes. I'll answer that Ed. I think generally speaking when we think about the characteristic of a partner in terms of their focus, their experience in primary care, their enthusiasm for the phase and their experience specifically in the space. I think you are right that largely our criteria are the same. I think we continue to be very focused on geographies including Europe and East Asia where the market for gout are significant as they are in the United States. And I think at the end of the day some of the things that we think about our folks in those regions that have very good access, very good distribution in those regions and overall again fitting the kinds of profile that we ultimately saw in Kowa Pharmaceuticals as well.

[Operator:]

Our next question is from David Bouchey from IFS Securities. Please go ahead.

[David Bouchey:]

Hi, guys. Quite a busy year and yes so let me ask I know that technology transfer can be a pretty drawn out and complicated process especially when you are dealing with some of the more traditional Japanese firms which Kowa certainly is. And I believe you are looking at timeline of anywhere from nine months to sixteen months, can you give me any kind of color on where you stand now? How much more you think is left to go? When we might expect to see they make a decision on with the Phase 3 would start?

[Sujal Shah:]

Yes, David. Let me take a stab by giving you some color I think will be helpful. So as we pointed out and Hal pointed out, we are very excited about the partnership with Kowa. They are a group that highly motivated and focused in moving the program forward. We, of course cannot talk to very specifics around the timeline of their program. They are of course now fully in charge of development as well as ultimately commercialization. What I can tell you is that Kowa is a diverse group; they not only have presence in Japan. They have USA presence with respect to their commercial group as well as development. And we have kicked off the process in fact face to face meeting with the very broad teams from Kowa to move this forward as quickly as possible. So we are very happy with their level of commitment and excitement and we continue to work with them in this tech transfer. Not a lot I can give you with respect to all the specifics around their timeline but we have had our first kick off meeting earlier this year and things continue to progress very well.

[Operator:]

[Operator Instructions] And our next question comes from Sa’ar Yaniv from Roth Capital Partners. Please go ahead.

[Sa’ar Yaniv:]

Hi, guys. Thank you for taking my call. I appreciate it. I had a couple of questions. First, if you guys can start with the third arm of the PBC study? So you are going to review the eight week data before -- from the first two arms before you start the third group, is that correct?

[Hal Van Wart:]

Yes, that's correct. So the way the further call is written after the last patient has completed eight weeks of dosing they needed to file in both the 5 and 10 mg cohort. We just have cumulative look at all the data just to make sure if there is anything going on that would give us hesitation with starting the higher dose cohort. This is just a picking appropriate caution and make sure that as we escalate the dose we are not exposing patients to any undue risk.

[Sa’ar Yaniv:]

Right. So I guess my question was in that regard, will that be after you release the interim data from the first two groups in early third quarter or will you start that before you release the data? Can you talk a little bit about the timing?

[Hal Van Wart:]

Yes. Now is the former, so we would intend to release the headline data very soon after that eight weeks period are done. And at about the same time we'll hopefully make the decision to start enrolling that 25 mg cohort and we speculate based upon -- we project based upon currently enrollment dynamics that we could have that data for that cohort by the end of the year.

[Sa’ar Yaniv:]

Okay. So data for that's third cohort will be very special but at end of the year. Okay. Now shifting little bit to NASH, Hal you have been on the Canada's board for quite some time. So just wanted to know if you can give us an idea of what you learned regarding NASH? And then how do you see for example the Phase 2 program looking like as far as the length, patient, biomarkers et cetera?

[Hal Van Wart:]

Well, it's a good question. So first of all we are extremely heartened by the preclinical data that we've collected showing that Seladelpar reverses NASH pathology and fibrosis and what we believe to be a very relevant model for the human disease. So we are currently trying to figure out what a Phase 2 proof of concept study will look like and we are planning to have the pre IND meeting with the FDA probably in the second quarter, and at that time we hope to have ready a couple of discussion topics regarding whether designing a proof of concept trial could look like. Is that all I can say right now.

[Sa’ar Yaniv:]

Okay. So now that you are talking about what you are seeing in the preclinical NASH model and I think you mentioned you assume reversal of fibrosis. Have you seen any reduction inflammation, have you seen any reduction or reversal of fibrosis at all and maybe some other metabolic markers, lipids maybe say maybe A1C et cetera?

[Hal Van Wart:]

Yes. Let me ask -- have Chuck answer that but the answer is yes.

[Chuck McWherter:]

Great. Thanks. Yes, good to hear from you. Yes, so we presented at liver meetings the work that we did with Geoff Farrell just to remind everyone this is a model in which animals are hyperphagic, they recapitulate a lot of the human disease they become over weight, insulin resistant to become actually diabetic, they accumulate a lot of lipid and fat in the liver. They get lipotoxicity, oxidative stress and then they get the ballooning, the characteristic ballooning inflammation that you see macrophage and Kupffer cells, and then you see fibrosis. And what we like about the model is that our expert pathologist is Mathew Yeh at the University of Washington in Seattle, he is on the NASHCRN, he likes this model because of all the rodent model that NASH pathology he think this is much closer to that and these mice to the human pathology. So what we saw briefly in the study is that we saw a reduction in lipid, reduction in ALP, improvement in -- the decreases in lipotoxicity and what really stood out, what really characterize the mechanism relative to others is really a complete absence of the ballooning characteristic of NASH which is a key feature in the NASH pathology. Did reduce collagen staining by collagen densitometry, so less fibrosis and very impressive reduction in insulin resistant. So really dropped the glucose intolerance, the hypercholesterolemia was reduced. So overall the reason that I am particularly excited about Seladelpar is that I view it as the potential and it's only a potential in the early days, it is only mass data as a foundational therapy. In other words, if you look across the spectrum of NASH, the disease where you have high metabolic load, you have fat, you have lipotoxicity and inflammation and then you have injury in terms of ballooning and fibrosis. It really covers the entire continuum. So as the field progresses to look at potential for combination therapy, it's a therapy that could both reinforce as well as compliment other therapy.

[Operator:]

This does conclude the question-and-answer session. I'd like to turn the floor over to management for any closing comment.

[Hal Van Wart:]

Yes. This is Hal here. I just like to end by saying that we think we completed a really good and productive year. There is a real sense of excitement here about the prospects for the PBC program and other program related to Seladelpar. And I'd like to end by thanking our investors who are continuing to believe in our story and for their support. So thank you everybody for tuning in.

[Operator:]

Thank you. This conclude today's telecast. You may disconnect your line at this time. Thank you for your participation.