CymaBay Therapeutics, Inc.
Q3 2014 Earnings Call Transcript

Published: 13 Nov 2014

[Operator:]

Good day, ladies and gentlemen and welcome to the CymaBay Third Quarter 2014 Financial Results 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 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 and Head of Investor Relations at CymaBay. Sujal, please proceed.

[Sujal Shah:]

Thank you, operator and good afternoon everyone. Welcome to CymaBay’s third quarter 2014 financial and operating results conference call. This afternoon, we issued a press release announcing our third quarter 2014 financial results. The release is available on our website under the Investors tab. Joining me on the call today is Harold Van Wart, President and Chief Executive Officer of CymaBay who will provide an operational update covering our clinical programs. I will return to review the company’s financial results, pass the call back over to Harold for a summary of our upcoming milestones, and then open the call up 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 statement as defined under the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are intended to be subject to the Safe Harbor protection provided by the Reform Act. 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 statement whether as a result of new information, future events or otherwise. Participants are directed to the risks set forth in today’s press release as well as the risk factors set forth in CymaBay’s quarterly report on Form 10-Q filed with the SEC on August 14, 2014. 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 Harold.

[Harold Van Wart:]

Thank you, Sujal and good afternoon, everyone and thanks to all of you for joining us on CymaBay’s first ever earnings call. I’d like to use this as an opportunity to first briefly review the key features of our two active clinical assets, including some background on the diseases that we intend to treat, followed by an update on recent progress in their clinical development. CymaBay began its life as a public company last October when we raised $38 million to continue the development of arhalofenate for the treatment of gout. Gout is an inflammatory arthritis defined by a signature event referred as a flare, which is triggered by the presence of urate crystals, which form in joints as the result of hyperuricemia. The two primary goals of gout therapy are lower serum uric acid and to prevent and retreat flares. Different drugs are currently used to meet these two goals. Allopurinol and febuxostat are uric acid lowering therapies, ULTs that blocks the synthesis of uric acid, while anti-inflammatory drugs such as colchicine are used to prevent and treat flares. If a patient is able to stay on a ULT that gets their serum uric acid below the goal of 6 mg/dL for an extended period of time, the urate crystals in the body can be effectively washed out and the flaring will reside. A paradox in the treatment of gout, however, is that the initiation of ULT causes the incidence of flares to increase for at least the first 6 months requiring prophylaxis with colchicine. Arhalofenate is a once-daily oral candidate for the treatment of gout that has a unique dual mechanism of action. It is the ULT that blocks the re-absorption of uric acid in the kidney by inhibiting a uric acid transporter called URAT-1. This leads to excretion of uric acid into the urine and lowers serum uric acid. Arhalofenate also has an inherent anti-inflammatory activity. It blocks the urate crystal induced production of IL-1 data explaining its ability to prevent gout flares. This dual mechanism differentiates it from all currently available treatments for gout. We have two ongoing Phase 2 studies designed to gather more information on the uric acid lowering and flare prevention activities of arhalofenate. Because we have not yet identified a maximum tolerated dose, we are expanding the dose range in both studies to include 800 milligrams. The first study is a 12-week Phase 2b trial in patients with gout that is primarily designed to assess the flare prevention activity of arhalofenate was administered without colchicine. In our earlier Phase 2 studies, all patients were on background colchicine therapy. We believe that arhalofenate acts upstream of colchicine in the inflammatory cascade and are testing the hypothesis that arhalofenate can replace colchicine with flare prophylaxis. The study consists of five arms placebo, arhalofenate at 600 milligrams or 800 milligrams, allopurinol 300 milligrams and allopurinol 300 milligrams together with colchicine. The primary endpoint is the flare rate defined as the average number of flares per patient normalized for patient exposure. The study is powered to detect the 50% reduction in flare rate for the arhalofenate 800 milligram arm compared to the allopurinol 300 milligram arm. This study was initiated in March and fully enrolled on September 29 ahead of our previous guidance of year end 2014. Enrollment has surpassed the target of 225 patients. I am also pleased to report that in September, an independent Data Monitoring Committee reviewed interim safety data and recommended that the study continue as planned. We expect to report top line data from the study by the second quarter of 2015. In the second ongoing Phase 2 trial, we are studying arhalofenate in combination with febuxostat in patients with gout. For patients who do not get to their serum uric acid goal of less than 6 mg/dL on arhalofenate alone, the combination with febuxostat could constitute an attractive therapeutic option. One goal of the study is to assess the serum uric acid lowering of different combinations of arhalofenate and febuxostat. In part of the study, we will also measure the urinary excretion of uric acid during the arhalofenate dosing periods. Patients will first receive arhalofenate monotherapy either 600 milligrams or 800 milligrams followed by successive dosing periods in which febuxostat 40 milligrams or 80 milligrams is co-administered, followed by a washout of the arhalofenate. A second goal of this study is to asses whether there is a potential drug interaction between arhalofenate and febuxostat by seeing if either drug affects the PK of the other. This study has been initiated at a single site in the U.S. and is now fully enrolled. We expect to report top line data in the first quarter of 2015. Earlier this year in July, we completed a follow-on financing in which we raised an additional $25 million primarily targeted to further advance MBX-8025 or a potent selective PPAR-δ agonist. MBX-8025 had previously completed a Phase 2 study in patients with mixed dyslipidemia and demonstrated positive effects on lipids, including reductions in LDL cholesterol. The FDA has informed us that the development program for MBX-8025 for the mixed dyslipidemia indication would need to recruit a pre-approval cardiovascular outcome study making the cost and time of development prohibitive [ph]. As a result, we have started to identify alternate high unmet need indications for which an outcome study would not be needed. We have now identified homozygous familial hypercholesterolemia, HoFH, as the first new indication. HoFH is a rare life threatening genetic disorder characterized by loss of function mutations in the LDL receptor resulting in extremely high levels of LDL cholesterol. Two recently introduced therapies, Juxtapid and Kynamro, provide LDL lowering. However, both drugs have tolerability and safety issues, including black box warnings. Thus there continues to be a need for a therapy that will lower LDL cholesterol in these patients. Based upon the demonstrated ability of MBX-8025 to lower LDL, particularly from higher baseline levels in excess of 200 mg/dL that are typical of HoFH patients, we have decided to conduct a pilot study in patients with HoFH. Although this is still in the planning stage, I can say that we envision this to be an open-label, dose escalation study in up to 8 patients. The study will be carried out in Europe mostly likely at a small number of sites in two or three countries. Our goal is to enroll the first patient in the first half of 2015. Now, we continue to explore potential opportunities for small-focused pilot or proof-of-concept studies in other indications. Based on clinically demonstrated effects of MBX-8025, potential air use for further study includes severe refractory hypertriglyceridemia as well as primary biliary cirrhosis. We are also exploring the possibility of developing 8025 for non-alcoholic steato-hepatitis, or NASH, as PPAR-δ agonists maybe promising treatments for this disease. We are hoping that there will soon be clarity from regulatory agencies as to the requirements for approval for this indication. We are also monitoring the progress of ongoing clinical studies of other drug candidates for NASH, including the mixed PPAR-α/δ agonist, GFT505. As our plans become more firm, we will issue additional guidance. With that, I will now turn the call over to Sujal Shah to review our financials.

[Sujal Shah:]

Thanks, Harold. To follow-up on what Harold just mentioned, on July 28, we announced the successful closing of a public offering consisting of 4.6 million shares of common stock at a public offering price of $5.50 per share. This included the exercise in full by the underwriters of their option to purchase up to 600,000 additional shares of common stock. The net proceeds from the sale of the shares after deducting the underwriters’ discounts and other operating expenses were approximately $23 million. In today’s press release, we reported cash, cash equivalents and marketable securities at the end of the third quarter of $42.6 million compared to $23.6 million at the end of the second quarter of 2014. Our expenses in the quarter for R&D were $3.8 million compared to $4.1 million in the second quarter. G&A expenses in the third quarter of $1.7 million were consistent with the $1.7 million incurred in G&A in the second quarter of this year. Net loss for the third quarter was $6 million as compared to a net loss of $3.2 million for the second quarter. The difference was primarily due to a non-cash gain of $2.8 million in the second quarter compared to a non-cash loss of $0.3 million in the third quarter of 2014 from the mark-to-mark valuations of the company’s warrant liability. We believe we have sufficient cash to fund our operating expenses in capital expenditure requirements until at least the end of 2015. Harold?

[Harold Van Wart:]

Thanks, Sujal. Well, let me close by reiterating the company’s near-term value generating milestones. First, we expect top line data from the Phase 2 febuxostat interaction and uric acid lowering study of arhalofenate in combination with febuxostat in the first quarter of 2015. We expect top line data from the Phase 2b study of arhalofenate in the second quarter of 2015. And finally, we expect to initiate the pilot study for MBX-8025 in HoFH in the first half of 2015. We would now like to open the call up for your questions. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Brian Klein with Stifel. Please proceed with your question. Brian, your line is live. Our next question comes from Ed Arce with ROTH Capital Partners. Please proceed with your question.

[Ed Arce-ROTH Capital Partners:]

Hi, good afternoon guys.

[Harold Van Wart:]

Hi, Ed. How are you?

[Ed Arce-ROTH Capital Partners:]

Good, good. Congratulations on the first couple of company conference calls.

[Harold Van Wart:]

Thank you.

[Ed Arce-ROTH Capital Partners:]

I have a few questions. First on your, I guess your lead trial here the Phase 2b for arhalofenate, I know you are looking at primary endpoint of comparing the 800 milligram arhalofenate dose to the standard 300 milligram allopurinol. But I guess what I am looking for is a little more details around what specifically you are looking for in terms of differencing what you would expect? Thanks.

[Harold Van Wart:]

Yes. So, we powered the study to detect a 50% decrease in the flare rate as we defined it a little bit earlier. And we believe that 50% drop would not only be clinically significant, but would support a commercially viable profile.

[Ed Arce-ROTH Capital Partners:]

Okay. And then with the other things to trial in combination with febuxostat, I know this is primarily a drug-drug interaction study, if you could just help us understand some of the other aspects that you are hoping to gain from the results of that study?

[Harold Van Wart:]

Sure. Well, this started out to be primarily a drug interaction study, because we do intend in our Phase 3 program to study these together and you need to have these drug interaction studies completed before launching a new full Phase 3 program. However, because we elected to do the study in patients with gout, during the study we will be able to collect information on serum uric acid lowering and gain additional information on how synergistic the two drugs are in lowering uric acid. I will note that in this study we are going to the 800 milligram dose which we have not studied before. And so we are hoping we will see even more uric acid lowering in combination with febuxostat than we saw in our earlier study, which only went up to 600 milligrams. Now, during the monotherapy arm of the study, we also will have the ability to look at the excretion of uric acid into the urine and that may give us some insights into how that process plays out during the course of the day. This could be very useful information down the road.

[Ed Arce-ROTH Capital Partners:]

Okay, great. One last question if I may on your PPAR-δ 8025, I know that you have done a fair amount of work in looking at different orphan diseases that might make a good fit and perhaps it was a bit of back and forth. I am wondering, if you could elucidate for us a little more how it was that you came to ultimately decide on HoFH as the first pilot to move forward with the compound?

[Harold Van Wart:]

Yes, that’s a good question. Well, I think the components that were part of that decision were number one, the very clear need for additional LDL lowering in that population and the fact that our mechanism we believe is applicable and does not work through the LDL receptor and would be applicable to patients with that affliction. That was – played a very prominent role in our decision. Second, we have established some consulting relationships with some KOLs who gave us great encouragement that this drug will have the potential of becoming first line therapy for HoFH if we saw the kind of LDL lowering that we might expect from our earlier studies. And finally, we were buoyed by the knowledge that we could do a relatively small study in Europe and get a pretty good estimate of what the effect size was in a relatively short period of time. We hope to get that study done in 2015.

[Ed Arce-ROTH Capital Partners:]

Okay. Actually, one quick last question before I jump on to the queue. So, this – these discussions with KOLs that you mentioned, referenced some earlier studies in those results. Could you remind us again what those were?

[Harold Van Wart:]

Yes. The earlier clinical study that we had conducted with MBX-8025 was in patients with mixed dyslipidemia. And in that dose, we have actually two published papers on our website and peer-reviewed journals describing the results. And amongst other things, the drug was very effective of lowering LDL, triglycerides and in general, improving the entire lipid profile, a very anti-atherogenic profile.

[Ed Arce-ROTH Capital Partners:]

Great. Thanks a lot Harold.

[Harold Van Wart:]

You are welcome, Ed.

[Operator:]

Our next question comes from Brian Klein with Stifel. Please proceed with your question.

[Brian Klein-Stifel:]

Hi, guys. Thanks for taking my question. Sorry I missed the last window. So, first on arhalofenate, I was wondering if you could comment a little bit about the potential reentry of the generic colchicine to the market, how that might impact both the trial as well as – our future trials as well the commercial opportunity?

[Harold Van Wart:]

Well, I could tell you what we know about that. It’s a very complicated case. The FDA has recently approved the branded version, branded capsule formulation of colchicine called MITIGARE, which was developed by a company called West-Ward, a subsidiary of Hikma Pharmaceuticals. And the approval path where I used the 505(b)(2) route, but did not reference Colcrys and the indication they got is for the prevention of flares. It remains unclear whether or not they intend to market that as a branded drug or move toward a authorized generic. Now, we know that Takeda is fighting it. They filed suit against both the FDA and challenging the approval of MITIGARE. They have also filed a suit against West-Ward claiming induced infringement of the Colcrys patents. Temporary restraining order was granted that prevented Hikma from selling MITIGARE, but a subsequent request by Takeda for a preliminary injunction has been denied and is under appeal. So, this appears to be a very complex case that I think will play itself out in the court. It’s very difficult for us to speculate as to the timing or outcome of the litigation or the impact on colchicine pricing. What I can reiterate though is our view that arhalofenate is a potential safer and better tolerated alternative to colchicine that would be an option for the gout patient, no matter what the circumstances for colchicine were. Many gout patients we know don’t take colchicine, because it’s not tolerated. So, even if colchicine were to be made available as a qualified generic drug, we believe that arhalofenate would have a prominent place in the gout market with any flares.

[Brian Klein-Stifel:]

Great, thanks. And then second question is in terms of the potential competitor, lesinurad, I know that they have experienced some kidney toxicity. Have you seen anything new as you have – as your trials have progressed and as you have completed enrollment in the Phase 2 in terms of kidney toxicity that you would deem concerning?

[Harold Van Wart:]

No, we haven’t. We have noted that AZ has submitted an abstract at the upcoming ACR meeting describing some of the results of the clear studies with lesinurad. And we did notice that there are creatinine elevations that seem to be correlated with the renal AEs. What I can tell you is that we have gone back and looked at our three Phase 2a gout studies in which we treated 122 patients with arhalofenate and there were no cases of serum creatinine elevations of greater than 1.5x as opposed to the incidences that we was cited in the AZ abstract. So, that’s all I can say at this time is that we haven’t seen that.

[Brian Klein-Stifel:]

Okay, great. Thanks. And then just one final question, as you approach the Phase 2b data and when you start thinking about a potential pivotal program, when do you think is the optimal time to potentially partner this product? And are you still thinking about just an ex-U.S. partnership or are you thinking more of a global type of partnership? Thanks.

[Harold Van Wart:]

I think we are open-minded. Global would be fine with us. I think we intend to initiate partnering discussions after we get our data in hand. However, the plan would be for us to go to our – and conduct our own end of Phase 2 meeting and negotiate the Phase 3 program with the FDA. If a partner were interested in participating in that, then there have to be some discussions about how to come to a business arrangement that would be consistent with that, but the answer is we intend to reengage [indiscernible] shortly after we get the full data from the study and feel we understand it completely.

[Brian Klein-Stifel:]

Great. Thanks a lot for taking my questions.

[Harold Van Wart:]

You are welcome. Thanks Brian.

[Operator:]

Thank you. Our next question comes from Jeff Chen with Cowen & Company. Please proceed with your question.

[Jeff Chen-Cowen & Company:]

Hi, thank you for taking my question and congratulations again for your first call. First one is on the arhalofenate with the febuxostat combination. So, in terms of going in the 800 milligram doses, do you expect dose escalation to the way you absorb any kind of drug and drug interaction as you escalate [ph] the dosage to?

[Harold Van Wart:]

No, we don’t expect one. We have carried out an earlier study of febuxostat in combination with arhalofenate, in which we did not measure drug levels, but we measured uric acid lowering. And the uric acid lowering was completely predicted by the contributions of the two drugs individually, which would signal that the lack of a drug interaction. However, we are confirming the lack of a drug interaction in the current study by actually measuring PK values of both drugs full curves, 23-hour curves. So, we don’t expect any drug interaction, but we need to confirm that before we go forward.

[Jeff Chen-Cowen & Company:]

Okay. And to follow-up on that study, so for the uric acid lowering levels here do you have expectation of how low you can go and you will see an even the synergistic effects?

[Harold Van Wart:]

In our earlier study when we combined 600 milligrams with arhalofenate with 80 grams of febuxostat, we saw approximately 60% drop in uric acid from baseline. What we might hope to expect is that when we escalate the arhalofenate dose to 800 milligrams, we would see a small additional amount of uric acid lowering that could be very valuable for some subsets of patients that need that.

[Jeff Chen-Cowen & Company:]

Thanks. That’s very helpful. Just one more for the MBX compound 8025, I know that you are still planning the Phase 2 study, but have you decided kind of what LDL lowering levels that you are trying to reach to or what kind of changes you might see?

[Harold Van Wart:]

The feedback that we have gotten from KOLs and there is no hard and fast number on this is that an LDL drop of 20% to 25% would be very significant for these patients, because recall a 20% drop from a baseline of 400, which is not uncommon for these patients, that would be 80 mg/dL drop in LDL, which is really quite significant in terms of reducing the risk of atherosclerotic events.

[Jeff Chen-Cowen & Company:]

Thank you. And the – for the dosing experiment, have you – for the dosing escalation, have you – can you tell us about your prior experience in terms of the escalations with the drug?

[Harold Van Wart:]

Well, in Phase 1 studies with this drug which were carried out at J&J, who we in-licensed it from, the drug was studied over a dose range up to 200 milligrams. In our prior study with in the dyslipidemia study, the drug was studied at 50 milligrams and 100 milligrams and we are probably going to dose all the way up to 200 milligrams in our dose escalation study in HoFH.

[Jeff Chen-Cowen & Company:]

Okay, that’s all for me. Thank you very much.

[Harold Van Wart:]

You’re welcome.

[Operator:]

Thank you. At this time, I would like to turn the call back over to management for closing comments.

[Sujal Shah:]

Thank you, operator and thanks everyone for joining. We look forward to seeing investors at upcoming conferences. We will be presenting at the Stifel Conference next week and at the Piper Jaffray Conference in December. Thanks again all for joining.

[Operator:]

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time and have a great day.