ChemoCentryx, Inc.
Q2 2019 Earnings Call Transcript

Published: 6 Aug 2019

[Operator:]

Good afternoon, and welcome to the ChemoCentryx Second Quarter 2019 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference will be recorded.I would now like to turn the call over to Mr. Bill Slattery of Burns McClellan. Mr. Slattery, please go ahead.

[Bill Slattery:]

Thank you, operator. Goof afternoon and welcome to the ChemoCentryx second quarter 2019 financial results conference call. Earlier this afternoon, the company issued a press release providing an overview of its financial results for the second quarter ended June 30, 2019. This press release, along with a few slides that you may find helpful while you listen to this call, are available on the Investor Relations section of the company's website at www.chemocentryx.com.Joining me on today's call is Dr. Thomas Schall, President and Chief Executive Officer of ChemoCentryx, who will review the company's recent business and clinical progress. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer of ChemoCentryx, will provide an overview of the company's financial highlights for the second quarter of 2019 before turning the call back over to Tom for closing remarks.During today's call, we'll be making certain forward-looking statements, which those of you following the slides can see if you look at Slide 2. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements.These risks are described in the company's filings made with the Securities and Exchange Commission, including the company's annual report on Form 10-K filed on March 11, 2019. You are cautioned not to place undue reliance on these forward-looking statements, and ChemoCentryx disclaims any obligation to update such statements.In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 6, 2019. ChemoCentryx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call.At this time, it's my pleasure to turn the call over to Tom Schall. Tom?

[Thomas Schall:]

Thank you, Bill and good afternoon to everyone listening. Thank you for joining us on our second quarter 2019 conference call. Our market progress towards the ultimate goal of commercializing our unique small molecule therapeutics assets continues to gain momentum. Today I will lay out for you the sequence of significant near term clinical readouts that we see ahead of us as we plan to release top line data from no fewer than five key clinical trials over the next 18 months.First and foremost, we look forward to announcing top line data from the pivotal advocate Phase III trial of our drug candidate of avacopan and ANCA-associated vasculitis in the fourth quarter of this year. Let me break this down a little bit for you. Ultimately, ADVOCATE enrolled 331 patients from 20 countries. Notably, the country of Japan was a fairly late addition to the study, not originally planned for ADVOCATE. But despite a later start to enrollment, the Japan cohort was enrolled very efficiently and they completed enrollment of only five weeks later than the rest of the world. Accordingly, we decided to include this Japan cohort within the global study data sets.This does not change our overall guidance for advocate data release, we continue to expect the release of results in Q4 of this year, now projecting mid to late Q4. A reminder of the ADVOCATE trial features can be seen on Slide 3. Informed observers have noted that they are encouraged that ADVOCATE is built on a long and solid foundation, well controlled pharmacological experiments and in vivo models, as well as uncontrolled clinical data in humans. For example, in ANCA-associated vasculitis, the role of compliment innovation and specifically the C5a receptor is well established in the literature. There are in fact, carefully controlled genetic and pharmacological in vivo model experiments that demonstrate the mechanism of action of C5a receptor in this disease in great detail.Animal data show that the C5a receptor is necessary to cause and stage ankle disease. Accordingly, those same models demonstrate that blocking C5a receptor and specifically C5a receptor is necessary and sufficient in obtaining a beneficial therapeutic result. An important point is that avacopan targets only the C5a receptor thus stifling the activation of C5a receptor bearing pro-inflammatory neutrophils that have been shown to cause the disease symptomatology. It is to be stressed that avacopan achieves this beneficial in activation of the C5 a receptor. But that avacopan does not block a second receptor for C5a known as the C5L2.This is quite important because C5L2 has been shown to have beneficial or pro healthy effects if you will, in many studies, including the best validated in vivo model of ANCA vasculitis. And to be clear, this is the reason we have endeavored always to target the C5a receptor and not say the ligand C5a since C5a can give rise to good actions via C5L2. An important human data from previous trials is also enhanced for avacopan, specifically from two successful multicenter, randomized, placebo controlled phase II clinical trials and ANCA vasculitis patients. These are the CLEAR and CLASSIC trials.The CLEAR clinical trial was a randomized controlled study of avacopan which demonstrated that avacopan rapidly brought neutrophils to normal levels in ANCA patients while also rapidly reducing proteinuria and stabilizing glomerular filtration rates. Always good signs in terms of treating impaired kidney function and most ANCA patients eventually have kidney dysfunction. And avacopan brought the acute signs and symptoms of active vasculitis rapidly under control. Avacopan did all of this in CLEAR without the need for daily high doses of noxious steroids such as prednisone and methylprednisolone that are currently used to control disease symptoms in ANCA patients.Furthermore, the CLASSIC trial another randomized placebo controlled trial with avacopan met its goal of supporting a avacopan safety profile, even when added on top of the current standard of care regimen. Our Phase III ADVOCATE randomized control trial expands on what we learned in the Phase II trials. ADVOCATE like CLEAR before it, is a double blind double dummy protocol, so that patients do not know whether they are receiving avacopan or the steroids continuing regimen with 165 patients in each arm. It is a truly global study involving more than 200 sites in 20 countries around the world. Importantly with ADVOCATE like CLEAR, we aim to curb the use of chronic steroids that are responsible for so much of the suffering of ANCA vasculitis patients in terms of both mortality as well as morbidities. Based on the data from the controlled studies today, we believe avacopan may alleviate the total burden of disease in ANCA vasculitis patients.As you can see from Slide 4, we have a four pronged aim with avacopan; first, a rapid and lasting end to the acute episode of vasculitis; second, the significant diminution of severe consequences from the therapy to reform the current standard of care; third, arresting the damage to organs, notably the kidney and fourth marked improvement in quality of life. These aims go far beyond the rather limited scope measured in the Birmingham Vasculitis Activity Score or BVAS, which solely measures active and acute vasculitis signs and symptoms, but does not measure if a patient is truly well. And we know that both the FDA and the European Medicines Agency are interested in the broader data concerning the total burden of disease.So as shown in slide five, while the two primary endpoints are based on remission as measured by a BVAS score of zero after being off steroids for at least four weeks, we are confident from discussions that regulators and other experts will also take into account key secondary endpoints, which helped to measure alleviating the total burden of disease. The primary endpoints based on BVAS will be first assessed to 26 weeks, since the use of steroids and immunosuppressants, conventionally runs for this period of about six months. And for the first time in a controlled randomized ANCA vasculitis trial, we will also look at BVAS at 52 weeks.The BVAS primary endpoint statistical null hypothesis is non-inferiority or NI at weeks 26 and 52. This is the appropriate null hypothesis and in fact, the only one which pragmatically can be used. NI is the appropriate null hypothesis when a disruptive new therapy is contemplated to unseat an incumbent therapy that is known to have significant liabilities, such as safety and that is certainly the case with the present ANCA regimen that includes chronic high doses of steroids. And in fact, that statistical null hypothesis of non-inferiority is the only test that pragmatically can be used in this instance, since in orphan diseases such as ANCA patient number or N tends to be small, even in pivotal trials, such as ADVOCATE.This statistical test has previously been well established in ANCA vasculitis, specifically in the only other pivotal study that resulted in an FDA approval for ANCA that of rituximab in the Phase III pivotal RAVE trial. It is to be noted that rituximab was approved as an alternative to cyclophosphamide, but always coupled to high doses of chronic steroids solely based on achieving the statistical null hypothesis of non-inferiority when compared to cyclophosphamide plus steroids.Let me now turn to our second unique therapeutic agent, CCX140 our orally administered inhibitor of the chemokine receptor known as CCR2 as illustrated on Slide 6. We recently reached another milestone by completing patient enrollment in our LUMINA 1 trial of CCX140 in patients with primary Focal Segmental Glomerulosclerosis or FSGS and we expect the final patient to be randomized next week. FSGS is an orphan renal condition for which there is no approved treatment today. It can lead to kidney failure, requiring expensive treatment and extensive dialysis. Our scientific discovery and development team has been working on the role of CCR2 to inhibition in FSGS. In patients with FSGS scar tissue develops on the glomeruli, those parts of the kidneys that filter waste from the blood. Proteins begin to leak into the urine elevating proteinuria.CCX140 is an orally administered selective CCR2 inhibitor and previously we demonstrated a rapid and durable reduction in proteinuria with a good safety profile in our Phase II in several hundred patients with diabetic chronic kidney disease, DCKD or sometimes called diabetic nephropathy, DN. In fact proteinuria reduction was the DCKD trials primary endpoint, which we successfully achieved with CCX140. We pivoted from DCKD to FSGS because, importantly, unlike in DCKD, in FSGS the FDA has indicated that proteinuria allowing can potentially be a registration endpoint. Our LUMINA 1 study is a randomized placebo controlled trial of FSGS patients, all of whom have high levels of protein in the urine. The primary endpoint is a drop in proteinuria at 12 weeks. Given our progress in the LUMINA 1 trial, we expect to release top line data in the first half of the coming year.Meanwhile, we continue to enroll our LUMINA 2 single arm open label study of patients with nephritic proteinuria primary FSGS, a rarer and more severe condition. We expect to report out that trial too during 2020. While our partner Vifor Pharma has been granted the international commercial rights to both of avacopan for ANCA vasculitis and CCX140 for FSGS, I will remind you that ChemoCentryx retains all rights in the United States. We are actively building our commercial capability as we prepare to take the final step in our forward integration.We are looking forward to another top line data readout in 2020 from our trial to diversify avacopan in the treatment of C3 glomerulopathy, another rare kidney disease, which can be life threatening. Our ACCOLADE trial of avacopan in C3G has reached overall the halfway mark and can be seen on Slide 7. ACCOLADE is a randomized controlled trial of two strata of 44 patients each comparing avacopan to the current standard of care after six months of therapy. The primary endpoint in the trial will be the percentage change in the C3G histologic index after six months of treatments. We are also measuring reductions in proteinuria and changes over time in glomerular filtration rates. It is worth noting that we are receiving very encouraging feedback from KOLs surrounding our practice of taking biopsies during the trial, which will allow us to track histological changes and relate those changes to clinical measurements.Other current C3G trials do not require biopsies. While KOLs confirm that are ours is the most rigorous and complete trial of C3G, the price we pay for this bonus is a somewhat slower patient enrollment in this very rare disease. However, it is fair to say our trial is ahead of other drug trials in C3G. We got off to a fast start as we tapped into pent up demand from patients who you will remember have no approved therapies. Some experts are opining that the total number of patients available for C3G trials is now the rate limiting factor, which is why all C3G trails seem currently to be making slower progress towards their ultimate enrollment goals. Nevertheless, the ACCOLADE trial has enrolled more than the others and is past the halfway mark overall.Importantly too, we are nearly 100% enrolled in our original target population, those C3G patients with high levels of circulating activated compliment. This group Stratum 1 in our ACCOLADE study is regarded by many as having the most pronounced C3G disease and possibly those most responses to highly selective compliment inhibition therapy such as avacopan. We expect to release top line data from the ACCOLADE C3G trail this coming year 2020.Finally, in terms of other clinical readouts in this coming year, there is a rigorously planned AURORA trial of avacopan in hidradenitis suppurativa or HS, a chronic disfiguring inflammatory skin disorder featured on Slide 8. HS is thought to be a compliment mediated disease driven by C5a receptor activation of inflammatory neutrophils at the site of unremitting postulates and HS lesions. Many regard the C5a receptor as an ideal target and avacopan as a potentially ideal remedy. During the second quarter support from key opinion leaders in the HS community for our carefully planned AURORA trial actually increased substantially contributing to an acceleration in site activation and patient enrollment. We now have more than 50% of sites activated with enrollment at approximately 25%. To the HS patient and clinical community, we at CCXI have committed to provide a definitive answer with data from AURORA this coming year about how C5a receptor inhibition might benefit people with HS. They and all of us deserve no less than such an answer.Since avacopan is involved in three of the five expected top line data readouts, let me remind you briefly of key advantages that we see in this unique molecule, which are shown on Slide 9. Patients can take about avacopan at home or wherever they happen to be, rather than having to go to the clinic for an infusion. As a small molecule rather than say a much larger antibody, avacopan is ideally suited to penetrate the micro environment of individual lesions or disease sites. Avacopan's unique mechanism of action targets only the problematic C5a receptor, leaving intact the C5L2 pathway which is known to have beneficial effects. We believe this exquisite selectivity in targeting and convenience offer tremendous potential to patients and clinicians.In summary, as I've described, we continue to execute on our 2019 goals fortified by a strong financial position, which Susan Kanaya will outline in a moment. We are optimistic about our near term inflexion point, and look forward to providing top line data readouts during the next six quarters. Our drug discovery engine continues to generate new opportunities, which we will look forward to bringing to you in the near future. We are confident in our potential to bring innovative new medicines to patients and to build further value for our investors.I will now turn the call over to Susan to give you further details about our enviable financial position. Susan?

[Susan Kanaya:]

Thank you, Tom. Our second quarter 2019 financial results were included in our press release today and are summarized on Slide 10. Revenue was 7.2 million for the second quarter compared to 15 million for the same period in 2018. Revenue was recognized based on proportion of costs incurred as a percentage of the total budgeted costs to fulfill the performance obligations of under our avacopan and CCX140 commercialization agreements with Vifor Pharma. The decrease from 2018 to 2019 was primarily due to a higher proportion of avacopan related costs relative to the budgeted costs incurred in 2018.Research and development expenses were 17.6 million for the second quarter of 2019, compared to 17.8 million for the same period in 2018. Expenses decreased in 2019 for the avacopan ADVOCATE Phase III pivotal trial as the study was fully enrolled in the second half of 2018. While the Phase II clinical expenses increased, primarily due to patient enrollment of the avacopan AURORA trial in patients with HS and the two CCX140 LUMINA trials in patients with FSGS.General and administrative expenses were 5.6 million for the second quarter, compared to 4.7 in the same period in 2018. The increase from 2018 to 2019 was primarily due to higher employee related expenses, including those associated with our commercialization planning efforts and higher professional fees.We recorded a net loss for the second quarter of 2019 of 15.2 million, compared to 6.9 million for the same period in 2018. Total shares outstanding at June 30, 2019 were approximately 58.2 million shares. Lastly, we ended the second quarter with $223.1 million in reported cash, cash equivalents and investments. We expect to utilize cash and investments for the calendar year in the range of 70 million to 80 million in 2019.Tom?

[Thomas Schall:]

Thank you, Susan. Before taking your questions, I will summarize our progress and prospects depicted on Slide 11 in two simple sentences. First, we are well on our way to completing our plan to deliver top line data from five clinical trials by the end of next year. We expect the first to be our pivotal ADVOCATE trial, which represents the summit of a mountain of pharmacological and clinical work and data in Q4 of this year. We'll be holding an R&D day in New York on October 1 as a prelude to the top line data readouts that will follow. I hope that many of you will be able to join us there and hear from top experts in the field.Second, as Susan has reported, by judiciously targeting the fruits of our science and the use of funds that investors have entrusted to us, our financial strength gives us the muscle to contemplate filing marketing submissions to both the FDA and the EMA during 2020, assuming that the top line ADVOCATE data are positive. A strong fair win is now filling our main sales in our voyage of value creation throughout this year. Next key data readouts should provide the coordinates to draw a new map for CCXI and its growing realm of opportunity to markedly improve the lives of patients and provide important returns for investors.I will now turn the call back over to the operator and look forward to your questions. Operator?

[Operator:]

Certainly, sir. [Operator Instructions] Your first question comes from the line of Michelle Gilson from Canaccord Genuity. Your line is now open.

[Michelle Gilson:]

Hi, Tom. Hi, Susan. Thanks for taking my question. I was just wondering can you walk us through what we should be expecting in the top line release next quarter. And kind of going along with that, how are the patients from Japan going to be treated within your statistical analysis plan? Do they improve your powering at all? And have those updates been submitted to regulators?

[Thomas Schall:]

The short answer is yes, to all the above. The Japan population will be treated just as part of the unified data set. And they do slightly increase the statistical power. Originally, the study was based on 302 arms Michelle. We ultimately reached in the original 19 country target 316 people that got randomized. The Japan cohort actually ultimately added and rounded up that total to 331. So at least we know how many got randomized. Not everyone is done yet with the trial. So I don't have a great – I mean, I won't have a number for you although, I can estimate pretty well, which I won't provide today, the total number that we will finally analyze. But of course, every set of patients adds to power. So that really works well for us. The top line data will obviously include the BVAS primary endpoints and as I mentioned, BVAS really only measures the acute active signs and symptoms of vasculitis. So while that's important, obviously, and it's the only thing that regulators have traditionally known what to pay attention to. In addition, there's other very important features of our study, which we will try to spell out as well with the top line data. Obviously, overall safety will be reported.We will be looking at many of the same things that we looked at in the Phase II CLEAR study. So quality of life, we believe that at least we'll have the top line quality of life readouts, glucocorticoid toxicity profile, that is those SAEs and safety events associated with glucocorticoid use. And then a number of lab readouts that speak more to preservation of organ function. They include things like the proteinuria values such as we presented in the CLEAR trial, grow GFR, glomerular filtration rates over time, shedding of inflammatory markers in the urine and ultimately the vascular damage index as well, all which read through to how organs are functioning and whether or not you're accumulating damage with chronic symptomatology either from the vasculitis or from the damaging effects of the standard of care. So I think in large part that is the general spectrum that we'll be aiming for in the top line data that we hope to release in Q4.

[Michelle Gilson:]

Okay. And then just one follow up, if you don't mind. Also, what should I be expecting the focus to really be on at the R&D day? And will you be releasing any data around the baseline characteristics of patients in ADVOCATE during that day?

[Thomas Schall:]

Right now, I can't speak to whether or not we might be releasing data around baseline characteristics. But I will say this, there's a number of things that people find mystifying about ANCA vasculitis from the way BVAS has scored, and what it really means to the statistical analysis plan. So we intend to demystify that for the audience. We intend also to describe a little bit more how we are marching through again, measuring the total burden of disease and why that's important. And we'll review the solid based upon which ADVOCATE is built by revealing how and why the Phase II results were so key to our understanding and we think to our interpretation of ADVOCATE. I will say too that by and large the inclusion exclusion criteria in ADVOCATE were based on the CLEAR trial. And I think that accordingly, we can expect that the baseline characteristics generally speaking, will conform to predictions.

[Michelle Gilson:]

Okay, thank you so much for taking my question. I look forward to Susan to speak.

[Thomas Schall:]

Thank you.

[Susan Kanaya:]

Absolutely, look forward to it.

[Operator:]

Your next question comes from the line of Dae Gon Ha from SVB Leerink. Your line is now open.

[Dae Gon Ha:]

Great, good afternoon, thanks for taking the questions. Hi, Tom. Hi, Susan. Just two questions, two parts each, if I may. So first question is on the ADVOCATE trial, just wanted to dig a little deeper on the pharmaco dynamics, I guess we'll get a lot of demystifying at the R&D day, so I don't want to jump the gun here. But in your preparation, as you're gearing up for pre-commercialization and commercialization efforts. What are some of the feedback that you've gotten in terms of the non-inferiority? And I guess what are the scenarios that you envision in terms of giving you the most pricing flexibility that we can look forward to? The second part of that question is if you can maybe talk to us about, based on your market research, how the PEXIVAS trial data has impacted the treatment landscape as of late in AAV and I've got a follow up.

[Thomas Schall:]

Right, so PEXIVAS – I'll start with the reverse. PEXIVAS has done from my perspective almost nothing because number one, I don't think we have the refereed paper out yet. Number two, all PEXIVAS showed it seems to me and others now in the field was that plasma exchange was not an effective therapy for ANCA vasculitis patients with long-term outcomes, long-term meaning death or dialysis, so they all did poorly. Plasma exchange didn't help them. There was an idea, by the way that emerged from PEXIVAS that said, well, you can kind of lower the dose of steroids regimen to a somewhat lower dose and you get the same outcomes. Two things around that; number one, the same outcomes, meaning they're all still bad, in my opinion and the opinion of other experts.And secondly, the lower dose actually was not defined in a lot of the discussions the all discussions, but that's quote, lower dose was about two thirds the traditional regimen when taken as a total load over six months. And in fact, the lower dose in PEXIVAS is pretty close to what we're using as a standard in the ADVOCATE trial. And we'll step through the details of all that at our R&D day. Again, is an attempt to try to demystify some of this, so PEXIVAS to me doesn't change anything that we're doing because again, what it showed is that everyone still did poorly. We hope to change that considerably. Based on again, not – and we're looking at BVAS and another symptomatology, we're not looking at the longer term outcomes that we're not helped by plasma exchange in PEXIVAS study.You were asking also about what's the greatest step – how do we think about flexibility as we go forward to marketing presumably a successful avacopan product. It's really clear that what we'd like to see obviously is – you asked first about the primary endpoint. Birmingham Vasculitis Activity Score, as I mentioned in my remarks, really only measures and focuses on one thing, acute and active signs and symptoms of vasculitis. So the BVAS is really just designed historically, to make sure that we can measure how many people we get through the active vasculitc crisis because prior to the rather primitive regimen of steroids plus immunosuppression, which is with us to this day, 50 years on in the field that it was first tried. Prior to that regimen being tried, active vasculitis would kill people very fast, typically within five or six months, I think greater than 80% mortality during that timeframe.So the BVAS was designed to just look at the vasculitic crisis in its acute form. For that reason, as I mentioned, we're looking at can we induce a so called BVAS remission by week 26, which is the comparison that we need to look at even though we think and we hope our drug should work faster than that. But 26 weeks is the standard of care regimen and that's the traditional endpoint because it takes that long for standard of care to exert its maximum effect across a population and convince the observers that those people aren't in fact going to die. So week 26, again the statistical North Caucasus is not inferiority. We'd like to hit that, we think we handled it well and of course, our models are based on the RAVE study that I alluded to in my remark. We hope that we can sustain remission to week 52. And we believe that we ought to be able to do that.And in fact, the numerical separation may start to widen with the avacopan treatment, perhaps sustaining at a higher number than the standard of care therapy for the reason – one of the simple reasons is that they have to be weaned off standard of care because it's too toxic to take chronically for 52 weeks, it reveals part of the medical need. So, again, we believe from our models that we should handily be able to achieve non inferiority at week 52. And in our statistical plan, we actually have a hierarchical determination to take a glimpse at superiority at week 52, which while a stretch is not beyond the realm of feasible, it would be great if we hit superiority week 52 for just the purposes that you're talking about, those conversations will be easier to have around primary endpoint. But I stress that's not the full picture, BVAS is not the full picture.The full picture is can we show reduced glucocorticoid associated toxicities, morbidities, indeed maybe mortalities? Can we show an improved quality of life since that has a direct pharmacoeconomic impact, which we did show in the Phase II in an enhanced quality of life? And can we show evidence, objective lab based evidence for preservation of organ function and forestalling additional accumulated organ damage, particularly in the kidney since that's a really expensive thing with ANCA vasculitis patients as they go through their disease course, many of them end up in end stage renal disease. And of course you know as well as everybody how expensive that care of regimen is. So we'd like to hit on being able to show an overall picture of reducing in fact in a colloquial way, I'll say in a superior way, small or less the total burden of disease across those four categories. And I think if we do that or largely accomplished that as we did in the Phase II that will be a very compelling argument and provide us with maximum pricing flexibility.

[Dae Gon Ha:]

Great, thanks for all that color Tom. Second question was on HS, the AURORA trial that we're expecting for next year. You provide a color that the enrollment is about 25% complete, over 50% of the sites have been activated. Just wanted to get your take on – since the SHINE data read out? Have you seen any pick up in terms of enrollment pace or site activations? And also what's the general, I guess, sentiment around the 50% placebo rate pertaining to the C5a innovation mechanism there? Thank you.

[Thomas Schall:]

SHINE, what's that? I'm sorry. Interestingly, we have actually seen enrollment pickup since the SHINE result, that's fascinating to me. But what we're getting from our experts in the field are some really important comments. Let me try to restrict most of those, what they say about our approach and why they're very high on our approach. They fundamentally believe that neutrophils are the culprit. They fundamentally believe that activated compliment is going on in the system. They love an orally active small molecule because of two things. Number one, that's just the need in this population, but more important than a mechanism level. Some of them and including ones that are quite vocal and well versed, fundamentally believe that you've got to get the molecule to the side of the lesion.And these lesions are messy, it's really hard to envision how a large molecule like 180,000 built in protein will get to these micro environments of the lesions, whereas approximately 500 molecular mass small molecule, which has lovely properties that help it slide into these environments and help it get through potentially these messy, gelatinous neutrophil nets that form parts of these lesions, that's a really appealing idea. So people are really – again, I was really interested because I was prepared for a decline or pause, in enrollment, quite the opposite. It's actually accelerated. And so that's, I think, very, very interesting to us.And again, the differences between the large protein and the small molecule are inevitable; this community has understood more and more the distinction between the small molecule sitting down on the C5a receptor rather than a large molecule trying to cover C5a, which is a fundamentally different kind of idea. And they were unhappy with the last pharmacokinetic pharmacodynamic data, showing that that anybody was getting to all of the target and stopping it up. Whereas we published a lot of data on how avacopan is covering the C5a receptor, which is the pro-inflammatory receptor, even at trough levels of the drug. So that science and those data matter to that community.And finally, they also appreciate the mystery of the second receptor C5L2 is one of those things that simply cannot be ignored. And there is enough data reproduced by many good teams including allergic skin diseases and autoimmune skin disease models, showing see C5L2 was a good actor and you want to C5a there around to interact with that good actor. So the other approach took out C5a and therefore the good actor was also taken out of the equation. So there's a debate about whether or not the balance between pro-inflammatory and anti-inflammatory was enforced.I will finally add just one more thing about the final aspect of your question about the high placebo response rate. Fundamentally, one can expect placebo response rates based on scoring endpoints to increase when new entrants come in and get approved such as Humira. One anticipates that. Certainly, our model anticipates that, so I we have almost 400 people in this trial. But what you don't want to do is create an expectation of response or create an expectation in the patient population that they're going to get active compound, expectation on part of patients and physicians. I will say that the other trial to the extent that I understand it seemed to have 80% chance of getting quote active compound. And that can't but help to drive placebo response up in a condition such as that.So we've taken great pains not to do that. We've also taken great pains to make sure that the primary endpoint training high score has been very rigid rather and rigorously enforced. And in fact, we have a lot more central communication around the standardization of high score. So I believe people have been involved in both those trials. That's another kind of feedback we're getting. So all of that gives us comfort that at least we're performing, I think, a very careful, carefully considered and I think a well so far, a well-executed trial. And as I said, our commitment to the community is, let's get an answer. Let's not be guessing. And that's what we're going to do.

[Dae Gon Ha:]

Great, thanks for all the insights. We'll see you guys on October 1.

[Susan Kanaya:]

Thank you.

[Operator:]

Your next question comes from the line of Steve Seedhouse from Raymond James. Your line is open.

[Steve Seedhouse:]

Good afternoon. Thank you. First question on the inclusion of the Japan cohort in ADVOCATE, is there anything notable, one about the expected PK or effect of avacopan and different patient populations? And I think you might have alluded earlier to only 15 patients from Japan being enrolled. Can you just clarify if I heard that right? Or was that referring to just recently enrolled patients? Are there more than 15 from Japan?

[Thomas Schall:]

Yeah, thank you, Steve, you did some quick arithmetic there and came up with the not unreasonable conclusion that there were 15 from Japan. In fact, there were over 20, probably 21; I think was the final number, which was a kind of a good threshold for PMDA to say. Wow, if you guys could actually be involved in the global study that would be fabulous. So that's why we covered with all of our colleagues and decided that yes, it would be a good idea to include Japan because they might well, assuming success, might well be able to in lockstep with FDA and EMA lead to licensure in Japan, which helps everybody including ChemoCentryx as well as ANCA patients and all of the rest that are involved. So ultimately, it was it was over 20, which was good. There were six and again, I won't go into the complications of this, but there were six Japanese subjects in the original 316. And then by the time the Japanese cohorts got fully enrolled, it was somewhat over 20. So that's why you're coming up with the arithmetic you're coming up with. At the end of the day, it doesn't matter. It's all one global data set and we're going to analyze it all, one common technical documents and all those other wonderful things we do for registration. Now your question about PK are really insightful. Thank you. We have done separate studies in Phase I. And in fact, our Japanese colleagues did another separate Phase I study and suffice it to say we are satisfied that the PK response is not going to be materially different in that population as opposed to [indiscernible], so all that work is done in background.

[Steve Seedhouse:]

Okay, great. And my next question, so you stock obviously got hit hard when SHINE failed. Regarding your AURORA HS study therefore, you have 25% enrolled, so you have about 100 patients already enrolled, given SHINE failed, given no prior data for avacopan in this indication and given a lack of relevant animal models, as far as I know, for this disease, I'm wondering if a utility analysis or frankly stopping the study early to analyze the data and if successful, moving to a Phase III would be prudent here? What are your thoughts on that or if not, what's the advantage of enrolling this all the way to 400 patients?

[Thomas Schall:]

Great question, Steve, one which I might have predicted coming from the insightful mind over there. So I'll tell you, here's how I think about it. You're right. Interestingly, we didn't get a lot of credit necessarily for being in HS. But we certainly have gotten punished for it. So I think there's a saying in quantum computing that says, the future is already here, it's just not evenly distributed yet. And it's kind of strange, the quantum entanglement we had from the SHINE study because again, even though we had nothing to do with that study, its design or the characteristics of that molecule. As I said, it's a strange world that we've suffered so much from the other guy stuff. But having said all that, your questions are very relevant in that. So here's how we think of it. There is evidence and certainly anecdotal evidences among others, some lab evidence that's emerging from us and others and we hope to present whatever we know in a little bit more detail on October 1. But let's just say the evidence – there is some evidence, it's not a complete hypothesis based on no data that HS is driven by C5a receptor, an activated compliment at the lesion site. So the evidence is nowhere near as strong as ANCA vasculitis, it's completely correct.So we've taken a long look at this whole situation, we are running the AURORA trial in a very efficient way, both temporarily, as well as fiscally. And so we reserve the right to potentially do an early analysis. I think what's really – the reason we would do that obviously, is to save time and money, but time is money in clinical trials, as you know. So if one is going really fast anyway, that really is the principal driver of cost. So by the time we decided to do a partial analysis, some models might suggest that we could have the full data set. So the way we look at it at this moment is, again, we're going to talk more about that at October 1 and where we have decided on how we're going to conduct the future of this particular trial. But right now, the expectations are very low from most of the investment we're on. So the upside could be vast and our investments are modest and both time and money, I think are very manageable. So we may well be able to just get the definitive result. And if that is result is a positive one, well, good heavens, we really will have left towards it very significant and very important and lucrative endpoint. So again, more details at the R&D day, but that's how we're thinking of it now.

[Steve Seedhouse:]

Okay, appreciate that answer, Tom. And we've covered, I guess, arithmetic and quantum mechanics. So maybe I'll just toss an algebra question here to finish up on enrollment of the Phase II C3G study. So this is 50% enrolled this quarter and it was approximately 50% last quarter and approaching 50% in the fourth quarter of 2018. So if I draw a straight line there it's challenging to imagine how you'll have data in 2020 unless enrollment picks up significantly. So I'm just hoping you can maybe crystallize specifically what you're assuming in terms of enrollment changing soon or is the data readout going to be striatum one only? Thanks for taking the question.

[Thomas Schall:]

Very good question, yeah. So you're right, short of going through a wormhole, the space time continuum. How will we get this thing to look any different? I would say there are two or three things that are relevant. You're absolutely right. We were racing along with that study and then we just hit a brick wall. In part, I think it's because other competing studies came online that did not require a biopsy endpoint. And frankly, many of them were smaller and a lot of them were actually open label. So from a patient's perspective, it's a lot easier to go into some of those other studies. I think we were mopping up originally, probably the vast majority of the available trial population. And then we again, as I said, we and others ran into this limit of what is the available travel population and maybe we've exhausted that. That's some of the feedback coming from the major sites.However, having said all that, we have also embarked on now a global campaign to bring on more sites, sites that maybe we overlooked earlier, perhaps we left them because we thought this is going to be easier than we thought to get enrolled. So those are now happening. And that may well make a difference in enrollment. And you also perceptively point out that the original hypothesis and C3G was really the folks that have this disease, will have lots of activated compliment in the periphery, we measure it with C5b-9 in the circulation because that's a stable marker and one that's acknowledged to be reasonably easy to measure and reliably easy to measure in clinical trials. That guy is almost – that's enrolled and virtually enrolled now. So we would have the potential and that was in our original stats plan as well to look at those two strata separately. So we're going to see how things go for the next few weeks and then again, we'll reveal to the community what our plan is about how we're analyzing those two strata separately, collectively or what have you. But thanks for the question.

[Steve Seedhouse:]

Thank you.

[Operator:]

Your next question comes from the line of Ed White from H.C. Wainwright. Your line is now open.

[Ed White:]

Hi, Tom and Susan, thanks for taking my question.

[Susan Kanaya:]

Hi, Ed.

[Thomas Schall:]

Thanks Ed.

[Ed White:]

So just maybe for Susan, the cash burn guidance is lower by 5 million from last quarter. So I'm just wondering where that savings came from? And then also, it appears to me that you have cash runway, at least through all five data readouts, right. I just want to confirm your thoughts on that.

[Susan Kanaya:]

Sure, thanks for the question Ed. So yes, you're correct. I think this burn that the reserve balances of Cash and investment do indeed take it to the five anticipated data readouts that Tom reviewed during the call today. And with respect to the lower guidance, we're just tracking low wards, as you can see from our actual goals for the first six months it's really largely due to timing Ed. So just because some ancillary studies and things of this sort that are just starting a little later, sonothing too magical about that revised guidance.

[Ed White:]

Okay. Alright, thanks. And I just want to ask a couple of questions because it seems like some of the data readout timelines that have – you're now saying 2020, whereas before you had said maybe perhaps like LUMINA 2 mid 2020 or in HS you had said mid or data immediate or second half of 2020. Both of those are now saying 2020. I'm just wondering if it's just semantics or if there's some difference there?

[Thomas Schall:]

Thank you, Ed. Mostly its semantics. The LUMINA 1 study is actually running really well and running according to plan or maybe even slightly ahead. So LUMINA 1 is doing really well. The HS study, we at least temporarily modified our language because again, we weren't sure what the effect of the other sponsor study would be. But it turns out it doesn't seem to be affecting us much at all or in fact, maybe slightly positively. So if that trend continues, again, we'll start supplying a lot more granularity. But I think we're right in line with the original prediction. And the thing that has slipped admittedly is the C3G timeline for the reasons that we just described. So that one is definitely a little bit more difficult, but again, we are still predicting 2020. So between Q4 of this year and all through 2020, we hope to bring home all these results from the five studies that I alluded to in the remarks.

[Ed White:]

Okay, great. Thanks Thom and Susan.

[Susan Kanaya:]

Our pleasure.

[Operator:]

Your next question comes from the line of Ted Tenthoff from Piper Jaffray. Your line is now open.

[Ted Tenthoff:]

Great, thank you very much for the thorough update. Tom, in particular, I really appreciate your differentiation in the HS space. Most of my questions have been answered. But I guess maybe just sort of checking in on some of the earlier stage pipeline and any progress that we should be anticipating there. Thanks very much.

[Thomas Schall:]

Great. Thank you, Ted. Yeah, we were pretty excited about some stuff that's emerging now in the earlier stage pipeline. I hesitate to talk about it just yet this quarter because I don't want to deflect the focus and attention on the ANCA vasculitis program particularly and the other ones we've been talking about. We may have a little bit to say at R&D day about some of these other programs and when you might expect some more details around those.

[Ted Tenthoff:]

Thanks. Well, I look forward to seeing you in New York on October 1.

[Thomas Schall:]

Thank you.

[Operator:]

Your next question comes from the line of Anupam Rama from JPMorgan. Your line is now open.

[Anupam Rama:]

Hey, Tom. Hey, Susan. Thanks so much for taking the question and congrats on all the progress here.

[Thomas Schall:]

Thank you, Anupam.

[Anupam Rama:]

I have a question about the control group of ADVOCATE, right. So you have this stereotype for over 21 weeks. And some of the literature we've been reviewing suggests there could be some incremental benefits of steroids over a short period of time. So help us get comfortable with the 26 weeks be that endpoint that there isn't any risk around a control arm out performance. And then if a patient goes into remission, but then relapses it counts as a lapsed observation carry forward, right? So just maybe check my head on that. Thanks so much.

[Thomas Schall:]

Yeah, so Anupam excellent questions and you cut out there for some of it, but I think I got the gist of it. So is there a risk of the control arm outperforming in ADVOCATE? I'm hoping not and that hope is based on data. So what we did is we really carefully model the ADVOCATE design on the one trial that we really had precedent for which is the RAVE trial and you know but others may not be as familiar. RAVE was rituximab plus steroids versus the then standard of care which was cyclophosphamide plus steroids. And essentially, it was it was the same kind of taper, although was not quite as protocolized carefully at the start of that trial. But what we did is working with the leaders in RAVE we very carefully protocolized and regimented the steroid taper so that we could at minimum compare to the extent possible apples to apples, in this case, our 26 week remission data from RAVE with whatever we came up with ADVOCATE.And for you listeners and other colleagues, the RAVE trial at week 26 rituximab plus steroids over the 26 week paper with rituximab that was a 64% BVAS equals zero plus being off of the steroids for four weeks. That was the remission definition as it is an ADVOCATE versus the standard of care at the time, which was steroids plus cyclophosphamide that was 53%. And so those two numbers while numerically different were statistically similar. So it was a statistical non-inferiority for rituximab and that was enough to get an approval because rituximab had some perceived benefits of safety over cyclophosphamide. By the way, none of those benefits were in evidence in the RAVE trial. It was merely approved on the BVAS endpoint.But having said all that, so we work with the guys who ran RAVE and we said, let's have current clinical practice, which is overall trending lower to steroid load, as I already alluded to, from my comments on PEXIVAS, but certainly within the range of what was happening in RAVE. We just really protocolized and standardized that and put it into kit so that nobody could vary from that protocolized steroids regimen. So our model for ADVOCATE is probably – the control arm should be somewhere in the middle of what I just talked about, so you could use the number of 60 for the control arm? Do we expect a big variant of that? I don't think so and if any variants occur in any of the arms, it would have to come from a significant deviation of non-study supply glucocorticoids. In this example, we're talking about glucocorticoids and that would be, in fact a failure and intend to treat failure.And so relapse is also, again, there's strict rules to get to the second question, strict rules about if it's a major relapse, you're absolutely right. We carry that forward and that's part of the calculation for ITT. We keep them in the trial, because there's much to learn from those patients still, obviously, but for the purposes of BVAS it would be scored that way. You could have minor symptomatology of temporary nature et cetera and you wouldn't necessarily be scored as a relapse. But again, that is strictly protocolized and also there's a consulting committee for BVAS scoring the BVAS adjudication committee to try to standardize all of these practices, all of the calls and the BVAS scoring is adjudicated and standardized by that central committee. So we think, to the greatest extent possible, we think we controlled for the kinds of things that you you've alluded to, because we were worried about those things from the very start. And I think expert opinion is that we probably captured it, certainly as well as could be expected in the trial.

[Anupam Rama:]

Great, thanks so much for taking our question.

[Operator:]

Your next question comes from the line of Harshita Polishetty from B. Riley FBR. Your line is now open.

[Harshita Polishetty:]

Hey, Tom and Susan, thank you for taking my questions. Just one on my end with regard to FSGS, could you shed some color on the relationship between protienuria and eGFR? I guess what I'm ultimately trying to get at is understanding how important is change in eGFR over time in assessing kidney function alone?

[Thomas Schall:]

That's a great question and for different kidney diseases, it seems like there are somewhat different answers. Generally speaking, people believe that proteinuria reduction will correlate over time with stabilizations and perhaps even improvements in eGFR overtime, estimated glomerular filtration rate. What has been really interesting is how regulators have tried to look at data sets across various kinds of chronic kidney disease and correlate what kind of reduction in proteinuria might correlate with longer term outcomes, including again, stabilization and minimum of GFR. So that's been a little bit more difficult question, particularly since in rarer chronic kidney diseases like FSGS and IgA and nephropathy that the data sets aren't large, even an aggregate because the fact that it's an orphan disease or orphaned indications, I should say.So, generally speaking, however, what we know is that proteinuria is – a drop in proteinuria is indicative of better kidney function and you can measure it in a shorter term, which is why it's become very attractive. And in fact for some of these indications, the FDA has been pretty clear that, for example, the faradic levels of proteinuria that above three grams per day, three grams of, of urinary protein, per gram of creatinine in the blood that the nephrotic syndrome, that even showing say, a 30% reduction might be very interesting and could correlate to longer term benefits. So people are starting to look at 30% reductions as being kind of an interesting feature for some of the rarer disease and obviously, the idea is that as protein is being shed from the circulation into the urine, that's not only a symptom of kidney failure to filter properly, but the protein itself becomes an insult to the kidney structures, the two builds and so on. So especially in things like FSGS, the reduction of proteinuria is taught not just to be diagnostic and prognostic, but may be mechanistically related.So it's still an evolving picture. But I think the FDA is paying a lot more attention to proteinuria reduction, at least for whatever reason, the evidence seems satisfactory to them, that if you're allowing protein in the first few months, and if that is sustained over many months, that should relate to a stabilization of GFR over a longer period of time, which of course will keep people out of dialysis, which is the ultimate outcome that everyone wants to think about. But dialysis outcomes take many years as now and to be certain about they take many hundreds or thousands of patients, you're simply not going to get that in orphan diseases. So we and others are looking especially in FSGS. IgA and nephropathy is another one that the FDA has given some blessing to for proteinuria reduction, we and others are looking at that as an endpoint. And then it will just remain to be seen in discussion with FDA whether or not the degree of proteinuria reduction over the time period that we bring in the data set is sufficient for registration and/or at least sufficient for conditional approval and/or finally, at least sufficient to say, here's how to do the longer term and somewhat larger trial to get a license for that agent.

[Harshita Polishetty:]

Great. That's very helpful. Thanks again, Tom.

[Thomas Schall:]

Thank you.

[Operator:]

I'm showing no further questions at this time. I would like to turn the conference back to Mr. Thomas Schall. You may proceed.

[Thomas Schall:]

Well, thank you very much. I just want to thank everybody again for taking the time to join us this afternoon. I want to thank everyone for their excellent questions. And I look forward to giving you more updates in the coming weeks and quarters and at our R&D day in October. Thanks again for your participation. Have a good afternoon.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thank you for joining and have a wonderful day. So you may all disconnect.