ChemoCentryx, Inc.
Q2 2017 Earnings Call Transcript

Published: 12 Aug 2017

[Operator:]

Good afternoon, and welcome to the ChemoCentryx Second Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we'll conduct a question-and-answer session. As a reminder, this conference call will be recorded. I would now like to turn the call over to Steve Klass of Burns McClellan. Mr. Klass, please go ahead.

[Steve Klass:]

Thanks, Britney. Good afternoon, and welcome to the ChemoCentryx Second Quarter 2017 Financial Results Conference Call. This afternoon, the company issued a press release providing an overview of its financial results for the quarter ended June 30, 2017. This press release, along with a few slides that you will 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 the call today is Dr. Thomas Schall, President and Chief Executive Officer of ChemoCentryx, who will provide an overview of progress during the quarter. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial & Administrative Officer, will provide an overview of the financial highlights for the second quarter before turning the call back over to Tom for closing remarks. During today's call, we will be making certain forward-looking statements. 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 the 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 14, 2017. 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, August 8, 2017. ChemoCentryx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. I would now like to call over -- turn the call over to Tom Schall.

[Thomas Schall:]

Thank you, Steve. And good afternoon, everyone. Thank you for joining us on our second quarter 2017 conference call. As a reminder, our first wave of orally administered novel medicines targeting specific chemokines or chemoattractant receptors involve in chronic kidney diseases, focusing initially on those who need it most. Patients with rare or orphan renal diseases that can lead to chronic kidney disease and subsequently organ failure or death. While the term orphan or rare drugs may seem diminutive, many of you know, in actuality, a focus on rare disease brings big advantages. For example, orphan or rare diseases can be characterized by faster and less costly clinical and regulatory phases, and novel orphan therapies tend to support attractive pricing. And today, I'll update you on three main topics

[Susan Kanaya:]

Thank you, Tom. Our second quarter 2017 financial results were included in our press release today and are summarized on Slide 6. Revenue was $8.9 million for the second quarter compared to $2.8 million for the same period in 2016. The increase in revenue from 2016 to 2017 was due to amortization of the upfront licensing fee commitment in connection with our kidney health alliance with Vifor. Research and development expenses were $14.3 million for the second quarter compared to $9.1 million in the same period in 2016. The increase in research and development expenses from 2016 to 2017 was primarily attributable to higher phase doing development expenses for the ADVOCATE trial and startup expenses for the registration supporting trial of avacopan for the treatment of C3G. These increases were partly offset by decreases in Phase I clinical development expense due to the completion of enrollment in the Phase I clinical trial for CCX872 in patients with advanced pancreatic cancer in 2016. And in Phase II development expenses due to the completion of the clear and classic Phase II clinical trials for avacopan for the treatment of ANCA vasculitis in 2016. General and administrative expenses were $4.2 million for the second quarter, up from $3.9 million for the same period in 2016. This increase was primarily due to higher intellectual property-related expenses and accounting-related fees associated with preparing to meet the requirements pursuant to the Sarbanes-Oxley Act of 2002. We recorded net losses for the second quarter of $9.2 million compared to $10 million for the same period in 2016. Total shares outstanding at June 30, 2017, were approximately 48.6 million shares. We ended the quarter with $166.7 million in pro forma cash, cash equivalents and investments, which includes $30 million of remaining cash commitments from Vifor Pharma, not reflected on the balance sheet as of June 30, 2017. We continue to expect to utilize cash and cash equivalents in the range of $50 million to $55 million in 2017, which excludes upfront payments received during the year from our deals with Vifor Pharma. Tom?

[Thomas Schall:]

Thank you, Susan. As I mentioned, the second quarter of 2017 saw strong progress and site activation in the progress of our pivotal Phase III ADVOCATE trial for avacopan and ANCA vasculitis. And also, the initiation of a second-generation -- I'm sorry, a second registration supporting trial for avacopan and C3G. We are also preparing to launch a registration supporting trials for our second compound, CCX140, for the treatment of patients with FSGS. In parallel, we are actively planning for commercialization with our partner Vifor Pharma. While our late-stage drug candidates are for hoped to be patients with rare kidney diseases, our early-stage pipeline is full of promise in other autoimmune inflammatory diseases. At ChemoCentryx, as our focus has become sharper, our balance sheet stronger, our pipeline more mature, our mission has also become clearer in the creation of value for patients and shareholders alike. With that, I will now turn the call back over to the operator, and I look forward to your questions. Operator?

[Operator:]

Thank you. [Operator instructions] And our first question comes from Anupam Rama with JPMorgan.

[Tessa Romero:]

Hi. Thanks for taking the question. This is Tessa, actually, filling in for Anupam this evening. We were wondering if you could expand a bit on your plans to enter the FSGS trial later this year. We noticed that in the ERA, EBTA presentation, you indicated that reduction in proteinuria might be a provisional registration endpoint for certain forms of primary FSGS. How should we be thinking about what physicians will view as a clinically meaningful reduction in FSGS patients versus the normal course of change over a six-month period. And I had one more follow-up as well?

[Thomas Schall:]

Thank you, Tessa. The area of FSGS is so incredibly fascinating and fast moving at the moment. As you may know from the ERA, EDTA poster presentations, we published with two separate models of FSGS, both the nephrectomized model in animals as well as the adriamycin model. Really very rapid and robust reduction of proteinuria in those models, ranging from anywhere between 50% and 90% within one to two weeks, depending how our drug, the CCR2 inhibitor, was administered with standard therapy such as we see in the clinic. As to what we will be doing with our endpoints, you're quite correct, FDA has signaled that, at least, for certain populations within the primary FSGS population, proteinuria reduction will be indeed a path to registration. We are working with that guidance right now, and we'll be providing more details next quarter on exactly how we're thinking about the FSGS trial as of launches and the endpoint. So, for the moment, I'm going to differ those questions for another quarter on the specificities, or the specifics rather, of the nature of the endpoint and the magnitude of the reduction.

[Tessa Romero:]

Great. That's very helpful, thank you. And I guess, one more on the -- your global trial -- ADVOCATE trial, and your progress there? And we just wondered, have regulators indicated the geographic breakdown needed in the pivotal trial? And any other elaboration on how that's going would be great.

[Thomas Schall:]

Great, thank you. Yes, as we stated, we're targeting 200 sites worldwide, Southern Hemisphere, Europe, North America, we're making really good progress as I mentioned today, I'm getting all those sites up and running, now have the large majority activated. We have buy in from both Europe and the United States' regulators as to how the trial conduct was planned. I will say that we have good representation in all the geographies, and I believe, based on our discussion with regulators, there's really -- everyone has accepted the geographic and potential geographic distribution of the patient population given where those sites are targeted to be activated and indeed are ongoing. So, I think that's going very well at this point.

[Tessa Romero:]

Great. That's fine. Thank you very much.

[Thomas Schall:]

Thank you.

[Operator:]

[Operator instructions] And our next question comes from Eric Schmidt with Cowen and Company. Your line is open.

[Eric Schmidt:]

Good afternoon and thanks for the questions. Tom, is there any update on the avacopan C3G patient who is treated under expanded access?

[Thomas Schall:]

Currently, no, Eric. We don't have a report on that patient to give you at this time.

[Eric Schmidt:]

Okay. And is it too early to talk about the pivotal trial design here in C3G? And what the endpoint might be?

[Thomas Schall:]

Sure, we can give you a little more color on that. We plan to enroll about 44 patients, could be as many as 40 sites in probably 10 or 11 countries. We're planning a randomized study that, at least, for the first part of the study, which will be the time that we're looking at the primary endpoint. So, two-arm controlled study will be some sort of rollover after the first period of investigation of the primary endpoint, which we think will be at 26 weeks. There are few new answers still around how we're going to be looking at the data and totality at 26 weeks, but certainly, we want to be looking at histological index that we've taken a lot of efforts -- put a lot of effort into perfecting with a small consortium of key experts in that the area as well as looking at some of the other markers of kidney functions. And those markers will be looked at both early and as well as an ongoing dosing of the patients after the primary endpoint.

[Eric Schmidt:]

Okay. And I didn't think there's any approved in this indication, is the randomization just for this placebo?

[Thomas Schall:]

That's correct. There are nonapprove things that are used typically in the clinical practice of C3G. But you're absolutely right, there is no approved therapy. So, our randomization will be against protocolized standards of care.

[Eric Schmidt:]

Thank you.

[Thomas Schall:]

You're welcome.

[Operator:]

And I'm showing no further question in the queue. I would now like to turn the call over to Tom Schall for closing remarks.

[Thomas Schall:]

Thank you, operator. And thanks for everyone for joining our call today. We very much look forward to updating you as we continue to execute on our plan, and we look forward to our discussions next quarter. With that, I'll say good afternoon, and then have a pleasant evening.

[Operator:]

This does conclude the program. You may all disconnect. Everyone, have a great day.