ChemoCentryx, Inc.
Q3 2016 Earnings Call Transcript

Published: 8 Nov 2016

[Operator:]

Good afternoon and welcome to the ChemoCentryx Third Quarter 2016 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer. As a reminder, this conference call will be recorded. I would now like to turn the conference over to your host Ms. Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer at ChemoCentryx. Ms. Kanaya, please go ahead.

[Susan Kanaya:]

Thank you. Good afternoon and welcome to the ChemoCentryx third quarter 2016 financial results conference call. This afternoon we issued a press release providing an overview of financial results and corporate highlights for the quarter ended September 30, 2016. This press release is available on our 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 a corporate update and review our anticipated milestones. Following his comments, I will provide an overview of the financial highlights for the third 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 actual results to differ materially than those contained in the forward-looking statements. These risks are described in our filings made with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed on March 14, 2016. 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, November 07, 2016. 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 will now turn the call over to Tom.

[Thomas Schall:]

Thank you, Susan, and good afternoon, everyone. Thank you for joining us on our third quarter conference call. Today, I will discuss real progress on a carefully considered plan to expand our clinical footprint in orphan and rare diseases especially as relates to our lead program. From the very productive and ongoing efforts employing our priority discovery platform ChemoCentryx has generated a pipeline of high value drug candidates. The lead candidate in a pipeline is the unique complement receptor inhibitor previously known as CCX168 a newly designated avacopan, which is soon to initiate Phase III clinical development. When I reflect on the recent quarter and the year so far, we have made significant inroads in rare and orphan diseases. Let’s recap what we accomplished with avacopan so far this year. One, positive Phase II CLEAR data in ANCA Vasculitis or AAV; two, positive Phase II CLASSIC data also in AAV; three, positive results demonstrating inhibition of serum induced thrombus formation in aHUS patients; four, positive results in treating a renal transplantation patient with C3 glomerulopathy or C3G disease who had not responded to a host of immune suppressants; five, validation from European regulators with the priority medicines were PRIME designation designed to expedite clinical development and accelerate marketing authorization; six, an FDA grant to assist in the clinical development of avacopan; and importantly seven of validating commercial partnership with Vifor Pharma that significant. We have executed on plan for avacopan and that plan is entering its next phase. Specifically not only have we developed the Phase III trial design for AAV, but now we are also expanding the footprint of avacopan into additional rare renal indications. And so expanding within a tightly focused and curated set of rare disease indications, we believe we can provide the most efficient indeed the most rapid path for avacopan and increase its scope of use. This is a theme we will also develop in other of our product programs in the future. Make no mistake, we aspire to be ultimately a force to be reckoned with in the orphan and rare disease space and we intend to continue to build on the momentum into 2017 and beyond towards that goal. For today’s discussion, let’s focus first a little bit more on the avacopan program. I will there after summarize a few selected developments in other parts of our program. Avacopan is the name now given to the drug candidate we previously called CCX168. It’s the so called United States adopted name or USAN designation as well as its globally recognized international non-proprietary name or INN. These designations are given when a new therapeutic agent reaches late stage development. Avacopan is a potent, orally administered, highly specific, small molecule inhibitor of the complement C5a receptor or C5aR, which drives inflammatory cells and their damaging effects in autoimmune diseases including rare and orphan diseases such as AAV, aHUS, Atypical Hemolytic Uremic Syndrome and C3 glomerulopathy or C3G disease for which avacopan is being developed. We believe this triad of rare disease indications offers a promising commercial opportunity for avacopan. Our goal in treating AAV patients with this drug is to provide highly effective control of AAV disease, while at the same time eliminating the need for chronic high doses of glucocorticosteroids that are currently part of the standard of care. I have spoken of the benefits of eliminating steroids by using avacopan at length in the past. Suffice it to say that the vasculitis community is anxiously waiting a new therapeutic option as the frequent news of high dose steroids in AAV creates many issues that are clinically very difficult to manage and side effects including premature death. Indeed, the most recent independent published literature shows that 11% of the patients die within one year of diagnosis driven mostly by the infections resulting from chronic high steroid use not the disease itself. Clinicians are also focused on improving disease remission and decreasing rates of relapse about a third of the patients in AAV relapse between 6 months to 18 months and about half relapse within 3 years to 5 years. Relapse is particularly troubling because with each episode patients risk additional and irreversible organ damage leading to dialysis in some cases death. It is clear that the use of chronic high dose steroid containing regimens in AAV, it is costly, not just to patient lives but to say nothing of the immense economic burden to healthcare systems around the world. We believe that the benefits of avacopan – the benefits of avacopan can provide in this disease are clear and would be highly valued and welcomed as an advancement in the treatment of AAV. Evidence suggesting the ability of avacopan to provide highly effective control of the disease and eliminate steroids from the current standard of care in AAV exists from the comprehensive and successful Phase II CLEAR trial that we completed earlier this year. The significance of this potential treatment advancement is underscored by the selection of the Phase II CLEAR clinical trial results for an oral presentation next week at the American Society of Nephrology meeting Kidney Week in Chicago. Rounding out our AAV Phase II development program is the CLASSIC study, which was designed to assess the safety profile of avacopan when added to the current full standard of care. The positive CLASSIC trial results were selected for all presentation at the upcoming American College of Rheumatology meeting taking place next week as well. With the combination of our AAV Phase II development program, our plan for the of avacopan AAV Phase III trial design is based on providing remission of AAV disease and to allow for the elimination of chronic high doses of steroids from the current standard of care. Discussions with the Europeans Medicines Agency or EMA and the U.S. FDA have been progressing well and our most recent regulatory meetings held last week and subject to final regulatory feedback we are optimistic that such discussions allow us now to initiate our Phase III development program very shortly. Accordingly, in parallel with our regulatory discussions, we’ve been working diligently with our contract research organization, who will be responsible for clinical trial related aspects including the start of activities associated with our initiation of our Phase III program. We believe that a successful avacopan Phase III program will lead to a paradigm shifting therapeutic alternative for AAV patients and innovative new product that we believe that our partner in Europe Vifor Pharma and ourselves will be able to successfully commercialize. With respect to our planned expansion of the footprint of avacopan into other rare renal diseases, let us now turn to Atypical Hemolytic Uremic Syndrome or aHUS. aHUS is a rare life threatening disease characterized by systemic thrombotic microangiopathy or the formation of blood clots in the small blood vessels throughout the body. Systemic thrombotic microangiopathy can lead to heart attack, stroke and kidney failure, which are the primary causes of mortality associated with aHUS. We believe that inhibition of the C5a receptor with avacopan represents a potential attractive alternative to preventing ischemic and stage organ damage in aHUS patients. aHUS is currently treated with eculizumab. However, not all patients receive and for those who do not all of them derive continued benefit. In the absence of appropriate therapy up to half of all patients progressed and stage renal disease and 25% die in the acute phase of the disease. Further eculizumab is administered by infusion by contrast avacopan is an oral agent and would offer a more convenient mode of administration. There is clearly an unmet need for aHUS patients. At the upcoming ASN Kidney Week, our collaborators will outline the positive results seen in our avacopan pilot Phase II study in aHUS patients with end stage renal disease on chronic dialysis. In that study twice-daily oral doses of 30 milligrams of avacopan for 14 days were administered. The result showed treatment of patients with avacopan was effective in reducing aHUS serum induced thrombus formation. Results from five patients evaluated showed positive treatment effect. Specifically an overall mean decrease in thrombus size of 83% was observed across the 5a, aHUS patients possess after treatment. Three of those patients who complete – had a complete inhibition of thrombus formation and a fourth had a greater than 30% inhibition. A fifth patient who received only two days of treatment still showed greater than 30% inhibition at that time. In addition, treatment appeared to be mechanism specific as thrombus size return to pretreatment levels when avacopan treatment was withdrawn. Patients with aHUS also often have low platelet counts due to high thrombotic activity. And indeed two patients in the study who exhibited low patient counts at baseline increased with avacopan treatment. Importantly other components of the complement system were unchanged by avacopan treatment. This speaks to the very specific mechanism of action of avacopan differentiating it from other compounds in development for aHUS and the fact that such specificity should result and potentially far fewer safety consequences. Based on these positive results in 2017, we plan to initiate a multi-center clinical endpoint trial. That is employing a clinical endpoint already established by others developing compounds in aHUS. This next trial may well lead to the registration of avacopan for the treatment of patients with aHUS. Let’s now review progress in a third indication in our avacopan clinical expansion strategy, the exciting opportunity in Complement 3 glomerulopathy or C3G. While the disease name refers to Complement 3, it is now known that the C5a, C5a receptor pathway, which is further downstream of C3 in the complement cascade and the target of avacopan is an essential part of the disease causing pathology. Hence C3 is actually a marker of the downstream effects of C5a receptor. C3G disease is an ultra rare disease of the kidney, the prevalence of C3G is estimated at 2 to 3 per million people or approximately 800 patients in the U.S. and about 2,000 in Europe. C3G is characterized by a deposition of the protein known as C3 in the glomeruli or the filtration units of the kidney thus causing renal damage. Consider this, there is no approved therapy for C3G. Typically patients receive a collection of non-specific immunosuppressants sometimes as many as six or seven at a time. Without treatment C3G invariably leads to kidney failure and the current constellation of unapproved therapies only delays end stage renal disease somewhat. Kidney transplant is frequently the only option and even after transplantation the new kidney will frequently manifest the disease. In collaboration with a leading renal and transplant center in United Kingdom and under a special needs’ protocol, which is similar to the compassionate use protocols in the United States, we have treated a C3G renal transplant patient with avacopan. This patient who has previously in failing health has now been on avacopan treatment for well over a year. Prior to being treated with avacopan the patient that received a kidney transplant from his mother after some years of deteriorating native kidney function. Notwithstanding the transplant his kidney function was also steadily deteriorating despite receiving ongoing treatment with a wide spectrum of immunosuppressant drugs including rituximab, cyclophosphamide, mycophenolate, tacrolimus and glucocorticoids, all of which were failing to prevent the disease progression in his transplanted kidney. This young man with C3G has now entered month 15 of treatment with avacopan and has exhibited what his physician’s think of as remarkable improvements. For example after only one month of treatment the patient’s renal function based on glomerular filtration rate stabilized and has stayed stable throughout the subsequent 15 months. Also sequential kidney biopsies taken after the patient had been on avacopan for two and seven months showed continued improvement in kidney histology based on a decrease in glomerular endocapillary proliferation any mark reduction in the number of glomerular inflammatory macrophages as compared to pretreatment biopsies. Also after over a year of ongoing avacopan therapy the drug seems to be very well tolerated which is consistent with our findings in the larger Phase II trials in AAV. We believe these encouraging results now provide a path to a clinical trial in C3G employing an endpoint that could lead directly to registration. We plan to consult with the FDA in the first half of this coming year about developing avacopan in C3G with the intent of initiating a clinical end point study very soon. To summarize the avacopan program we achieved – we have achieved this year remarkable series of milestones. First, the culmination of the AAV Phase II development program; second conducting productive regulatory meetings both in the U.S. and Europe, which should enable us now to initiate the AAV Phase III program; and third reporting positive data in two additional clinical indications would support the further advancement into clinical endpoint studies, which in themselves may lead to registration. We look forward to continued success in 2017 as we execute on our strategic plan to expand the clinical footprint of avacopan into multiple rare renal diseases. Now concerning other parts of our pipeline and plans, I would like to turn briefly to our immuno-oncology program. During the third quarter, we reported initial results from our ongoing open-label Phase Ib study with CCX872 an inhibitor of the chemokine receptor known as CCR2 in patients with advanced pancreatic cancer. As you probably know pancreatic cancer is notoriously difficult to treat and as a median overall survival of about six to eight months. Research shows that CCR2 inhibition decreases immunosuppressive cells in the tumor microenvironment as well as immunosuppressive cytokines and increases cytotoxic T cells and their cytokines in the tumor microenvironment. In the ongoing multi-center Phase Ib clinical trial with CCX872, we enrolled 50 patients with non-resectable metastatic pancreatic cancer to receive CCX872 in combination with FOLFIRINOX, one of the current standards of care in the treatment of pancreatic cancer. We reported overall response rate data in August and we are continuing to treat patients for as long as they remain in a progression free state. Early in the first quarter of 2017, we plan to report progression free survival data most likely at a major medical meeting. Within our immuno-oncology preclinical initiatives, we have been extensively evaluating various chemokine receptor inhibitors in combination with checkpoint inhibitors to determine potential antitumor effects. In September, at the American Association for Cancer Research or AACR International Cancer Immunotherapy Conference, we reported data demonstrating that blocking CCR2 with CC872 potentiates checkpoint inhibitor immunotherapy in a preclinical model of pancreatic cancer. The result summarized the mechanistic rationale for investigating the combination of CCX872 and an immune checkpoint inhibitor for the potential treatment of pancreatic cancer. To that end, we plan to initiate a multi-center clinical trial with CCX872 in combination with a checkpoint inhibitor in 2017. We also believe that the effective CCR2 inhibition may have impact on diseases outside of immuno-oncology. These specifically include non-alcoholic, steatohepatitis or NASH. Research shows that inhibiting CCR2 will reduce macrophage infiltration and resulting inflammation in the liver. This translates into the reduction of liver scarring or fibrosis such fibrosis in NASH is particularly difficult to treat and has a considerable impact on long-term mortality and the rates of liver transplantation. Last month at the American College of Gastroenterology Annual Meeting, we showed that CCX872 reduced hepatic inflammation, reduce steatosis or infiltration of liver cells was fat and fibrosis in models of NASH. In the two models of NASH that we used treatment with CCX872 achieved a statistically significant reduction in liver fibrosis as compared to the placebo control. Additionally in a side by side comparison in a model, which is known to induce NASH, we demonstrated that CCX872 was more efficacious than a CCR2, CCR5, dual inhibitor that is being advanced elsewhere in clinical development. Despite the fact that NASH is a complicated and multi-factorial disease, it is an intensively studied and attractive field in the industry at present. It is easy to see why there are currently no approved treatments for NASH and more than 15 million people in the U.S. have the disease. The worldwide market for NASH droves is predicted to reach billions of dollars by the year 2020. We would actively pursue the development of CCX872 in NASH in the context of a partnership in this vastly unmet clinical area. Exemplified by the C3G and NASH opportunities that I have outlined we are strategically expanding our clinical pipeline into high value, high met, high unmet disease areas. Again speaking to a carefully considered approach, some of our programs will remain proprietary to ChemoCentryx, well for others we aim to out license to partners. Indeed some partnerships may be largely commercial alliances. For example, the Vifor Pharma avacopan partnership enables us to control the development of this asset and own it in North America, while capitalizing on the extensive regulatory and commercial capabilities of Vifor Pharma and Europe and elsewhere in the world. In contrast, other programs maybe partnered earlier in development where the required scope of investment may be to significant for us to develop alone. Before I turn the call back over to Susan to review our third quarter financial results, I would like to reiterate how pleased we are to have appointed Dr. Hank McKinnell to our Board of Directors. Hank brings an incredible depth of experience from his illustrious period at Pfizer, which culminated in his role as Chairman and Chief Executive Officer. We will surely benefit from having his seasoned counsel. And with that, I will turn it back over to Susan.

[Susan Kanaya:]

Thank you, Tom. As I mentioned earlier, our third quarter 2016 financial results were included in our press release provided this afternoon. Revenue was $4.1 million for the three months ended September 30, 2016 compared to zero in the same period in 2015. The increase in revenue from 2015 to 2016 was due to amortization of the upfront payment from Vifor Pharma pursuant to the avacopan agreement and grant revenue from the FDA to support the clinical development of avacopan for the treatment of patients with AAV. Research and development expenses were $8.4 million for the three months ended September 30, 2016 compared to $7.9 million in 2015. This increase was primarily attributable to higher expenses associated with avacopan for startup activities related to the Phase III development program in patients with AAV. This increase was partially offset by lower expenses associated with Phase II development of avacopan due to the completion of the CLEAR and CLASSIC Phase II trial in 2016. General and administrative expenses were $3.2 million for the three months ended September 30, 2016 compared to $3.8 million in 2015. The decrease from 2015 to 2016 was primarily due to lower stock-based compensation and intellectual property filing expenses. Total shares outstanding of September 30, 2016 were approximately 47.8 million shares. Cash, cash equivalents and investments totaled $131.6 million at September 30, 2016 and we expect to end the year with cash and investments for approximately $120 million. With respect to 2017, we are projecting cash utilization to be in the mid $15 million range for the year. Tom?

[Thomas Schall:]

Thank you, Susan. There are several important developments we expect in the coming months and we anticipate these events to continue to drive value for ChemoCentryx. Specifically, we look forward to data presentations next week from our avacopan orphan and rare disease program including CLEAR and CLASSIC AAV trial results, as well as data from the aHUS pilot study. Secondly, we’ll be launching our avacopan Phase III program in AAV very shortly by the end of this year. And thirdly, reporting progression free survival results from our CCX872 Phase Ib advanced pancreatic cancer trial early in the first quarter. Beyond these expected near-term milestones, we also anticipate the strategic expansion of avacopan into other high value rare unmet renal diseases as well as continued progress in our immuno-oncology program. These include initiating of clinical endpoint trial with avacopan in patients with C3G in the first half of 2017 and also initiating a clinical endpoint trial at avacopan in patients with aHUS in 2017, as well as initiating a study with CCX872 in combination with a checkpoint inhibitor in 2017. In closing, we have a great deal of momentum heading into the New Year and I look forward to updating you on our continued progress. With that, I will now turn the call back over to the operator so that we may take your questions.

[Operator:]

Thank you. [Operator Instructions] We have a question from Anupam Rama of JPMorgan. Your line is open.

[Eric:]

Hi guys, this is Eric in for Anupam this evening. Thanks for taking the question. Tom I just wonder if you could expand a little bit on your recent regulatory feedback on the Phase III for avacopan and AAV. Should be still be thinking of way that the useful president in terms of design and pivotal endpoint [indiscernible]. And what are some of the reaming gaining factors to a Phase III start?

[Thomas Schall:]

Very good question, Eric. Thank you for asking it. We have a great deal of information now and I think we have buy in on all our clinical development plans. What I can tell you this so far is we’ll have a global development strategy. So one Phase III trial, BVAS will be the primary endpoint, we have a two-arm study. So we’re really trying to find out just how effective we can be with avacopan on its own plus and immunosuppression in background no steroids onboard, as we’ve been discussing as – and after us of our Phase II CLEAR trial. We also have some other key measurements that include patient well being to quality of life instruments with pidity of remission, which again was evident in our Phase II development program seemingly superior over standard of care as well as a way of assessing the safety benefit of not having the high chronic doses of steroid onboard. So to some extent ray it has provided the useful president, it’s provided a president however that’s been somewhat more limited than our needs. And I think with our discussions with both EMA and FDA we found a way to fulfill both ChemoCentryx’s needs, the needs of patients and address the fundamental regulatory questions as well. All that remains essentially formal recording of the minutes making sure, there is no additional feedback and we’ll be ready to launch. Already we’re out in the field developing sites, setting up sites and getting ready to get that study going.

[Eric:]

Great, that’s helpful. And just maybe on aHUS, in terms of next steps how should we thinking about disease setting, refactoring as a patients and clinical endpoints and also perhaps trials sizing in a potential next study. Thanks.

[Thomas Schall:]

Yes, so one fundamental next step as we still have some discussions with FDA and EMA to have on that very early in coming year. We without compromising any of our ongoing discussions with thought leaders and clinical sites I can say that there is ample president obviously for clinical endpoints things like TMA or thrombotic microangiopathy, which has been well established by some of our colleagues in the field. And clearly what we know from some of the at least public discussion of the guidance FDA seems to give another sponsors in the antibody space, it’s pretty apparent that the possibility of doing a single study in a fairly modest number of patients without going head to head against the incumbent is not only possible but that seems to be accepted on the regulatory front. Naturally, we’ll have to have our own discussions. But we believe that given the both the differentiation of our product as an orally active drug and the ability to also be differentiated potentially on the safety front, that alone with constitute an unmet need, the feedback we get from the fields and KOLs and others that there is a desire to test a new type of mortality. So we’ll have much more about that to say about that after we get our regulatory meanings behind us in the early part of first half of 2017 in any case.

[Eric:]

Great. Thanks for taking the questions.

[Thomas Schall:]

Sure. Thank you.

[Operator:]

Thank you. [Operator Instructions] I’m showing no further questions at this time. I’ll turn the conference back over Mr. Schall for any closing remarks.

[Thomas Schall:]

Thank you so much operator. I appreciate everyone’s participation in our conference call today. I very much look forward and discussing more of our progress to the end of the year and into next. And I very much look forward to our next conference call on Q1. Thank you so much. Good afternoon.

[Operator:]

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.