ChemoCentryx, Inc.
Q2 2013 Earnings Call Transcript

Published: 12 Aug 2013

[Operator:]

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ChemoCentryx’s second quarter 2013 financial results conference call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, today’s conference call may be recorded. It's now my pleasure to turn the floor over to Susan Kanaya, Senior Vice President and Chief Financial Officer at ChemoCentryx. Please go ahead.

[Susan Kanaya:]

Thank you. Good afternoon and welcome to the ChemoCentryx second quarter 2013 financial results conference call. This afternoon we issued a press release providing financial results and company highlights for the six months ended June 30, 2013. 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’ll provide a corporate update and review upcoming milestones for the remainder of 2013. Following his comments, I will provide an overview of the financial highlights for the second quarter before turning the call back over to Tom for closing remarks. As a reminder, 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 from 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, 2013. 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 only accurate as of the date of this live broadcast, August 12, 2013. 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 thank you to everyone for taking the time to join us for our second quarter earnings conference call. As you know, ChemoCentryx is focused on discovering, developing, and commercializing novel, orally available drugs that target the chemokine system which plays a key role in driving the inflamatory response. Consisting the both chemokines and receptors that buying to them, the chemokine system as well as related chemoattractants have been implicated in numerous human diseases. ChemoCentryx has built a diverse pipeline with both wholly-owned assets and partnered programs in area such as autoimmune, disease inflammatory disorders and cancer. Our scientific expertise in the chemokine field is the foundation of an innovative discovery platform, which has generated our diverse and deep clinical portfolio. I would now like to review a few highlights in the second quarter of 2013 on both the clinical development and corporate fronts. The ChemoCentryx team has been actively driving forward several key initiatives intended to enhance our position as we head into the remainder of the year. First, on the clinical front, significantly, we completed and indeed surpassed our target patient enrollment for our Phase II trial in patients with diabetic kidney disease, also called diabetic nephropathy. Who have been treated with our drug candidate CCX140, this achievement enables us to report 12-week interim data in the third quarter of this year as planned. CCX140 is an inhibitor of the chemokine receptor known as CCR2 and is ChemoCentryx’s lead wholly-owned drug candidate. We also presented positive Phase I safety data for CCX507 in healthy subjects as well as reported a positive preclinical data using 507 in ulcerative colitis models of inflammatory bowel disease. These data are encouraging and reinforced the potential utility of the CCR9 inhibitor in the treatment of inflammatory bowel disease including UC. Additionally on the corporate front, we hosted our first Analyst Day in May, bringing together key opinion leaders in gastrointestinal and renal disease. The forum enabled us to share the valuable clinical perspective on our lead programs and pipeline. Also we appointed the permanent healthcare insurance executives Ira Klein, MD, MBA, and Fellow of The American College of Physicians to our Board of Directors. Dr. Klein’s expertise and reimbursement and their strategy will be invaluable as we plan for potential product approvals and commercialization. Finally, we completed our first follow on offering of 5,750,000 shares of common stock which resulted net proceeds of $64.4 million. Looking ahead I will now review key milestone events for the remainder of 2013. First, as I mentioned previously, we expect 12 week interim data in the third quarter and approximately 200 patients from the CCX140 Phase II trial in diabetic nephropathy. This data will be focused on safety and tolerability of CCX140 in this patient population and also examine effects of CCX140 on protein levels in the urine or proteinuria as a measure of kidney function. We will also examine the drug's effects on hemoglobin A1c or HbA1c. As you may recall, we have amended the protocol at the end of 2012 to extend the dosing in this study to 52 weeks in order to subsequently assess additional markers related to kidney functions which have historically shown to take longer to declare themselves in the clinic. Overall trial recruitment was very successful with the total enrolment of 332 patients surpassing our enrollment target of 270 patients. We believe that the strong enrollment momentum in this trial highlights the need and demand for new treatment options for these diabetic nephropathy patients. Secondly, we expect top line data in early Q4 from our most advanced drug candidate Vercirnon in the SHIELD-1 Phase III clinical trial in Crohn's disease. Vercirnon, which has now partnered with GlaxoSmithKline targets the chemokine receptor known as CCR9. A receptor that guides a specialized population of inflammatory cells to the gastrointestinal tract. This trial is the first of four pivotal trials with Vercirnon, which are being run and are fully funded by our partner GSK. Third, we expect GSK's by option decision on another compound, CCX168, an inhibitor of the complement receptor known as C5aR by the end of the year. This is the third and final drug candidate subject to option within our GSK partnership. And finally, we anticipate continued clinical progress with CCX507, our wholly owned de novo inhibitor of the chemokine receptor known as CCR9. And now we would like to turn the call back over to Susan Kanaya, to discuss our financial results.

[Susan Kanaya:]

Thank you, Tom. As mentioned earlier, our second quarter 2013 financial results were included in our press release which was provided earlier this afternoon. Revenues for the second quarter ended June 30, 2013 were $1.9 million compared to $1.1 million for the same period in 2012. The increase from 2012 was primarily due to funding of clinical support from GSK for CCX168 for the treatment of ANCA-associated vasculitis. Research and development expenses for the second quarter ended June 30, 2013 were $8.7 million compared to $9.7 million for the same period in 2012. The decrease in 2012 was primarily due to lower expenses associated with developing our next generation candidate at phase 1 clinical development of CCX872, our second generation CCR2 inhibitor, the CCX507, our de novo CCR9 inhibitor near completion. In addition, lower expenses associated with drug discovery efforts targeting CXCR7 contributed to the decrease for the period. Partially offsetting these decreases were increases associated with CCX168 due to continued patient enrollment in our Phase II clinical trial and higher drug discovery efforts in programs targeting chemokine receptors such as CCR6 and CCR4. General and administrative expenses for the second quarter ended June 30, 2013 were $2.8 million compared to $2.5 million for the comparable period in 2012. The increase from 2012 was primarily due to increased stock-based compensation expense for stock option grants in addition to higher professional service fees relating to our financial reporting obligations as a public company. Cash, cash equivalent and investments totaled $166.4 million at June 30, 2013. With that, I will turn this call back over to Tom.

[Thomas Schall:]

Thank you, Susan. In closing, we believe ChemoCentryx is poised for transformation with two key data readouts expected in the coming the months in both CCX140, our lead wholly-owned program and Vercirnon our lead partnered program, as well we expect an option decision from GSK on CCX168 the third and final drug candidate subject to option in the partnership. A sight from these near-term catalysts, ChemoCentryx remains in strong financial shape with a diverse risk balance portfolio of those partnered and wholly-owned drug candidates. Our team continues to innovate and execute with precision in order to meet our goal of bringing important new medicines to patients in need while delivering maximum value for our shareholders. It has been a pleasure to host this call and now I would like to open up the call to questions. Operator?

[Operator:]

Thank you. (Operator Instructions) And our first question will come from Eric Schmidt with Cowen & Co. Please go ahead, your line is now open

[Eric Schmidt:]

Tom as we are now approaching the CCX140 data I was hoping you could just kind of layout your expectations for what would be a good result, what would be a meaningful improvement in proteinuria and or HbA1c that would drive you to moving this compound forward into Phase III trials.

[Thomas Schall:]

Thank you Eric, that's a great question. Now by the way I'm join share by the senior VP of all of our clinical and regulatory efforts Dr. Petrus Bekker, so he may chime in to on some of these questions as well. Eric as now this is now 52 week dosing regimen study. At the 12 week data, we're very keen to look at both safety and tolerability obviously as well as focusing on proteinuria and continuing to look at the hemoglobin A1c, I'll refresh everyone's memory by reminding us that in the four week study that we did with CCX140 in diabetics through in that population did not have kidney disease, HbA1c was lowered specifically significantly in patients on 10 milligram once a day of CCX140 relative to the placebo taking group. So, we'll continue to follow HbA1c but back to proteinuria. We very much think that looking at the data over the last few years, when you look at studies from (inaudible) say at all and journal of America Society of Nephrology a couple of years ago also here (inaudible) and [med analysis] in 2011 and advances in chronic kidney disease. Essentially it looks like reductions in proteinuria of 20% or greater correlate with longer term benefits to kidney, our outcomes and major renal outcomes including time to renal disease and time to dialysis as well as time to kidney death. So I have said in the past that we will be, we think the success will be anything more than 20% reduction or more in proteinuria and mechanistically we are hoping from more than that, but beyond 20% I think we think that is the success.

[Eric Schmidt:]

That’s great and just couple of quick ones and what’s next agenda for 507?

[Thomas Schall:]

CCX507 has completed a single-ascending dose Phase I studies in humans. We will now move on to a multiple-ascending dose study and we are beginning to do our feasibility analysis on taking 507 forward and inflammatory bowel disease with a focus on ulcerative colitis. So you will be hearing more about those plans as we go forward in the coming quarters.

[Eric Schmidt:]

And then lastly maybe a quick one for Susan, should GSK pick up the option on CCX168, could you remind us what the payment would be?

[Susan Kanaya:]

Sure it will be $25 million

[Operator:]

Thank you, our next question will come from Brian Klein with Stifel. Please go ahead. Your line is now open.

[Brian Klein:]

Thanks for taking my questions. And congrats on the over enrollment in the Phase 2 140 study. Just wondering given that you are now treating more patients, how will that impact your spend rate in the coming months and does that impact the timing at all on the final 52 week data?

[Thomas Schall:]

In both cases no, the effects are not great at all, the spend is not going to be increased very much at all, and the read out of the 52 week data will happen just as according to plan.

[Brian Klein:]

On vercirnon I recall you do have an option to co-promote that product with GSK. Just wondering when that decision needs to be made?

[Thomas Schall:]

That decision will come later in Phase 3 development Brian. We can’t give you a precise date at this point and a part of it depends on at internal processes at GSK and when the deliver up to us a fully laden budget for the development of the drug, at which we’ll have a certain period of time in which to make our decision. But I think it’s safe to say that will be a bit later in Phase 3 development.

[Brian Klein:]

Do you anticipate that’s a 2014 event?

[Thomas Schall:]

Hard to say at this point. I think we’ll just have to see how the order SHIELD trials continue to play out and in the timing it’s almost entirely up to GSK at this point.

[Operator:]

Our next question will come from the line of Geoff Meacham from JP Morgan. Please go ahead with your question please.

[Geoff Meacham:]

With over enrolling for CCX140 and obviously you have higher statistical power, but was this sort of your decision or is it something that the FDA was looking for when you guys think Phase 3 and I have a couple of follow-up.

[Thomas Schall:]

Geoff there were no outside agencies that were really pressing us to over enroll. In fact it’s almost solely a function of the momentum and the trial. In the last several months there was a lot of folks that came in for screening, passed the screen and got enrolled in the trial and so enrollment rates really were very robust in the past few months. We are always happy with higher end, so we certainly think it’s a good thing to have those folks in the trial. But there were no outside influences on suggesting that we should enroll more people in that trial.

[Geoff Meacham:]

And how are you guys thinking about the Phase 3 design at this point. Is the agency ready for approaching [urea] as an endpoint or do you feel like it's still, we are still in a world with a time to event like a time to dialysis kind of study for Phase 3?

[Thomas Schall:]

As you know, Geoff, historically the Phase 3 studies have been essentially multiple outcomes studies, typically three outcome studies where you look at the composites of events, time to end stage renal disease usually measured as time to dialysis, time to death or a time to doubling of serum creatinine, but also it's pretty clear now that there is a movement of foot and perhaps Pirow can comment on this to have a time to an increase in serum creatinine be used as the sole registration endpoint in Phase 3. Pirow, I'll let you comment on that for Geoff and the team?

[Petrus Bekker:]

Thanks. If it's concerning to allow a endpoint of decrease of estimated GFR of at least 40%, which corresponds to about a 50% increase in serum creatine as an endpoint, and that could potentially have implications on study size. So for example, making the study size somewhat smaller and also potentially enrolling patients with less severe disease in to Phase 3. So we're keeping an eye on that development and we’ll obviously be discussing with the FDA at the end of Phase 2 meeting.

[Geoff Meacham:]

And final question on vercirnon? Are you guys able to give any guidance and I know this was asked previously but for SHIELD-2, when the maintenance study comes out and just maybe to get your perspective on the product profile is SHIELD-2 the primary value driver from sort of economic standpoint. By having a maintenance study, do you still feel like SHIELD-1 was effective is really the key here.

[Thomas Schall:]

Well, Jeff, always it’s been the case and I think it’s well accepted that certainly a maintenance drug has a greater degree of serving clinical need ultimately as well as their foreign economic impact. So we are optimistic both with induction as well as maintenance based on our positive PROTECT-1 data from the 436 patient trial that we ran a little while ago, where we thought both the good induction of clinical response as well as longer term maintenance of remission with Vercirnon then called CCX282 B. So we are optimistic based on the data that we have historically that we have a good shot at having good readouts in both SHIELD-1 and SHIELD-2. Economically SHIELD-2 is going to be obviously very, very important part of the equation.

[Geoff Meacham:]

And so that’s still you feel like that still reasonable to expect that in 2014?

[Thomas Schall:]

Well I think that again we’ll have to appeal the GSK, their in control that trials, since they are paying for it a 100% and I think we’ll have to ask them to speak to the details of the timing.

[Operator:]

Thank you. (Operator Instructions). And our next question will come from the line of Yaron Werber with Citi. Please go ahead your line is now open.

[Unidentified Analyst:]

Great thank you for taking the question, this is Chris for Yaron. Can you comment if the 12 week data is robust on (inaudible) will you approach the FDA about designing the Phase 3 program. And then a follow-up can you kind of go through how 872 you backup CCR2 compound is different from 140 in terms of the profile?

[Thomas Schall:]

Certainly. So depending on the robust, this is a 12 week data Chris, certainly it would be an option for us to begin exploring and planning actively, planning our Phase 3 development plan, that may include of course going to the FDA and showing them the data we have at that point and asking them about the plan that we're putting together. So again, I think that would be solely a function of the strength and robustness of the 12 week data. As to 872, 872 is the same [chemo] quantity obviously it’s in 140. It is somewhat more potent 5 to 10 fold more potent that CCX140 and obviously part of it’s own IP domain if you will. Currently, the 872 is pretty much completed its Phase 1 studies in man and we'll be releasing more data on that in the coming months.

[Unidentified Analyst:]

Depending on how 140 looks we do potentially accelerate that program?

[Thomas Schall:]

The 872 program?

[Unidentified Analyst:]

Yes.

[Thomas Schall:]

We believe there are a number of indications for a CCR2 inhibitor even in the renal space. So I think as we go through the 140 data over the next period of time, we are going to evaluate how to look at these various indications. Some of those indications are very interesting, shorter term regimens of dosing, more acute kind of treatment regimens and we're developing plans to look at those indications either as an extension of what we do at 140 or with the different entity possibly 872.

[Operator:]

Thank you. (Operator Instructions) presenters, at this time, I am showing no additional question is in the queue. And now I would like to turn the program back over to Dr. Thomas Schall for closing remarks.

[Thomas Schall:]

Thank you very much. And I would like to thank everyone for joining us on this afternoon’s conference call. It’s been a pleasure to host the call and I wish everyone a great afternoon and look forward to our next call, thanks again.

[Operator:]

Thank you, presenters, and thank you ladies and gentlemen. This does conclude today’s call. Thank you for participation. And have a wonderful day. Attendees you may now all disconnect.