Concert Pharmaceuticals, Inc.
Q1 2020 Earnings Call Transcript

Published: 30 Apr 2020

[Operator:]

Ladies and gentlemen, thank you for standing-by. Welcome to the Concert Pharmaceuticals First Quarter 2020 Financial Results Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. [Operator Instructions]I would now like to introduce your host for today's conference call, Ms. Justine Koenigsberg, one moment.

[Justine Koenigsberg:]

Good morning and welcome to Concert Pharmaceuticals’ first quarter 2020 investor update.Joining me this morning with prepared remarks are Roger Tung, our President and CEO; Jim Cassella, our Chief Development Officer; and Marc Becker, our CFO. We will also be joined by Nancy Stuart, our Chief Operating Officer for the Q&A portion of the call.As a reminder, today’s discussion will include forward-looking statements about our future expectations, plans and prospects. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A description of these risk factors can be found in our most recent 10-Q filed with the SEC. Any forward-looking statements speak only as of today’s date, and we assume no obligation to update any forward-looking statements made on today’s call.With that, I would now like to turn the call over to Roger.

[Roger Tung:]

Thank you, Justine. During the past quarter and throughout 2019, we have achieved positive developments that positions Concert from important clinical milestones in value creation in months and year ahead. Our team has worked diligently to advance our two proprietary programs, both of which have the potential to be in late-stage clinical testing next year.It's impossible not to look beyond our business as global citizens, Americans, neighbors, friends and family and considered how the COVID-19 pandemic has impacted so much in our world. First, we're proud to be part of an industry that takes as its mission the development positively life impacting medicines, and we salute the companies that have stepped forward to develop therapeutics and vaccines for COVID-19. We also have to acknowledge that the pandemic will have broad impact on companies conducting clinical trials and other indications.In our remarks today, we'll provide an update on the development status of our two clinical candidates in light of COVID-19. We've been in close touch with our clinical sites and KOL advisors and are monitoring the situation in real time. Today's update is subject to reassessment as COVID-19 runs its course throughout the U.S. and other territories in which we have ongoing or planned clinical operations.First, let me cover CTP-543. We are highly focused on addressing the need for an effective treatment for alopecia areata for a favorable safety profile, and we are continuing to advance 543 to meet this product profile and bring it to patients as quickly as possible. The data we generated in our CTP-543 dose ranging Phase 2 trial set what we believe to be a new benchmark for clinical efficacy in the treatment of alopecia areata.Among the JAK inhibitors being developed for the treatment of this disease, CTP-543 appears to have provided the most robust efficacy results reported to-date in any controlled trial. Based on these results, we feel it is possible for CTP-543 to be an early entrant in the alopecia areata market with the potential to have a very favorable product profile. We remain on track to initiate a Phase 3 clinical trial in fourth quarter of this year.Now turning to CTP-692, our candidate for schizophrenia, we believe that CTP-692 has the potential to improve on the primary symptoms remain in schizophrenia including positive and negative symptoms and cognitive function, when added to existing antipsychotic treatments. The dose ranging Phase 2 study got off to a great start enrolling patients, but due to COVID-19 we now project completing enrollment for a year-end.Jim will describe the status of activities with our clinical trials sites and how we are working to support completion of this trial. As I stated earlier, the Company's accomplishments over the past year have enabled us to reach this exciting point with both of our proprietary clinical programs. Although, we are well aware of the challenging times we're facing in our communities and with our programs, we're focused on the future.With a longer-term view, our belief in the potential value of our drug candidates for two important diseases, which affect millions of people alopecia areata and schizophrenia, is unchanged. In the more immediate term, we're working to do everything possible to support the integrity of our clinical programs and keep them advancing in spite of the unprecedented disruptions that have arisen as a result of Covid-19.I'd like to pause here and turn the presentation to Jim to discuss the current status of our clinical programs and to provide a detailed look at our planned CTP-543 Phase 3 trial. Then Marc will provide an overview of our financial results before we open the call to questions.

[Jim Cassella:]

Thanks, Roger. Let me start with CTP-692 and some further discussion about our Phase 2 clinical study. This is our ongoing clinical study that, like many other clinical trials, has been impacted by COVID-19 and policies put in place to control its spread. Here's where we are to-date, we were on track to enroll patients in time to complete and read out the Phase 2 study this year, up until the COVID-19 virus and related policies put a significant hold on recruitment activities and conduct of all clinical programs across the country.With the overshadowing of restrictions related to COVID-19, our study sites have continued to work within all the federal and state guidelines to complete the study visits in person or remotely for patients already enrolled in the study. However, as you might expect, screening activities for the enrollment of new patients have slowed or been temporarily suspended at our centers. With this temporary disruption in the screening and enrollment of patients, we expect the complete enrollment of the Phase 2 study by year end.Looking at the bigger picture with CTP-692, we believe we have a drug candidate with very compelling potential for treating schizophrenia, a major disease that affects millions of patients. We are hopeful that by amplifying or extending the effects of the current antipsychotic agents with CTP-692, we can more comprehensively treat schizophrenia and provide greater benefits to these patients.As we turn to the clinical program for CTP-543, I'd like to spend a few minutes this morning to provide an overview of our planned CTP-543 Phase 3 programs in alopecia areata and make a few comments on the data we've generated thus far. As a reminder, we're developing CTP-543 as a treatment for moderate to severe alopecia areata. We are very excited about this prospect of this program.Based on our discussions that in end of Phase 2 meeting with FDA, we are planning to conduct two randomized double blind placebo control Phase 3 trials in adults to support our NDA, patients will be randomized to receive 1 of 2 doses of CTP-543 or placebo. In our Phase 2 dose raising trial that was completed last year, patients treated with either 8 milligrams twice daily or 12-milligrams twice daily of CTP-543 met their primary efficacy endpoint.More specifically, the primary endpoint showed statistically significant differences relative to placebo, in the percentage of patients achieving a 50% or greater relative change from baseline at 24 weeks using the severity of Severity of Alopecia Tool, or SALT. We also saw significance at more stringent response threshold as we look more closely at all the SALT generated data. With that backdrop, let me highlight several key aspects of our planned Phase 3 program.Given the effects observed with both doses in Phase 2, our intent is to study both the 8 milligram and 12 milligram twice daily doses and ultimately seek approval of these doses so that patients and clinicians will have dosing options in real world use. We intend to randomize about 700 adult patients with moderate to severe alopecia areata per trial at sites in the U.S., Canada and Europe.The primary outcome measure for the Phase 3 programs will be the percent of patients who achieved an absolute SALT score of 20 or less following 24 weeks of treatment. Since SALT is a measure of scalp hair loss, a SALT score 20 means that patient has re-grown sufficient hair such that they have at least 80% scalp hair presence.Our analysis of the SALT data from our Phase 2 study showed that patients receiving either the 8 milligrams or 12 milligrams twice daily dose of CTP-543 were statistically superior to placebo patients in terms of achieving a SALT score of 20 or less. We have worked for several years to advance CTP-543 and the team here is very excited about this drug candidate moving to pivotal testing.We have a solid understanding of CTP-543's activity in alopecia areata and believe we are well-equipped to deliver in Phase 3 and ultimately offer patients a safe and effective treatment for alopecia areata.Let me pause here and turn the discussion over to Marc.

[Marc Becker:]

Thank you, Jim. As I review our first quarter of 2020 financial results, please reference the financial tables found in today's press release.Research and development expenses were $14 million during Q1 2020, compared to $15.8 million during the same period in 2019, a decrease of $1.8 million. The decrease in research and development expenses relates primarily to the completion of the Phase 2 dose ranging study and related pharmaceutical development for CTP-543. As we moved from 2020, we expect that R&D expenses will increase as we continue to develop CTP-692 and prepare to advance the CTP-543 into Phase 3 testing in the fourth quarter of this year.General and administrative expenses were $4.7 million during Q1 '20, compared to $5.6 million for the same period in 2019. The decrease is primarily attributable to decreases in legal expenses. Our net loss for Q1 2020 was $20.5 million or $0.70 per share, compared to a net loss of $21.8 million or $0.93 per share during the same time period in 2019.Finally, we ended the first quarter of 2020 with $159.6 million in cash, cash equivalents and investments. At the end of January, we completed a follow-on offering with common stock and pre-funded loans with net proceeds of approximately $70 million. As a result, under our current operating plan, we continue to expect our cash to fund the Company into the second half of 2021. Despite the challenges, we are all facing as a result as COVID-19, the ongoing execution of our business makes us optimistic for 2020 which we see as a year of significant milestones for our company.This concludes our prepared remarks and we would be happy to address any questions.

[Operator:]

[Operator Instructions] Our first question comes from Maury Raycroft with Jefferies.

[Unidentified Analyst:]

Hi, this is Swapnil [ph] on for Maury. So just a couple of questions. One is regarding 543 Phase 3. In 4Q, are there any gating factors for this trial to start? Or is it all clear and you are good to go?

[Roger Tung:]

Jim, could you take that?

[Jim Cassella:]

Sure. Hi. Good morning. Yes. So, we had a great meeting with the FDA. We have clarity on our Phase 3 protocol. At this point in time, it is going to be the logistics of getting the trial going. COVID-19 is clearly one of the influences in getting the trial up and running. So as we see greater clarity around the pandemic, we'll be able to make our very firm plans to start the trial in Q4, but we don't expect any difficulties in doing that.

[Unidentified Analyst:]

Okay, that's helpful and one question on 692. So, can you like tell us a little bit about your data expectations for the Phase 2 readout? And what kind of data would give you confidence to move forward that drug into pivotal trial?

[Roger Tung:]

Jim again.

[Jim Cassella:]

Yes, sure. So, as we mentioned earlier, COVID-19 has affected all the ongoing clinical trials across the country. Our guidance now is that we'll be able to complete enrollment by year, end and so our data readout will occur more than likely in 2021. We have -- our sites have been operational, we've done as much as we could to really help them out during the pandemic. So, as you can imagine, some sites were slowed and some sites had to really, slow down on enrollment.So, I think, we are anticipating a completion of enrollment at the end of this year, and then we'll be able to wrap up to trial. I think, as we talked before, we with positive results here, we will plan on having of Phase 2 meeting with the FDA. We think this is the only trial we need to do for Phase 2. It's a dose ranging trial and we would anticipate, starting the Phase 3 trial after discussions with the FDA at the end of Phase 2 meeting.

[Operator:]

Our next question comes from Joon Lee with SunTrust Robinson.

[Joon Lee:]

When will you know, if you definitely can or cannot proceed with Phase 3 outpatient study in the fourth quarter? And once your breakdown of academic versus private clinics, the reason for asking this is, we're hearing that academic sites may be more difficult to recoup from compare to private clinics where COVID-19 impact may be a lot less. And given the pandemic, what if any laxity could you expect from the FDA? Do you foresee perhaps less stringent requirements for initial maybe conditional approval with some post approval requirements?

[Jim Cassella:]

Hi, Joon. I am sorry, go ahead, Roger.

[Roger Tung:]

No, go on Jim.

[Jim Cassella:]

Hi, Joon. So, I think we're in good shape to start in Q4 given the current status of things in the world. Our Phase 3 trial will be run in U.S., Canada and Europe. And as we look forward into the later part of this year, I think the anticipation is unless things get worse again with COVID-19, we are in good shape from a planning perspective to start in Q4. So, again, unless there is a downward trend again with the virus, I think we are in really good shape.I think the FDA has put out guidances for current trials that are ongoing right now, in terms of flexibility and providing as much guidance as it can right now, in terms of what's going on with COVID. I don't know what's going to happen once we get beyond this crunch period with COVID in terms of regulatory expectations, but we have a fully developed program. We have a lot of data. We are continuing to track the trials that we need to do in relationship to NDA approval.So, we have a good plan here and we will be able to execute that plan as things open up a little bit more. We have a number of sites that we've been working with for our Phase 2 program. We obviously will be expanding the number of sites for Phase 3. We are feeling very confident that, the sites we are selecting both here and abroad are going to be sites that will be able to do this study, and I think that's really where our emphasis is right now in preparing for the start of this Phase 3.

[Roger Tung:]

Joon, I would not guide you to expect a change in the regulatory approval pathway though. I think our expectation is that, this will be a flow-through the normal course of our registration.

[Joon Lee:]

Great. Great. And if I could ask one more question. As we discussed on the fireside chat, just want to make sure I understand this correctly. If you look at the Phase 2 study that you have completed and assuming 100% of the SALT baseline score was 100 at baseline, at least 60% in the 8 milligram BID and 36% in the 12 milligram BID would've had SALT score of less than 10 compared to 2% in the placebo. Is that a fair way to understand the outcome?

[Jim Cassella:]

I'm just framing it this way because the endpoint in the Phase 3 is less than 20.

[Roger Tung:]

Yes, I'm sorry, I don't have the graph. So, yes, so go on Jim.

[Jim Cassella:]

Yes. So Joon, our average in the Phase 2, our average baseline score was about an 88 give or take.

[Roger Tung:]

Yes.

[Jim Cassella:]

You're right. So, that's a fair amount of hair loss coming into the trial. And I think the way that you could look at this is, we have the SALT assessment tool which allows us to cut the data in lots of different ways. So, when you look at the folks, who have had, based on the data that we've shown previously in terms of percent change from baseline, we did have 36% of the 12 milligram group have 90% or greater change from baseline.So, looking at an absolute score like SALT 20, of course we were able to look at that. We did say that, we had significance at the SALT 20 and we were going to be presenting that data at the AAD meeting. That meeting is now going to be a virtual meeting. So, we'll be able to present our new data analysis at AAD, so you'll be able to see those data. But we will -- we powered our Phase 3 study based on the analysis that we were able to conduct from our Phase 2 trial using the SALT 20 specifically.So, the powering for the trial is really based on what we know about achieving this end point. And I think, the data that we presented so far, doesn't quite show you that, but those data will be presented at the ADD meeting.

[Joon Lee:]

Has the date been set for that presentation?

[Jim Cassella:]

It has not been set yet, but the AAD has announced that they will have a virtual meeting.

[Joon Lee:]

Thanks.

[Jim Cassella:]

And we were selected for the late breaker session.

[Joon Lee:]

Great. Well, looking forward to it. Thank you.

[Operator:]

Our next question comes from Adam Walsh from Stifel.

[Unidentified Analyst:]

Hi. Thanks for taking the questions. This is [indiscernible] for Adam. I understand you have a Phase 2 extension study while CTP-543, is there any data from study this year? What is the dosing regimen in this extension file? Are the patients switching to the BID dosing that you plan to use in Q3? And then I have a follow-up.

[Jim Cassella:]

This is Jim. So, we do have an extension trial ongoing. It's the patients from the 12 milligram cohort as well as our other Phase 2 studies were eligible to rollover into the extension study. This is a long term extension study that we have been running now and the subjects were rolled over into it either onto the 8 milligram BID or 12 milligram BID dosing regimen. So, there are two doses in that study.

[Unidentified Analyst:]

Do we expect any data readouts this year?

[Jim Cassella:]

We haven't discussed when we're going to be talking about data from that study. It is a long term study. So, we haven't decided when we would or if we would start showing any of that data, but I think it's fair to say that you, we would not anticipate releasing any of that data this year.

[Unidentified Analyst:]

Okay, my second question is on patent 149 at PTAB. Can you help us understand the timeline here? We don't do any spec deposition from the new panel of PTAB judge? Thank you.

[Jim Cassella:]

Yes, I'm sorry to say that we can't provide very much guidance on that. This is as you as you understand an unprecedented situation with having these remands going back to PTAB. We expect that they'll probably try to act on it relatively soon, but we have no basis to give any specific guidance.

[Operator:]

Our next question comes from Liisa Bayko with JMP securities.

[Unidentified Analyst:]

Hi, guys, Neil on for Liisa. For the CTP-692, is it safe to say, can we say, the data will be first half of '21 or not sure yet? And then second question, the good news I think is that, dermatologists, psychiatrists, lots of other specialties, more likely to be able to do their job virtually, any reason to think differently in terms of the clinical trial setting?

[Roger Tung:]

Jim.

[Jim Cassella:]

Yes. So, I think that psychiatrists and dermatologists that we're using for our studies are well equipped to do the work that we're doing right now. I think the virus has had some impact in terms of overall logistics and things, but I think we've been able to really maintain things in terms of the 692, trial, which is really the active trial that we're running right now. We've had to work with all the sites to see what they needed, and I think they're mostly psychiatry centers they're very well experienced, and we're able to really make sure that they had what they needed to maintain their activities. I'm sorry. Could you repeat the first part of the question?

[Unidentified Analyst:]

Just the timeline 2021, can we say first half or not sure yet?

[Jim Cassella:]

Yes. So I think if we're on track to have enrollment completed by the end of the year, I think the first half is a reasonable expectation. I think it still depends on the impact of the virus. But if we can complete the enrollment by the end of the year, I think first half is a reasonable expectation.

[Operator:]

[Operator Instructions] Our next question comes from Esther Hong from Janney.

[Esther Hong:]

Hi. Good morning. So on CTP-692 for schizophrenia, is there the potential for any missing data because of the COVID-19 pandemic and maybe follow-up visits around the trials? Does this impact any powering assumptions? And then on CTP-543 for alopecia, any developments in other cases that have been similarly remanded? Thanks.

[Jim Cassella:]

Hi. So, I'll talk about 692. Look, I can't get into logistics and the actual details of the trial, but let me just say that, we've done everything we possibly could to maintain the integrity of the trial with the guidance issued by the FDA. It did allow for flexibility around remote assessments. And I think it's fair to say that, we'd done everything possible within the scope of all the guidances to maintaining integrity of the trial and also continue doing what we needed to do.

[Esther Hong:]

Okay.

[Roger Tung:]

Yes, with respect to the remand to the PTAB, as far as we're aware, there really has not been any further action under Arthrex in terms of remands and secondary adjudication or read adjudication of those studies for the trials. So, we're in a wait-and-see kind of mode. I just want to really emphasize that, regarding the conduct of the CTP-692 study, Jim's group has done a tremendous job of keeping things moving forward under really very challenging conditions. And, while it's difficult to assess the future, I think we're feeling really good about where the trial is right now relative to our initial concerns. So, it is continuing to move forward. We are continuing to enroll new patients and if things move in the trajectory that they had to-date, I think that study will move forward quite well.

[Operator:]

Our next question comes from Difei Yang from Mizuho Securities.

[Difei Yang:]

Hi. Good morning and thanks for taking my question. So, just a quick one, based on available clinical data from D-serine in schizophrenia, is this a correct assumption that we should expect a greater effects on the negative side of the symptoms versus the positive symptom and perhaps versus cognitive as well?

[Roger Tung:]

Jim?

[Jim Cassella:]

Yes. Hi, Difei. I think the literature has shown a very nice effect on negative symptoms. There's also been a very nice effect shown on positive symptoms and in some cases on the cognitive functioning. I think that has really reinforced our approach here, which is to look at the total PANSS score, which captures all three of those things. Of course, as we've discussed in the past, we will be able to go in there and look at the effects on negative symptoms and positive symptoms specifically, by the way that the PANSS are designed, and we'll also be able to look at those questions that are related or those items that are related to cognitive functioning.So, I think you're right the assessment of the literature is that there's been a very favorable effect on negative symptoms. I think that's one of the hallmarks of D-Serine. It's also one of the things that we're very much interested in. But because of the nature of D-Serine mechanism and its ability to really impact all those symptom domains, that's why we looked at the total score, but we will be able to look in that those individual domains as well.

[Difei Yang:]

Thank you, Jim. Then changing subject onto the IP discussions, so let's say, move forward a year a 2 month-ish. There is a decision either from the court or with competitors, maybe there's a settlement et cetera. So, whatever the outcome on the 149 patent, do you think there is any read through for the rest of the pipeline products for Concert?

[Jim Cassella:]

I really think that each of the products and each of the patents is a case-by-case situation with different facts surrounding them. As you are aware with respect to CTP-692, we're not pursuing a competition of better patents on it since that, that competition was, has been known in the literature. What we're relying on in that case is the unexpected properties of the compound toxicologically. We're not aware that there's ever been a case where a Deuterium-modified compound has had strongly positive toxicological characteristics, particularly renal tox relative to a non-deuterated compound. And that's a singular observation, we think provides a very strong basis for methods of use in a variety of different conditions as well as potentially pharmaceutical compositions.So, it's a very different kind of legal situation than with respect to the 149 patent. And I should also note that with respect to 149 that we do have the subsequent issuance of the 659 patent, which was in light of knowing that, there was the ongoing litigation around 149. So, we think that the subsequent patents on CTP-543, which protects pharmaceutical compositions, methods use of specific dosages of it, is an important patent that provides independent protection that really reduces the impact and importance of a 149 litigation.

[Operator:]

And I'm not showing any further questions at this time. I'd like to turn the call back over to Justine.

[Justine Koenigsberg:]

Thanks, Kevin. We'd like to thank everyone for joining us this morning and look forward to continue you to provide updates on our pipeline candidates as they progress. For a summary of upcoming events, please visit the IR section of our website.This concludes today's call. Thank you.

[Operator:]

Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.