Concert Pharmaceuticals, Inc.
Q2 2018 Earnings Call Transcript

Published: 4 Aug 2018

[Operator:]

Good day ladies and gentlemen and welcome to the Concert Pharmaceuticals' Second Quarter 2018 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, this conference call may be recorded. I would now like to introduce your host for today's conference, Ms. Justine Koenigsberg, Senior Vice President of Corporate Communications and Investor Relations. Ma'am, you may begin.

[Justine Koenigsberg:]

Thank you. Good morning and welcome to Concert Pharmaceuticals' second quarter 2018 investor update. Our press release announcing our financial results was issued earlier this morning and an electronic copy of our press release is also available on our website at concertpharma.com. Joining me this morning with prepared remarks are Roger Tung, our President and CEO; and Marc Becker, our CFO. We will also be joined by Jim Cassella, our Chief Development Officer; and 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 discussion of these risks, 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. Before we begin, I'd like to make an announcement about Concert's move to our new office space. Ahead of the expiration of our current lease, we'll be moving to a new location in Lexington, Massachusetts. Effective August 13th, our new headquarters will be located at 65, Hayden Avenue, which is the old Cubist headquarters and down the street from our existing space. We look forward to welcoming many of you to our new offices. With that, I would now like to turn the call over to Roger.

[Roger Tung:]

Thank you, Justine, and good morning. During the second quarter, we made important progress, particularly, in advancing our clinical programs. As we pass the mid-year mark, I'm very pleased to report that we're on track to execute on our plan to achieve Concert's remaining 2018 milestones. We have been and will continue to be significantly focused on advancing the development of CTP-543 in patients with moderate to severe alopecia areata. Our first key readout is expected in the fourth quarter when we will report the topline data of 4 and 8-milligram BID cohorts in the trial. Based on our understanding of the mechanism and the compound, we believe that CTP-543 will be pharmacologically active within this dose range. We look forward to sharing the topline results for 543 with you later this year. Let me recap the current status of our CTP-543 Phase IIa trial in alopecia areata. All subjects enrolled in the 4-milligram BID cohort have now completed dosing. We announced in late April that enrollment of the 8-milligram BID cohort was also complete. Consistent with our conduct in the 4-milligram cohort, after all patients in the 8-milligram cohort have completed 12 weeks of dosing, the Data Monitoring Committee will review the patient safety data. Pending a positive assessment by the DMC, we will propose a protocol amendment to the FDA to evaluate a 12-milligram dose of CTP-543 compared to placebo twice-daily. Our interest in pursuing a 12-milligram dose is consistent with our original approach and trial design to assess what we believe will be a full dose ranging exploration of clinically relevant doses of CTP-543 in the study. We believe it is important for patients and for competitive positioning to identify the most effective dose strength of CTP-543 that has a favorable safety profile. Let me add a few comments about data reporting and regulatory path. Moving to a 12-milligram BID dose would not change our plan to report topline data from the 4 and 8-milligram cohorts in the fourth quarter. Also, in contrast with the sequential dosing scheme we've used for this trial, we expect the Phase IIb trial to have a parallel design to evaluate two doses and two dosing regimens of CTP-543, which is designed to support Phase III in registration. We are developing our patient-reported outcome or PRO measures which will be validated to the IIb trial. Experts in the autoimmune and dermatology space generally equate that JAK inhibitors will play an important role across multiple indications in the years to come. We've been at the forefront of developing our oral treatment for alopecia areata and we are pleased about the progress we've made advancing CTP-543 in the clinic. Briefly on the legal front, the inter parties review or IPR proceeding against our patent covering CTP-543 is progressing with oral arguments expected in December. The PTAB will make a decision by April 9th, 2019. We strongly believe in the validity of our patent claims and will vigorously defend the patent. As CTP-543 continues to progress in Phase II development, we are preparing to move our next candidate CTP-692 into Phase I clinical testing in the fourth quarter. 692 is our deuterium-modified analog of the endogenous neurotransmitter D-serine which we are developing as an adjunctive treatment for schizophrenia. As we've discussed previously, studies have shown that patients with schizophrenia have reduced levels of D-serine in the blood and cerebral spinal fluid. Increased activity of D-amino acid oxidase which degrades D-serine has also been reported in post-mortem brain tissues of individuals with schizophrenia. Based on documented effects of D-serine in patients with schizophrenia, we believe that CTP-692 has the potential to restore an MDA receptor activity in key areas of the brain and improve clinical outcomes. In our preclinical studies, we show that CTP-692 and D-serine have similar binding and functional activity at the human NMDA receptor supporting the potential for similar activity. We also demonstrated that 692 results in higher exposure than a similar dose of D-serine. Importantly, in our studies in rats at doses far above those at which D-serine caused [Indiscernible] toxicity, 692 was well-tolerated with no changes in the serum creatinine and blood urea nitrogen demonstrating the potential for renal safety advantage for a deuterated drug. These findings will be presented at the American College of Toxicology Annual Meeting in November. As a result, we expect that we will be able to explore higher and potentially more relevant drug exposure than would be feasible with D-serine in our 692 program to explore the full therapeutic potential of our drug candidate. We are preparing to initiate Phase I clinical testing by year end. The Phase I program will include a D-serine crossover trial and we intend to hold that with a single ascending dose Phase I trial to assess the safety, tolerability, and pharmacokinetics of CTP-692 in healthy volunteers. Initial topline data is expected in the first quarter of 2019. A multiple ascending dose trial is expected to commence in the first half of 2019 followed by a Phase II dose-ranging trial to assess efficacy and safety of 692 as an adjunctive therapy in patients within adequately controlled symptoms of schizophrenia. Already there is strong enthusiasm from the KOL community about the prospect of the CTP-692 program and we look forward to advancing it into Phase II development in 2019. In summary, the achievements of this past quarter put Concert in strong position to create value from our pipeline. Key readouts for both of our proprietary clinical programs are on horizon and we look forward to keeping you updated on our progress. I'd like to pause here and ask Marc to review our second quarter financial results.

[Marc Becker:]

Thank you, Roger. As I review our second quarter results, please reference the financial tables found in today's press release. Revenue recognized in the second quarter was minimal. In the first quarter, we recognized $10.5 million primarily in non-cash consideration from Processa Pharmaceuticals under a license agreement, whereby Processa will develop and commercialize CTP-499. On the expense side, research and development expenses were $8.9 million for the quarter ended June 30th, 2018 compared to $7.3 million for the same period in 2017. In the second quarter of 2018, research and development expenses were primarily associated with the development of CTP-543 and CTP-692. General and administrative expenses were $5.5 million for the quarter ended June 30th, 2018 compared to $5.7 million for the 2017 period, a decrease of $0.2 million. Our net loss was $13 million or $0.56 per share compared with a net loss of $13 million or $0.58 per share for the quarter ended June 30th, 2017. Finally, we ended the second quarter of 2018 with $180.3 million in cash, cash equivalents, and investments. We continue to anticipate that our cash position will be sufficient to fund the company into 2021 under our current operating plan. We are at an exciting time for Concert to create value with a strong financial underpinning. Our proprietary candidate targets significant unmet medical needs. Individually, CTP-543 and CTP-692, which Roger described earlier may provide significant benefits to patients and have the potential to be blockbuster commercial opportunities. Additionally, our deal with the Vertex and the collaboration with Avanir, both have potential to create meaningful financial upside to Concert. With that backdrop and our strong cash position, we're well-positioned to advance our pipeline, starting with our first key readout with CTP-543 for alopecia areata in the fourth quarter. This concludes our prepared remarks and we would be happy to address any questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Adam Walsh with Stifel. Your line is now open.

[Neil Carnahan:]

Good morning. This is Neil Carnahan on for Adam. Congrats on the progress guys. First, CTP-692 is the plan -- I know you addressed it on your opening statements, but is the plan still to conduct the Phase I outside the U.S. and then do the multiple ascending dose domestically here prior to beginning with Phase II? And then do you guys have any updates on discussions you may have had with the FDA?

[Roger Tung:]

Hi Neil. Thanks for the question. The answer is yes. We are still planning on initiating our Phase I studies outside the U.S. and completing them under the U.S. IND. At this point, we don't have any comment about interactions with the FDA on the program.

[Neil Carnahan:]

Okay. Thank you, guys.

[Operator:]

Thank you. Our next question comes from Carter Gould with UBS. Your line is now open.

[Unidentified Analyst:]

Hi, this is Andrea [ph] on for Carter. Thanks for taking the question. Got a couple here on the 692 program. What are the remaining stage for starting the OUS Phase I this year? And as a follow-up, given that the data is expected during the first quarter next year, how should we be thinking about study size, enrollment, and length of the Phase 1?

[Roger Tung:]

Thanks very much for the question. So, we are in the process right now of finishing up the required studies, in particular the toxicology studies and manufacturing the necessary to initiate the study in Australia. In terms of the data that we intend to report out, we will be initiating the study with a crossover that will give us a sense of the relative bioavailability and exposure of D-serine versus CTP-692. And we will reporting -- report on the pharmacokinetic parameters. With respect to the single ascending dose and the multiple ascending dose studies, we'll be reporting on efficacy or -- excuse me on safety parameters and pharmacokinetics, but of course not on efficacy because these will be healthy volunteer studies.

[Unidentified Analyst:]

Okay, great. And lastly given the differentiated mechanism here and underlying biology, should our assumption be that the ultimate pivotal programs were consistent with [Indiscernible] programs in schizophrenia? Are there novel endpoints and trial design you can leverage here?

[James Cassella:]

Hi, this is Jim. So, I think that because we're focusing on adjunctive therapy for our indication, we will be using endpoints that are consistent with looking across the board at the symptom base for patients with schizophrenia. And -- so the standard scales that will assess positive symptoms, negative symptoms and cognitive functioning are scales that we're thinking of employing.

[Unidentified Analyst:]

Thank you.

[Operator:]

Thank you. Our next question comes from Konstantinos Aprilakis with JMP Securities. Your line is now open.

[Konstantinos Aprilakis:]

Hi guys. Thanks very much for taking my questions. So, could you update us as to the progress of the IPR proceedings concerning CTP-543? What steps are being taken to prepare for the oral arguments slated for later this year in December and how are you thinking about the process as a whole?

[Roger Tung:]

Thanks for the question Konstantinos. So, we are spending, of course, a great deal of time honing our arguments around the IPR. We feel strongly that we have a very good position defending our intellectual property going into this. So, we have a number of experts who we're working closely with that agree with us and that will help bolster our position with respect to the patentability of CTP-543. And we are, of course, spending a lot of time with our legal group on the strategy of exactly how we position our arguments. In general, we think that we have a good set of positions and we look forward to an opportunity to deploy them in a oral argument.

[Konstantinos Aprilakis:]

Great. And then just a quick question on CTP-692. And I'm sorry if it was covered in the prepared remarks, but the dose levels that you're going to look at for 692 and D-serine and how close do they approach the levels that are considered nephrotoxic, for D-serine?

[Roger Tung:]

Yes, so the study will be carried out with typical safety parameters guiding the dosing that's done in the Phase I study. And as with any xenobiotic agent albeit this is due to a deform [Indiscernible] or just a compound, we will be proceeding with an eye to care relative to the non-clinical toxicology development.

[Konstantinos Aprilakis:]

Okay, great. Thanks very much.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Difei Yang with Mizuho. Your line is now open.

[Difei Yang:]

Hi, good morning and thanks for taking my questions. Just a couple quick one on the CTP-543. So, do you see any reason to dose escalate beyond 12 mg?

[Roger Tung:]

Thanks for the question, Difei. We believe that 12 milligrams will give us, we think, the top of what we expect to see as the clinically relevant dosing parameters. We don't think that escalating beyond that will really provide a significant enhancement in terms of efficacy and when we get to that kind of dose level, we're bumping towards what we would expect to see as a safety -- high dose with respect to safety of the entity.

[Difei Yang:]

Okay. And then in terms of timeline, so if assuming you can move forward with the protocol amendment and then do the study, when should we be expecting readouts?

[Roger Tung:]

Well, I think in general, as we've noted before, the size of the patient group that we'd be looking at is approximately 30 patients plus some placebos exposed to the 12-milligram BID cohort. So, it would be the enrollment period of that cohort, plus six months to complete dosing or 24 weeks after the last patient is enrolled into the study and then the time to collect topline data after that.

[Difei Yang:]

Okay. Thank you, Roger.

[Roger Tung:]

Welcome.

[Operator:]

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Justine Koenigsberg expect for any closing remarks.

[Justine Koenigsberg:]

Thank you. And we'd like to thank everyone for listening in this morning. Next month we'll be presenting at the Wells Fargo, the H.C. Wainwright, and the Janney Montgomery Healthcare Conferences and we hope to see many of you there. This now concludes today's call. Thank you for joining us.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a great day.