Concert Pharmaceuticals, Inc.
Q3 2018 Earnings Call Transcript

Published: 1 Nov 2018

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Concert Pharmaceuticals Third Quarter 2018 Financial Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Justine Koenigsberg. You may go ahead.

[Justine Koenigsberg:]

Thank you, Julie. Good morning, and welcome to Concert Pharmaceuticals Third 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 description 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. With that, I would now like to turn the call over to Roger.

[Roger Tung:]

Thank you, Justine, and good morning. During the third quarter, we significantly focused on advancing the clinical development of our lead pipeline product, CTP-543, in patients with moderate to severe alopecia areata. We're at the forefront of developing an oral treatment for alopecia areata, and we're pleased with the progress we've made advancing CTP-543 in the clinic. We remain highly committed to developing this promising drug candidate as a first-in-class treatment to address an unmet need in a major market. In the coming weeks, we will report for CTP-543 efficacy data from our ongoing dose-ranging trial. Our clinical program for CTP-543 continues to have great momentum. During the third quarter, an independent data monitoring committee assessed 12-week safety data of the full 8-milligram BID cohort and, importantly, supported the addition of a 12-milligram BID cohort to the trial. As a result, consistent with our previously announced plans, we amended our protocol and, in September, began enrolling patients in the higher-dose cohort. We believe that the evaluation of the 12-milligram dose for CTP-543 is important for defining the dose-response relationship in enabling the best informed dose selection for future trials. As this double-blinded final cohort in the Phase IIa trial progresses, we will unblind the data from the 4- and 8-milligram cohorts and report top line data results later this month. Based on our understanding of the mechanism and the compound, we believe that CTP-543 will be pharmacologically active within this dose range. The mechanistic and pharmacokinetic profile of CTP-543 is potentially very well suited for the treatment of alopecia areata. Specifically, its JAK 1/2 mechanism has been demonstrated -- has demonstrated what we see as important proof of principle for efficacy. We believe that the JAK subtype selectivity of CTP-543, combined with its pharmacokinetic properties, may offer safety or efficacy advantages for alopecia areata patients relative to other JAK inhibitors. Before we turn to other highlights in our pipeline, let me make a brief comment on the legal front. In the IPR proceeding that Incyte brought against the patent that we have covering CTP-543, oral arguments will be held on January 25, 2019, and the PTAB is expected to render a final decision by April 9, 2019. We remain confident in our ability to defend the validity of our patent. In addition, we believe we have multiple ways to protect CTP-543 and intend to continue aggressively advancing its development. In addition to our enthusiasm for CTP-543, we're also very excited about CTP-692. 692 is a deuterated form of D-serine, which is an endogenous amino acid neurotransmitter that acts as a co-agonist at the NMDA receptor. As we've described previously, an NMDA receptor hypofunction is believed to contribute to the pathophysiology of schizophrenia. Oral administration of D-serine has been shown to benefit individuals with schizophrenia taking standard-of-care antipsychotic medication. Despite its therapeutic potential, the development of D-serine has been limited by safety concerns, in particular, renal toxicity, which has been observed in preclinical species. We applied Concert's deuterium chemistry technology to create CTP-692 as an innovative potential first-in-class medicine that's designed to enhance the therapeutic properties of D-serine. We intend to initiate Phase I clinical testing with CTP-692 in healthy volunteers this quarter. The Phase I program will include a D-serine crossover comparison, and we also intend to evaluate single and multiple ascending doses of CTP-692. The Phase I program will provide the support to move into what we hope will be a single Phase III-enabling dose-ranging Phase II efficacy trial by year-end 2019. The CTP-692 clinical program is supported by preclinical studies which have shown the potential for 692 to improve upon the safety profile of D-serine, which is known to cause nephrotoxicity in published analyst studies. Unlike D-serine, CTP-692 did not cause abnormal levels of serum creatinine or blood urea nitrogen, even when dosed at levels far above those where D-serine was overly toxic. This finding is even more remarkable since CTP-692 provided higher exposure than similar doses of D-serine. These findings will be presented next week in a poster at the American College of Toxicology Annual Meeting. We're enthusiastic about moving towards the clinic with CTP-692 as potential adjunctive treatment for schizophrenia. It represents another example of how we're building our pipeline and applying our deuterium chemistry to create innovative medicines with differentiated therapeutic properties. In summary, I'm excited about the potential of our proprietary candidates, CTP-543 in alopecia areata and CTP-692 in schizophrenia, both of which have the opportunity to address significant unmet needs for many patients. Key readouts for both of these programs are on the horizon, and we look forward to keeping you updated on our progress. I'd like to pause here and ask Marc to review our third quarter financial results before we open the call to questions.

[Marc Becker:]

Thank you, Roger. As I review our third quarter results, please reference the financial tables found in today's press release. Research and development expenses were $11 million for the quarter ended September 30, 2018, compared to $7.1 million for the same period in 2017. In the third quarter of 2018, research and development expenses were primarily associated with the development of CTP-543 and CTP-692. General and administrative expenses were $6.3 million for the quarter ended September 30, 2018, compared to $4.9 million in the 2017 period, an increase of $1.4 million. Our net loss was $17.4 million or $0.74 per share compared with a net income of $128.1 million or $5.61 per share for the quarter ended September 30, 2017. The 2017 net income was driven primarily by revenue related to the close of the CTP-656 asset purchase agreement with Vertex. Finally, we ended the third quarter of 2018 with $168.5 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're at an exciting time for Concert as our key development programs and other value drivers advance closer to milestone events. In addition to our top line data for CTP-543 and our Phase I initiation of CTP-692, our deal with Vertex and the collaboration with Avanir both have the potential to generate meaningful financial upside to Concert. The AVP-786 Phase III trials for Alzheimer's agitation are progressing under our agreement with Avanir, and Avanir is projecting to complete them in 2019 for use to support a U.S. registration. The next anticipated milestone under the collaboration relate to the acceptance of regulatory filings, which include a $5 million milestone payment to Concert on acceptance of the MDA. We also stand to receive commercial milestones under that collaboration. With that backdrop, we're well positioned to advance our pipeline starting with our first key readout of CTP-543 for alopecia areata in November. This concludes our prepared remarks, and we would be happy to address any questions.

[Operator:]

[Operator Instructions]. Your first question comes from the line of Adam Walsh from Stifel.

[Neil Carnahan:]

This is Neil on for Adam. Can you give us an update on the progress of the 12-milligram enrollment and then maybe any color you can offer on when we can expect that readout?

[James Cassella:]

This is Jim. So as you know, we've -- we started the enrollment of the 12-milligram cohort at the end of September, and we won't give the specifics of how things are going until we tell you when that enrollment is complete. But just for reference, the 4- and the 8-milligram cohorts enrolled in about 2, 3 months. And then at the end of the enrollment period, we have 24 weeks of dosing. And our intention is that we'll be wrapping up the study once we get all the data in, and we'll be able to report out as that comes in. But it will -- the clock starts ticking, really, once we know that the enrollment is complete.

[Operator:]

Your next question comes from the line of Difei Yang from Mizuho Securities.

[Difei Yang:]

Just a couple here. First, on CTP-543, could you talk a little bit about how do you see the regulatory pathway works out? And do you need to wait until we have readout on the 12 mg dose before moving into the registrational trials? Is it 2 trials, 1 trial, et cetera?

[Roger Tung:]

Yes. Well, thanks for the question. We won't truly know the regulatory pathway until we meet with FDA in an end-of-Phase II meeting. Having said that, we feel very hopeful that the ongoing studies will provide the dose ranging that's necessary to move forward. And so our intent is to assess the data, of course, first from the 4- and 8-milligram cohorts, which will be available later this month, and then the 12-milligram cohort, when that dose group is completed. And we think that all of that, both safety and efficacy, information will really be necessary to enable us to have a meaningful discussion with the agency on the path forward. But if it is of sufficient quality, we would intend to approach FDA regarding possibly moving into pivotal studies directly afterwards. Our current plan is to do 2 Phase III studies, really, more toward the logistical aspects of running studies in that way rather than running a very large single study.

[Difei Yang:]

Okay. And earlier in the conference call, you talked about the IPR process on CTP-543, and you made the comment you believe there are additional ways other than IP protection maybe you can use to protect the asset. I just wanted to clarify if I heard that correct -- correctly. And if yes, what are the different ways? On the very high level, if you could give us a little bit more color.

[Roger Tung:]

Sure. Well, we, of course, believe that we will prevail with the ongoing IPR challenge. But beyond that, we also have additional patents that have been filed covering various aspects of the composition and use of CTP-543. And of course, we have the likelihood of where we have -- we know we'll have regulatory exclusivity once the drug is approved.

[Operator:]

Your next question comes from the line of Konstantinos Aprilakis from JMP Securities.

[Konstantinos Aprilakis:]

So first, for CTP-543, can you remind us what biomarkers you're tracking in the ongoing Phase IIa study and whether you're intent on maybe pursuing a selection strategy going forward into pivotal studies depending on what you learned there? And I've got a quick one on 692.

[Roger Tung:]

Sure. Well, thanks for the question. So we are really not looking at biomarkers as selection strategy. The data using ruxolitinib as stalking horse for the JAK 1/2 mechanism suggests that the majority of patients may be responsive to that mechanism. And if we see that being the case, it would be a more straightforward approach to develop the compound without having a companion diagnostic. So that's not our intent. We will be following a number of mainly blood-borne biomarkers. We're not taking scalp biopsies in this study. And the intent is to do some retrospective analysis of what the -- again, with the hope of understanding mechanistically what is happening at the fine level of detail rather than using it for selection purposes in the future.

[Konstantinos Aprilakis:]

Okay, great. And so for the 692 Phase I, you're including a crossover comparison to D-serine. So would you expect to see nephrotoxicity of the D-serine doses you're studying? And if so, what steps are you taking to protect against it?

[Roger Tung:]

We would not. D-serine has been used fairly extensively in moderate doses in humans. So there haven't been any reports of frank toxicity. We, of course, will be careful in terms of the dose that we're using, and we're only going to be using a single dose. So we don't feel that there's a concern with taking that approach. We do see as -- likely seeing quite market differences in terms of a reduction in the occurrence of renal toxicity with CTP-692. So we, of course, feel much more comfortable about the escalation and further study of that compound.

[Operator:]

[Operator Instructions]. Our next question comes from the line of Carter Gould from UBS.

[Carter Gould:]

Just a couple of clarifying ones for me. So I guess just to be clear, is the expectation that you'll wait for the 12 mg data before meeting with FDA? And then, I guess, on the other piece there, Roger, just, again, to be clear, if the data warrants it, you'll still look to move to registrational studies even if the IPR doesn't go in your favor?

[Roger Tung:]

Thanks for the question, Carter. The answer to both of those is yes. So with the ongoing study, we'll include in its final analysis placebo patients who are included in the 12-milligram arm. So we don't really have a full data set until the completion of the 12-milligram study or the 12-milligram arm of the study. So we wouldn't really have a complete dataset to take to FDA until we have completion of all arms. And with respect to the IPR, as I indicated, we believe that we not only will prevail in that but also that we have other potential to protect the compound. So yes, our intent is to move forward regardless of the outcome.

[Operator:]

Your next question comes from the line of Esther Hong from Janney.

[Esther Hong:]

My first question is on CTP-692 for schizophrenia. Can you discuss the competitive landscape for therapies treating negative and cognitive symptoms? So for example, Vraylar. Vraylar is approved for schizophrenia and has demonstrated improvement and negative symptoms when compared to risperidone. And as a follow-up, what would the potential treatment paradigm be if CTP-692 were approved? Would patient be treated first for positive symptoms and then later for negative and cognitive symptoms?

[Roger Tung:]

Sure. Thanks for the question, Esther. So I just want to make clear that our initial approval for CTP-692 is going to be directed towards overall adjunctive treatment of schizophrenia, not specifically for negative symptoms. We are aware that D-serine has shown amelioration of both the positive as well as negative and cognitive symptoms in schizophrenia patients. And so the intent would be to take patients who have stable baseline on existing medication and to add 692 versus placebo as an adjunctive therapy and then look at patents' total scores. In terms of the overall landscape for negative symptoms, I don't want to go through a exhaustive list, but there are certainly a number of different mechanisms that are being looked at in negative symptom studies in schizophrenia. Our understanding, having looked at this in some detail, is that those are fairly difficult to get -- to have well-controlled studies and to conduct in a way that is optimal. So that would not be the first approach that we take towards utilizing the compound. The intent will later on in the development of the program to consider looking at negative symptoms as a separate indication. But as of right now, as I indicated, we're looking at adjunctive therapy.

[Operator:]

I am showing no further questions at this time. I would now like to turn the call back over to Justine Koenigsberg.

[Justine Koenigsberg:]

Thank you. And thank you, everyone, for listening in this morning. Later this month, we'll be participating at the Stifel and Jefferies conferences and hope to see you there. This concludes our call. Thank you.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may now disconnect.