Concert Pharmaceuticals, Inc.
Q2 2017 Earnings Call Transcript

Published: 12 Aug 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Concert Pharmaceuticals' Second Quarter 2017 financial results. 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 is being recorded. I would like to introduce host for today’s conference Mr. Justine Koenigsberg, Vice President, Investor Relations and Cooperate Communications. Ma’am you may begin.

[Justine Koenigsberg:]

Thank you, Kevin. Good morning, and welcome to Concert Pharmaceuticals’ second quarter 2017 investor update. Our press release announcing our financial results was issued earlier this morning and an electronic copy of our press releases is also available on our website at concertpharma.com. Joining me this morning with prepared remarks are Roger Tung, our President and CEO; Jim Cassella, our Chief Development Officer; and Nancy Stuart, our Chief Operating Officer. After our prepared remarks, we will open the call for questions. Our remarks today will focus on our financial results for CTP-656 asset purchase agreement with Vertex and the CTP-543 program. As a remainder, 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 thanks to those of you who are online for joining this morning. I’m pleased to say that we’ve closed the asset purchase agreement with Vertex for CTP-656 and or other cystic fibrosis assets. As a remainder, Concert shareholders approved the asset sale in May and in July the FTC grant determination of HSR waiting period. As a result, Vertex made a payment to Concert of $160 million in July. We also have the potential to receive an additional $90 million in future pre-commercial milestone. Given Vertex stated interest in developing CTP-656 as part of their future combination therapies and their substantial pipeline of CFTR correctors, we believe the potentials realized these milestones as high. With the closing, Vertex has assumed full control of CTP-656 program. We look forward to seeing the compound advanced in further development to hopefully provide improved CF therapies with important patient benefits. The Vertex transaction creates broad value with multiple ways, but the CF community we believe that CTP-656 has the potential to be the best-in-class potentiator and that Vertex is best suited to bring it forward given their arsenal of pipeline products, clinical expertise and commercialization capabilities in cystic fibrosis. We are grateful to our study participants or sites in the CF foundation for their support of CTP-656. [Indiscernible] that this transaction will from the Company into 2021 while our pipeline products advanced to several key milestones, specifically during this time spend AVP-786 being developed under our collaboration with Avanir is expected to achieve the Phase 3 data readouts in Alzheimer’s agitation. Also during this time period, we expect to advance CTP-543 into pivotal clinical testing for alopecia areata. With financial resources now available to us, we have the ability to expand our pipeline. As our confidence and understanding of the opportunities with 543 continues to grow, we’re currently assessing additional autoimmune indications for the compound. We are also continuing to assess opportunities to pipeline expansion outside of the 543 franchisee. The CTP-543 program is a result of conscious rigorous product discovery and development activities should yield and continue to create important intellectual property protecting the compound to the program. CTP-543 is deuterated form of ruxolitinib. Importantly, we have demonstrated significant differentiation relative to ruxolitinib. At the end of the second quarter, we filed a petition with the U.S. Patent and Trade Mark Office requesting that the Patent Trial and Appeal Board or PTAB institute to post back grant review of the patent recently issued inside which claims deuterated ruxolitinib analogs. Our petition seeks cancellation of all claims based on lack of the name on it and lack of written description. Regarding the post grant review requested by Concert, we expect Incyte to file a response by October '18. After Incyte's response, we expect PTAB to decide in first quarter of 2018 whether or not to grant our petition and institute the PCR reviews. As we have reported, Incyte filed a petition for Inter Partes Review or IPR in April challenging our 543 composition of matter of patent also with PTAB. Last month, we filed our response to Incyte's IPR petitioning. As I noted, CTP-543 has unanticipated differentiating properties and we are confident in the validity of the patents. As a next step, the PTAB will make a decision early in the third quarter whether or not to institute the preceding. Both of these proceedings provide a mean to clarify our intellectual property landscape early in the development of CTP-543. We look forward to hearing from the PTAB on both matters. We are pleased by the validation that we've earned for Concert's deuterium chemistry platform with companies such Vertex, AbbVie, Otsuka, Jazz Pharmaceuticals, and Celgene. We continue to make progress with our deuterium innovation engine with CTP-543 as the next key focus of our proprietary pipeline. Let me pause here and turn the call over to Jim to discuss the CTP-543 Phase 2 trial.

[Jim Cassella:]

Thank you, Roger. Last month, the FDA listed the clinical hope on our Phase 2a trial evaluating CTP-543 in patients with modern to severe alopecia areata and the trial is now continuing. Following discussions with FDA, we agreed to modify to trial design. It's our impression that the FDA is taking a measured approach through the development of JAK inhibitors in autoimmune dermatological indication such as alopecia areata. The changes we have incorporated into the protocol for design to follow the FDAs input of staging to those groups to get a read on the safety of each dose group before escalating to a higher dose. Once we established the safe and efficacious dose range in this study, we believe our later development trials will progress as we had originally planned. We expect to enroll 90 patients in the trial and we will be evaluating two doses 4 mg and 8 mg of CTP-543 twice daily for a treatment duration of six months compared to placebo. The first cohort will be randomly assigned to the 4 mg dose or placebo and following the assessment of and approval of the safety data by our data monitoring community the next cohort of patients will be randomly signed to the 8 mg dose or placebo. If appropriate, the protocol maybe amended to assess a higher dose of CTP-543. We look forward to completing the 2a trial and to further advancing CTP-543 involvement. We are pleased with the skilled efforts by our regulatory and clinical team as well as the support for our product clinical trial site to facilitate the advancement of CTP-543 program. The trial is now expected to complete in the second half of 2018, and we will report top line data soon thereafter. In the mean time, the FDA has announced a patient focused drug development initiative meeting for alopecia areata scheduled for September 11. These meetings are intended to take into account to current stage of drug development specific interest of FDA review division and the need for information gathering from a patient perspective on their condition in treatment options. The medical community and patient suffering from alopecia areata have been eager for new treatments. We plan to attend the upcoming patient focus meeting as way to deepen our understanding of the needs patients with this disease and hope they will provide valuable insights on the importance of advancing new treatments for alopecia areata including the development of CTP-543. The National Alopecia Areata Foundations’ annual patient meeting this summer was another opportunity where Concert was able to engage with patient community. Participating on the industry panel and taking with patients enabled us to connect with the community and gain additional insights into the needs of patients and families affected by alopecia areata. I'd like to now turn the call the Nancy, to review our financial results for the quarter.

[Nancy Stuart:]

Thanks, Jim, and good morning everyone. As I review our second quarter results, please reference the financial tables found in today’s press release. Looking first at R&D expenses, research and development expenses were $7.3 million for the 2017 period compared to $9.8 million in the 2016 period, a decrease of $2.5 million. The decrease of $2.5 million was primarily due to timing to initiate the 543 Phase 2a trial as well as scale up of manufacturing expenses in 2016 to support the 656 and 543 Phase 2 trial. General and administrative expenses were $5.7 million for the 2017 compared to $3.8 million in the 2016 period. The increase of $1.9 million in G&A expenses was primarily related to professional fees in connection with 656 asset purchase agreement and the patent matters related to 543. Our net loss was $13 million or $0.58 per share for the second quarter of 2017. For the corresponding 2016 period, our net loss was $13.4 million or $0.60 per share. We ended the quarter with $103.4 million in cash, cash equivalents and investments. With the $160 million from the Vertex transaction, we believe our cash will be sufficient to fund the Company into 2021 under our current operating plan. In the second quarter, we secured $30 million in venture debt from Hercules Capital. We intend to pay off the loan during the Vertex pre-payment provision period. This will enable a 50% reduction in the end of the time chart in wavier of the prepayment penalty. This concludes our prepared remarks, and we would happy to address any questions.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Jeff Hung from UBS. Your line is open.

[Jeff Hung:]

Thank you for taking the question. Now that the sales 656 closed, can you talk about little bit more about the autoimmune indication for 543. Do you plan in there multiple indications in clinic at once or do you see yourselves proceeding one indication at a time? Appreciate any clarity on the timing, I guess, are there any indications likely to be announced for year-end? Or are you waiting for the PTAB to decide whether they will refuse PGR application?

[Roger Tung:]

Jeff, thanks very much for the question. So we probably will not do multiple indications at once. We are thinking about balancing our pipeline up by both broadening the indication that we are pursuing with 543 as well as looking to bring new compounds into the pipeline. Probably, the next action that we will take would be to bring another indication forward with 543. But that’s something that we haven’t determined as of today's timing of, it would probably be next year rather than this year but stay tuned.

[Jeff Hung:]

And then just to clarify the recognition of the 160 million from Vertex. Will the portion not in [Aspro] show up as a lump sum in 3Q? Thank you.

[Nancy Stuart:]

Yes, so the 147 million most of the revenue will be recognized this year. There will be a little bit of revenue recognized next year.

[Operator:]

And our next question comes from Adam Walsh with Stifel. Your line is open.

[Adam Walsh:]

Jim, I'm just curious. Can you remind us what kind of results we have seen of any with ruxolitinib with the lower doses that you are testing the 4 mg and 8 mg bid?

[Jim Cassella:]

Hi, Adam, thanks for the question. You know the trial that was published by Colombia was using the 20 mg bid dose, however, there has been nothing published formally but we have heard from trial list that the 10 mg bid dose of ruxolitinib has shown to be effective.

[Adam Walsh:]

And then just a follow-to the last question. In terms of expanding the development pipeline, Roger, I'm curious about the rationale around advancing 543 and other indications given the IPR and PGR ongoing scenarios that are playing out. As opposed to bringing something forward from your pipeline another patented compound, as a follow-up to that. Just can you walk us through the thought process of -- were to bring another compound forward from your pipeline? Do you things -- it might be something more along the lines of 786 where it’s a deuterated of patent compound or would you potentially bring another deuterated on patent compound that’s still under patent by a competitor? Thank you.

[Jim Cassella:]

Those are great questions, Adam. So with respect to timing of bringing another indication forward, as I indicated we are not going to rush into doing that with 543. Although, we are taking very seriously the broad activity that’s known for JAK 1 and 2 inhibitors and are carefully assessing what we might go forward in from our variety of perspectives. So in terms of timing as I indicated is not eminent, but where the fortunate situation of having not to have an exclusive forward or mutually exclusive approach of taking 543 or another compound or compounds forward, we can do both of those with our cash. And we think that that’s the best choose for our proceeds. So regarding additional compounds, we have a robust process right now that’s ongoing and we are looking at cost abilities from variety perspectives literally have multiple approaches being looked at by different teams that are looking at both compounds that we currently have intellectual property issued and other compounds that are earlier in their cycle with us. And we’re looking at most compounds that are currently on brand and one that or like 786 differentiated by deuterium modification, but don’t have current some branded competition when we come out. So, I think it's safe to say that our approach is pretty broad and as I think I've indicated with you in the past, we may take multiple compounds, additional compounds forward into early PK studies and assess them for settling on specifically our next all-in development candidate.

[Operator:]

[Operator Instructions] At this time, I’m showing no further questions.

[Nancy Stuart:]

Okay, thank you everyone for joining us today. We look forward to keeping you updated on our progress. In the meantime, we will be participating at the Wells Fargo Conference next month in Boston and hope to see many of you there. This concludes our call. Thanks again.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day.