Concert Pharmaceuticals, Inc.
Q1 2016 Earnings Call Transcript

Published: 8 May 2016

[Operator:]

Good day ladies and gentlemen, and welcome to the First Quarter 2016 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 be given at that time. [Operator Instructions] I would now like to introduce your host for today’s conference, Justine Koenigsberg. You may begin.

[Justine Koenigsberg:]

Great, thank you. Good morning, and welcome to Concert Pharmaceuticals’ first quarter 2016 investor update. Our press release announcing our financial results along with the press release we issued last night, describing our new clinical candidate CTP-543, are both available on our website at concertpharma.com. Please reference these releases during today’s discussion. Joining me today with prepared remarks are Roger Tung, our President and CEO; and Ryan Daws, our CFO; and they will be joined by Nancy Stuart, our Chief Operating Officer for the Q&A portion of the call. As a remainder, today’s discussion will include statements about the company’s future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in the risks factor section of our most recent quarterly report on Form 10-Q filed with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. With that, I would now like to turn the call over to Roger.

[Roger Tung:]

Thank you, Justine. Good morning and thank you for joining us this morning. I’ll start today’s call by highlighting our new program CTP-543, and then discuss the latest on CTP-656 and then pass the call to Ryan to review our financial results. As we announced late yesterday, we unveiled our newest clinical program CTP-543 and we are very excited that it is poised to enter clinical evaluation this quarter. CTP-543 is a proprietary inhibitor of Janus kinases 1 and 2, known as JAK1 and JAK2 that we intend to develop as an oral treatment for alopecia areata and autoimmune disorder that results in patchy or widespread hair loss and that has no approved treatment options. CTP-543 is a deuterium-modified analog of ruxolitinib, which is commercially marketed as Jakafi into United States for the treatment of myelofibrosis and polycythemia vera. The 543 program is a prime example of the application of our deuterium platform to create proprietary new medicines, which extend the utility of known molecules into new therapeutic areas. And as with our other clinical programs, 543 may have utility in additional indications. For those of you not familiar with alopecia areata, as I mentioned, it is an autoimmune disease that results in partial or complete loss of hair on the scalp and body. Onset can occur at any age including childhood and affects both women and men. Many individuals with alopecia areata report experiencing anxiety and depression. In moderate to severe disease, which is the indication that we intend to initially target with CTP-543, spontaneous remission rates are reported to be low. There is a major need to provide an effective medicine for the many patients with alopecia areata. According to MD Anderson, nearly 2% of people in the United States suffer from the disease. While there are currently no FDA approved drugs for the treatment of alopecia areata, FDA clearly recognized its importance. Last year, the agency designated alopecia areata as one of the disease areas to review under its 2016 to 2017 Patient-Focused Drug Development Initiative. The goal of this initiative is to create a systematic way of gathering patient perspective on their conditions and treatment options. Against this backdrop of regulatory awareness, we believe that 543 is well-positioned to provide important patient benefits in an area of compelling medical needs. Similar to other programs in our pipeline, we have a substantial body acknowledge in forming the development of 543, including the views of ruxolitinib and academic settings demonstrating hair growth in individuals with moderate to severe disease. Recent insights into immune dysregulation associated with alopecia areata supports the potential of 543 to be an effective treatment. In pre-clinical testing CTP-543 retains ruxolitinib’s JAK1 and JAK2 inhibition profile as would be expected. And it shows greater metabolic stability than the non-deuterated compound. Based on what we know about the use of our ruxolitinib to-date in the syndication and our pre-clinical data with 543, we are very excited about the prospects of this program. As the next step, we intend to advance CTP-543 into a Phase 1 clinical trial to assess its safety, tolerability, pharmacokinetics and its pharmacodynamic profile in healthy volunteers. This Phase 1 trial is expected to begin in the second quarter of 2016 and our goal is to advance 543 into a Phase 2 efficacy study next year. Alopecia areata is an important disease where we hope to provide meaningful benefit to patients and some attractive market opportunities that we believe is addressable by Concert. We hope to be the first market with an oral agent for this disease. Turning now to CTP-656. As with our single-dose study, we are happy to see our multiple-dose trial also demonstrate a differentiated for 656 relative to Kalydeco. We continue to observe a long half-life supporting once-daily dosing and improved exposure to active parent compound relative to less-active metabolites. We believe the potential of 656 to be dosed once-daily as well as its improved metabolic profile, may provide important patient benefits including the ease of adherence and potentially improved efficacy. As a reminder, this trial was conducted in two parts and enrolled 38 healthy volunteers to assess, safety, tolerability and pharmacokinetics of 656 with our tablet formulation. In the first part of this study, we assessed a single 150 mg dose of 656 versus 150 mg of Kalydeco. The second part of this study was double-blind placebo-controlled and assessed three doses of 656, which were 75 mg, 150 mg, and 225 mg, each dose daily for seven days. Across all three doses, the average plasma half-life of 656 was approximately 18 hours at steady state. CTP-656 showed a dose proportional increase in exposure with repeated dosing across the 75 mg and 150 mg doses. The 225 mg dose showed greater than just proportional exposure. CTP-656 was safe and well tolerated in all three dose groups. We have now used these data to select the doses for our Phase 2 trial that bracket parent drug exposure associated with the commercial dose of Kalydeco. The metabolite exposure profile of CTP-656 after seven days of dosing showed that the greatest exposure in plasma was to the parent drug. These findings confirm that at steady state, the metabolite profile was similar to that previously demonstrated in the single ascending Phase 1 trial. We also recently completed a Phase 1 Food Effect study. This healthy volunteer trial was designed to evaluate the bioavailability and pharmacokinetics of CTP-656 when dosed fasted or with a low fat or moderate fat-containing meal. Results showed that CTP-656’s exposure was consistent when dosed with either a low or moderate fat-containing meal and was also consistent with the exposure previously observed when dosed with a high fat meal. We are pleased to see that full bioavailability of 656 was retained even with a low fat meal. Since our last update, we’ve defined Phase 2 design for 656 that includes a low dose strength. Beyond that we are not in a position to discuss the trial design until closure to study initiation. However, as a result of our additional manufacturing, we currently project a modest delay to the start of dosing. We remain on track to open our IND by year-end and continue to expect to have Phase 2 topline data by year-end 2017. Our Phase 1 results and KOL feedback on our program and our Phase 2 design to-date, reinforce our excitement about the potential for CTP-656 to offer a better treatment option alternative for cystic fibrosis. With that, let me turn the call over to Ryan to discuss our first quarter 2016 financial results.

[Ryan Daws:]

Thank you, Roger. Before we review our first quarter financial results, I would like to briefly comment on our collaborations. Avanir is conducting multiple trials with AVP-786 in a number of indications. Importantly the Phase 3 trials in Alzheimer’s agitation are underway and are expected to be complete in the third quarter of 2018. Otsuka has also stated it intends to begin a Phase 3 trial with 786 in Japan for Alzheimer’s agitation. They remain very committed to this clinical candidate, an indication and we look forward to its progression under Avanir’s and Otsuka’s global leadership. There is a large unmet need in Alzheimer’s education and we believe the potential future royalties to Concert could be substantial. We know there is an expectation with the major depression trial with AVP-786. This project is complete in this quarter. It is clear from our discussions with Avanir that they and Otsuka will handle all communications about this in future Phase 2 trials. As a result, we can't predict when or if they will release clinical data. In our other collaborations, as a reminder, Celgene and Jazz have assumed development control of the CTP-730 and JZP-386 programs respectively and there are no updates to report at this time. Turning now to our financial results, beginning with revenue. Revenue was $56,000 for the quarter ended March 31, 2016 compared to 1.3 million for the prior year period. The decrease in revenue was attributable to the completion of Phase 1 clinical evaluation of CTP-730 and JZP-386. Research and development expenses were $10.5 million for the quarter ended March 31, 2016 from $36.9 million in 2015, an increase of $3.5 million. The increase in research and development expenses was due to the conduct of our Phase 1 clinical trials of CTP-656 as well as increased manufacturing and preclinical costs associated with the development of CTP-543. General and administrative expenses were $3.6 million for the quarter ended March 31, 2016 compared to $3.2 million in 2015. The increase was attributable to a $400,000 increase in non-cash stock based compensation. Our net loss was $13.9 million or $0.63 per share for the quarter ended March 31, 2016 compared to a net loss of $9 million or $0.48 per share in 2015. We ended the quarter with $127.7 million in cash, cash equivalents and investments. We believe our current cash is sufficient to fund our operations into 2018 and achieve a number of inflection points for our clinical programs over the next 12 to 24 months. As we approach the mid part of the year, we are pleased that we have the financial resources to continue to support progressing both CTP-656 and CTP-543 into Phase 2 efficacy studies during 2015.

[Justine Koenigsberg:]

Thanks, Ryan. This concludes our prepared remarks and we would be happy to address any questions at this time.

[Operator:]

[Operator Instructions] And our first question comes from the line of Joe Pantginis from ROTH Capital Partners. Your line is open.

[Joe Pantginis:]

Hey, guys, good morning. Thanks for taking the question. Couple of questions on 543, if you don’t mind. First, are you able to discuss little more about the pre-clinical properties that you saw. You mentioned it has obviously a better metabolic profile, but can you discuss any of the maybe analogies similar to 656 with regard to the active metabolites or any other factors you can share with us?

[Roger Tung:]

Hi, Joe, thanks for the questions. Really what we're viewing in this program is as is a way to take a mechanism of action which appears to be clearly effective in a disease state which is not currently being treated by existing therapies and to utilize our technology to make what we hope will be a breaking medicine for it. This really is not so much around a specific aspect of the pharmacokinetic profile of the compound as it is to take a compound that is differentiated and has well-known properties into an indication where there is tremendous patient need.

[Joe Pantginis:]

And that's actually a good point because you did mention in your press release too that you have already been awarded composition of matter patent, so that's very encouraging. And I guess as you look forward and of course it is a very forward looking statement here. I do notice that Incyte is developing Jakafi for this indication. So, you are looking to your differentiated properties and you also mentioned potential other indications. Can you give us a glance as to what any of those indications might be?

[Roger Tung:]

Maybe the first question first. We're certainly aware that Incyte has an interest in developing ruxolitinib as a topical treatment for Alopecia areata which we think is great. We think there are different patient populations, different segments who may wish to use the drug in different reforms and I really should say the mechanism. We think that we have an ability to bring in oral agent first forward that would potentially position us as first-in-class an oral agent. Regarding other possible indications, we are really not discussing that. At this time, as you're aware, the Janus kinase field has turned out to be quite a rich one in terms of potential pathophysiology that it can address and we think that the particular properties of JAK1, 2 inhibitor are potentially broad, but our focus right now is on alopecia areata.

[Joe Pantginis:]

No, that's perfect. And my last quick question, thank you for the patience, is the duration of the compound did not impact at all any of the inhibitory properties of either of the JAKs correct, right.

[Roger Tung:]

That's correct. As far as we've been able to assess the compound or retain the full selectivity and the full potency of ruxolitinib.

[Joe Pantginis:]

Okay. Thank you very much guys.

[Roger Tung:]

Thank you.

[Operator:]

Thank you. And our next question comes from the line of Jeff Hung from UBS. Your line is open.

[Jeff Hung:]

Thanks for taking the question. Can you provide some color on whether you approached Incyte with 543 and if so what was the receptivity to partnering?

[Roger Tung:]

Thanks very much for the question. We really don't comment on our or partnering activities. Appreciate it, but that's just something we don't discuss.

[Jeff Hung:]

Okay. And then just if you went from a solution to tablet for 656, would you eventually develop a topical formulation of 543.

[Roger Tung:]

Our focus is on an oral formulation and our studies will be done with solid CTP-543.

[Jeff Hung:]

Okay. And then one last one if I may, a big picture question. I guess as you advance your pipeline with 656, 543 in CF and alopecia, how do you think about bringing these to market like are there certain indications that you would build out a commercial organization versus partnering? Thanks.

[Roger Tung:]

Our approach as an organization is really to be opportunistic. We feel that by progressing our compounds and demonstrating their unique properties and activity in the clinic, it gives us the opportunity to take them forward either as wholly owned entities and market them ourselves which we believe that we can do in these - with these compounds in these indications or potentially to find marketing or development partners on a case by case basis.

[Jeff Hung:]

Thank you.

[Operator:]

Thank you. And our next question comes from the line of Mike King from JMP Securities. Your line is open.

[Mike King:]

Hi, good morning, guys. Thanks for taking the question. I guess my questions aren’t going to differ too much from the others, but I’d maybe ask an inverse of the question of alopecia which is if I'm just curious, Incyte is followed by a colleague of mine, so I don’t know the story that well, but I have to imagine there is a reason that they're going with a topical versus an oral version of ruxolitinib in that setting and is that potentially because of immune-suppressive properties or something else that's undesirable in that setting.

[Roger Tung:]

Hi, Mike, this is Ryan. Thanks for the question. We believe that due to the licensing agreements that Incyte has with Lilly that they would not be able to bring an oral ruxolitinib into alopecia areata. They did retain the topical rights and that should be noted.

[Mike King:]

Okay, great. Roger, I know you said in your formal remarks that you are pushing out a little bit the development of 656, but I am just wondering what you can tell us as far as what are the gating items or what are the boxes need to be ticked or there any manufacturing CMC types of things that need to be done of preclinical data that needs to be generated to support more advanced studies?

[Roger Tung:]

Sure, good question Mike, I should again reemphasize that our intent has we’ve indicated before is to open our IND for the phase 2 study of [indiscernible] into half topline data by the end of next year. So in that regard we are really staying pretty close to the track that we’d indicated. So there is not at the back end really as we can foresee any movement there. The decision to add another dose group really came out of discussions that we've had with various stakeholders in the program to fully characterize the activity of 656. And as a result we are just making an additional dose strength of it and it's the manufacturing of that additional dose strength which is causing us to factor the -

[Mike King:]

Maybe to switch back to deuterated ruxolitinib for a second. I know that in the case of 656 there are properties [indiscernible] et cetera that seem to be competitive. I don't say weaknesses but not advantages either, what is your - can you comment on deuterated ruxolitinib, what kind of properties are you trying to enhance or eliminate or reduce that are inherent in the current molecule?

[Roger Tung:]

So, as I indicated before our view is that our technology is given as a compound which is proprietary and unique, we are not really looking at it as a comparative agent with respect to ruxolitinib because we believe for a reason that Ryan had indicated but that's compound that’s not going to be developed in alopecia areata certainly by incite. And so what we think is we have a compound that really standalone agent that can meet a tremendous medical need, we think that there is a rapidly growing awareness of specifically alopecia areata but in general our systemic treatment of derma, autoimmune indications. And as an agent which really has the opportunity to address a huge need that we think that we can develop safely and effectively for a population that currently just doesn't have other options. And so we’re just really excited about the opportunity with 543 to take it forward and to be potentially personally for medication for this indication.

[Mike King:]

Just one quick one on partner programs and that is any update on Celgene at all?

[Nancy Stuart:]

Hi Mike, it’s Nancy. Thanks for the question. As we’ve said before he completed our phase 1 studies and we and Celgene are assessing it’s path forward and potentially in different indications other than what apremilast is approved for but like our other programs they’ve really are controlling the next steps as well as the communication on the program.

[Operator:]

Thank you. And our next question comes from the line of Robert LeBoyer from Aegis Capital. Your line is open.

[Robert LeBoyer:]

Good morning and congratulations on all the progress that you've made recently. My question has to do with the strategic focus and could you update us on the number of pipeline products that you expect to move from preclinical to clinical during the rest of the year?

[Roger Tung:]

Thanks for the question Robert, at this point our focus is really firmly on these two programs, on 656 and 543. We certainly have got a rich preclinical pipeline that offers us the opportunity to move more compounds forward but that’s really not where we are putting our emphasis. As indicated by Ryan that's where our money is going, we think that these are tremendous opportunities and that's really where our focus is going to be. We don’t currently anticipate having other compounds moving into the clinic this year although as I indicated we certainly have got other agents that we’re excited about and could push forward, we want to be disciplined and focused.

[Robert LeBoyer:]

In terms of the portfolio of molecules that you have in development or have patents on. Could you give an update on the number of products in that portfolio and the number of patents both total and new molecules?

[Roger Tung:]

The number of total molecules is very large because our patents tend to and [indiscernible] of compounds as opposed to single entities. We currently have a belief over 85 US patents and many of I think over 160 worldwide patents that have been issued on mainly compositions of matter of modified drugs and other biologically active compounds as well as a rich pipeline of applications which are moving their way through various patent offices both US and ex-US. Those cover dozens; I really don't know the exact number but dozens of different marketed drugs which have been modified with [indiscernible] as well as other biologically active agents.

[Robert LeBoyer:]

I know it's a very large number and just lastly, could you offer any guidance on the R&D expense or whether you expect the number seen in the first quarter to be run rate or any full year guidance that you can offer?

[Ryan Daws:]

Hey Robert, this is Ryan thanks for the question. We're not giving specific guidance for the year, I think what I could leave you with is that we expect expenses to move around a little bit probably a little bit north this year but it's not going to be significantly north this year, but is going to bounce depending on whether we are in trials or not with different agents.

[Roger Tung:]

And Robert, I’ll reiterate that first we expect that our cash run rate will bring us into 2018. And secondly that a lot of the expense not only is being worked at that took CTP-543 through its preclinical phases towards our clinical evaluation later this quarter but is supporting more intensive manufacturing work in CTP-656 as we move it towards a commercial process.

[Operator:]

Thank you. And our next question comes from the line of [indiscernible] Hazlett from Ladenburg. Your line is open.

[Unidentified Analyst:]

I have a couple just on 543, congratulations of progress. Should be thinking of alopecia areata as you mentioned additional indications along with that Should we be thinking of that as a toe in water sort to speak with this molecule or this really the primary focus of old version as the molecule moving forward?

[Roger Tung:]

Thanks for the question; we view it more as a cannonball of the diving board. We are really all in on alopecia areata, we think that it is a - that really is the reason that we are taking this molecule forward is that we think that there is a huge unmet medical need that we are very focused on and that's got to our full attention. We are worried that the jack mechanism as I noted earlier is a pretty broad one, it's philanthropic its hits quite a few different downstream effectors and as such has broad potential, but we think that should do justice to development in Alopecia areata, it's going to take our full attention and that's what we intend to do.

[Unidentified Analyst:]

Okay. Thank you for that. And I guess just a little bit more on 543 and its activity. You say that it does retain JAK1 and JAK2 activity, does it shift the kinome activity of ruxol - in any particular way, and I'm thinking about it in terms of maybe potential efficacy, but I'm also thinking about potential thrombocytopenia or anemia or a neutropenia that you might see with ruxol, whether or not [indiscernible] version might have any effects with regard to AEs?

[Roger Tung:]

Great questions. So as far as we've been able to assess, there really is no change in the selectivity pattern with respect to the kinome of CTP-543 relative to ruxolitinib. One of the interesting aspects as we have looked into ruxolitinib’s activities is the difference in the adverse event profile of the compound in healthier individuals versus patients with myelofibrosis or polycythemia vera. They’re quite different, actually markedly different adverse effect profiles. In healthy volunteers, for instance, there was no report of thrombocytopenia, whereas that's the main adverse effect that’s noted in myelofibrosis patients. And there are other differences between myelofibrosis and polycythemia vera terms of the noted adverse effects profile. We think that there are - the data that exists to date, which are relatively small, but very intriguing, suggests that there is a good possibility developing CTP-543 as a very effective safe treatment for Alopecia areata in that patient population. We certainly will be developing it in a way to look for the minimal effective dose, which we think is very appropriate for this population and we are very hopeful based on existing data that what we have is going to be a tremendously effective agent that we will find a way of dosing safely in that population.

[Unidentified Analyst:]

Thank you for that additional color. That's great. Shifting to 656 and I’ve got just one or two quick ones, additional ones, 656, do you intend to open the IND with the 656 molecule that you have in place or is there even an optimized 656 in the wings that you are examining?

[Roger Tung:]

We’re very happy with CTP-656, the D9 molecule that we are taking forward. That is the compound that we are working on manufacturing, so there will not be any changes from here forward.

[Unidentified Analyst:]

Okay, thanks. And could you - maybe to reiterate or clarify the comments you made about release of the depression data, I wasn't quite sure I heard that, and then just a brief update on the Jazz program, it’s still under your pipeline, I'm just curious as to if there has been any progress with that program as well? And that’s it. Thanks.

[Ryan Daws:]

Sure. Thanks for the question. This is Ryan. Just to clarify on the major depressive disorder, we know there is an expectation that that trial will complete and as we were gearing up the discussions with Avanir about how they intend to handle that really, it just became very clear that they intend to be the spokesperson for that compound and that data and so what we are saying is that we’re not going to be able to predict when or if they’re going to release that data. And then on your question on JZP-386, there is nothing nearly new to report there.

[Operator:]

Thank you. [Operator Instructions] And our next question comes from the line of Difei Yang from Brean Capital. Your line is open.

[Difei Yang:]

Hi, good morning. Thanks for taking my questions. So just a couple of quick once on CTP-543, what should we expect if the Phase 1 starts second quarter, so this quarter. What’s following the single ascending dose, is that multiple ascending dose and when can we reasonably assume get to Phase 2, assuming Phase 1 is successful?

[Roger Tung:]

Thanks for the question, Difei. So we do expect to initiate the Phase 1 program later this quarter and what we'll be doing is a single, followed by a multiple ascending dose evaluation of the compound, measuring its pharmacokinetic, pharmacodynamic safety and tolerability profile in healthy volunteers. We expect to have the topline results from that in the fourth quarter of this year and to initiate Phase 2 studies next year.

[Difei Yang:]

Okay, thank you, Roger. And another quick question, you might have guided before, on the very high level, do you look to bring at least one or two compound per year into the clinics from the platform? Is there such guidance out there?

[Roger Tung:]

We're not going to offer that guidance. We’ve indicated previously that we believe we have the capability, as an organization, of bringing at least one program into development per year. As noted in an earlier question, we are putting all of our emphasis right now on CTP-656 and CTP-543 and just given the limitations on our manufacturing capabilities, on our clinical development capabilities, just all of our organizational bits and pieces as they were, our intent is really to focus on pushing those programs ahead as fast and as far as we can. So at this point, anything that we do to bring additional compounds into clinical valuation is really going to be not a focus of ours. We have certainly a lot of asset and organizational know-how, but we really want to push these programs, which we see as being important ways of serving patient needs that are well defined, we want to push these forward to become products.

[Difei Yang:]

Thank you. So my last question on CTP-499, should we assume that's along the pipeline and - or if there is any update on that program?

[Ryan Daws:]

Sure, Difei. This is Ryan. Thanks for the question. As Roger said earlier on a different question, we don't comment on BD activities, but I think what I would like to reiterate there and we said this before, diabetic kidney disease is a tough area to partner and given the relatively few number of companies looking for assets here. So I think our goal here is to really focus intention on 543, 656 and to the extent we are able to partner 499, we’ll come back and update the market at a later time.

[Difei Yang:]

Yeah. Thank you so much and congratulations on the new Phase 1 compound. Thanks.

[Ryan Daws:]

Thank you.

[Operator:]

Thank you. At this time, I'm showing no further questions. I would like to turn the call over to Justine Koenigsberg for any closing remarks.

[Justine Koenigsberg:]

Great. I’d like to thank everyone for joining us today and we look forward to keeping you updated on our progress. We will actually be participating at the UBS Conference later this month as well as the Jefferies and JMP Conferences in June and we hope to see many of you there. This now concludes our call. Thanks again for joining us.

[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.