Concert Pharmaceuticals, Inc.
Q3 2016 Earnings Call Transcript

Published: 8 Nov 2016

[Operator:]

Good day, ladies and gentlemen and welcome to the Concert Pharmaceuticals’ Third Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to your host for today, Justine Koenigsberg, Vice President, Corporate Communications and Investor Relations. You may begin.

[Justine Koenigsberg:]

Thank you. Good morning, and welcome to Concert Pharmaceuticals’ third quarter 2016 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; Ryan Daws, our CFO; and Jim Cassella, our Chief Development Officer. We will also be joined by Nancy Stuart, our Chief Operating Officer for the Q&A portion of the call. Our remarks will focus on our proprietary program CTP-656 and CTP-543 as well as our financial results. Regarding our collaboration please note that there are no new updates to report at this time. 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 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. Lastly, we would like to congratulate [Robert Hazlett] and Difei Yang, both who previously covered Concert on the move to a new research firm. With that, I would now like to turn the call over to Roger.

[Roger Tung:]

Thank you, Justine. Happy Election Day. Thank you for joining us this morning. As we approach the end of the year our team continues to make great progress in advancing the drug candidates in our proprietary pipeline. We are well positioned to meet our goal of having two efficacy studies underway in 2017. The team is committed, focused and executing. Let me start with CTP-656, our next-generation potentiator for the treatment of cystic fibrosis. We are on track to open the IND by year-end to begin enrollment in our Phase 2 clinical trial. The Phase 2 trial will assess CTP-656 as monotherapy in 30 to 40 patients with gating mutations, and we expect to have top line data by year-end 2017. We believe the features of our product continue to be well received within the cystic fibrosis community. While it is well-recognized that Kalydeco represented a significant advance in the treatment of cystic fibrosis due to getting mutations, there remains an ongoing need for improved treatments enabling better patient adherence. We have designed CTP-656 with those needs in mind, and believe in its potential to advance therapy for individuals with cystic fibrosis. First, CTP-656 will be simpler to take as it can be dosed once daily with simple food requirements. With less dosing complexity, we project that adherence to CTP-656 will be improved. Better adherence may in turn enable real world benefits closer to those reported from Kalydeco’s clinical trials than the lesser benefits observed in patient registry outcomes. Second, the differentiated metabolic profile of CTP-656 may provide enhanced efficacy and lastly, CTP-656 has the potential to minimize certain drug-drug interactions. Together these features offer the potential for better treatment option for individuals with cystic fibrosis, and we look forward to progressing its clinical development. Now let me turn to CTP-543, our proprietary drug candidate being developed for the treatment of autoimmune disease alopecia areata. Earlier this quarter, we had a pre-IND discussion with the FDA and subsequently filed our investigational new drug application for CTP-543. Under the IND, we initially intend to conduct a crossover study this year evaluating the metabolic profile of CTP-543 relative to ruxolitinib in healthy subjects. Subsequent to that, we intend to initiate a Phase 2A safety and efficacy trial in patients with alopecia areata in the first quarter of 2017. It is our intent to complete this six-month primary efficacy analysis by the end of 2017. We believe this study will provide important information on the safety and efficacy profile of CTP-543 in patients with alopecia areata. Later this quarter, we will report on the single and multiple ascending dose PK and tolerability top line results from our Phase 1 trial. The CTP-543 multiple ascending dose study is designed to evaluate tolerability as well as pharmacokinetics and pharmacodynamics. The PD Marker we are using is inhibition of STAT 3 phosphorylation, which we view as both a direct measure of CTP-543’s in vivo kinase inhibition, and a demonstration of its ability to affect downstream gene regulation. Our intent is to show that we can safely and tolerably produce pharmacodynamic effects with CTP-543 similar to those observed with ruxolitinib, which has demonstrated efficacy in alopecia areata. The PD Phase 1 results are expected to be available in the first quarter of 2017. I like to pause here and turn the call to Ryan, who will discuss the third quarter results, and then to Jim, to further discuss our proprietary programs, including details about the planned Phase 2 design for CTP-543 in alopecia areata.

[Ryan Daws:]

Thank you, Roger. Beginning with revenue, revenue was $26,000 for the quarter ended September 30, 2016 compared to $1.7 million over the same period in 2015. The decrease in revenue relates to the completion of the Phase 1 clinical evaluation under our collaboration with Celgene in 2015. Research and development expenses were $8.1 million for the quarter ended September 30, 2016 compared to $7.1 million for the same period in 2015. The increase was primarily due to higher expenses associated with the development of the company's proprietary programs CTP-656 and CTP-543. G&A expenses for the quarter ended September 30, 2016 were $3.4 million compared to $3.3 million for the same period in 2015. Our net loss was $11.4 million or $0.51 per share as compared to a net loss of $8.6 million or $0.39 per share for the quarter ended September 30, 2015. We ended the quarter with $108 million in cash, cash equivalents and investment. We believe this is sufficient to fund our operations through the second quarter of 2018. I will now turn the call over to Jim, who will provide more details on the clinical development of our proprietary problems.

[Jim Cassella:]

Thanks Ryan. I like to first comment briefly on our CTP-656 poster presentation at the North American cystic fibrosis conference last month, and then going into our planned Phase 2 trial design for CTP-543. The simplicity of CTP-656 dosing profile has been very well received. Feedback from both the UK CF Trust Meeting in early September and last month at NACFC around our simplified dosing requirements are being viewed as meaningful improvements for patients. We have demonstrated in our Phase 1 that the exposure of CTP-656 was similar regardless of whether we dose with low, moderate or high-fat food. As a reminder, the Kalydeco label specifies that it be taken with fat containing food every 12 hours. Our data today suggest that patients will get the same benefit from CTP-656 when taken once daily with food regardless of fat content. There is a reported adherence issue with Kalydeco, which may contribute to the disconnect between the real world efficacy and that which was seen in Phase 3. We believe our profile could help address adherence concerns. We are on track to open the IND for CTP-656 by year-end, and a number of activities are underway to move into our Phase 2 study in the US, including site selections and quantification. We expect to be completing this study and reporting top line data by year-end 2017. We also intend to conduct a small Kalydeco switching study in Europe in patients with gating mutations next year. I will now turn to CTP-543, which is another exciting product opportunity for Concert. CTP-543 is a sub-type selective JAK inhibitor that we are developing for alopecia areata in autoimmune disease resulting in patchy and sometimes complete hair loss. Our Phase 1 program in healthy volunteers was designed to support dose selection in advance of programs with patient studies in 2017. Earlier this fall, we had our CTP-543 pre-IND meeting with the FDA to discuss the program and the feedback we have received has been positive and encouraging, and we are aligned on the overall study design for the Phase 2A study. Our initial planned efficacy trial, which will include approximately 100 patients with moderate to severe alopecia areata is a dose ranging study with four active arms and a placebo comparator. The primary outcome measure of the Phase 2 study of CTP-543 will utilize the severity of alopecia tool, otherwise known as SALT. For those not familiar with the measure, SALT is a validated assessment scale developed by the National Alopecia Areata Foundation working committee to evaluate the degree of hair loss. It is calculated by measuring the percentage of hair loss in each of the four areas of the scalp, and adding the total to achieve a composite score. Hair regrowth is reflected by a decrease in the SALT score. For example, no hair on the scalp would have a SALT score of 100, which complete hair regrowth would be a SALT score of 0. The primary endpoint will be the percentage of patients with at least a 50% improvement from baseline in their SALT score at 24 weeks. We will also conduct an additional 28 weeks of dosing during which time all patients will receive CTP-543 as we continue to track efficacy and safety of the treatment. The Phase 2 trial is expected to commence in the first quarter of next year. We expect to report top line primary outcome data by the end of 2017. Several JAK inhibitors have already demonstrated efficacy in alopecia areata, and we have benefit of substantial knowledge about the safety and tolerability characteristics of ruxolitinib, the non- deuterium form of CTP-543. This provides us with important context to guide our development of CTP-543. With significant unmet medical need for individuals with alopecia areata in growing and consistent data highlighting the importance of the JAK mechanism in the disease condition. We believe that CTP-543 has great promise as a drug candidate for the treatment of alopecia areata. As Roger said at the outset, we are committed, we are focused and we are executing. We are excited by the potential to offer a better treatment for CF patients and their physicians with CTP-656. We are also excited to be advancing CTP-543, which has the potential to be the first FDA approved oral medicine to treat alopecia areata. We look forward to keeping you updated on the clinical advancements for both CTP-656 and CTP-543.

[Justine Koenigsberg:]

Thank you, Jim. This concludes our prepared remarks and we will be happy to address any questions at this time.

[Operator:]

Thank you. [Operator Instructions] And our first question comes Adam Walsh of Stifel. Your line is now open.

[Adam Walsh:]

Hi, good morning guys. Thanks so much for taking my question. How are you doing?

[Roger Tung:]

Great. Thanks for the question.

[Adam Walsh:]

Excellent. My first question is for Jim, Jim on the US-based Phase 2 CTP-656 study, are you still looking at 30 to 40 patients 28 days and sweat chloride in FEV1 as the – sweat chloride as the primary in FEV1 will also be measured, is that still kind of the thinking around the US trial and then on the small switching trial in Europe, can you give us a little bit more detail around the rationale there and when we should expect that to begin and results? Thanks.

[Jim Cassella:]

Sure, Adam. Thanks for the question. Yes, you are absolutely correct on the assumptions for the US trial. That hasn't changed. There will be 30 to 40 patients with gating mutation. There will be three active doses of CTP-656 placebo and Kalydeco control. And we are looking at 28 days of dosing and FEV1 will be looked at, but sweat chloride is the primary driver for the outcome measure. So that is absolutely correct and has not changed. Europe is a very important part of our strategy, and as we have been discussing our plans with European KOLs in the clinical trial network there, it was becoming very clear to us that the requirement to run a placebo-controlled trial by the FDA in the US was becoming very challenging in the European environment and we know that that EMA is actually looking at writing new guidance for treating CF at some point over the next year or so. So in talking to the experts in the clinical trial network it became clear that we needed to do something a little different there. So we came up with the idea of the switching study to help initiate our activities in Europe, whereby we will have patients who are currently taking Kalydeco and then they will be switched over to CTP-656 and studied over a similar time period.

[Adam Walsh:]

Okay, that is terrific and then just one if I may really quickly on CTP-543, there has been, some talk at one of your competitors about their patent portfolio around the use of JAKs for alopecia areata, and I think they were out with a press release a couple of weeks ago, and I just wanted to get your take on kind of your freedom to operate and how you think about the patent landscape for JAKs in alopecia areata? Thank you.

[Roger Tung:]

We have done a very [controlled] freedom to operate analysis on our compound, CTP-543. We do have an issued patent, as you know which is different than freedom to operate, but our freedom to operate analysis is really independent. We believe that it is very strong and we are happy with our position.

[Adam Walsh:]

That is helpful. Thanks Roger.

[Roger Tung:]

Sure.

[Operator:]

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

[Jeff Hung:]

Thanks for taking the question. Given the limited number of patient per arm in CTP-656 study, can you remind us what you need to see to consider [Indiscernible], what magnitude difference you need to see from placebo, and what you need to see relative to Kalydeco [CTP-656]? Thanks.

[Roger Tung:]

The study is a small study. Again it is primarily to help us look at differences among the three doses of 656. We are primarily looking at the difference between the active 656 doses, and placebo, looking primarily at the sweat chloride. So, we believe that with the number of subjects that we have in the trial, we will be able to see meaningful differences between the placebo. The Kalydeco is running more as a concurrent control, and that was part of our discussion with the FDA, where because there could be some variability around there. So we are not actually powered to look for any differences between the Kalydeco arm and CTP-656, but we are running that as a concurrent control.

[Jeff Hung:]

Thank you.

[Operator:]

Thank you. And our next question comes from Joe Pantginis of Roth Capital Partners. Your line is now open.

[Joe Pantginis:]

Hi guys. Good morning. Thanks for taking the question. First on CTP-656, I was wondering, obviously one of the things you are pointing to, even on today's call, is the potential better adherence, and I was just wondering, can you point to any data or analysis or focus groups you have done thus far especially following your recent poster that would point to, the real world benefits of the food effect study?

[Roger Tung:]

Okay. Sorry when you were talking about this I initially thought that you are aiming towards the once-daily aspect of it. Now this is really more in terms of…

[Joe Pantginis:]

The once daily absolutely.

[Roger Tung:]

Yes. In terms of food effect, we were actually surprised frankly when – and Jim can actually speak a little bit more to this that appears to be a very significant aspect of the product profile. And I will turn it over to him in a second, but in terms of the once daily, there is a very deep literature on the increases in adherence. They are observed in chronic medications that are taken once versus twice daily, so there are many meds that have been historically dosed twice daily that have gone on to extended release formulations, and the once and twice daily formulations have been compared, and as far as I am aware in all cases the once daily formulations had significantly better adherence aspects to them kind of regardless of the indication in which they are being studied. So this is something that is I think very well understood from that perspective. One thing to understand about ivacaftor is because of the product characteristics, it would be extremely difficult or possibly not feasible at all to create an extended release formulation of that drug, which is why deuterium technology really offers a unique benefit for that molecule. But I will let Jim talk about the food effect aspect.

[Jim Cassella:]

So, I think in terms of what we are learning, we have rather nicely built our network, our working network of physicians and patient advocacy groups both here in the US, the TDN and the CTN in Europe, and with that we have the opportunity to really get them to opine on some of the findings that we have from our Phase 1 work. I think as we have talked about previously, the once a day dosing from the people that are actually treating patients is considered a very important benefit to patients. When we generated the food effect data, primarily looking at the fat content of the meal that we were dosing with, we were pleasantly surprised to see how much of an impact the KOLs and the physicians thought that would have on the patients in terms of making the dosing even more simpler than the once a day, but now removing that fat requirement will help the adherence issue. And more importantly, what adherence really represents is the optimization of the dosing and with once a day dosing without a fat requirement we believe with CTP-656 we will have a better opportunity to have optimal dosing conditions so that we can have an improved therapy.

[Roger Tung:]

Specifically, we have actually received some feedback that the removing fat requirement aspect maybe more important for adherence than the once to twice-daily aspect, which is a little bit counterintuitive to us. But we are pleased to hear that that will be helpful to patients.

[Joe Pantginis:]

Now that actually is quite interesting. Now thank you and if I could just switch over to CTP-543 quickly, with the hopes that you would move CTP-543 into a pivotal study, do you anticipate that the SALT endpoint would be the primary endpoint in a Phase 3 as well, and the reason I am asking that, is this still a work in progress with regard to regulatory discussion since there are no oral drugs approved yet with regard to how you might see regulatory discussions, play out or is SALT basically set in stone as a potential pivotal endpoint?

[Roger Tung:]

I think it is a very interesting question. As we mentioned, we have had a very successful meeting with the FDA. We discussed all of these things with them. I think SALT is a very appropriate measure at this point in time. We clearly are using it in our Phase 2 and as we generate more data I think we will continue to have those discussions with the FDA. I think you are absolutely right. There is no drug that has been approved for the treatment of alopecia areata. So I don't think anybody could say right now that it is definite, but I think as we continue to collect data in the Phase 2 program, and bring that to the FDA we will be able to demonstrate the utility of the SALT score.

[Joe Pantginis:]

Great. Thanks a lot guys.

[Roger Tung:]

Thanks Joe.

[Operator:]

Thank you. [Operator Instructions] And our next question comes from Mike King of JMP Securities. Your line is now open.

[Michael King:]

Good morning guys. Thanks for taking my question. I wanted to just follow up a little bit with questions on CTP-543, I'm just wondering if you could comment about, there is the endpoint of a 50% improvement in SALT, but I just wonder what is the sort of what I would call the personal benefit is to the patient, and I don't know if you guys have surveyed either patients or KOLs about does it matter if your hair, you got 50% more of your hair if you still have patches on top of your head, and whether maybe some quality of life instrument or some other patient reported outcome measure might be useful to include in your studies?

[Roger Tung:]

Mike it is a great question, very perceptive. And you are absolutely right, the SALT score is something that will help us semi-quantitate the amount of hair loss and consequently the amount of hair regrowth. So I think if we think about that as a tool that will help us assess the amount of hair. The other important part of it is what is a meaningful improvement to the patient, and I think where we stand with the FDA is that it is going to be very important to get something like a patient reported outcome measure in there. I think with the initiative that the FDA has with the patient focused drug development initiative for alopecia areata, which would be probably sometime next year, clearly there is a focus on getting the opinion from patients maybe meaningful to them, and I think over the course of the evolution of the program we will come to a nice agreement with the FDA as to what to use to complement something like a SALT score.

[Mike King:]

Great. That's very helpful. And then I was curious about, not too much of IP protection but more competitive protection since there are a number of JAK inhibitors on the market beyond ruxolitinib. And what do we know about the biology of alopecia? Is it JAK1 dependent, is it JAK2 dependent, it does it need to be JAK or pan-JAK approach? I'm thinking about other JAK inhibitors that might be repurposed for alopecia that aren’t isn’t anticipated at this moment.

[Roger Tung:]

Thanks, Mike, great question. I think our understanding of the biology of JAK inhibitors in general and certainly with specifically with respect to alopecia areata is an evolving field. We -- there are several publications that came out recently that discussed clinical studies using two different JAK inhibitors, one with ruxolitinib and the other with tofacitinib in the treatment of alopecia areata. And from those publications and our discussions with KOLs, to-date it appears that ruxolitinib may be the more effective in terms of the treatment of alopecia areata. And the data that exists right now suggests that a combination of JAK inhibition would be important for the treatment of the disease. We believe that a JAK1 JAK2 inhibitor probably has the best support, JAK2 is the most highly upregulated of the Janus kinases in lesional skin in patients with alopecia areata is as has been reported in the literature although all of them are upregulated. We think that pan-JAK inhibition may from a systemic perspective may be less desirable than a more selective profile. And one of the things I think is really important is that there are the majority, the significant majority of compound with JAK inhibition that gone into the clinic have failed in clinical trials largely due to safety although not solely. And so, having a compound that we have good confidence in terms of the overall characteristics that we can take forward, we think is an important aspect in what we think as a derisking of the program. So, we're actually very bullish on CTP-543 and we're looking for to getting our Phase 2 study underway.

[Mike King:]

Thanks for the additional color, Roger.

[Roger Tung:]

Sure, Mike. Thanks.

[Operator:]

Thank you. [Operator Instructions] And our next question comes from Bert Hazlett from BTIG. Your line is now open.

[Bert Hazlett:]

Thank you. Thanks for taking the question. You clearly have a lot on your plate with 543 and 656 moving through the clinic. My question is with regard to the broader intellectual property portfolio. Is there any additional thought to optimizing the progression with that either through partnerships or through an acceleration of molecules? Just thinking about how you're treating the intellectual property you have beyond the two assets that are moving through the clinic well in your own hands?

[Ryan Daws:]

Sure, Bert, this is Ryan. Thanks for the question, it’s a good one. We're always looking at opportunities within our patent portfolio whether for own benefit or that could be interesting to others on a say on a partnering basis. So, we continue to do that, we continue to file additional IP that we think could be interesting. And we will continue to evaluate the opportunity to as they present themselves.

[Bert Hazlett:]

Okay. Thank you for the answer.

[Operator:]

Thank you. [Operator Instructions] And this does conclude our question and answer session. I would now like to turn the call back over to Justine Koenigsberg for any further remarks.

[Justine Koenigsberg:]

Right, thank you. Thank you everyone for joining us today. We look forward to keeping you updated on our progress. We will be participating at the Stifel and the Jefferies London Healthcare Conferences next week and at the Guggenheim Conference in December. And hope to see many of you there. This now concludes our call. Thanks again for joining us.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may now disconnect. Everyone, have a great day.