Concert Pharmaceuticals, Inc.
Q1 2015 Earnings Call Transcript

Published: 10 May 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the Concert Pharmaceuticals First Quarter 2015 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] As a reminder, this conference is being recorded. I would now turn the conference over to Justine Koenigsberg, Vice President, Corporate Communications, and Investor Relations. You may begin.

[Justine Koenigsberg:]

Thank you. Good morning, and welcome to Concert Pharmaceuticals’ first quarter 2015 Investor update. A press release announcing our first quarter results was issued earlier this morning. An electronic copy of our press release is also available on our Web site at concertpharma.com. During the call, Roger Tung, our President and CEO will provide an update on our clinical pipeline and Ryan Daws, our CFO will discuss our financial results. After our prepared remarks, we will open the call for questions. Before we begin, I would like to remind you that 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 annual report on Form 10-K 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. I’m pleased to have the opportunity to provide an update on the evolution of Concert’s portfolio of drug candidates including important clinical progress cost and number of programs. It’s an exciting time for the field of deuterium chemistry with further validation of the technology in the form of recent M&A activity in the sector. Concert is the leading company in deuterium medicinal chemistry with great prospects provided by our extensive clinical and preclinical pipeline. I’d like to start today with our most recent news relating to JZP-386. As we announced yesterday with Jazz Pharmaceuticals, we recently completed our planned Phase 1 evaluation of JZP-386. We’re very pleased that favourable deuterium related effects were observed in the Phase 1 clinical trial including higher serum concentrations and correspondingly increased pharmacodynamics effects, clinically relevant time points compared to Xyrem. The safety profile of JZP-386 was similar to that observed with Xyrem. The results to date indicate that further exploration of JZP-386 is wanted. The next step for the program is to explore formulation options to further enhance the positive deuterium effects in order to achieve an improved product profile for patients with narcolepsy. Our other programs overall are also making nice progress in the clinic. Under our collaboration with Celgene, CTP-730 is being evaluated in multiple ascending dose Phase 1 study, this is a healthy volunteer study to assess the pharmacokinetic profile the studies state. We expect the Phase 1 study will conclude in the third quarter of 2015 which further results in a milestone payable to Concert before the end of the year. Another Concert’s collaborators Avanir is progressing AVP-786 which represents the next generation product in the flagship franchise. Avanir is now a wholly owned subsidiary of Otsuka and AVP-786 was identified by Otsuka as one of the key drivers for their acquisition of Avanir. We continue to expect the program will advance into Phase 3 clinical evaluation later this year for the treatment of agitation in patients with Alzheimer’s disease. As a reminder, Avanir is also conducting a Phase 2 clinical study evaluating AVP-786 for treatment resistant major depressive disorder. We expect this study will conclude in mid-2016. In early March, we announced the initiation of the three part Phase 1 study for deuterated ivacaftor program. The first part of the Phase 1 study has assessed two research analogs to determine which had a more favourable pharmacokinetic profile and units. We’re pleased to announce the advancements of a very promising candidate CTP-656 into further clinical development. The next steps in this evaluation will be single and multiple ascending dose Phase 1 studies including a direct comparison with Kalydeco. Cystic Fibrosiscan be caused by a number of genetic defects that compromise the function of the CFTR ion channel. In preclinical testing CTP-656 is demonstrating the ability to improve the function of some of the most common CFTR mutations as well as normal or well type CFTR. Therefore we believe that CTP-656 has the potential to be used as a monotherapy in certain mutations such as G551D and in combination with the number of new drug candidates that are being developed by various companies. As we developed CTP-656 we look forward to exploring these opportunities, we expect the multiple ascending dose Phase 1 trial to begin in the second half of the year, we intend to report top line data of the Phase 1 program potentially late this year or early next year. Regarding CTP-499 and CTP-354 we expect to make important progress with both programs this year to guide our next steps. We continue to expect the negotiation of the special protocol assessment for CTP-499 this year which we see as an important step in its further progression and partnering, for CTP-354 our non-clinical testing is ongoing and we expect to provide an update on program later this year. Overall, we continue to aggressively advance our drug candidates in our pipeline well evaluating the highest value opportunities to bring forth from our preclinical assets. Our diverse pipeline is a distinguishing feature and a strength of the company, we’re able to apply our deuterium platform to create differentiated proprietary candidates from broad range of existing drug products positioning us very favourably with the portfolio of opportunities that we can evaluate in time and cost efficient Phase 1 proof of concept studies. We demonstrated this with our deuterated ivacaftor program resulting in exciting new candidates CTP-656 applying a similar approach, we intend to advance a new drug develop candidates into the clinic in 2016. I’d now like to call – to turn the call over to Ryan to discuss the first quarter financial results.

[Ryan Daws:]

Thank you Roger. As I walk through our first quarter financial results, please reference the financial tables down in today’s press release. Looking first at revenue, for the first quarter of 2015 revenue was $1.3 million compared to $1.6 million in the corresponding period of 2014, a decrease of $300,000 and 2015 we have the potential to realize $10 million milestone payments relating to our collaborations including $8 million from Celgene upon completion of the 730 Phase 1 program and $2 million from Avanir upon the initiation of dosing of 786 in Phase 3. As Roger mentioned, the next step in the 386 program this is for formulation options to further enhance the positive deuterium effects of JZP-386 in Phase 1. As a result, we don’t expect to realize the next development milestone from Jazz Pharmaceuticals at this time, on the expense type, research and development expenses were $6.9 million in the first quarter of 2015 compared to $5.6 million in the first quarter of 2014. The increase in research and development expenses was primarily related to development activities for CTP-656, JZP-386 and internal research and development platform expenses. General and administrative expenses were $3.2 million in the first quarter of 2015 compared to $2.5 million in the same period of 2014. The increase was primarily related to expenses associated with operating as a public company and compensation expense including non-cash stock based compensation expense. Our first quarter 2015 net loss attributable to common stockholders was $9 million or $0.48 per share. For the first quarter of 2014, our net loss attributable to common stockholders was $7 million or $0.76 per share. We ended the first quarter with $113.1 million in cash, cash equivalents and investments. In March, we completed a follow-on offering with net proceeds of $46.7 million as a result we believe our current cash is sufficient to carry the company into the second half of 2017. Pursuant to a patent assignment agreement we entered into with Auspex Pharmaceuticals in 2011, we expect to receive a paymentas a result of Teva’s acquisition of Auspex. We believe the payment in Concert will be about $50 million based on the publicly disclosed terms of the acquisition. Teva announced earlier this week the acquisition of Auspex had been completed and will provide an update when the payment is received. As Roger said at the onset of this call, it’s an exciting time for deuterium medicinal chemistry that Concert has positioned as the leader in the state. As we end this quarter, I’m pleased to report that Concert has the strong balance sheet and the financial resources to invest in our portfolio of promising product candidates.

[Justine Koenigsberg:]

Thank you, Ryan. This concludes our prepared remarks and we’ll now open the call for your questions. And can we have the first question.

[Operator:]

[Operator Instructions] Our first question comes from the line of Matt Roden of UBS. Your line is now open.

[Matt Roden:]

Great good morning. Thanks for taking the question. So on 386, I think maybe it’s not 100% clear to me as to why the data is there favourable as you described would not warrant advancement as it is, can you just help us with the what the limitations are in formulation and what the next steps could be in terms of advancement of the program?

[Roger Tung:]

Thanks for the question, Matt. We don’t believe that the deuterium related effects that we observed in the Phase 1 studies support advancing into later stage clinical trials at this time. However the results indicate that further evaluation of JZP-386 is warranted, so the company’s intent to explore formulation options to enhance the positive effects that were observed in the studies to achieve and improve product profile for patients with narcolepsy.

[Matt Roden:]

So to translate that it sounds like maybe you’re seeing the effects, you would hope to see but you’re looking is that directionally you’re seeing the effects, you’d like to see but from a magnitude perspective you like to see maybe more of an effect on PK?

[Roger Tung:]

I think it’s fair to say that we are clearly seeing positive deuterium related effects and that’s the profile is directionally where we want to be going but not quite there as far as the criteria that we would like to see for a product that is one that we’re going to take into or that Jazz I should really say we will take into late stage clinical evaluation.

[Matt Roden:]

Okay great, thank you. That’s fair. And then on the deuterated ivacaftor you mentioned you would evaluated two analogs and you had selected one. Can you maybe talk about to what extent one was clearly better than the other and what was the sort of range of activity you saw there or range of PK?

[Roger Tung:]

Right. So we’re going to be submitting abstracts for presentation of later at a medical meeting. So I don’t want to give out information ahead of the scientists presenting that. As I think you may know we had studied two analogs pre-clinically and had been surprised to see that the rank order of those analogs were different depending upon the different species. We did see that one of the compounds appear to be better than the other in humans as well as so that change in rank order continue to occur in humans as well as it did pre-clinically which is interesting because based on purely enzymatic perspective they act very much the same. So the human system is more complex and differentiates more clearly than the enzymatic system and again that, the details on the clinical results will be presented in due course at the medical meeting.

[Matt Roden:]

Okay. And based on this person human data that you have on the program, how confident are you that in the end in humans you’re going to have a product that’s differentiated from the apparent ivacaftor molecule?

[Roger Tung:]

I’ll just say that we’re very happy with what we’re seeing right now and I’ll wait for specific data to be released at appropriate conference.

[Matt Roden:]

Okay great. Thanks very much for taking the questions.

[Roger Tung:]

Sure, thank you.

[Operator:]

Thank you. Our next question comes from Joe Pantginis of ROTH Capital Partners. Your line is now open.

[Joe Pantginis:]

Hey guys good morning. Thanks for taking the question. Want to follow up on the 656 products, the FDA documents came out today and I was just curious if you think there might be any change of thinking or how these document might impact the development program for 656 obviously the main questions come up about lumacaftor but then there were also some question arising whether – ivacaftor monotherapy itself has a positive treatment effect on CF, I’m just wondering if to get some initial thoughts?

[Roger Tung:]

Hi Joe thanks very much for the question, I haven’t had the chance to review the documents in any detail and so at this time I don’t want to get over my skies and respond to things that I haven’t had a chance of think about. We do think that we have an opportunity to provide, create new potentiator that has the possibility of being both monotherapy and additive agent to other CFTR modulators but specifically with respect to your question, I’d like to take that up at a later point.

[Joe Pantginis:]

Okay that’s fair, and I was just curious with regard to your SPA talks for 499, can you may be describe what are some outstanding issues or questions might be?

[Roger Tung:]

Yes I think it’s just nailing down the details of exactly how we assess and some of the operational details of the study conduct itself. So these are fairly complex studies, actually quite complex studies and for the purposes of special protocol assessment there is quite a bit of detail that goes into the not only it’s not just with the actual protocol that gets signed off by FDA is what is really those operational details, statistical details that we’re in the process of nailing down.

[Joe Pantginis:]

Got it and then maybe I’ll just end up with a quick logistical question I apologize that I don’t my account on today but with regard to the Auspex potential payment there have been $15 million would that be recognized as a one-time or would it be amortized?

[Ryan Daws:]

It would be recognized as a one-time item.

[Joe Pantginis:]

Okay, great. Thanks a lot guys.

[Ryan Daws:]

Okay, thank you.

[Operator:]

[Operator Instructions] Our next question comes from the line of Bert Hazlett of Ladenburg. Your line is now open.

[Bert Hazlett:]

Thank you. Thanks for taking the question. Just shifting to maybe some bigger picture strategic items given some of the M&A that’s going on very recently with – in the deuterium medicinal chemistry space, Roger does this have an effect on your overall strategy i.e. does it make you more focused on proprietary programs versus partnering the programs and then maybe if you could follow-up a little bit, give us a little bit more color at this point in terms of how you’re thinking about – how you’re thinking about advancing the proprietary programs that you’ve done with 656 and are contemplating with others, thank you.

[Roger Tung:]

Sure. Thanks for the question. We have always tried to take an approach that balances compounds that are partnered with those that we wholly own. We had as you know bit of a setback when we ran into a tox signal with CTP-354. So that has put that little bit behind but the strength of the technology is our ability to create rapidly clearly bioactive new molecules that we can take forward into Phase 1 proof of concept studies based on the overall value creation the technology, we are focused now more on compounds that has demonstrated the not only efficacy but safety profiles in humans such as CTP-656 and or leaning towards that for the majority of our future work although not necessarily all of it. So we continue to believe that we will have a balance of compounds that are wholly owned and those that we will see partnership for CTP-499 continues to be an entity that we will seek to partner. In terms of our progression of compounds forward, I think what we have stated in the past and what we continue to believe is that the properties of the compounds particularly those based on deuterium substitution in drugs that have known safety and efficacy in humans enable us to take compounds forward with more assuredness and more quickly than when one could and we believe with overall lower risk than one can with compounds that don’t have those advantages.

[Bert Hazlett:]

Thank you and I guess just to follow up briefly is there any thought to advancing the multiple compounds in a particular therapeutic area that does not necessarily seem to be the case with your existing portfolio of clinical compounds is that a strategy that you would tend to employ as you advance things in the future?

[Roger Tung:]

As of right now we are not therapeutically focused. We may do that more in the future, I would say that overall we have had more activity in agents with neurologic activity than other areas hence that’s an area that we’re watching closely but we are not at this time at a point where we’re making a specific therapeutically focused play.

[Bert Hazlett:]

Okay. Thank you for the color.

[Roger Tung:]

Sure thank you.

[Operator:]

[Operator Instructions] And I’m showing no further questions at this time. I’d like to hand the call back over to Justine Koenigsberg for any closing remarks.

[Justine Koenigsberg:]

Thank you. Thank you everyone for joining us today. We are planning to attend the UBS Conference later this month as well as the Jefferies and JMP Conferences next month and we look forward to seeing many of you there. And thank you again for joining us today.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. That does conclude today’s program. You may all disconnect. Have a great day everyone.