Concert Pharmaceuticals, Inc.
Q3 2015 Earnings Call Transcript

Published: 8 Nov 2015

[Operator:]

Good day ladies and gentlemen, and welcome to the Concert Pharmaceuticals Third 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 follow at that time. [Operator Instructions] As a reminder, this conference maybe recorded. I would now like to turn the conference over to our host for today’s call, Ms. Justine Koenigsberg. You may begin.

[Justine Koenigsberg:]

Thank you. Good morning, and welcome to Concert Pharmaceuticals’ Third Quarter 2015 Investor Update. I’m Justine Koenigsberg, Vice President of Corporate Communications and Investor Relations at Concert. Our press release announcing our third quarter 2015 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 today with prepared remarks are Roger Tung, our President and CEO, Jim Cassella, our Chief Development Officer, Nancy Stuart, our Chief Operating Officer and Ryan Daws, our CFO. 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 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:]

Thanks, Justine. Good morning and thank you for joining us today. As we approach the end of year I’m happy to reflect on the progress we’ve made. Our pipeline is well positioned to advance innovative drug candidates with the potential to provide better treatment options for a range of diseases. We have a diversified pipeline of drug candidates derived from our DCE Platform. During the past quarter and throughout 2015, we’ve made significant progress with multiple drug candidates and we couldn’t be more excited about the prospects ahead for our business. Our strong balance sheet provides a solid base from which we could maximize the value of and continue to expand our product pipeline. Increasingly, we are applying our deuterium platform to enhance the properties of approved drugs. We view our technology as providing high-value opportunities both for our wholly-owned programs as well as in our collaborations. In the latter case, it’s clear that deploying our deuterium platform has the potential to enable our collaborators to improve upon their key products, expedite development, extend product life cycles and expand indications. For our proprietary Concert pipeline programs we’ve demonstrated that we can rapidly advance deuterated versions of existing drugs from our platform into Phase 1 proof-of-concept clinical trials. Our capabilities in identifying high-value proprietary drug candidates combine our expertise in deuterium chemistry with our ability to define unmet medical needs and commercial opportunities for our potential Concert drug candidate. Throughout our process our aim is always to make better medicines that meaningfully enhance patient care. Recently, we presented new data relating to CTP-656, a potent novel potentiator for cystic fibrosis. We’re highly encouraged by its superior PK profile compared to ivacaftor. As we presented data from our trial at the U.K CF Trust and North American Cystic Fibrosis conferences we had the opportunity to interact with key opinion leaders, clinicians and the broader CF community and the response to our program has been very positive. CTP-656 is a great example of a molecule that we developed using our technology to make improvements to marketed drugs or well-studied compounds. By implying selective deuterium substitution, we have the ability to create a potentially better medicine that can meaningfully enhance patient care. 656 represents an important value driver in the next phase of Concert’s growth plans, but as I noted earlier we have a diversified pipeline of drug candidates derived from our DCE Platform. On today’s call, we are pleased to provide an overview and update of this exciting pipeline along with a discussion of our financial results. Joining me today in doing so are members of our management team beginning with Jim, who will provide an overview of the clinical findings to date and our next steps in developing CTP-656. Following Jim, Nancy will provide an update on the rest of the pipeline and Ryan will provide a financial update. Now, let me turn it over to Jim.

[Jim Cassella:]

Thanks Roger. We are really excited by CTP-656 and the opportunity it represents as a potential new treatment option in cystic fibrosis. CTP-656 is a new chemical entity that we designed to provide superior pharmacokinetic properties while leveraging the known safety and efficacy of non-deuterated ivacaftor known commercially as Kalydeco. With CTP-656, we set out to improve the treatment of cystic fibrosis and offer an alternative treatment option for individuals with CF. We see the potential of 656 to offer enhanced therapeutic properties as model therapy for gating and minimal function mutations. Importantly, we also see 656 as being the backbone potentiator in combination with other CFTR modulators in development for CF. We believe 656’s half-life support once-daily dosing and therefore we have an opportunity to simplify treatment regimens and improve patient dosing adherence. As Roger mentioned, we participated in scientific forums to announce data from our initial crossover comparison trial and a single ascending dose Phase 1 trial of CTP-656. Last month, at the North American Cystic Fibrosis Conference, we showed the crossover data in healthy volunteers for the two analogs we initially brought into clinical evaluation. Importantly, our platform allowed us to quickly move two deuterium modified analogs into the clinic to comparing healthy volunteers so we could select the best candidate for further development. These trials showed that both the deuterium modified ivacaftor analogs provided an impressive PK parameters in humans and D9 was superior overall to D18. In addition, both deuterium modified analogs provided equivalent in vitro CFTR potentiation demonstrating the same pharmacology as non- deuterated ivacaftor. Subsequently, we chose D9-ivacaftor as the superior candidate and designated it CTP-656. Our single ascending dose Phase 1 clinical trial was conducted in healthy volunteers in evaluated 75 150 and 300 milligrams of CTP-656. 656’s mean half-life was 15 hours supporting once-daily dosing. 656 also demonstrated dose linear pharmacokinetics. In addition, 75 milligrams of 656, the lowest dose tested provide higher exposure to the commercially available 150 milligram dose of Kalydeco. As previously mentioned, in our comparison of 656 to Kalydeco we showed that 656 had a superior pharmacokinetic profile. In this Phase 1 trial, we compared an aqueous suspension of 150 milligrams of 656 versus 150 milligram commercial tablet of Kalydeco following a high-fat meal, which is the optimal condition for Kalydeco absorption. 656 provided a reduced rate of clearance relative Kalydeco resulting in a longer half-life, substantially increased exposure in greater plasma levels at 12 hours and 24 hours. In addition, we conducted an analysis of metabolites in plasma and showed that the overall exposure profile of 656 was superior to that of Kalydeco. Following dosing with 656 they were higher levels of the active parent drug in the blood relative to its less-active and inactive metabolites. With Kalydeco on the other hand, blood levels of its less-active and inactive metabolites predominated over the parent drug. We are eager to explore whether the greater metabolic stability of 656 its enhanced exposure to parent and reduced exposure to metabolites could provide greater efficacy and reduced drug-drug interactions. CTP-656 was well tolerated across all dose groups and there were no serious adverse events reported in subjects who received 656. With these findings we are encouraged by the prospects of 656 to have a favorable therapeutic profile that we will move forward for further evaluation. Our next step is to initiate the multiple ascending dose study in healthy volunteers before year end. This upcoming multiple ascending dose Phase 1 trial will include a single dose crossover comparison of a tablet formulation of CTP-656 compared to Kalydeco. We expect to report topline results from this multiple ascending dose trial in the first half of 2016. Subsequent to our healthy volunteer studies we are planning a small efficient Phase 2 trial in cystic fibrosis patients in the second half of 2016. We will initially focus in cystic fibrosis associated with gating or minimal function CFTR mutations the population for which Kalydeco is proved. Our goal is to advance this program as rapidly as possible to provide a new treatment option in cystic fibrosis. Let me close by saying that we are very excited about the potential of 656 in the therapeutic promise this drug has for individuals with CF. We appreciate the support the program is receiving in the CF community and we look forward to its further advancement in the clinic. Next, Nancy will provide an update on our collaboration programs.

[Nancy Stuart:]

Thanks, Jim and good morning, everyone. In addition to 656 we also continued to see value from our DCE Platform as it relates to our collaboration. These really represent opportunities to improve the characteristics of existing products to extend their life cycle and potentially to expand their therapeutic indications. While we’re not making any new updates at this time on our Jazz collaboration, we have successfully achieved the anticipated development milestone under our collaboration with Celgene and we expect to achieve an additional milestone this year from Avanir. With Celgene, we announced last month that we achieved an $8 million milestone related to the completion of the Phase 1 clinical evaluation of CTP-730. Just as a reminder, 730 is a deuterium-modified analog of apremilast. We are encouraged by the favorable pharmacokinetic profile of 730 observed in our Phase 1 clinical trials, compared to historical data for apremilast. Going forward, Celgene would be responsible for any post Phase 1 development activities for the program. With our Avanir collaboration, we continue to expect that Avanir will initiate Phase 3 testing this year with AVP-786 for the treatment of agitation in patients with Alzheimer’s disease. In addition, Avanir is also evaluating 786 as a potential adjunctive therapy in patients with major depressive disorder who had inadequate response to antidepressant treatment and also as a potential adjunctive treatment in patients with residual schizophrenia. Avanir’s overall development program speaks to the broad potential of 786 as a neurologic and psychiatric agent. We are also very pleased to see that 786 for Alzheimer’s agitation was highlighted by Chemical and Engineering News as one of their Top 20 drugs in the pipeline for 2015. The list was compiled and published by C&E News in their September supplement and provides a snapshot of the 20 drugs that they believe has the potential to be successful. As 786 advances through clinical testing, we hope to realize additional milestones including a $2 million payment associated with the initiation of dosing in the Phase 3 Alzheimer’s agitation trial. Lastly, we continue to view CTP-499 as a partnering opportunity for diabetic nephropathy. In line with our expectations, we have finalized our Special Protocol Assessment or SPA with the FDA. We have agreed on end clients the statistic of analysis of plan and other aspects of the potential Phase 3 trial and we hope that with the collaborator this program can move forward. Let me close my remarks by stating that through our collaborations we have been able to leverage our deuterium platforms to participate in the development of important products in major therapeutic markets. Our execution on the strategy continues to expand the capabilities of our DCE Platform and also to generate revenues and future value creating opportunities for our business. With that I’d like to now turn the call over to Ryan to provide our financial update.

[Ryan Daws:]

Thank you, Nancy. As I walk through our third quarter financial results, please reference the financial tables found in today’s press release. Looking first at revenue, for the third quarter of 2015, revenue was $1.7 million, compared to $4.4 million in the corresponding period of 2014. The decrease in revenue was partially due to the completion of the Phase 1 study with Jazz Pharmaceuticals in the first half of 2015. In addition, in the prior-year period, we achieved a $2 million development milestone payment from Avanir related to the initiation of dosing in a Phase 2 trial. As Nancy mentioned, we achieved $8 million milestone from Celgene and expect to record this as fourth-quarter revenue. On the expense side, research and development expenses were $7.1 million in the third quarter of 2015, compared to $8.6 million in the corresponding period of 2014. The decrease in research and development expenses was primarily attributable to lower expenses associated with JZP-386 and other proprietary program. The decrease in R&D expenses was partially offset by increased development expenses associated with CTP-656. General and administrative expenses were $3.3 million in the third quarter of 2015 compared to $3.5 million in the corresponding period of 2014. Our third quarter 2015 net loss attributable to common stockholders was $8.6 million or $0.39 per share. For the third quarter of 2014, our net loss attributable to common stockholders was $7.8 million or $0.43 per share. As a reminder, we expect to be profitable for the full-year 2015, as a result of the one-time change of control payment we received in the second quarter of 2015 related to Teva’s acquisition of Auspex. We expect to have sufficient operating loss carryforwards available to offset our estimated ordinary taxable income for fiscal 2015. During the nine months ended September 30, we recorded a tax provision of $400,000 to recognize our expected alternative minimum tax obligation for 2015. We ended the third quarter with $142 million in cash, cash equivalents and investments, excludes about the $8 million milestone we achieved from Celgene, we believe our current cash is sufficient to fund our operations into 2018. As we end this quarter, I’m pleased to report that we have a strong balance sheet and the financial resources to invest in our portfolio of promising product candidates.

[Justine Koenigsberg:]

Thanks Ryan. This concludes our prepared remarks. And we’d be happy to address any questions at this time.

[Operator:]

Certainly. [Operator Instructions] And our first question comes from Difei Yang of Brean Capital, your line is open.

[Difei Yang:]

Hi good morning and thanks for taking my question. Just a couple, the first one is related to CTP-499, how should we think about the potential timing of finding a partner to move into Phase 3 development?

[Jim Cassella:]

It’s not our policy to comment on this development. We think the SPA is a positive step in that process, but it’s really premature to say anything more on that.

[Difei Yang:]

Okay. Thank you. And now moving on to JZP-386, is that program still active or would you give us a quick update on where that program stands?

[Roger Tung:]

Sure, this is Roger. We can’t really comment on the current activities because it’s being developed by Jazz Pharmaceuticals, but they have been providing updates on that and it certainly is an active program.

[Difei Yang:]

Okay. Thanks. So, I guess I’m trying to understand JZP-386 is still being worked on by Jazz Pharmaceuticals, it’s not abandoned or anything like that.

[Roger Tung:]

Jazz Pharmaceuticals had indicated that their next work would be to study formulations of JZP-386. Just as a reminder on that program we had indicated with the Phase 1 study that we did of JZP-386 versus Xyrem that JZP-386 had a superior pharmacokinetic profile with better pharmacokinetic or better exposure data and better pharmaco-dynamic data at relevant time points after the Cmax. So, we think that it has the potential to be a superior product. Jazz, however felt that it was not sufficiently improved to take it directly into late-stage clinical studies and so they announced that their intent was to develop the compound further by studying formulations with it.

[Difei Yang:]

Okay. Thanks for the clarification. I’ll jump back in the queue.

[Roger Tung:]

Sure, thanks for the question.

[Operator:]

And our next question comes from Matt Roden of UBS. Your line is open.

[Matt Roden:]

Thanks very much for taking my questions and congrats on the progress here with 656 in CF, I guess can you talk a little bit more about the development strategy there? I guess I’m just thinking about whether or not we’re looking to have simply another option in CF or whether or not we’re looking for something that’s really clinically differentiated from Kalydeco. So, I’m not sure if it’s too premature to talk about endpoints that you would look at in your Phase 2 trial that you mentioned, but what level of differentiation would you be looking to get out of your clinical program?

[Roger Tung:]

Thanks for the question Matt. That’s a really good question. Our intent is to have a compound that provides not only another option, but hopefully a better option for patients and that’s the way in which we intend to develop the compound. I think it’s probably most appropriate if Jim comments on the path forward for it, but we really think that the properties that we have in the molecule are separated significantly from those of ivacaftor.

[Jim Cassella:]

Hi Matt, this is Jim. So, as Roger said, we already have some nice differentiation resulting from our very first Phase 1 trial. Our development plans right now are to move the program forward as quickly as possible, our multiple ascending dose trial is going to get kicked off this quarter and we expect to read out results in the first-half of next year. We will be doing a Phase 2, a very small Phase 2 under 40 patients starting in the second half from next year. The purpose of that trial is to really look at couple of different doses that will come out of our multiple ascending dose trial and really look at some key functional endpoints in CF patients sweat chloride, FEV1 are key things that we’re thinking about right now and release for dose selection for moving quickly into the Phase 3.

[Matt Roden:]

And would you have a Kalydeco reference on in that trial?

[Jim Cassella:]

We believe that for the Phase 2 we will be taking patients who are currently on Kalydeco and watching them off for a few days and then looking at the resulting effects over roughly a month time period with dosing with 656.

[Matt Roden:]

Okay. That’s helpful.

[Roger Tung:]

Matt, I just wanted to follow up a little bit on that. One of the aspects of 656 that we think could be really important is an improvement in the ability of patients or individuals with CF too is here with their treatment. One of the things that we would have expected and has been borne out by recent publication is that adherence to compounds that are taken twice daily on a chronic basis is less than complete. A recent publication in the Journal of CF indicated that in a subgroup of patients wherein a small group of patients were followed with electronic CAT monitoring that despite self-reporting of a 100% adherence to their medicine they were actually only taking Kalydeco as prescribed about 60% of the time. We know that the real world efficacy in terms of effect on FEV1 for patients taking Kalydeco is lower than it has been for patients who are in the Phase 3 trial, again not surprisingly and what you’d expect from historical data. So, our hope is that by transiting from a compound that’s twice-daily dose to one that’s once-daily that will make it simpler for individuals with CF to comply with the optimal regimen and to adhere more closely to the way the drug should be taken and have more optimal results.

[Matt Roden:]

That’s helpful Roger. Thank you. I guess I just wanted to also ask about the Special Protocol Assessment on 499, specifically curious if you can talk about the targeted patient population within CKD, maybe what you’re studying on endpoints and I don’t know if we can get into this statistical powering assumptions, things like that, anything that would be helpful, thanks.

[Jim Cassella:]

Sure. With respect to 499 we had used the data that we had from our Phase 2 study to provide a backdrop with FDA [indiscernible] expectations are in Phase 3. So, the patients’ cohort that we would expect to have going into that study is similar to that which responded well to CTP-499. Those patients would be in Stage III and the upper portion of Stage IV in terms of CKD and we would expect them to have an increased urinary albumin at baseline. Endpoints would be event-driven and this is entry of patients into end-stage renal disease as defined by the protocol and although it’s not a primary endpoint, we of course are going to track mortality in that study given the patient population.

[Matt Roden:]

Great. Sounds like a good study. Thanks very much.

[Jim Cassella:]

Absolutely.

[Operator:]

And our next question comes from Joe Pantginis of ROTH Capital, your line is open.

[Joe Pantginis:]

Hey, guys, good morning [indiscernible] say or can you say what any of the potential gating factors were and also congratulations for getting on the spot.

[Jim Cassella:]

Well, thanks very much. We appreciate that and first of all I will say that this - I will reiterate this is a partnering opportunity although we think it’s an exciting molecule due to the length and frankly expense of doing a registration study, it’s something that we would not pursue without a partnership. Having said that, our interactions with FDA were actually very easy, it’s clear that they’re looking for new medicines to treat chronic kidney disease, diabetic nephropathy and I’d say in terms of our interactions with them they were very positive without a lot of hitches.

[Joe Pantginis:]

So, that’s great. So it just sounds more of just dotting the I’s and crossing the T’s not to be cliché I’m just making sure the endpoints in the stats were offset. So then, just a follow-up with regard to 656, you mentioned in your prepared comments, you even had a lot of discussions at the recent CF Conference, I was just wondering if you can dive into that a little more with regard to the [indiscernible].

[Roger Tung:]

And I was actually at the poster presentation. It was a very active session. We had a lot of positive response. We’ve had a very good response in talking to KOLs and clinical trial experts in the CF space both here in the U.S. and abroad. So, I’d say in general we’re getting a very nice welcoming response to the compound and to the data.

[Joe Pantginis:]

Okay. Great, thanks a lot guys.

[Operator:]

And our next question comes from Bert Hazlett of Ladenburg, your line is open.

[Bert Hazlett:]

Thanks. Three separate subjects, but we should be able to get through them reasonably. So, in terms of 499 and the SPA, is there any expected, how long do you think that study actually might take soup to nuts?

[Roger Tung:]

Well, it depends upon your expectations regarding the enrollment to the study. First of all, I just have to say that this was really a team effort to get the 499 program to the stage where we have special protocol assessment. I really want to congratulate the people at Concert who put in the tremendous hard work to make it happen and have a very smooth pathway with FDA. So, in terms of the overall expectations, again we are assuming that the event rate is going to be about 30% per year and that’s based on expectations of an update of historical data if that makes sense. So, we have historical data on studies that have been done in the space using the positive controls of ACE inhibitors and ARBs, but we expect that the standard of care has improved since then. In order to get what we would like to see from a statistical signal are expectations that are that it would be on the two plus year timeframe of actual dosing. So, you add that on to maybe 2.5 years plus the enrollment time and that gives you a sense of what the overall study would look like.

[Bert Hazlett:]

Okay. That’s helpful, thank you. And then just a quick one on Celgene and congratulations on the milestone there and the progress there and you being able to discuss that exciting program clearly, what are your expectations internally for milestones beyond the $8 million that you just received?

[Nancy Stuart:]

Hi, it’s Nancy. So, the next development milestone that we could see would be either the dosing in the Phase 3 trial or an acceptance of an NDA filing and that would be a $15 million milestone.

[Bert Hazlett:]

Okay. That’s helpful thanks and then just kind of strategically the 656 program is clearly gaining momentum in a number of different ways. The comments were on it being potentially being a backbone potentiator to be used in combination with other modulators, how do you go about effecting that strategy, how do you think about that just given the activity that’s in the space right now?

[Ryan Daws:]

Hey Bert, it’s Ryan. It’s a great question. I think our goal really is to get our molecule approved. I think that will facilitate combination drug development. So, that’s really when you hear Jim say we’re working to move this quickly. It benefits the patients and us as well in terms of being able to look at combinations. I think with our data there we’ve gotten a lot of interest in people trying to figure out how you might put combinations together [508 stage] for example and go compete with our candidates. So, I think it’s just going to take some time to play out and we’ll just have to see how that gears, but what we can control is getting this drug approved.

[Bert Hazlett:]

That’s clearly an exciting program, thanks for the color and congratulations on the progress with it.

[Roger Tung:]

Thanks Bert.

[Operator:]

And our last question comes from Robert LeBoyer at Aegis Capital. Your line is open.

[Robert LeBoyer:]

Good morning and congratulations for the team on all the progress that you’ve made lately. My question has to do with, actually a follow-up to the Celgene collaboration question and I was wondering if there are any expected progress on additional products that might move into the clinic or anything from your own pipeline that you may move into the clinic individually?

[Nancy Stuart:]

Sure, hi it’s Nancy. As far as the Celgene collaboration goes, it does cover additional compounds but at this time we are only discussing CTP-730. In terms of our own pipeline, we do expect to identify an additional candidate and what we said is that we will move that candidate into the clinic next year and we’ll identify it probably around that time and I guess the…

[Robert LeBoyer:]

Okay. And…

[Nancy Stuart:]

Sorry.

[Robert LeBoyer:]

No, go ahead, finish your answer.

[Nancy Stuart:]

And the other thing that we stated was that that compound will be a deuterated version of a marketed drug.

[Robert LeBoyer:]

Okay. So, no change there, but anything, any expected timeframes for a partnership on 499?

[Ryan Daws:]

No. This is Ryan again. As we said earlier, we’re not really commenting on this development. It’s just one of those things that you can’t predict and like I said earlier having the SPA in place is we think a positive step.

[Robert LeBoyer:]

Yeah, okay, terrific, thank you very much.

[Operator:]

And I’m showing no further questions at this time. I’d now like to turn the call back over to Justine Koenigsberg.

[Justine Koenigsberg:]

Thank you. And thank you everyone for joining us today. We’re really pleased with the progress we’re making towards creating important new medicines for patients and we look forward to keeping you updated on our progress. We’ll be participating at the Brean’s, Stifel, and Jefferies Conference later this month and hope to see many of you there. This concludes our call this morning. Thank you again for joining us.

[Operator:]

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day.