ChemoCentryx Inc (CCXI) 2017 Q1 法說會逐字稿

Good afternoon, and welcome to the ChemoCentryx First Quarter 2017 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference call will be recorded. I would now like to turn the call over to Steve Klass, Vice President with Burns McClellan. Mr. Klass, Please go ahead.

Thanks, Carmen. Good afternoon, and welcome to the ChemoCentryx First Quarter 2017 Financial Results Conference Call. Earlier this afternoon, the company issued a press release providing an overview of financial results for the quarter ended March 31, 2017. The press release, along with a few slides that you will find helpful while you listen to this call, are available on the Investor Relations section of the company's website at www.chemocentryx.com.

Joining me on the call today is Dr. Thomas Schall, President and Chief Executive Officer of ChemoCentryx, who will provide an overview of the company's recent corporate highlights and anticipated milestones. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer at ChemoCentryx, will provide an overview of the company's financial highlights for the first quarter before turning the call back over to Tom for closing remarks.

During today's call, we will be making certain forward-looking statements. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These risks are described in the company's filings made with the Securities and Exchange Commission, including the company's annual report on Form 10-K filed on March 14, 2017. You are cautioned not to place undue reliance on these forward-looking statements, and ChemoCentryx disclaims any obligation to update such statements.

In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 10, 2017. ChemoCentryx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

With that, I would now like to turn the call over to Tom.

Thank you, Steve, and thanks and good afternoon, everyone. Thank you for joining us on our first quarter 2017 conference call. On today's call, I'll discuss 3 topics. First, I will share with you our current thinking as we advance our late-stage drug candidates across 4 indications. Second, I'll review briefly the financial strength that we derive from our global kidney health alliance with Vifor Pharma, which itself serves as an independent validation of our excitement at the prospects of helping patients with orphan and rare renal diseases. And third, I'll briefly touch upon our early-stage pipeline before explaining how we see our late-stage candidates completing our value-creation spectrum.

Let me start by updating you on our late-stage drug candidates. Two months ago, in our fourth quarter 2016 call, I outlined for you how we are dividing the drug candidates from our chemoattractant receptor inhibitor platform into late stage and early stage, as referred to on your Slide 3.

Our late-stage candidates are targeted at orphan and rare renal diseases. With one Phase III clinical trial already underway, our plan over the course of this year is to launch clinical trials in a further 3 indications, each of which, if successful, would provide data to support our submissions for registration. It is exciting to be moving forward on multiple fronts with our orphan kidney disease franchise.

The term orphan drugs may seem diminutive, but in actuality, a focus on orphan and rare disease brings big advantages to a company of our size. For example, orphan and rare diseases can be characterized by faster and less costly clinical and regulatory phases, and they tend to generate attractive pricing.

One of our 2 late-stage compounds, avacopan, is in itself becoming a pipeline with 3 indications already being examined. Avacopan is unique. It is the only orally administered, small molecule inhibitor of the C5a receptor, and it is in Phase III clinical development. Small molecules are important because patients can swallow a pill or a capsule rather than heading to the clinic for infusions or undergoing repeated injections.

In March, the FDA granted another Orphan Drug Designation for avacopan for the treatment of patients with C3 glomerulopathy, or C3G, shown in Slide 4. This is the fourth Orphan Drug Designation received by avacopan, 1 of our 2 lead drug candidates. We are currently sharing with the FDA and the European's Medicines Agency our design of a late-stage clinical trial to prove the safety and efficacy of avacopan for C3G.

C3G is a rare disorder that strikes the young, requiring dialysis and kidney transplant. There is no approved treatment. For every million people, an estimated 2 to 3 individuals are afflicted by C3G. Even after kidney transplant, return of C3G disease is common, destroying the function of the transplanted kidney as well.

Following the successful treatment of a C3G patient in the United Kingdom who has been treated continuously since September of the year 2015, we have now received many additional compassionate use requests for C3G and indeed for other rare complement dysregulation and deficiency disorders. Each of these requests, of course, requires institutional board approval, but they provide a clear indication of the growing awareness of the potential health benefits from treatment with avacopan. So we look forward to launching our controlled clinical trial for avacopan in C3G around the middle of this year, paving the way for clinical results that, if successful, would support registration of avacopan in C3G in our regulatory submissions for that disease.

More recently, the prestigious Journal of the American Society of Nephrology published results from our successful Phase II CLEAR clinical trial, which demonstrated that avacopan provides rapid, robust and effective control of ANCA vasculitis while also eliminating the need and the significant safety risks from the chronic high doses of steroids that characterize the current standard of care.

ANCA vasculitis, depicted on Slide 5, is an autoimmune disease where blood vessels are destroyed by neutrophils, ultimately leading to renal failure. There are an estimated 200,000 patients suffering from ANCA vasculitis in the United States and Europe, with 17,000 new patients diagnosed each year.

Our Phase III ADVOCATE clinical trial is a randomized, double-blind, 2-armed, multicentered study of avacopan for the treatment of ANCA vasculitis and it is now underway. We held 3 meetings with ANCA vasculitis clinical investigator specialists in the first quarter of this year. These meetings in the United States, in Europe and in Australia have led to acceleration in clinical trial site activation, which in turn should lead to an efficient enrollment of patients in the ADVOCATE trial. We plan to have a total of 200 clinical sites around the world, consisting mainly of centers of expertise in this disease and each with a network of feeder sites. It is still somewhat difficult at this stage to predict accurately the pace of enrollment of patients in orphan diseases such as ANCA vasculitis, but our preliminary estimate was that it would take approximately 18 months from the start of our ADVOCATE study to complete enrollment of the 300 patients that we need.

Our third potential indication for avacopan is in the treatment of atypical hemolytic uremic syndrome, or aHUS, shown in Slide 6. aHUS is a disease in which patients experience kidney damage from the formation of blood clots in the blood vessels, leading in about half the cases to the suffering and expense of end-stage renal disease. This, too, is a rare disease. In a population of 1 million people, 2 or 3 are estimated to suffer from aHUS. We are working on the design of a late-stage clinical trial with the goal of launching that trial later this year.

Besides avacopan, our other late-stage drug candidate is CCX140, an oral medication that blocks CCR2, another of the body's pro-inflammatory mechanisms. We are pursuing CCX140 in the treatment of focal segmental glomerulosclerosis, or FSGS, as depicted on Slide 7. FSGS is another severe disorder of the kidney for which no approved treatment exists and which leads to end-stage renal disease. FSGS is a rare disease, and we expect that the late-stage trial that we are designing will involve fewer patients than for the avacopan trial in ANCA vasculitis.

Now let me turn to how we fund our late-stage clinical development programs for avacopan's 3 indications and for CCX140 in FSGS, and please see Slide 8. In February of this year, 2017, we announced an expanded agreement with Vifor Pharma, our partner in our global kidney health alliance. The agreement harmonized the geographic rights across the 3 avacopan indications I have described with those of CCX140 for FSGS. Specifically, we at ChemoCentryx own entirely the commercial rights to both avacopan and CCX140 in the United States, while Vifor Pharma has the corresponding rights to international markets abroad, except China. The latest $20 million in upfront cash commitments to ChemoCentryx under the most recent part of the agreement brings the total of upfront cash payments and cash commitments from Vifor Pharma to $155 million.

In addition, ChemoCentryx is entitled to milestone payments as well as tiered royalties ranging from the teens to the mid-20s on potential net sales from the Vifor territories. This very important value-creating partnership with Vifor Pharma also provides expert third-party validation of the promise of ChemoCentryx's rare renal drug candidates and has put us in a strong financial position.

Finally, let me say a word about one candidate in our early-stage pipeline that has already moved into the clinical setting, our CCR2 inhibitor known as CCX872. We plan to initiate later this year further Phase II work with CCX872 in combination with other therapies in patients with pancreatic cancer, this following some encouraging results in an ongoing Phase Ib trial. We intend to report updated overall survival data from the ongoing Phase Ib trial in pancreatic cancer later this year.

At ChemoCentryx, we are advancing across the value-creation spectrum as we move from basic science and conceptualization towards late-stage clinical trials and beyond. Our aim with our 2 lead candidates is to save and enhance human lives and help lower the huge economic burden of kidney disease. In doing this, we will create value for our shareholders by commercializing our rare and orphan renal disease medications in the United States and through double-digit tiered royalties from international sales through our partner, Vifor Pharma. This in turn will give us the capacity to bring forward the early-stage development candidates from our discovery research program that we have identified in other disease areas, such as cancer, inflammatory autoimmune disease and skin pathologies. The reality of success with our chemoattractant receptor inhibitor platform has never been closer.

I will now turn the call over to Susan Kanaya to review our first quarter financial results. Susan?

Thank you, Tom. Our first quarter 2017 financial results were included in our press release today and are summarized on Slide 9.

Revenue was $8.2 million for the first quarter compared to $0 million in the first quarter of 2016. The increase in revenue from 2016 to 2017 was due to amortization of the upfront license fee commitment in connection with our kidney health alliance with Vifor.

Research and development expenses were $10 million for the first quarter, down from $11.2 million in the same quarter in 2016. The decrease in research and development expenses from 2016 to 2017 was primarily attributable to lower Phase I and Phase II clinical development expenses in 2017, partially offset by an increase in Phase III development expenses. Phase I clinical development expense was lower in 2017 period due to the completion of enrollment in the Phase I clinical trial for CCX872 in patients with advanced pancreatic cancer in 2016. The decrease in Phase II development expense was due to the completion of the CLEAR and CLASSIC Phase II clinical trials for avacopan for the treatment of ANCA vasculitis in 2016. These decreases were partially offset by an increase in Phase III development expense due to the initiation of the Phase III ADVOCATE trial for patients -- for avacopan in patients with ANCA vasculitis in the fourth quarter of 2016.

General and administrative expenses were $4.6 million for the first quarter of 2017, up from $4.1 million we recorded in the first quarter of 2016. The increase from 2016 to 2017 was primarily due to increased intellectual property-related expenses, partially offset by lower travel. We recorded net losses for the first quarter of $6 million compared to $15.2 million in the first quarter of 2016.

Total shares outstanding at March 31, 2017, were approximately 48.2 million shares. We ended the quarter with $179.7 million in pro forma cash, cash equivalents and investments, which includes $30 million of remaining cash commitments from Vifor not reflected on the balance sheet as of March 31, 2017. We continue to expect to use -- utilize cash and cash equivalents of between $50 million and $55 million in 2017, which excludes upfront payments during the year based on commitments in our deals with Vifor Pharma.

Tom?

Thank you, Susan. We ended the first quarter of 2017 with a strength in balance sheet and with our Phase III ADVOCATE trial for avacopan and ANCA vasculitis underway. We plan by the end of this year to launch a further 3 late-stage clinical trials, 2 additional for avacopan and 1 for CCX140.

We are pleased with our progress across the value-creation spectrum. We aim to reach further new heights, to ascend the steps of success in the path from conceptualization to commercialization. We look forward to establishing a sales and marketing capability for our rare and orphan renal disease medications in the United States. And following our late-stage candidates, we intend to bring forward further development candidates that we have discovered in other disease areas. The future of our chemoattractant receptor inhibitor platform has never been brighter.

With that, I will now turn the call back over to the operator, and I look forward to your questions. Operator?

(Operator Instructions) And our first question is from the line of Anupam Rama with JPMorgan.

It's Eric in for Anupam this afternoon. Just a couple on C3G. You talk about plans to move forward with a registration-enabling -- potentially registration-enabling study later this year. I'm just wondering if you could walk us through the rationale moving straight into a pivotal program over generating data in a handful of patients first. And just -- and also with respect to disease setting, you have some anecdotal data in a post transplant -- post kidney transplant patient. Is this how -- is this basically what we should be thinking about the treatment setting in the pivotal study that you plan to discuss with regulators?

Thank you, Eric. Excellent question. So C3G is a very important indication because as I mentioned, there are no approved therapies. So this is a disease for which precious little can be done ultimately for patients. And it typically strikes young people in their teens and 20s, who go into end-stage renal disease, that is dialysis for a time. They typically can get -- if they're lucky, they'll get a transplant typically from a parent. And then that transplant succumbs to the same disease, and they go back into the declining spiral of end-stage renal disease and dialysis. So certainly very expensive, certainly very tragic and nothing to be done in terms of approved therapies. That is the reason that we feel, and I think we've got some encouraging discussions around this topic so far, that we can go directly into a trial that, if successful, could lead to registration of that drug in this rare disease. In addition, we're supported in that effort by the really considerable amount of data we've already amassed in humans with this drug and the fact that we know a lot about the drug's properties and the fact that it seems very well tolerated and safe in humans to date and we completed the large majority of our off-clinical work as well. All of those together have led to discussions with the FDA around how to get a drug approved in this indication, specifically, avacopan. The disease setting, we believe, should not just be limited to the case study experience we have so far, which, as you correctly pointed out, was stabilizing continuously now for going on 2 years in September, what was otherwise decline in kidney function in a patient that had received a transplant from one of his parents. And that has been a great success story so far. Even better, and we believe because the underlying condition is what we're treating in terms of the terminal damage effector pathway with our drug, we believe also that catching people before the need for transplant will be even a greater value proposition. So I think the disease setting, you can expect to see both those situations being tested and that's what we intend to launch, as I said, in the not-too-distant future.

And our next question is from the line of Eric Schmidt with Cowen and Company.

It's maybe similar to what Eric was asking but on aHUS, Tom. Could you talk about when we might see some data from your, I think ongoing Phase II study that could support the pivotal trial that you're hoping to initiate then? And -- sorry, I think by year-end, you said? And maybe in this case, talk a little bit more about the standard of care, Soliris, and how you might design a study with or without that product on board.

Absolutely. Thank you, Eric. As you know, aHUS is probably one of the most challenging areas that we or anyone else could attempt to look at right now for variety of reasons. It is quite a rare disease, and there is an incumbent standard of care, Soliris, which has been well adopted certainly here in the United States and many other parts of the world but not universally yet accessible in all patients who need aHUS, and there are countries right now where Soliris is simply unavailable. I will talk very briefly about the differentiating features of our drug versus Soliris. As folks may well know, Soliris is an antibody. It binds a certain part of the complement cascade, which while effective in diseases like aHUS in preventing the blood clotting dysfunction which occurs mostly in the kidney, also inhibits the formation of something called the membrane attack complex, which is an important part of host defense for bacterial infections of certain varieties. So there are some safety issues to be managed with Soliris, particularly in a setting where patients present very acutely and need to be treated and cannot -- there's simply not enough time to immunize them, if you will, against the infectious component. That's fairly well managed, but not completely managed. Soliris is also quite an expensive drug, as most folks know. So what we need to do is to, first, we have to show, and we have shown, we'll be publishing some data, we've talked about it at meetings, that the inhibition of the C5a receptor, which is distinct from the MAC complex inhibition and will not engender the same safety consequences by the way, and the fact that our drug is an orally active drug and not an injectable or infusible, could also inhibit this clot-forming potential in the system of people with aHUS. And we've done a pilot Phase II study in Europe showing that in the patients that we dosed with our drug, their blood simply has the vast majority of the clotting potential eliminated as a consequence of inhibiting the C5a receptor. It's not a clinical endpoint study at this point, but it paves the way now for the clinical endpoint study. So now this is where we are. The challenge is finding patients that do not have access to Soliris because we don't necessarily want to do a comparative study at this point, and the FDA has guided folks in this area that that's not essential to do. A fairly small number of patients can open the gateway to the evaluation of your drug for registration in aHUS. And it has been guided that even a single-arm open-label study of a new agent showing the inhibition of the microangiopathy endpoint at 6 months would be sufficient to have the drug evaluated, and if the data support, register a new agent in aHUS. So we are going places, frankly, Eric, where Soliris is not readily available or where it's not readily accessible even where it is available. And we hope to start in a fairly small number of patients and show some clinical readouts fairly early on, such things as platelet recovery and so on, and continue to look through 6 months of TMA. And then based on the back of that data, expand to a large enough number which will still be a modest number we believe that, if successful, will support the registration of the drug. So that's where we are, and we hope to be announcing the first patients in the clinical endpoint study when they come online a little later on this year. And there are couple of other ways to think about the drug, and we may have more to say about that, including preventing relapse in folks that may have gotten under control in the first instance with Soliris but for whatever reason have a discontinued use of Soliris. But that's a slightly different clinical question, and we'll be coming back to that at some point in the near future.

Is there an update on the FSGS patient that you reported on, I think it was last year? Is that patient still on drug and performing well?

Eric, that actually, I believe, you're referring to the C3 glomerulopathy patient who got on the drug -- who got on avacopan in September of 2015. We haven't treated any -- certainly, we haven't reported any treatment yet of FSGS patients with CCX140. In my presentation, the avacopan patient that you referred to, if that is indeed what you're referring to, continues to do very well. And coming into September, he'll be on drug continuously for 2 years.

And ladies and gentlemen, this concludes our Q&A session for today. I would like to turn the call back to Tom Schall for his final remarks.

It's been a great pleasure to update everybody on our program this afternoon. I appreciate your attention and your questions, and I very much look forward to bringing you up-to-date on additional developments next quarter. Thanks, again.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect. Have a wonderful day.