ChemoCentryx Inc (CCXI) 2017 Q2 法說會逐字稿

Good afternoon, and welcome to the ChemoCentryx Second 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 of Burns McClellan. Mr. Klass, please go ahead.

Thanks, Britney. Good afternoon, and welcome to the ChemoCentryx Second Quarter 2017 Financial Results Conference Call. This afternoon, the company issued a press release providing an overview of its financial results for the quarter ended June 30, 2017. This 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 progress during the quarter. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial & Administrative Officer, will provide an overview of the financial highlights for the second 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, August 8, 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.

I would now like to call over -- turn the call over to Tom Schall.

Thank you, Steve. And good afternoon, everyone. Thank you for joining us on our second quarter 2017 conference call. As a reminder, our first wave of orally administered novel medicines targeting specific chemokines or chemoattractant receptors involved in chronic kidney diseases, focusing initially on those who need it most. Patients with rare or orphan renal disease that can lead to chronic kidney disease and subsequently organ failure or death.

While the term orphan or rare drugs may seem diminutive, many of you know, in actuality, a focus on rare disease brings big advantages. For example, orphan or rare diseases can be characterized by faster and less costly clinical and regulatory phases, and novel orphan therapies tend to support attractive pricing. And today, I'll update you on 3 main topics. First, you will hear about the progress we are making on our pivotal Phase III ADVOCATE trial of avacopan in ANCA vasculitis. Second, I'll briefly review where we stand on registration supporting trials for other indications for avacopan as well as for our second lead drug candidate CCX140. Third, I'll put the execution of our registration supporting trials into the context of our overall business strategy.

Let me start by reporting on progress in our pivotal Phase III trial for avacopan in the treatment of anti-neutrophil cytoplasmic auto-antibody associated or ANCA vasculitis. This trial is called the ADVOCATE trial. For those of you viewing slides online, you will be able to see a screenshot of the ADVOCATE trial website on Slide 3.

ANCA vasculitis is caused by the over-activation of the complement system, which in turn activates neutrophils to destroy blood vessels through inflammation. This results in organ damage and failure with the kidney as the major target. ANCA vasculitis is fatal if not treated. And sadly, it is often fatal if -- even if treated with the current standard of care. Avacopan is our unique first-in-class small molecule that blocks the complement C5a receptor and subsequent activation of neutrophils, attacking the root cause of ANCA vasculitis without causing collateral damage to healthy cells.

Avacopan is convenient for patients since it is orally administered. We see exciting potential for avacopan to help patients achieve disease remission more quickly and provide effective control of the disease while significantly reducing the debilitating physical and psychological burdens that so often occurs with current treatments. ANCA vasculitis is currently treated with courses of immuno-suppressants, mainly cyclophosphamide or rituximab, combined with high doses of steroids, such as prednisone or methylprednisolone, administered for long periods of time.

Following initial treatment, up to 30% of ANCA vasculitis patients relapse within the first 6 to 18 months, and approximately 50% of all patients will relapse within 3 to 5 years. The data to date suggests that avacopan can make steroids and their noxious side effects irrelevant in the treatment paradigm of ANCA vasculitis. And by the way, for those who wonder just how bad a regimen of chronic steroids can be, look no further than a paper last week published in the prestigious Journal of the American Medical Association or JAMA. I find the results of that study to be stunning. In a randomized, blinded study of over 250 patients, examining the effects of just a 2-month regimen, including the taper of full dose methylprednisolone in the rare kidney disease of IgA nephropathy, the study had to be stopped by the independent data monitoring safety committee for safety reasons in the steroid taking group. Notably, serious adverse events or SAEs in the steroid group were 5 fold higher in the methylprednisolone group than in the nonsteroid placebo taking group.

Most of these SAEs were serious infections, indeed there were no serious infections in the placebo group and the SAE's included deaths. This paper exactly addresses the dangers of even short term steroid use and in a rare renal disease. But with avacopan, based on the Phase II clinical data we have so far, we believe that we can make steroid therapy irrelevant in ANCA vasculitis while providing rapid, robust and effective control of the disease and markedly improving the patient's quality of life.

In our phase -- in our pivotal Phase III ADVOCATE trial, which designed on these Phase II studies, we have now activated 144 sites around the globe. And that growing number of sites has led to increasing momentum in terms of patient enrollment. We are confident of our projections to complete enrollment by mid-2018. Our late stage pipeline, which includes avacopan, is shown in Slide 4. With the ADVOCATE trial for avacopan and ANCA vasculitis now well underway, we are moving, now also, avacopan into trials, which could support registration for this novel drug candidate in another indication C3 Glomerulopathy or C3G. C3G is a rare disorder that often affects the young, requiring dialysis and, all too frequently, kidney transplant. But even after transplant, relapse is all too common. During Q2, we conducted productive regulatory meetings with the U.S. FDA as well as the European Medicines Agency on the regulatory pathway for avacopan and C3G. The European Medicines Agency also granted avacopan orphan designation for C3G in May following the Orphan Drug Designation we received for avacopan in C3G from the FDA in Q1. We have now received a greenlight from the FDA to proceed with our C3G clinical trial and are in the process of readying clinical sites for initiation.

You have also heard, previously, about a third indication for avacopan in the treatment of atypical hemolytic uremic syndrome or aHUS, a progressive genetic disease in which blood clots cause kidney damage and acute kidney failure leading to end-stage renal disease in about half of all cases. We will update you on this later in the year and hope to start trials which would support registration of the drug for aHUS by the end of 2017.

As you can see, avacopan is becoming a pipeline in a drug, advancing into potential registration supporting trials for several different indications. Indeed, at the 54th European Renal Association, European Dialysis and Transplant Association Congress, or ERA-EDTA congress held in June, investigators shared findings of a pilot Phase II study using avacopan in a potential fourth indication, immunoglobulin A or IgA nephropathy also known as Berger's disease. IgA nephropathy can cause excess protein in the urine, known as proteinuria, and can lead to chronic kidney disease, kidney failure and end-stage renal disease.

It was not surprising to hear that researchers concluded that avacopan appeared to be safe and well tolerated in the study, given the number of patients already treated with avacopan in other clinical trials to date. But it was encouraging to hear that avacopan could even be considered a promising potential treatment option for patients with IgA nephropathy. Developing multiple indications for avacopan is consistent with our strategy to bring novel medicines to those who need it, people suffering with debilitating chronic kidney disease. Avacopan's exciting potential to help patients with rare renal diseases was endorsed by Vifor Pharma in an alliance which has provided expert validation as well as much of the financial strength we need to embark on multiple registration supporting trials. Recall, importantly, that under the Vifor alliance, we at ChemoCentryx own entirely the commercial rights to avacopan and CCX140 in the United States. While Vifor Pharma has rights to commercialize in international markets abroad except China and where ChemoCentryx is entitled to milestone payments as well as significant royalties on sales from those Vifor territories.

On June 9, a second highly sophisticated pharmaceutical company in the kidney care space, Kissei Pharmaceuticals, provided additional validation of the promise that avacopan offers patients by sublicensing from Vifor Pharma the exclusive rights to market avacopan in Japan. ANCA vasculitis, C3G and aHUS have all been designated as intractable diseases by the Japanese Ministry of Health, Labour and Welfare. Intractable diseases being their designation for diseases which have no effective treatments to date. This sublicensing deal in Japan will help with commercial execution contributing to ex-U. S. royalties and the achievement of higher-tier payments from potential net sales in the Vifor Pharma territories.

Avacopan is just the start of our chemoattractant drug discovery platform, a second novel compound at the leading edge of our drug development pipeline is CCX140. CCX140 is being employed in our strategy to treat the debilitating kidney disorder known as focal segmental glomerulosclerosis or FSGS. FSGS is a disease for which no approved treatment option exists. FSGS patients present with very high levels of proteinuria and the condition leads to end-stage renal disease. CCX140 is an oral medication that targets the chemokine receptor known as CCR2.

Preclinical data presented at the same June ERA-EDTA meeting, to which I referred a moment ago, concluded that blocking CCR2 represents a novel mechanism action for the treatment of FSGS, leading to marked, rapid and durable proteinuria reduction in 2 distinct models of FSGS. We have been discussing with the FDA and the European Medicines Agency the regulatory pathway for CCX140, which has already exhibited an excellent safety and tolerability profile from clinical trials in other diseases including other kinds of chronic kidney disease involving over 400 patients.

We plan to initiate a registration supporting trial for FSGS in Q4 of this year. We expect that the FSGS trial will require a few -- fewer patients than our ADVOCATE avacopan trial. As we execute on our registration supporting trials, we are advancing across the value-creation spectrum. We have, at ChemoCentryx, a consistent history of effective forward integration. We started with the basic concept that great science would lead to great medicine. We took that conceptualization to practice in discovering novel molecules that specifically inhibited chemoattractant receptors, which are the molecular guidance systems of destructive inflammatory cells. We then went out of the lab and into living model systems of disease and to human clinical trials. Now with our partner, Vifor Pharma, we are planning for commercialization, the next big piece in the value-creation puzzle.

But we don't just have breadth of activity with our chemoattractant platform, we also have depth. I would encourage you to visualize our chemoattractant franchise in the image of an iceberg as those of you following our slides can see on Slide 5. The versatile avacopan and also CCX140 form the top part of the iceberg, easily visible. Less obvious but no less exciting is the remainder of the iceberg, our earlier-stage candidates.

The value we create for shareholders by commercializing our rare renal disease medicines will help us to accelerate our earlier stage candidates into other disease areas where chemoattractant receptors inhibition could provide the key: cancer, debilitating skin pathologies and other inflammatory autoimmune diseases. To give you just one example, we plan, later this year, to report on updated overall survival data from our ongoing Phase I B trial of CCX872 in combination with FOLFIRINOX, which is one of the current standards of care for patients with advanced nonoperable pancreatic cancer. We will also soon update you on our plans to initiate further Phase II work with CCX872 in combination with other therapies in patients with pancreatic cancer. Lastly, I would like to pay tribute to Dr. Pirow Bekker, who is retiring as our Chief Medical Officer in order to care for a family member. I am very grateful to Pirow for his many contributions to ChemoCentryx, he has been a big part of our story as we make real progress in helping patients suffering from kidney disease. I'm delighted to say that Pirow has kindly agreed to stay on as a consultant, and he will be closely involved in the ongoing clinical development programs. We have also bolstered our clinical development team with the additional high-level talent and we will continue to do so as we search for a suitably qualified successor.

I will now turn the call over to Susan Kanaya, to give you an overview of our robust financial picture with the main points from our second quarter financial results. Susan?

Thank you, Tom. Our second quarter 2017 financial results were included in our press release today and are summarized on Slide 6. Revenue was $8.9 million for the second quarter compared to $2.8 million for the same period in 2016. The increase in revenue from 2016 to 2017 was due to amortization of the upfront licensing fee commitments in connection with our kidney health alliance with Vifor. Research and development expenses were $14.3 million for the second quarter compared to $9.1 million in the same period in 2016. The increase in research and development expenses from 2016 to 2017 was primarily attributable to higher Phase III development expenses for the ADVOCATE trial and startup expenses for the registration supporting trial of avacopan for the treatment of C3G.

These increases were partly offset by decreases in Phase I clinical development expense due to the completion of enrollment in the Phase I clinical trial for CCX872 in patients with advanced pancreatic cancer in 2016. And in Phase II development expenses due to the completion of the clear and classic Phase II clinical trials for avacopan for the treatment of ANCA vasculitis in 2016.

General and administrative expenses were $4.2 million for the second quarter, up from $3.9 million for the same period in 2016. This increase was primarily due to higher intellectual property-related expenses and accounting-related fees associated with preparing to meet the requirements pursuant to the Sarbanes-Oxley Act of 2002.

We recorded net losses for the second quarter of $9.2 million compared to $10 million for the same period in 2016. Total shares outstanding at June 30, 2017, were approximately 48.6 million shares. We ended the quarter with $166.7 million in pro forma cash, cash equivalents and investments, which includes $30 million of remaining cash commitments from Vifor Pharma, not reflected on the balance sheet as of June 30, 2017.

We continue to expect to utilize cash and cash equivalents in the range of $50 million to $55 million in 2017, which excludes upfront payments received during the year from our deals with Vifor Pharma. Tom?

Thank you, Susan. As I mentioned, the second quarter of 2017 saw strong progress and site activation in the progress of our pivotal Phase III ADVOCATE trial for avacopan in ANCA vasculitis. And also, the initiation of a second generation -- I'm sorry, a second registration supporting trial for avacopan in C3G.

We are also preparing to launch a registration supporting trials for our second compound, CCX140, for the treatment of patients with FSGS. In parallel, we are actively planning for commercialization with our partner Vifor Pharma. While our late-stage drug candidates offer hope to patients with rare kidney diseases, our early-stage pipeline is full of promise in other autoimmune and inflammatory diseases.

At ChemoCentryx, as our focus has become sharper, our balance sheet stronger, our pipeline more mature, our mission has also become clearer in the creation of value for patients and shareholders alike.

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 comes from Anupam Rama with JPMorgan.

This is Tessa, actually, filling in for Anupam this evening. We were wondering if you could expand a bit on your plans to enter the FSGS trial later this year. We noticed that in the ERA-EDTA presentation, you indicated that reduction in proteinuria might be a provisional registration endpoint for certain forms of primary FSGS. How should we be thinking about what physicians would view as a clinically meaningful reduction in FSGS patients versus the normal course of change over a 6-month period. And I had one more follow-up as well?

Thank you, Tessa. The area of FSGS is so incredibly fascinating and fast moving at the moment. As you may know from the ERA-EDTA poster presentations we published with 2 separate models of FSGS, both the nephrectomized model in animals as well as the adriamycin model. Really very rapid and robust reductions of proteinuria in those models, ranging from anywhere between 50% and 90% within 1 to 2 weeks, depending how our drug, the CCR2 inhibitor, was administered with standard therapy such as we see in the clinic. As to what we will be doing with our endpoints, you're quite correct, FDA has signaled that, at least for certain populations within the primary FSGS population, proteinuria reduction will be indeed a path to registration. We are working with that guidance right now, and we'll be providing more details next quarter on exactly how we're thinking about the FSGS trial as it launches and the endpoint. So for the moment, I'm going to differ those questions for another quarter on the specificities, or the specifics rather, of the nature of the endpoint and the magnitude of the reduction.

Great. That's very helpful, thank you. And I guess, one more on the -- your global trial -- ADVOCATE trial, and your progress there? And we just wondered, have regulators indicated the geographic breakdown needed in the pivotal trial? And any other elaboration on how that's going would be great.

Great, thank you. Yes, as we stated, we're targeting 200 sites worldwide, Southern Hemisphere, Europe, North America, we're making really good progress, as I mentioned today, on getting all those sites up and running and now have the large majority activated. We have buy-in from both Europe and the United States regulators as to how the trial conduct was planned. I will say that we have good representation in all the geographies, and I believe, based on our discussion with regulators, there's really -- everyone has accepted the geographic and potential geographic distribution of the patient population given where those sites are targeted to be activated and indeed are ongoing. So I think that's going very well at this point.

(Operator Instructions) And our next question comes from Eric Schmidt with Cowen and Company.

Tom, is there any update on the avacopan C3G patient who was treated under expanded access?

Currently, no, Eric. We don't have a report on that patient to give you at this time.

Okay. And is it too early to talk about the pivotal trial design here in C3G and what the endpoint might be?

Sure, we can give you a little more color on that. We plan to enroll about 44 patients, could be as many as 40 sites in probably 10 or 11 countries. We're planning a randomized study that, at least, for the first part of the study, which will be the time that we're looking at the primary endpoint. So a 2-arm controlled study, there will be some sort of rollover after the first period of investigation of the primary endpoint, which we think will be at 26 weeks. There are a few nuances still around how we're going to be looking at the data in totality at 26 weeks, but certainly, we want to be looking at a histological index that we've taken a lot of efforts -- put a lot of effort into perfecting with a small consortium of key experts in that the area as well as looking at some of the other markers of kidney functions. And those markers will be looked at both early and as well as in ongoing dosing of the patients after the primary endpoint.

Okay. And I didn't think there was anything approved in this indication. Is the randomization just versus placebo?

That's correct. There are non-approved things that are used typically in the clinical practice of C3G. But you're absolutely right, there is no approved therapy. So our randomization will be against protocolized standards of care.

And I'm showing no further question in the queue. I would now like to turn the call over to Tom Schall for closing remarks.

Thank you, operator. And thanks for everyone for joining our call today. We very much look forward to updating you as we continue to execute on our plan, and we look forward to our discussions next quarter. With that, I'll say good afternoon, and then have a pleasant evening.

This does conclude the program. You may all disconnect. Everyone, have a great day.