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Cempra Holdings (NASDAQ:CEMP)

Solithromycin and TAKSTA Clinical Update Conference Call

December 16, 2013 04:00 PM ET

Executives

Robert Flamm - IR, Russo Partners

Prabhavathi Fernandes - President and CEO

Analysts

Marko Kozul - Leerink Swann

Alan Carr - Needham & Company

Stephen Brozak - WBB Securities

Eun Yang - Jefferies

Operator

Good day ladies and gentlemen and welcome to the Cempra Inc. provides Update on Clinical Programs 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, today’s program is being recorded. I would now like to introduce your host for today’s program, Robert Flamm, Russo Partners. Please go ahead.

Robert Flamm

Thank you, Jonathan. Good afternoon and welcome to Cempra's conference call to provide update on the clinical development of Solithromycin and Taksta. Throughout today’s call, management will be making forward-looking statements including about the progress of solithromycin intravenous to oral or Solitaire-IV Phase 3 trial, the progress of the solithromycin oral or Solitaire-Oral Phase 3 trial, the timing of completion and results of the Taksta Phase 2 trial on prosthetic joint infections or PJI, the design timing of initiation and completion and results of the Phase 2 trial of Taksta and PJI and other statements that are not historical facts.

Such statements may include the words, plan, will, expect, believe, may, could, would or similar words. You are cautioned to not place undue reliance on these forward-looking statements, which are only predictions and reflect the company’s beliefs, expectations and assumptions based on currently available information, and speak only as of the time they are made. Risks and uncertainties could cause actual results to differ materially from those described in our forward-looking statements. For a discussion of these and other factors, please refer to the risk factors described in our filings with the SEC. For forward-looking statements we claim the protection of the Private Securities Litigation Reform Act of 1995.

I will now turn the call over to Dr. Fernandes, President and CEO of Cempra.

Prabhavathi Fernandes

Thank you, Robert. Good afternoon everyone and thank you for participating in today’s call giving us the opportunity to update you on the status of our clinical programs. As we had discussed throughout the year we planned on initiating the Solithromycin IV to oral Phase 3 trial what we call Solitaire-IV by the end of 2013. We also promised you a status report on the progress of the Taksta Phase 2 trial in prosthetic joint infections or PJI. These are the topics we will cover this afternoon. Following my comments, we will open the floor for questions.

The Solitaire-IV Phase 2 trial has initiated. Clinical sites are open and these sites have been supplied with both intravenous and oral solithromycin. We reviewed the study design in the news release. So we will not do it here but we will be happy to take questions on it after our prepared remarks. We’re not yet in a position to provide guidance as the timing of release of top line results from this trial. But we will let you know when enrollment trends enable us to do so. As you know CABP is a seasonal disease. That said our first Phase 3 trial Solitaire-Oral is enrolling and we continue to expect based on trends to-date that we will release top line results in the middle of 2014.

As many of you may be aware we have initiated commercialization activities for solithromycin. One of our first steps is the branding of the Phase 3 clinical trials as Solitaire. We choose the word Solitaire to emphasize that solithromycin is being developed as monotherapy for CABP. We will update you on important steps in this process as the most solithromycin closes to the market.

We have a lot to talk about regarding our Taksta program in PJI, including a promise snapshot of the Phase 2 study through December. We want to share this with you today that four topics I will discuss; the first, I will discuss the ongoing Phase 2 trial including more information on the trials design and our results to-date; second, I want to spend a little time talking about our recently awarded orphan drug designation for prosthetic joint infections. We received notification on the same date that we reported our third quarter financial results and we thought this would be a good time to provide additional perspective on what this means for Cempra and Taksta; third, we would like to let you know that this month the Office of Rare Disease Research at NIH has listed PJI as a rare disease. Finally, I will discuss the steps we’re taking to design a study to allow us to obtain NDA approval by the FDA.

Our randomized open-label Phase 2 study was designed to evaluate Taksta compared to the standard of care in patients with prosthetic joint infections. Because there is no FDA guidance for PJI trial, we took the guidance of the Musculoskeletal Society as well as the broad guidelines from the IDSA into consideration while planning this trial. 50 patients were to be enrolled and randomized one-to-one either to the Taksta plus rifampin arm or to the standard of care arm typically intravenous vancomycin. Up to 25 sites were allowed of which 14 are actively enrolling and additional sites are expected to come onboard.

The primary endpoint of the trial was the status of the infection at the best cure at 12 weeks following randomization and initiation of drug treatment. The trial was initiated in December 2012 and we enrolled the first patient in April 2013. The study was initiated using the standard of treatment, that is, two stage joint revision. Patients whose prosthetic joints are infected are returned to surgery and while on intravenous vancomycin, the infected prosthesis is removed and a spacer is put in place. The patient is then randomized and either continues receiving intravenous vancomycin or receive oral Taksta plus rifampin for up to 12 weeks at which time the surgeon removed spacer prosthesis and cultures the joints space.

If culture negative, a new prosthesis is implanted and the treatment is called a success. Although we have had interaction with the FDA, the study design was complicated by the nature of the patient and the very complicated cases that we have screened as well as the lack of written guidance for PJI which resulted in an exclusive and difficult study design including the need for a positive culture.

To date, 31 patients have been screened of which 21 have enrolled on the Taksta plus rifampin regimen. Of these subjects, 13 did not grow a positive culture or did not tolerate the drug. Eight patients have been randomized though. Of these eight, four are on Taksta plus rifampin regimen and three have finished the 12 weeks of treatment. One has had a negative culture on re-implantation which has got success for Taksta. The other two are awaiting re-implantation and culture to prove success. However, we can say that they have no clinical sign of PJI, but this has to proven by culture at surgery of course.

One patient did not tolerate the combination treatment. Four subjects are in the intravenous vancomycin. Of the four on this standard of care, one with the culture negative success but the treatment was switch vancomycin to daptomycin midstream. Another patient is still on IV vancomycin therapy. The third patient had a negative culture for the original organism. But staphylococcus hominis as possible contentment was found at the second stage culture. And the fourth patient has finished treatment and is awaiting surgery. The enrollment in this trial is continuing.

As we noted during our third quarter call, we amended the protocol to allow patients who could not have another surgery. During this trial, we have request for patients who could not undergo another surgery, so we introduced an amendment to allow divide and retain patients whether prosthesis in the patients stays in and is treated.

On October 29, we announced that Taksta received Orphan Drug designation for it use to treat PJI. This was in fact a significant and rare event for an antibiotic. Our state proximate 3,000 orphan drug designations that has been issued through the years, only 19 are antibacterial and these are usually issued for use to treat tuberculosis and cystic fibrosis related infection.

Orphan drug status for Taksta offers separate (Ph) managers for us. On the financial side it provides a 50% clinical cost tax credit and could also result in waiver of producer fees. This can be substantial for a small company like Cempra. From a commercial standpoint it provides seven years of statutory marketing exclusivity. This will be on top of five years statutory exclusivity provided by Waxman-Hatch. In addition, we expect to receive qualified infection diseases process and designation because MRSA is again a pathogen, which is a major pathogen in prosthetic joint infection.

So, on top of the potential 12 years of statutory exclusivity, the seven years for orphan and five year for gain or Hatch-Waxman we also have our loading dose patent which is based on blood levels of Taksta that provides patent exclusivity into 2029 plus patent term extension.

This month PJI has been identified and listed as a rare disease by the Office of Rare Diseases Research at the National Institutes of Health. Finally, orphan drug designation as well as the rare disease designation enables us to develop a path to the NDA currently, while running our phase 2 study rather than waiting for completion of the trial to discuss path towards an NDA.

To that end, we have designed an innovative phase 3 protocol based on what we have learned so far from our phase 2 study. We planned to submit our proposed protocol to the FDA early next year and to discuss his strategy with the FDA during the first half of 2014. We will provide you more information on our plans following discussions with the FDA.

So, that is the update of our pipeline. We would now like to open the floor to questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from the line of [indiscernible], your question, please.

Unidentified Analyst

I guess for the, first question, just for the patient that couldn’t tolerate Taksta and rifampin, can you tell how do by manifest was it like whoever talks, or something would be suspected for rifampin?

Prabhavathi Fernandes

It’s mostly seen in deliria and you may know that rifampin, Fusidic acid or Taksta has been known for decades or so to be safe and well tolerated. As you know, we ran a skin study where about 63 patients have been exposed to it plus all of our Phase 1 data and it was well tolerated. We had no dropout from nausea and vomiting in our Phase 1 study when Fusidic acid was used by itself. But in this trial, we’re using it in combination with rifampin. You probably know that in the treatment of TB patients, tuberculosis patients, as well as in some other cases, rifampin is not well tolerated but in this case we’ve had to combine it because that’s the way to use by orthopedic surgeons, and so in combination it was not tolerated, it was nausea and diarrhea. Thanks.

Unidentified Analyst

Great and I know you’ve talked a little bit about the innovative Phase 3 design and I know you can’t want to get in too many details ahead of a discussion with the FDA. But how exactly should we look at this data that you’re presenting today and how we could think about how it might inform your protocol design?

Prabhavathi Fernandes

So it is not a lot of things during this Phase 2 trial because we have not done a PJI study. In fact that has not been any which have been run. So we’ve learned how orthopedic surgeons operate. We know how infectious disease doctors (Ph) are calling. And we have learned the nature of the patients. We have learned the nature of the types of other drugs they’re on and who can be included and who can excluded. We have also learned those who don’t want to have surgery. So that’s a lot of learning and also we have learned as you just talked about, the effect of rifampin together with Fusidic acid.

So we also know that a loading dose is very effective in treating staphylococcal infections from our skin study so using all of this information we’ve designed a study. Now secondly, we know the historical controls with vancomycin how it works. How vancomycin is used in the standard of care. It was also used as the control in other studies. So we can use the historical database and design a study now that we have orphan drug designation as well as rare disease. Being orphan and rare those words will imply that there are not that many patients so we can design a study now which is not huge, which we hope the FDA will expect will be enough for the NDA.

Unidentified Analyst

Great thanks. I will get back into the queue.

Prabhavathi Fernandes

Thank you, Brian.

Operator

Thank you, our next question comes from the line of Marko Kozul from Leerink Swann. Your question please?

Marko Kozul - Leerink Swann

Good afternoon and congratulations on the updates. I just have a quick question which has to do with Taksta study, the new one with innovated design that you’re referring to, I guess I’m just wondering to what degree are you seeking to leverage negotiation related to GAIN Act or LPAD in design of this trial? Wish you could speak to that. Thank you.

Prabhavathi Fernandes

Thank you, so indeed we’re going to be asking for this to also be a qualified infectious disease pathogen, but I think getting the orphan drug really trumps all; because getting the orphan drug allows you to say that it’s an orphan, it’s a few patients as well as having now listed at the NIH as a rare disease. If it’s rare, there’re only so many patients available, so we will use all of those possibilities. So we’ll use orphan, we will use rare disease and we will use the qualified infectious disease pathogen in order to perceive this particular indication.

Marko Kozul - Leerink Swann

Terrific, thanks for taking the questions and I’ll jump back in the queue as well.

Prabhavathi Fernandes

Thank you.

Operator

Our next question comes from the line of Alan Carr from Needham & Company. Your question please?

Alan Carr - Needham & Company

Hi thanks for taking my questions. Can you talk a bit more about your discussion with the FDA around Phase 3 design and at what point do you think you’ll have enough data from the Phase 2 trial in order to start a Phase 3 registration trial? What sort of factors are involved in here, in this?

Prabhavathi Fernandes

That’s a good question, so we’re planning to go back in because we feel we have learned sufficiently enough from this trial to perhaps send the protocol in and then initiate a Phase 3 trial. So the Phase 2 trial per se may convert to a Phase 3 trial if that is accepted. So we may not have to wait for the Phase 2 to finish. The FDA may of course think otherwise and say finish your Phase 2 trial, but being an orphan it will be obvious that there’re not that many patients and if this drug is needed by so many patients then this would be a place to seek a path forward.

Alan Carr - Needham & Company

So best case scenario this ongoing trial right now might service the Phase 3?

Prabhavathi Fernandes

We’ve certainly learned a lot from this Phase 2 trial and this data will certainly go towards helping with the eventual approval. Whether we actually use them as numbers or if it can be used to do the conversion to a Phase 3 that is yet to be seen.

Alan Carr - Needham & Company

How is you’ve changed the enrollment criteria to allow just once stage surgery? How is that impacting enrollment?

Prabhavathi Fernandes

Sorry, it’s not an amendment that everybody will have it. So what has happened is when we wrote this we had eight patients and so we talked about it. And enrollment is going on, so in fact today, Dr. Oldach, Head of Clinical, has informed that the next patient is now also on Taksta and rifampin. So we have one more patient, patient number nine. And so this is ongoing. And those are patients who are getting the two stage prosthesis put in and this is very important to us because you want to be able to go there and culture this joint, right. So when you go and the surgeon is going there you can take a swab and take a culture of that region. Now in the [indiscernible] treat it’s very long treatment because there is no surgery once they’ve started the treatment and it’s healing you can’t go and open the wound to see if it’s in there. So this is just an amendment to be allow new patients ethically as well as from consideration of safety database building that we will allow those patients enroll but they’ll not -- we don’t believe that they will be part of our final Phase 3 study. We will always keep that open so that patients who need the drug will get the drug.

Alan Carr - Needham & Company

Okay, that’s helpful. Thanks very much.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Stephen Brozak from WBB Securities your question please.

Stephen Brozak - WBB Securities

Well, congratulations right off the bad I do have two questions and I’ll hop back in. You’ve gone on the periphery of what the GAIN act look forward to with Taksta. Do you want to itemize exactly what you see as a difference that the GAIN act will give Taksta under your control? And also one specific question in terms of its actual characteristics please.

Prabhavathi Fernandes

So thank you very much. So on the GAIN act normally if you got the GAIN act so if you well know if you get a qualified infection disease pathogen you get priority to view as well as you will get five years of patient and extension. Now if you did not have an orphan indication that would be very important for us to add five years of statutory protection to the hatchbacks when act. But with the orphan indication you already get order (Ph) to review and you already have the various credits I had mentioned so the GAIN act is less important but however I’ll tell you why it’s important is because every plus in your favor is a plus so you have orphan you have now rare disease and if you get qualified infectious disease pathogen all the favor is on your side, so that is very-very important for us.

Stephen Brozak - WBB Securities

So we’re looking at something now that qualifies you well beyond what you would normally expect that the drug with the profile and the understanding that you’ve got from all the European usage that really pretty much is unheard of you for a drug that you’d be bringing to the United States. Is that an accurate assessment?

Prabhavathi Fernandes

That is correct. And we’re very happy to do so because of the great need for the United States’ patients who are now undergoing so many months of vancomycin and so many surgeries.

Stephen Brozak - WBB Securities

Okay, that will bring me to the last question. Since you know so much about it and you know so much about the characteristics obviously everybody’s concern with what happens with other antibiotic use, can you give us any ideas to the drug interactions and I’ll hop back in the queue after that.

Prabhavathi Fernandes

Yes, so it is very well known to be safe and has been used for so many years in older patients as well as in for long term chronic use in bone and joint infections. These older patients are generally on other medications more than one in many cases and it is very well tolerated. Having said that there is one particular drug we cannot use it as many of the statins because through the same pathway and so you do not want to use it with the statins. And if you think about it the older patients that are on statins the risk of having your cholesterol go up in just for the few months you can always top the statin and if well patient absolutely has to be on a statin then there are certain types of statins like pravastatin where there is less interaction than other statins which are more popular.

Stephen Brozak - WBB Securities

So you basically have looked at the different profiles and again it comes back to this is one because of the background the data and everything oversees you’re very comfortable with this?

Prabhavathi Fernandes

That is correct, and doctors oversees a very comfortable with the drug I know infectious disease doctors are very comfortable with the product and orthopedic surgeons are very aware of the products and have told us it could a gamechanger once we have this approved for the treatment for prosthetic joint infections.

Stephen Brozak - WBB Securities

Great, well congratulation again this is really terrific news. Thank you.

Operator

Thank you. Our next question comes from the line of Eun Yang from Jefferies, your question please.

Eun Yang - Jefferies

Thanks very much. So with this IV to oral step downs of your phase for initiation have you started QTC study as well?

Prabhavathi Fernandes

Yes, thanks Eun Yang, very good question. Yes, we have actually conducted the human section in life section of the QT study we’re going to analyzing the data in January and we will certainly let the investors know about the results of this study. Now why are we so confident going into an IV to oral study since older macrolides have been stopped because of the QT for instance clarithromycin, my baby, is not approved for IV in the United States because of QT. Here are the reasons; firstly in the dog, in the conscious dog telemetry it is a negative for the QT whereas clarithromycin is positive; secondly, when we did ketoconazole drug interactions because ketoconazole blocks it three or four you have very-very high levels of solithromycin or for that matter any other macrolide. So if we were to give clarithromycin or clarithromycin or other molecules which give up the QT you will see a QT signal when you give it with ketoconazole. We saw none of the above. And then lastly which is probably the most important one when we did our Phase 1 intravenous study I think you know that we have gone to a 1000 milligram single dose in the intravenous study in those if you’re aware to inject those for any QT positive drug you will probably see we had leads on these patients we didn’t subjects, we did not see any QT effect, so any of our Phase 1 or any of our studies two days have we seen it. In the Phase 1 oral we have gone to 1600 milligrams and never seen a QT signal in the gonorrhea study we just finished in the Phase 2 we’ve never seen a QT signal. So we don’t know and have the results in hand but the current expectation is that this will be a very safe macrolide.

Eun Yang - Jefferies

How many patients ever been exposed to 1000 milligram IV in a Phase 1?

Prabhavathi Fernandes

I believe it is at least seven subjects have been exposed to single dose of 1000. So let me talk about blood levels. So the exposure of the heart to the Cmax is what is most important that’s when the iron (Ph) channels gets wacked by the high Cmax. We have achieved that level with the 1000 milligrams we have achieved it many times with the multiple doses of the 400 and 800 multi-dose. We’ve also achieved it in the 1600 single dose oral. So remember this drug is very well absorbed orally so when you go higher the oral you will expose to that Cmax to the heart channels.

Eun Yang - Jefferies

Okay, and then Taksta in the past that you gave a guidance that you plan to with the FDA following FDA’s decision on orphan status given in October. So have you met with FDA or are you planning to meet with the FDA near term?

Prabhavathi Fernandes

No, so actually this was a one plus for us because we were planning to meet with the FDA and talk about this study the current ongoing study and with very complicated patients and we’re pulling our hair out and how do you get this culture positive how the enrollment of the study. So when we hired Dr. Horwith our EVP of Regulatory, he said Prabha the way forward is to do an orphan indication designation. So he went ahead and applied for orphan drug designation and hats off to him we won it. So in lea for meeting with the FDA we got the orphan designation and then we got the rare disease designation. Now we can go to the FDA because now we have a path forward. There is -- unless one has a path forward and it can make a very acceptable proposal is very difficult to have a meeting because the meeting is not to discuss ask them to tell us what to do is for us to say this is what we’re going to do is this acceptable now we are in a place with the orphan drug designation as well as the rare disease and perhaps the qualified infectious disease pathogen when we get that is to say this is the path forward we’re going to take is it acceptable and being a rare disease they can expected to do 100s of patients.

Eun Yang - Jefferies

So when are you planning to meet with the FDA?

Prabhavathi Fernandes

We are submitting our protocol early part of this January and then once that’s done generally within three months they will give us a meeting.

Eun Yang - Jefferies

Okay, the protocol would it be for Phase 3 plan?

Prabhavathi Fernandes

That is correct.

Eun Yang - Jefferies

Okay, great. Thank you.

Operator

Thank you. Our next question comes from the line of Stephen Willey from Stifel, your question please.

Unidentified Analyst

This is [indiscernible] for Stephen Willey. Just wanted to know if you intend to provide another update on the enrollment status for the oral trial or are you pretty confident in the seasonality and the enrollment time lines so far? Thank you.

Prabhavathi Fernandes

Yes, we may see by the end of February or March, we may give an update we haven’t yet really decided that. As you said it’s very seasonal this year the flu season has been slow and picking up but is now picking up. So by about end of February we will know and we will certainly give you a guidance by let’s say the first week of March. We haven’t really made an official decision on that but that would be the expected time you’ll know how it’s going. But all I can say is the study is a very high quality study and is going quite well right now.

Unidentified Analyst

Okay, thank you.

Operator

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back for any further remarks.

Prabhavathi Fernandes

So thank you all very much for listening to the call. I just want to wish all of you happy holidays and a very happy New Year. Thank you again.

Operator

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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