ChemoCentryx's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar.13.14 | About: ChemoCentryx (CCXI)

ChemoCentryx Inc. (NASDAQ:CCXI)

Q4 2013 Earnings Conference Call

March 13, 2014 05:00 PM ET

Executives

Susan Kanaya - SVP, Finance and CFO

Tom Schall - President and CEO

Petrus Bekker - SVP, Clinical and Medical Affairs

Analysts

Brian Klein - Stifel

Navdeep Singh - Goldman Sachs

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ChemoCentryx Fourth Quarter 2013 Financial Results Conference Call. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session. As a reminder, this conference call is being recorded.

I would now like to turn the call over to Susan Kanaya, Senior Vice President and Chief Financial Officer at ChemoCentryx. Ms. Kanaya, please go ahead.

Susan Kanaya

Thank you. Good afternoon, and welcome to the ChemoCentryx Fourth Quarter 2013 Financial Results Conference Call. This afternoon we issued a press release providing financial results and company highlights for the fourth quarter and year ended December 31, 2013. This press release is available on our 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 a brief corporate update and review upcoming anticipated milestones for 2014. Following his comments I will provide an overview of the financial highlights for fourth quarter before turning the call back over to Tom for closing remarks.

As a reminder 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 our filings made with the Securities and Exchange Commission including our Annual Report on Form 10-K to be filed on March 14, 2014. 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, March 13, 2014. 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 will now turn the call over to Tom.

Tom Schall

Thank you, Susan, and thank you everyone for taking the time to join us for our fourth quarter financial results conference call. Today I will review briefly the events of the last quarter of 2013 and then turn to upcoming highlights and expected milestones for 2014. We are pleased to report clinical progress this past fall for our two lead drug candidates CCX168 and CCX140, both currently in late stage Phase II development, and the anchors of our wholly owned renal disease portfolio.

We announced strong preliminary data for CCX168 in a Phase II trial for the treatment of ANCA-Associated Renal Vasculitis or AARV and interim Phase II data for CCX140 in diabetic nephropathy. The readouts showed encouraging signs of improvement in renal disease parameters.

We also advanced two Phase I programs and several interesting preclinical programs. Despite a setback with our event partner GSK’s trial with vercirnon in 2013, the demonstrated productivity of our chemokine based platform has enabled the build out of this broad and diverse clinical pipeline. Importantly we entered the year with a strong cash position of approximately $150 million which should enable us to move forward with multiple programs in 2014 and achieve key milestones including the initiation of a potential registration of clinical trial for CCX168 as well as reporting a complete 52 week Phase II data for CCX140 in the fourth quarter of this year.

Our development pipeline comprises four pillars of value, from which we expect multiple catalysts in 2014. The first pillar is the C5a receptor program which includes CCX168. The second is our CCR2 program, which includes CCX140 as well as CCX872. The third pillar of value is our CCR9 program, which includes vercirnon and CCX507. And the last but important pillar of value is our early stage programs which target chemokine receptors such as CCR1, CCR4, CCR5, CCR6, and CXCR7.We believe many of these targets will be important in the emerging area of immuno-oncology.

Now let’s review each of these areas in turn. CCX168 is an inhibitor that targets the chemo-attractant receptor known as the C5a receptor or C5aR. CCX168 is in Phase II clinical development for the treatment of ANCA-Associated Renal Vasculitis. This is a potentially life threatening autoimmune disease in which inflammatory cells destroy the smaller blood vessels of the kidney. There are no approved treatments, specifically for the renal manifestations of ANCA-Associated Vasculitis and the standard of care, high-dose corticosteroids and cyclophosphamide has significant safety risks and deleterious long term side effects, as well as high rates of relapse in end-stage renal failure.

We recently announced positive data from the first two steps of the Phase II CLEAR trial which included 26 patients. The aim of this trial was determined whether CCX168 could at least partially replace steroids in the current standard of care in the induction of renal response of these patients without compromising safety and efficacy. Data from the first two steps of the CLEAR trial showed that CCX168 appears to be safe, well tolerated, and successful in allowing both reduction and even elimination of corticosteroids without compromising efficacy or safety during the 12 week treatment period.

There were no serious unexpected suspected adverse reactions reported and the only early withdrawal from the trial was in the standard of care control group. Additionally, CCX168 treatment showed greater improvements than the standard of care group consistently across a number of renal health parameters including renal response rates, proteinuria, inflammatory mediators, [indiscernible] and the Birmingham Vasculitis Activity Score or BVAS, a global disease activity index as well as other renal function measures.

We expect to present detailed data from these first two steps of the CLEAR trial at medical meetings in the second quarter of this year. Importantly, we have been meeting with key opinion leaders in the Vasculitis community from several countries including the U.S., Canada, UK, Sweden, Czech Republic, France and the Netherlands who are encouraged by the potential of CCX168 as a novel treatment option with a rapid onset of action that could potentially improve disease response and ANCA-Associated Renal Vasculitis patients and help reduce the toxicities associated with prolonged steroid use.

We will conduct a meeting with the FDA in the first half of 2014 to discuss an optimal development strategy in the U.S. to support the potential registration of CCX168. Given that there are currently no approved treatments specifically for ANCA-Associated Renal Vasculitis, we will be working closely with the agency to determine the safest, most expeditious path to potential approval.

Regardless of the development path, we are already actively focused on how to expedite patient recruitment in this orphan disease. We also anticipate applying for Orphan Drug Designation in the first half of 2014 and expect to hear from the FDA regarding that most likely in the second half of the year.

CCX168 is wholly owned by ChemoCentryx. Our business strategy is to develop CCX168 independently and to retain commercial rights to CCX168 in orphan indications such as ANCA-Associated Renal Vasculitis and other orphan renal indications, potentially including lupus nephritis and IgA nephropathy.

Moving to our CCR2 program, our lead compound is CCX140, a CCR2 inhibitor currently in a randomized double blind Phase II trial in patients with diabetic nephropathy. Diabetic nephropathy, also known as diabetic kB disease is a progressive disease that can ultimately lead to kidney failure and/or the need for kidney transplantation.

The ongoing 52 week Phase II trial is being conducted at over 90 sites throughout Europe. In this trial all patients receive stable background medications of either an Angiotensin Converting Enzyme, or ACE inhibitor, or an Angiotensin Receptor Blocker or ARB. In addition they are randomized to either 5 milligram of CCX140 once daily or 10 milligram of CCX140 once daily or a placebo to CCX140.

Last fall we announced interim 12 week data from the trial, which showed that CCX140 appears to be safe and well tolerated. Data also showed encouraging signs of reduction in proteinuria as measured by the Urinary Albumin to Creatinine Ratio or UACR as well as a reduction in hemoglobin A1c or HbA1c levels which are elevated in patients with diabetic kidney disease.

Following the interim data review as well as subsequent meetings, the independent data monitoring committee has recommended continuation of the trial unchanged through its completion. We anticipate reporting 52 week data in the fourth quarter of this year. The dataset will include redoubts on the drug’s effect on levels of proteinuria and HbA1c as well as other renal parameters including estimated glomerular filtration rates or eGFR based on serum creatinine levels.

As you recall, we amended the initial trial protocol at the end of 2012 to extend dosing to 52 weeks and increased the originally contemplated enrollment number of patients. We anticipate that approximately 200 patients will comprise the available patient population at 52 weeks.

Depending on the outcome of the trial, we anticipate having an end of Phase II meeting with the FDA to discuss the Phase III program. Our objective is to develop and commercialize CCX140 independently in North America while seeking a partner for the rest of the world rights. In addition to CCX140 data, we look forward to completing Phase I development for CCX872, our next generation CCR2 inhibitor in 2014.

With respect to our CCR9 program, we are continuing the data transfer process from GlaxoSmithKline from the SHIELD development program on vercirnon, a CCR9 inhibitor in Crohn’s disease. Our analysis of these data will help inform the potential future clinical development path for vercirnon.

Our goal is to seek a partner for vercirnon, possibly along with our second generation CCR9 inhibitor CCX507 in the treatment of inflammatory bowel disease and potentially explore vercirnon’s role in the maintenance of remission setting in Crohn's disease, which ultimately was not addressed sufficiently in GSK’s trials. Additionally, we look forward to completing the Phase I program for the next generation inhibitor CCX507 in the first half of the year.

Finally, in our early stage program area, we are actively examining the role of a number of chemokine receptors such as CCR2, CCR4, CCR5, CCR6 and CXCR7 which are likely to play diverse roles in cancer growth, cancer metastasis, cancer angiogenesis and the composition of the tumor microenvironment as suggested by a growing body of data. The combination of chemokine receptor modulators with traditional chemotherapeutic agents or with immunotherapy is in the learning strategy since this may likely increase the specificity of treatment efficacy and potentially limit additional systemic side effects. We look forward to sharing more information as these programs progress.

With that I'd like to turn the call back over to Susan.

Susan Kanaya

Thank you, Tom. As mentioned, our 2013 fourth quarter financial results were included in our press release which was provided earlier this afternoon. Revenues for the three months ended December 31, 2013 were $725,000 compared to $2.1 million in the same period in 2012. The decrease in total revenues from 2012 to 2013 was primarily due to lower upfront payment revenue recognized upon the completion of the research term under the GSK collaboration in October 2013, and lower funding of clinical support from GSK for CCX168, our C5aR inhibitor as Steps 1 and 2 of the ongoing Phase II study were completed.

Research and development expenses for the three months ended December 31, 2013 were $7.4 million, compared to $9.2 million for the same period in 2012. The decrease in research and development expenses from 2012 to 2013 was primarily attributed to lower expenses associated with the drug discovery efforts targeting CXCR7 for the treatment of glioblastoma and developing CCX872, our second generation CCR2 inhibitor and CCX507, our second generation of CCR9 inhibitor due to the timing of Phase I related activities.

General and administrative expenses for the three months ended December 31, 2013 were $3 million, compared to $2.8 million for the comparable period in 2012. The increase from 2012 to 2013 was primarily due to increased stock-based compensation expense or stock option grants in addition to higher professional service fees relating to our investor relations and our business development efforts. Cash, cash equivalents and investments totaled $149.9 million at December 31, 2013. Our projected 2014 cash utilization is expected to range from $40 million to $45 million, thereby ending 2014 with projected cash and investments in excess of $100 million.

Tom Schall

Thanks, Susan. In closing we look forward to anticipated milestones in several programs this coming year and we entered 2014 in a strong financial position to meet these key events. In our C5a receptor program, we expect to present detailed CCX168 data from the first two steps of our Phase II CLEAR trial in ANCA associated renal vasculitis in the second quarter of this year.

We will conduct a meeting with the FDA in the first half of the year to refine the clinical development strategy. Following our discussions with the FDA, we expect to expand clinical development in ANCA associated renal vasculitis to support registration of CCX168. In our CCR2 program, we expect to report full 52 week data on CCX140 in its phase II study of diabetic nephropathy in the fourth quarter of this year. Also we intend to complete Phase I development of CCX872, our next generation CCR2 inhibitor in the second half of the year.

With our CCR9 program, we expect to determine the next steps for vercirnon, including potentially partnering vercirnon to address its role in the maintenance setting of Crohn's disease and we expect to complete Phase I development of CCX507, our next generation CCR9 inhibitor in inflammatory bowel disease in the first half of this year.

As always, thank you for your continued support and now I'd like to open up the call to any questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And our first question comes from Brian Klein from Stifel. Your line is open. Please go ahead.

Brian Klein - Stifel

So first, it seems that you could be entering two potential registration programs, one for your CCR2 inhibitor and one for your CCR5A inhibitor. Can you give us a sense of how you’re going to prioritize your resources between those two programs for this coming year?

Tom Schall

Sure Brian. This is Tom. Yes, we’re very keen to know more about our development path and to share that with the community for the C5A receptor program focused on CCX168. Clearly that’s an important program for our space and where we are in the Phase 2 data right now and once we have discussions with the agency, we’ll be describing more what our plan is on that development path. That’s high priority for us and it's a program that we intend to invest in from our own resources in that orphan indication.

The CCR2, CCX140 program also very important. As you know we’re waiting for the 52 week data read out later in this year. Once we have that data, we’ll know exactly what we’re doing in the next step of clinical development. We’ve said in the past that our plan there potentially is to look for a rest of world partner for CCX140 in diabetic nephropathy and retain rights in North America certainly for -- certainly at least for the ability to market that drug to specialists once it’s approved. The ROW partnership would provide resources to help us make sure that we maximize the potential of the drug eventually around the world and certainly one hopes to help us with some of the Phase 3 development costs.

Brian Klein - Stifel

Turing now to Vercirnon, can you give us a sense of when that data will be presented from SHIELD?

Tom Schall

We are attempting to find the most appropriate GI meetings, international meetings to present the data Brian. We’ll have more to say about that soon but we’re hoping to be able to at least get some of the data put out at European meeting later this year. Again, we’ll have more to say as soon as we’ve confirmed that.

Brian Klein - Stifel

Great and along those lines, now that you've had the full data for a while to pour over, can you give us any new insights into that trials and what you think may or may not have gone wrong?

Tom Schall

Well surprisingly we really haven’t had the full data. I think it’s even fair to say that the data process transfer is still ongoing from the SHIELD development path. However we have had enough data to at least get a glimpse. We’ve talked a little bit about the fact that the trial differences -- there were differences in the trial design between the earlier PROTECT-1 study that we ran in 436 stations around world at ChemoCentryx and then the subsequent SHIELD program that GSK ran.

SHIELD-1 I'll stress was an induction of response or emission trial in Crohn's disease. PROTECT-1 had both an induction and importantly a maintenance of remission phase. So the current trial results have been discussed. SHIELD-1 don’t address the maintenance part of this at all.

But what we do know is that there were quite a bit of differences in the patients that were enrolled in SHIELD-1 versus the earlier PROTECT-1. For example the number of prior TNF receptor inhibitor patients in SHIELD-1 was almost 70% lower, 69% in the SHIELD-1 trial versus the earlier PROTECT-1 trial which was a 26% heads up prior TNF use. That was one big difference in the patient population. There was a dose in SHIELD-1 that we had no experience with in previous clinical trials. That was also an interesting difference between the studies.

And I will say too that the entrance criteria, based on the clinical instrument used in these trials or so called CDAI Crohn's Disease Activity Index, there were some slight differences in the incursion criteria with the SHIELD-1 trial run by GSK being slightly lower than the PROTECT-1 trial that we had ran earlier at ChemoCentryx. Also importantly, some of the other ways that you might evaluate efficacy at the end of the study period of 12 weeks, in the PROTECT-1 study that we ran, we had a subset of folks that had a post treatment regimen endoscopy. Unfortunately that wasn’t available in SHIELD-1. So there are number of important differences and we’ll be describing those and others at upcoming meetings. We believe that all those certainly make it more difficult to compare the results between those two trials certainly.

Brian Klein - Stifel

And then just one last question. On SHIELD-2 I know that a lot of patients didn’t complete the study, but are there any inklings of efficacy as a maintenance therapy that you can glean from the uncompleted study?

Tom Schall

I think the short answer is no and I think it’s also fair to say that we’re still getting the data from SHIELD-2 frankly. So as soon as we have a chance to analyze that data set thoroughly, at least more thoroughly than anything we’ve had to date, we’ll certainly try to share those data as well to see if there are any glimpses but I’ll say Brian, I have the pleasure of also being accompanied today by our Senior Vice President for Medical and Regulatory Petrus Bekker and Petrus you might have another comment or two on whether there is any information to be gleaned from SHIELD-2?

Petrus Bekker

No. It is fair to say Tom, we still need to evaluate the data from that study but Brian, you’re absolutely correct. The number of patients you have completed the maintenance period is actually very low in that study. So I'm not sure we’ll get a lot of useful information from it.

Operator

Thank you. Our next question comes from Navdeep Singh from Goldman Sachs. Your line is open. Please go ahead.

Navdeep Singh - Goldman Sachs

You mentioned many times in your prepared remarks that you’re scheduled to meet with the FDA to refine your clinical development strategy for CCX168. Can you give us a sense of what you’re going to proposing to the FDA, maybe some color on the trial design?

Tom Schall

Navdeep, it is a little bit premature to talk about details but certainly in our present trial design in the so called CLEAR trial, we’ve talked about the data from steps one and two. That particular trial protocol has already in a step three, which is already been approved that involves enrolling more patients to look at folks in an ongoing study regimen where in step three by default they will go to no-steroids plus cyclophosphamide in the present synapsis of CCX168. At minimum we probably like to carry both the no steroid and low dose steroid forward and that could happen with a near trial amendment.

But the bigger question is would it be appropriate and possible to expand our ongoing study, which is already open now, reopened in the CLEAR trial, could we expand then, could we expand or amend the trial in other ways to actually make it a big part of the registration package. So that's something that we would like to discuss with the FDA and we’ll certainly share more details with you after that discussion has occurred.

Navdeep Singh - Goldman Sachs

And then you discussed in your prepared remarks that you’re planning to file for Orphan Drug Designation, but maybe taking a step further, do you also plan to file for breakthrough designation for this product?

Tom Schall

I think it’s fair to say that that is in our plan. It’s a somewhat higher bar as you know. And outside the oncology space, the percentages are -- while not discouraging are not quite as high as in oncology but we believe with the data that we have in hand now and the fact that this is a high unmet medical need, a very serious disease, that those are very appropriate discussions to have with the agency. So we intend to do so.

Navdeep Singh - Goldman Sachs

And then my final question is on CCX140. Can you discuss maybe the impact on proteinuria or on eGFR at week 52 that I guess you guys would find interesting or maybe the medical community would find clinically meaningful?

Tom Schall

It’s a very good question. I know that Petrus will have probably better ideas about this but clearly what we know from history is with agents that have been shown to have a beneficial effect on the eGFR, historically when you think about the ACEs and ARBs which have been approved to date, there has been a delay and decay of eGFR as assessed by a diminution in the increased level in serum creatinine over 52 weeks. So we obviously would like to see a delay, further delay, because remember we’re on top of ACE or ARB, we’re on top of standard of care; one which would allow us with the other data in hand to suggest that yes, there is a meaningful improvement. And again we’ll be looking at changes in serum creatinine. Petrus, you probably have more to say about that. So I’ll leave that to you for the moment?

Petrus Bekker

Yes. So Navdeep, as you know, we have shown some encouraging data in the interim analysis that we’ve conducted. I think we’d like to see at least that magnitude effect that we saw in the study. And in terms of eGFR, I think most people would agree as long as you show that you can slow down the eGFR decline, which typically would be in the range of I would say anywhere from 2 to 5 milliliter per minute in the control group, which is the standard of care control group. And so we’d like to obviously see that we at least slowed that down to some extent. And we believe 52 weeks should be enough time to provide us that information.

Navdeep Singh - Goldman Sachs

Okay guys. I’m going to I think sneak another quick question in here. What’s the level of interest in terms of partnerships for both CCX168 and CCX 140?

Tom Schall

Well, clearly Navdeep kidney disease is a very, very big area, both clinically in terms of unmet needs and obviously the commensurate possibilities for commercial effect. So there is a lot of interest. It’s premature to say now any more details about that but we’ll certainly keep you posted on those discussions as they get to more mature stages.

Operator

Thank you. Our next question comes from Geoff Meacham from JPMorgan. Your line is open. Please go ahead.

Unidentified Analyst

It’s Mike in for Geoff. Just on the CCX168 program, you guys have talked in the past about potential other indications. Can you maybe remind us what those are and how you’re thinking about potentially moving forward in some of these other indications and maybe timeframe? We need to kind of see the next steps for the ANCA before you consider that?

Tom Schall

Great question Mike. So clearly we’re delighted to be working with CCX168 in an orphan indication, which we think is very important and very attractable in terms of its potential development path for us. So that’s very important. There are a couple of other renal indications that immediately suggest themselves either from the clinical data to-date or off clinical or even pre-clinical models. Things like IgA nephropathy has been something mentioned several times by our key opinion leaders and others in the field. When they realized that we had probably one of the or perhaps a unique C5a receptor inhibitor.

So there's been a lot of outreach from that community to us about whether or not we can work with them in IgA nephropathy. That’s something we’re certainly looking very carefully at right now. Other indications where a highly inflammatory component in the renal area, lupus nephritis comes to mind as well, is another candidate in the renal space.

Beyond that, certainly we can go into larger areas that are outside renal where C5a and C5a receptor have been implicated as being central to the pathology. And they are frequently and larger indications and I will say that one of the advantages that we have in our program is that we do have other compounds already identified that are also very good, orally active, potent and selective inhibitors to C5A receptor.

So were we to go into something else, even something like AMD or other larger inflammatory indications, we also have other compounds that we might bring to bear in some of those indications that also offer some flexibility for a potentially partnering strategy as well. So I think we’re well positioned with that part of our pipeline and that part of our portfolio to really look very carefully at a lot broader range of C5a receptor mediated diseases. In terms of time, no we don’t see the results necessarily of the next step in the CLEAR trial. I think we would like to have a little bit greater definition around the development path exactly so that we can look at the landscape overall and think about what our financial, as well as other resources are before we start to broaden that path too much. But certainly we’ll be talking about that in a lot more detail in the coming weeks.

Operator

Thank you. And I’m showing no further questions at this time. I’d like to hand the conference over to Dr. Thomas Schall for closing remarks.

Tom Schall

Well once again I’d like to thank everyone for participating in today’s conference call and for asking some excellent questions. I look forward to hosting our next conference call next quarter and addressing these very interesting topics again. Thanks again for your time.

Operator

Ladies and gentlemen. Thank you for participating in today’s conference. This concludes our program. You may all disconnect and have a wonderful day.

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