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Celladon Corporation (NASDAQ:CLDN)

Q2 2014 Earnings Conference Call

August 07, 2014, 08:30 AM ET

Executives

Fredrik Wiklund - Vice President, Corporate Development and Investor Relations

Krisztina Zsebo - Chief Executive Officer

Paul Cleveland - President and Chief Financial Officer

Analysts

Andy Washkowitz - Stifel

Operator

Good day, ladies and gentlemen, and welcome to Celladon's second quarter 2014 earnings call. (Operator Instructions) I would like to now introduce your host for today's conference, Vice President of Investor Relations and Corporate Development, Fredrik Wiklund. You may begin.

Fredrik Wiklund

Good morning, and welcome to Celladon's second quarter 2014 conference call. This is Fred Wiklund, Vice President of Investor Relations and Corporate Development at Celladon Corporation. You can listen to our live webcast or a replay of this call, by going to Investors section of our website, celladon.com.

The agenda for today's call is as follows. First, Dr. Krisztina Zsebo, our CEO, will provide the company's summary and discuss recent corporate highlights and updates. Paul Cleveland, our President and CFO, will then review then company's financial results. And then, they close their remarks and open up the call for Q&A.

I'd also like to bring to your attention that this morning we issued a press release announcing that we have commenced an equity offering process of Celladon common stock. We are limited in our communications on the subject per SEC regulations. Therefore, we will not be in a position this morning to comment on the proposed offering.

Finally, before we begin this morning, I'd like to remind everyone that statements made during this call regarding matters that are not historical facts are forward-looking statements in the safe harbor provisions for the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, performance and achievements to differ materially from those expressed or implied in the statement. Please see the forward-looking statements disclaimer on the company's press release issued today, as well as the risk factors section in our Form 10-Q filed with the SEC.

In addition, any forward-looking statements represent our views only as of the date those statements are made, and Celladon specifically disclaims any obligation to update such statements to reflect future information, events or circumstances.

With that, I'll turn the call over to Celladon's CEO, Dr. Kristina Zsebo. Kris?

Kristina Zsebo

Thanks, Fred, and good morning, everyone. Thanks for joining us today. We continue to make good progress through the first half of 2014. We achieved all of our stated corporate milestones and expect this level of execution to continue moving forward. We see great progress across our various development programs and momentum in our overall business.

Today, we will be providing recent updates on our development program, and then conclude with a general business update, followed by a financial review. After our prepared remarks, we will be happy to answer any questions you may have in Q&A session.

Let me first start with some recent MYDICAR achievements. Importantly, earlier in the quarter we announced that MYDICAR was recently granted Breakthrough Therapy designation by the U.S. Food and Drug Administration, for reducing hospitalizations for heart failure in NYHA class III or IV chronic heart failure patient that are neutralizing antibody negative.

I also want to remind everyone that MYDICAR had previously received Fast Track Status from the FDA. So this designation is now in addition to Fast Track Status.

The relatively new breakthrough therapy program is intended to further expedite the development and review of drugs for serious or life-threatening conditions, where preliminary clinical evidence suggest that it provides a substantial improvement over existing therapies.

I believe this designation validates MYDICAR's unique characteristics and is a testament to the strength of our clinical data to date, where in the CUPID 1 trial, MYDICAR high-dose subjects had an 88% risk reduction of cardiovascular events with a p-value of 0.003. I also believe it clearly underscores the urgent need for new treatments for the serious and life-threatening condition.

At the time of branding, this was only the third Breakthrough Therapy designation awarded by the Center for Biologics Division of the FDA, and MYDICAR is the first and only gene therapy product candidate granted this designation to date. We look forward to working with the senior staff of the FDA to determine the most expeditious path to bring MYDICAR to patients with heart failure.

Although, we can't predict the outcome of future discussions with the agency under MYDICAR status, as a breakthrough therapy product candidate, we believe that depending on strength of the CUPID 2 data, there is a possibility that the FDA may not require us to complete additional efficacy trials of MYDICAR for the treatment of systolic heart failure, if the result of our ongoing CUPID 2 trial satisfy FDA's requirement under this new breakthrough therapy regime.

With respect to our clinical progress, most of you are already aware that we completed enrollment of 250 subjects in the MYDICAR CUPID 2 study in February 2014. This trial is randomized double-blind, placebo-controlled international study comparing a single intracoronary administration of MYDICAR versus placebo, added to an optimal heart failure regimen.

The primary objective is to determine the efficacy of MYDICAR in patients with NYHA class III/IV symptoms of heart failure by reducing the frequency and/or delaying heart failure-related hospitalizations compared to placebo-treated patients.

I want to again remind everyone that the CUPID 2 trial is an event-driven trial, and two events need to occur prior to unblinding this trial. First, we need to observe at least 186 cardiovascular events. Second, all patients need to be observed for at least 12 months. In light of these requirements, we can again reconfirm today that we are on track for data from this trial in April 2015.

Let me now move into some other recent and new initiatives of MYDICAR in advanced heart failure that we are excited about. As many of you are aware, we currently exclude from treatment all patients that have evidence of pre-existing antibodies to the AAV vector that is used to deliver the SERCA2a gene to the heart muscle valve. The reason for this is that antibodies to AAV effectively block MYDICAR from entering the heart muscle valve, thereby rendering the treatment ineffective in a subgroup of patients.

We have developed a companion diagnostic, which help us identify the presence and levels of neutralizing antibodies in patients. Based on our database of blood samples today, we currently estimate that approximately 60% of all patients in the United States are neutralizing antibody positive and perhaps even more than that in certain European geographies.

To address the potential market of neutralizing antibody positive patients, we recently announced a new clinical development initiative, centered on the concept that undergoing a plasma exchange procedure can potentially lower AAV1 neutralizing antibody titer prior to MYDICAR dosing in certain antibody positive patients, and therefore, enable these patients to potentially follow up by for MYDICAR treatment.

Specifically, we expect to initiate a pilot, 24 patient, Phase 1/2 clinical trial in advance heart failure patients with systolic dysfunction, who has varying levels of pre-existing AAV1 antibodies. We expect to initiate this study in late 2014, and announce initial results in 2015.

Let me briefly explain the concept further. During the plasma exchange procedure, some times referred to as plasmapheresis, blood is to remove from the body and blood cells and plasma are separated, and then the blood cells are returned, essentially clean of certain antibodies. There are several precedents, where plasma exchange has been very successfully implemented in the clinical settings and has become standardized practice for many patients.

For example, certain organ transplantations may have multiple plasma exchange session before and after surgery, to remove antibodies to prevent organ rejection. If successful, this procedure can effectively remove the presence of these antibodies for a certain period of time, in which in turn would allow additional patients to receive MYDICAR treatment.

Based on our database of blood samples to date from U.S. patients, we expect that we could potentially increase by 50% the incremental number of U.S. patients who may qualify for MYDICAR treatment. From our prevalence perspective, this translates to an additional 175,000 patients in the United States. If successful, we therefore believe, plasma exchange could have an important impact on our projected MYDICAR eligible patient population, and it eventually enhance the overall commercial opportunity of the product.

Now, let me move on to our other evolving MYDICAR program, which is guided by the fundamental biological role, the SERCA2a enzyme play in vascular health. SERCA2a has an important beneficial role, not only in muscle, but also in blood vessels. Increasing SERCA2a in blood vessels with MYDICAR has been demonstrated in preclinical models to improve blood flow and inhibit stenosis or vessel blockage.

Therefore, we believe there are scientifically substantiated opportunities to address vascular-related disease state, such as AV-fistula maturation failure with SERCA2a therapeutics such as MYDICAR. We have just recently initiated development program with MYDICAR, targeting AV-fistula maturation failure in end-stage renal disease.

AV-fistulas are surgically created in the blood vessels of dialysis patients arms to provide easy access for dialysis, and are the preferred route of vascular access for dialysis patients. Unfortunately, approximately half of these interventions fail due to vessel blockage, which presents a major clinical problem to these patients and physicians. As many as 25% of hospital admissions in the dialysis population have been attributed to vascular access problem including fistula malfunction and thrombosis.

We believe MYDICAR maybe able to prevent these blockages and improve success rates for these procedures. There is a very high unmet need here as there are currently no FDA approved product to enhance AVF maturation.

Pending completion of additional preclinical work and approval by the FDA, we expect to initiate a clinical trial to evaluate MYDICAR's effect on improving blood flow in treated vessels and functional use of the fistula for hemodialysis. Initial results are expected in 2015.

Now, moving on to our recent announcement of our in-licensing of the Stem Cell Factor gene therapy program, we believe Stem Cell Factor gene therapy has a potential to harness the body's endogenous cardiac stem cells at the site of injury such as after myocardial infarction without the associate complications of developing cells as products. We're delighted that this program will be taken forward by Celladon. This is a great asset for Celladon as it fully leverages our extensive gene therapy research and product development experience.

Researchers at the Cardiovascular Research Center at Icahn School of Medicine at Mount Sinai in New York have recently successfully tested Stem Cell Factor gene therapy to limit heart damage following myocardial infarction in animal models. These were recently published in the lead article in the medical journal of Circulation Research and are available on our website, www.celladon.com.

Our initial focus with this program will be to generate clinically-acceptable gene therapy vector in support of potentially conducting a future clinical trial in patients who have suffered cardiac damage, as well as exploration of other potential applications. We look forward to providing you with periodic update on the progress of this program.

With that pipeline update, I would now like to focus on some recent corporate highlights. On the corporate front, we are very pleased to have Paul Cleveland join the Celladon team as President and Chief Financial Officer, and Elizabeth Reed joined as General Counsel. We believe Paul and Elizabeth's extensive industry experience will greatly compliment the existing Celladon management team.

To conclude then, we believe Celladon today is in excellent position to execute on our vision and goal. And MYDICAR program for heart failure continues to progress. And we look forward to upcoming data in April. We continue to demonstrate the broad therapeutic potentials of MYDICAR by rapidly expanding into other therapeutic indications with this product. We are excited about our recent strategic licensing of a truly novel and innovating gene therapy asset, expanding our pipeline beyond SERCA enzymes.

With that overview, I'll now turn the call over to Paul to discuss the financials for the quarter.

Paul Cleveland

Thanks, Kris. Before I begin, I'd like to first express how excited I am to join the Celladon team. I believe we have some great development assets led by MYDICAR, which is a product that may truly transform the treatment of heart failure.

I'll now discuss Celladon's financial results for the second quarter, which are also included in these mornings press release and are available along with additional information in our Form 10-Q, which has been filed with the SEC.

For the three months ended June 30, 2014, Celladon reported a consolidated net loss of $7 million compared to a consolidated net loss of $4.9 million for the second quarter of 2013.

Research and development expenses were $5 million in the second quarter of 2014, compared to $4.2 million in the second quarter of 2013. This increase was primarily due to manufacturing activities or clinical supply of MYDICAR and increased headcount to support our MYDICAR development.

General and administrative expenses were $2.0 million in the second quarter of 2014 compared to $0.8 million in the second quarter of 2013. The increase was largely due to an increase in headcount and other incremental expenses associated of being a public company.

As of June 30, 2014, Celladon had cash, cash equivalents and marketable securities of $51.2 million. We recently entered into a credit facility with Hercules Technology Growth Capital, which provides us with up to $25 million of loans. We drew our first tranche of $10 million with the closing of this transaction, and a second tranche of $15 million maybe drawn upon meeting certain conditions, post CUPID 2 data release in April of 2015. Importantly, there were no warrants or financial covenants associated with this loan.

This credit facility with Hercules will provide additional funding in support of our rapidly advancing pipeline, and I believe it also represents a vote of confidence in our company by Hercules. The cash number of $51.2 million does not include the first $10 million tranche from this facility, which was incurred after June 30.

Before we begin the Q&A, I would like to summarize, we are very pleased with our recent progress. We intend to continue this level of execution as we progress development programs going forward. We are encouraged with the progress of the CUPID 2 trial and we look forward to the data expected in April 2015.

And you just heard it, we also have a number of new development initiatives ongoing and we look forward to sharing the progress of these programs over the course of the next months and years.

With that, I think we'll now open it to Q&A.

Question-and-Answer Session

Operator

(Operator Instructions) And we do have a question from Andy Washkowitz with Stifel.

Andy Washkowitz - Stifel

This is Andy Washkowitz in for Brian Klein. I was wondering a little bit about your companion diagnostic for you AAV neutralizing antibodies. Have you gotten any guidance from the FDA on what kind of approval timelines you need or what kind of oversight there will be towards implementing it?

Krisztina Zsebo

Yes. We have had extensive discussion with CDRH, which is the division that oversees companion diagnostics. And our current development program is on track and contemplates getting the companion diagnostic approved prior to the MYDICAR drug product being approved as well. So it's a development program that goes hand in hand and we are managing through CDRH.

Operator

And I am showing no further questions at this time. I would like to turn the call back over to management for further remarks.

Krisztina Zsebo

Thanks. I just want to thank everybody who joined us today for the time and attention. We appreciate your interest and continued support and believe in the bold innovation that Celladon seeks to deliver to patients in need. So I hope you all have a good day. And thanks again for joining.

Operator

Ladies and gentlemen, thank you for you participation in today's conference. This does conclude the program. You may now disconnect.

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