Conatus Pharmaceuticals' (CNAT) CEO Steve Mento on Q2 2016 Results - Earnings Call Transcript

| About: Conatus Pharmaceuticals (CNAT)

Conatus Pharmaceuticals (NASDAQ:CNAT)

Q2 2016 Earnings Conference Call

August 3, 2016 04:30 AM ET

Executives

Alan Engbring - Executive Director, IR and Corporate Communications

Steve Mento - President and CEO

Chuck Cashion - SVP and CFO

Analysts

Lisa Bayko - JMP Securities

Vernon Bernardino - FBR & Company

John Boris - SunTrust Robinson Humphrey

Ed Arce - H.C. Wainwright

Operator

Welcome to the Conatus Pharmaceuticals' Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investor Center of the Conatus website at www.conatuspharma.com. This call is property of Conatus Pharmaceuticals and recordings, reproductions, or transmission of this call without the expressed written consent of Conatus is strictly prohibited. As a reminder, today's call is being recorded.

I would now like to introduce Alan Engbring, Executive Director of Investor Relations and Corporate Communications at Conatus.

Alan Engbring

Good afternoon. A press release of the company’s Second Quarter 2016 financial results was issued earlier this afternoon and can be found in the investor section of the Conatus website at conatuspharma.com.

During today’s call, we may make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. Actual results could differ materially from those projected in these forward-looking statements due to risks and uncertainties associated with Conatus' business.

These forward-looking statements are qualified by the cautionary statements contained in Conatus' SEC filings, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, and Conatus' press releases, including today’s release on second quarter 2016 financial results.

This call contains time-sensitive information that is accurate only as of the date of this live broadcast. Conatus undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.

Participating on the call today are Steve Mento, President and Chief Executive Officer of Conatus, who will discuss recent company highlights and clinical development programs, and Chuck Cashion, Senior Vice President and Chief Financial Officer of Conatus, who will review the company’s financial results. We will then open the call for questions from invited participants.

I would now like to turn the call over to Steve Mento.

Steve Mento

Thank you Alan. Good afternoon everyone. We recently completed another quarter of steady progress in our development programs highlighted by an expanding accumulation of data support of our belief that Emricasan will be an important treatment for patients with liver disease.

At the EASL Conference in Barcelona in April, we presented positive results from the first stage of our Phase 2 Liver Cirrhosis clinical trial in which we showed that Emricasan treatment improved validated measures of short term survival and improved liver function in patients with MELD scores of 15 to 20.

We also shared some encouraging preclinical data, addressing the safety of caspase inhibition in a setting of liver cancer in which treatment with a caspase inhibitor did not accelerate tumor growth nor interfere with a drug used to treat that cancer.

At our last quarterly conference call in May, we presented positive results from the second stage of our Phase 2 Liver Cirrhosis clinical trial, in which patients with MELD scores of 15 to 20 treated with Emricasan for an additional three months, showed continued improvement in survival and liver function endpoints. And importantly our development plans in patients with NASH cirrhosis showed improvement in survival and liver function endpoints regardless of baseline MELD score.

We have continued to made excellent progress in our post-transplant HCV SVR clinical trial and our ENCORE NASH fibrosis clinical trial, and remain on track for data readouts from both in 2018. We also have advanced well with our strategy for further development towards initial registration of Emricasan in NASH Cirrhosis, an area of significant unmet medical needs.

Lot of focus today on that strategy, which we introduced last November and present a closer look at the mechanistic and clinical evidence reinforcing our confidence in that strategy. I’ll also provide an update on the refinements we’ve made to our development plans since November for a clear vision of what we believe is our best path forward.

I’ll begin with a little context from Emricasan; most of the drugs on the market (inaudible) for liver disease target either initial causes of late stage symptoms. For example, on the initial cause front there are vaccines and antiviral drugs that aim to prevent the progression of lever disease by blocking, suppressing or clearing the various hepatitis viruses.

There are metabolic disorder drugs that aim to prevent the progression of liver disease by reducing the accumulation of fat in the liver. These drugs are best applied in early stage disease before the liver is severely damaged or after a liver transplant to protect the new lever from sustaining further damage.

On the late stage symptom side, there are drugs that aim to reduce the effects of portal hypertension by lowering cardiac output and constricting blood flow from the gastrointestinal track in to the liver, others aim to control hepatic encephalopathy by decreasing ammonia absorption and/or production from the gut.

Although these drugs may provide temporary symptomatic relief or improved quality of life for patients while they wait for a liver transplant, they do not act directly to address the damaged liver and do nothing to return the liver towards more normal structure and function.

There are anti-fibrotic drugs in development aiming to reduce the formation, the buildup for the cross-linking collagen fibers in the liver, which is a natural wound healing response to chronic [ACLF].

What sets Emricasan apart from the other anti-fibrotic drugs in development is that it is not just an anti-fibrotic. Emricasan also has clinical important anti-inflammatory effects and can address hemodynamic effects both inside and outside the liver in patients with portal hypertension. Its unique mechanism of action reducing excessive caspase activation gives Emricasan true disease modifying potential.

We call that Emricasan as a pan caspase protease inhibitor that is delivered orally, and is naturally and selectively targeted to the liver. Regardless of initial cause and regardless of disease stage, excessive caspase activation drives excessive apoptosis and inflammation, two fundamental biological processes with multiple downstream consequences responsible for damage to the liver.

By reducing excessive caspase activation Emricasan has the potential to provide rapid and sustained disruption and we believe even reversal of the liver damaging process, and even when the initial cause is still present as the case in NASH. This capability demonstrated across a broad spectrum of liver disease through expensive development efforts to date provides the basis and the confidence to advance Emricasan in towards its initial opportunity for approval in NASH Cirrhosis.

We’ve chosen a pathway embracing the principle that higher unmet medical needs translates into potentially lower clinical and regulatory hurdles. The drug has a mechanism powerful enough to address a broad range of liver disease stages and relatively healthy to those awaiting transplantation, as we believe Emricasan does the optimal path to initial approval will be to prove the clinical benefits of treatment in those patients with the greatest unmet medical needs. Patients with support cirrhosis will progress more quickly to negative outcomes. These outcomes are well defined and widely recognized.

While the balance between risk and benefit cannot be quantitated, the use of medication in the healthiest population requires that those medications be very well tolerated. While even small degrees of real clinical benefit can outweigh potential risks in patients with the most urgent needs, the result of these combined factors is that trials and patients with more advanced disease can be smaller, shorter, less expensive and more straight forward pathways to potential approval than trials in less healed patients.

We’ve built our initial registration strategy around this principle. Since we rolled out that strategy last November, we’ve reported both a three month placebo controlled and six months open label result from our Phase 2 Liver Cirrhosis trial. We’ve also had multiple interactions with regulatory authorities and were granted fast track designation by the FDA for NASH Cirrhosis.

With this information in hand, we have refined our development strategy accordingly. The foundation of our strategy continues to be the ENCORE-PH for portal hypertension trial using HVPG as a primary endpoint in patients with earlier stage cirrhosis and severe portal hypertension.

We originally planned to enroll patients with either NASH or HCV driven cirrhosis in this trial, but based on regulatory agency guidance, we will now focus on a single etiology of cirrhosis NASH. This Phase 2b trial expected to start before year-end will be a randomized double blind placebo controlled trial in compensated or early decompensated NASH Cirrhosis patients with baseline HVPG values of 10 millimeters of mercury or higher.

We will evaluate multiple doses of Emricasan against a placebo controlled for a six months treatment period. We will provide additional details on trial design at the time of initiation.

Our confidence in this approach is based on multiple mechanistic opportunities for Emricasan to improve portal hypertension, and supported by the results we released last September from our portal hypertension trial. We call the damage to a parasite in cirrhosis drives excessive caspase activity in the liver leading to local information as well as apoptosis of liver cells and the release of vasoactive and pro-inflammatory microparticles.

These microparticles activate [stelite] cells in the liver directly causing vasoconstriction, the release of proinflammatory agents, collagen production and fibrosis. Excessive caspace activity also clears enzyme in the liver that produces nitric oxide, and agent that relaxes blood vessels. The lack of nitric oxide therefore intensifies vaso constriction within the liver.

Outside the liver those same microparticles released by excessive apoptosis travel through this circulation to the gastrointestinal track where they stimulate increased vasodilation of (inaudible) which leads to increased blood flow in to the liver and increased portal hypertension. Emricasan by reducing the excessive caspase activity reduces local inflammation, excessive apoptosis of healthy liver cells and the resulting release of these microparticles in turn reducing portal hypertension, improving liver function, resolving fibrosis and overtime potentially leading to more normal liver structure and function.

Results from our pilot Portal Hypertension trial demonstrated that one or more of these various mechanisms inside and/or outside the liver can act very quickly, even during a short one month treatment period. We do not believe a longer treatment duration such as that planned for the six month ENCORE-PH trial should lead to further improvements if the fibrosis and cirrhosis start to reverse as we believe can happen with Emricasan treatment.

The second randomized double blind placebo controlled trial on our registration strategy is expected to focus on patients with later stage key compensated NASH Cirrhosis, it’s called the ENCORE-LF for liver function trial. It is a direct successor to our recently completed liver cirrhosis trial and is expected to start in the first half of 2017. This could either be a Phase 2b or a Phase 2b/3 trial based on further regulatory discussions.

We plan to use surrogate endpoint such as MELD score and/or Child-Pugh status which are short term predictive measures of prognosis and survival in cirrhosis patients. As well as liver function metrics such as Bilirubin and INR, which have also functional components of MELD score and Child-Pugh status? We will not be measuring HVPG in this trial.

In these later stage cirrhosis patients we also plan to explore the feasibility of including transplant free survival as a potential secondary endpoint. Transplant free survival is an endpoint potentially suitable for full approval. The ENCORE-LF trial in addition to being a well-controlled trial providing a potential pathway to approval could also provide important registrative support to chronic administration safety data. We will provide additional details on the final trial design at the time of initiation.

For this approach our confidence is based on the medium term mechanistic benefits of Emricasan and is supported by the results from our Liver Cirrhosis trial. Specifically Emricasans’ intrahepatic vascular and anti-fibrotic activity which I’ve just described offer the opportunity for compounding benefits overtime, reduced inflammation, improved blood flow through the liver, reduced production of collagen fibers and resolution of fibrosis all contribute to improving the liver’s functional capacity.

Our Liver Cirrhosis trial demonstrated a statistically significant treatment affect during the three months placebo controlled first stage mixed etiology patients with a baseline MELD score of 15 or higher, and in NASH Cirrhosis patients independent of baseline MELD score.

Patients who continued on Emricasan during the subsequent three-month open label stage continued to improve. Our ability to identify NASH Cirrhosis patients with baseline clinical characteristics likely to achieve the most pronounced treatment effects will be helpful in finalizing the design of the ENCORE-LF trial.

A third component of our registration strategy is continuation of treatment for an additional 18 months or for a total of two years for patients completing the ENCORE-PH or ENCORE-LF trial. While practical considerations may lead to follow-on for each of these studies, we are using a single name ENCORE-XT for extension to capture the concept.

Both ENCORE-PH and ENCORE-LF are using validated surrogate endpoints, meaning endpoints that are reasonably likely to predict clinically relevant outcomes. The extension trials will assess the long term Emricasan treatment affects and track the same surrogate endpoints used in the primary trials potentially linking them to clinical outcomes such as transplant free survival and health related quality of life.

Long term safety data is another objective of these extension trials. This information will be needed to support accelerated approval.

We initiated a randomized double blind placebo controlled trial in the ENCORE series in January in patients with NASH fibrosis. The ENCORE-NF Phase 2 trial is evaluating the effect of Emricasan and reducing fibrosis and improving steatohepatitis in earlier stage NASH patients who have fibrosis but not yet sclerosis.

In patients who have NASH fibrosis is the single best predictor of progression to sclerosis. The ENCORE-NF trial is enrolling 330 patients with treatment for 72 weeks. The primary end point in this trial is a biopsy base change in fibrosis using the NASH clinical research network histological scoring system, without worsening of steatohepatitis. This is not a registration trial, but its endpoints are consistent with those likely needed for registration and will allow the robust design of a subsequent confirmatory efficacy trial.

In addition to providing efficacy data as step towards expansion of registration in to earlier stage NASH fibrosis market, the ENCORE-NF trial will provide a rigorous assessment of safety in a large group of patients with NASH helping to build the safety experience required to support the further development and registration of Emricasan for NASH sclerosis.

Another key feature of this trial is the evaluation of the potential for dose differentiation. Biomarker studies we’ve carried out in patients with fibrosis suggest that efficacy with 5 [grams] twice daily dosing should be equivalent to efficacy with 50 milligrams twice daily dosing. If this is confirmed using change in fibrosis as an end point, we may establish the lower dose as the most appropriate for patients with NASH fibrosis. For patients with sclerosis regardless of etiology, biomarker data to date suggest that a higher dose will provide greater benefit in these later stage patients.

Rounding out our clinical development effort is the POLT-HCV-SVR trial which started in 2014 and is fully enrolled with liver transplant recipient subsequently cleared of the hepatitis C virus infection, but having reestablished fibrosis or sclerosis. This two to one randomized double blind placebo controlled Phase 2 clinical trial is designed to evaluate long term improvement in liver fibrosis back and be progressive in transplant patients with slight effective treatment of the hepatitis C virus infection and can lead to decreased liver function over time.

Fibrosis is measured using biopsy based evaluation of Ishak fibrosis score as the primary endpoint. Top line results were expected in the first half of 2018. As a reminder, Emricasan has often drug designation for liver transplant recipients with reestablished fibrosis regardless of etiology. This could be an independent pathway to approval for a niche market segment.

For substantial unmet clinical need in full sclerosis patients is the key reason why we have chosen to focus on sclerosis for initial registration pathway. We believe that Emricasan has the potential to provide disease modifying benefit for sclerosis patients through its multi-faceted mechanism of action, and we believe our development approach is well designed to demonstrate that benefit. Although the overall registration study have outlined will require additional capital to complete, we are confident in our approach and committed to securing the necessary resources to bring this drug to market.

Next I’ll ask Chuck to provide a brief update on the second quarter financial result. Chuck?

Chuck Cashion

Thank you Steve. We released financial results for the second quarter of 2016 after the close today. The net loss for the second quarter of 2016 was $6.5 million compared with $6.1 million for the second quarter of 2015. The net loss for the first six months of 2016 was $13.7 million compared with $12.0 million for the first six months of 2015.

Research and development expenses were $4.2 million for the second quarter of 2016 compared with $4.1 million for the second quarter of 2015. R&D expenses were $8.9 million for the first half of 2016, compared with $8.0 million for the first half of 2015. The increases in R&D expense were primarily due to higher external clinical trial and manufacturing costs.

General and administrative expenses were $2.2 million for the second quarter of 2016, compared with $2.0 million for the second quarter of 2015. The increase in G&A expenses for the quarter was primarily due to higher personnel cost and consulting fees. G&A expenses were $4.8 million for the first half of 2016 compared with $4.1 million for the first half of 2015. The increase in G&A expenses for the first half was primarily due to higher personnel costs and higher consulting, legal and accounting fees.

We ended the second quarter of 2016 with cash, cash equivalents and marketable securities of $30.2 million compared with $36.5 million at year end 2015. We believe we have sufficient financial resources to maintain operations and ongoing clinical trials for at least the next 12 months. We will need additional capital to fully implement our development plans. We expect to fulfill that need through opportunistic financings, strategic partnerships or a combination of the two as always with high sensitivity to long term shareholder interest.

I will now turn the call back to Steve for some closing comments, before the Q&A session. Steve?

Steve Mento

Thank you Chuck. To summarize, we believe Emricasan has a powerful mechanism of action which is broadly applicable across the spectrum of liver disease. We are pursuing an initial registration in NASH sclerosis where there is substantial unmet medical need and where our validated surrogated endpoints define clear registration pathways.

Our ENCORE trials are designed to provide multiple opportunities to confirm efficacy, link that efficacy to clinical outcomes and quality of life and collectively secure sufficient registrative support of safety data. Our parallel studies in fibrosis are intended to contribute to the safety database, while providing a jump start towards market expansion in to earlier stage disease.

Our path forward depends on our ability to secure the necessary capital, which we believe is warranted by the results from our (inaudible) development efforts to date and a sizeable market opportunity. We remain excited by the prospects for rapid advancement towards initial registration and eager to remain on track with our (inaudible) time lines.

That concludes our formal presentation, now I’d like to turn the call over to our Operator to moderate the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] our first question comes from the line of Stephen Willey with Stifel. Your line is open.

Unidentified Analyst

Hi this is (inaudible) Rahman for Steve today thank you for taking my questions. So just wanted one clarification on your Portal Hypertension trial ENCORE-PH. I heard you say you’re going to use a cut-off of 10 millimeter, just wanted to (inaudible) why you’re using the 10 millimeter versus 12 millimeter that you used in your Portal Hypertension trial.

Steve Mento

That was a mistake, it should have been 12.

Unidentified Analyst

In the past you’ve talked about doing small trials in coherent used sclerosis of Hep C patients. Do you have any plans for that any update on that front?

Steve Mento

They are still being discussed, but we are not formally committed to doing trials in those patents as of today.

Unidentified Analyst

Anything, just asking on any update on the partnership front?

Steve Mento

No.

Operator

Our next question comes from the line of Lisa Bayko with JMP Securities. Your line is open.

Lisa Bayko

I’m just curious about the first trial the one in sclerosis patients. If you were to kind of go out and actually track patients through sort of an outcome, more of an outcome study, what kind of time duration are you talking about and maybe you could talk a little bit more here, but at least for now your intended size of the study.

Steve Mento

Lisa which study you’re talking about?

Lisa Bayko

The sclerosis.

Steve Mento

Well the Portal Hypertension and the liver function are both sclerosis studies, which one do you want to me?

Lisa Bayko

Maybe you can go through both.

Steve Mento

Well in the Portal Hypertension study, those are earlier stage sclerosis patients, so most of those patients are going to be compensated meaning asymptomatic. So the expectation is that through the duration of that study, the dosing of that study is six months, not a whole lot of advancement in clinical disease will be apparent.

Now a portion of those patients will be I’d say early decompensated with one decompensated event. There’s a chance that we’ll see something in those but it’s very low. So really that first study is focused primarily on demonstrating reduction in that surrogate end point, portal hypertension. And we really don’t expect to see clinical outcomes in those patients until they are rolled over in to the XT study which as I mentioned is 18 months additional dosing. So longer term in that patient population.

On the ENCORE-LF study, a different situation. Those patients will be decompensated and have high MELD score 15 to 20 and recall that 15 is normally the minimum MELD score required for transplant listing. So these are patients that are far long and many of those will already be on the liver transplant list.

In that case, it really depends on its not just the MELD score, but it’s in how MELD score is progressing overtime, which will define how long it will take for those patients to show negative clinical outcome. It can be as short as three months recalling our Liver Sclerosis trial that we just completed that in the placebo group that had baseline of 15 and above, half of those patients had actually dropped out and a couple of those due to negative clinical outcomes in only three months.

So you can see as early as three months, but a lot of those - a significant portion of those patients will progress within a year. Now we haven’t focused and haven’t described the details of that study with respect of duration of therapy or the dosing schedule, but it gives you a flavor that in that population things are happening a lot faster and that’s why we would be considering transplantation free survival as a potential end point in that study.

Lisa Bayko

And then in terms of the sort of the approximate cost of these two studies. I know you’re going to stagger them and what not, but what are you thinking in terms of cost?

Steve Mento

We haven’t provided any guidance specifics on cost of either the trials or the previous trials we’ve done.

Operator

Our next question comes from the line of [Matt Macosbon] with Brean Capital. Your line is open.

Unidentified Analyst

Thanks for taking my call, representing Difei over at Brean Capital today. I know you spoke about briefly with ENCORE-PH about FDA input on the Phase 2 trials. I was also wondering in relation to ENCORE-LF and ENCORE-XT if you needed any more of their inputs or further conversation with them before study protocol proceedings.

Steve Mento

Let me talk first about the ENCORE-PH trial. So we did have good interactions with regulatory authorities that helped us come up with a very robust protocol for that clinical trial. Those took place over a month end of last year and early this year, and really the two key components of that were understanding how to measure HVPG as an endpoint from the regulatory authorities, as well as refining our etiology for that trial from a combined etiology of NASH to HCV. FDA made it clear to us they prefer single etiology trial. So I won’t in to the details and interactions, but those are two obviously pieces understanding how to measure the endpoint in the patients as well as doing single etiology trial.

In the ENCORE-LF study what we’ve said all along was that the data from the LC study would serve as a basis for future discussions with the regulator. So we do plan to have additional input from the regulatory authorities in the context of that study and also that will as I mentioned in my formal remarks will help us to determine whether or not we want to go for that study as a Phase 2b study or a Phase 2b/3 study. So there’ll definitely be additional interactions with the regulators to facilitate and understanding of that.

And I also wanted to point out - sorry I’ve got just one other comment, I want to point out that both of those studies are international studies. So those regulatory interactions won’t just be with the FDA.

Unidentified Analyst

With the 2b or 2b/3 decision, do you have a potential (inaudible) with those discussions.

Steve Mento

All we’ve said is that we plan to initiate the trial whether it’s a 2b or 3 in 2017.

Unidentified Analyst

And anything on the XT?

Steve Mento

The XT will depend on as patients complete their dosing. So for example on the PH trial as they complete their six months dosing they will offered the opportunity to role in. So that will be a direct continuation of the PH trial and ultimately potentially the LF trial as well.

Operator

Our next question comes from the line of Vernon Bernardino with FBR & Company. Your line is open.

Vernon Bernardino

My question actually has been asked by Matt, but just wondering if you could talk a little bit further. You said you wouldn’t provide any detail at this moment, but about the discussions that drove, regarding the PH trial from NASH HCV to focus on NASH sclerosis as hyper patients.

Steve Mento

It was very straight forward in the discussions and actually those discussions took place early in the process with the regulators and resulting in its filing fast track designation only in NASH sclerosis. So when it became clear through our discussions actually late last year with the FDA that they were - they certainly preferred, they understood the rationale and early studies of looking at mixed etiology. But for studies that would be supportive of registration opportunities they absolutely preferred single etiology studies.

And it was at that stage of the game, we didn’t yet have the three month or the six month data from the liver sclerosis trial, but we decided that we were going to focus on NASH sclerosis based on some of the data we had from the portal hypertension pilot study we reported in September.

And it was actually very good that we did because as you know now the three month data from the liver sclerosis trial actually showed that we had a positive impact statistically significant reduction in MELD score in NASH sclerosis patient that subset regardless of their baseline NASH. So it was a good choice for us to go in to NASH sclerosis.

Vernon Bernardino

And the FDA has been very quiet, can you provide anything you can as far as the FDA is thinking these days and perhaps any timing on what they may propose us as far as our guide lines for the industry.

Steve Mento

I don’t actually think the FDA has been quiet. I think they’ve been actively participating in the AASLD meeting, [Measles] meetings and in the liver forum discussions. With respect to formal guidelines, I just don’t know when they’d come out and they’ve certainly been responsive to request we’d had for interactions. So I think FDA is highly involved, maybe not as publicly involved as people would like but highly involved.

Vernon Bernardino

Yeah, just thinking about public information.

Steve Mento

Vernon, part of that is a learning process. We’re having discussions with them in a space where they are not having discussions before. I mean we’re the only group out there that’s really thinking going into decompensated patients or decompensated sclerosis patients, patients that have symptoms. So it’s really potentially discussions that we have with the regulatory authorities that can help facilitate the guidelines.

Operator

Our next question comes from the line of John Boris of SunTrust. Your line is open.

John Boris

Thanks for laying out Steve at least the clinical plan and path forward. Can you maybe help us understand on the regulatory side of the equation, your regulatory strategy for a base case submission for approval obviously contingent on how the results come out and maybe an optimistic plan on maybe a more accelerated type of filing there?

Second question has to do just on the work partnership. There’s a couple components very in general. Obviously there’s a geographical component and an indication component which you must obviously be exploring with (inaudible) partners. But how are you thinking about geography indications in terms of what you need to potentially sacrifice to be able to get significant infusion of capital going forward.

Steve Mento

I think what we’ve been saying all along is that we believe that for Emricasan the US market opportunity in sclerosis is a really valuable component of that. So one of the things that we’ve talked about in the context of potential partnership discussion is trying to maintain that component of the market opportunities for Conatus, and as you’ve heard from me in the past, because of the nature of the patients and who treats those patients, it really is a market opportunity that a little company would manage with a relatively small sales force. So that’s certainly a component.

Regional and rest of the world are all options, but we definitely want to maintain a presence in the US market in sclerosis. When you move on to fibrosis, that’s potentially a different situation because that would be a much position call point population and probably not something that Conatus will be comfortable all alone. That answers I guess the second question. What was the first question again?

John Boris

The first just has to do with regulatory path forward, base case assumption, optimistic assumption. Obviously there is still meeting that you obviously have to have with the FDA to crystalize that strategy, but just how are you thinking about approaching the FDA with respect to that?

Steve Mento

Base case hasn’t changed, which is looking at HVPG, MELD and potentially Child-Pugh as surrogate endpoints for accelerated approval, and if we were to get approval and looking at at least on the surface whether or not it be possible just the ENCORE-PH and ENCORE-LF studies alone to apply for that can obviously comment on what that would be because we have to see the data in order to see that upfront.

So that’s the base case scenario. Worst case is, we’d have to additional confirmatory studies in Phase 3, but we think that the ENCORE-PH and LF studies are going to give us robust data certainly supportive if not alone being able to provide the opportunity to apply for accelerated approval.

The fact that we are in a position in the liver function trial to consider looking at full approval endpoints like transplantation, free survival is something that we’re going to explore. And if we are able to incorporate full approval, this addresses a little bit about one of the earlier questions. Things happen a lot faster with respect to deterioration in those patients once they hit MELD score of 15. So we can select the right patient population and do the balancing act, obviously making sure that placebo’s behave as they would be expected to behave based on the information we have in hand now.

A full approval could considerably make the regulatory process much simpler. I mean survival endpoints are pretty easy to convince regulators that they are valid. But this is something we’re just exploring right now, as I mentioned in the comments, something that we’ve been talking among ourselves and then with the regulators. And it’s really going to depend on whether or not we can actually select the appropriate population that balances survival in the placebo group with efficacy in the active group.

Won’t comment on what the actual timing would be for filing for approval, but in both of those cases we think that there’s an opportunity for a more rapid approval than in any of the earlier stage diseases in fibrosis for example. And we still believe that the pathway that we’ve chosen potentially could put us on the market in this space before anybody else.

Vernon Bernardino

Is there a possibility of putting interim looks in to those (inaudible).

Steve Mento

There’s always a possibility and there’s always a possibility of looking at innovative trial designs as well. And again to a question those are all points that potentially could be components of the discussion with regulators which is always the case.

Operator

Our next question comes from the line of Ed Arce with H.C. Wainwright. Your line is open.

Ed Arce

Several of them have already been asked, but I did want to just go over the thought behind the two trials the portal hypertension and the liver function trial. So, clearly with the results that you’ve seen last year with HVPG, the PH study six months gives you plenty of opportunity to see some significant reductions on that validated endpoint. But my question is around LF with outcomes as the primary measure and mostly decompensated patients.

You’ve got essentially double the number of patients that you may be looking at in PH, although you have a sicker patient population that could be reasonably expected to progress to a hard outcomes quicker. So I’m just wondering if that’s the reason why you have sort of an open question on the term of the study.

Steve Mento

Yeah, actually that is and remember we didn’t say that we were going to use or didn’t say that we were going to use a hard out unlike transplantation free survival as the primary endpoint. We just said we were exploring it for that. But you’re right, the balancing act here is, based on the data we have from the liver sclerosis study that we just completed. We feel that we can show significant changes in MELD score in patients that start off at 15 or above in a relatively short period of time.

So if the study was just designed to look at MELD score, it wouldn’t have to be a very long duration we don’t believe. And it also simplifies things relative to your placebo population, because recall on I just mentioned this earlier that in the liver sclerosis trial we just reported on a couple of times over the last year the placebo patients that presented at 15 or above half of those had dropped out within the first three months.

So, if you’re looking at MELD score as an endpoint that gives statistically significant improvement, it’s not just the response rate in the active group. Let me recall, none of the active patients in that first three months dropped out. So all the patients on Emricasan that started at 15 were still there after three months. So you have to factor in practical aspects associated with the behavior of the placebo patients in the sicker population progressing potentially rapidly.

That’s a disadvantage. The advantage is that if they are progressing rapidly, you can think about and explore it as I have talked about looking at harder endpoints, transplantation free survival, as a potential outcome and not have to wait a couple of years to look at that. Certainly longer than three months and that’s the balancing act that we’re looking at. The duration of the trial, the endpoints we’re looking at, the practical aspects associated with maintaining a relevant placebo population for the duration, a measurement of those endpoints, and we’re still in the process of working out all the details. And as I said in my formal comments, when we have that protocol finalized, we’ll go over those details with the outside world.

Ed Arce

Another question around a comment you made earlier on the high level interaction with the FDA on the PH file and certainly on problems that came from those interactions on the design, one of them being how to go about measuring the HVPG. I was just wondering is that a specifically referring to measurements at or above the 12 milligrams or millimeters of mercury as a severe portal hypertension or was there something else around that.

Steve Mento

We’ll give you the details on the protocol and the actual measurements when we actually start to travel. What I can say now is, what we’ve always been talking about and when we actually reported in the pilot study, you can look at mean HVPG in a broad based population and argue that that is a valid measure from a population basis as to what’s going on in that population.

But there clearly was interest and we actually reported the data from the pilot study in a variety of responder analysis ways. The 10% improvement regardless - these are on patients that started at 12 or above, what the 10% improvement mean, what the 20% improvement mean, what’s the reduction to less than 12. There’s literature supporting all of those responder type analysis right now with the discussions with the regulators or which if any of those are the most appropriate responder analysis and stay tuned, we’ll let you know.

Ed Arce

A couple of more if I may, just one on the finances, I know that you expect to start PH later this year and then the LF in the first half of next year. Are one or both of those contingent upon additional financing?

Steve Mento

Yes.

Ed Arce

Last question was just remembering earlier discussion, have you or do you still plan to file for breakthrough status designation?

Steve Mento

We haven’t commented on whether or not we’re going to file for breakthrough status. But we didn’t comment before we filed for fast track either.

Operator

[Operator Instructions] We have a follow-up from the line of Stephen Willey with Stifel. Your line is open.

Unidentified Analyst

Just wanted to ask if you have any plans for visitation later AASLD from the liver sclerosis trial or additional crux of the data.

Steve Mento

I can’t tell, I am being told I can’t tell you.

Unidentified Analyst

And I just wanted to confirm if you just mentioned on the call the POLT-SVR trials complete recruitment, is that correct?

Steve Mento

Yes.

Operator

Thank you. And I’m showing no further question at this time. I will now turn the call back to Steve Mento for closing comments

Steve Mento

Well want to thank you all for your participation in today’s call, and for you continued support Conatus. We look forward to providing periodic updates on our programs and meeting with many of you through the remainder of the year.

Operator

Ladies and gentlemen, this concludes today’s conference. You may now disconnect.

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