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Concert Pharmaceuticals, Inc. (CNCE) Q2 2020 Earnings Call Transcript

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Concert Pharmaceuticals, Inc. (NASDAQ: CNCE)
Q2 2020 Earnings Call
Aug 6, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Concert Pharmaceuticals' Second Quarter 2020 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today Justine Koenigsberg, Senior Vice President, Corporate Communications and Investor Relations. Thank you. Please go ahead, ma'am.

Justine Koenigsberg -- Senior Vice President, Corporate Communications and Investor Relations

Thank you. Good morning and welcome to Concert Pharmaceuticals' second quarter 2020 investor update. Joining me this morning with prepared remarks are Roger Tung, our President and CEO; Jim Cassella, our Chief Development Officer; and Marc Becker, our CFO. We will also be joined by Nancy Stuart, our Chief Operating Officer for the Q&A portion of the call.

As a reminder, today's discussion will include forward-looking statements about our future expectations, plans and prospects. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A description of these risks can be found in our most recent 10-Q filed with the SEC. Any forward-looking statements speak only as of today's date and we assume no obligation to update any forward-looking statements made on today's call.

With that, I would now like to turn the call over to Roger.

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Thank you, Justine. Good morning and thank you for joining us today. I'm pleased to report we've made important progress across both our clinical programs. Before I review the key highlights of our programs, however, I'd like to make a few comments relating to the current turbulent environment. COVID-19 has affected each of us and our communities in many ways. At Concert, our top priorities are to support the safety of our employees, the patients participating in our trials, and staff at our clinical sites, while advancing the operational goals for the company and maintaining the integrity of our clinical trials. We had, in a staged manner and ensuring that we have appropriate safety controls and systems in place, reopened our facilities to our live-based R&D personnel. For the broader Concert team, many of us can do our jobs remotely and we will continue to do so for the foreseeable future, when there is not a pressing need to be in the office.

We continue to be in close contact with our existing and planned clinical sites. Our practices relating to our ongoing trials align with regulatory guidance, industry best practices, and on a site-by-site basis, local rules and ordinances. Maintaining a nimble responsive approach has enabled us to successfully keep our ongoing studies up and running.

For the CTP-692 Phase 2 schizophrenia trial, I commend our team for rapidly developing and implementing approaches and strategies to minimize disruption through the spring and early summer. Keeping safety is our top priority. Our current trend continues to indicate complete enrollment of the CTP-692 study by year-end.

Our clinical program accomplishments for the first half of 2020 extend beyond CTP-692 and position us to continue to advance CTP-543 in alopecia areata. Following a successful end-of-Phase 2 meeting with the FDA earlier this year, we applied for and were granted Breakthrough Therapy Designation for CTP-543 for adult patients with moderate-to-severe alopecia areata. Breakthrough designation is intended to expedite the development and review of medicines aimed at treating a serious or life-threatening disease where there is preliminary clinical evidence that the investigational therapy may offer substantial improvement over existing therapies. FDA works with sponsors of breakthrough therapies by providing a dedicated team to facilitate efficient trial design, provide timely advice, and streamline development review. We're pleased that the FDA granted Breakthrough Therapy Designation to CTP-543 and look forward to our increased interactions with them. There are currently no FDA-approved treatments for alopecia areata and CTP-543 has the potential to be one of the first to market.

Both 543 and 692 are tremendous potential advancements for patient care and for Concert. We look forward to our ongoing evolution as a late-stage drug development company and to keeping you updated on our continued progress.

I'll now turn the discussion to Jim for more color on the development front.

James V. Cassella -- Chief Development Officer

Thanks, Roger. As we discussed previously, we are in full execution mode to start the first Phase 3 trial with CTP-543 in the fourth quarter of this year. This is a major focus of our clinical development team, as well as our company overall. As we've discussed, we are planning to conduct two randomized, double-blind, placebo-controlled Phase 3 trials in adults with moderate-to-severe alopecia areata to support our NDA. Patients will be randomized to receive one of two doses of CTP-543 or placebo in a randomization schedule that gives patients only a one in seven chance of being assigned to placebo. This schedule, along with the opportunity to roll over into our ongoing long term open label extension study, where all patients are on active treatment, are major incentives for trial recruitment.

In our completed Phase 2 dose ranging trial, patients treated with either 8 milligram or 12 milligram of CTP-543 twice-daily, met the primary efficacy endpoint in the percentage of patients achieving a 50% or greater relative change from baseline at 24 weeks using the Severity of Alopecia Tool or SALT. We also saw statistical significance for both dose groups compared to placebo at more stringent response thresholds using SALT-generated data, including those patients who achieved a SALT score of 20 or less. We recently released these clinical results in connection with the American Academy of Dermatology's Virtual Meeting after the in-person meeting was canceled in March. Our slides are available on our website. I am pleased to say that our results were also highlighted in their late-breaking news publication.

At week 24, 26% of patients in the 8 milligram twice-daily cohort and 42% of patients in the 12 milligram twice-daily cohort achieved a SALT 20 or less. These results are statistically significant with a P-value of less than 0.05 and less than 0.001 versus placebo, respectively. Achieving a SALT score of 20 or less indicates an 80% or greater presence of scalp hair, which has been shown to be clinically meaningful by both alopecia areata patients and treating physicians. Based on these significant results from the Phase 2 study and the importance of the measure, the percentage of patients achieving a SALT score of 20 or less will be the primary efficacy endpoint for our upcoming Phase 3 program.

The Concert team is diligently working to begin Phase 3 testing in the fourth quarter of this year. Additionally, the enthusiasm among investigators and study sites has been tremendous. We look forward to moving the program through Phase 3 with the goal to offer patients a new and meaningful treatment option for alopecia areata.

Briefly on CTP-692. We are pleased to have had the opportunity to showcase the program at the American Society of Clinical Psychopharmacology Virtual Meeting in late May. The data we presented provided a strong foundation to advance the program into Phase 2. For the first time in a scientific meeting, we released non-clinical findings showing that CTP-692 produced approximately 1.7 times higher drug exposure relative to D-serine in areas of the rat brain like frontal cortex, an area important to schizophrenia. Also, during this pharmaceutical pipeline session at ASCP, we presented our CTP-692 Phase 1 results to a well-attended Zoom audience.

As a reminder, up to 4 grams of CTP-692 given for seven consecutive days demonstrated a favorable safety, tolerability and pharmacokinetic profile. Importantly, key blood and urine markers of kidney function did not indicate any signs of renal impairment in the Phase 1 trial, giving us confidence as we advance the program in our ongoing dose ranging efficacy trial. CTP-692 has an attractively long half-life of about 19 hours in humans and so it's very well suited for once-daily dosing. With the increased PK exposure of CTP-692, compared to D-serine in humans and it's increased brain exposure found in rats, we believe our dose range of 1, 2 and 4 grams administered once-daily is appropriate to fully assess the potential benefit of CTP-692 in the Phase 2 trial.

As Roger mentioned, enrollment in the Phase 2 trial for CTP-692 is ongoing and we expect it to be fully enrolled by year-end. As a reminder, the treatment duration is 12 weeks with an initial extended training period to ensure eligibility of incoming patients. We are working closely with each clinical trial site and while enrollment slowed for detection of patients and study staff during the early days and peak of the COVID-19 pandemic, we continue to see progress on the trial. Let me reiterate how extremely excited we are about CTP-543 moving into Phase 3 pivotal testing in Q4 and the expected completion of enrollment in the Phase 2 CTP-692 trial by year-end.

Let me pause here and turn the call over to Marc.

Marc Becker -- Chief Financial Officer

Thank you, Jim. As I review our second quarter 2020 financial results, please reference the financial tables found in today's press release. Revenue was $6.4 million for the second quarter of 2020 due to the recognition of non-cash deferred revenue related to the expiration of certain development options under our 2013 licensing arrangement with Celgene.

Research and development expenses were $14.8 million during the second quarter of 2020, compared to $14.5 million during the same period in 2019. The Q2 '20 increase was primarily related to CTP-692 Phase 2 development expenses. On a year-to-date basis, the increased spending on CTP-692 was offset by savings related to CTP-543 platform and other R&D expenses. As we move through 2020, we expect that R&D expenses will increase as we continue to develop CTP-692 for schizophrenia and prepare to advance CTP-543 into Phase 3 testing for alopecia areata in the fourth quarter of this year.

General and administrative expenses were $4.7 million during Q2 '20 compared to $5 million for the same period in 2019. The Q2 '20 decrease is attributable to lower professional fees and employee costs, and decreases in legal fees provided further savings on a year-to-date basis. Our net loss for Q2 '20 was $13 million or $0.41 per share compared to a net loss of $18.7 million or $0.78 per share during the same period in 2019.

Finally, we ended the second quarter of 2020 with $144.7 million in cash, cash equivalents and investments. Under our current operating plan, we continue to expect our cash to fund the company into the second half of 2021. Concert continues to advance its two wholly owned assets that each have blockbuster commercial potential and we are looking forward to becoming a late-stage drug development company.

This concludes our prepared remarks and we'd be happy to open the call to questions.

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Joon Lee with Truist Securities. Your line is open.

Joon Lee -- Truist Securities -- Analyst

Hi, thanks for taking my question and congrats on all the progress. So you recently got Breakthrough Therapy Designation for alopecia areata and some of the perspec's [Phonetic] that we've gotten from investors is that AA is mostly cosmetic. So what sort of dialog went into 543 getting breakthrough designations for alopecia areata? And I have a follow-up. Thank you.

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Hi, Joon. This is Roger. Thanks for english [Phonetic] for the question. So FDA has, for some time now, considered alopecia areata to be a serious disease. As a reminder, we had Fast-Track Designation, which is also reserved for more serious diseases for some time. And several years ago, FDA held a patient-focused drug development initiatives meeting, which was only the, I believe, 20th that they have ever held. And there was a record-breaking number of patients who attended it. And at that meeting, it was very clear, I think, to all attendees how serious the effects of the disease were on the safety of individuals who have alopecia areata. So the effects are really more than cosmetic in the sense that they change the life trajectory of many individuals who have the disease. And at this point, I think there is very little question that FDA, and of course the individuals who have alopecia areata, consider it to be a serious disease.

Joon Lee -- Truist Securities -- Analyst

And so the follow-up question is, you have disclosed starting the study in the fourth quarter. Would you need a second confirmatory study for the full approval? And if so, when do you anticipate on starting that second confirmatory study?

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

We assume that we will have second study. We need to get through the ICH number of patients who were exposed to drug, which will require a significant number of individuals, and it's logistically easier to have two studies rather than one. Our expectation is that the second study will start next year.

Joon Lee -- Truist Securities -- Analyst

Great. And then my final question is that, so you reported 26% and 42% achieving SALT score of 20 or less. Number one, what was the placebo response? And secondly, Is [Technical Issues] the SALT score scale more or less linear with the percent share loss? Thank you.

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

It is. But, Jim, could you answer that, please?

James V. Cassella -- Chief Development Officer

Sure, hi, Joon. So, yes -- so for the placebo response, we had under a 10% placebo response for the SALT 20 and the SALT score is an assessment by the trained raters of the amount of hair loss on the scalp. So, I mean, it's linear to the extent that the trained raters can detect these changes, but, yes, it pretty much goes hand in hand with the amount of hair loss on the scalp.

Joon Lee -- Truist Securities -- Analyst

Great, thank you so much.

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Thanks, Joon.

Operator

Thank you. And our next question comes from Maury Raycroft with Jefferies. Your line is open.

Kevin Strang -- Jefferies -- Analyst

Hi, this is Kevin here for Maury. Just wanted to ask -- so you mentioned that you had the 42% of patients on the 12 milligram twice-daily that achieved that SALT score of less than 20, which is the primary endpoint for your Phase 3. I just wanted to ask about responder analysis. Are you planning on looking more -- running a study exploring differences in baseline characteristics for these patients? What makes a responder versus a non-responder?

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Jim?

James V. Cassella -- Chief Development Officer

It's a great question. I think there are so many things that go into what makes a responder or non-responder and for the purposes of our registration program, we don't plan on doing those kinds of studies. However, our focuses right now is to really make sure that we understand the relationship between the drug and the recovery of hair regrowth. So we'll be focusing on that. We know that we have similar baseline characteristics of the individuals coming in and I think this will be -- these will be studies down the road as we get more understanding of these JAK inhibitors and alopecia areata. But for the registration program, we don't plan on doing studies like that at this moment.

Kevin Strang -- Jefferies -- Analyst

Great.

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Kevin, I'll also...

Kevin Strang -- Jefferies -- Analyst

Yeah.

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

This is Roger. I'll also add that we've seen very good responses from patients who have had extensive, even complete loss of hair relative to patients who have had a more limited loss of hair to-date, although, as Jim says that they have not been formal studies.

Kevin Strang -- Jefferies -- Analyst

Great, thank you. And then just a quick other question on the pending patent case. Is there anything you can tell us surrounding that with PTAB if there is any potential further delays due to pandemic, etc?

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Sure. Well, just as a reminder, the pending patent case, while it's something that we're tracking, it's a lot less important to us as a company since we have the issuance of a subsequent patent which is independent from that -- the 659 patent, which provides coverage of the exclusivity of the compound through 2037 for the drug, I should say. Responding specifically to your question, we know that the Supreme Court is assessing whether or not to hear the case and we believe that they may do so this fall. But regardless, we do not expect to hear a result from their analysis until the end of -- late in the session next year.

Kevin Strang -- Jefferies -- Analyst

That's helpful. Thank you.

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Thanks, Kevin.

Operator

Thank you. And our next question comes from Difei Yang with Mizuho. Your line is open.

Difei Yang -- Mizuho Securities -- Analyst

Hi, good morning and thanks for taking my question. Just a review here [Phonetic], with regards to CTP-543, what's the gating factor to start the second Phase 3?

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Thanks for the question. Jim, do you want to answer that?

James V. Cassella -- Chief Development Officer

Sure. Hi, Difei. So, these are large studies and we are focusing on getting the first study started as we mentioned. So the second Phase 3 study will also be a major effort in getting under way. Some of that is logistical so that we will be really focusing on getting our new sites up and running, which will likely be a different size than we're using for the first study. So in some ways it's a little bit of logistics and coordination to get the -- both these studies up and running. We anticipate that we could get that second trial started within six months of the first.

Difei Yang -- Mizuho Securities -- Analyst

Thank you, Jim, for that. And then continue on CTP-543, the -- on IP situation, so with the pharmaceutical composition patents, in the case, if you go beyond alopecia, do you expect these patents to protect 543 in additional indications?

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

So -- thanks, Difei. We -- the patent -- the 659 patent covers not only method-of-use in alopecia areata, but it also covers the doses and the regimens that we used in our successful Phase 2 study, and to the extent that we apply those to other uses for CTP-543, it will cover those. As a reminder, what we stated before is that we have additional patents that we have -- or applications, I should say, that we have filed or are in process of being filed. So we expect there to be substantial coverage of 543 for alopecia areata and for other uses.

Difei Yang -- Mizuho Securities -- Analyst

Thank you, Jim. Thank you, Roger, for that. That's all I have.

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

Okay, thanks.

Operator

Ladies and gentlemen, I'm not showing any further questions at this time. I would now like to turn the conference back to Justine Koenigsberg for any further remarks.

Justine Koenigsberg -- Senior Vice President, Corporate Communications and Investor Relations

Thank you. We'd like to thank everyone for joining us this morning. Please note, we will be participating virtually at the Wainwright and Cantor conferences next month and we hope to have the opportunity to meet with many of you at one of these events. And this concludes today's call. Thank you.

Operator

[Operator Closing Remarks]

Duration: 23 minutes

Call participants:

Justine Koenigsberg -- Senior Vice President, Corporate Communications and Investor Relations

Roger D. Tung -- Co-Founder, President and Chief Executive Officer

James V. Cassella -- Chief Development Officer

Marc Becker -- Chief Financial Officer

Joon Lee -- Truist Securities -- Analyst

Kevin Strang -- Jefferies -- Analyst

Difei Yang -- Mizuho Securities -- Analyst

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