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Edited Transcript of CCXI earnings conference call or presentation 6-May-19 9:00pm GMT

Q1 2019 ChemoCentryx Inc Earnings Call

Mountain View May 11, 2019 (Thomson StreetEvents) -- Edited Transcript of ChemoCentryx Inc earnings conference call or presentation Monday, May 6, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Susan M. Kanaya

ChemoCentryx, Inc. - Executive VP, Chief Financial & Administrative Officer and Secretary

* Thomas J. Schall

ChemoCentryx, Inc. - Founder, President, CEO & Chairman

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Conference Call Participants

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* Anupam Rama

JP Morgan Chase & Co, Research Division - VP and Analyst

* Dae Gon Ha

SVB Leerink LLC, Research Division - Associate

* Edward Andrew Tenthoff

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Edward Patrick White

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Harshita Polishetty

B. Riley FBR, Inc., Research Division - Analyst

* Michelle Lim Gilson

Canaccord Genuity Limited, Research Division - Analyst

* Steven James Seedhouse

Raymond James & Associates, Inc., Research Division - Research Analyst

* Bill Slattery

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Presentation

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Operator [1]

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Good afternoon, and welcome to the ChemoCentryx First Quarter 2019 Financial Results Conference Call. (Operator Instructions) As a reminder, this conference will be recorded.

I would now like to turn the call over to Bill Slattery of Burns McClellan. Mr. Slattery, please go ahead.

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Bill Slattery, [2]

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Thank you. Earlier this afternoon, the company issued a press release providing an overview of its financial results for the fourth quarter and full year ended March 31, 2019. This press release, along with a few slides that you may find helpful while you listen to this call, are available on the Investor Relations section of the company's website at www.chemocentryx.com.

Joining me on today's call is Dr. Thomas Schall, President and Chief Executive Officer of ChemoCentryx, who will review the company's recent business and clinical progress. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer of ChemoCentryx, will provide an overview of the company's financial highlights for the first quarter 2019 before turning the call back over to Tom for closing remarks.

During today's call, we will be making certain forward-looking statements, which those of you following the slides can see if you look at Slide 2. 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 the company's filings made with the Securities and Exchange Commission, including the company's annual report on Form 10-K filed on March 11, 2019. 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, May 6, 2019. ChemoCentryx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call.

At this time, it's my pleasure to turn the call over to Tom Schall. Tom?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [3]

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Thank you, Bill, and good afternoon to everyone listening. Thank you for joining us on our first quarter 2019 conference call.

We are on track with the objectives that we laid out for you during our full year 2018 conference call, as those of you following on our slides can see on Slide 3, as we continue the positive momentum we built up in 2018. We are working toward release of the top line data in Q4 this year with our lead molecule, avacopan, from our pivotal ADVOCATE Phase III trial. And we are also progressing concurrently with several other late-stage trials both with avacopan and another unique asset, CCX140. This is significant because each of these additional trials beyond ADVOCATE could act as significant value catalysts in their own rights.

To understand all of this, we will today cover what makes avacopan different, this unique pipeline in a drug that is the center of attention in 3 of our late-stage clinical trials. Then I will cover 4 additional topics in my remarks today: first, our evidence-driven aspirations for what avacopan will demonstrate in the ADVOCATE trial for patients suffering from ANCA-associated vasculitis as we address the total burden of disease in ANCA; second, our first foray outside of kidney disease with avacopan into the dermal area with our AURORA trial in the treatment of hidradenitis suppurativa or HS; third, our clinical trial with avacopan in the treatment of C3 glomerulopathy, or C3G, a rare kidney disease that often strikes the young; and fourth, progress in the LUMINA trials of our CCR2 inhibitor, CCX140, in focal segmental glomerulosclerosis, or FSGS. After these updates, I'll briefly summarize where we stand today with great confidence in the belief that we are on the threshold of a new era of new medicine supported by a robust financial position that was strengthened in the first quarter.

So I'll start today, if you look at Slide 4, with a reminder of the characteristics of avacopan that give it such potential to help patients and significantly improve the treatment landscape in the diseases affecting them. Avacopan is a unique patented molecule that is both clearly targeted and clearly differentiated, and this is by design, not serendipity. These differentiating qualities include: a, avacopan is a small molecule, which means it can be taken orally in a capsule formulation in the convenience of your home. Contrast that with an injection or an infusion that would be necessary with an antibody therapy.

B, we have years of data now on avacopan and know that it is specific to the C5a receptor, rendering that receptor pharmacologically inert even at trough levels of the drug in the body. We have demonstrated this through pharmacokinetic and pharmacodynamic studies showing that avacopan essentially ablates the ability of inflammatory cells, that is the C5a receptor-driven neutrophils, essentially stopping their activation and migration that causes the destruction in vasculitis and other diseases. These effects -- this effect happens at even the lowest levels of avacopan in the body.

C, avacopan smartly targets the C5a receptor, avoiding collateral damage to C5L2, which is a second C5a-binding pathway and one which is known to have protective effects. Leaving C5L2 alone is important. Published literature has shown that destruction of C5L2 has, for example, been linked to worsened acute lung injury, worsening of inflammation in contact dermatitis and indeed to an exacerbated signal and deficiencies in an ANCA vasculitis disease model in validated pharmacology models.

And finally, d, targeting the C5a receptor is preferable to targeting C5a itself and that the amount of C5a in the local environment is unknown, and there are many different ways to produce C5a through different enzymatic processes. For example, while it is understood that 1 antibody needs to be present to bind 2 C5a ligands, people don't know what the grand total is that is needed. By contrast, we in ChemoCentryx have a very good understanding on what is needed to pharmacologically inhibit the C5a receptor proven not only in vitro but in vivo in human beings. Thus, there are fundamental differences in the nature and challenges of inhibiting these 2 targets: C5a itself and the C5a receptor. And data suggests that the advantages go to inhibiting the C5a receptor as we do with avacopan.

Let me give you a quick and simple analogy to illustrate these differences. If you're trying to prevent a thief getting into your house with a key, you can put superglue in the lock of your door. Avacopan is that superglue, the lock cannot be unlocked. It doesn't matter if the thief has 1 key, 10 keys or even a key-making truck with thousands of keys on the doorstep. The lock cannot be unlocked. The antibody, however, has to pick up each and every one of these keys, so you don't know whether you need 1 antibody, 500 or 1 million. That's one reason we have always favored targeting the receptor with a small molecule.

The data we have generated to date provides us with deep confidence about our future success. That is why we and many patients, the clinical community and investors are looking forward with keen interest to the results of our pivotal ADVOCATE Phase III trial of avacopan in ANCA-associated vasculitis depicted on Slide 5.

The current standard of care in ANCA vasculitis, high doses of daily steroids coupled with a powerful immunosuppressant, is pragmatically limited to 6 months because of the significant mortality and morbidity it causes particularly from the high-dose daily steroid regimen. Our ADVOCATE trial therefore starts by looking at a so-called induction of active symptomatic remission with avacopan at 6 months or 26 weeks. We will then assess durable symptomatic remission at 52 weeks in a controlled blinded fashion. This will be done by measuring active vasculitis signs and symptoms using a clinical trial measurement instrument called the Birmingham Vasculitis Activity Score, or BVAS.

Just as important though, beyond the BVAS and the ADVOCATE trial, we are focusing also on the total burden of disease, most of which is not captured by the BVAS clinical trial instrument, which you can see graphically depicted on Slide 6. So not only are we looking to assess symptomatic remission by BVAS but also to measure the elimination of illnesses caused by the very therapies that are today used as part of the standard of care in ANCA vasculitis, also to assess the arresting of the accumulated organ damage in ANCA and to show improvements in the patient's quality of life using validated quality of life measurements.

So when will these data be ready? We are on track with our planned time line and expect top line data to be released in Q4 of this year. In short, I will remind you that we are focusing on demonstrating no less than effective, rapid and sustained remission in ANCA vasculitis, reducing the total burden of disease for ANCA vasculitis patients and thus improving their quality of life in all senses of that term. This would represent a huge contribution to the well-being of people with ANCA vasculitis as well as a large pharmaco-economic opportunity. After the release of ADVOCATE data expected in Q4 and with the positive readout, we look forward to making full regulatory submissions for marketing approval next year in the U.S. and in Europe.

Let me now share with you where we stand with our AURORA trial of avacopan in the dermatological disorder, hidradenitis suppurativa, HS, as depicted in Slide 7. We believe this is a significant opportunity for us, keeping in mind that one and only moderately effective therapy on the market today is believed to have annual sales of over $1 billion in the HS indication, and some are expecting the market to expand considerably as better therapies become available.

There is a clear need for therapy to manage this chronic, disabling autoimmune skin disease, which features painful disfiguring nodules, boils and abscesses to the point where patients can be reluctant to show themselves in public. You will recall that we dosed our first patient in AURORA in December. Last month, we convened a meeting of investigators in Chicago, which was very well attended. The HS community want an orally administered, long-lasting treatment option. Since HS is a neutrophil-driven disease activated by C5a and its receptor, C5a receptor, the hope is that avacopan will be -- will prove to be the solution.

Our AURORA trial aims to enroll 390 patients with moderate to severe HS. The primary end point is avacopan versus placebo assessed at 12 weeks using the hidradenitis suppurativa clinical response, or HiSCR, score, a validated end point accepted by the FDA from the Humira pioneer studies. Key secondary end points in the trial include skin pain, quality of life and other metrics of importance to the HS patient. After the initial 12-week treatment period, we will follow up -- we will follow all groups for an additional 24 weeks.

We have this year been accelerating activation of clinical sites in AURORA. In reporting on progress, we'll follow the precedent that we set with the ADVOCATE trial. Once we get the majority of sites up and running, we'll be better able to predict the run rate of patients per site and overall enrollment. Our aspirational goal remains unchanged. We would like to complete enrollment this year and to release top line data in this potentially registration-supporting trial during 2020.

Our third late-stage trial of avacopan is in the treatment of patients with C3G. Our expanded trial design includes 88 patients in 2 strata using a randomized control design, as you can see on Slide 8. We have reached approximately 50% enrollment. Enrollment has slowed somewhat recently, which is partially a reflection of the rarity of this disease. I'm glad this disease is rare because it is a terrible disease that strikes the young and a disease with no FDA-approved therapies, something that we intend to change. We will keep you informed of our progress here and still hope to complete our trial this year, releasing top line data next year.

The primary end point will be assessed using a renal histology index at 6 months of therapy, comparing the avacopan group to the group receiving the empirically derived standard of care. We will also collect other prespecified end points, including reduction in proteinuria, changes in markers of kidney inflammation that are shed in the urine and changes in glomerular filtration rates.

To summarize, as shown on Slide 9, we have 3 successive opportunities for avacopan, 2 in kidney disease and 1 in dermatological disease, and we are 2 quarters away from our first expected top line readout. In addition, as you will hear next, we have 2 further trials underway for a grand total of 5 data opportunities this year and next, all of which could catalyze significant value going forward.

I will conclude this review of what I call our march of progress through our late-stage trials with our second unique small molecule asset, the CCR2 inhibitor, CCX140, for the treatment of focal segmental glomerulosclerosis, or FSGS, shown on Slide 10. Some of you will recall that previously we demonstrated a statistically significant reduction in proteinuria, which is a key indicator for kidney disease in a Phase II trial of the same molecule, CCX140, in diabetic chronic kidney disease.

We have now surpassed 70% enrollment in our LUMINA-1 trial of CCX140 in patients with sub-nephrotic primary FSGS. At this rate of enrollment, we should be able to complete enrollment by the middle of this year and read out data next year. The LUMINA-2 trial consists of a second group of very rare so-called nephrotic patients, and it continues to enroll as well.

In summary, our drive to take ChemoCentryx to the next level is well underway, as you can see from Slide 11. We are another quarter closer to delivering a succession of top line data readouts from 5 value-driving clinical events, clinical trials, starting with the ADVOCATE Phase III data this year in Q4. Our already robust financial position has been further strengthened by the addition during the first quarter of $73.3 million in net proceeds from an issuance of common stock, expanding our shareholder base with top-tier institutions. We ended the quarter with $234 million.

I would like to remind you that CCXI possesses 100% of the rights for all of our drug candidates in the United States and that our preparations for commercialization are underway. Meanwhile, our drug discovery platform continues to generate novel opportunities that we hope to develop in the very near future.

I'll now turn the call over to Susan to give you further details of our enviable financial position. Susan?

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Susan M. Kanaya, ChemoCentryx, Inc. - Executive VP, Chief Financial & Administrative Officer and Secretary [4]

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Thank you, Tom. Our first quarter 2019 financial results were included in our press release today and are summarized on Slide 12. Revenue was $8.3 million for the first quarter compared to $9.5 million for the same period in 2018. Revenue recognized represents amortization of the upfront license fees, milestone payments and collaboration funding from Vifor pursuant to the avacopan and CCX140 agreements.

Research and development expenses were $15.4 million for the first quarter of 2019 compared to $14.7 million for the same period in 2018. The increase from 2018 to 2019 was primarily due to the initiation and patient enrollment of the avacopan Phase II clinical trial in patients with HS and the CCX140 Phase II clinical trials in patients with FSGS. These increases were partially offset by a decrease in the avacopan ADVOCATE Phase III pivotal trial expenses as the study was fully enrolled in the second half of 2018.

General and administrative expenses were $5.5 million for the first quarter of 2019 compared to $4.7 million for the same period in 2018. The increase from 2018 to 2019 was primarily due to higher employee-related expenses, including those associated with our commercialization planning efforts and higher professional fees. We recorded a net loss for the first quarter of $11.9 million compared to $9.4 million for the same period in 2018. Total shares outstanding at March 31, 2019, were approximately 57.7 million shares.

As Tom stated, during the first quarter, we raised $73.3 million in net proceeds from the issuance of common stock due to full utilization of our ATM facility and ended the first quarter with $234.1 million in reported cash, cash equivalents and investments.

Lastly, consistent with our earlier guidance, we continue to expect to utilize cash and investments in the range of $75 million to $85 million in 2019. Tom?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [5]

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Thank you, Susan. To summarize, as you can see from Slide 13, we have continued the remarkable momentum we generated in 2018, making considerable progress in activating sites and enrolling patients for the AURORA trial of avacopan in HS and reaching the halfway mark or beyond in our trials of CCX140 and FSGS and avacopan in C3G. We are on track for top line data readout of our ADVOCATE Phase III trial in Q4 of this year. This will be the first of 5 top line data readouts that should occur within the space of 18 months.

Our financial strength is still greater than when I reported to you on our first full year 2018 results just 2 months ago, and we have added some household names to our list of impressive investors. Our ability to attract capital is a tangible sign that there is considerable enthusiasm for the potential of our CCX pipeline of products and for our ability to execute inexorably on our plan and make real progress towards our ambitious and innovative goals. It seems this view is shared by an increasing number of people, whether they be investors or clinicians or patients.

With that, I will now turn the call back over to the operator and look forward to your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is going to come from Michelle Gilson from Canaccord.

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Michelle Lim Gilson, Canaccord Genuity Limited, Research Division - Analyst [2]

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I'm just a little curious about HS. Can you maybe talk a bit about what you view as the drivers of disease in HS and I guess if and how you view them as similar to ANCA? And then just kind of following up on that thought, if you do see the disease mechanisms as similar, would you expect -- do you expect in AURORA similar patterns and consistency of response that you observed previously in CLEAR along the lines of that rapid response pattern? And more broadly, would you expect that kind of a pattern of response for targeting the C5a and C5a receptor pathway just more generally?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [3]

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All excellent questions, Michelle. Thank you. It's been known for a number of years that there seems to be elevated complement -- terminal complement fragments in HS patients when we measure them in the blood. Those elevations seem to be quite similar to what's been measured in ANCA vasculitis patients. We know that the neutrophil component of HS patient blood is also activated, and they seem to have again similar sort of activation markers as we see in ANCA vasculitis. So there are many parallels in the overall profile of HS patients as well as ANCA vasculitis patients.

There's been data over the years, in fact, going back almost to the 1960s, about how complement is certainly present in skin biopsies of HS lesions, and those certainly seem to be associated with a high prevalence of infiltrating activated neutrophils. So whether it's around a disrupted hair follicle or hair follicles in the presence of disrupted sebaceous glands, et cetera, all of the data point to a C5a receptor-driven, neutrophil-driven disorder, which seems to be at the core of HS much as it is at the core of ANCA vasculitis. And it's merely a difference in the location of the dysregulated complement neutrophil-driven reaction in vasculitis. It's at the surface of the interior of the blood vessel and just under the blood vessel first with ongoing inflammation and then ultimately with vascular necrosis and destruction and with HS, obviously, at local lesions in the skin typically around hair follicles and sebaceous glands.

So for all of those global reasons, we feel that an anti-C5a receptor approach is really going to be very exciting. And yes, I would assume at the level of at least the pharmacodynamics, for example, where -- well, that will have a rapid response. So for example, we showed in our ANCA vasculitis Phase II studies that within a couple of days, we could detect the neutrophil levels going right down to the middle range of normal with avacopan therapy. That was good news since, again, this is a neutrophil-driven disease as is HS. That is the current science. And so we feel that we'll have a good chance of seeing clinical efficacy in short order.

That may be an advantage too that goes to a small molecule, which has to suffuse and perfuse the local environment where the damage is taking place, and that means small molecules need to get inside and maybe even underneath these neutrophil nets, if you will, and small molecules will have an advantage in getting to the site of actual ongoing destruction and one hopes preventing continued destruction and replenishment of the lesion.

So that leads to the third part of your question, I think we're getting to the third part, would an antibody therapeutic necessarily give the same result and kinetics as a small molecule. And the answer is fundamentally, antibodies being very large molecules, perhaps 300- to 500-fold bigger than a small molecule such as ours, they're going to have other challenges beyond the fact that the antibodies in use now are, in fact, on a mouse backbone so they may be immunogenic over time and therefore lose any efficacy that they might have. But they also might take longer to work merely by getting to the site of action, again, trying to get through these localized neutrophils and neutrophil nets, which will be difficult to do and just penetrating the local environment in the tissue. So remains to be seen whether the kinetics of an antibody approach versus our small molecule approach will be the same.

And of course, that's to say nothing of the complicated biology that is incumbent upon an antibody approach, which also takes out the second C5a pathway with the second receptor called C5L2 where there's lots of data that C5L2 binding to C5a and C5a's breakdown products actually throws a beneficial or immunoprotective signal. So how all of those complications have to work out in the clinic in terms of time to response, action at the local lesion or even the ability to drive effective mass action and cover the target, I think those will be challenges with antibodies. That's why we chose a small molecule approach. So we'll see how the data comes out, and then we'll decide obviously if we need to understand the relative mechanisms of action more.

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Michelle Lim Gilson, Canaccord Genuity Limited, Research Division - Analyst [4]

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Okay. And then just a follow-up for me if I may. In a disease like HS where you have flares, do you see a treatment like avacopan as a chronic treatment to keep patients from flaring? And if that's your view, where would you see antibiotics fitting in? And could you just talk a little bit about any potential antibiotic use in the AURORA study as well? And is there (inaudible) [type indications]?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [5]

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Sure. Right, right. So first, to the point of utility, I think that effective therapy in HS ideally will be chronic therapy. That's true in ANCA vasculitis as well. It's true in C3 glomerulopathy. You want to prevent the ongoing accumulated destruction and damage. In HS, for example, we have a lot of scarring, and scarring is dysfunction and is typically thought as being irreversible. So even grumbling disease can contribute to some of these effects over time. One would like to arrest them, and one would like to keep people out of any kind of flares. So I think chronic therapy will be best. But I acknowledge that we'll have to work out the details on an indication-by-indication basis.

Antibiotic use is quite common, but we know and everyone knows that it does not provide a long-term effect, and it may provide temporary relief from flare. So while antibiotics may clear the infection, you still need to get to the core problem of the destruction, which is the complement system activation. Now naturally, infection may be contributing that. But until the complement system is, in a sense, brought back in homeostasis, you're going to have an ongoing problem.

So I think that the antibiotic use is an interesting question. But most of the literature is suggesting that the antibody -- antibiotic-driven responses are probably associated with lower levels of infection. So what we are doing in our study is to make sure that we have -- while accepting antibiotic use is a reality in this situation, we are very carefully stratifying how antibiotics are used and balanced in our treatment arms so that the use of concomitant antibiotics is: a, strictly protocolized; and b, stratified so it shouldn't impact the overall results given the fairly large n of our trial.

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Operator [6]

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And our next question comes for Ted Tenthoff from Piper Jaffray.

And our next question is going to come from Dae Gon Ha from SVB Leerink.

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Dae Gon Ha, SVB Leerink LLC, Research Division - Associate [7]

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I apologize for the background noise. Just 2 quick questions from me, one on ADVOCATE trial and one on AURORA. So Tom, on ADVOCATE, can you remind us what the bar would be for approval across U.S. and EU? And in the press release, you mentioned that now you included Japan in the patient population. So where does Japan fall on that regulatory bar? With regards to AURORA, you're dosing 10-milligram and 30-milligram BID, so can you remind us what you saw in your earlier experience to give you confidence that these are the sufficient doses? And just going with an earlier presentation from the monoclonal antibody study, it seemed like you don't necessarily need chronic. At a certain point, some patients do reach that curative state. So what are your thoughts there in terms of reaching that milestone with avacopan?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [8]

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Sure. Thank you, Dae Gon. So the regulatory milestones in ANCA vasculitis really have only been addressed in essentially 1 previous Phase III study that is analogous in any way to the ADVOCATE trial. And that was the so-called RAVE study of rituximab plus chronic doses of steroids being offered as an alternative to cyclophosphamide, which also were given with chronic doses of steroids. RAVE was a 197-patient trial. The primary end point was at 26 weeks. And the primary end point was so-called symptomatic remission indicated by a BVAS score going to 0 plus importantly patients being off of the chronic daily steroids for at least 4 weeks.

And so that's really the only regulatory precedent for us. And rituximab was approved as an alternative to cyclophosphamide both as a backdrop being dosed with chronic steroids. So the numbers were rituximab was 64% effective at 6 months and getting them to symptomatic remission as defined and the background therapy, which was standard of care at the time, was 53% effective. So rituximab was numerically superior but statistically noninferior through the confidence interval that was defined in that trial.

So regulators' appeal to that trial for the example, we're using essentially a very similar format. We're looking at week 26, and then we're also looking at durable remission at week 52. So essentially, if we achieve the same kind of end point results as the RAVE trial achieved for rituximab, we're fairly confident of regulatory approval certainly in Europe. If we achieve both week 26 and week 52, we're quite confident in the United States. And I think Japan will follow pretty much the precedent of Europe and the U.S.

I will also stress though that the field has come aways since the rituximab RAVE result. And I've made a point today of talking about the total burden of disease because interestingly, in RAVE trial, the only statistical end point that seemed to really be beneficial was that remission end point at week 26. Safety at week 26 really wasn't any different between the 2 groups, and that puts squarely the spotlight on glucocorticoids during that 6-month time frame as being the biggest safety problem.

So people are going to be very keen to know if the glucocorticoid-related toxicities can be significantly diminished in the avacopan group that doesn't get the chronic steroids. They will also want to know a lot about the improvement in the quality of life metrics, which we showed in the CLEAR trial for the first time ever to be significantly improved with avacopan in the absence of chronic steroids. And of course, the ongoing arrest of accumulated vascular damage and other organ damage will be something that we measure as well. So I've said it before and I'll say it again, I think that the package of data across the total burden of disease will be of some interest to regulators around the world, and then that's how we're going to present it in the top line data as well.

If I go back to your other question, so we were talking about the antibody data in HS to date. Suffice it to say, that's a very small data set that's at least out there so far. It's an open-label study. I need to see more data about the so-called -- I know you used the term curative effect. I would not use that at this point. Let's just say the durability of effect of any anti-C5a or even C5a receptor therapy. I'm a tiny bit skeptical, but I think the natural history of HS is a little bit more mysterious than other even rare diseases like ANCA. So perhaps once complement gets back to homeostasis, until there's a next big challenge that will then reactivate the complement system, one could establish a durable homeostasis, and I think that remains to be seen. But suffice it to say, I think the clinical evidence so far is not sufficient to make that claim, and we'll all be looking keenly at longer-term data.

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Dae Gon Ha, SVB Leerink LLC, Research Division - Associate [9]

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Sure. Just one final one. I just wanted to clarify the cadence of events for next year after the ADVOCATE. I know you've got a number of trials enrolling right now. So how should we be thinking about the readout cadence in terms of HS, C3G and your LUMINA studies?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [10]

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It's great, great questions. So clearly, we have greatest optics over the nearest-term event, which is top line data from ADVOCATE this year in Q4. It wouldn't surprise me if in the first half of 2020, we have some LUMINA data possibly from the multi-arm study, the LUMINA-1 study. Middle of the year, approximately first half, middle, maybe we're looking at the nephrotic population with the LUMINA-2 study. And somewhere in there, we'll get C3G in the middle of the year potentially perhaps. Well, we'll know a little bit more about that as we go through the next quarter or 2 and get enrollment rounded out. And HS, I would say and generally mid to second half of the year. These are all subject to change and fine-tuning, but that would be a general cadence.

By the way, Dae Gon, I forgot about your other question. You asked about 10 and 30. In the ANCA vasculitis Phase II trials, we did have a trial where we used 10 and 30. Again, that was a -- that trial was not necessarily powered for efficacy. It was a safety study where 2 doses and a placebo group were -- basically, they're all with full-dose standard of care, including the full-dose chronic steroid. But to the extent that we had some efficacy readouts in that trial, it was pretty clear that 30 was the effective dose consistent with the CLEAR study where the trial was designed for efficacy, consistent with the pharmacokinetics where essentially we get 95% receptor coverage after several weeks even at trough levels of the drug in patient populations, again, with similar features between HS and ANCA vasculitis patients. 10 had some efficacy, but it certainly appeared to be less. And so using those 2 doses with which we have clinical experience, that's why we are moving forward in HS with that same sort of dose regimen.

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Operator [11]

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And our next question comes from Steve Seedhouse from Raymond James.

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Steven James Seedhouse, Raymond James & Associates, Inc., Research Division - Research Analyst [12]

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A few quick questions on avacopan's pharmacology. Tom, you mentioned 95% receptor coverage. Just want to clarify, is that a 30-mg BID? And what, I guess, inhibition of the C5aR pathway do you see between 10 mg and 30 mg? And then just another follow-up related to that. Do you think that the C5a levels, if they are different in AAV and HS patients, would change the relative inhibition you're getting at C5aR in those 2 diseases?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [13]

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So thank you, Steve, those are really excellent questions. Number one, I don't think there's a great deal of data suggesting that the C5a receptor levels are going to be that different, but even if they are -- in HS versus ANCA. But even if they are -- and again, the key issue is what happens in an environment where the disease is happening, and that's impossible to know with current technology. But even if they're 10-fold, 100-fold, I would say even 1,000-fold different, I do not have that much concern with binding up the receptor. I think that we're going to make that receptor pharmacologically inert for all intents and purposes.

We did an interesting experiment to try to model this where we delivered -- we just mainlined into the circulation pure C5a in a variety of species right up to primates, essentially activating every neutrophil in the blood, every single one of them by saturating every C5a receptor on every neutrophil. And when you do that and you measure the neutrophils in the blood after this infusion or injection of pure C5a, it's something that would never really happen in nature presumably. But when you do that, you measure neutrophils, you find out that after about 10 minutes, all the neutrophils are gone from the blood. And the reason they're gone is that C5a just blasts each and every neutrophil, and they suddenly upregulate their adhesion molecules as they go into a crisis pro-inflammatory response. And they stick like crazy to the surface of the blood vessels, in the lung, liver, spleen especially. And so suddenly, they come out of blood. So it looks like suddenly, you have a transient neutropenia, like someone vacuum-cleaned all of the neutrophils in your blood.

So why is that important? Because it's important, that's like literally every neutrophil, every C5a receptor getting stimulated with C5a. If you can dose an animal right up to primates, as I said, and I'm a primate and most of my friends are. So if you can dose an animal and inhibit that transient neutrophil depletion, that shows you, to a great degree of confidence, how much inhibitor you need onboard to get 100% inhibition of that depletion.

And so we've done that experiment in multiple species. And essentially, you need about 200 nanomolar of C5a receptor inhibitor, avacopan in this case, to stop that sort of complete depletion of neutrophils. It turns out that at 30 mg twice a day, the trough levels of C5a receptor inhibitor avacopan in human, even in short-term experiments if you count the active metabolites, is about 200 nanomolar. Longer-term exposure in patients, it actually accumulates a few fold. So we handily have the receptor covered even at the lowest levels of the drug in the body. And that corresponds to all of the sort of PK/PD assessments we've done in humans, both in healthy volunteers and in diseased subjects.

So again, I think to a great degree of confidence, we know that the receptor is covered. And the thing is, Steve, we're taking the very most conservative approach. We don't know if you have to be at that level 24 hours a day and above. We're certainly at that level at the lowest level of drug. If you say the biology is really happening in bursts and you have a peak concentration of the drug counts or area under the curve counts more than trough levels, then we're even in a better situation. So it's all those reasons I say that we feel, based on our experiments and our clinical data, we've really just taken this receptor out of commission. And then all of the other stuff we've done in the test tube again suggests that it doesn't matter how much extra C5a you throw at it, you're just not going to get the receptor activated to perform its biology. So that's why I think we're seeing clinical benefit in Phase II in ANCA. That's why I'm optimistic for HS as we go forward in AURORA and in Phase III in ANCA in the ADVOCATE trial and indeed other C5a neutrophil-driven diseases.

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Steven James Seedhouse, Raymond James & Associates, Inc., Research Division - Research Analyst [14]

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Okay. And again, on the HS trial, how important is the secondary analysis where you are treating through, I think, 36 weeks and following patients through even longer? You've spoken about this potentially being a registrational trial. Is that potential for registration assuming completion of that full, I think, 44-week follow-up at a minimum?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [15]

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Yes, it's a great question, Steve. And the fact of the matter is, again, we only have so much regulatory precedent, if you will, for lack of a better word. And that really is the adalimumab trial, the Humira pioneer trials, where that was the first drug licensed for HS. The primary end point there is clear, it's 12 weeks. We and others wish to know obviously what happens beyond 12 weeks. But without going into too much detail about discussions with agencies, which are naturally fairly sensitive, suffice it to say that the -- what we're all looking to do is to see, using as best we can an apples-to-apples comparison, whether or not the same regulatory standards can apply and whether those efficacy end points are meaningful. And so far, that's all we have to work with.

So yes, I think the 12-week primary is the most important thing we're focused on. But naturally, we need to look beyond that, and that's why we designed the trial the way we did. And we'll all obviously be interested in what that means, both through the 36 weeks of active dosing, and there is a follow-on period as well where drug is taken away. And that will help determine what we do in terms of the registration discussions and the label with the FDA, frankly.

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Steven James Seedhouse, Raymond James & Associates, Inc., Research Division - Research Analyst [16]

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Okay. And my last question, it's actually a multipart question, is for Susan. On the -- just your operating expenses and the corresponding revenue related to that collaboration agreement for avacopan, that decreased this quarter. And I think you mentioned that was because of the ADVOCATE trial enrollment completing. So the first question, I guess, is that just likely a onetime anomaly in terms of it decreasing? And can you just clarify, per the terms of the collaboration agreement, do the costs and revenue that's recognized apply sort of equally across different indications for avacopan? And where do you expect the avacopan-related spending to go into the back half of this year and beyond?

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Susan M. Kanaya, ChemoCentryx, Inc. - Executive VP, Chief Financial & Administrative Officer and Secretary [17]

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Okay, great. Well, multiple questions for sure. So the -- how does it work? So with respect to the revenue, it's just strictly proportionate to the total transaction cost -- or the transaction price rather tied to the avacopan and CCX140 agreement. So when you roll in all of the upfront fees, milestone payments and funding and then you -- and you look at your proportionate costs as a percentage of completion to complete all the programs and all the activities under the alliance, you then take a proportionate recognition of your expense. So as ADVOCATE went down proportionately, right, because we're fully enrolled but then HS is kind of offsetting that to a large degree, and that's why you see this kind of onetime effect. But it's all amortization, Steve, so -- because it's all pretty much cash upfront that we've received, right? How do I -- well, I'm sorry, what was the other part of your question with respect to the...

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Steven James Seedhouse, Raymond James & Associates, Inc., Research Division - Research Analyst [18]

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Yes, I was just curious if that was, in fact, a onetime sort of thing and just to gauge sort of how the avacopan spending is going or how the progress is going, if that's going to ramp up into the back half of this year and beyond based on HS.

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Susan M. Kanaya, ChemoCentryx, Inc. - Executive VP, Chief Financial & Administrative Officer and Secretary [19]

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Oh, sure, yes. That one, sorry -- I'm sorry, I missed that part of your question. I would say yes because it's not only HS, but it's a lot of the other off-clinical support activities that contribute to the total spend.

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Operator [20]

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Our next question comes from Ted Tenthoff from Piper Jaffray.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [21]

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So some of mine were asked. But I wanted to kind of pick up on the sort of timing of things. Appreciating too that we're sort of breaking new ground here. But let's assume all 3 avacopan studies are positive, which we're hoping they will be, do you file first for ava for ANCA-associated vasculitis? And then would it actually be supplemental filings, do you think, for C3G and HS? Or what's kind of your current thinking about that? And then I have a quick follow-up.

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [22]

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Yes. Great. Thank you, Ted. It's a great -- it's an interesting question. And you're right, we are breaking new ground particularly since, for example, there's no FDA-approved therapy for C3G, by way of example. But I think our current thinking is 3 separate NDAs all treated as sort of separate modalities. And that kind of makes sense especially with a third being a dermal indication, so that might be a reasonable way to think about it.

Now naturally, the safety database will be in common. The fact that the asset is quite mature and has all -- virtually all of its off-clinical stuff done, and the CMC processes are all common, that's going to be a very big advantage in all of those filings. But I would think that there'll be 3 separate NDAs in the U.S., and I would -- since the ADVOCATE trial is the one that's going to read out first, assuming positive data, that would be the first filing. And that would be obviously the filing with which we would -- that has the most meat to it in terms of its history in any case with all of the other ADVOCATE -- I'm sorry, ANCA vasculitis clinical work we've done over these past few years.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [23]

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Great, and that makes a lot of sense. And then it's probably a little early to be discussing this, but how should we be thinking about pricing because we're kind of spanning the orphan realm here where we've got ultra-orphan conditions and then probably with HS, one of the larger orphan conditions? So do you kind of split the middle? Do you think those could have an impact? And obviously, data would be important in all of those but just a little bit in terms of some early thinking there.

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [24]

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Yes. That is a really good question, and it's one which I wish I could give you an envelope with the price in it to be exact. But here's what we've been saying. You're absolutely right. I mean it's difficult to really work out what -- if you're pricing ultra-orphan, orphan, super-orphan, what have you. But we've been saying this, and we'll provide a lot more guidance once we have data, of course, but all we need to do to capture in the U.S., and we've just focused on the U.S. for our modeling where we own 100% of all the rights and we're building our commercial infrastructure, you've got the indications for ANCA -- for avacopan in ANCA vasculitis in C3G and in HS. And you're right, they all have their own profiles.

But in aggregate, there's probably something on the order of, say, 200,000 to 250,000 patients in those 3 conditions available to us, probably a little bit more and probably conservative. And if you were to take just a small percentage, single-digit or low, low double-digit percentage as market penetration or accessible population over time, all we're thinking about is the sort of normal orphan pricing corridor. And again, if I just put out a model of what that corridor looks like, the upper limit, 200,000 per year, lower limit 50,000 per year, well then you can just do some straight-line arithmetic, and you get to the several hundreds of millions to the billions just in the U.S. and potential to drive revenue from very modest market penetrations across that aggregate population just for avacopan over the first several years.

So that's kind of how we're thinking about it. We know that we're not in the business at this point of thinking about sort of super-orphan pricing. We think there'll be challenges there. We just need a normal corridor of orphan pricing, and we'll obviously be showing the world more how we think about that based on our value models as we go forward. And of course, what I just mentioned doesn't even include the second asset, CCX140, where you could add another 100,000 to 125,000 patients potentially in the U.S. to access. And again, just hitting single digits or low double digits of penetration considerably enhances the revenue model. So that's how we're thinking about it, Ted.

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Operator [25]

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Our next question is from Ed White from H.C. Wainwright.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [26]

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So just something you just mentioned, you just mentioned about building a commercial infrastructure. And maybe can you just give us an update of where you are right now?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [27]

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They're raring to go, Ed. We've got the bowling shirts, the whole bit. No, to be serious, sorry, so we've hired a very good early commercialization team. We're starting to build our models for what the field force looks like. Field force will obviously include some MSLs as well as traditional reps. The important points, at least for early -- for our early discussions internally, Ed, is our commercial chiefs are here, our med affairs chiefs are here. And the fact is -- let's talk about ANCA vasculitis just for a moment. Most of those folks will be seen in terms of where the prescriptions are going to be driven by nephrologists or rheumatologists. As you know, that's a fairly manageable population, full stop. But in fact, the ones that see the ANCA patients are even the smaller node in that larger network. And that network even, as I said, the full picture is fairly manageable.

So we're putting together our assessments of field force, total field force, and we are starting to project when we need to hire specifically those professionals to market the drug. We've already got, again, the crew in place that's doing that work and laying down the infrastructure, and all of the other business processes of which you'll be familiar that lead up to launch and working backwards from that. So we have about 200 or 300 distinct business processes that go into that commercial preparation. And I'm happy to say that I think we have a good handle on those business processes, and we've already hired the staff to start that and then the staff that's going to hire the additional staff to actually get the drug out there to the practitioners.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [28]

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Okay. And most of my other questions I have were answered, but I just have one thing on Slide #11 where you have avacopan AURORA study near or complete -- near-complete enrollment in 2019. Is that a slight change from prior talks where you had mentioned that enrollment is expected to be completed in 2019? Or are you giving yourself a little bit more leeway to maybe it occurs in 2020? Am I right in my read to that?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [29]

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Yes, that's a correct read, Ed. We've soften the language a wee bit because it's, as I said, a new space for us. But our aspiration, as I said, remains to complete or get the bulk of enrollment this year. And fundamentally, it doesn't change our prediction when data is going to read out. Top line data in 2020 is again our aspiration, so we should be able to hit that. And I think to the extent that we said second half of 2020 before, we have not changed that, so just trying to crystallize a little bit more as we mature the program.

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Operator [30]

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And our next question comes from Anupam Rama from JPMorgan.

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Anupam Rama, JP Morgan Chase & Co, Research Division - VP and Analyst [31]

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Hey, guys, congrats on all the progress. Maybe I'd just ask a quick question on enrollment in the C3G trial. It feels like the last couple of quarters, you've been hovering around this 50% of total enrollment. Is there something going on there that -- on the enrollment dynamics relative to your expectations, is there anything you guys are doing to kind of speed up enrollment there?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [32]

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Yes. That's a great question. So Anupam, with the C3G trial, we started fairly slow, and then we had several bursts. And so we were enrolling in record time kind of almost ahead of our expectations. And then you're quite right, it slowed down again. This could either be the fact that it's a rare disease, and we're kind of getting the patients as they're sort of coming into the clinic, so there's these stochastic bursts, if you will. It could also be that there is increasing competition in the C3G space. And for a while, I think we were the -- certainly one -- the best in the race at that moment in terms of trial design and top of mind. And so now there are more players, maybe in part because people were encouraged by our then enrollment rate. And it could also be candidly, the FDA has been saying a lot lately about proteinuria and whether or not the reduction in proteinuria could be used itself as a registration end point in certain disorders. I think people are more and more saying, "Well, let's just do proteinuria end points." And by the way, our trial has proteinuria as one of the prespecified end points. But we also require histology, so that makes our trial a lot more, we believe, definitive, and we will have a definitive answer.

But all of those features may be affecting the enrollment. So what are we doing? What are we doing to make sure that we're not going to fall behind and that we can finish up this trial? We are actually out in the field now. We're certainly mobilizing the sites with direct peer-to-peer contact. We've arranged meetings between groups, the good enrollers and those that are still hovering, if you will. And we're certainly even adding more sites. So I'm fairly optimistic that we're going to see a different picture fairly soon, and so we'll keep you posted on that. We still believe we'll have a readout on C3G this coming year 2020. So overall, the picture for us looks, we hope, about the same.

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Operator [33]

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And our next question comes from Harshita Polishetty from B. Riley FBR.

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Harshita Polishetty, B. Riley FBR, Inc., Research Division - Analyst [34]

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Hey, Tom, just a quick one for me. It's been a while since we discussed CCX872 in pancreatic cancer. Just wanted to get an update on how the company's thinking about this program, and what are the next steps and/or updates we should expect for this candidate?

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [35]

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Thank you, a good question. So we're -- we have to focus on certain things. And clearly, in the context of these calls, we focus on the lead programs that are farthest advanced in the clinic where we're making the most investment of our time and other resources. But you're right, Harshita. We had a very encouraging result with 872 as part of the strategy of inhibiting myeloid-derived suppressor cells in the context of a tumor microenvironment. We showed an overall survival increase in advanced pancreatic cancer at 18 months of about 10% to 11% over traditional chemotherapy alone, quite encouraging.

So our aspiration there is to take forward some of our immuno-oncology assets, including 872, in the context of partnership. So in background, those discussions have been -- are ongoing. They'll continue to be ongoing. And when we are able to consummate an appropriate partnership, we'll definitely bring that to light, and we'll bring everyone fully into the picture of the plans for 872.

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Operator [36]

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And I'm showing no further questions. I would now like to turn the call over to Thomas Schall for closing remarks.

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Thomas J. Schall, ChemoCentryx, Inc. - Founder, President, CEO & Chairman [37]

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Well, I would like to thank everyone for participating in our call today and the stimulating questions and discussions. I look forward to updating all of you as we make further progress, and I wish you all a great evening and afternoon. You may now disconnect. Thank you.

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Operator [38]

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Thank you. And ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.