U.S. markets closed
  • S&P 500

    3,841.94
    +73.47 (+1.95%)
     
  • Dow 30

    31,496.30
    +572.16 (+1.85%)
     
  • Nasdaq

    12,920.15
    +196.68 (+1.55%)
     
  • Russell 2000

    2,192.21
    +45.29 (+2.11%)
     
  • Crude Oil

    66.28
    +2.45 (+3.84%)
     
  • Gold

    1,698.20
    -2.50 (-0.15%)
     
  • Silver

    25.30
    -0.17 (-0.65%)
     
  • EUR/USD

    1.1916
    -0.0063 (-0.52%)
     
  • 10-Yr Bond

    1.5540
    +0.0040 (+0.26%)
     
  • GBP/USD

    1.3834
    -0.0060 (-0.43%)
     
  • USD/JPY

    108.3600
    +0.3840 (+0.36%)
     
  • BTC-USD

    49,612.46
    +964.86 (+1.98%)
     
  • CMC Crypto 200

    982.93
    +39.75 (+4.21%)
     
  • FTSE 100

    6,630.52
    -20.36 (-0.31%)
     
  • Nikkei 225

    28,864.32
    -65.78 (-0.23%)
     

Edited Transcript of CNCE earnings conference call or presentation 27-Feb-20 1:30pm GMT

·31 min read
  • Oops!
    Something went wrong.
    Please try again later.

Q4 2019 Concert Pharmaceuticals Inc Earnings Call Lexington Mar 12, 2020 (Thomson StreetEvents) -- Edited Transcript of Concert Pharmaceuticals Inc earnings conference call or presentation Thursday, February 27, 2020 at 1:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * James V. Cassella Concert Pharmaceuticals, Inc. - Chief Development Officer * Justine E. Koenigsberg Concert Pharmaceuticals, Inc. - SVP of Corporate Communications and IR * Marc A. Becker Concert Pharmaceuticals, Inc. - CFO, Principal Financial Officer & Principal Accounting Officer * Roger D. Tung Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director ================================================================================ Conference Call Participants ================================================================================ * Adam Anderson Walsh Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst * Difei Yang Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research * Esther Lannie Hong Janney Montgomery Scott LLC, Research Division - Director of Biotechnology * John Walden;JMP Securities;Analyst * Joon So Lee SunTrust Robinson Humphrey, Inc., Research Division - VP * Robin Thai Garner Kalley LifeSci Capital, LLC, Research Division - Senior Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen, and welcome to the call to discuss Concert Pharmaceuticals' Fourth Quarter 2019 Financial Results. (Operator Instructions) I would now like to turn the conference over to your host Ms. Justine Koenigsberg, Senior Vice President of Corporate Communications and Investor Relations. Please go ahead. -------------------------------------------------------------------------------- Justine E. Koenigsberg, Concert Pharmaceuticals, Inc. - SVP of Corporate Communications and IR [2] -------------------------------------------------------------------------------- Thank you, Stephanie. Good morning and welcome to Concert Pharmaceuticals' fourth quarter 2019 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 risk factors 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, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [3] -------------------------------------------------------------------------------- Thank you, Justine. Good morning. As we enter 2020 Concert achieved key milestones relating to each of our proprietary pipeline compounds that set the stage for this to be an important year for us. We have 2 distinct wholly owned product candidates that we are advancing towards late-stage clinical testing. First CTP-543 for alopecia areata, we are preparing to move into Phase III testing later this year. And second is CTP-692 for schizophrenia, which is now being studied in the initial efficacy trial with potential to begin pivotal testing in 2021. First, let me highlight our most advanced candidate CTP-543. We're conducting a dynamic clinical program for the treatment of moderate to severe alopecia areata that's poised to move ahead this year into pivotal evaluation. This past fall we reported results from our Phase II dose ranging trial, the results were striking providing what we achieved the most robust data generated to-date in any controlled trial for the treatment of alopecia areata. Based on these findings and those reported state by other companies, CTP-543 has the potential to be a best-in-class treatment for the slight faltering autoimmune disease. Turning to the underlying intellectual property for CTP-543. Earlier this year we are branch in new patents relating to CTP-543 that provides protection for pharmaceutical compositions consisting of specific dose strengths and methods of treating alopecia areata with CTP-543, the issuance of this patent 2 significant because it covers the clinical doses that produce the robust results observed in our Phase II trial alopecia areata and the dose that we expect to carry forward into our Phase III program. The patent is Orange Book eligible on approval of CTP-543. It's expected to provide protection for 5.3 into 2037. So we're continuing to pursue multiple avenues to secure additional patent protection for 5.3 and the issuance of this new patent is an important development within our broader IP strategy. So a separate matter recently at the [Federal Circuit Court of Appeals] decision relating to our 149 patent. As a result the IPR proceeding, which is separate and independent from the new patent issue earlier this year will be re-heard by a new panel of judges each. We remain highly committed to the continued advancement of CTP-543as a potential treatment for alopecia areata and our development timelines for CTP-543 remain on track. Next. Let me turn to the second proprietary antigen in our pipeline CTP-692 which were initially developing as in adjunctive treatment for schizophrenia. One of the most debilitating, devastating and costly metal disorders. Schizophrenia is highly prevalent and way to effect nearly 1% of the worldwide population, we believe that CTP 692 represents a new mechanistic approach in the treatment of schizophrenia and one that may enable effective treatment of a broader range disease symptoms and due existing antipsychotic medications. We design CTP-692 to leverage and expand on our CapEx studies indicating the D-Syrian convective patients with schizophrenia by helping to remediate NMDA hyper function which is believed widely to be an important causative factor in schizophrenia. Our pre-clinical data demonstrate that CTP-692 is differentiated from D-Syrian by its dramatically improved renal stage profile. Furthermore, no evidence renal impairment was observed in our Phase 1 trials. Patients with schizophrenia are reported to have low levels of D-Serine in plasma and cerebral spinal fluid, therefore bolstering induction of levels of D-Serine with CTP-692 on top of their standard antipsychotic medication could offer patients and new treatment option that's fundamentally different from current antipsychotic medicines. As a reminder, existing medicines focus on controlling dopaminergic transmission and are typically fully effective in treating so called negative symptoms and cognitive permit which are major reasons for patient outcomes. This program advanced rapidly from preclinical evaluation through Phase 1 and in December, we initiated our Phase II trial evaluating CTP-692 as an adjunctive treatment in patients with schizophrenia. The enthusiasm among the treatment community for our clinical trial has been very strong and we're on track to report top line results by year-end. In summary, these positive developments in the ongoing execution of our business as well as in our overall strategy of designing, developing, protection and eventually selling novel compounds with groundbreaking potential in important diseases have led to the exciting point we've reached today with potential Phase III trials for 2 proprietary clinical programs in the near-term horizon. Let me conclude my remarks by emphasizing our optimism for 2020 which we see as a year of significant milestones for our company. As we make progress foresees inflection points, I look forward to keeping you updated. I'd like to pause here and ask Jim to discuss our clinical progress, and then Marc will review our 2019 financial results before we open the call to questions. -------------------------------------------------------------------------------- James V. Cassella, Concert Pharmaceuticals, Inc. - Chief Development Officer [4] -------------------------------------------------------------------------------- Thanks, Roger. As Roger just described, we are well positioned to execute on the clinical development of both of our lead drug candidate CTP-543 for alopecia areata and CTP-692 for schizophrenia. We are highly focused on the need for an effective treatment for alopecia areata with a favorable safety profile and we are continuing to advance CTP-543 to meet this product profile and bring it to patients as quickly as possible. We are on track to meet with the FDA this quarter for in the Phase II meeting, pending the outcome of this meeting, we expect to start Phase III program in the second half of 2020. Putting this program into perspective the CTP-543 results are significant for 3 reasons. First, we believe the data we generated in our dose ranging Phase II trial setting a new benchmark for clinical efficacy in the treatment of alopecia areata. Among the JAK inhibitor is being developed for the oral treatment for alopecia areata CTP-543 now here is to have provided the most robust efficacy results reported to date in any controlled trial. Second, we have identified 2 doses of CTP-543 with promising efficacy and tolerability profiles, both of which we believe are suitable for assessment in future trials. We also see some advantages of the 12 milligrams twice-daily dose group compared to the 8 milligram twice-daily dose group including faster onset and greater magnitude of effect. Our intent is to further test and ultimately seek approval of both the 8 milligram BID and 12 milligram BID doses so that patients and clinicians will have dosing options in real world use. Third, results in our 8 milligrams twice daily arm of our open-label dose regimen trial were consistent with the previously reported 8 milligrams twice daily results from our Phase II dose ranging trials 65-43. We accomplished what we set out to learn with this study and based on the results, we intend to utilize twice daily dosing of CTP- 543 in our clinical development program going forward. Additionally, we are delighted that our abstract was accepted for a late breaking presentation at 80 next month. Our presentation will expand on the previously reported results from the primary efficacy endpoints of the Phase II trial by reporting other endpoints that quantify [hair] re-growth of patients in the study. This is a great opportunity to further elevate the program within the medical dermatology community. Turning now to CTP- 692. Our team has moved very swiftly to progress this program. In December we initiated our Phase II trial with CTP- 692in patients with schizophrenia. As a reminder, we are developing 692 as an adjunctive treatment for schizophrenia. Patients enrolled in the Phase II trial will be stable on their existing antipsychotic medication. We intend to randomize approximately 300 patients in the US, we are evaluating 1, 2 and 4 grams of CTP- 692 to once daily compared to placebo, over 12-week treatment period. Our rationale for assessing CTP- 692 is to offer an entirely new mechanism of action to treat schizophrenia it and to potentially more broadly address symptoms not optimally treated with standard dopaminergic and certain antipsychotic medications. We believe that CTP- 692 has the potential to improve on the primary symptom domains in schizophrenia, including positive and negative symptoms and cognitive function. When added to existing antipsychotic of treatments. In the Phase II trial, the primary outcome measure will employ the Positive and Negative Syndrome Scale, otherwise known as pans and the primary endpoint will assess the change in total PANS score at week 12, compared to baseline. The pans is a commonly used rating scale to evaluate symptoms in individuals with schizophrenia. The pans contains 3 items rated on a scale of 1 to 7, items are divided into 3 symptom domains that includes positive symptoms negative symptoms and general psychopathology. Scores can be derived for each symptom domain and a total score can be calculated. We will also have some secondary endpoints including the Clinical Global Impression scale as well as the Personal and Social Performance scale. For the pans, we will also analyze the sub scales for assessment of changes, specific to positive and negative symptoms, as well as items related to cognitive function. We are hopeful that by amplifying or extending the effects of the current antipsychotic agents with CTP- 692 we can move, we can more comprehensively treat schizophrenia and provide greater benefit to these patients. Top line data from the Phase II study are expected by year-end 2020. It will be a productive and exciting year on the clinical front and we may look forward to providing updates on both CTP 543 and CTP- 692 as 2020 progresses. Let me pause here and turn to discussion to Marc to review the 2019 financial results. -------------------------------------------------------------------------------- Marc A. Becker, Concert Pharmaceuticals, Inc. - CFO, Principal Financial Officer & Principal Accounting Officer [5] -------------------------------------------------------------------------------- Thank you, Jim. As I review our 2019 financial results please reference the financial tables found in today's press release. Research and development expenses were $59.8 million in 2019, compared to $43.1 million in 2018, an increase of $16.7 million. The increase in research and development expenses relates primarily to Phase II development CTP-543 as well as Phase 1 clinical trials and manufacturing costs to support the continued development of CTP-692 into Phase II testing. General and administrative expenses were $20.3 million for 2019, compared to $22.9 million for the same period in 2018. The decrease was primarily attributable to decreases in legal and employee-related expenses. Our net loss for 2019 was $78.2 million or $3.29 per share compared to a net loss of $56 million or $2.40 per share in 2018. Finally, we ended the fourth quarter of 2019 with $106.4 million in cash, cash equivalents and investments. In January of this year, we completed a follow-on offering with net proceeds of approximately $70 million. As a result under our current operating plan, we expect our cash to fund the company into the second half of 2021. As Roger mentioned at the start of the call Concert has achieved several key milestones relating to our proprietary pipeline and set the stage for 2020 to be an important year for us. Our 2 wholly owned product candidates CTP - 543 for alopecia areata and CTP- 692 for schizophrenia are advancing towards late-stage clinical testing. The ongoing execution of our business makes us optimistic for 2020 which we see as a year of significant milestones for our company. This concludes our prepared remarks and we would be happy to address any questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from the line of Joon Lee from SunTrust. -------------------------------------------------------------------------------- Joon So Lee, SunTrust Robinson Humphrey, Inc., Research Division - VP [2] -------------------------------------------------------------------------------- Congratulations on all the progress. Regarding the 543, could you help us understand what the 659 pattern is and the basis for being granted composition of matter patent and for 149 patent, what's your strategy to prevail this time around, with the new panel and how critical is it that you prevail in light of the 659 patent already giving you a composition of matter of protection and I have follow-up. -------------------------------------------------------------------------------- Roger D. Tung, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [3] -------------------------------------------------------------------------------- Thanks very much for the question. So I think your last point is really the most salient one which is with the new patent issuance. That's really what we are seeing as an important aspect of our overall intellectual property strategy, that and additional patents that we have of files and our deposits filing will provide what we believe will be strong protection for CTP - 543 till 2037 and hopefully beyond. So with regard to what the new patents covers is specifically relating to pharmaceutical compositions, that is a combination of CTP - 543 and pharmaceutical recipients for dosing into humans as the dose levels, which were the ones that related with that provided the robust results that we saw in our Phase II study. Those are of course the dose that we intend to take into Phase III and eventually have on our product label. And therefore, those product claims as well as the use of CTP 543 for the treatment of hair loss and specifically alopecia areata will provide strong protection for 543. With respect to the 149 patents, we don't know at this point what opportunity we will have for additional arguments around the validity of the patents. We believe that the arguments that we've made, frankly should prevail as sense, but obviously if we have an opportunity for further or any additional written arguments we will take it and manage that. -------------------------------------------------------------------------------- Joon So Lee, SunTrust Robinson Humphrey, Inc., Research Division - VP [4] -------------------------------------------------------------------------------- Great, very helpful. And for the 692 program for schizophrenia. It seems like there's a lot of scientific rationale for using NMDA agonists to treat schizophrenia given that antagonist are known to illicit schizophrenia like symptoms, and it looks like some of your competitors are looking at NMDA positive ballast modulators for cognitive impairment associated with Huntington's, Parkinson's and Alzheimer's diseases to list, a few. Do you have any plans for those indications as well down the road? And also maybe can you talk about why targeting the glycine site maybe a better approach than targeting the glutamate site, given that they're both core agonist? Thank you very much. -------------------------------------------------------------------------------- Roger D. Tung, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [5] -------------------------------------------------------------------------------- Sure. So glutamate is more specifically related according to the literature, to the potential negative outcomes of (inaudible) toxicities whereas our glycine is really a co-agonist site is associated with that and as lead specifically to be deficient in terms of our exposure in patients with schizophrenia. There is a fairly extensive literature, indicating that both plasma levels and through spinal fluid levels of D-Serine which is believed to be the most important co-agonist of glutamate at the NMDA receptor or low in patients with schizophrenia and that's the rationale for our interest in enhancing it along with of course of initial academic studies that suggested that treatment with D-Serine itself can potentially remediate the overall central mortality of schizophrenia, including both positive symptoms, as well as other symptoms domains which are not well treated by Cortex psychotic agents such as negative and cognitive domains. As you indicated, there has been, there remains and has been now for probably 3 decades, a strong interest in attempting to enhance included mature transmission, specifically through the NMDA receptor and that has been interest that supply not only just Schizophrenia but to other areas of cognitive dysfunction and negative symptomatology across a number of diseases. We, of course, are very interested in expansion of use of CTP-692, but right now we're very focused on trying to run a positive and just the significant positive outcome in our schizophrenia study and after that of course we will work towards expanding indications. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Your next question comes from the line of Liisa Bayko from JMP Securities. -------------------------------------------------------------------------------- John Walden;JMP Securities;Analyst, [7] -------------------------------------------------------------------------------- This is John Walden on for Liisa. Just a couple of quick questions from me, what are your key discussion topics at the end of Phase II meeting and then kind of what are your thoughts, you discussed 2 doses moving forward, but as far as endpoints, duration, number of patients and what are the gating factors from the end of Phase II to starting the trial. -------------------------------------------------------------------------------- James V. Cassella, Concert Pharmaceuticals, Inc. - Chief Development Officer [8] -------------------------------------------------------------------------------- This is Jim. So, this will be a, our Phase II meetings are pretty comprehensive. Meeting to talk not only about the specific Phase III plans but also the whole program aiming towards registrations. So, in focusing on the Phase III obviously, there are things we need to get alignment on with the FDA including endpoint, patient characteristics, duration of the trial etcetera. We think we are in a very good position because of the Phase II trial that we were in, which was a definitive (inaudible) trial, where we've been able to identify our dose range. We identified 4 milligram BID dose that did not work, we're not carrying forward. We identified the patient population that will be relevant for the Phase III program. And obviously, our endpoint using salt as an assessment tool. So, I think we're going into that meeting with a very solid database and evidence to support our Phase III plans and that will be a good portion of the discussion. Once we get an agreement with the FDA, the Phase III plan and also talking in the general perspective of the program, we'll be able to then get our study sides up and ready to go, do the logistics for supply chain, for a much larger trial, again for Phase III, assuming we have an agreement with the FDA, we're talking in the order of 600 and so patients. This will be a multinational trial. We're currently working in the U.S. and Canada but we're planning on expanding to Europe. So, there are logistics to get going for that trial. So, we are confident that we will be able to get that going in the second half of this year. -------------------------------------------------------------------------------- John Walden;JMP Securities;Analyst, [9] -------------------------------------------------------------------------------- Great. And then with the upcoming Baricitinib Phase III study. Can you just kind of discuss your thoughts on that program and your overall competitive positioning? -------------------------------------------------------------------------------- Roger D. Tung, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [10] -------------------------------------------------------------------------------- Yes. Thanks, John. Well, with respect to Baricitinib, we don't have a confirmation as of right now about what doses are being tested and there is in terms of actual clinical database that's been reported at stake. Only a single patient who has had results in alopecia areata, and that was at a substantially higher dose and it's currently approved. So at this point, I think what we can say is that we don't have a lot of information to go on with respect to Baricitinib other than the current product label. As you know Baricitinib was not approved as the 4 milligram level in (inaudible) groups in the U.S., that's 2 milligram level but with a significant black box warning associated with comp on. So it remains to be seen how the dermatology division will deal with the approval of that compound and what doses are being tested and what doses are going to be put up for approval. So at this point, it's more of a stay tuned situation. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Your next question comes from the line of Adam Walsh with Stifel. -------------------------------------------------------------------------------- Adam Anderson Walsh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [12] -------------------------------------------------------------------------------- I have a couple of questions. The first one is, can you give us any granularity on the enrollment in the 692 Phase II at this point? I'm looking at your guidance for timing for that data by year-end 2020 and I'm just trying to get some granularity around that. -------------------------------------------------------------------------------- James V. Cassella, Concert Pharmaceuticals, Inc. - Chief Development Officer [13] -------------------------------------------------------------------------------- Adam, this is Jim. So, yes I think it's an ongoing trial and we really can't talk specifics here. But I think I can say that things are going as we expected and we are still giving the guidance for data read out by the end of the year. -------------------------------------------------------------------------------- Adam Anderson Walsh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [14] -------------------------------------------------------------------------------- Okay. And then in terms of the kind of ongoing patent litigation battle with Insight. I'm just curious, are there any -- can you foresee any court or PTAB decisions over the next 12 to 18 months? And if so, can you lay out the time lines for when we might be getting different hearings or decisions? -------------------------------------------------------------------------------- Roger D. Tung, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [15] -------------------------------------------------------------------------------- Adam, this is Roger. Thanks again for your questions. As you would know, the cadence of the quarter and the [3 months] PTAB was done under the Arthrex ruling which was unprecedented, let's say. And at this point, I think we really don't have a lot of visibility in terms of how PTAB is going to be dealing with that ruling. So it's entirely possible that it will be ticked back under the typical time lines of a one-year time frame. But it's also possible that it will be adjudicated more quickly than that. At this point, we just don't have anything to go on because it's really not pressing for this situation. -------------------------------------------------------------------------------- Adam Anderson Walsh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [16] -------------------------------------------------------------------------------- And then, Roger, on the new patent I'm just curious, is there and it's kind of a historically relevant anticipated response on behalf of Insight? What should we expect now that the new patent has been issued? -------------------------------------------------------------------------------- Roger D. Tung, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [17] -------------------------------------------------------------------------------- Well, I think it's the case that of course any patent can be challenged for any reason. We believe that we have a strong situation with that patent for a number of reasons. One of them is I indicated on the call, is that the specific dose strengths that are covered under that patent are the ones that provided a very impressive clinical results in our Phase II study. The protection of the compound is very specific to a particular composition of matter of CTP-543, as well as levels of deuterium enrichment in that compound, so it's a very narrow and specific patent. And the patent was also issued by the office with full knowledge of existing litigation regarding the 149 patent. So we think that overall it's in a very strong position to be upheld if it is challenged. -------------------------------------------------------------------------------- Adam Anderson Walsh, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [18] -------------------------------------------------------------------------------- That's helpful, Roger. And then, Marc, just really quickly on the OpEx, can you speak to how we should be thinking about the ramp in R&D over the next -- and even SG&A -- over the next 12 to 18 months? I know you've given kind of the overall cash guidance, but I'm just curious kind of sequencing it out during the 2020 quarters, how we should think about the spending? Thank you. -------------------------------------------------------------------------------- Marc A. Becker, Concert Pharmaceuticals, Inc. - CFO, Principal Financial Officer & Principal Accounting Officer [19] -------------------------------------------------------------------------------- Yes, thanks for the question. Yes, cash will last into the second half of 2021, which we mentioned earlier and regarding build up with expense, yes, it is natural that the expense on R&D will go up now that we're into a Phase II trial for 692 and planning the Phase III trial for 543. So, expenses will ramp up. The run rate that we're projecting for this year is approximately $90 million and it will be sequenced according to the clinical development milestones that we've laid out. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Your next question comes from the line of Esther Hong from Janney. -------------------------------------------------------------------------------- Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [21] -------------------------------------------------------------------------------- As Roger mentioned the Arthrex v. Smith & Nephew ruling is relatively new. So, can you speak of any other cases earlier in the queue to patent 149 that are being reheard under that ruling and when the outcomes of those cases may occur? -------------------------------------------------------------------------------- Roger D. Tung, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [22] -------------------------------------------------------------------------------- Thanks very much for the question. I can't claim to have a lot of expertise on case law associated with Arthrex v. Smith & Nephew. Of course Arthrex itself is the first case to be remanded and presumably to reheard. We know that there are other cases multiple other cases that have been also vacated and remanded but I'm not going to try to get into the law because it's outside of any expertise that I claim to have. -------------------------------------------------------------------------------- Esther Lannie Hong, Janney Montgomery Scott LLC, Research Division - Director of Biotechnology [23] -------------------------------------------------------------------------------- Okay, thanks. And also, congrats on the progress with all the programs. -------------------------------------------------------------------------------- Roger D. Tung, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [24] -------------------------------------------------------------------------------- Thanks very much. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Your next question comes from the line of Difei Yang with Mizuho Securities. -------------------------------------------------------------------------------- Difei Yang, Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research [26] -------------------------------------------------------------------------------- Just a couple. T-he first one is related to CTP-543. After the end of Phase II meeting with the FDA, would you expect to press release the findings or the designs or maybe holding a conference call? What should we be expecting there? -------------------------------------------------------------------------------- Justine E. Koenigsberg, Concert Pharmaceuticals, Inc. - SVP of Corporate Communications and IR [27] -------------------------------------------------------------------------------- Difei, it's Justine here. I guess we would expect some form of communication to lay out our plans for our Phase III program. -------------------------------------------------------------------------------- Difei Yang, Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research [28] -------------------------------------------------------------------------------- Okay, great, thanks and then follow-up on the CTP-692. So historically, we have seen clinical data of the serving showing roughly a ten-point difference versus placebo on the [PANSS] score, which is a scale for the assessment of negative symptoms. How should we think about that difference in terms of the PANSS negative sub-scale? -------------------------------------------------------------------------------- James V. Cassella, Concert Pharmaceuticals, Inc. - Chief Development Officer [29] -------------------------------------------------------------------------------- Difei, its Jim. So I think when we look at the literature where there has been positive reports on multiple of the domains -- positive and negative symptoms -- I think that the SANS has been used, and there has been the negative symptom factor score as well from the PANSS as well. I think what we see in these trials, where there has been positive benefit, that we do see meaningful movement on both the SANS and the PAN negative symptoms scale as well. So I think when we designed our trial we try to triangulate using all the information that we had from all of those positive trials to really get a sense for where we would be in terms of the individual sub-scales. However, I do want to remind you that we are looking at the total symptom score, your total PANSS score because what that does for us, it allows us to look holistically at the patient. We know that these hearing has shown in the literature that it can move the negative symptoms, it can move the positive symptoms and improve on cognitive functions as measured by the PANSS scale. So we can parse those sub-scales out, but our focus is still on the holistic treatment of the patient by looking at the total PANSS improvement. -------------------------------------------------------------------------------- Difei Yang, Mizuho Securities USA LLC, Research Division - Executive Director of Americas Research [30] -------------------------------------------------------------------------------- Then my final question is how should we think about the placebo response anytime we run sort of psychiatric-related trial? Placebo sometimes is always a concern. -------------------------------------------------------------------------------- James V. Cassella, Concert Pharmaceuticals, Inc. - Chief Development Officer [31] -------------------------------------------------------------------------------- Absolutely. Placebo in CNS trials is always an issue. As you know, I've been doing this for a long time. We really spent a lot of time at the investigator meeting and in the design of the trial to really keep the placebo response as low as possible. We've instituted things in the trial that we will keep it low as possible. We have basically a screening qualification period where we're looking for stability of the patient on-hand and making sure that they are actually complying with their antipsychotic medication. We've done things to reduce the amount of time in the clinic where we know that multiple assessments things that you don't need to do can influence placebo response. So we're very directed at getting our PANSS assessments and the other 2 secondary efficacy endpoints -- the PSP and the CGI. So I think we've really built in a lot of things into the trial to really keep the placebo response under control. The other thing is that we're using very experienced sites. A lot of these sites I've worked within the past for my past CNS programs. We really spend a lot of time on focused on really trying to reduce those variability that we know can lead to increased placebo response. I think I can say that we're really comprehensively trying to hit the placebo by multiple factors: by the way, we control the trial, by the way we design the trial and by the way we are working with the sites. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- Your next question comes from the line of Robin Garner from LifeSci. -------------------------------------------------------------------------------- Robin Thai Garner Kalley, LifeSci Capital, LLC, Research Division - Senior Analyst [33] -------------------------------------------------------------------------------- My first question is regarding to the newly issued patent and I'd love to hear any further detail you can provide on the excipients that are covered under those claims and how important are they for the delivery of CTP-543 at the treatment? -------------------------------------------------------------------------------- Roger D. Tung, Concert Pharmaceuticals, Inc. - Co-Founder, CEO, President & Director [34] -------------------------------------------------------------------------------- Robin, this is Roger. Thanks very much for the question. So, in principle this covers any excipients which enable the delivery of CTP-543 in an oral form for the treatment of alopecia areata or frankly any other cost utilization of 543. Really with the patent is directed towards is the fact that we discovered that a specific amount of a specific molecule with a specific level of deuterium incorporation has remarkable and previously unprecedented results in the treatment of the specific disease -- in this case alopecia areata. And that specific set of both the entity 543, the delivery of the entity orally for the treatment of a disease state that provides the basis on which the patent was issued and the utilization of 543 going forward. -------------------------------------------------------------------------------- Robin Thai Garner Kalley, LifeSci Capital, LLC, Research Division - Senior Analyst [35] -------------------------------------------------------------------------------- Okay. Can you also comment if this is also regarding CTP-543 on the endpoints that are being used by competitor programs in Phase III and any insights that Concert's Phase II might show us in terms of being able to achieve those endpoints. -------------------------------------------------------------------------------- James V. Cassella, Concert Pharmaceuticals, Inc. - Chief Development Officer [36] -------------------------------------------------------------------------------- Yes. Robin, this is Jim. So I think the commonality that we have across all the various companies that are looking at alopecia areata is that we're all using the [SALT] scale. So I think that's a very important fact and I think that provides a lot of consistency. So in our program we have trained and certified raters not unlike, I think believe what other companies are doing. But then it comes down to how do you look at the SALT data and from our Phase II trial, our dose ranging trial as others have, coming into the first trial with (inaudible) alopecia areata, we looked at a 50% change from baseline and call that a responder. Not unlike what others have done. And then from there you get a slice to the data, we had very nice dose-related responses and very significant results for our 8 milligrams, 12 milligram BID doses. But the fact that we have the SALT data allowed us to go in there and slice the data up in other ways because you have your basic raw data set. So for example, we can look at the number of people who achieve an absolute SALT score of let's say a SALT 20, which means that they have 80% percent hair coverage. So those are the kinds of things and when we look at those kinds of data, we see the same kind of consistent, beautiful dose-related responses. So, no matter how we looked at our SALT data set, we saw very significant differences depending on how you look at the slice of the data. I think when you start looking at, for example just clinicaltrial.gov listing and you start seeing that companies are looking at more along the lines of these absolute SALT scores. In one way or another looking at something like a 10% or 20% hair loss or 80% or 90% hair on scalp. So I think those are the kinds of things that we're thinking about that we'll be talking over with the FDA and we will come up with that final number that we will use as our primary efficacy endpoint, but I feel very confident from the data that we have from our definitive dose ranging trial that we have good data to support whatever we're going in with. -------------------------------------------------------------------------------- Robin Thai Garner Kalley, LifeSci Capital, LLC, Research Division - Senior Analyst [37] -------------------------------------------------------------------------------- And just my final question, is there any further information from Otsuka-Avanir on their clinical activities that they're continuing to conduct on 786? -------------------------------------------------------------------------------- James V. Cassella, Concert Pharmaceuticals, Inc. - Chief Development Officer [38] -------------------------------------------------------------------------------- So they have not really provided any recent updates. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- I'm showing no further questions at this time, I would now like to turn the conference back to Justine. -------------------------------------------------------------------------------- Justine E. Koenigsberg, Concert Pharmaceuticals, Inc. - SVP of Corporate Communications and IR [40] -------------------------------------------------------------------------------- Thank you. I would like to thank everyone for joining us this morning. Please note, we'll be participating at the Oppenheimer Healthcare Conference next month and the Wainwright London Conference in April and hope to see many of you there. This concludes today's call. Thank you. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.