Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the clearest therapeutics fourth quarter and for year 2019 earnings and business update call.
At this time participant lines ARNA listen only mode.
After the speaker presentation, there will be question answer session.
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And I like to Kinda conference to your Speaker today, Neil lead Jackson, Chief Legal Officer. Please go ahead.
Thank you.
I'm really Jackson, Chief legal officer for clarity. Please note that early today Cerus issued a press release announcing fourth quarter and for your 2019 result.
For those of you have not yet seen it you'll find a release polson investor section of our website.
W. W.
Layer T X dot com.
Joining me today for the call a docking meal Walker, President and Chief Executive Officer.
Frankly from our Chief Financial Officer, David Gordon, Our Chief Medical Officer, and Joe Monahan, Our executive Vice President for research and development.
Well, we begin our prepared remarks, I would like to remind you that very seems to make during this call is at the company's future results of operations and financial position business strategies and plans objectives for clarity future operations are considered forward looking statements within the meaning of the federal Securities law.
These statements are based upon current expectations involve risks.
Changes in circumstances.
Options and uncertainties that could cause actual results to differ materially from those reflected in such statements. These risks are described in the risk factors and management's discussion and analysis financial condition results of operation section.
<unk> form 10-K for the year ended December 31st 2019 filed earlier today.
Other filings there makes you see from time to time.
These documents are available under the FCC filing section of the investors page of affair website at Www Dot there, yes Satcon [noise].
All the information we provide this conference will just provided as of today and we undertake no obligation.
The update any forward looking statements we make on this call on account of new information future events or otherwise.
Please be advised that today's call is being reported and webcast link to the webcast posted in the Investor section of our website.
I'll turn the call over to Dr., Neal Walker presence yoga Claire Neil.
Thank you Camille. Thank you everyone for joining us on our first quarter earnings call. This evening.
2019 was a transitional year, which we redefined our strategy and shifted our capital allocation to focus on our immuno inflammatory pipeline.
As a reminder, in 2019, we divested rofin retired all 30 million of our debt I made the strategic shift from a biopharmaceutical company focused only on dermatology Swan now focused on our core competency of developing kaizen kinase inhibitors for immuno inflammatory diseases.
The fourth quarter was particularly productive we reported positive results from the second of two pivotal phase three trials from common warts as a reminder, both our phase three studies in common words were highly statistically significant across all end points and if they want to 145% as approved it has the potential to be the first the FDA approved Rx products for cash.
Worth.
Physician doesn't Rx products, we will be distributed through the traditional retail pharmacy channel with the convenience of at home use we're actively pursuing strategic alternatives for the faster.
Turning now to the pipeline Nazis <unk> recently completed our first in human singly, sending a multiple ascending dose trial with 80 I've worked 50, an oral small molecule MK two inhibitor for the treatment of immuno inflammatory disease.
As we announced in January the team continues to execute across our pipeline. Its third off 2020 with positive preliminary results from our phase one sad and Mad trial in the study we demonstrated potent freshen up TNF Nile one.
The goal the next phase two studies will be to demonstrate the PD profile and the will characterize condition rheumatoid arthritis, which will provide us with the potential to extrapolate into various other inflammatory conditions that are characterized by high levels of one or more of TNF I'll, one I only denials.
We also intend to study 80, I've worked to see any seconds immuno inflammatory indications.
In addition, we continue to advance our additional novel kinase inhibitors.
77, which is our self check in each 21, 38, or covelli bound I Teekay T X K Jack free towards I in D. submission.
A renewed R&D efforts is targeting opportunities in a multibillion dollar immuno inflammatory markers given the continued unmet needs broadly in the immunology space, We believe our portfolio and our approach has positioned us well to address the growing opportunity for novel focus mechanisms and oral formulations that have the potential.
The reshape the immunology landscape.
Turning now to our teams.
We accomplish our objectives, we have assembled a world class team focused on the design of innovative Chinese targeted small molecule therapeutics that can't be design for oral or site specific use.
Our discovery and early stage drug development team in Saint Louis is led by Joe Monahan washing Galeon, John Jacobson and Walter Smith, who have been leaders in this field for many years. This team is complemented by our later stage development team based in Wayne that have continued to deliver on all of our strategic objective we're proud of art.
Teams accomplishments and look forward to delivering on the following catalyst. Some 2024 HCR Fourfifty plan to initiate phase two trial in rheumatoid arthritis, and the first 2020 subsequent data read out in the second half roughly 20.
Hi, guys 17, 77 are subject to plan to submit the idea mid 2020 and initiate phase one slash two trial in the second half of 2020.
And finally for 18 to 21, 38, which is our I Teekay T X K Jack free inhibitor, we plan to submit the R&D in late 2020, possibly early 2021.
Frank will review in more detail later in the call. We ended the year was 75 million in cash and investments and this is sufficient to get us to the third quarter of 2021 I want to reiterate that this guidance gives no effect any potential business development transactions for financing activity.
With that I'll hand, it off the Dave or CMO, we'll update you on our R&D progress Dave Thanks, Neil.
Very pleased to end the year by completing the phase one program for if you ask for 50 or small molecule for all MK to jot inhibitor. So we are developing as a potential treatment for immuno inflammatory diseases.
Preliminary data from study Ittai Fourfifty PK PD, one and one which was a thought must study was released in January so I won't repeat all about information, but in summary in healthy volunteers Ittai Fourfifty demonstrated mark inhibition of TNF Alpha Iowan based file it an io.
Six.
It was generally well tolerated although these tested in the trial.
Most common adverse events reported by two or more subjects, who receive who received a check for 50 observe German the trial dizziness, headache, upper respiratory tract infection, constipation, abdominal pain and nausea.
If you I for 50 demonstrates the dose proportional pharmacokinetics with a terminal half life of nine to 12 hours in the month cohorts finally that demonstrated no meaningful for the fight for drug drug interaction with methotrexate.
When the basis of these results we plan to initiate a phase two clinical trial VTI for 50 in subjects with rheumatoid arthritis for R&D in the near future.
We believe set to talk to a study them aside Mad study the 50 milligram I'd.
The appropriate doors for our investigation of the effect of C.G.I. Fourfifty and Ari.
The most important question and this study is to establish a fourfifty can reduce and maintain a reduction and information for 12 weeks and patients with already.
We also plan to initiate a phase two proof of concept study for 80 I for 50 in an additional immuno inflammatory indications.
Moving to fit <unk> 17, 77, our investigational topicals soft JAK inhibitor, we are progressing towards filing the eye in the mid Twentytwenty. As a reminder, we're developing a T.I. 17 77 as a potential treatment for moderate to severe atopic dermatitis you plan to initiate.
Phase one two clinical trial in healthy subjects and in subjects with the atopic dermatitis and the second half of Twentytwenty.
Lastly, we're also developing <unk> 21 started to our investigational oral I teekay see executed three and having a compound.
That's an habitually mechanism and trucks T cell signaling pathways and lymphocytes and I thought you T 21, Turkey has potential to be a treatment for psoriasis and or inflammatory bowel disease, both of which are T cell mediated altria immune diseases.
Hey, T. I 21, 38 targets humid kinases expressed formulate an immune cells. This specificity me avoid some of the toxicities associated with other T cell targeted therapies lifecycle for him.
We expect to submit an eye on D. for 18 to 21 38 in the fourth quarter of 2024, and the first quarter of 2021.
No pass the microphone to Frank for the financial update.
Thanks, David.
Good afternoon, everyone as I walk through our fourth quarter and full year 2019 financial results. Please reference the financial tables. They can be found in today's press release for further detail. Please refer to the Mdna section of our form 10-K filed today.
First just to note in a reminder, about the current in prior years financial statement presentation. As a result of our strategic decision during 2019 to refocus our resources on our immuno inflammatory development programs, our historical revenues and expenses from a product sales are summarized in the line item loss from discontinued operations on the face of our plc.
Please reference footnote 18 in the form 10-K for additional details.
As of December 31st 2019, we had cash and investments a $75 million and no debt.
For the full year 2019, our R&D expenses were $64.9 million.
Compared to $60.8 million for the full year 2018.
These amounts included noncash charges of approximately 6 million and $7.9 million in each year respectively.
The net increase in expense in 2019 was mainly the result of $5.5 million in milestone and other expenses related to our license agreement with Rigel.
In addition in 29 team, we incurred 4.1 million dollar increase in preclinical and clinical development expenses related to Fourfifty.
For 50 that is and a $3.2 million increase in our work program spending.
These were offset by a $7.2 million decrease in spending for our phase two clinical trials for 80, I fiber, one and five okay as compared to the prior year.
For the full year 2019, our total Gina expenses were $27.2 million compared to $25.6 million for the full year 2018.
These amounts included noncash charges of approximately 10.9 and $9.9 million each year respectively.
Personnel and other onetime restructuring charges, mainly to account for the year on year increase [noise].
Gives me.
Other income net for the full year consisted of $2.5 million of expense for 2019 as compared to $2.7 million of income for the full year 2018.
This decrease was mainly the result of interest expense and repayment costs incurred on our outstanding debt, which was borrowed in Twond October of 2018, and subsequently repaid in October of 2019.
Our loss from continuing operations was $113.5 million for the full year 2019 compared to $82.1 million for the full year 2018.
We recorded a onetime noncash goodwill impairment charges eight of $18.5 million, which is included in our 2019 loss from continuing operations no such charges recorded in the prior year.
Our loss from discontinued operations was $47.8 million for the full year of 2019 compared to $50.6 million for the full year 2018.
Just two main items to draw your attention to in the line item loss from discontinued operations.
We recognize $13.6 million net sales of rotate in 2019 through its disposition in October of 2019, and also recognized a onetime noncash impairment charge of $27.6 million. So the write down of our tangible asset related to rotate included in the fall 2019 results.
There was no such charge in the prior year.
Now switching to cash flow.
For the year ended December 30, Onest 2019, net cash used in operating activities was $96.4 million, including $20.4 million in the fourth quarter of 20 Nike.
The net cash used in operations during the fourth quarter 2018 decreased considerably as compared to the average quarterly rate experiences we commercialized in early 2018.
This cash flow.
Reflects the initial changes in our business following our announcement to exit the commercial product sales business last September and focus our business on our early stage pipeline.
Our fourth quarter cash burn from operations continued to include expenses related to our legacy Dom development programs and transitional expenses related to our commercial products business that we exited in late 2019.
Consistent with our new strategy, we expect that most of our R&D spending going forward, we'll be focused on our current immuno inflammatory pipeline, specifically a T.I. fourfifty Patriarch 17, 77 in AI 21 38.
Additionally, as a result of our recent restructuring which included a head count reduction of 60% across the company, we anticipate a significant cash savings.
To the spending rate prior to the restructuring in September of 2019.
Given these recent changes and the strategy of our business. We care. We currently anticipate that our current capital will provide a clarus run cash runway ended the third quarter of 2021 without giving effect to any potential business development transactions for financing activities.
With that ill turn the call back over to Neil for a few closing remarks.
Thanks, Frank we look forward to reporting out on on the 80 450.
Cynical study work and as the year progressive hitting into an eye. Indeed for 18, I 17, 77 and also for 18 21 38, So we have a busy catalyst.
Year. This year, we look forward to updating everyone as we make progress Victor can you please pull for questions.
Thank you.
As a reminder to ask a question you need to press star one on your telephone to withdraw your question press the pound key place I'm, probably composite can a roster.
No first first artisanal would be from the line Louise Chen from Cantor Fitzgerald.
You may begin.
Hello, everyone. A this is Sudan, Logan Nathan and for Louise Chen So I have a few questions. Here. So first question regarding <unk> 17, 77, so what makes it unique as the JAK inhibitor going forward as you.
I went to take that didn't indication into dermatitis as we know with JAK inhibitors. There has been a consensus with safety what a differentiating factor as well at 80, 870, 77 have to and really great those back.
Thoughts and then in terms of MK too as a novel target.
What other inflammatory indications are potential targets for that agent and how many are it's their plans for going forward and but that aspect. Thanks.
Hey, this is on Neal thanks for the questions. So first on 17 77 so.
I think it's an important question, we do know that both oral and topical Jack's worked quite well and atopic dermatitis a number of companies have shown that most recently insight is done we demonstrated that with topical ruxolitinib. So I think the opportunity that we had identified actually a year or so ago.
Actually probably 18 to 24 months ago was looking at how do we differentiate particularly on safety.
Knowing that JAK inhibitors worked quite well, both orally and topically in fact, they do very well on on itch, even topically you know the one place at one can differentiate is on the safety side. So we preferentially chose targeting Jack one free because we do a data to support that that so that as an important factor and then.
We also designed the molecule to be sought and by that we mean that it works on the skin.
At the slate of action so its site specific and once it hits the plasma is rapidly metabolized, giving virtually no systemic exposure. So when you think about it indication that has a disrupted skin carrier and disproportionately skews young that's really one of the places one of the key areas, where you want to differentiate going forward as this market evolves.
Which clearly a topic dermatitis market is evolving quite rapidly I think the other thing that we decided to do as well as we're targeting moderate to severe patients and we also designed a formulation into in the morning containing.
Spray solution.
In an effort to enhance compliance and drive more.
More robust usage of the compound over time, particularly in a in a in a condition like this it tends to wax and wane.
That's 17 77 on the MK to front, there's I think the exciting thing with the MK to inhibitors with what we've got here is an oral.
Dosage form the targets TNF Alpha Aylwin beta IL six annihilate in a very potent way and when you think about the the analogs in this market a lot of the biologics target these things, but we're doing it orally and so when you look at the kind of host of inflammatory indications of one could target think of anything that's driven by.
TNF alpha like rheumatoid arthritis like psoriasis.
Through things that are predominantly driven through while on beta like gout.
Taps.
Pericarditis, hi, drought in itis, there's just a host of conditions that are evolving that we now know are driven by by these cytokine. So I think that program in particular is quite exciting you know given the data that we that we already reported on earlier this year.
Great. Thank you.
Thank you and our next question comes online now Kim Little from William Blair You may begin.
Hi, this is not going on for Tim. Thanks for taking the questions first of all just wondering if you'd give an update on.
The partnership BT discussions for the legacy portfolio, how that's going and.
Yeah, maybe if there's if there's anything we can expect to see and then your time all the time wants it looked like a and then secondly also related to 80 450, Oh, just wondering how youre thinking about this other inflammatory indications that you know what are you looking out to prioritize the various indications and do you happen.
He sensitive when we could expect.
To know what that will be and whatnot trial might stop.
Sure. Thanks, Thanks so.
This is Neal again, and then maybe ill hand, it off to Joe or Dave, but on the BD process. So we don't comment on the specifics of BD. We are actively in active discussions.
Not only on the legacy derm business and across on legacy Derm business, but also across our core portfolio. I think we you know we've been able to generate quite a bit of interest the across the company. So we remain excited about the prospects and all that the relative to timing and other specifics we can't really comment on that at this time on 84.
50 regarding the other inflammatory indications I think.
One of the one other things that we're trying to be very thoughtful of is looking at things that are a mechanistic match and also looking to kind of diversify what we're targeting since we can target a number of different cytokine with this molecule.
Our A's predominantly TNF alpha, but also iowan beta driven so we're kind of looking more heavily at island data driven diseases and then just trying to be thoughtful about you know enrollment times, what we target basically what we want to show is that we're proving out the mechanism with this oral dosage form.
And you know I think in terms of the one we're going to go live with that it'll be shortly we'll be updating everyone. Shortly on that providing some more specifics and maybe Dave any other thoughts on indication yeah. I mean, we've got some clear ideas along these lines I mean, we've obviously got the.
She study starches, an already misses on a large indication and we're talking about second.
Indication as being a maybe driven by one of the other side to transition as dominant an already but also a makes sense to do something which is.
Maybe a of the rare and of the disease as well. So you may be tissue into more orphan I liked disease, and then not takes into consideration feasibility as you plan. These studies. So we're marching towards making decisions on initiatives about program fought making good decisions up by and.
Occasions, but sharp developable and our feasible is top of mind for the region.
Deliver an efficient program.
[noise]. Thank you as a reminder, next time for questions Star one.
Our next question will come from line of common Smith from SVB Lynn you may begin.
Hey, guys. Thanks for taking the questions I'm just a couple of questions on the phase one data for 80 450, I'm just wondering within a multiple ascending dose portion of the phase one trial there any early evidence of tackle access and obviously, it's been an issue with the class historically can you just remind us how quickly.
We tackle access became and you know in issue in the clinical programs for the other P 30 inhibitors.
Yeah. So if you look to the probably the best place colored for that evidence as and rheumatoid arthritis with the P 30 inhibitors and the the effect, we're seeing very consistently across all the P. 30, <unk> inhibitors in that disease, where you see as a really nice anti inflammatory effect.
Demonstrated by a reduction in CR p. to about two weeks and then.
CR P. comes back towards baseline, it's probably around about how free but the baseline by four weeks [laughter]. That's all the repeat bite to baseline essentially by eight weeks.
So really you have to go beyond two weeks.
Before you have a chance to start seeing pocketful access to the intention all the sod mine was not to get into the Dot investigation that was to show and ambition and not early stage show that the can answer is quite good and show the safety, but look good.
The next study that were opposed to meshed initiate says to investigate exactly that question can we discharge the risk of pack you fly access.
Just a reminder, by the data that we have so far what what gives us confidence the confidence and not as some a preclinical models on maybe one of the more significant about as says I'm not a most study where we compare the PCR <unk> to 450 and the ability.
Teacher and have it really so of TNF, we showed but BTI for 50 was not associated but can you talk to flex with over four weeks, whereas the PCR <unk> inhibitors worse. It supports that it's some preclinical data to support that this has a chance of being real and.
We go into that study really excited about the potential of discharging about Russ.
Right. Okay. Thanks, one.
One other question just on H.T.I. 17, 77, I guess, a just wondering how you're thinking about opportunities outside of a topic term.
You know potentially something like middle I guess.
Yes, So hey, this is neal thanks for the question, Yes, I think right now we're focused on on a topic term.
And certainly we think that the that the proof is there and that indication and we designed to this particular formulation is kind of a very targeted approach to 80.
Certainly you know one could consider Vitol I go I think we were constantly looking at how to allocate capital across the portfolio and and I think doing a study and Biddle I go out of the gate at the moment. You know is probably is probably not you know in the immediate plans.
Because remember we as you know 21, 38, which is an oral that we think is going to be a very valuable place to invest and so we're just being mindful of where we allocate our capital but could be something in the in the future, but I think for now we're going to focus on 80.
Okay. Thanks for taking the questions.
Thank you and I'm not showing any further questions at this time I'd like to turn the call back over to Dr. Neal Walker CEO for any closing remarks.
Oh, Thank you everybody for joining US here. This evening and we look forward to further reporting on our progress throughout the year.
Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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