Q2 2019 Earnings Call

Good afternoon, and a walk up to the Chemocentryx second quarter 2018 financial results Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. As a reminder, this conference calls will be recorded I would now like to turn the call over to Mr. Bill Slattery, a bunch and clearly that's there's loudly. Please go ahead.

Thank you operator.

Good afternoon, and welcome to the Chemocentryxs second quarter 2019 financial results Conference call.

Earlier this afternoon the company issued a press release, providing an overview of its financial results for the second quarter ended June Thirtyth 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 Dot Chemocentryx dotcom.

Joining me on the call today 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 Who'll provide an overview of the company's financial highlights for the second 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 of those of you. Following the slides can see if you look at slide two.

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 August 5th 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 is my pleasure to turn the call over to Tom So.

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

Our March of progress towards the ultimate goal of commercializing our unique small molecule therapeutic assets continues to gain momentum.

Today I will lay out for you the sequence of significant near term clinical read outs that we see ahead of us as we plan to release top line data from no fewer than five key clinical trials over the next 18 months.

First and foremost we look forward to announcing top line data.

From the pivotal advocate phase three trial of our drug candidate a backup hand in Anca associated vasculitis in the fourth quarter of this year.

Let me break this down a little bit for you.

Ultimately advocate enrolled in 331 patients from 20 countries.

Notably the country of Japan was a fairly late edition to the study not originally planned for advocate.

But despite a later start to enrollment the Japan cohort was enrolled very efficiently and they completed enrollment told only five weeks later than the rest of the world.

Accordingly, we decided to include this Japan cohort within the global study data sets.

This does not change our overall guidance for advocate data release, we continue to expect the release of results in Q4 of this year.

Now projecting mid to late Q4.

A reminder of the advocate trial features can be seen on slide three.

Informed observers have noted that they are encouraged that advocate is built on a long and solid foundation.

Well controlled pharmacological experiments and in vivo models as well as on controlled clinical data in humans.

For example.

In Anca associated vasculitis, the role of complement inhibition and specifically the C. Five a receptor.

He is well established in the literature.

There are in fact carefully controlled genetic and pharmacological in vivo model experiments that demonstrate the mechanism of action of Sci Fi they receptor in this disease in great detail.

Animal data show that the Cfivea receptor is necessary to cause and stage anca disease.

Accordingly, those same models demonstrate that blocking cfivea receptor and specifically cfivea receptor.

It is necessary and sufficient inept painting, a beneficial therapeutic result.

An important point is that a buck a pan targets only the cfivea receptor. Thus stifling the activation of Cfivea receptor bearing pro inflammatory neutrophils that had been shown to cause the disease symptomatology.

It is to be stressed that avago pan achieves this beneficial in activation of the Cfivea receptor, but that is not a backup hand does not block a second receptor for Sci Fi they known as the C. Five Hello too.

This is quite important because C. L. Two has been shown to have beneficial or pro healthy effects. If you will in many studies, including the best validated in vivo model of Anca vasculitis.

And to be clear. This is the reason we have endeavored always to target the cfivea receptor and not to say the ligand C. Five day.

Since Sci Fi they can give rise to good actions via C. five l. too.

Important human data from previous trials is also in hand for Avago pound specifically from two successful multicenter randomized placebo controlled trial phase two clinical clinical trials in Anca vasculitis patients.

These are the clear and classic trials.

The clear clinical trial was a randomized controlled study of a backup pen which demonstrated that.

Avago Pan rapidly brought neutrophils to normal levels in anca patients, while also rapidly reducing put to noria and stabilizing glomerular filtration rates always good signs in terms of treating impaired kidney function and most anca patients eventually have kidney dysfunction.

And developed and brought the acute signs and symptoms of ask good after active vasculitis rapidly under control.

Avago Pan did all of this and clear without the need for daily high doses of noxious steroids, such as prednisone methyl prednisone that are currently used to control disease symptoms in anca patients.

Furthermore, the classic trial, another randomized placebo controlled trial with a backup and met its goal of supporting a buck upon safety profile, even when added on top of the current standard of care regimen.

Our phase three advocate randomized control trial expands on what we learned in the phase two trials.

Advocate like cleared before it is a double blind double dummy protocol, so that patients do not know whether they are receiving a backup plan or the steroid containing regimen.

With 165 patients in each arm.

It is a truly global study involving more than 200 sites in 20 countries around the world.

Importantly, with advocate like clear, we aimed to curb the use of chronic steroids that are responsible for so much of the suffering of anca vasculitis patients in terms of both mortality as well as morbidities.

Based on the data from the controlled studies to date, we believe that about Japan may alleviate the total burden of disease in Anca vasculitis patients.

As you can see from slide four we have a four pronged aim with Avago Pam.

First a rapid and lasting into the acute episode of vasculitis shack and the significant diminution of severe consequences from the therapies that form the current standard of care.

Third arresting the damage to oregons, notably the kidney.

And fourth.

Marked improvement in quality of life.

These things go far beyond the rather limited scope measured in the Birmingham vasculitis activity score or be bass.

Which solely measures active and acute vasculitis signs and symptoms.

But does not measure if a patient is truly well.

And we know that both T.F.D.A. and the European Medicines agency are interested in the broader data concerning the total burden of disease.

So as shown in slide five while the two primary endpoints are based on remission as measured by a beavis score of zero.

After being off steroids for at least four weeks.

We are confident from discussions that regulators and other experts will also take into account key secondary endpoints, which help to measure alleviating the total burden of disease.

The primary endpoint based on be best will be first assessed at 26 weeks since the use of steroids and Immunosuppressants conventionally runs for this period of about six months.

And for the first time in a controlled randomized Anca vasculitis trial. We will also look at be best at 52 weeks.

The be vast primary end point statistical no hypothesis is non inferiority or and high at weeks 26 and 52.

This is the appropriate and all hypothesis and in fact, the only one which pragmatically can be used.

And I is the appropriate in all hypothesis when a disruptive new therapy is contemplated to unseat an incumbent therapy that is known to have a significant liabilities such as safety.

And that is certainly the case with the present anchor regimen that includes chronic high doses of steroids.

And in fact, the statistical no hypothesis of Noninferiority is the only test that pragmatically can be used in this instance, since in orphan diseases, such as anca patient number or and tends to be small even in pivotal trials such as advocate.

This statistical test has previously been well established in Anca vasculitis.

Specifically in the only other pivotal study that resulted in an FDIC approval for Anca.

That have right tucks than they had been the phase three pivotal rave trial.

It has to be noted that.

Right Teixeira Mab was approved as an alternative to cyclophosphamide, but always coupled to high doses of chronic steroids solely based on achieving the statistical no hypothesis of non inferiority when compare to cyclophosphamide plus steroids.

Let me now turn to our second unique therapeutic agent CCX, one four O R. Orally administered inhibitor of the chemo kind receptor known as Ccrtwo as illustrated on slide six.

We recently reached another milestone by completing patient enrollment in our alumina one trial of CCX, one four O in patients with primary focal segmental glomerulosclerosis or SSG, yes.

And we expect the final patient to be randomized next week.

Fs Gs is an orphan renal condition for which there is no approved treatment today.

It can lead to kidney failure, requiring expensive treatment and extensive dialysis.

Our scientific discovery and development team has been working on the role of Ccrtwo inhibition NFS, yes.

In patients with Fscs scar tissue develops on the glum area alone.

Those parts of the kidney that filter waste from the blood.

Proteins begin to leak into the urine elevating proteinuria.

CCX 140 is an orally administered selective ccrtwo inhibitor and previously we demonstrated a rapid.

And durable reduction in proteinuria with a good safety profile in our phase two trial in several hundred patients with diabetic chronic kidney disease D CKD or sometimes called diabetic nephropathy DM.

In fact.

Proteinuria reduction.

Was the CKD trials primary endpoint, which we successfully achieved we CCX one for oil.

We pivoted.

From DC kv to Fs Gs because importantly.

Unlike in D. CKD in F SGS.

The FDA has indicated that proteinuria lowering can potentially be a registration endpoint.

Our alumina one study is a randomized placebo controlled trial of FSP fscs patients all of whom have high levels of protein in the urine.

The primary endpoint is a drop in proteinuria at 12 weeks.

Given our progress in the alumina one trial, we expect to release top line data in the first half of the coming year.

Meanwhile, we continue to enroll our alumina two single arm open label study of patients with no thrombotic proteinuria primary fs Gs a rare and more severe condition, we expect to report out that trial to during 2020.

While our partner Vifor pharma has been granted the international commercial rights to both a buck a pound for Anca vasculitis and CCX, one four O for Fs Jess I will remind you that chemocentryx retains all rights in the United States. We are actively building our commercial capability as we prepare to take the final step in our forward integration.

We are looking forward to another topline data readout in 2020 from our trial of the versatile avago Pan in the treatment of C. Glow merial apathy, another rare kidney disease, which can be life threatening.

Our accolades trial of Avago pen and C. G has reached overall the halfway mark and can be seen on slide seven.

Alkali accolade is a randomized controlled trial of two strata a 44 patients each comparing about a couple of the current standard of care after six months of therapy.

The primary endpoint in the trial will be the percentage change in the C. G Histologic index after six months of treatment.

We're also measuring reductions in proteinuria and changes over time in Glen Merial or filtration rates.

It is worth noting that we are receiving very encouraging feedback from tail wells surrounding our practice of taking biopsies during the trial, which will allow us to track histological changes and relate those changes to clinical measurements.

Other currency Threeg Chiles do not require biopsies whitetail else confirmed that our ours is the most rigorous and complete trial of C. G.

The price we pay for this thoroughness is a somewhat slower patient enrollment in this very rare disease.

However, it is fair to say our trial is ahead of other drug trials and C. G. We got off to a fast start as we tapped into pent up demand from patients who you will remember have no approved therapies.

Some experts supine that the total number of patients available for C. G trials is now the rate limiting factor, which is why all C. G. Charles seen currently to be making slower progress towards their ultimate enrollment goals.

Nevertheless, the accolade trial has enrolled more than the others and this past the halfway mark overall.

Importantly, too we are nearly one.

Announce see threeg disease, and possibly those most responsive to highly selective complement inhibition therapy, such as a backup plan.

We expect to release top line data from the accolade C. G trial this coming year 2020.

Finally in terms of other clinical Readouts in this coming year. There is our rigorously planned Aurora trial of Avago Pan anhydride, not a super achiever or Hs, a chronic disfiguring inflammatory skin disorder featured on slide eight.

Hs is thought to be a complement mediated disease driven by cfivea receptor activation of inflammatory neutrophils at the site of unremitting pustules NHS lesions.

Many regard the cfivea receptor or.

As an ideal target in a backup plan as it potentially ideal remedy.

During the second quarter support from key opinion leaders in the Hs community for our carefully planned Aurora trial actually increased substantially contributing to an acceleration in site activation and patient enrollment.

We now have more than 50% of sites activated with enrollment at approximately 25%.

To the Hs patient and clinical community.

We at CCX I have committed to provide a definitive answer.

With data from Aurora, this coming year about how cfivea receptor inhibition might benefit people with a chess.

They.

And all of us deserve no less than such an answer.

Since about Japan is involved in three of the five expected topline data Readouts. Let me remind you briefly of key advantages that we see in this unique molecule, which are shown on slide nine.

Patients can take of ACO kind of at home or wherever they happen to be rather than rather than having to go to the clinic for an infusion.

As a small molecule rather than say a much larger antibody.

[noise] of occupying is ideally suited to penetrate the micro environment of individual lesions or disease sites.

Of our parents unique mechanism of action target only the problematic cfivea receptor, leaving intact. The C. L. Two pathway, which is known to have beneficial effects.

We believe that this exquisitely selectivity and targeting and convenience offer tremendous potential to patients and clinicians.

In summary, as I have described we continue to execute on our 2019 goals fortified by a strong financial position, which Susan can I will outline in a moment.

We are optimistic about our near term inflection points and look forward to providing top line data read outs during the next six quarters.

Our drug discovery engine continues to generate new opportunities, which we will look forward to bringing to you in the near future.

We are confident in our potential to bring innovative new medicines to patients and to build further value for our investors.

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

Thank you Tom I second quarter 2019 financial results were included in our press release today and I summarized on slide 10.

Revenue was $7.2 million for the second quarter compared to 15 million for the same period in 2018.

Revenue is recognized based on the proportion of costs incurred as a percentage of the total budgeted cost to fulfill the performance obligations under our ivanka Pan and CCX 140, commercialization agreements with pipe or pharma.

The decrease from 2018 to 2019 was primarily due to a higher proportion of Onco panel related costs relative to the budgeted cost incurred in 2018.

Research and development expenses were $17.6 million for the second quarter of 2019 compared to 17.8 million for the same period in 2018.

Expenses decreased in 2019 20 of Taco Pan advocate phase three pivotal trial.

As this study was fully enrolled in the second half of 2018 or the phase two clinical expenses increased primarily due to patient enrollment of the of Buck upon overall their trial in patients with H AD ended two ccxone hundred 40, luminaire trials in patients with F. SGS.

General and administrative expenses were 5.6 million for the second quarter compared to 4.7 in 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 reported a net loss for the second quarter of 2019, a $15.2 million compared to $6.9 million for the same period and 20 team.

Total shares outstanding at June 32019 were approximately 58.2 million shares.

Lastly, we ended the second quarter with $223.1 million in reported cash cash equivalents and investments.

We expect to utilize cash and investments for the calendar year in the range of 70 to 80 million in 2019.

Tom.

Thank you Susan.

Before taking your questions I will summarize our progress and prospects depicted on slide 11, and two simple sentences.

First we are well on our way to completing our plan to deliver topline data from five clinical trials.

By the end of next year.

We expect the first to be our pivotal advocate trial, which represents a somewhat of a mountain of pharmacological and clinical work and data.

In Q4 of this year.

We'll be holding an R&D day in New York on October Onest as a prelude to the topline data readouts that will follow.

I hope that many of you will be able to join US there and hear from talk top experts in the field.

Second as Susan has reported by judiciously targeting the fruits of our science and the use of funds that investors have entrusted to us our financial strength gives us the muscle to contemplate filing marketing submissions to both the FDA and the M&A during 2020, assuming that the topline advocate data are positive.

A strong fair wind is now filling our main sales in our voyage of value creation.

Throughout this year and next key data Readouts should provide the coordinates to draw new map for C. Cxi and its growing realm of opportunities to markedly improve the lives of patients and provide an important returns for investors.

I will now turn the call back over to the operator and look forward to your questions operator.

Certainly sir ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on you touched on telephone. If your question has been answered are you wish to remove yourself from the queue. Please press the pound.

Our first question comes from the line of Michelle Gilson from Canaccord Genuity. Your line is now open.

Hi, Tom Hi, Susan.

Thanks for taking my question.

I was just wondering can you walk us through what we should be expecting in the topline release next quarter and kind of going along with that how how are the patients from Japan going to be treated within your statistical analysis plan did they improve your powering it all.

And.

Have those updates then submitted to regulators.

The short answer is yes to all of the above the Japan population will be treated just as part of the unified data set.

And they do slightly increase that just statistical power. Originally this study was based on 302 arms Michelle.

We ultimately reached in the original 19 country target 316 people that got randomize of Japan cohort actually ultimately added and rounded up that total 331.

So at least we know how many got randomize not everyone is done yet with the trial. So I don't have a great I mean I won't have a number for you, although I can estimate pretty well, which I won't provide today. The total number that we will finally analyzed but of course every.

Every every set of patients adds to power, so thats that really works well for us.

The topline data will obviously include the D. vast primary endpoints and as I mentioned Beavis really only measures the acute active signs and symptoms of vasculitis. So while that's important obviously and it's the only thing that regulators have traditionally known what to pay attention to.

In addition, there is other very important features of our study, which we will try to start as well with the topline data obviously overall safety will be reported.

Well, we will be looking at many of the same things that we looked at in the phase two clear study so quality of life, we believe that at least love the topline quality of life Readouts.

Glucocorticoid toxicity profile that is those essays and safety events associated with glucocorticoid use and then a number of lab readouts that speak more to.

Preservation of organ function. They include things like the proteinuria values, such as we presented in the clear trial.

Well, Jeff Argo Mariella filtration rates over time.

Shedding of inflammatory markers in the urine and ultimately the vascular damage index as well, all which read through to how Oregons are.

Functioning and whether or not you're accumulating damage with chronic symptomatology either from the vasculitis or from the damaging effects of the standard of care. So I think in large part that is the general spectrum that we'd be aiming for and the topline data.

That we hope to release and in Q4.

Okay, and then just one follow up if you don't mind also what you might be expecting to focus too to really be on at the R&D day and.

Will you be releasing any data around.

The baseline characteristics of patients and advocate during that day.

Well right now I can't speak to whether or not we might be releasing data around baseline characteristics.

But I will say this there's a number of things that people find mystifying about anca vasculitis from the the way be Vassar scored and what it really means to the statistical analysis plan. So we intend to demystify that for the audience. We intend also to describe a little bit more how we are marching through again measuring the total burden of disease and why that's important.

And we'll review the solid base upon which advocate is.

Is built by reviewing how and why the phase two results were so key to our understanding and we think to our interpretation of advocate.

I will say to that by and large the inclusion exclusion criteria and advocate where based on the clear trial.

And I think that accordingly, we can expect that the baseline characteristics generally speaking.

Will conform to predictions.

Okay. Thank you so much for taking my questions.

Okay. Thank you.

Absolutely so look forward to it.

Your next question comes from the line of Megan Hof from SVB.

Thank your line is now open.

Great.

Good afternoon. Thanks for taking my question, Hi, Tom I Susan.

Just two quick <unk> to two parts here if I may. So first question is on the advocate trial.

Just wanted to dig a little deeper on the pharmacodynamics.

I guess, we'll get a lot of.

The mystifying at the R&D day, so I don't want to jump the gun here, but in your preparation as you're gearing up for pre commercialization and commercialization efforts what are some of the feedback that you've gotten in terms of the non inferiority and I guess what are the scenarios that you envision in terms of giving you. The most pricing flexibility that we can look forward to the second part of that question is.

If you can maybe talk to us about based on your market research how the pecs have asked trial date has impacted the treatment landscape as of late and.

Avi.

I've got a follow up.

Right so tax events I'll start with the reverse text. The Vas has done from from my perspective, almost nothing because number one I don't think we have the refereed paper out yet number two.

Opex of assets showed it seems to me and others now in the field was that plasma exchange was not an effective.

Therapy for Anca vasculitis patients with long term outcomes.

Long term, meaning death or dialysis. So they all did poorly plasma exchange didnt help them. There is a there was an idea by the way that emerge from Texas vast that said well you can kind of lower the dose of steroid regimen.

To a somewhat lower dose and use it you get the same outcomes.

Two things around that number one the same outcomes, meaning they're all still bad.

In my opinion and independent of other experts and secondly, the lower dose actually was not defined in a lot of the discussions you're all discussions but that quote lower dose was about two thirds the traditional regimen when taken as a total load over six months and in fact, a lower dose and effects of asset is pretty close to what were using as a standard in the advocate trial and will step through the details of all that at our R&D day again is an attempt to try to demystify. Some of this so packs of as to me Doesnt change anything that we're doing.

Because again, what it showed is that everyone's still did poorly.

We hope to change that considerably.

Based on again, not and we're looking at at Vivacit. Another symptomatology were not looking at the longer term up.

Outcomes that were not helped by plasma exchange and effectiveness study.

You are asking also about what's the greatest out how do we think about flexibility as we go forward to marketing.

Presumably a successful backup and product.

It's really clear that.

What we'd like to see obviously is.

You asked first about the primary endpoints.

Birmingham Vasculitis activity score.

As I mentioned in my remarks, really only measures and focuses on one thing.

Acute.

An active signs and symptoms of vasculitis. So the D. bass is really just design historically to make sure that we can measure how many people we get through the active vascular the crisis because prior to the rather primitive regimen of steroids, plus immuno suppression, which is with US to this day 50 years on in the field, but it was first tried prior to that regimen being tried.

Active vasculitis would kill people very fast typically within five or six months.

I week 26, which is the comparison that we need to look at even though we think and we hope our drug should work faster than that but 26 weeks as the standard of care regimen and thats. The traditional endpoint because it takes that long for standard of care to exert its maximum effect across the population and convince the observers that those people aren't in fact on a die. So weak 26 again the statistical no hypothesis is non inferiority.

We'd like to hit that we think we handled handily will.

And of course, our models are based on the rave study that I alluded to in my remark.

We hope that we can sustain remission two week 52.

And we believe that we ought to be able to do that and in fact, the numerical separation.

May start to widen with Avago pen treatment, perhaps sustaining at a higher number.

Then the standard of care therapy.

For the reason one of the simple reasons is that they have to be weaned off standard of care, because it's too toxic to take chronically for 52 weeks. It reveals part of the medical need.

So again, we believe from our models that we should handily be able to achieve non inferiority at week 52, and in our statistical plan, we actually have a hierarchical determination to take a glimpse at superiority at week 52, which while a stretch is not beyond the realm of feasible that would be great. If we hit superiority at week 52 four.

Just the purposes that you're talking about those conversations will be easier to have around primary endpoint, but I stress tests.

That's not the full picture Vivacit is not the full picture. The full picture is can we show reduced glucocorticoid associated toxicities Morbidities, Indeed, maybe mortalities.

Can we show an improved quality of life since that has a direct pharmacoeconomic impact.

Which we did show in the phase two and enhanced.

Sorry, and enhance quality of life.

And.

And can we show and.

Evidence objective lab based evidence for preservation of organ function and forestalling additional accumulated organ damage, particularly in the kidney since that's a really expensive thing with Anca vasculitis patients as they go through their disease course, many of them end up in end stage renal disease and of course, you know as well as as everybody.

How expensive that care regimen is so we'd like to hit on.

Being able to show an overall picture of.

Reducing and in fact on a colloquial way I'll say in a superior way small less the total burden of disease across those four categories and I think if we do that or largely accomplished that as we did in the phase II.

That will be a very compelling argument and provide us with.

Maximum pricing flexibility.

Great. Thanks for all that color. Tom second question was on HST or a trial that were expecting for next year.

You provided color that the enrollment is about 25% complete over 50% of these sites have been activated.

Just wanted to get your take on since the Shine data read out have you seen any pickup in terms of enrollment pace or site Activations and also whats the general I guess sentiment around the 50% placebo rate.

Turning to the.

The five a. inhibition mechanism there. Thank you.

Shying, what's that.

[laughter].

I'm sorry.

Interestingly, we have actually seen enrollment pickup since the shine result that that's fascinating to me.

But what we're getting from our experts in the field.

Our <unk>.

Our some really important comments.

Let me try to restrict most of those to what they say about our approach and why they're very high on our approach.

They fundamentally believe that neutrophils are the culprit. They fundamentally believe that activated complement is going on in the system.

They love an orally active small molecule because of two things number one that's just the need in this population, but more importantly, the mechanism level some of them, including ones that are quite vocal and well versed fundamentally believe that you've got to get the molecule to the site of the lesion.

And these lesions are messy, it's really hard to envision how a large molecule like a 180000 Dalton protein, we'll get to these micro environments of lesions, whereas a approximately 500 molecular mass small molecule, which has lovely properties that help it slide into these environments and they help us get through potentially these messy gelatinous neutrophil nets that form parts of these lesions.

That that's a really appealing idea.

So people are really again I was really interested because I was prepared for a decline or a pause in enrollment quite the opposite.

It's actually accelerated.

And so.

That's I think very very interesting to us.

And again the differences between the large protein and the small molecule are notable.

This community has understood more and more of the distinction between the small molecule sitting down on the C. Five a receptor.

Rather than a large molecule trying to cover C. A.

Which is a fundamentally different kind of idea.

And there they were unhappy with the lack of Pharmaco kinetic.

Pharmacodynamic data.

Showing that that anybody was getting to all of the target and stopping sopping up, whereas we've published a lot of data.

On how Lavaca Pan is covering the cfivea receptor, which is the pro inflammatory receptor even at trough levels of the drug so that science and those data matter to that community and finally, they also appreciate the mystery of the second receptor C. L. Two is one of those things that simply cannot be ignored and there is enough data reproduced by many good teams, including in allergic skin diseases, and autoimmune skin disease models showing C. L. Two as a good actor and you.

And about the high placebo response rate.

Fundamentally.

One can expect placebo response rates based on scoring endpoints to increase when new entrants come in and get approved such as Humira.

One anticipates that.

Certainly our model anticipates that is why we have almost 400 people in this trial, but what you don't want to do is create an expectation of response or create an expectation in the patient population that they're going to get active compound.

Expectation on par to patients and physicians.

I will say that the other trial to the extent that I understand it.

Seem to have.

80% chance of getting quote active compound and that can't but help to drive placebo response up into conditions, such as that so we've taken great pains not to do that.

We've also taken great pains to make sure that the primary endpoint training high score has been.

Very very good Richard rather and rigorously enforced and in fact, we have a lot more central communication around.

The standardization of high score. So I believe people have been involved in both those trials. That's another kind of feedback we are getting so all of that gives us comfort that at least we are performing I think a very careful.

Carefully considered and I think a wells so far well executed trial and as I said, our commitment to the community is let's get an answer lets not be guessing.

And that's what we're going to do.

Great. Thanks for all the insight you guys on October 1st.

Thank you.

Your next question comes from the line of Steve seat House from Raymond James Your line is open.

Good afternoon. Thank you first a question on the inclusion Craig sort inclusion of the Japan cohort.

Advocate is there anything notable one about.

The expected BK or effect of a backup pan in different patient populations.

You might have alluded earlier to only 15 patients from Japan being enrolled can you just clarify if I heard that right or was that referring to just recently enrolled patients are there are there more than 15 from Japan.

Yeah. Thank you Steve you did some quick arithmetic, there and came up with the not unreasonable conclusion that there were 15 from Japan.

In fact, there were over 20 of probably 21 I think was the final number which was a kind of a great. Good threshold for PMT Ada say Wow. If you guys could actually be involved in the global study that would be fabulous.

And so that's why we coupled with all of our colleagues and decided that yes. It would be a good idea to include Japan, because they might well assuming success.

Might well be able to in lockstep with F.D.A.M.A. lead to Leisinger in Japan, which helps everybody, including chemocentryx as well as anchor patients and and all the rest that are involved. So so ultimately it was a it was over 20, which was good there were six and again I won't go into the complications of this but there were six Japanese subjects in the original 316.

And and then by the time, the Japanese cohort got fully enrolled it was so it was somewhat over 20. So that's why you're coming up with the arithmetic here coming up with at the end of the day. It doesn't matter. It's all one global dataset and we're going to analyze it on one common technical document and all those other wonderful things we do for registration now your question about PK.

Really insightful. Thank you.

We have done.

Separate studies in phase one and in fact.

Our Japanese colleagues did another separate phase one study and suffice it to say we are satisfied that there. The PK responses is not going to be materially different.

In that population as opposed to rest of world. So all that work is done in background.

Okay great.

And my next question. So your stock obviously got hit hard when China failed.

Regarding your Aurora Hs study therefore.

You have.

25% of royalty of about 100 patients already enrolled there given shine failed given no prior data for a backup in this indication and given the lack of relevant animal models as far as I know for this disease I'm wondering if utility analysis or frankly, stopping the study early to analyze the data and if successful moving to a phase three would be prudent here what are your thoughts on that or if not what's the advantage of enrolling this all the way to 400 patients.

Great question Steve.

One, which I I might have predicted coming from the insightful mined over there so I tell you.

Here's how I think about it.

You're right <unk> Interestingly, we didn't get a lot of credit necessarily for being NHS.

But we certainly have gotten punished for it so I think there's a there's a saying in quantum computing that says the future is already here, it's just not evenly distributed yet and and it's kind of strange the quantum entanglement, we had from the Shine study because again, even though we had nothing to do with that study its design or the characteristics of that molecule.

As I said, it's a strange world that we suffered so much from the other guy stuff.

But having said all that your questions are very relevant in an app. So here's how we think of it.

There is.

No there is evidence and certainly anecdotal evidences among others. Some lab evidenced that that's emerging from from us and others and we hope to present, what whatever we know in a little bit more detail on October onest.

But let's just say the evident there is some evidence it's not a complete.

Hypothesis based on no data that HHS is driven by Cfivea receptor.

And activated complement at the legal side.

So the evidence is nowhere near as strong as Anca vasculitis, it's completely correct.

So we've taken a long look at this whole situation, we are running the Aurora trial in a very efficient way both temporarily as well as physically.

And so we reserve the right to potentially do an early analysis.

I think I think what's really.

The reason, we would do that obviously is to save time and money.

But time is money in clinical trials as you know so if one is going really fast anyway that really is the principal driver of cost. So by the time, we decided to do a partial analysis.

Some models might suggest that we could have the full dataset.

So the way we look at it at this moment is again, we're going to talk more about that at October Onest, and where we have decided on how we're going to conduct the future of this.

Particular trial.

But right now the expectations are very low from most of the investment world. So the upside could be vast and our investments are modest and both time and money I think are very manageable. So.

We may well be able to just get the definitive result, and if that is resolved is a positive one well good heavens, we really will have left towards the very significant and very important.

And lucrative endpoint so.

Again more details at the R&D day, but that's how we're thinking of it now.

Okay, I appreciate that answer Tom and <unk>.

Covered I guess arithmetic from quantum mechanics, so maybe I'll just toss in algebra questioning to finish up on enrollment.

The phase two C. G study.

So this is 50% enrolled this quarter and it was approximately 50% last quarter and approaching 50% in the fourth quarter of 2018, So if I draw straight line there its challenging to imagine how you'll have data in 2020.

Unless enrollment picks up significantly so I'm, just hoping you could maybe crystallize specifically, what you're assuming in terms of enrollment changing.

June or is the data readout going to be straight on one only thanks for taking the question.

Very good question, yes, so you're right started going through a wormhole the space time continuum, how will we get this thing to to look any different.

I would say there are two or three things that are relevant.

You are absolutely right. We we were racing along with that study and then we just hit a brick wall.

In part I think it's because other competing studies came online that did not require a biopsy endpoint and frankly many of them were smaller and a lot of them are actually open label. So from a patient perspective, it's a lot easier to go into some of those other studies.

I think we were mapping up originally probably the vast majority of the the available trial population.

And then we again as I said, we and others ran into this there is a limit of what is the available trial population and maybe we're just exhausts, we've exhausted that that some of the feedback coming from the major sites. However, having said all that we have also embarked on now a global campaign to bring on more sites sites that maybe we overlooked earlier, perhaps whoever let them because we not this is going to be easier than we thought to get enrolled.

So those are now happening and that may well make a difference in enrollment.

And you also perceptively point out that the original hypothesis and C. G was really the folks that have this disease.

We'll have lots of activated complement in the periphery, we measure it with Sci Fi be through nine in the circulation because that is a stable marker.

And one that's acknowledged to be reasonably easy to measure and reliably.

Easy to measure in clinical trials.

That guy is almost that's enrolled virtually enrolled now so we would have the potential and that was in our original stats plan as well to look at those two strata separately. So we're going to see how things go for the next few weeks and then again will reveal to the community. What our plan is about how we are analyzing those two strada separately collectively or or what have you.

But thanks for the question.

Thank you.

Your next question comes from the line of add White from H.C. Wainwright. Your line is now open.

Hi, Thomas Susan Thanks for taking my question.

I'm good.

Thanks, Ed.

So just maybe for Susan the cash burn guidance is lower by 5 million from last quarter.

So I'm just wondering.

You know where that savings came from.

And then also it appears to me that you have cash runway.

Through all five data readouts, but I just want to confirm your thoughts on that.

Sure. Thanks for the question Ed So, yes, you're correct I can confirm that the reserve balances of cash and investments do indeed take that to be five anticipated data readouts that Tom with you during the call today and with respect to the lower guidance and let's just say, we're just tracking lower as you can see from our actuals for the first six months, it's really largely due to timing. It. So just because it's an ancillary studies and things of this story, they're just starting a little later so.

Nothing nothing to magical about that revised guidance.

Okay, all right. Thanks.

And then I just want to.

Ah, Yes, you get a couple of questions because it seems like some of the.

Data readout timelines that's have.

You're now, saying 2020, where before you had said 80, perhaps like luminaire too.

Mid 2020 or in he chess you had said mid made or data in mid or second half the 2020.

Both of those you're now, saying 2020, I'm just wondering if it's just semantics or theres something some some difference there.

Thank you Ed, let's say it's semantics.

Lumina the Illumina, one study is actually running really well and running according to plan or maybe even slightly ahead. So luminent one is doing really well.

The HF study, we we lead for us at least temporarily modified our language because again, we weren't sure what the effect of of the other sponsors study would be but it turns out it doesn't seem to be affecting us much at all or in fact, maybe slightly positively. So if that trend continues again, we'll start supplying a lot more granularity, but I think were right in line with the original prediction.

And the the thing that has slipped admittedly is the C. G timeline for the reasons that we just described so.

That one is definitely have a little bit more difficult, but again, we are still predicting 2020. So between Q4 of this year and all through 2020, we hope to bring home. All these results from the five studies that I alluded to in the remarks.

Okay, great. Thanks, Tom says.

Mhm pleasure.

Your next question comes from the line of Ted Tenthoff from Piper Jaffray. Your line is now open.

Great. Thank you very much for the thorough update come in particular I really appreciate your differentiation is the interest space. Most of my questions have been answered, but I guess, maybe just sort of checking in on some of the earlier stage pipeline to the early progress that we should be anticipating thanks very much.

Great. Thank you Ted Yeah, we were pretty excited about some stuff that's emerging now in the earlier stage pipeline.

I hesitate to talk about it just yet this quarter, because I don't want to deflect the focus and attention on the Anca Vasculitis program, particularly in the other ones. We were we've been talking about we may have a little bit to say at a at R&D day about some of these other programs and when you might expect.

For some more details around those.

Great well look for different Bloom Burton if not before.

Thank you.

Your next question comes from the line of Ana Palm Rama from Jpmorgan. Your line is now open.

Hey, Tom Hey, Susan Thanks, So much for taking my question and congrats on all the progress here.

Thank you on your comment.

I have a question about the control group of advocate right. So you have the steroids taper over 21 week and some of the literature. We've been reviewing suggest there could be some incremental benefits of steroids over a short period of time, so help us get comfortable with the 26 week be that endpoint that there isn't any risk around a control arm.

Outperformance and Uh huh.

[noise], if a patient goes into remission, but then relapses.

It counts as a last observation carry forward right.

So.

Just.

Just maybe check my head on that so.

Thanks, so much yeah, so any problem excellent questions and you cut out there for some of that but I think I got the gist of it. So is there a risk of the control arm outperforming and advocate.

I'm, hoping not Tonight that hope is based on data. So what we did is we really carefully.

Modeled the advocate design on the one trial that we really had precedent for which is the rave trial and you know, but others may not be as familiar rave, what's reitox amount plus steroids versus the then standard of care, which was cyclophosphamide for steroids and essentially.

It was it was the same kind of taper, although it was not quite as protocol lies carefully at the start of that trial, but what we did is working with the the leaders in rave we very carefully protocol lies in regimented destroyed taper so that we could at minimum.

Compare to the extent possible apples to apples.

In this case hours 26 week remission data.

From rave with whatever we came up with advocate and for your listeners and other colleagues. The rave trial at week 26, right Tux amount plus steroids over the 26 week taper.

With respect to map that was a 64%.

Be bass equals zero plus being off of the steroids for four weeks that was the remission definition as it is an advocate versus the standard of care at the time, which was steroids plus cyclophosphamide that was 53% and so those two numbers while numerically different were statistically similar so they were it was a statistical non inferiority for REIT stocks in them and that was enough to get an approval because reitox emad had some perceived benefits of safety over cyclophosphamide by the way none of those benefits were in evidence in the rave trial. It was merely approved on the b that endpoint.

But having said all that so we work with the guys who ran rave and we said, let's let's have current clinical practice, which is.

Overall trending lower to steroid load as I already alluded to from my comments on Pexip bass, but certainly within the range of what was happening and Ray we just really protocol lives it standardize that and put it into kits. So that nobody could vary from that from that protocol I steroid regimen. So our model for advocate is probably you know the the control arm should be somewhere in the middle of what I just talked about so you could use them. The number of six zero for the control arm do we expect a big variance of that I don't think sell and if any variance occurs in any of the arms. It would have to come from a significant deviation of non study supplied glucocorticoids in in this example, we're talking about a glucocorticoid.

And that would be in fact, a failure and intend to treat failure.

And so relapse is also again there are strict rules to get to the second question strict rules about if it's a major relapse you're absolutely right then they that we carry that forward and that's part of the calculation for I T T.

We keep them in the trial because there is much to learn from those patients still obviously.

But for the purposes of Eve as it would be.

Would be scored that way you could have minor symptomatology.

Of temporary nature et cetera, and you wouldn't necessarily be scored as a relapse, but again that is strictly protocol lies and also there's a consulting committee for be best scoring the Vivacit Beautification committee to try to standardize all of these practices all of the calls and to be best scoring is adjudicated and standardized by that Central Committee. So we think to the greatest extent possible. We think we've controlled for the kinds of things that you you've alluded to because we were worried about those things from the very start and I think.

I think expert opinion is that we probably captured it certainly as well as could be expected in the trial.

Great. Thanks, so much for taking my question.

Your next question comes from the line of Hershey, Hopefully studies from Riley FBR. Your line is now open.

Hey, Tom and Susan Thank you for taking my questions. Just one on my end with regard to Ssds.

Could you shed some color on the relationship between proteinuria and EGI Fr I guess, what I'm ultimately trying to get at is understanding how important is change in EG fr. All my time and assessing kidney function alone.

That's a great question and for different kidney diseases.

It seems like there are somewhat different answers generally speaking people believe that proteinuria reduction will correlate overtime with stabilizations.

And perhaps even improvements in EG fr overtime estimated glomerular filtration rate.

What's been really interesting is how regulators have tried to look at data sets across various kinds of chronic kidney disease and correlate what kind of reduction in proteinuria might correlate with longer term outcomes, including again stabilization at minimum of Jeff are.

So that's been a little bit more difficult question, particularly since in rare for chronic kidney diseases like Fscs and I Jane a frothy that the number the datasets aren't large even an aggregate because the fact that it's an orphan disease or orphan indications I should say so.

Generally speaking however.

What we know is that proteinuria as is is.

A drop in proteinuria is indicated a better kidney function and you can measure it in a shorter term, which is why its become very attractive.

And in fact for some of these indications the FDA has been pretty clear that for example, nephrotic levels of proteinuria that above three grams per day three grams of.

Of urinary protein per hour, creating gram of granting and the blood.

That that nephrotic syndrome that even showing say a 30% reduction might be very interesting and could correlate to longer term benefit. So people are starting to look at 30% reductions as being kind of an interesting feature for some of the rare disease.

And obviously the.

As the two bills and so on so, especially in things like FX Gs the reduction of proteinuria is thought not just to be diagnostic.

And prognostic, but may be mechanistically related so it's still enough solving picture, but I think the FDA is paying a lot more attention to proteinuria reduction at least where for whatever reason the evidence seems satisfactory to them that if you are lowing protein in the first few months and if that is sustained over many months that should relate to a stabilization of gfsr over a longer period of time, which of course will keep people out of dialysis.

Which is the ultimate outcome that everyone wants to think about but dialysis outcomes take many years as you know and to be certain about those they take many hundreds or thousands of patients you are simply not going to get that an orphan diseases. So we and others are looking especially NFS yes.

Hi, Jane a property is another one that the FDA has given some blessing to for proteinuria reduction.

We and others are looking at that as an endpoint and then it will just remain to be seen in discussion with FDA, whether or not the degree of proteinuria reduction over the time period that we bring in the data set.

Is sufficient for registration and or at least sufficient for.

Conditional approval or and or finally at least sufficient to say here's how to do the longer term and somewhat larger trial to get a license for that agent.

Great that's very helpful. Thanks again.

Thank you.

I'm showing no further questions at this time I would now like to turn the conference back to Mr. Thomas Schall you May proceed.

Well. Thank you very much I just want to thank everybody again for taking the time to join US. This afternoon I want to thank everyone for their excellent questions and I look forward to giving you more updates in the coming weeks and quarters and at our R&D day in October . Thanks, again for your participation have a good afternoon.

Ladies and gentlemen. This concludes today's conference. Thank you for joining and have a wonderful day.

Ill discipline.