CymaBay Therapeutics, Inc. (NASDAQ:CBAY) Q1 2023 Earnings Call Transcript May 15, 2023

CymaBay Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-0.29 EPS, expectations were $-0.09.

Operator: Good day, ladies and gentlemen, and welcome to CymaBay’s First Quarter 2023 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks today, we will open up the call for your questions. Please be advised that the call will be recorded at the company’s request. It is also being webcast live on the Investors section at the CymaBay website at www.cymabay.com. At this time, I would like to turn the call over to Mr. Paul Quinlan, General Counsel at CymaBay. Mr. Quinlan, please proceed.

Paul Quinlan: Thank you operator, and good afternoon, everyone. I hope that you have had a chance to review the press release we issued announcing our first quarter 2023 financial results and business updates. You can access that release on our website under the Investors tab. Joining me on the call today are Sujal Shah, Chief Executive Officer; Chuck McWherter, Chief Scientific Officer and President of R&D; Lewis Stuart, Chief Commercial Officer; and Dan Menold, VP, Finance. Following our prepared remarks, we will open the call for Q&A. Before we begin, I’d like to remind everyone that statements made during this conference call, including the Q&A session relating to CymaBay’s expected future performance, business prospects, events or plans, including clinical plans, regulatory approvals, funding and repayment schedules, anticipated timelines and data release dates, cash runway and planning for commercialization are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

Although, company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual outcomes, and results are subject to risks and uncertainties and could differ materially from those forecast due to the impact of many factors. The company assumes no obligation to update or supplement any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. Participants are directed to the cautionary statements set forth in today’s press release, as well as the risk factors set forth in CymaBay’s quarterly and annual reports filed with the SEC for factors that could cause actual results to differ materially from those anticipated in the forward-looking statements.

This conference call is the property of CymaBay and any recording or rebroadcast is expressly prohibited without the written consent of CymaBay. At this time, I’d like to turn the call over to Sujal.

Sujal Shah: Thank you, Paul. Good afternoon, and thank you for joining us today. 2023 continues to be an exciting year for CymaBay with only a few short months before we report results from the RESPONSE Phase 3 study of seladelpar in patients with primary biliary cholangitis, or PBC. Conducted across five continents, the seladelpar development program embodies our commitment to advancing care for patients with this rare autoimmune liver disease. In service of their need for improved treatments, we have worked in close collaboration with patient advocacy groups and the world’s leading disease experts to ensure that the design of the seladelpar program evaluates those aspects most important for patient needs. Our early Q1 accomplishments included licensing of rights to develop and commercialize seladelpar in Japan to Kaken Pharmaceutical Company and a follow on equity offering.

The capital we raised will fund our operating plan through Q3 of 2024. Our update today will describe our key activities, progress, and accomplishments made since our last call and will share catalyst expected in the months ahead. Last week, we announced the appointment of Harish Shantharam as our Chief Financial Officer. For almost 20 years, Harish led various financial functions in commercial biotech companies, with a particular focus on setting strategy and building financial planning and accounting operations to prepare companies for commercial drug launch. Harish spent 11 years at Gilead Sciences last serving as Vice President and Head of Global Commercial Finance. Prior to Gilead, he served in various roles of increasing responsibility, driving forecasting commercial analytics, and business development at Amgen.

Over the course of his career, Harish has supported multiple product launches and brings his operational leadership capabilities as well as his strong strategic finance and commercial experience to CymaBay as we embark on a transformation to becoming a fully integrated commercial biotech company. We are thrilled to have him on our team and look forward to his impact on our mission to deliver seladelpar to patients with PBC. Since our last update call, we have continued to collaborate with PBC stakeholder communities. In April, we had the opportunity to be a sponsor and participant in the 10-year anniversary meeting of the global PBC study group that assembled experts, advocacy groups, regulators, and industry with the theme on the future of treating PBC.

Emerging concepts included advancing treatment goals to include normalization of cholestatic and inflammatory markers of disease, addressing clinical symptom burden, particularly fatigue and pruritus, and leveraging inherent knowledge within real world data to better understand risk parameters and effects of treatments on long-term outcomes. Thanks to the advances by so many around the world, we are convinced that an important inflection point is at hand for treating patients with PBC. Novel improved treatments and growing investments by the collective community is increasing awareness and diagnosis of PBC. Our goal is to increase the number of patients treated with therapies that for the first time have the potential to both reduce the risk of disease progression while also improving quality of life.

Today I will ask Chuck McWherter, our Chief Scientific Officer and President of Research and Development, to provide important updates on our clinical progress. Lewis Stuart, our Chief Commercial Officer, will then share a brief summary of our pre-commercial planning activities before handing the call to Dan Menold, VP of Finance to review our financials for the first quarter. Chuck?

Charles McWherter: Thank you, Sujal. I’m pleased to report the progress we made this quarter in our two global Phase 3 studies of seladelpar in patients with PBC. The pivotal RESPONSE study and the long-term safety ASSURE study are together currently active in more than 25 countries and more than 115 research sites and with more than 300 participants. We continue to be encouraged in both studies with patient retention. The most recently quarterly review by the RESPONSE Data Safety Monitoring Board directed that as before the study can continue without any changes. Our team is collaborating with our partners and the sites to complete RESPONSE and then to analyze data from both studies. Our goal is to share top line results from RESPONSE in the third quarter, and then to submit an NDA as soon as feasible.

Our aim for RESPONSE is to confirm the significant and clinically meaningful placebo controlled results observed in ENHANCE after three months. In RESPONSE, the alkaline phosphatase and bilirubin composite and alkaline phosphatase normalization endpoints are at 12 months, and the pruritus endpoint is at six months. The ENHANCE results were published online late last month after peer review in the AASLD flagship journal Hepatology. The article reports results in patients with PBC, having persistent elevations in alkaline phosphatase, most of whom are taking, if tolerated first-line ursodeoxycholic acid. After three months in ENHANCE, nearly 80% of patients taking daily oral seladelpar 10 milligrams achieve the alkaline phosphatase bilirubin composite endpoint previously used by regulators for approval.

Nearly one in three of these patients achieved normalization of alkaline phosphatase after three months, despite having an on average pre-treatment level of two and a half times the upper limit of normal. The article further reported that in patients with pre-specified baseline moderate to severe itch, those taking seladelpar 10 milligrams for three months had significant improvements compared to placebo in their pruritus intensity, using a daily electronic diary. ENHANCE is the first study in patients with PBC, using a pre-specified testing of endpoints of markers of disease activity and symptoms to achieve both significant and clinically meaningful differences on active treatment compared with placebo. Once again, we will have a significant presence with three accepted abstracts to be presented at the EASL Conference in Vienna, Austria from June 21st to 24th.

Once the EASL embargo is lifted in June, we’ll be able and eager to share the insights we’ve gathered in an abstract titled seladelpar treatment resulted in correlated decreases in serum IL31 and pruritus in patients with primary biliary cholangitis. Post-talk results from the Phase 3 randomized placebo controlled ENHANCE study to be presented by Professor Andreas Kremer of the University of Zurich. The IL31 pathway is a validated target associated with chronic pruritus in dermatological diseases. A second clinical abstract to be presented by Professor Gideon Hirschfield from the University of Toronto Liver Center is titled Baseline Characteristics and Risk Profiles of 1,111 Patients with primary biliary cholangitis in need of second line therapy.

CymaBay has acquired considerable experience having conducted clinical research in PBC since 2015. The third accepted abstract is titled Novel Pathways implicated in the seladelpar mediated reductions of established liver fibrosis are identified from RNA-SEQ data using plex search and two independent mouse pharmacology data sets. Presented by the CymaBay research team, new mechanistic preclinical findings are recorded. The full results of these abstracts and the progress they represent will be available at the Congress. At this time. I’ll turn it over to Lewis.

Lewis Stuart: Thank you, Chuck. During our last quarterly call, I shared several themes that our core components of our seladelpar go-to-market strategy. Beginning in January, we began activating numerous work streams from our commercial roadmap that will lay the groundwork for the company’s overall launch readiness and set a course for flawless execution of the seladelpar PBC launch. We initiated key commercial infrastructure projects within legal, finance, and human resources to support organizational readiness while beginning to evaluate logistic solutions to support our commercial supply and distribution channel strategy. Many of these projects have longer timelines with multi-stage deliverables, all to be enabled in careful alignment with key corporate milestones.

Our primary market research and data analytics initiatives are ongoing and continue to inform our HCP, patient and payer strategies. We recently finalized value messaging research with QUS payer organizations and were encouraged by their response to seladelpar’s target product profile, which we further strengthen by the results from our pivotal studies and continued evidence generation. Patient insights were also completed revealing the deeper emotional, personal and healthcare related needs of people living with PBC. In addition, we interviewed 125 hepatologists and gastroenterologists on their expected attitudes, drivers and behaviors relative to future PBC patient management, which we can then use for future segmentation and targeting efforts.

Finally, we’re so excited to have initiated our talent search for key commercial leadership roles scheduled for hire throughout the summer months as we prepare to accelerate our launch readiness plans in the second half of 2023. I’ll now turn the call over to Dan.

Dan Menold: Thank you, Lewis. As others on the team have highlighted, during Q1 2023, we made additional progress towards completing the patient treatment phase for the RESPONSE study, and in parallel, we’re preparing for final data analysis as we focus on delivering top line results in Q3 of this year and submitting our NDA thereafter. We further strengthened our leadership team and enhanced our strategic and operational commercial launch experience by recruiting Harish Shantharam as our new CFO. Overall, our efforts to begin transforming into a fully integrated commercial biotech company are underway as we work to execute on select strategic and operational commercial readiness initiatives to prepare for potential future launch of seladelpar and PBC.

From a financial perspective, we finished the quarter with a strong balance sheet with cash, cash equivalents and investments totaling $236.4 million as of March 31st, 2023. As a reminder from our year end call, in Q1 2023, we enhanced our cash position following the receipt of a $34.2 million upfront license payment from our Kaken collaboration and from the completion of a $92.4 million public equity offering. Overall, we believe that our cash and investments on hand as of March 31st, 2023 will be sufficient to fund our current operating plan through the third quarter of 2024. I’ll now turn to review of our first quarter operating results. Firstly, while the company received a $34.2 million upfront payment from Kaken, all revenue associated with our collaboration was deferred as of March 31st, 2023, pending completion of contractually required tech transfer activities and satisfaction of other future performance obligations associated with the agreement.

As for our operating expenses, research and development expenses for the quarters ended March 31st, 2023 and 2022 were $18.5 million and $18.4 million, respectively. Research and development expenses for quarter ended March 31st, 2023 were in line compared to corresponding periods in 2022, primarily due to the offsetting impact of lower clinical and CNC costs following enrollment completion of response in mid-2022, offset by higher employee compensation as we continue to hire additional personnel to support our clinical studies and other development activities. As we continue to progress late stage development in seladelpar and PBC, we expect our overall research and development expenses to increase in the future. Turning briefly now to a review of general and administrative expenses.

These costs for the quarters ended March 31st, 2023 and 2022 were $8.3 million and $6.1 million, respectively. General and administrative expenses for the quarter ended March 31st, 2023 were higher than the corresponding period in 2022 as we continue to add administrative personnel and expand our infrastructure in support of our corporate growth. Overall, our net loss for each of the quarters ended March 31st, 2023 and 2022 was $28.8 million and $27.8 million or $0.29 and $0.32 per share, respectively. Net loss for the quarter ended March 31st, 2023 was higher than the corresponding period in 2022 due primarily to an increase in general and administrative expenses partially offset by an increased in interest income earned on our cash equivalents and investments.

Overall, we expect operating expenses to increase in the future as we continue to execute our development and pre-commercialization plans for seladelpar and PBC. Let me now hand the call back to Sujal.

Sujal Shah: Thank you, Dan. While we are thrilled with the progress we have made thus far in the year, we are even more excited about the milestones ahead of us in the coming months. Our team remains laser focused on delivering seladelpar to patients with PBC, an objective that includes a deeper dive into the unique characteristics of the seladelpar mechanism, the impact seladelpar may have on both reducing the risk of disease progression and improving quality of life, and raising awareness of how we plan to lead a new frontier in treatment goals. We look forward to sharing more updates with you all at upcoming medical meetings, and of course, when we aim to share top line results from RESPONSE at the end of the third quarter. We’re now happy to take questions. Operator?

Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] Today’s first question comes from Yasmeen Rahimi with Piper Sandler. Please proceed.

Operator: The next question comes from Steve Seedhouse with Raymond James. Please proceed, sir.

Operator: The next question comes from Kristen Kluska with Cantor Fitzgerald. Please proceed.

Operator: Our next question comes from Patrick Dolezal with LifeSci Capital. Please proceed.

Operator: The next question comes from Julian Harrison with BTIG. Please proceed.

Operator: The next question comes from Andy Hsieh with William Blair. Please proceed.

Operator: The next question comes from Ed Arce with H.C. Wainwright. Please proceed.

Operator: Our next question is from Jay Olson with Oppenheimer. Please proceed.

Operator: The next question comes from Mayank Mamtani with B. Riley. Please proceed.

Operator: At this time, we are showing no further questioners in the queue. And this concludes our question-and-answer session. I would now like to turn the conference back over to Sujal Shah for any closing remarks.

Sujal Shah: Thank you all once again for joining us today. As we’ve mentioned a few times, it’s been a fast start to the year with much more ahead of us in the coming month. We look forward to sharing data at EASL at the end of June. Top line data from RESPONSE in the third quarter, and additional clinical and regulatory updates with you throughout the year. Thank you.

Operator: The conference is now concluded. Thank you for attending today’s presentation and you may now disconnect.