CymaBay Therapeutics, Inc. (NASDAQ:CBAY) Q4 2022 Earnings Call Transcript

CymaBay Therapeutics, Inc. (NASDAQ:CBAY) Q4 2022 Earnings Call Transcript March 16, 2023

Operator: Good day ladies and gentlemen and welcome to CymaBay’s Fourth Quarter and Full-Year 2022 Financial Results and Business Update Conference Call. Following the formal remarks, we will open 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. And now, I would like to turn the call over to Mr. Paul Quinlan, General Counsel at CymaBay. Thank you 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 fourth quarter and full-year 2022 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, President of Research & Development and Chief Scientific Officer; 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 manufacturing and commercialization are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

Although CymaBay 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. CymaBay 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. We finished 2022 with significant progress in our Phase 3 program for seladelpar in patients with primary biliary cholangitis or PBC. In parallel, we were establishing our readiness for its commercial manufacturing and also creating our pre-launch infrastructure and go to market plans. Importantly, we delivered through presentations and publications on our foundational commitment to understand the science of seladelpar’s potential for action on disease, improvement in symptoms, and confirming its effects after long-term treatment on serum biomarkers linked in the literature to improve transplant-free survival. We didn’t rest on our laurels with those 2022 accomplishments.

We came fast out of the blocks in 2023 with licensing Japan rights to seladelpar providing significant upfront cash, followed closely by a significant capital raise at a favorable valuation. By the end of January, we had strengthened our balance sheet by over $125 million to meet our planned operating cash needs 12 months beyond top line Phase 3 RESPONSE results expected in the third quarter of 2023. In short, we’ve set the stage to execute on our 2023 objectives to potentially transform the company by placing us on the doorstep of an NDA submission. And if successful, approval of our first product. Our prepared remarks today will be focused on key business updates centered around substantial advancements in the company’s clinical development program of seladelpar for patients with PBC, organizational growth and focus necessary to bring seladelpar to patients, and financial position to support value creation for all of our stakeholders.

At the core of our clinical activities, our two active global clinical trials, RESPONSE and ASSURE that are part of one of the most robust development programs ever conducted for patient with PBC. I’ll ask Chuck McWherter, our Chief Scientific Officer and President of Research and Development to start the call today with an overview of our clinical accomplishments over the past year, including presentations made at DDW, EASL, and AASLD last year and the latest progress on development activities. In addition to clinical progress, the past year was importantly defined by critical infrastructure and organizational growth necessary to enable the transition of our seladelpar clinical program to a commercial effort aimed at improving the lives of patients with PBC.

I will speak today about our business development efforts that led to our partnership with Kaken in Japan; CMC, regulatory, and quality priorities to enable NDA filing; and balance sheet growth positioning us with a cash runway beyond key catalysts in the second half of this year. I will ask Lewis Stuart, our Chief Commercial Officer to also outline critical progress in pre-commercial planning that kicked-off in 2022 and will continue through this year. We’ll end today’s call with Dan Menold, our VP of Finance, who will provide an overview of our financials during the fourth quarter and full-year 2022 before taking questions. Chuck?

Chuck McWherter: Thank you, Sujal. We made tremendous strides in 2022 marked by important accomplishments in our clinical development program and multiple data presentations made at three key medical meetings. The progress we made reflects our commitment to bring seladelpar to patients with PBC, through well-designed studies to understand its efficacy and safety. We believe that understanding the mechanistic underpinnings on the observed improvements and studies to date in markers of cholestasis, liver injury, inflammation, and pruritus is vital to gain the confidence of all our stakeholders, including the medical, regulatory, payer, investor and most importantly, patient communities. In addition, we organized and streamlined the oversight of our R&D function and decision making.

We recruited seasoned talent in clinical development and operations, biometrics, manufacturing, regulatory and quality, and medical affairs. Filling out our R&D capabilities, while simultaneously executing on seladelpar in development, was an imperative to enable meeting our goals in 2023. As the Omicron variants created a significant drag on the execution of clinical research across the globe, we mounted an aggressive on the ground White-Glove recruitment effort for RESPONSE, our global Phase 3 registration study of seladelpar in PBC. The CymaBay team hit the road conducting face-to-face interactions with personnel from about 70 sites, with site visits and focused mid-study investigator meetings. We provided hands-on solutions for recruitment with two-way communication that we believe visibly demonstrated our commitment to our worldwide network of investigators.

By the end of July 2022, the study enrolled 193 patients meeting the eligibility criteria of an inadequate response or intolerance to ursodeoxycholic acid, patients were randomized 2:1 to daily oral seladelpar 10 milligrams or placebo. We expect to report top line data from this study in the third quarter of this year. In 2022, we also made significant progress advancing the ASSURE open-label extension study that today includes over 200 patients from our prior clinical studies and from response taking seladelpar once daily. Inclusive of these two ongoing studies and across our entire development program, we expect to have over 600 unique PBC patient experiences, majority of which will have had anywhere between 1 years to 3 years of experience on seladelpar by the time we plan to apply for regulatory approval.

We believe that another significant aspect to ASSURE is that a majority of sites along with a significant proportion of patients from prior studies elected to participate in it, providing us encouragement regarding their prior experience with seladelpar. We had significant presence at three major medical meetings in 2022. At the annual Digestive Disease Week held in San Diego last May we’ve had an oral presentation in the Presidential plenary session on the impact of seladelpar on predicted survival after two years of treatment. We also had two posters that received conference poster of distinction awards. One presented a pooled analysis of patients with compensated cirrhosis and the other examine the effect of seladelpar on biochemical response and safety in patients with prior experience with obeticholic acid and fibrates.

At the EASL conference held in London last June, one of our main meeting highlights was an oral presentation by our collaborator, Professor Bernd Schnabl from The University California San Diego. He described studies established in the seladelpar acts through PPAR delta to suppress bile acid synthesis by upregulation of FGF21 in hepatocytes. This result explains at least in part, its anti-cholestatic effect. Importantly, his research established that seladelpar suppression of bile acid synthesis is via an entirely different pathway than that of FXR agonists, such as Ocaliva. Additional presentations at this meeting reported comparable safety and efficacy in a pooled analysis in patients with and without compensated cirrhosis. And a detailed mechanistic investigation, of seladelpar’s ability to reverse established fibrosis in mouse injury models, where it was found to provide greater FX than either an FXR agonist for a thyroid hormone beta receptor agonist.

Both of which are in active development for fibrotic liver disease. Traditionally, flagship meeting for us is the Liver Meeting hosted by the American Association of Liver Disease. Held in November of last year in Washington DC, we had two new presentations of clinical results for seladelpar in PBC. The first was a poster reporting on a post-hoc pooled analysis of lipids from the seladelpar open-label Phase 2 and Phase 3 ENHANZE studies in PBC. Dyslipidemia is a common feature in PBC and so we were interested in understanding how lipids were affected by seladelpar treatment in PBC patients. Changes in lipids were analyzed for 373 patients with PBC receiving daily oral treatment with placebo, 5 milligram or 10 milligrams of seladelpar at 1, 3, and 6 months.

The majority of these PBC patients had dyslipidemia with 77% being above normal total cholesterol levels, and 54% with elevated LDL cholesterol levels. Seladelpar treatment resulted in dose dependent decreases in total cholesterol and LDL cholesterol. And these changes were significant for those taking seladelpar 10 milligrams versus placebo. Interestingly, these effects were similar for the approximately 25% of patients on a background lipid therapy, compared to those who were not. Metabolic risk is a common characteristic in this population and the profile of seladelpar seen thus far is encouraging in this aspect. A second clinical presentation was made by the CymaBay research team describing an analysis of the Serum Metabolome of 160 patients completing three months of treatment in the ENHANZE study.

This analysis found broad dose dependent changes in the unbiased survey of 1,474 metabolites. Seladelpar was found to increase serum markers of mitochondrial and peroxisomal fatty acid beta oxidation, indicated by increase in carnitine, and acyl carnitines and decreases in dicarboxylates and significant reductions reduced serum levels of inflammatory lipid mediators, including long chain fatty acids, mono and diacylglycerol, eicosanoids, Ceramides and Sphingomyelins. Measured in our target PBC population, these results provide clinical evidence of seladelpar’s impact on mitochondrial function, as well as reductions in the serum of known inflammatory mediators. In 2022, two important peer-reviewed publications of results from the Phase 2 52-week dose ranging study of seladelpar in adult patients with PBC receiving seladelpar as add-on therapy to first line ursodeoxycholic acid or as monotherapy to the patients intolerant to UDCA were published.

Photo by Akram Huseyn on Unsplash

The first paper published in the Journal of Hepatology with the Lead Author Professor Chris Bowlus describes the treatment response and patients enrolled with a minimum serum alkaline phosphatase level of 1.67x the upper limit of normal or 194 units per liter. And these patients were on average in excess of 318 units per liter. Seladelpar was studied at 2, 5, or 10 milligrams for 12-weeks, after which doses could be increased up to 10 milligrams if needed to improve treatment response. Cirrhosis was present in 21% of patients and 71% had pruritus at baseline. At week 52, the composite biochemical response of ALP and bilirubin rates in patients initially randomized to 5 milligrams and 10 milligrams were 53% and 67%. ALP normalization rates in these cohorts were 13% and 33% respectively.

The pruritus visual analog scale was also decreased in the 5 milligram and 10 milligram cohorts. There were no treatment related serious adverse events and four patients discontinued due to adverse events. A companion paper appeared in print and liver international last year reporting the effects of seladelpar treatment in this study on patient reported symptoms of pruritus, sleep, and fatigue through one-year of treatment. In patients with moderate to severe pruritus, substantial improvement in pruritus was seen in 58% and 93% of patients in the 5 milligram and 10 milligram cohorts respectively. After one-year, patients reporting the improvement substantially outnumbered those who worsened in the total 5D itch scale and PBC-40 itch and fatigue domain questionnaires.

Improvement in sleep disturbance at one year was reported in 81% of the 5 milligram cohort and 78% of the 10 milligram cohort in those patients with baseline itch related sleep disturbance by the 5D itch score with similar results using the PBC-40 sleep questionnaire. Seladelpar treated patients had significant reductions of 46% in the 5 milligram cohort and 31% in the 10 milligram cohort in the serum bile acid precursor C4 and reductions of up to 38% in serum bile acids. Improvements in liver biochemistry and patient reported symptoms were generally confirmed at three months in the Phase 3 placebo controlled ENHANZE study, which we have now submitted for publication. Finally, I want to recognize our medical affairs team as we increased our effort to broaden engagement and scientific exchange with PBC key opinion leaders, our other healthcare providers and advocacy groups.

Sujal?

Sujal Shah: Thank you, Chuck. We made great strides supporting our overall goal to bring seladelpar to patients with PBC, along with the important progress in clinical development that Chuck highlighted. I’ll walk through a number of areas of progress that are vital to our future success. First, our business development activities have been focused on evaluating potential partners who can help us bring seladelpar to patients around the world, particularly in geographies outside the U.S. and Europe where additional development beyond our ongoing clinical studies will be required. In January, we were thrilled to announce our partnership with Kaken pharmaceutical company to develop and commercialize seladelpar for patients with PBC in Japan.

Kaken is a recognized leader in pharmaceutical industry in Japan with a strong history of scientific and medical innovation and a clear focus on improving the quality of life for patients. In exchange for the exclusive license to develop, commercialize, and market seladelpar in Japan for PBC, CymaBay received an upfront payment of $34.2 million and will receive potential milestone payments totaling up to approximately $128.4 million at current exchange rates for the achievement of certain regulatory and sales milestones in addition to net effective royalties. Kaken will be responsible for development, regulatory approval, and commercialization of seladelpar in Japan. There are currently no approved second-line treatments for PBC in Japan.

We could not have found a better partner who shares our values and our passion for the potential of seladelpar to significantly improve care and quality of life for patients with PBC and are excited to see this work advance. Key activities related to CMC, regulatory and quality functions are all crucial as our clinical development program progresses. Our teams have been ensuring that we are prepared to quickly file for regulatory approval should we confirm the efficacy and safety profile of seladelpar in our ongoing clinical studies. And to supply seladelpar should we be successful at gaining regulatory approval. These efforts are vital to our overall success and remain on-track for us to accomplish our objectives as the program progresses.

Another very important work stream has been pre-commercial planning. I’ll hand the call now to Lewis Stuart, our Chief Commercial Officer to outline key initiatives in this area. Lewis?

Lewis Stuart: Thank you, Sujal. In 2022, our commercial focus was on assessing seladelpar’s global market opportunity while conducting foundational market research and analysis within prioritized to region geographies. Our global market evaluations included both primary and secondary research across all key stakeholders, including PBC patients, while also examining healthcare providers perceptions of current PBC treatment versus seladelpar’s target product profile. It was equally important that we conduct market access landscape research in the U.S., Europe, and Japan as a means for defining the value proposition, reimbursement strategies, and optimal coverage pathways for each regional geography. As you may recall in September, we held a PBC Analyst Day, where I shared a summary of our findings, highlighting insights from our U.S. based research.

As I mentioned during our last earnings call, these global insights from patients, healthcare providers, and payers have aided in the development of our core strategic imperatives with the goal upon approval of achieving widespread patient access to seladelpar. In Q4 2022, we developed our initial global go to market strategy. And today I would like to share some of the essential themes from these plans. CymaBay’s commercial vision, will be driven by a laser focus on PBC and its stakeholders, utilizing a high touch engagement model that is supported by scientific rigor and innovation. Our partnership with healthcare professionals is to support this pursuit of an enriched quality of life, coupled with the potential to demonstrate improved health outcomes, but their PBC patients.

Our success in achieving this vision begins with the science of seladelpar, and its potential for resetting the ideal goals for PBC treatment with a greater portion of patients experiencing biochemical normalization, along with the alleviation of symptom burden. Our research shows that these new goals could significantly expand the second-line market opportunity, while improving each stage of a PBC patient’s overall treatment journey. Furthermore, our previous Phase 3 clinical study results from ENHANCE gives us confidence in seladelpar’s promise of becoming an optimal solution for changing the future PBC treatment paradigm. You will recall that in ENHANCE we observed higher biochemical responses and normalization rates for ALP and ALT, significant improvements in moderate to severe pruritus demonstrating these, as well as other efficacy and safety measures in both non-cirrhotic and compensated cirrhotic patients.

A second theme to seladelpar’s success will be maximizing patient access and compliance. Our U.S. market access landscape research reveals payers preference for seladelpar’s target product profile over that of obeticholic acid. Other analysis indicates consistent coverage of OCA in recent years, reflecting our confidence in seladelpar experiencing similar if not improved coverage. Moreover, the recent announced drug coverage enhancements for Medicare eligible patients could provide tremendous relief in out of pocket cost, including in many cases the elimination of monthly co-pays. Our development of a high-touch service model will be designed to support each patient’s access to seladelpar, as well as their overall treatment experience. A third strategic theme of our go-to-market plans will be to maximize seladelpar value in the U.S. by leveraging local expertise through partnerships in ex-U.S. prioritized regions.

The recent announcement of our collaboration with Kaken in Japan is an example of this endeavor and we are actively engaged in partnering discussions for other markets, including Europe. Let me now turn the call over to Dan to summarize our financials for the fourth quarter and full-year 2022. Dan?

Dan Menold: Thank you, Lewis. As others on the team have highlighted, during 2022, we focused our resources on executing the patient treatment phase of the fully enrolled response study and continuing enrollment of the ASSURE study. We also continue to advance other required clinical and regulatory activities necessary to complete our late stage development of seladelpar in PBC. And finally, we made further progress in manufacturing, as well as in medical affairs and commercial where we continue to plan and prepare for potential future launch of seladelpar in PBC. From a financial perspective, we finished the year with a strong balance sheet with cash, cash equivalents, and investments totaling $135.5 million as of December 31, 2022.

We further enhanced our cash position in January 2023 following the receipt of a $34.2 million upfront payment from our Kaken collaboration and the completion of a $94.2 million public equity offering. Overall, we believe that our year-end cash and investments on-hand together with the upfront Kaken payment and equity offering proceeds received in January 2023 will be sufficient to fund our operating plan through the third quarter of 2024. I will now turn to a review of our fourth quarter and full-year operating results. Research and development expenses for the quarters ended December 2022 and 2021 were $16.2 million and $18.4 million respectively. Research and development expenses in the quarter ended December 2022 were lower than 2021, primarily due to the completion of the enrollment phase of the RESPONSE trial in July 2022 and lower spending in other Phase 1 NDA enabling clinical studies.

Research and development expenses for the years ended December 2022 and 2021 were $68.0 million and $64.5 million, respectively. Overall, these expenses were higher in 2022 due to a $5.6 million in internal costs, which rose to $26.4 million as we added research and development personnel to support our late stage clinical studies in PBC. This increase in internal costs was partially offset by a slight decline in external development costs related to our CROs, CMOs, and other clinical and preclinical study vendors. Specifically, these external development costs decreased by $2.1 million to $41.6 million, due primarily to the completion of enrollment of the RESPONSE trial and lower spending in other clinical studies during 2022. As we continue to progress late stage development of seladelpar in 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 December 2022 and 2021 were $7.2 million and $6.1 million respectively, and for the years ended December 2022 and 2021 were $25.1 million and $23 million respectively. General and administrative expenses in the quarter and year ended December 2022 were higher than the corresponding periods in 2021, due primarily to the hiring of additional personnel to support our corporate growth. Overall, our net loss for the quarters ended December 2022 and 2021 was $26.6 million and $26.5 million or $0.30 and $0.34 per share respectively and net loss for the years ended December 2022 and 2021 was $106 million and $90 million or $1.21 and $1.27 per share respectively.

Net loss for the full-year 2022 was higher than 2021, due primarily to an increase in research and development and general and administrative expenses, as well as an increase in net interest expense related to our Abingworth development financing agreement. Overall, we expect our operating expenses to increase in the future as we continue to execute our development plans for seladelpar and PBC. Let me now hand the call back to Sujal.

Sujal Shah: Thank you, Dan. We could not be more excited about the year ahead of us at CymaBay. While we are proud of our recent accomplishments, we have much more to do ahead of us, as we maintain our laser focus on being an innovator and a leader in improving the lives of patients with PBC. We have assembled a committed and talented team here at CymaBay to bring our Phase 3 program to completion and submit for regulatory approvals, but also to begin key initiatives in medical affairs pre-commercial planning and life cycle management. We also continue to invest in understanding seladelpar’s effects in PBC and believe there is more to its potential benefits that have yet to be fully appreciated. Having worked with healthcare providers and patient advocacy groups in PBC since 2015, we believe we are well-equipped to be an innovator in this disease for years to come.

We are grateful for their partnership as we approach a transformational year ahead at CymaBay for all of our stakeholders, most importantly patients. We’re now happy to take questions. Operator?

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Q&A Session

Operator: Thank you, sir. And our first question comes from the line of Yasmeen Rahimi with Piper Sandler. Please proceed.

Yasmeen Rahimi: Good afternoon team, and congrats on all the great progress, and we’re really looking forward to the data. Few questions for you. One of the feedback we have been getting as we speak with PBC is how the entire PBC community is moving forward towards alkaline normalization rather than the upper limit. So, I would love to ask the question with that, have you €“ what does your market research say in terms of, you know, what percentage of the physician community are moving forward towards that goal? And then maybe some color on how the guidance is written or if they’re going to be updated because obviously that will substantially increase the market size? So, that’s sort of bucket 1. Bucket 2 is, Sujal, I’m certain that strategic interests have been high and will continue to be high and a question that we’re getting is, how do you weigh the pros and cons of M&A before or versus after data?

And then the third one is, for Chuck in regards to the Glove service that was provided through RESPONSE, we recognized that that really helped expedite the enrollment, but could you, maybe put in context how dose measures reduced heterogeneity and maybe ensure really a success, further success, some of the nuances? Sorry for the long question, and I’ll jump back into the queue. And thank you for taking them.

Sujal Shah: Thank you for the questions. Yes. Let me start-off and of course I’ll ask Chuck to add as well. Your first question was around treating patients to normalization with respect to biochemistries and particularly alkaline phosphatase, a liver enzyme that’s been associated with progression of disease and a reduction of which has been associated with reducing the progression of disease and particularly improving transplant free survival. In terms of our discussions, yes, I think as we’ve had conversations with many of the healthcare providers and particularly the thought leaders in the field globally, there’s no question that as potential agents like seladelpar where in our clinical studies to date, we’ve seen anywhere from 30% to 40% of patients enrolled in our prior studies between 1 years and 2 years of treatment actually experienced normalization of alkaline phosphatase.

There’s no question that there’s a push now to think about treating patients really to normal biochemistry. It’s not something that I would tell you have been able to really focus on in the absence of potential treatment alternatives that bring a good proportion of patients to normalization. The historical data sets that have been gathered among many of the databases, global PBC study group, but others as well, you know do in fact point to an increased benefit with respect to transplant free survival not only when you bring alkaline phosphatase levels lower, but when you actually bring them into the normal range. So, this association is one in which I think there’s much greater appreciation from healthcare providers. And over time, we think a greater appreciation from payers and the community at large.

And we think this is one of the potential advantages that seladelpar has. Chuck, anything to add?

Chuck McWherter: No, I think that’s a pretty good summary, Sujal.