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Concert Pharmaceuticals, inc (NASDAQ:CNCE)
Q3 2021 Earnings Call
Nov 9, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Concert Pharmaceuticals Third Quarter 2021Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to Justine Koenigsberg. Please go ahead.

Justine E. Koenigsberg -- Senior Vice President, Corporate Communications and Investor Relations

Good morning, and welcome to Concert Pharmaceuticals third quarter 2021 investor update. Joining me this morning with prepared remarks are Roger Tung, our CEO; and Marc Becker, our CFO. Our prepared comments today will be brief, so we can jump right into the Q&A portion of the call. We will then be joined by Nancy Stuart, our Chief Operating Officer; and Jim Cassella, our Chief Development Officer.

As a reminder, today's discussion will include forward-looking statements about our future expectations, plans and prospects. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A description of these risks can be found in our most recent 10-Q filed with the SEC. Any forward-looking statements speak only as of today's date and we assume no obligation to update any forward-looking statements made on today's call.

With that, I would now like to turn the call over to Roger.

Roger D.Tung -- Co-Founder, President and Chief Executive Officer

Thank you, Justine. 2021 has been all about the execution of our CTP-543 pivotal programs for Alopecia Areata. With each successive milestone, our team continues to advance CTP-543 to help bring this important new agent to commercialization. Along this path, we announced last month that the THRIVE-AA1 trial is fully enrolled. This was a large undertaking to enroll more than 700 patients in an international trial involving nearly 80 sites, all of all dealing with the pandemic. I'm proud of the outstanding job that our team has been doing to manage this trial in line with our projected time lines.

Looking past enrollment of our first pivotal trial, we remain on track to file our CTP-543 NDA with the FDA in early 2023. We continue to expect top line results from both the Phase 3 trials next year. The THRIVE AA1 results are expected in the second quarter and THRIVE AA2 results are expected in the second half of 2022.

Let me just step back for some perspective on CTP-543's potential in the therapeutic landscape. We're very excited about the data we've developed to date with 543. Unlike other autoimmune and inflammatory diseases with currently approved therapies, Alopecia Areata has to date proven poorly responsive to the mechanisms of action outside of JAK inhibition. Based on the results we've compiled so far with 543, as well as top line data releases for other compounds being developed in the field, we continue to believe that 543 has potential to be a best-in-class compound.

During the past quarter, we had the opportunity to present findings from our ongoing 543 North American open-label extension study, the second JAK inhibitors drug development summit. As this presentation summarized, over 100 patients had been dosed with 543 for at least a year and a half. Importantly, a high percentage of eligible patients have elected to continue to participate in the extension study. As we presented treatment with CTP-543 and the study continues to be generally well tolerated with adverse events consistent with those reported into Phase 2 studies. The findings show that the SALT score assessing hair regrowth were maintained or improved in the vast majority of Alopecia Areata patients who continued in the study.

To sum up, we remain steadfast and focused on our execution of the CTP-543 clinical program on track for our pivotal data readouts next year, and we believe we have competitively advantaged JAK inhibitor for treating Alopecia Areata. Above all, we hope to bring CTP-543 to Alopecia Areata patients as soon as possible.

Let me pause here and turn the call over to Marc.

Marc Becker -- Chief Financial Officer

Thank you, Roger. As I review our third quarter 2021 financial results, please reference the financial tables found in today's press release. Research and development expenses were $21.9 million during the third quarter of '21 compared to $16.3 million during the same period in 2020. The Q3 '21 increase was primarily related to the ongoing CTP-543 Phase 3 clinical program. General and administrative expenses were $5.5 million during Q3 '21 compared to $4.5 million for the same period in 2020. The increase was primarily attributable to higher external professional service expense and non-cash stock-based compensation.

Our net loss for Q3 '21 was $26.7 million or $0.78 per share compared to a net loss of $18.9 million or $0.60 per share during the same period in 2020. While we ended the third quarter of 2021 with $103.7 million in cash and cash equivalents, I'm very happy to say we completed a financing last week whereby we raised an additional $65 million. This financing with BVF and RA Capital consists of three components; the sale of common and preferred stock, warrants, and a portion of potential future AVP-786 royalties under our existing licensing agreement with Avanir. We will have the potential to receive an additional $100.3 million upon the full exercise of warrants issued in connection with the agreement.

As a result, under our current operating plan, we expect our cash and cash equivalents to fund the company into the fourth quarter of 2022. If all of the warrants are fully exercised, we expect to be funded beyond the anticipated submission of our new drug application for CTP-543, which as Roger mentioned is expected in early 2023. This added financial strength will allow us to continue advancing the CTP-543 Phase 3 program, our key pipeline focus. As Roger mentioned at the start of the call, Concert has achieved several key milestones, setting the stage for 2022 to be an important year for us. CTP-543 for Alopecia Areata is advancing in two late stage clinical trials. We expect data readouts from both studies next year. The ongoing execution of our clinical program makes us optimistic for the future, as we hope to have the opportunity to bring CTP-543, a potential best-in-class treatment to market.

This concludes our prepared remarks and we would be happy to address any questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Jason Butler from JMP Securities. Your line is now open.

Devin Ryan -- JMP Securities -- Analyst

Hi, Devin for Jason. Thanks for taking our questions. I guess the first one on CTP-543. Just curious what the plans are for development ex U.S., with that drug? And then congrats on the on the recent financing. We're just curious if it's changed how you're thinking about the pipeline beyond 543 or even including further development of 543? Thanks.

Roger D.Tung -- Co-Founder, President and Chief Executive Officer

Hi, thanks very much for the question, this is Mr. Roger. So we do have development in the sense of clinical trial work that is going on ex U.S., or Phase 3 studies include trial sites that are scattered throughout Europe as well as in Canada. We do not have specific plans at this time for registration ex U.S., that's something that we're waiting on to really focus on the develop or the registration in the U.S. first. As far as additional development for 543 and ex 543 is concerned, we are -- we continue to be interested both in pipeline expansion through additional indications for 543 as well as for additional compounds. Our focus remains first and foremost on Alopecia Areata since we are currently into Phase 3 studies for it and we'll have more say subsequently.

Devin Ryan -- JMP Securities -- Analyst

Okay, thank you.

Operator

Thank you. And our next question comes from Joon Lee with Truist Securities. Your line is now open.

Les Sulewsk -- Truist Securities -- Analyst

Yes, this is Les [Phonetic] on for June. Good morning. And again, thanks for taking the call and congratulations on the financing. I just have a few questions regarding your involvement in the new Alopecia Areata disease severity scale. Can you provide more color on its development and what do you expect this approach to be implemented into clinical practice? Also, how does the new scale compared to SALT scores and could this be a replacement for SALT and any impact on your ongoing trials and the NDA filing? And lastly, were there any additional findings from your participation that could potentially broaden or enhance the market opportunity for AA and I have a follow-up?

James V. Cassella -- Chief Development Officer

Hi, this is Jim. So as far as the scale go, we think that this is an important step forward. This was initiated by Kay Wells, who really wanted to make sure that -- that the entire Alopecia Areata is taken into consideration when you start assigning severity scores to it. So in the past it's been mostly based on the amount of hair on your body scalp included, so the terms Alopecia universalis and totalis referred to complete baldness on the scalp and universalis included loss of hair on the body.

I think the importance of the new paper that was really both, KOL driven and with industry involvement was to highlight the notion that Alopecia Areata affects the whole being and it includes other factors in there when you're trying to look at severity. So to address your question about will this replace SALT? No, it won't, because SALT is a measurement tool that allows you to assess the amount of scalp loss. But this also -- this new scale takes into account whether or not there are other factors, whether or not their emotional and psychological factors, whether there's other burdens that will come into play and it will include the amount of hair loss, but it's going to be more flexible on the amount of hair loss, but take into account other factors like psychological impact and things like that. So that's on that scale, yeah.

Les Sulewsk -- Truist Securities -- Analyst

Very helpful, thank you for that. And then the second part, what is your take on FDA's expansion of box warnings for JAK Inhibitors? Do you see any potential breakthrough to see CTP-543 or is it premature to discuss labeling at this time? Thank you.

James V. Cassella -- Chief Development Officer

I think the FDA is building a knowledge base on JAK inhibitors, especially in the dermatology division. So I think that with the labeling they've come out with in terms of rheumatoid arthritis clearly effects that therapeutic indications. As far as the dermatology division, I think they're still determinations on the atopic dermatitis drugs that have been submitted for approval and there's no read on those yet. So I think it may be a little too early to know exactly where things are going in this space. But I think we might expect there's going to be some kind of labeling in the space at some point. I think the important point to consider, especially for our drug in Alopecia Areata is that there is no approved treatment for Alopecia Areata. So it's unlike these other indications, especially in rheumatoid arthritis or atopic dermatitis where there are existing drugs that are outside the JAK class.

JAK is a very important mechanism for a lot of indications. JAK inhibition is a very important therapeutic class for Alopecia Areata. And really it's a very effective treatment. It seems to be involved in the pathophysiology and there's no other approved or effective treatment. So I think it makes Alopecia Areata, very different and JAK is really important and really here to stay for treatment of Alopecia Areata.

Les Sulewsk -- Truist Securities -- Analyst

Got it. If I may, maybe I'll squeeze one more question. Can you provide a progress update on the modified release formulation? Thank you.

Roger D.Tung -- Co-Founder, President and Chief Executive Officer

Sure, it's an ongoing project for us. I think it's fair to say that we have work continuing and we don't really have anything to report in terms of publicly available information at this point in time, but it is an important project for us and we are making progress.

Les Sulewsk -- Truist Securities -- Analyst

Excellent. Thank you.

Operator

Thank you. Our next question comes from Maury Raycroft with Jefferies. Your line is open.

Maury T. Raycroft -- Jefferies LLC -- Analyst

Hi, good morning, and congrats on the updates and thanks for taking my questions. Maybe it's kind of follow-up to one of the prior questions based on some of the commentary from FDA. I guess, if you can talk about the degree of enthusiasm from KOL's enrolling for your Phase 3 program and just the demand from patients. And are there any specifics you can provide in how your Phase 3 patient population compares to your Phase 2?

James V. Cassella -- Chief Development Officer

Yeah, hey, thanks, Maury this is Jim again. So I think we have a lot of enthusiasm for our program. Yeah, as I mentioned just previously, JAK inhibition is a very important mechanism for Alopecia Areata. We are working with all of the KOL's and many, many sites as Roger mentioned for our Phase 3 program. We have done I think really well in a very COVID constrained environment for any type of clinical trial, in recruiting for the Phase 3 program. We have a lot of enthusiastic patients looking to get in into the trial. So I think that's all gone very, very well. So I think that we hear a lot of enthusiasm. We believe that our data set is very strong based on the Phase 2 results. We have a very similar population. As to our Phase 2 trials, we have the same kind of entry criteria. The Phase 3s were really expanded to bring up our safety numbers to make sure we have sufficient data to submit the NDA.

We have the same type of entry criteria coming into the Phase 3 trial as we did for the Phase 2. And of course, we're using SALT score, which is the tool for assessing scalp hair loss. Now in the Phase 2, we used a different numeric calculation for our end point. But now we're using the achievement of SALT 20 score, which again we were able to calculate for our Phase 2 studies. We were able to power up our Phase 3 program based on our Phase 2 results. And remember, we ran three Phase 2 trial, so we have a good basis for forming the power calculations for our Phase 3. So we come into the Phase 3 program very confident that we have a good base of understanding for our drug and for what it does in the patient population and the same patient population is -- we have the same population between the Phase 2 and Phase 3 studies.

Maury T. Raycroft -- Jefferies LLC -- Analyst

Got it. It's all falling down. Phase 3 is blinded. But can you say anything at this point about the general status of the study, including dose adjustments and safety balancing at this point?

James V. Cassella -- Chief Development Officer

Obviously, we've released the information that we finished the enrollment of our THRIVE-AA1 study, our 708 patients actually enrolled in that study. What I can tell you is that these are placebo controlled double-blind studies. We have the 8 mg b.i.d and the 12 mg b.i.d dose groups compared to placebo. We are randomizing based on the positive findings we had in Phase 2, we're randomizing to a greater proportion to active treatment than placebo, which has turned out to also be a very good recruitment tool.

But as a reminder, we also have subjects rolling over into our open label extension study. And today we've had a very high percentage of patients rolling over. So I think the data that we presented, as Roger mentioned at the JAK conference earlier this year, we did highlight that we have continued to -- in the open label extension study, that study started in April of 2019 with our very first Phase 2 trial. We do have a lot of long-term safety data that we've been generating in a fair number of patients, over 100 patients who were on drug for a year and a half at that time that we presented at the conference. So I think the safety profile ends up being consistent in the open label compared to what we saw on Phase 2, and I think, we have a continuing progress in generating our safety database for the NDA.

Maury T. Raycroft -- Jefferies LLC -- Analyst

Got it, that's really helpful. And maybe just last question from me, you had the recent financing, just wanted to check if the rest of your Avanir royalties are tied to the additional $103 million in any way or are the rest of those royalties wholly owned by Concert?

Marc Becker -- Chief Financial Officer

Hey, Maury, this is Marc. The rest of those royalties are wholly owned by Concert. So we still have the remaining royalty and that's not factored into the $103 million, the $103 million is only for the -- in the case where the warrants are fully exercised?

Maury T. Raycroft -- Jefferies LLC -- Analyst

Got it. Okay, thank you very much for taking my questions.

Operator

Thank you. And our next question comes from Esther Hong with Berenberg. Your line is open.

Elaine Kim -- Berenberg Capital Markets -- Analyst

Hi, good morning. This is Elaine Kim for Esther. I just want to ask what's the status of AVP-786. I know it's currently in several trials including Alzheimer's agitation and negative symptoms of schizophrenia, that trial is expecting completion in H2 2022. Just wanted to know if there are any other updates, some added color? Thank you.

Roger D.Tung -- Co-Founder, President and Chief Executive Officer

Hi, this is Roger. Thanks very much for the question. At this time, we really don't have any further information, as you note there is the Alzheimer's agitation study Phase 3 that we'll be reading out next year or it's projected to read out and the negative symptoms study, which is a Phase 2 study. There are also two other Phase 3 studies that are scheduled to read out in the latter half of 2024. So Avanir continues to invest very heavily in the compound and they prominently highlighted in their Investor Relations. So it's something that they are excited about, but we have no further information beyond what's publicly available.

Elaine Kim -- Berenberg Capital Markets -- Analyst

Thank you so much.

Operator

Thank you. [Operator Instructions] And our next question comes from Alex Bouilloux with Mizuho. Your line is open.

Alexandre Bouilloux -- Mizuho Securities -- Analyst

Hi, good morning. Congrats on the progress. Thanks for taking the question. Just thinking about future pipeline opportunities, would you prioritize new indications for CTP-543 or do you prioritize new molecular entities?

Roger D.Tung -- Co-Founder, President and Chief Executive Officer

Hi, this is Roger. It's a great question. I think we have to look at additional indication development with 543 given the amount of investment we've made in it and our enthusiasm for the compound and feeling of the high likelihood of it moving forward toward registration and to registration. But we also have interests in earlier stage compounds. And it's something that we're actively involved in as well. So it's hard for me to rank one over the other. I think we're excited about both.

Alexandre Bouilloux -- Mizuho Securities -- Analyst

Great, thank you.

Operator

Thank you. And at this time, I'm showing up for the questions. I'd like to hand the conference back over to Justine Koenigsberg for any closing comments.

Justine E. Koenigsberg -- Senior Vice President, Corporate Communications and Investor Relations

Thank you. We'd like to thank everyone for joining us this morning and we look forward to continuing to provide updates on our progress. As a reminder, we will be participating next week at the Jeffrey's London Conference. And of course, if there are any follow-up questions, please don't hesitate to reach out. This concludes today's call. Thank you.

Operator

[Operator Closing Remarks]

Duration: 23 minutes

Call participants:

Justine E. Koenigsberg -- Senior Vice President, Corporate Communications and Investor Relations

Roger D.Tung -- Co-Founder, President and Chief Executive Officer

Marc Becker -- Chief Financial Officer

James V. Cassella -- Chief Development Officer

Devin Ryan -- JMP Securities -- Analyst

Les Sulewsk -- Truist Securities -- Analyst

Maury T. Raycroft -- Jefferies LLC -- Analyst

Elaine Kim -- Berenberg Capital Markets -- Analyst

Alexandre Bouilloux -- Mizuho Securities -- Analyst

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