CDTX - NASDAQ

Laurence Watts - Westwicke Partners Jeff Stein - President and Chief Executive Officer Matt Onaitis - Chief Financial Officer

Louise Chen - Canter Laura Chico - Raymond James Tim Chiang - BTIG Alan Carr - Needham Robert Driscoll - Wedbush Securities Paul Matteis - Leerink

Good day, ladies and gentlemen, and welcome to Cidara Therapeutic Third Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference may be recorded. I would now like to turn the call over to Mr. Laurence Watts. Sir, you may begin.

Thank you, Operator. Good afternoon, everyone, and welcome to Cidara's conference call to provide a company update and discuss third quarter 2017 financial results. Joining me on the call from Cidara are Jeff Stein, President and Chief Executive Officer; and Matt Onaitis, Chief Financial Officer. Before I turn the call over to Jeff, I would like to note that all of the information discussed on the call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. I caution listeners that, during this call, management will be making forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the Company's business. These forward-looking statements are qualified in their entirety by the cautionary statements contained in Cidara's SEC filings, including its Annual Report on Form 10-K and the quarterly report on Form 10-Q that was filed earlier this afternoon. I would also like to point out that the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, November 8, 2017. Cidara undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. I will now turn the call over to Jeff Stein, President and CEO of Cidara.

Good afternoon, everyone, and thank you for joining our teleconference to discuss important company updates and our third quarter 2017 financial results. On this call, I will first provide an update on the substantial progress we have made on our CD101 IV and Cloudbreak programs, after which Matt will discuss our financial performance for the third quarter of 2017. We will then be available to take your questions. Turning first to our CD101 IV program, we note that CD101 has been granted the name of rezafungin acetate by both the WHO as well as USAN. As a result, we will use this unique generic name for CD101 moving forward. We have been working diligently to complete enrollment in the ongoing Phase 2 STRIVE trial for rezafungin for the treatment of candidemia and invasive candidiasis. As a reminder, we plan to enroll at least 90 patients in the mITT or Microbiological Intent to Treat population in the STRIVE trail, with 30 patients in each of two rezafungin arms and 30 patients receiving the comparator drug, caspofungin. Because of these small numbers, STRIVE is not powered for inferential statistics, and its main objective is to select one of the two rezafungin dosing regimens for phase three. As of today, we have enrolled 96 total patients in the trial, and we estimate that we'll need to enroll an additional eight patients to achieve the target of 90 patients in the mITT population. Based on this enrollment status, we expect to have top line data readout from the trial in the first quarter of 2018. More importantly, our expectations of success in the STRIVE trial remain unchanged. We are also encouraged by recent regulatory feedback we have received relating to the rezafungin treatment and prophylaxis programs. We recently received feedback from the FDA that the results of the STRIVE Phase 2 trial, along with the results of a single Phase 3 pivotal trial with a non-inferiority margin of 20%, will provide data supportive of registration of rezafungin in the treatment of candidemia and invasive candidiasis in patients with limited or no treatment options, assuming positive results. The FDA confirmed that the target patient population for this phase III trial will be the same as our current target patient population for the STRIVE trial. Pending final results from the STRIVE trial, and subject to feedback from European regulators, we plan to conduct a single global randomized double-blind phase III pivotal trial in approximately 150 patients. We expect this trial to begin in mid-2018, with top line data expected in mid-2020. This represents approximately half the number of patients we estimated in the phase III program prior to the recent FDA feedback, so we expect this to result in material cost and time savings. With this phase III trial size of approximately 150 patients, we estimate that the total number of patient exposed to the selected dose and duration of resofungin treatment from the combined treatment program will be less than the typically required target safety database of 300 patients. For this reason, as well as to maintain enrollment momentum before the start of the phase III trial, we intend to continue enrollment at STRIVE trial sites after database lock. This continuation of the STRIVE trial, which we will call STRIVE part B, will use one of the two dosing regimens selected from the STRIVE trial in comparison to caspofungin in a two-to-one randomization regime. The STRIVE part B trial will continue in each trial site until such site is ready to begin enrolling patients in the phase III trial. Turning now to the resofungin prophylaxis program, we believe there is a significant unmet medical need for a safe and well-tolerated agent with a spectrum of resofungin in the prevention of fungal infections in vulnerable patients. These patients include those undergoing bone marrow or solid organ transplants, or patients with hematologic malignancies undergoing chemotherapy. We have conducted preclinical studies demonstrating the efficacy of resofungin in preventing candida, aspergillus, and pneumocystis infections in neutropenic animals. Based on these studies, and in conjunction with the clinical safety, tolerability, and pharmacokinetic data, we expect that once-weekly resofungin could be an effective and well-tolerated prophylactic agent for invasive fungal infections in at-risk patients. Based on both FDA and MHRA feedback we have recently received, and subject to further regulatory feedback and financial resources, we plan to conduct a single global randomized double-blind phase III clinical trial of a 90-day prophylaxis regimen of resofungin in patients undergoing allogenic bone marrow transplant. Subject to further regulatory discussions, we believe that this trial could start in mid-2018 and produce top line results in mid-2020. Based on interactions with the FDA and MHRA, we believe that our planned phase III trial in prophylaxis, supported by the data from our planned phase III clinical trial in the treatment of candidemia and invasive candidiasis, could suffice for approval of resofungin for both prophylaxis and treatment of invasive fungal infections. Turning quickly to our Cloudbreak program, we have continued preclinical studies of CD201, our novel, bispecific antimicrobial immunotherapy for the treatment of multi-drug resistant gram-negative bacterial infections. As we announced earlier this year, we received a grant for up to $6.9 million from CARB-X to advance the development of CD201 and backup candidates. The backup candidates include antibody drug conjugates that we are testing in various animal models of bacterial infections. The antibody drug conjugates show a promising spectrum of potency, PK and preliminary safety in in vitro and in in vivo studies. We are evaluating the results of these studies and expect to determine the future direction of the program by the end of next month. With that, I will now turn the call over to Matt for a review of our financial results for the third quarter of 2017.

Thanks, Jeff, and good afternoon, everyone. Cash, cash equivalents, and short-term investments totaled $64.2 million as of September 30, 2017 compared with $78 million as of June 30, 2017 and $104.6 million as of December 31, 2016. These numbers do not include the net proceeds of approximately $19 million from the private placement financing we completed in October 2017. We are pleased to have the opportunity to address investor demand in that transaction to strengthen our balance sheet and also broaden our investor base. With that financing done, we believe that we have sufficient financial resources to operate our business for at least 12 months beyond our planned release of STRIVE top line data in the first quarter of 2018. Turning now to our financial results, research and development expenses were $9.2 million and $32.6 million for the three and nine months ended September 30, 2017 respectively compared to $8.7 million and $24.4 million for the same periods in 2016. The increases were primarily attributable to the escalation of clinical development activities for rezafungin. General and administrative expenses were $3.1 million and $9.7 million for the three and nine months ended September 30, 2017 compared to $3.6 million and $9.7 million for the same periods in 2016. Net loss for the three months ended September 30, 2017 was $12.3 million compared to a net loss of $12.2 million for the third quarter of 2016. For the nine months ended September 30, 2017 and 2016, our net loss was $42.3 million and $33.8 million respectively. As of October 31, 2017, we had 20.2 million common shares outstanding and 23.6 million fully diluted shares, which includes our outstanding stock options, RSUs, and warrants. Both of these numbers are inclusive of the 3.36 million shares we issued in our October 2017 private placement financing. With that, I will now turn the call back to Jeff.

Thank you, Matt. To summarize, our Phase 2 STRIVE trial of rezafungin is ongoing, with patient enrollment nearing completion. We expect to announce top line data for the STRIVE trial in the first quarter of 2018. We have received regulatory feedback on the rezafungin treatment and prophylaxis programs that we believe is favorable and provides clarity toward a path to approval with one Phase 3 trial in each program. We continue to perform preclinical studies on our CD201 and backup antibody drug conjugate molecules, and we'll evaluate the data and determine how to proceed. With that, I would like to turn the call back over to the operator so that we can address your questions. Operator?

[Operator Instructions]. Our first question comes from the line of Louise Chen from Canter. You may begin.

I had a few questions here. So first one was regarding the enrollment for rezafungin, was this lower than you had anticipated, and that's why you moved out the data date? And then second thing on your cash runway, did I hear you correctly that you have enough cash runway until the second quarter of ‘19, and then what's your cash balance, including the pipe financing? On the prophylaxis opportunity for CD101, just curious how you would characterize that, and what the opportunity here, and who would you compete with in this space? Thanks.

Remind me of the first question?

On the enrollment for STRIVE, and was it slower than you had…

So, enrollment is fairly close overall on a patient per-site per-month basis. This summer, we had a slower-than-anticipated slowdown in sites in July and August in particular at our European study sites. So, consequently, we moved the estimate of top line data from the end of Q4 of 2017 and into Q1 of 2018.

On our cash runway, so yes, we said that we would have at least 12 months as of the time that we announce our phase II STRIVE date in the first quarter of 2018. And the cash that we have at the end of the third quarter on a pro forma basis to include the pipe net proceeds is $83.2 million.

What was the third question, Louise?

It was on the prophylaxis opportunity, if you could characterize that, and then how it compares to other products in the market and who might you compete with in the prophylaxis space.

This is an area where there's substantial unmet need for a drug that can prevent infections by candida, aspergillus, and PCP, or pneumocystis. Right now, the options for prophylaxis are not very good. Basically there are azols and Bactrim, or other preventatives. All of those have substantial drug-drug interactions or other deleterious effects, especially given this vulnerable patient population. So, accordingly, echinocandin would be ideal for this, but the available echinocandins are once-daily, one-hour infusions, and clearly not suitable for the prophylaxis of patients for up to or even exceeding three months. So, accordingly, once-weekly treatment by resofungin is very appealing, and we have identified a number of clinical trial sites globally that are eager to start this study. And so, with that perspective, we think that the commercial opportunity for resofungin will be enhanced substantially, especially given that we now have a clear path to approval for both treatment and prophylaxis in two separate studies.

And our next question comes from the line of Laura Chico from Raymond James. You may begin.

Jeff, I have one clarification on the STRIVE part B study, just wondering if you could elaborate a little further there. You mentioned the subjects will continue to enroll until they switch into the phase III studies. I guess, is this solely for safety data-based accrual, or what should be the expectations in terms of additional efficacy data coming out of this study?

The primary objective of STRIVE part B is to bolster the safety database, which is why we are conducting in a two-to-one randomization schedule against caspofungin. It is going to be a double-blind study so that the data can be used and can contribute to our registration data. Another reason is to maintain enrollment momentum. These types of studies in candidemia and invasive candidiasis are challenging to enroll, and it takes quite a bit of time in order to reach your enrollment momentum. So we're at that level of momentum now, and we don't want to lose that. So, consequently, we felt by keeping these sites active, we could maintain momentum, and then just flip them into our phase III program. And then, finally, the third reason is the opportunity to potentially capture some candida auris patients in the study. As you may be aware, candida auris is a severe fungal infection, severe pathogen causing candidemia and invasive candidiasis. It's a global outbreak that has reached the U.S. last year, has spread from the East Coast to the West Coast just in the last two months. So there is increasing alarm over this deadly pathogen, and we hope to be able to capture some patients with candida auris infections as we continue STRIVE part B, and then going into our phase III program.

Okay, that's very helpful. I guess one quick follow up and then I'll halt back in the queue. You also mentioned previously the partnership with T2 Biosystems. And as you were talking about maintaining momentum. Could you just clarify, are you going to be completing that enrollment by year-end? I'm sorry if I missed that. And also perhaps looking ahead, what impact would you expect to have on enrollment trends, going forward, as a result of implementing the T2 placements?

Sure. Yes, we do fully expect to complete enrollment before the end of the year, and we will be announcing that. Thus far, in our STRIVE study, relatively few of our study sites are using the T2 Biosystems machine. We have noted, however, that those that do employ the device are amongst our best enrollers. Because it does alleviate specific challenge in enrolling these studies, as the limitation of greater than 48 hours of prior antifungal therapy, and it's challenging to get to a culture-positive result. So the T2 system device can get to a culture-positive or negative within three or four hours, so that can help enormously. We expect that the placement of the T2 Biosystems machines in our STRIVE part B study sites, as well as in phase III, to greatly assist with enrollment.

Thanks very much, guys.

Sure.

And our next question comes from the line Tim Chiang from BTIG. You may begin.

Hi, thanks. Assuming the STRIVE trials shows the results that you want and you pick the dose, you obviously provided some targets for a number of pivotal studies next year. Would you consider a partnership opportunity on one of the indications for resofungin?

Thanks for the question. Obviously we have global rights to the intellectual property of CD101, or resofungin, so we do have the opportunity to do territorial deals. We have initiated those types of conversations. And we hope that positive top-line data will facilitate those discussions, going forward. At this time, we have no plans to separate the indications, but that's certainly something we can consider as those discussions play out.

And may be just one follow-up Jeff. Is there any update or what are the expectations for your Cloudbreak immunotherapy candidate? Is the timing that you'll still file an IND some time next year?

Yes, unlikely, if we were to switch to one of our antibody drug conjugates which are earlier in development that the IND would be filed next year and this is in particularly -- it's a manufacturing issue where we have to develop the cell lines for the antibody component. So that will likely not be in 2018, should we switch to the [EDC] program.

And our next question comes from the line of Alan Carr from Needham. You may begin

I come back to the trial design in the Phase 3, and particularly with -- it looks like you're going to be able to build a database here of less than 300 patients for an NDA. I'm wondering if you can talk a bit more about the design of this Phase 3 trial. Are you -- is this a one-to-one or a two-to-one design? And can you also tell us about -- was there some sort of expectation from the FDA around a minimum number of a certain type of patient with particularly serious infections in this trial? I'm trying to get a better sense of why the 300 patient rule might not be needed here.

As you may recall, the minimum safety population in infectious disease programs such as this used to be 1,500 patients. With the passage of the GAIN Act, that has been reduced for products with QIDP status, and rezafungin has that status with the FDA. So, consequently, we should be eligible to get approved based on a 300 patient safety population, which is typical of QIDP products. That said, the total number at the end of the day will be based on the safety performance of rezafungin in Phase 2 and in Phase 3. So, it will always be a review issue. If the safety comes out, safety and tolerability comes out as we would expect of an echinocandin, there could be an opportunity to get approved based on a somewhat smaller safety population. However, we don't know that yet. So we're planning on 300. Hence, we think that the STRIVE Part B study will be very helpful in achieving that goal.

The Phase 3 trial with 150 patients, is that going to be a one-to-one randomization, or two-to-one, or what are you thinking there?

Yes, it will be a two-to-one randomization of one of the two dosing regimens that we are now testing in Phase 2. And those dosing regimens are 400 milligrams once a week, or 400 milligrams week one followed by 200 milligrams once a week in subsequent weeks. And just to get to your earlier part of your question, in part B and in phase III, the patient population will be identical to the patient population we're currently examining in the STRIVE study. We have certain thresholds of severity, so these are patients with a minimum threshold of candidemia and invasive candidiasis severity of infection. So these are patients that do have a pretty high mortality rate. So there's no question that they are in need of effective drugs such as CD101.

And then what sort of scale are you thinking for the prophylaxis trial? I imagine if that's going to be wrapping up around the same time as the treatment trial, you'll get some patient exposures there, too, that you could submit with it, or maybe you're considering submitting an NDA for both of these at the same time.

Ideally, we would submit NDAs for both at the same time since we expect that both studies should be completed within a quarter. We have some estimates of that trial size, based on assumptions of the non-inferiority margin. However, we need to finalize that with the regulatory authorities.

Your discussions with the FDA around prophylaxis, those aren't completed yet?

That's right. We will need to get some more feedback on the noninferiority margins, so we're continuing those discussions. And finally, none of this will be finalized until we receive the results of the STRIVE study.

An our next question comes from the line of Robert Driscoll from Wedbush Securities. You may begin.

Just wondered if you could talk a little bit about the high level blinded review that you mention in your 10-Q of the first half of the STRIVE data, and whether that drove FDA support for the smaller study. Or was it driven by the in vivo? Sorry preclinical activity of resofungin against candida auris strains? Thanks.

As you know, it is common in these types of studies to conduct blinded, high-level analyses of the overall results from a safety perspective, especially in the case of our STRIVE study part A and part B, when we expect to select one of the two dosing regimens. And we want to ensure that, from a safety perspective, that there's no issues in selecting one of the two dosing regimens. And we're pleased to report that, at this stage of the study, there have been no safety or tolerability issues that would cause us not to select one of the two dosing regimens. At the same time, we can get some insight on the high-level efficacy results, again in a blinded manner. And we are encouraged by the fact that the high-level efficacy results are consistent, if not better, than what has been reported for other echinocandins at similar endpoints. Obviously, there's a big caveat there. These are blinded results, very difficult to compare current studies with past studies and so forth. But, overall, the blinded results suggest that the study is on track with our prior expectations.

Great. Thanks very much.

Sure.

Thank you. And our next question comes from the line of Ed Arce from H.C. Wainwright. You may begin.

Hi, this is Matt for Ed Arce. I have a brief question about. So first, could you briefly explain how will you conduct analysis on STRIVE with the power to derive inferential statistics?

Yeah, that's a great question. So the objective of STRIVE is to select one of the two dosing regimens to take into phase III. So our expectations are that the two dosing regimens will be approximately equivalent to caspofungin in the STRIVE study. So that is our baseline expectations. And so far we see no reason to believe that that will not be the case. So it is not, with 30 patients in each of the three dosing arms of the study, it is too small for inferential statistics, but we'll just be selecting the dose based on high-level overall efficacy, safety, and tolerability.

Got it. And the last question is regarding the T2 Bio collaboration, what's the main objective of this, and will it affect the experiment? Because you said only after insight that you have that they have access to this technology.

We hope that, in collaboration with T2, we can place as many of their machines as possible in our clinical trial sites. This is an exclusive arrangement so that those machines and the tests can only be used for our Cidara STRIVE part B and phase III programs. So based on the machines that are currently being used in a small handful of our STRIVE sites, we note that they tend to be our best enrollers, because we can get to a culture-positive result in three to four hours versus 48 or more hours. So we think it should be helpful, and obviously the more machines that can be placed at our clinical trial sites, the better that should be for enrollment.

Got it. Thank you for taking my questions.

Sure

Our next question comes from the line of Paul Matteis from Leerink. You may begin.

Great. thanks so much. And congrats on all the progress. Jeff, I wanted to ask a couple more questions about this blinded interim analysis, if you don't mind. So first one as I wanted to know if you could just describe the patient population in the study relative to the patient population that was recruited in prior caspofungin studies. And if there's any other exogenous variables that could be explaining what you're seeing on a blinded basis that might not be just drug-dependent.

Yeah, Paul. Thanks for the question. That's an important one. It's very difficult to compare contemporary studies with past studies, especially given the fact that physicians are just better equipped now to treat patients than they were during the conduct of historical studies. So because of that, it's very difficult to make those types of comparisons with the historical studies. That said, we can look at these trends of efficacy, and again, it's blinded overall, and have some assumptions based on past studies how that should look, especially looking at things like mortality. So we're encouraged that it seems to be consistent with past studies, and in fact there is an opportunity that -- possibility that the overall results could be a bit better than historical studies. But that is not breaking out any of the arms of the study, so that's an overall perspective.

And then I was wondering why, Jeff, you decided to disclose this now at this time. I understand these line analyses are performed pretty routinely by companies, but I guess it's more unique to have it disclosed like this in a 10-Q. what was the impetus for taking this look right now and making it public and communicating it?

As mentioned, we were planning on doing this analysis specifically for making decisions on STRIVE Part B. And so that's largely from a safety and tolerability perspective, but we also wanted to examine overall efficacy to see if things were on track. And it appears to be the case. This was disclosed with our pipe investors under CDA, and so we are using this opportunity to disclose it more broadly.

On the pivotal program, what have you learned from this study about enrolling the serious fungal infection studies? And what could you do in a subsequent trial to help it enroll more quickly?

I think we're doing what can be done to enroll more quickly, and that's by using the T2 machine to help alleviate probably the biggest bottleneck in the enrollment of these studies, which is exceeding 48 hours of prior antifungal therapy. Because of the severity of these infections, the vast majority of patients are receiving empiric treatment standard-of-care at that specific institution. So, because of that, you do not want to bias the results by giving more than 48 hours of prior antifungal therapy, because then the patient would be disqualified. So if you can confirm that there is a fungal pathogen, a yeast in this case, in that patient before 48 hours, then you wind up with a better clinical study.

And I'm showing no further questions at this time. I would now like to turn the call back to Mr. Jeff Stein, Chief Executive Officer, for closing remarks.

Great. Thank you for participating in our call today. We appreciate your interest and continued support of the company. If you have any additional questions, please feel free to contact us. Have a good day, everyone.