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In The Spotlight: Concert Pharma

Concertpharma 122217

Shares of Concert Pharmaceuticals Inc. (CNCE) are up nearly 150% year-to-date compared to the modest 20% returned by the iShares NASDAQ Biotechnology Index (ETF) (IBB) during the same time frame.

Concert Pharma is a clinical-stage company exploring the deuterated drug landscape.

Why deuterium?

Deuterium, also called heavy hydrogen, is one of the isotopes of hydrogen. Substituting some of the hydrogen atoms with deuterium is said to improve the stability, safety, efficacy, and/or tolerability of a therapeutic agent.

The idea of incorporating deuterium to alter drug metabolism, pharmacokinetics and toxicity has been in the work for decades, and it finally materialized this year when the FDA approved the first deuterated drug Austedo in April 2017 for chorea associated with Huntington's disease. Austedo was originally developed at Auspex Pharmaceuticals, which was acquired by Teva Pharmaceutical Industries Ltd (TEVA) in 2015 for $3.5 billion.

Pipeline

Concert Pharma has one wholly-owned compound, CTP-543, and three partnered compounds, AVP-786, CTP-730 and JZP-386, in clinical development, all based on its proprietary DCE (deuterated chemical entity) Platform.

-- CTP-543 is a deuterium-modified analog of an approved drug Jakafi.

Jakafi, developed by Incyte Corp. (INCY), is indicated for the treatment of certain blood disorders say, myelofibrosis and polycythemia vera.

-- AVP-786 is a deuterated analogue of the cough suppressant dextromethorphan. AVP-786 is being developed in partnership with Otsuka's U.S. subsidiary Avanir Pharmaceuticals.
-- CTP 730 is a deuterated Apremilast, being developed in collaboration with Celgene Corp. (CELG). Apremilast, whose brand name is Otezla, is an approved medication for the treatment of certain types of psoriasis and psoriatic arthritis.
-- JZP-386 (formerly known as C-10323) is a deuterium-modified analog of sodium oxybate, the active pharmaceutical ingredient in narcolepsy drug Xyrem. Jazz has worldwide rights to develop and commercialize JZP-386.

Clinical Trials & Catalysts

-- A phase IIa trial evaluating CTP-543 for the treatment of moderate-to-severe alopecia areata, an autoimmune disorder in which the immune system attacks hair follicles, resulting in patchy or complete hair loss, is underway.

The phase IIa trial is designed to assess two doses namely 4 mg and 8 mg twice daily of CTP-543.

The first cohort is testing the 4mg dose, and an interim review of the safety data from this cohort is expected to be conducted in the first quarter of 2018. Dosing in the 8 mg arm of the trial is expected to begin after this review.

Concert expects to complete the phase IIa trial of CTP-543 in the second half of 2018.

-- Phase III clinical trials evaluating AVP-786 for the treatment of agitation in patients with Alzheimer's disease are underway.

The first key readout from phase III trial of AVP-786 is expected in Q3 2018.

Concert Pharma is entitled to receive $170 million in milestone payments from Otsuka (Avanir). Concert has received $8 million milestone to date from Otsuka.

-- A phase I trial of CTP-730 for the potential treatment of inflammatory disease is complete. The phase I trial involved healthy volunteers.

With regard to CTP-730, the Company has earned from Celgene a non-refundable upfront payment of $35.0 million and $8.0 million in development milestone.

-- JZP-386 is being developed for the potential treatment of patients with narcolepsy. A phase 1 clinical study of JZP-386 was completed in May 2015. Jazz Pharmaceuticals is responsible for any further development of JZP-386 and is continuing to evaluate once-nightly dosing.

Legal Tangle

In April 2017, Incyte filed an *Inter Partes Review Petition (IPR) against Concert Pharma, seeking to invalidate Concert's patent covering CTP-543, its investigational compound for the treatment of alopecia areata.

An IPR is a trial proceeding conducted at the Patent Trial and Appeal Board to review the patentability of one or more claims of an issued patent. (Source: Smith & Hopen).

On October 19, 2017, the Company got a big boost when the PTAB denied Incyte's petition to institute IPR.

In June 2017, Concert filed a Post Grant Review (PGR) petition with the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office against Incyte challenging the validity of all claims in Incyte's patents, which includes claims relating to CTP-543.

The Patent Trial and Appeal Board (PTAB) is expected to make a decision in January 2018.

Key Metrics (Q3, 2017)

-- Cash and Investments: $207.1 million
-- Revenue: $143.8 million
-- Operating Expenses: $12.0 million
-- Shares outstanding: 22.8 million

The Company expects the cash on hand to be sufficient to fund its operations into 2021.

CNCE has traded in a range of $8.61 to $30.71 over the last 52 weeks. The stock closed Thursday's (Dec.21) trading at $25.70, down 6.00%.

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