Cidara Therapeutics, Inc. (20D0.DU) Earnings Call Transcript & Summary

Good morning, everyone. Thank you very much for carving out time this morning to attend the Morgan Stanley Healthcare Conference. My name is Ryuk Byun. I'm a Managing Director at Morgan Stanley Investment banking Division. I just have a brief disclosure to read before we have our fireside chat session. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

With that, we have the pleasure of having the Cidara management team, Jeff and Frank. We wanted to thank you for carving out time early morning to attend our conference and have this fireside chat. Perhaps for those of us that may not be quite familiar with the Cidara story, Jeff and Frank, could you maybe do a quick introduction and just tell us a little bit around how the company got started?

Oh boy, yes, that was 11 years ago. And first, let me thank those of you who are here. I was expecting an empty room at 7:00 a.m. or 4:00 a.m. Pacific Time where we're from. So very grateful for your presence. Cidara was formed 11 years ago, early 2014 and the founding principle is actually what is called the Cloudbreak immunotherapy platform, the application of bispecific immunotherapy to infectious disease. That was a completely different format back then. We had some very exciting early data, not clinical but preclinical data and we launched the company on that premise. The initial target was to apply it to antifungals because that was a huge unmet need. One of the targets that we identified the kind of the drug moiety, and that's a topic that we'll get to in more detail later, was an echinocandin antifungal drug. And we happen to find a drug of that class that had really compelling data, very long half-life. And that's another theme that we'll touch upon today. And we advanced that -- so we acquired that for $0.5 million in equity and advanced that from a preclinical stage to approval in the U.S. and Europe in 2023. But along the way, we did something that many companies would not have done, is you typically become your latest stage program. But we are still incubating this Cloudbreak platform all along the way. And in 2018 is when we came upon this drug-Fc conjugate or DFC approach. And it's the combination of a very potent small molecule drug that we array in multiple copies on a mutated form of a human Fc that is mutated to provide prolonged half-life. The very first molecule of this new platform, the DFC platform was CD388 and we advanced that through all the IND-enabling studies. We partnered that with J&J in 2021. Under that partnership, J&J provided us with the funding to advance it through 2 Phase I studies and a Phase IIa study. And at that point in time, they had the option under a partnership agreement to deliver to us a notice to proceed, which is the formal handover of the program from Cidara to J&J. And they were to have taken this CD388 into a Phase IIb study in 2023. But what happened in the summer of 2023 is that they had new leadership in R&D. John Reed joined as Head of R&D from Sanofi, and he determined that they were exiting infectious disease across the board. So what turned out -- we were very concerned at the time, obviously, what that would do and The Street obviously reacted negatively to that -- to us, but that was a gift and we were able to compete with big pharmas for CD388. So they started a series of divestitures starting with their latest stage program to the earlier-stage programs. CD388 was the third in that process, and we were able to get it back. And now we put it into the clinic in 2024 and had spectacular results, which we announced in June.

Got it. So maybe spending a little bit of time on CD388. How is it -- how is the unique design able to confer advantages over traditional antivirals and vaccines for influenza?

Yes, a real important point. So the small molecule antiviral that we selected is zanamivir. It's the most potent neuraminidase inhibitor. So just taking a half step back, there are 2 external targets on the influenza virus. That's hemagglutinin and the other is neuraminidase. And that's the HN designation when you hear about the seasonal influenza strain, H5N1, there are multiple versions of each of those targets. The most highly conserved druggable site on the influenza virus is neuraminidase. Zanamivir, which is generic drug, it's been approved for quite some time, is ultra potent. It actually attacks a transition state of the enzyme. So it is virtually impossible for the influenza virus to mutate resistance to zanamivir without conferring a very costly fitness mutation. So we selected that. We actually modified zanamivir, have 2 copies of it, so we make a dimer of it with a short linker, and then we attach that short linker to a longer linker, which is then attached to the Fc. And we have multiple copies of those dimers arrayed across the surface of the Fc. And that's really important because there is a lot of structure activity relationship experimentation that went into the length of those respective linkers. We designed them so that zanamivir can actually target multiple copies of neuraminidase on the surface of the viral cell. So those arrayed at specific distances, and the length of that long linker was established so that one molecule of CD388 can bridge adjacent viral particles. And that's what results in this amplification of potency that we've seen certainly in vitro, in vivo and animal studies and now we saw that in our Phase IIb study.

Now how does the once-per-season administration compare to the traditional dosing regimens of existing antivirals and vaccines in terms of patient convenience and compliance?

Yes, that's an important point. So zanamivir is approved. It's known as Relenza. There are other neuraminidase antivirals as well. Those are not approved for pre-exposure prophylaxis. They are either oral or inhaled drugs, and they're administered for post-exposure prophylaxis or for treatment. It's an important distinction because they have to be administered once a day. So it's really not practical for the seasonal prevention of influenza, but that's what we've engineered into CD388. So think about -- the simplistic way to think about it is take the most potent influenza antiviral and turn it into basically vaccine-like administration of once per flu season.

Perhaps we can spend a minute on the NAVIGATE Phase IIb data readout. I think most folks have heard the calls and have reviewed the data. But maybe just at a high level, if you could just summarize the findings from the NAVIGATE IIb trial.

Sure. Yes, the initial intent of the NAVIGATE study was for dose selection. So we tested 3 doses, 150 milligrams, 300 milligrams and 450 milligrams dosed once at the beginning of flu season. And the idea of the study was not -- originally was not to power it statistically to show that there is a statistically meaningful difference from placebo, is rather just to see on a more of a subjective basis like which of these doses are best and obviously, you have to look at the tolerability as well. If you're going into seasonal prevention, you have to have a large safety database, have to be a very safe drug, right? Because if you're administering something that doesn't go away for half a year, it has to be very, very safe. So these are the original objectives of the study. And we assumed a relatively modest flu season with an attack rate of about 2%, which is the percentage of subjects in the placebo arm of the study that get influenza based on the definition and the primary endpoint. And based on that assumption, we didn't think a 5,000-subject study divided amongst 4 arms. So that's 1,250 subjects in each of the 4 arms. With a 2% breakthrough infection rate, you expect 25 subjects in the placebo arm. So it's clearly not robustly powered. But what unfolded last year, as I'm sure everyone is aware, it was a historically severe flu season, the worst in 15 years. The placebo attack rate was substantially higher and by our definition of influenza, it was 2.8%. Now you might think, wow, that's not very much higher than 2%, but it was meaningful. Now we were obviously blinded during the course of the flu season. But based on the blinded data, we determined that we should take a chance and go back to the FDA and discuss modifying the statistical analysis plan to use a prespecified p-value. Thankfully, we did that, and thankfully, the FDA agreed to the plan. And as it turned out, each of those doses made the p-value by a large measure. So with a 450-milligram dose, a p of less than 0.0001 and each of the 3 -- the other 2 doses also achieved the p-value by a large margin. So very grateful for the bad flu season and for the -- our ability to make that modification.

And congratulations on your successful trial readout. Now in terms of -- so I wanted to spend a few minutes on the regulatory pathway. Now what can you share about any interactions that you've been having with the FDA, particularly around your end of Phase II meeting?

So we had a Type C meeting with the FDA in May before we had the data. And we largely reached alignment in that meeting with respect to the overall design of the Phase III study. So alignment around kind of the high-level principles of the primary endpoint and all the other elements of a Phase III study. So clearly, we couldn't finalize that because we didn't have the data. So we then -- we've got the data. We put in a meeting request for the end of Phase II meeting. We announced that, that was going to happen by the end of August, which it did. And we are very pleased with the outcome, but we don't want to kind of formally announce the outcome before we actually get the minutes. So that meeting was at the end of August. We expect it on a 30-day clock by the end of this month. It may come sooner and at that point in time, we'll update The Street with the refreshed guidance.

Got it. So could you talk a little bit around your regulatory pathway and thinking about fast track and priority review designations potentially expediting the development time line, if it's possible?

Yes. Based on our current assumptions, our Phase III -- with our contemplated Phase III program, CD388 could get approved in late 2027 and potentially launch in early 2028.

Which is coming up. Can you spend a minute on the proposed Phase III design, including the trial population and endpoints, if there's any differences from the IIb study?

It is different. So the Phase IIb was in healthy normal unvaccinated individuals and that was important to establish a safety database in a healthy normal population because in Phase III, we're going into a high-risk comorbid and immunocompromised population. So it's important to establish a safety database, which we did, and I didn't have an opportunity to describe the safety, which, as I indicated, is very important for a drug like this. Remarkably, in the Phase IIb study, we got a very clear dose response going from 150 to 300 to 450. Now typically, when you get a dose response like that on efficacy, you tend to get a dose response on safety signals as well. The more drug you put on board, the more opportunity there is to have some type of safety tolerability signals coming out. But remarkably, we didn't see that. They all looked very similar to placebo. So it's good to -- and you can only establish that in a healthy normal population without the conflating issues of other things that are going on because in Phase III, we're going into high-risk comorbid and immune-compromised population that may or may not be vaccinated. We estimate about 65% of the Phase III population will be vaccinated. And that's important for Phase III because we actually want to show the potential of CD388 being additive on top of vaccines. And there's precedents for that with zanamivir, the active moiety in CD388, where there's previous clinical studies run, where the -- there's, in vaccinated and unvaccinated individuals, high-risk population, which showed that it's almost exactly additive. So if you have, say, 80% efficacy of a vaccine and 80% efficacy on zanamivir, it's something like 95% and so the potential of showing with CD388 of potentially having close to 100% efficacy in the prevention of influenza is very important.

Got it. Can you spend a little bit of time specifically talking about what comorbidities and how -- or how the immunocompromised status is, how that defines the high-risk subjects?

Yes. We haven't finalized them. Obviously, we will do so with the receipt of the FDA meeting minutes. But the comorbidities are going to be largely cardiovascular, pulmonary and renal comorbidities, moderate to severe. And then one important outcome from our Type C meeting, which we hope to confirm with the meeting minutes, is that only 10% of the population needs to be immunocompromised, but we can get a label that includes the immunocompromised population. So FDA recognizes that it is exceedingly difficult to demonstrate and power a study for efficacy in immunocompromised population. And the reason for that is you would think it would be the opposite, right? You would think, well, they have no immune system. They're going to get influenza, but these are individuals that are very protected or cocooned. It's kind of like how we were during COVID, right? You don't go out. You're masked all the time and whatnot. So the attack rate in that population is very low, even though the unmet need is very high in that population. So what something like CD388 could do is actually let them lead their lives in a more normal fashion, which is very important. So only 10% of the population will be immune compromised. We can get the label, but the powering will be based on the high-risk comorbid population.

Got it. I think recently announced that you'll likely include populations that are older than 65 years old in the Phase III.

Yes. It will certainly be another difference from the Phase IIb study, which was adults 18 to 65. In the Phase III, it will be anyone high-risk comorbid, immune compromised over the age of 12. Now with these comorbidities, they tend to track to the older age group. So we will -- there is no cap, so they can be over 65.

Yes. Got it. Okay. Now maybe -- as we're sitting here about to go into your pivotal studies, can you talk a little bit around -- maybe we can spend a few minutes on the ultimate commercialization and the market opportunity. So what's your current plan to engage with specialist physicians, whether that be cardiologists, pulmonologists, nephrologists, et cetera, versus primary care physicians to drive the adoption among the various patient populations?

Great question. I'll let Frank get some airtime on that one.

Okay. Well, thank you. Well, the Phase III development strategy that Jeff just outlined was in part derived based on our longer-term commercial plans and going after the patient population at highest risk for complications from influenza offers us a couple of opportunities. The first one is that this is the patient population where we believe we can have the biggest impact in patients, but it's also an area where we believe the commercial footprint that is required to cover the specialists who treat these patients is something that we can take on ourselves. And so this particular patient population is not covered by primary care physicians primarily but by specialist providers. And one of the key questions as we thought about how can we unlock the commercial potential for CD388 in this patient population was whether we could successfully engage these specialist providers to generate demand. And so we conducted some market research around that. And the findings had been, I would say, quite encouraging. First of all, these specialist providers acknowledged a very high flu burden in these patients with moderate to severe comorbidities and IC status. They also felt that the importance of -- or they rank the importance of preventing flu in these patients as very high. By the way, they also rank the importance of preventing flu in the milder comorbid patients as comparatively high, particularly in patients with cardiovascular and pulmonary comorbidities, which was interesting for us to see because it indicates that there are interesting large, longer-term life cycle management opportunities for us beyond just the more narrowly defined population we're going after in Phase III. We then also were interested in understanding what role, if any, do these specialist providers actually play in preventing the flu in these patients. And interestingly here, these providers rank themselves as the highest amongst any physician group, including primary care physicians and pharmacists as having the primary responsibility in preventing flu in these at-risk patients. And that may be -- and that was another finding of our market research. That may be why about 80% of the people that were part of the survey are already stocking and administering flu vaccines in their offices today. So the specialist providers we're interested in, they acknowledge the high burden of flu. They think it's important to prevent it in the patients. They see themselves as being primarily responsible, and they're already administering and stocking flu vaccines today. And so you can see how this is a -- how the existing treatment workflow lends itself for CD388 to sort of fit nicely into that.

Can you -- I know you've talked to share some of your initial perspectives around payers and how they would view the ultimate value proposition and the -- maybe touching a little bit around kind of your interpretation or your perspectives around how the payers will ultimately react when CD388 will be approved. And also, how do the pricing corridors influence expected access and restrictions in the U.S. market?

Okay. Yes. So we did also conduct market research around that because we were curious to understand what pricing and access dynamics we could expect for CD388. And again, the findings, I would say, were encouraging. Payers radically acknowledge the high disease burden in this particular patient population that we're going after in Phase III. They see a very high clinical and economic burden in these patients. And that was important to recognize because it directly then translated in what we heard on our pricing research, where we looked at different pricing corridors to understand what type of restrictions we might expect at different pricing levels. And really up to a pricing level of about $500 to $600, there were no, if any, restrictions mentioned by payers. It was really only after we got to $600 to $750, where some restrictions were mentioned, not necessarily in the form of prior authorizations, maybe more in the form of physician certifications to ensure that the patients truly have comorbid or IC status. And really only after we got north of $750 in that research, payers would more frequently then say that they would expect to deploy prior authorizations to manage access. So this was encouraging for us to hear. Payers also were accepting of us generating further cost effectiveness data in real-world evidence studies post approval because they recognize the primary endpoint in our Phase III study as relevant and had confidence that a symptomatic reduction in flu would translate into economic and clinical value. And so I think the fact that it's well understood that there's a significant disease burden in these patient populations, I think, will help us. And of course, over time, we plan to generate additional health economics and cost effectiveness data. And in fact, in this particular patient population, the rate of hospitalization is dramatically higher than it is in a normal healthy population. And we have just recently conducted another range of research work to really get a little bit deeper into that. We plan to share some of this perhaps later this year in another Investor Day. And then long term, of course, we would generate also additional data through real-world evidence studies. And all this goes to say that we expect over time to have a much more complete body of evidence to really demonstrate the clinical effectiveness and cost effectiveness of CD388, which we believe will further increase sort of our pricing leverage in discussions with payers.

I'd just add a couple of things. As you may be aware, in these types of pricing surveys, payers are much more price sensitive in their responses than they are in the real world, right? And so we found it really encouraging that there is really no pushback until that -- we get over $600 a dose. And so -- and there's precedents when you look at Beyfortus, for example, the RSV drug, which is administered once a season, pricing of, what is that, $550 a dose or something like that. Yes. So it's nice to see that there's precedence there that the pricing research where payers are typically very price sensitive indicates that we could price in the same pricing corridor as a drug like Beyfortus. So that was really encouraging for us.

Got it. Now if I am an investor trying to build a model and I am looking at the current market for existing flu vaccines and antivirals, and now looking at CD388, how should I be thinking about the overall market opportunity or peak sales opportunity, both in terms of the target population size and the potential revenue?

Yes, I'll just make a couple of comments and Frank can add to it. If you look only at the moderate-to-severe high-risk comorbid population, you're looking at about 50 million to 60 million individuals in the U.S. And you can do the arithmetic in your model with the pricing targets that we've identified. So it is very different from vaccine. And that's one of the initial hurdles we have to overcome when we talk to investors because many of them have in their heads, well, this is -- let me look up the price of high-dose -- that flu vaccine because it's administered once a flu season. That's the easiest thing to do. And you're talking about from $15 to $100 plus per dose. That's not what we're talking about here. So this is definitely going to be more like a monoclonal antibody like pricing. Frank, anything else to add?

Yes. I think the key point really is the size of the patient population, which even though we are limited or we're focusing our initial efforts on these patients that are at highest risk for complications from influenza, it is important to recognize this is still a very sizable patient pool, as Jeff said, now upwards of 50 million patients. And then the question is what price point can you justify in this population. I think this comes directly back to what is the cost effectiveness of CD388 in this population. And I come back here to the burden of disease that is experienced by these patients. And if you look at, let's say, hospitalization as a measure for disease burden, it's interesting to look at this data and recognize that hospitalizations as a result of attracting the flu in this patient population result in a variety of health consequences. 14% of patients in this particular population that get hospitalized with the flu end up in the ICU, 6% of these patients end up dying, and 15% of the elderly adults report catastrophic disability following a hospitalization due to the flu. So the disease burden in this population is high. And I think that demonstrating this more with further either real-world evidence and resource utilization data and research, I think, will be key and then ultimately justifying or supporting our pricing strategy.

I know we just have a few more minutes. One of the things that comes up a lot is manufacturing. Now how is your manufacturing process different from seasonal flu vaccines? And what types of operational advantages does it offer? And then follow-on question for that is what, if any, additional CMC work you are doing ahead of your Phase III and as you're thinking about the ultimate launch.

Yes. Thanks for asking that. Clear advantage over the seasonal influenza vaccine, right, which has to be manufactured from scratch every year. CD388 will have a single manufacturing process. It won't change from season to season. So presently, we have -- our CMC is kind of locked down. We have their Phase III drug supply in place. And that's being administered as with the Phase IIb and the 450-milligram dose is administered as 3 subcutaneous injections from a prefilled syringe, 150-milligram per ml prefilled syringe. That is not what we will launch with. So the launch configuration will be in a single-use vial, will be 2 doses from a single-use vial. But in parallel to all of this, we are developing a high-dose or high concentration formulation to put in that single-use vial. And ultimately, post launch, it will be a -- the objective is to have a single dose administered from a prefilled syringe. So all this work is going on in parallel. We often get asked about what is the cost of goods, right? And so based on our current forecast, the cost of goods at launch should be below $70 per dose and we expect it, obviously, to decline further as we optimize.

Now I think you had indicated that you're anticipating enrolling a subset of patients who had previously been dosed with 388 in the NAVIGATE trial and redosing these. What are your plans there? Any concerns or perspectives as you're looking at those patients who are getting redosed as part of the Phase III?

Yes. It's great opportunity. We have at the 450-milligram dose, about 1,250 subjects from the Phase IIb, great resource for which to do a repeat dose study. And that's important because for any drug that's administered like this, you want to see the potential of antidrug antibodies, and you want to look at tolerability over multiple seasons. So that's something that we're interested in, certainly, the FDA is interested in as well. So we'll be embarking on that this fall.

Got it. And my recollection is that prior similar studies had not induced.

No, we did multi-dose study in Phase I. Obviously, we have a lot of subjects in the Phase IIb. We looked at 4 antidrug antibodies, and we didn't see any differences between doses, including placebo. So we definitely want to look at that more closely.

Got it. Now as we're looking at the rest of this year, obviously, you'll provide an update once you get the minutes from the end of Phase II meeting, which will be important. You also have a few medical conferences coming up. What types of additional analysis from the NAVIGATE study could we look for in those updates?

Yes. The most proximal one is the ISIRV conference, which is -- was it next week or the week after? We'll be disclosing some new data on the PK from -- and some virology data. We actually have 3 conferences coming up in the next month or so.

Okay. Great. Well, I know we're up in time. Thank you very much for your time today and spending some time with the audience here. Good luck with the rest of the conference. Great. Thank you.