Cidara Therapeutics, Inc. (CDTX) Earnings Call Transcript & Summary

Thank you for joining us this morning for our virtual symposium with the CEOs of Aridis, Cidara and Spero. So before we begin, I wanted to read a disclosure to the audience. The company executives have confirmed that they will not disclose any material, nonpublic information, and the audience should bring their questions appropriately. So to start, I wanted to ask each of the speakers to introduce themselves and provide a brief overview of why you have a better way to fight infections than products that are currently on the market. And let's go out in alphabetical order here. So Vu at Aridis, could you start?

Thank you, Louise. Thanks for putting this wonderful symposium together. This is Vu Truong. I'm the CEO of Aridis Pharmaceutical. We are a NASDAQ-listed company in the San Francisco Bay Area. We focus on the monoclonal antibodies in infection diseases. We have a pipeline of monoclonal that are being evaluated clinically for various bacterial infections. We also have several antiviral programs, including COVID-19 antibody program. We believe that antibodies as used for infection treatment rather than cancer that most have come to know, I think this is a promising area and it could potentially offer a new way to find infection that is very different from traditional antibiotics. So we're -- we will soon have several data readouts in the clinic, starting with our Phase III compound, trying to develop the therapy to treat pneumonia in mechanically ventilated patients. So we're excited about the prospect of seeing what some of these molecules can do.

Great. Jeff?

Great. Thank you, Louise. Jeff Stein, CEO of Cidara Therapeutics based in San Diego. We have 2 fundamentally different platforms. One is an antifungal, rezafungin, which is in 2 Phase III clinical trials at the moment. One is for the treatment of candidemia and invasive candidiasis and the other Phase III program is for the prevention, so prophylaxis study in blood and marrow transplant patients. These are 2 substantial unmet needs, very high mortality rates in each of those 2 patient populations. Rezafungin is an echinocandin antifungal that can be dosed once weekly. And so this should facilitate the early discharge of patients, both in treatment as well as in prophylaxis. So we're very excited about those 2 programs. Our other platform is called Cloudbreak AVCs for antiviral conjugate. This is a fundamentally new approach for the treatment and prevention of viral infections. It's not a vaccine, not a monoclonal antibody, not a traditional small molecule, but rather it's a fusion between a very potent small molecule antiviral, coupled to an engineered FC domain of the human antibody. What that enables us to do is to treat -- get rapid treatment as well as long-term prevention. So our lead program there is CD377. CD377 is -- has been designed for -- as a once-per-flu season preventative as well as a rapid treatment. So it is very effective against every strain of influenza, both seasonal as well as pandemic. And yesterday, you may have seen the alarming news out of China, the new pandemic strain, the new version of H1N1. So CD377 should be well positioned both to treat and prevent infections.

Great. And now saving the best for last, Ankit?

Louise, thanks for kindly organizing this symposium on such an important topic. I'm Ankit Mahadevia, the founder of Spero Therapeutics, which is a clinical-stage Boston-based company. We are developing multiple medicines to treat the largest unmet needs in infectious disease, primarily outside of the hospital. The 2 programs that I'd highlight. The first is our lead program, which is tebipenem. That's an oral carbapenem providing the potency of IV therapy in pill form designed to help treat the millions of patients a year that need treatment but should get it outside of the hospital. The second medicine that I'd highlight is a treatment we have for non-tuberculous mycobacterial disease, which is also a large unmet need. SPR720 would be the first oral novel agent to treat patients first-line for NTM. Tebipenem will be reading out its Phase III in the third quarter of this year and 720 will be beginning a Phase II study in NTM patients in the second half of this year. And we'll be delighted to say more about how this fits into the treatment landscape as we go.

Okay. Great. Thank you, everybody. So my first question for you is one that I get asked by a lot of investors, and you may get asked as well, which is why the uptake of new antibiotic drugs has been so slow?

I'm happy to feed my view. Obviously, my colleagues will have their own views as well, but there's a confluence of factors that I think can be attributable to why there has been slowness. Obviously, the pharmaceutical companies are no longer finding it cost-effective for research and development of these. Cost to market is $2.7 billion on average to bring these antibiotic rank infected to the market, and the uptake -- the sales have been relatively modest. If you average the last 10 antibiotics that's been approved, the average annual revenues from that is somewhere around $200 million. And so this is definitely not going to be economic for investors and large pharma companies. So a general poor investment climate means that a lot of these drugs gets developed by smaller companies like us that gets -- that are willing to take the risk, but then when they're undercapitalized, progress tends to be slower. And then I think the payers and hospitals, generally, are unwilling to pay a premium price for a new antibiotic. And that -- there's a lot of reasons why that may be. The conditioning that is brought about by decades of antibiotics abundance. And so there's a lot of standard of care that physicians can choose from. A lot of them have a long-established safety profile that they're comfortable with. They're cheaper obviously, and so they tend to gravitate to those and reserve the new branded antibiotic for very difficult cases. So a lot of these antibiotics gets put on the shelf. And so over the years, you don't show the revenues. Therefore, obviously, the return on investment for investors gets to be a challenging proposition. And then I think the government, while they, in the recent year, have been terrific in terms of creating new incentives, there's generally a slowness in terms of the push and pull types of incentives that governments are putting on, for example, this RMAT, which Jeff will tell you a lot about later on. It's been in Congress for -- it has been anticipated for several years now and it's still not passed. And so there is really a confluence of factors that gets us to where we are today, but I think it does provide a strong incentive for companies like us, Jeff, mine and Ankit's company to focus on more and more innovative approaches, right? Where are the -- what's the latest innovation? And how can we bring to the market something better that payers are willing to pay a premium price for? How can we bring that differentiation that there is, generally, a lack of? Most of the antibiotic that are brought recently, one can argue that there is a lack of a material -- a substantial benefit and superiority demonstration to current standard of care. And so I think our respective companies are certainly aware of the problem. I think you can regard as a new breed of companies that are focusing on very innovative approaches to fighting infection. Jeff's company focuses on antifungal, which is chronically an area of great need. So I think as we look towards the future, especially being reminded of COVID-19 and how infectious disease is such an important area to focus on with a lot of companies that are undervalued, I think, as we look towards the future -- at least as I look to the future, I'm not sure about Ankit and Jeff's, but I'm excited about -- of the new wave, the next wave of companies that are going to inject innovation into this area, which is very much needed.

Okay…

Very comprehensive response as usual, Vu. I would amplify just one part of that, and that is reimbursement reform. And that's what DISARM is intended to do, and I can touch on that a little bit later. But there's a major disincentive in hospitals to administer or prescribe branded agents because of the diagnosis-related group or DRG-based reimbursement where hospitals simply lose money. So that provides a disincentive to use branded agents and an incentive to overuse generic drugs, and that is one of the problems that is driving multidrug resistance in the hospitals today. So if we can remove that disincentive by reimbursing these innovative products that Vu referred to commensurate with the value they bring and also provide patients and provide physicians the drugs that are needed to treat these patients because right now, these decisions are being made based on pricing alone and not based on what is best for the patient. And there's a lot of excitement, for example, as Spero's lead program when that becomes available, but that, as well as many other drugs, may face some real challenges in reimbursement in the in-hospital setting. Now it's different in the out-of-hospital setting, the discharge setting. It's reimbursed differently, but it's really that DRG-based in-hospital reimbursement that needs to be fixed.

Yes. I think my colleagues have really outlined the problems well. And when we founded Spero, we thought about looking at that history and thinking about how we drive pipeline selection to try to solve those. And to Jeff's kind of point, the reason that we've chosen to focus on oral therapies is because of the price/volume issue that we have in antibacterials. One needs either a sufficiently high price and/or enough of a volume of patients to really drive market growth. So we have purposely focused on tebipenem, which is exclusively reimbursed outside of the hospital, DRG; and NTM, which is also to sort of stay out of that dynamic. We are very optimistic that as awareness of the threat of infection comes with COVID, that we'll see some changes, though we can't count on that from -- on the time scale, as Vu had mentioned. So we're focused outside of the hospital. The second point that I'd make -- that I'd add to my colleagues is we also have had a volume issue where, to the points that Jeff and Vu made, the products that we have chosen over time, the sort of subset that aren't well addressed by generics and only can use the branded can sometimes be rather small, and we don't have the benefit of orphan prices to solve that. So our solution has been, one, stay out of the hospital; and 2, go after unmet needs like cUTI treated outside of the hospital where the prevalence is quite broad. That's 2.3 million Americans a year that resist orals, for example. So I think that both through legislation, but also through pipeline selection, we can solve the price/volume issue as we go forward. And I share Vu's optimism that we have looked at this fact pattern over the last decade and have found good solutions based on what we've invested in.

Next question I have for all of you are what are some unmet needs for the treatment of life-threatening infections? And how can your company help address those needs?

So I'll just keep giving -- this is a good segue to how we've thought about pipeline selection. Our view, and our teammates have written a blog about this, which is on our website, tries to break down each unmet need that we see in infectious disease into treatment days. So really, the duration of therapy times the number of patients that really are eligible for the medicine. And the way that we see it is that the 2 largest unmet needs on a treatment basis are cUTI patients that are resistant to oral agents. That's number one, as we mentioned, because 2 million patients in the U.S. alone are resistant to oral. And the second is NTM, and that's for a different reason. That's an orphan population that ends up needing chronic antimicrobial therapy to get better. So it's been our decision that both because of that prevalence, but also because of the outside of the hospital reimbursement that, that has been our pipeline focus for the better part of Spero's founding.

Another way to look at it is just to look at the CDC list of urgent and serious unmet needs. These are all bacterial and fungal pathogens. For Cidara, we're focused on the urgent unmet need list. Candida auris is now approaching a virtual pandemic, gets global and is multidrug-resistant. And certainly, rezafungin is well equipped to deal with that urgent unmet need. Multidrug-resistant infections due to Candida more broadly is a serious unmet need. And so this is an important list, and the audience can certainly look that up to identify those pathogens that are most concerning.

I think if you want to look at the pace of antibiotic resistance, I think it's starting to make a lot of the bacterial infections that otherwise are fairly treatable and becoming life-threatening because we are starting to run out of antibiotic and we plan to seeing an antifungal pipeline. And so one can argue that a lot of these treatable infection are starting to become serious infections, and it didn't have to be the case. So I would walk you that, certainly, there is a strong need to replenish the pipeline. And then the current pandemic, the zoonotic diseases, that is illnesses that can be spread between animals and people. COVID-19 is a perfect example. So we're talking about emerging coronaviruses, these RNA viruses that can -- that has very high mutation rates. And eventually, it's going to jump into a human. It's really not a question of if and when. Swine flu. Jeff just mentioned this morning that the H1 -- the new H1N1 out of China is a potential issue. Bird flu, African swine flu and so on; salmonellosis, a food-borne bacteria; West Nile virus is at play, for example. And then the -- I think the -- a lot of fungal infection occurring in very sick patients, those that remain to be a very vulnerable population. And so there are quite a bit of unmet need in infective diseases. This is a sector that has been really under-invested in the last decades, and I think you're going to see the pendulum start to swing back this way. But what we are doing at Aridis is to focus on really novel mechanism. Heavy focus of the company is on leveraging the human immune response. How can we learn what the human response does best in terms of controlling infection, fighting some of the most lethal infections? And how do some of these patients that survive an infection while others get exposed and really succumb to it? So we like to understand what is it that the immune system does well, and can we replicate that? And so in doing so, what we've been doing is to use our platform technology to screen the B-cell repertoire of a patient that has survived the infection, that is convalescent patient, looking for new potent antibodies. And our pipeline that comprise of 6 different monoclonal for antibacterial, antiviral, they're all developed this way and discovered this way, that is from convalescent patients. And so we think that, that provides a potential great option for treating future life-threatening infections.

Okay. Great. If there aren't any more comments, then we'll move on to the next question is, basically, what are regulatory and government initiatives that have been implemented to support anti-infective development? And maybe from this aspect, I'll just start with Jeff here given your position on the AWG. What is the status of reimbursement with DISARM Act? And how do you think about all of this?

Yes. And just to clarify, AWG, the Antimicrobial Working Group, is a coalition of 12 companies largely based in the U.S., which comprises over 50% of the development pipeline of drugs being developed in the U.S. We have been very active in working on the DISARM Act, which was mentioned earlier. This is an act that was introduced, as Vu mentioned, some 6, 7 years ago, and it is intended to improve the reimbursement environment for QIDP-based drugs, so qualified infectious disease product-based drugs, which all of us on this panel have or have in development now. It would basically remove these drugs from DRG-based reimbursement. This was actually introduced in the initial CARES Act, was ultimately removed by the House Democratic leadership in the interest of passing the CARES Act as quickly as possible, but there's full intent to reintroduce this act in the next version of the CARES Act. Should that be introduced, I think this would revolutionize how these products are being not only reimbursed, but how they are being viewed. I think it could do a lot to stimulate investment in the area. Certainly, in the run up to getting this attached to the CARES Act, we had a lot of support by many different elements in biotech and pharma industry. Over 2 dozen investors have been involved in promoting this act. It is the only piece of legislation that I'm aware of that has bipartisan, bicameral support, so both the Senate and the House, bipartisan support. So I think there is a great momentum, and hopefully, we'll see this pass. There are some other pieces of legislation that are pending. Most recently, there's the PASTEUR Act, which you may have read about. This piece of legislation is intended to form a subscription-based reimbursement system whereby a hospital or a hospital system can subscribe and then get access to brand -- a certain panel of branded agents. So that's very early in the process. This has been introduced by Senator Bennet in Colorado, and we're looking for support in the House. There is no parallel legislation in the House and looking for some Republican cosponsors as well. So that's early in the process. I think it's an interesting approach. And then just yesterday or the day before, you probably heard about this $1 billion investment in a coalition formed by Pfizer, Merck, Novo Nordisk and the WHO to invest in small companies. So I think there's a lot of support, but the most advanced is the DISARM Act. And hopefully, we'll see that passed later this year.

Ankit or Vu?

Yes. So I think the need for push and pull incentives, those of you who are not familiar with the concept, push incentives, those would be government funding, right, NIA from the NIH and BARDA and so on; simplifying the regulatory requirements for demonstration of efficacy while still preserving the high safety bar to push these medicines along; extending patent expiry period for companies so that they have a longer time window where they could market the product. And Jeff talked a lot about DISARM Act. A lot of this is covered in the DISARM Act. So hopefully, after the last few cycle going into next year and with the new administrations or continue the current administration, that can be passed. Stewardship program. I think there's also discussions about how do you optimize the stewardship program. Now that was -- the end of my stewardship program was originally spent to really control how antibiotics are selected and prescribed, but it has -- over the last few years, has turned into a cost-saving type of stewardship where now a lot of the pharmacists are making the decision as to what antibiotic that the physician can use. And so a lot of those decisions are now based on what's the cheapest. So what's the cheapest? It's obviously the standard of care and the less innovative, the old antibiotic, right? So I think there's discussion on how to optimize that program and programs that allows the government's Medicare programs for seniors to offer additional reimbursement for -- to hospitals. So this is the core tenet of the DISARM Act that I think is going to be very, very important. And also, finally, I might add more robust stockpiling programs. I mean, I think we can talk about that. We may talk about it later, but this is also one of those pull incentives that the government could more aggressively pursue to incentivize pharmaceutical company to really grow in this area.

I think my colleagues have covered the many things in development from -- incentive-wise very well. I'd take a 100,000-foot view and note that I think the world has increasingly realized that infectious disease is the problem of the moment. It has economic implications, national security implications and certainly implications for mortality of people. And it seems like there's folks that have been on the sidelines for some time, whether they are lawmakers or pharma companies, jumping into this fray, and this really seems like our moment. And there's both focused solutions like DISARM that address particular aspects of barriers to the uptake of antibacterials. And then there's also folks that seem to be willing to think big. And DISARM is -- or PASTEUR is early, though the interesting feature of it is that for folks that get to the approval finish line, there's potentially a 9-figure payment waiting for them, and certainly, large pharma companies who are willing to put 9 figures together to be able to support this. So if you asked me a year ago, I would say that our strategy would have been can't count on this, we're going to focus on our pipeline and let the pipeline deliver. And we still believe that because we don't know when these things are going to land, but it really does feel like all eyeballs are on this sector right now because we've seen what a lack of infrastructure in this field does to society more generally. I mean, look at this meeting. I would have been delighted to do this in New York, Louise, with you in your offices, but we can't do that. And the reason is because we just don't have enough therapeutics for infection.

Okay. Great. Next question I have here is basically on stockpiling. Do you think, as a result of COVID-19, the U.S. government will start stockpiling anti-infectives? And why don't we start with Ankit here and your opinion on that?

Yes. I would keep it short. I would say that -- and there was even the recent articles coming out about the national security implications of having all of our CMC efforts being ex-U.S. I think that it's increasingly realized by society in general that access to anti-infectives is a national security issue. And I would expect that even before COVID-19, we saw moves from BARDA and others to really create a pathway for how to use stockpiling as a way certainly to provide avenues of demand for new commercializers of anti-infectives. But now more than ever, there's an onus, I think, on society to figure out how we ensure that these things are accessible for the future.

Yes. I think that's well put. And Spero is a beneficiary of having a BARDA contract. I sit on the Board of Paratek Pharmaceuticals. That is a recipient of a substantial stockpiling contract from BARDA as well. I think the take-home information here is to invest early in generating the requisite data that fits the profile of what BARDA or other government agencies that are interested in stockpiling fit those criteria, and then your company will be very well positioned to be a recipient of a large stockpiling grant.