Last Updated on March 7, 2019 by Sultan Beardsley
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On the heels of the contentious revealing of ENCORE-PH top-line data MS Money Moves decided to go to the source for clarification. After a fruitful discussion with Conatus Pharmaceuticals (Nasdaq: CNAT) Executive Director of Investor Relations and Corporate Communications Alan Engbring, we are happy to report what we learned to MS readers and the investment community.
Authors Note: Responses by Conatus should not be interpreted as exact quotes from Mr. Engbring. Due to the nature of the interview some content is paraphrased based on notes and from memory.
Questions and Responses
(Conatus responses in red, MS commentary in blue)
1. Why did you include patients with decompensated cirrhosis? Did you want to explore emricasan’s efficacy in patients with decompensation events?
The important thing to know is that Conatus designed ENCORE-PH to meet the development needs of a small biotech company prior to the partnership with Novartis (NYSE: NVS) – including a range of doses and patients to explore the drug’s broad potential. A big pharma company might well have run separate and larger trials for compensated and decompensated populations.
Results from the 28-day proof of concept study (POC) indicated emricasan had clinically meaningful effects on severe portal hypertension (HVPG≥12 mmHg).
ENCORE-PH was designed primarily to evaluate emricasan’s potential to treat severe portal hypertension in compensated NASH cirrhosis. A subgroup of patients with decompensated NASH-cirrhosis was also included. Although regulators had guided Conatus that separate pivotal trials would be needed for each patient population, the decision to include both in a single Phase 2b trial was driven by cost and efficiency.
Q: Doesn’t including decompensated patients jeopardize the ENCORE-PH primary endpoint?
Hitting the primary endpoint was not the only focus of the study. Of course, Conatus wanted to meet it and acknowledged that missing it hurt the share price as many investors don’t look beyond the primary endpoint. But, the true purpose of the study was to discover where the drug works and where it does not.
We wholly agree with this approach. Short-term price action should be of little concern with respect to CNAT’s intermediate to long-term performance. What is most important is that Conatus learns as much as possible about emricasan’s efficacy at different doses in different patient populations. This is the only way they, along with their partner Novartis, can identify optimal demographics for Phase 3, and ultimately commercialize the drug. Short-term pain is just that, short-term.
Data from ENCORE-PH was very positive and insightful with more to learn at the 48-week analysis. In conjunction with information learned from ENCORE-NF & LF CNAT and NVS will have an arsenal of clinical data for designing a Phase 3 study, increasing the chance of study success and penetrating a huge untapped market. Investors who understand this and accumulate a position at times like these could realize tremendous capital gain.
The discussion shifted to dosing decisions for ENCORE-LF
Based on data from preclinical toxicology studies in healthy rats, combined with pharmacokinetic/pharmacodynamic studies in humans with severe liver impairment, CNAT knew they would not be able to test the 50 mg dose of emricasan in patients with reduced liver function like those in the ENCORE-LF trial, hence the inclusion of only 5 mg and 25 mg dosages.
Higher doses could bypass the liver and accumulate in the bloodstream at levels exceeding the preclinical toxicology coverage. The concern however is only theoretical as zero incidences of off-target effects have been observed, and the limitation was predicated on highest achieved concentration; not based on dose-limiting toxicity.
2. Do you think that the fact there was between 6.7% and 9.4% less patients with decompensated cirrhosis and the same degree more compensated patients in the placebo group significantly impacted the data?
Conatus emphasized these differences were minor in the grand scheme of things and purely luck of the draw. No intentional skewing of patient placement occurred. They did their best to construct a balanced study population, but it is very difficult to stratify every factor. It’s entirely possible that in the event of a positive outcome with an unbalanced patient population investors and analysts would have been even more skeptical of positive results.
Bottomline the company does not feel the disproportionate aspects of ENCORE-PH affected the overall quality of the study nor clouded their interpretation of the results.
Remember that these patients were very sick. Some of the placebo patients even showed mild improvements, but these instances very well could be related to uncontrollable variables.
3. What was the prevalence of varices in the 28-day POC study if there were any? If not do you think having varices in the Encore-PH study significantly affected the results?
Prevalence of varices in the POC study was as follows:
In short, CNAT does not believe the presence of varices, small, medium, or large affected the ENCORE-PH study’s integrity or impeded attainment of accurate HVPG measurements.
When we asked this question, Mr. Engbring thought it stemmed from assertions by a competitor that you cannot accurately determine HVPG in patients with varices. He noted that this claim was debunked when posed at the 2018 KOL symposium. Furthermore, there is no way to know whether the size of varices in ENCORE-PH or POC affected the results. No imbalances in the data raised suspicions that varices drove HVPG differences between emricasan and placebo. Nor were there any patterns of unreadable or unreliable data in this area.
4. What are your thoughts on the FDA’s draft guidance for noncirrhotic NASH fibrosis? Is Conatus considering seeking accelerated approval?
The FDA’s guidance is still in the very early stages. Right now, companies negotiate with the FDA after getting clinical results. Essentially, the FDA is most concerned with endpoints being scientifically supported as reliable indicators of clinical outcomes.
Conatus and Novartis will continue discussions with regulators. Many of their endpoints overlap with FDA guidance, but not all of them. For instance, HVPG is viewed currently as a surrogate endpoint for clinical outcomes. As we know this was the primary endpoint used in ENCORE-PH. Although they failed to meet it the data suggested that emricasan is potent enough to sufficiently lower HVPG compared to a placebo under different circumstances. Other endpoints that overlap are non-invasive imaging and biomarkers such as aspartate aminotransferase (AST) and alanine aminotransferase (ALT). A third biomarker correlated with apoptosis CNAT deployed not specified in the draft guidance was cCK18; an enzyme elevated in patients with fibrosis and correlated with apoptosis.
With regards to accelerated approval, Conatus will continue to collaborate with Novartis and make such decisions based on data from the remaining ENCORE clinical trials. Again, the focus of these trials is not just hitting endpoints. It is learning what the data informs Conatus and Novartis about the drug. For now it would be premature for Conatus to comment either way about accelerated approval without a complete picture to discuss with Novartis.
5. Do you think there would be a significant clinical benefit for patients with NASH-cirrhosis and severe portal hypertension if emricasan were combined with other agents? What about in NASH fibrosis?
To date emricasan has not been combined with any other drugs in clinical trials. What makes the most sense given emricasan’s mode of action is to combine it with a molecule with metabolic activity reducing fat in the liver. Novartis’s FXR-agonist (a bile acid receptor) still under clinical development is the most likely candidate at this point. In clinical studies the FXR-agonist showed to address three important aspects of NASH progression: Reduction of fat, inflammation, and fibrosis in the liver. But, it’s still early to say whether Novartis and Conatus will pursue a combination therapy track for emricasan. For the time being it is still being developed as a single agent therapy.
6. How will you be measuring liver function at week 48? What about determining clinical outcomes?
Patients are continuing their dosing regimens and are still blinded. Liver function will be evaluated by using MELD, Child Pugh scores, and biomarker data. Presumably, the same biomarkers in the ENCORE-PH top-line readout (ALT, AST, cCK18, and caspase-3/7). Conatus will not be measuring HVPG because it is a fairly invasive procedure. If they were to do that chances are it would be harder to recruit patients and more would drop out or be unwilling to undergo a third measurement. Clinical outcomes will also be evaluated at Week 48 for any differences or trends between the treatment and placebo groups.
7. What was the average reduction in portal pressure in the compensated patients with a baseline HVPG greater than or equal to 13 mmHg? Was it greater than or equal to 20%?
Unfortunately, this information is not public, so we could not get an exact answer. What we did learn was Conatus’ rationale for not reporting it. They reported the 12 mmHg and above group because it captured the total compensated patient population.
The HVPG≥16 mmHg was chosen as focal point because the trends in dosage responses became very clear in the differences between emricasan groups and placebos. Furthermore, 16 mmHg was the median for the full study population at baseline. This gave a top half versus bottom half data set to analyze.
Moreover, patients with HVPG≥16 mmHg are at higher risk of decompensated events, variceal bleeding, liver failure, and death. Therefore, the observed response rates of ~2 mmHg reductions in mean HVPG is clinically meaningful.
Conatus felt that including mean HVPG reductions in multiple subgroups would have distracted attention away from the salient message.
8.What can you comment about milestone payments from NVS?
Conatus was not able to disclose individual payments, only that there is $650 million total in potential milestones. What they did tell us is that the agreement provides for standard developmental and commercial milestones. There are some incremental milestones that aren’t all sales based, some could be near term some could be further with sales etc. They aren’t unusual milestone triggers.
Q: If you hit the endpoint would it trigger a milestone?
Mr. Engbring was not able to directly answer this question. He did share though that you generally do not get a payment for completing a step in the development process. You get them for advancing to the next step in the process.
9.Was conversion of the promissory note granted to Novartis selling them 2,882,519 million shares of CNAT common stock for ~$5.20 a day before the stock crashed an indirect signaling of Novartis’ commitment?
Although many people including myself did view the note conversion as such a message, this was a business decision. The conversion price was based on 120% of the 20-day moving average. Converting the note on the same day as the data disclosure allowed them to get the best price possible for the near-term and limit dilution.
Q: Why not hold out for a higher conversion price given the note option does not expire until December 31st, 2019? It is reasonable to expect CNAT would recover by then with upcoming clinical catalysts?
The answer is because there is no way to know for certain what the share price will be even with successful readouts from the upcoming ENCORE trial data. The stock price could be higher after 2019 data readouts, but nothing is certain. If it was lower that would mean greater dilution in a conversion. If they did not convert the stock Conatus would have to pay back to Novartis with interest eventually, and this would shorten their cash runway. Essentially, Conatus made a prudent business decision to repay Novartis, protect their cash reserves, and insulate shareholders from heavy dilution.
10. Why do you think the 5mg dose improved HVPG but did not show Caspase inhibition?
In the overall patient population (compensated and decompensated), none of the three dosing groups showed statistically significant improvements in HVPG, so we can’t say those doses improved HVPG. In the overall patient population, the 25 mg and 50 mg doses showed significant reductions in Caspase 3/7, while the 5 mg dose did not. This could be a simple