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Concert Pharmaceuticals: Investors Ignoring A New Blockbuster

Summary

CNCE down 20% after announcing slight to deueterated Kalydeco.

Development for CTP-656 is still moving along smoothly.

CTP-543, a deueterated Ruxolitinib, is yet another clear blockbuster added to CNCE's growing pipeline.

Concert Pharmaceuticals (NASDAQ:CNCE) gave an update on their business on the recent earnings call this past Thursday, May 5th. What transpired was a tumultuous ride for the stock from ~$13.50/share to $10.67 at the close on May 10th.

What happened? All eyes are on CTP-656 [a deuterated Kalydeco - Vertex (NASDAQ:VRTX)], but a new molecule in development that has a clear de-risked development pathway and blockbuster potential was definitely not well communicated by management.

CTP-656 Continuing its Development

First, while management had initially guided to initiating a phase 2 trial for the cystic fibrosis compound around mid-2016 they are now aiming for an initiation in late-2016 with a data readout in late-2017. While not the best news, this is really not horrible. Concert CEO Roger Tung can actually be quoted on the call, albeit with poor transcription, as stating that they always intended to have topline data in 2H17 and this does not change that timeline. Regardless, investors responded negatively to the news. Pushing back the launch by ~1 year decreased my original NPV from $270mn to $213mn, a 20% decline in value.

This delay had a cause that was a second notable piece of information for CTP-656; The Phase 2 trial must include a "low-dose strength" and the trial has been delayed because manufacturing capabilities for a lower dose must be effectuated. I believe this could actually be a neutral-to-positive sign for the compound. The FDA is typically concerned with the "minimum effective dose" for a molecule in order to establish an acceptable dosing range. CNCE tested 75mg, 150mg, and 225mg doses, and per the conference call transcript the deuterated 75mg and 150mg doses showed proportional increases in exposure (similar to Kalydeco between 25mg and 250mg - page 15) while the 225mg dose showed a greater than proportional increase in exposure for the drug. Why would the FDA request a low-dose strength? I believe the easiest conclusion is that it's for the simple reason of establishing an effective dose range that is standard practice for the FDA, especially because the 75mg dose of CTP-656 showed a greater mean plasma concentration at 24 hours than the 150mg dose used for standard Kalydeco, and the standard Kalydeco was tested at the lower 50mg dosing in development as a monotherapy.

One speculation is that the request may be because the data the FDA has reviewed could compellingly indicate that CTP-656 could have increased efficacy when compared to Kalydeco because of the increased blood plasma concentration mentioned earlier and highlighted in the CNCE presentation snapshot, and due to the increased parent molecule vs. metabolite concentration cited (slide 7 of the CNCE May Investor Presentation). While I don't have a dog in the efficacy fight yet I don't have any reason to think the efficacy would be less for a deuterated...


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