Good afternoon, and welcome to the ChemoCentryx Third Quarter 2019 Financial Results Conference Call. [Operator Instructions]. As a reminder, this conference call will be recorded. I would now like to turn the call over to Mr. Bill Slattery of Burns McClellan. Mr. Slattery, please go ahead.

Thank you. Good afternoon, and welcome to the ChemoCentryx Third Quarter 2019 Financial Results Conference Call. Earlier this afternoon, the company issued a press release providing an overview of its financial results for the third quarter ended September 30, 2019. This press release, along with a few slides that you may find helpful while you listen to this call, are available on the Investor Relations section of the company's website at www.chemocentryx.com. Joining me on the call today is Dr. Thomas Schall, President and Chief Executive Officer of ChemoCentryx, who will review the company's recent business and clinical progress. Following his comments, Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer at ChemoCentryx, will provide an overview of the company's financial highlights for the third quarter 2019 before turning the call back over to Tom for closing remarks. During today's call, we will be making certain forward-looking statements, which those of you following the slides can see, if you look at Slide 2. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These risks are described in the company's filings made with the Securities and Exchange Commission, including the company's annual report on Form 10-K filed on March 11, 2019. You are cautioned not to place undue reliance on these forward-looking statements, and ChemoCentryx disclaims any obligation to update such statements. In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, November 4, 2019. ChemoCentryx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call. At this time, it is my pleasure to turn the call over to Tom Schall.

Thank you, Bill, and good afternoon, everyone listening. Thank you for joining us on our third quarter 2019 conference call. In the third quarter, I adopted a new mantra that I then called 4, 5, 6, which of those of you who are following can see on Slide 3, that is, we at ChemoCentryx had 4 clinical programs, yielding 5 data readouts over the then next 6 quarters. One quarter later, we are on track with this goal. Today, I will concentrate on the first top line data events for each of our first 2 drug candidates, the release of results from our pivotal Phase III ADVOCATE trial of Avacopan in the treatment of ANCA-associated vasculitis in mid- to late Q4, that is, this quarter and then I'll touch upon 2 studies of CCX140 for focal segmental glomerulosclerosis, or FSGS, in the LUMINA I trial, which is expected to have top line data in the first half of 2020, followed by the LUMINA II trial also next year. Rounding out the last quarter's mantra of 4, 5, 6 will be data that we project in 2020 from 2 more trials of avacopan: the AURORA trial of avacopan in hidradenitis suppurativa, or HS; and the ACCOLADE study of avacopan in C3 glomerulopathy, or C3G. So as you can see, top line data will come fast and frequent as we enter the most exciting period yet in our rich and storied history here at ChemoCentryx. As most of you are aware, on October 1, we were joined in New York by 2 of the world's leading nephrologists, Dr. David Jayne of Cambridge University in England; and Dr. John Niles of Massachusetts General Hospital in Boston. We hosted an R&D Day, went into great depth on ANCA vasculitis and FSGS and the unique…

Thank you, Tom. Our third quarter 2019 financial results were included in our press release today and are summarized on Slide 12. Revenue was $10.6 million for the third quarter compared to $9 million for the same period in 2018. Revenue is recognized based on the proportion of cost incurred as a percentage of the total budgeted cost to fulfill the performance obligations under our avacopan and CCX140 commercialization agreements with Vifor Pharma. Research and development expenses were $18.1 million for the third quarter compared to $15.1 million in the same period in 2018. Phase II clinical expenses increased in 2019 primarily due to patient enrollment in the avacopan AURORA trial in patients with HS and the 2 CCX140 LUMINA trials in patients with FSGS. These increases were partially offset by lower expenses for the avacopan ADVOCATE Phase III pivotal trial as the study was fully enrolled in the second half of 2018. General and administrative expenses were $6.1 million for the third quarter compared to $5.4 million in the same period in 2018. The increase from 2018 to 2019 was primarily due to higher employee-related expenses including those associated with our launch readiness efforts and higher professional fees. We recorded a net loss for the third quarter of 2019 of $12.9 million compared to $10.9 million for the same period in 2018. Total shares outstanding at September 30, 2019, were approximately 58.3 million shares. Lastly, we ended the third quarter with $205.8 million in reported cash, cash equivalents and investments, and we expect to close the calendar year with more than $185 million in cash and investments. Tom?

Thank you, Susan. My final slide is Slide 13. As you can tell, we are well placed to deliver on our plan and our promise with 6 top-line data readouts expected between now and the end of this coming year. Consider this, we have an excellent track record of program execution over many years. We have a plan for bringing our new medicines to market, with ChemoCentryx owning the U.S. market entirely and our capable partner Vifor Pharma preparing an ex U.S. international launch with excellent economics for ChemoCentryx. We have a strong financial position so that we can run these multiple trials, get the data readouts and submit our regulatory filings to the FDA and EMA including those for positive data after ADVOCATE. And after ADVOCATE, we look forward to the next year with 2020-4 sights. For all these reasons and more, I believe ChemoCentryx represents an enterprise of value like few others in the industry. I'll now turn the call back over to the operator and we look forward to your questions. Operator?

[Operator Instructions]. Your first question is from Steve Seedhouse from Raymond James.

Looking forward to data later this quarter. My first question is can you share the split or the rough split or qualify in some way how many patients would have received Rituxan or cyclophosphamide in ADVOCATE even if it's on a blinded basis? Or if not, was there anything in the protocol to ensure a minimum number of patients on either of those regimens?

Steve more details to come, of course. I don't have the exact details to give to you today. I will say this that we modeled the rituximab cyclophosphamide usage pretty much how the geography where the trial was going to be mapped out. So approximately about 1.25 or 1.3 rituximab to every 0.6-or-so cyclophosphamide just given the global distribution. And so I have no reason to believe that we'll be too variant from that, but I just don't have the details at this moment.

Okay. That's still helpful. And could you maybe also, on the secondary end points, speak to which of those on the entire list, or whichever ones you might highlight, are adequately powered to hit a nominal p-.05 and which may not be powered for that type of nominal p-value, even if the result favors avacopan numerically? Or are they all theoretically well powered?

I think the short answer is they're all theoretically well powered rather and, of course, the details are -- for example, when you have quality of life, you actually have several categories within quality of life. And so the question is, is there a way to talk about those in aggregate or do you talk about categories individually. In Phase II, we talked about categories more or less individually, but it was very clear, 6 of 8 of those categories in the SF-36, by way of example, was statistically p less than 0.05 in advantage to avacopan relative to the baseline readings and relative to the standard of care. So we're fairly optimistic that with the larger N in the ADVOCATE trial, we'll be able to show reasonable p-values across a number of very important secondary end points and in short we tried to power the numbers appropriately to at least show folks where we thought we were seeing meaningful benefit in some of those areas.

Okay. Are there any milestones from your partner associated with Phase III either hitting the primary end point or subsequently filing for approval or subsequently approval that we should be aware of?

Susan, I'll let you take that question.

Sure, Steve. The milestones are not tied to clinical but are indeed tied to regulatory events.

Okay. And are you able to disclose ranges or what those amounts would be?

No. We haven't done so. But I think the CMA gave you a guide at least for one piece. But tied to approval would be the likely next one and then think about other territories that may trigger additional regulatory milestones.

The next question is from Michelle Gilson from Canaccord.

Can you just talk about given the baseline characteristics and severity of the population you hold in ADVOCATE and kind of the lower dose GC regimen that landed within the control arm? Could you just talk about what expectation should be in the first 26 weeks around safety, maybe infections and also other GC-related tox? Are there any toxicities that we should be keeping our eye on that should expect to be more predictively observed within the GTI and within the control arm that we should expect avacopan to improve on substantially? And then just one more. Which of those toxicities within the glucocorticoid toxicity index contribute the most to the overall QC economic burden in ANCA?

Wonderful questions, Michelle. Thank you so much. When we think about glucocorticoid toxicities in these trials, I think we have a couple of different things that inform our ideas and informed how we set up ADVOCATE. So number one, we're using more or less the same steroid regimen that we used in CLEAR. So we certainly have some experience with what I call the more modern practice of the GC regimens over 6 months, which is a little bit lower than what was used historically and incrementally lower than what was used in RAVE but not -- again, not too much lower but a more modern practice I would say. When we took in aggregate the normal serious adverse event categories related to GC use, things like incipient diabetes, bone fractures, weight gains, psychiatric disorders and infections and maybe a couple of others as well, we and others have used that as a sort of basket of common glucocorticoid-related SAEs and safety events over the history of this and other indications. As we knew from CLEAR, overall, we had a significantly -- a significant fewer number of those events in aggregate with avacopan therapy versus the standard of care. Certain categories were very interesting. And again, we'll just have to see what happens with the greater end. So we'll use that same bucket of categories that's been traditionally used. And again, I'm optimistic that we ought to be able to show in aggregate significantly fewer events with avacopan than with the standard of care. We're also using this fairly newly developed glucocorticoid toxicity index, which is very data rich indeed, there's lots of stuff that goes into it, and it was developed by John Stone and colleagues of Mass General. We are probably the first trial, blinded trial of scale,…

Okay. [Technical Difficulty].

Michelle, with apologies, you're cutting out. So I am not -- I only caught maybe every third word of your question.

I'm sorry, [Technical Difficulty].

Not really, no.

[Technical Difficulty]. I'll follow-up with you later.

Okay. Thank you. I do apologize, but we and others couldn't hear what you were asking.

The next question is from Anupam Rama from JPMorgan.

This is Tessa filling in for Anupam tonight. We had 2 questions today centered on ADVOCATE. The first one being will ADVOCATE potentially have more renally involved patients? And what impact might that have on the results here coming this quarter?

I think the -- as we look at the big population of all ANCA pop people, it's pretty well known that ultimately, over time, about 75% of folks will manifest renal dysfunction and ultimately, over time, fairly severe renal dysfunction. So again, I would expect that what we'll see will not be out of line with what we saw in the Phase II programs. And I wouldn't expect a big variance from that. And again, I won't quote a number since we'll be releasing data this quarter. But let's put it this way, frankly, I don't think it matters much whether it's a renal dysfunction, a pulmonary dysfunction, an ENT disorder. Our mechanism of action really speaks to the damage that is caused at the end of the process and arresting that damage and putting the system back in a situation where we don't have chronic inflammation and eventually vascular necrosis. I think David Jayne actually brought this up very astutely at the R&D Day where Professor Jayne pointed out that, in a strange way, the 2 major forms of ANCA disease, and for those that are not totally initiated yet, they are something called GPA or MPA, and they more or less relate to the kind -- one or 2 antibodies, autoantibodies, that shows up: anti-proteinase 3 or anti-myeloperoxidase. And in a strange way at a genetic level, they're different diseases because those antibody -- the production of those autoantibodies is caused by 2 different lesions. But the point is once the antibodies are present, the neutrophils get primed, and these autoantibodies also act as a kind of stimulator of chronic complement activation leading ultimately to C5a production, which then binds the C5a receptor on these prime neutrophils, and that's really what causes the damage. So the beauty of our approach is, because our mode of action is very targeted and targeted at what actually causes the disease and the destruction, I really don't care if it's MPO or PR3. And I think that when we looked at our generally, the features across the patient population from the Phase II development program, I think that, that was borne out. Admittedly, numbers are fairly small from Phase II, but it certainly supported the idea that our mode of action should be reasonably effective irrespective of whether the primary pathology seems renal or otherwise. And so I'm very optimistic that we're going to get a good effect. I welcome kidney patients because I think there's a profound economic driver to the opportunity with renal involvement as, ultimately, renal involvement and its care in ANCA vasculitis is staggeringly expensive. So if we can help those folks, and we showed in Phase II that the evidence suggested that we could, at least in the context of that development program, I think that's a very powerful feature.

The next question is from Dae Gon Ha from SVB Leerink.

Congrats on all the progress, look very much forward to the ADVOCATE data this quarter. So I guess, just one question on the ADVOCATE. Tom, can you just remind us, are patients stratified for their baseline steroid use coming into the study? And perhaps as you're -- like you said in your prepared remarks, you're engaging in a lot of commercialization effort, so perhaps if you can speak to what you have found in terms of the major disconnect in the physician community or even in payer community. And then the second question is on AURORA. It looks like the enrollment pace is picking up pace, you now have 80% of sites activated, 55% of patients enrolled. So in light of the SHINE data last year, I was just wondering can you perhaps talk about quantity over quality as you get these underway. What efforts are put in place to avoid the unusually high placebo rates that those InflaRx folks saw?

Sure. Sure. Sure. So let me take the HS stuff first. Yes, we're probably, as of today, even way beyond the 55% that you quoted. So you're right, enrollment has picked up considerably. And we've taken great pains to make sure the quality stays high in this trial. We want a definitive result. We don't want a nonresult. So among other things, we'd taken great care in site selection. And in fact, I will just say and it's probably a matter of record in our filings, we're actually a U.S. trial with the AURORA trial at this point. And so we believe that some of the placebo response seen in other parts of the world at least will have some greater control up here. More to the point and more important however, we've done extensive training and we've tried to centralize a lot of the discussion around the primary end point, the HiSCR. Everyone must get past the ability -- or they're trained before they are validated for the trial or the sites are activated for the trial. We have monthly training in HiSCR. We have very active outreach. We have people in the sites all the time, reminding them of what we need to do in HiSCR. And then if things come through in the blinded data on the scoring through successive assessments, there are actually alerts that our team go out and say, let's make sure we're using consistent criteria. Let's make sure you're using the checklist and the notes, et cetera. So we believe that we'll be able to standardize that a lot more fundamentally. Moreover, we have not created the expectation, I believe, based on randomization ratios that patients -- the majority of patients will get active drug or at least the dose of active drug…

The next question is from Ted Tenthoff from Piper Jaffray.

I really appreciate the detail you provided about differentiation between other studies and the labor you put in to really trying to design ADVOCATE. My question is sort of [indiscernible] since we've had so many on the clinical program kind of roll forward a little bit. And assuming positive data, you mentioned that FDA and EMA filings could come next year. What has to be done to sort of get those going beyond clinical data submissions? And then even looking a little bit further, what should we be starting to anticipate for early commercial preparation?

Great. Yes, Ted, obviously, that's the key question on our mind as well, or key set of questions. We, of course, assume success. I think we believe in success based on the data from the previous trials and all the blinded data and the preponderance of all the information we have. So naturally, we must plan for success in ADVOCATE. An NDA filing in the United States is quite a profound undertaking. We understand that deeply. We have assembled a regulatory team here at ChemoCentryx now over the past couple of years, which is I believe one of the best in the industry. They have multiple, in fact, among the team, many dozens of NDA filings and launches under their belt. We have a raft of recent FDA personnel on the consultant role. And so I think we're moving along beautifully and putting together all of the necessary components of the future NDA filing. And we're really well on track to do that. Once we have our top line data, again, we believe we'll be well within industry standards in terms of time from top line to the ability to file the NDA. And of course, the NDA requires obviously, a finalized clinical study report, all your CMC has to be in shape, et cetera, et cetera. We, I must say, for a small company, I'm really proud to say that we anticipated a lot of these questions, and I must say we've had the benefit under the previous so-called prime designation in Europe of understanding what we needed to do to get in shape for a licensing application. And so we had some -- a little bit early heads-up with that, and that was great. So we got ahead a lot of the critical questions. I won't go in…

Excellent. Well, I agree with your sentiments that it took some exciting time at the company, wishing you well in the first data readout.

Your final question is from Ed White from H.C. Wainwright.

I think all of my ADVOCATE questions were asked except for one. You were talking previously about pharmacoeconomic data. Will you have an actual study or a publication around the ADVOCATE -- end-of-day ADVOCATE trial or will you have at least pharmacoeconomic data in hand once the drug is launched?

Absolutely, Ed. I hope the answer is yes to both of your questions and, in fact, already is in process. We are doing a lot of work on the pharmacoeconomic prospects for the drug. There'll be more data coming out from others as well as some of our own data coming out over the next year about the health economics surrounding avacopan and its opportunity. Naturally, we plan on putting out not just one but a series of papers in the referee journals talking about the data in some detail. So that plan is really well established here. And again, once we get through the top line readout, I think you'll see lots of information coming out in what I call a fast and frequent way, one hopes, that will help you address all these questions.

And then the other question I had was just on C3G with the ACCOLADE study. So it's now 60% enrolled. I think the last time we had talked about it you had said the first stratum was almost 100% enrolled. Is that fully enrolled now? And we can just assume that all the other patients are from the second stratum of patients?

Ed, I would say it's nearly fully enrolled in the first stratum. And you're right, disproportionately, we're getting more of that second stratum. So we'll -- I'll have more to say about the details of how we're going -- the trial conduct and what we plan to do in the coming quarter.

There are no further questions at this time, sir.

Well, with that, I want to thank everyone for joining our call today and all the excellent questions. For those of you who will be at the American Society of Nephrology meeting, we look forward to seeing you and then subsequently updating you further in the near future as we make progress this quarter and beyond. So you may now disconnect, thank you again.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.