Concert Pharmaceuticals, Inc. (NASDAQ:CNCE): A Promising Biopharmaceutical Company Advancing Novel Deuterated Compounds

Concert Pharmaceuticals, Inc. (NASDAQ:CNCE) is a late-stage clinical biopharmaceutical company that is developing deuruxolitinib, a novel, deuterated, oral Janus Kinase 1 and Janus Kinase 2 (JAK1/2) inhibitor, for the treatment of adults with moderate to severe alopecia areata, a serious autoimmune dermatological disease.

Business Overview

Concert Pharmaceuticals was incorporated in 2006 and is headquartered in Lexington, Massachusetts. The company's core focus is on developing novel small molecule drugs based on its knowledge of deuterium chemistry. Deuterium is a stable, non-radioactive isotope of hydrogen that can be selectively incorporated into existing pharmaceutical compounds to create new chemical entities with improved properties.

The company's lead product candidate, deuruxolitinib, has successfully completed two Phase 3 clinical trials for the treatment of adults with moderate to severe alopecia areata. Alopecia areata is a serious autoimmune disorder characterized by partial or complete loss of hair on the scalp and elsewhere on the body. The company plans to file a New Drug Application (NDA) with the U.S. Food and Drug Administration (FDA) for deuruxolitinib in the first half of 2023.

In addition to deuruxolitinib, Concert Pharmaceuticals has entered into collaborative arrangements with other companies to develop deuterium-modified versions of their marketed products. For example, the company has a development and license agreement with Avanir Pharmaceuticals, Inc., a subsidiary of Otsuka Pharmaceutical Co., Ltd., for the worldwide rights to develop, manufacture and commercialize AVP-786, a combination of deudextromethorphan hydrobromide (d6-DM) and quinidine sulfate, which is being investigated for the treatment of neurologic and psychiatric disorders.

Financials

For the full year 2022, Concert Pharmaceuticals reported annual net income of -$82,594,000, annual revenue of $32,578,000, annual operating cash flow of -$55,154,000, and annual free cash flow of -$55,409,000.

In the third quarter of 2022, the company reported revenue of $8,000, a net loss of $28,904,000, and used $29,606,000 in cash for operating activities. The company ended the third quarter with $95,189,000 in cash and cash equivalents and $53,669,000 in investments, for a total of $148,858,000 in cash, cash equivalents and investments.

Liquidity

As of September 30, 2022, Concert Pharmaceuticals had cash, cash equivalents and investments of $148.9 million and net working capital of $139.8 million. The company has incurred cumulative net losses of $440.1 million since inception and requires capital to continue future development activities.

Based on the company's current operating plan, management believes that its current cash, cash equivalents and investments will allow it to fund its operating expenses and capital expenditure requirements through the second quarter of 2023. However, the company has stated that there is substantial doubt about its ability to continue as a going concern for a period of at least twelve months from the issuance date of its latest quarterly report. To alleviate its financing requirements, the company plans to pursue one or more of the following steps to raise additional capital: raising funding through the sale of its common or preferred stock, raising funding through debt financing, and establishing collaborations with potential partners to advance its product pipeline.

Deuruxolitinib Development and Regulatory Pathway

Deuruxolitinib is an oral JAK1/2 inhibitor that Concert Pharmaceuticals is developing for the treatment of moderate to severe alopecia areata. The FDA has granted deuruxolitinib Breakthrough Therapy designation for the treatment of adult patients with moderate to severe alopecia areata and Fast Track designation for the treatment of alopecia areata.

In May 2022, the company announced positive topline results from its THRIVE-AA1 Phase 3 clinical trial of deuruxolitinib. The primary efficacy endpoint and all key secondary endpoints were met with statistical significance in both the 8 mg twice-daily and 12 mg twice-daily dose groups relative to placebo. In August 2022, the company also announced positive topline results from its THRIVE-AA2 Phase 3 clinical trial, with the primary efficacy endpoint and all key secondary endpoints met with statistical significance in both the 8 mg twice-daily and 12 mg twice-daily dose groups compared to placebo.

Based on the successful completion of these two Phase 3 trials, Concert Pharmaceuticals plans to file an NDA with the FDA for deuruxolitinib in the first half of 2023. If approved, deuruxolitinib would be the first oral JAK inhibitor indicated for the treatment of alopecia areata in the United States.

Competitive Landscape and Market Opportunity

The market opportunity to treat alopecia areata within the United States is significant. Based on a recent large cross-sectional survey study, it is estimated that the current prevalence of alopecia areata in the United States may be up to approximately 1.5 million persons. The study also estimates that about 43% of the alopecia areata population in the United States has 50% or greater loss of scalp hair.

If approved, deuruxolitinib would face competition from baricitinib, a JAK1/2 inhibitor developed by Eli Lilly that was recently granted approval by the FDA for the treatment of adult patients with severe alopecia areata. Additionally, a number of other product candidates are being studied for alopecia areata, including ritlecitinib, a JAK3/TEC inhibitor being developed by Pfizer Inc.

However, the company believes that the market opportunity within the United States could support multiple approved treatments for alopecia areata. If deuruxolitinib is successful in obtaining FDA approval, the company intends to commercialize the product in the United States either on its own or with the assistance of strategic partners.

Risks and Challenges

Concert Pharmaceuticals faces several risks and uncertainties that could impact its business and financial performance. These include the company's ability to successfully develop, obtain marketing approval for, and commercialize deuruxolitinib; the potential for competition from other treatments for alopecia areata; the company's ability to raise additional capital to fund its operations; and the impact of macroeconomic conditions, such as the ongoing COVID-19 pandemic and rising inflation and interest rates, on the company's business and ability to access capital markets.

Additionally, the company is subject to the risks inherent in the biopharmaceutical industry, such as the uncertainty of clinical trial outcomes, regulatory approval processes, and the ability to manufacture products at commercial scale. The company also faces intellectual property risks, including the potential for patent challenges and the need to protect its proprietary technology.

Conclusion

Concert Pharmaceuticals is a promising biopharmaceutical company that is advancing the development of novel deuterated compounds, with a focus on its lead product candidate, deuruxolitinib, for the treatment of alopecia areata. The successful completion of the company's two Phase 3 clinical trials for deuruxolitinib and its plans to file an NDA with the FDA in the first half of 2023 represent significant milestones for the company.

However, the company faces several risks and uncertainties, including the need to raise additional capital to fund its operations and the potential for competition in the alopecia areata market. Investors should carefully consider these factors when evaluating an investment in Concert Pharmaceuticals.