Ascendis Pharma A/S
Q2 2020 Earnings Call Transcript

Published: 27 Aug 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2020 Ascendis Pharma Earnings Conference Call. . I would now like to hand the conference over to your speaker today, Scott Smith, Senior Vice President and Chief Financial Officer, at Ascendis Pharma. Please go ahead.

[Scott Smith:]

Thank you, Operator. Thank you, everyone, for joining our Second Quarter 2020 Financial Results Conference Call today. I'm Scott Smith, Chief Financial Officer of Ascendis. Joining me on today's call are Jan Mikkelsen, President and Chief Executive Officer; Dr. Dana Pizzuti, Head of Development Operations; and Dr. Juha Punnonen, Head of Oncology.

[Jan Mikkelsen:]

Thanks, Scott, and good afternoon, everyone. This second quarter, we achieved several key milestones for Ascendis. As we continue to advance towards our Vision 3x3 to build a fully integrated biopharma company. We submitted our first BLA to the FDA for TransCon Growth Hormone for the treatment of pediatric growth hormone deficiency in June. The BLA submission was completely in line with our stated 2020 corporate goals. And it moves Ascendis, another step closer to become a fully integrated global biopharma company.

[Scott Smith:]

Thank you, Jan. Turning to our financial results for the quarter ended June 30, 2020. We reported a net loss of €94.9 million or €1.97 per basic and diluted share compared to a net loss of €58.9 million or €1.25 per basic and diluted share during the same period in 2019. Now I will run through some of the key components of these results. Research and development costs for the second quarter were €63.6 million compared to €43.8 million during the same period in 2019. The increase in R&D costs reflect continued advancement of our pipeline with the primary drivers, including for TransCon Growth Hormone, costs were higher compared to the same period of the prior year due to increased costs related to manufacturing of commercial product supply as well as increased clinical trial activities, including start-up costs for the global Phase III adult GHD trial, the foresiGHt Trial. And the Phase III pediatric GHD trial in Japan. And for both TransCon PTH and TransCon CMP, costs were higher primarily due to increased clinical trial and manufacturing costs. We also saw higher external costs related to the continued build-out of our oncology therapeutic area and across all programs, an overall increase in personnel-related costs. Selling, general and administrative expenses for the second quarter were €20.8 million compared to €11 million during the same period in 2019. These higher costs primarily reflect an increase in personnel and related costs, as well as expenses associated with the continued build-out of our commercial capabilities. Other income and expenses included an unrealized noncash loss of €9.9 million compared to an unrealized noncash loss of €8.2 million during the same period in 2019 due to foreign currency exchange rate fluctuations. We ended the second quarter with cash, cash equivalents and marketable securities totaling €471.6 million. In July, subsequent to quarter end, we completed a follow-on financing with net proceeds of USD 654.7 million or approximately €580.7 million. Including net proceeds from the July offering, pro forma cash, cash equivalents and marketable securities, as of quarter end, would have been approximately €1 billion. We also remain on track to achieve the following milestones for the remainder of 2020

[Operator:]

. Our first question comes from the line of Michelle Gilson with Canaccord Genuity.

[Michelle Gilson:]

Congratulations on the data. I know it's not apples-to-apples because of the duration of treatment and the baseline. But perhaps you can expand a little bit on some of your comments about this being the first trial to show a difference in quality of life for SF-36 results in a randomized placebo-controlled study. And maybe specifically, you can help us understand if there's a comparison to be made with the results from the REPLACE study, which showed that net par treatment did not result in a statistically significant improvement in either of those domains compared to placebo?

[Jan Mikkelsen:]

Thanks, Michelle. Why we really are so excited about the data is because we basically had been missing something because -- and when we started our TransCon PTH product, we had a long discussion about how do we really describe the severity of the disease. And people try some way to describe it from the pill burden. And when we look on the patient demographic that we have enrolled in our Phase II trial, some of the patients is definitely being placed in the group of mild, taking low amount of activated vitamin D, taking a low amount of calcium supplement. And then we have the more moderate and then we have the severe, but what we saw -- because all the 58 patients now is past this 6-months step. And then we know the burden of daily administration, but still patients are staying and not dropping out. And typically, I have seen many trials, tried many trials. Typically, I would expect in the open-label extension, we will already -- have seen a lot of drops out. Why are all the -- and then including the mild patient there must be something else which we cannot just get from biochemical analysis. And this is why we develop the disease-specific PRO patient-reported outcome for hypoparathyroidism because we wanted really to cash that and get it validated and seen. The SF-36 is what we call it nondisease-specific validation, just describing the benefit you can really achieve in the well-being of a person and what we saw here is that SF-36 came out so clear in just the first four weeks. And we believe that is because we are providing the physiological PTH level 24 hours, seven days a week, meaning it's a flat curve without huge flotations. And this is why we believe other product has not been possible to show a significant change in SF-36 when they have a double-blinded period. And I actually believe this is just talking about the strengths of the product opportunity. But I think perhaps more important, for me and Ascendis, is we really see the benefit that the patient get. We see how they really are changing their life. They are coming and adapting more to a normal life because they get the right hormone replacement therapy.

[Michelle Gilson:]

Great. And just as a follow-up, are you planning to report the PRO with your 6-month data later this quarter? And just moving forward, when we do get those data without a placebo arm in the open-label extension study, how should we think about interpreting the PRO or SF-36 results?

[Jan Mikkelsen:]

I think we both have the SF-36 results. But then, Dana, you can comment about our...

[Dana Pizzuti:]

Right. Yes, as far as our own PRO instrument, the HPES, we've already submitted to the FDA, the documentation to get that validated by them. And so it's really not so much to look at the individual groups and how patients fit, but more about the instrument itself, how it behaves, how predictive it is. And as we have talked about before, there were the two major aspects of that, which was the symptom side of it and then the impact side. So we're pretty excited that it seems to function quite well. But the thing is that it's not validated. And the reason that we came forward with SF-36 was because it's a validated instrument, again, not specific for hypoparathyroidism, but well-established in terms of patient well-being, as Jan mentioned. And so we'll be able to sort of correlate actually both of those scales as we go forward. Now the issue that we're going to have in interpreting the 6-month data is that there's no control arm beyond the first four weeks. So we can follow and see how patients do. And based upon what we've seen so far with patients, as Jan said, staying on the trial, we would expect nothing less than a maintenance or an improvement in the four week results we got from either the SF-36 or the HPES data as well. So again, we will be looking at that very closely once we finalize the 6-month data in all of the 58 subjects that are still in the trial.

[Jan Mikkelsen:]

We have never had any doubt there was a reduced health-related quality of life in patients with hypoparathyroidism. There is multiple application that's showing that. But what is the interesting part for me from a high-level scientific perspective is that it looks like this level can be independent on calcium levels. And this is where I think that what we're seeing more and more, is potential and direct CNS effect that is providing this benefit related to health-related quality of life. And this is what we will like to sustain further with both our own PRO but also continue measuring SF-36. But we are really interested about these results because it's really are the best thing you ever can see when you see the huge benefit that you can provide with an endocrine product where you're basically also providing a high level of health-related quality of life.

[Operator:]

Our next question comes from the line of Joseph Schwartz with SVB Leerink.

[Joori Park:]

Hi. I'm Joori dialing for Joe. So the first one has to do with the . We were just wondering if you talked to the FDA about the SF-36 data, and do you have a sense about how the FDA feels about the study design and primary endpoint for Phase III?

[Jan Mikkelsen:]

I think we just got that data now. This is why we released it here together with our Q2 earnings. And definitely, Dana and her team will really go in and discuss it with FDA. You can comment on that, Dana.

[Dana Pizzuti:]

Yes. I mean we actually are preparing to communicate not only these data with just about the SF-36, but also the 6-month data once we get that all compiled and finalized. So in addition to validating our new instrument, the HPES, we'll talk further about the SF-36 and the long-term efficacy and safety of the product after the 6-month time period.

[Jan Mikkelsen:]

So in conclusion, we have not shown regulatory agencies this data yet. We are going to do it together with our 6-month data that's coming later this quarter.

[Joori Park:]

Okay. Great. That's helpful. And then if I could just dive a little bit deeper about your HPES PRO, could you just talk a little bit more about it? What potential differences could there be between your HPES PRO and SF? And what do you believe, obviously, you just resubmitted it and it's in the hands of the regulator, but what do you believe -- or what do you wish to capture with your PRO that the off-the-shelf endpoint of SF-36 would not be able to?

[Dana Pizzuti:]

Well, I think that the major difference is that this has been developed and sort of validated in hypoparathyroidism patients, right? And so SF-36 has been around for quite a while. It's been used in all sorts of therapeutic areas for sort of looking at how the patients react or respond to therapies. So what we were able to do, though, as we look at the different -- for instance, the symptoms, many of them that are sort of more prominent or more of a problem in patients who have hypoparathyroidism. So CNS things around remembering and concentration, which are the big things that patients tell us about this brain fog and things like that. So we ask specific questions about that. And then as well, other, like less CNS-related symptoms are also part of the different queries that we make to the patients. And so that's the symptoms side. And then on the impact side, then it becomes a question about, so how much better or worse are you with respect to your sort of general physical activity, okay? Your ability to work, your sort of mood. And then also your social relationships. So those are like the different parameters like on the impact side. But again, the big difference is that it's validated in patients with hypoparathyroidism.

[Operator:]

Our next question comes from the line of Josh Schimmer with Evercore ISI.

[Joshua Schimmer:]

I have three of them. First, on the foresiGHT trial, can you describe the dose and titration schedules for the weekly and daily treatment arms? For the CN -- actually, still on the growth hormone market, you had indicated that the adult growth hormone market is under-penetrated. Maybe you could talk a little bit more about the unmet need, the symptomatology and the benefits that they could derive from a convenient growth hormone option? And then when do you think we're going to get a clear sense on the TransCon CMP candidate profile in terms of its differentiated effect on growth specifically in patients?

[Jan Mikkelsen:]

Let me start with your last question. Yes. It's a good question. When we are getting the efficacy on the right cohort, we are dose escalating now and what we already know from our knowledge about the product profile. We basically already think it's highly differentiated because it's continuous exposure of CMP molecule without the high peak that is associated with any effect on vasodilation and other things like that. And we see the efficacy is really highly differentiated, too. When we will see the impact on this highly differentiated product opportunity in the clinical trial, we will see when we are going to state in our dose escalation cohort that we're finding the right dose that is providing. And what we call high meaningful efficacy, not only related to high, but also related to potential other comorbidities. I will hope and expect but I don't know. I hope we will see that in a time where the next 6 to 9 months, but I cannot guarantee that because I do not know which one is basically the right cohort where we will see the effect that we want to have. Related to adult growth hormone deficiency is a quite different patient population that you basically see in growth hormone deficiency in pediatric where many of the adult patients are coming from a complete different background, meaning there's only 15% to 20% that basically are coming from the pediatric growth hormone deficiency. Many of them are coming from the cancer setting oncology, coming from trauma and other places where they have and decreased amount in growth hormone. This here is basically underserved. There has been a lot of different serves about what is the penetration. People are talking about 15% to 20% is really getting treated of the total patient population. So it definitely is a possibility to both help a lot of patients in adult growth hormone deficiency because it's very hard for them to adhere to the daily injection, and we can move them over to a once-weekly dosing. Typically, and what we wanted to do in our foresiGHT trial, which is built in such a way we have a 1

[Operator:]

Our next question comes from the line of Jessica Fye with JPMorgan.

[Jessica Fye:]

In PTH data today, I'm curious if the 4-week SF-36 results or the HPES results track with the biomarker and supplement withdrawal components of the primary and key secondary efficacy endpoints in PaTH Forward. Essentially, were the responders on the primary and secondary more likely to benefit on SF-36 or HPES than the nonresponders? And related to that, it sounds like you're saying that some patients benefited meaningfully on quality of life, even if they did not meet the responder criteria for some reason. And if so, I was hoping that we could dig into which element of the responder criteria seemed less important for quality of life. You alluded to calcium in response to an earlier question. Was that serum calcium or urinary calcium?

[Jan Mikkelsen:]

I think we have still a lot to learn about how really TransCon PTH have so many positive effects when you have a normal replacement therapy. What we could not see any clear correlation was reflecting a serum calcium. And any kind of the parameter related to quality of life. So that was one of the more interesting perspectives we wanted to analyze. Taking to the next deep dive, we have not reached yet, and we will continue to analyze other any kind of the subgroup of the SF-36 where you can subgroup it further down in the 36 questions in different domains, where some of them are much more reflecting to one single parameter of the other one. We are not to the level where -- at least I'm not seeing analysis that basically are describing any kind of correlation or lack of correlation. But it's basically a very, very interesting topic what we really will follow up on. What we basically are coming from is that what we see in our SF-36 is also some of the same positive trends that we're seeing in our disease-specific PRO. So I think there is a great alignment in the data.

[Jessica Fye:]

Okay. And following up on that. Do you see any possibility of changing the planned Phase III endpoint to SF-36 or HPES?

[Jan Mikkelsen:]

I actually believe that when we look in our primary endpoint, we actually will include such a parameter potential as a key secondary element, which are a great way to also have an opportunity to isolate and be ensuring that we can either build it on our patient-specific PRO, but we can also include element as SF-36. So definitely, we have a chance, but we are not thinking on building it into the primary endpoint, but basically take it up as a key secondary endpoint.

[Jessica Fye:]

Okay. Great. And last one, maybe a quick one. Is it possible to refine when, in the third quarter, we can expect the 6-month PaTH Forward update?

[Jan Mikkelsen:]

It's not so many months left now in the third quarter now. So I actually think that they will be -- there's only one month left now, basically September. So it will be in the next 4 to 6 weeks.

[Operator:]

Our next question comes from the line of James Birchenough with Wells Fargo.

[James Birchenough:]

Congrats on another strong update. A couple of questions. I guess first, maybe not to pick on data, but just on the mental component of the SF-36, it just seems like there's a pretty substantial decline in the placebo group from baseline to week four. Is that an expected natural history? And is the drug result specifically superior to the baseline of the placebo? I'm just trying to understand if the decline in the placebo contributed to the results.

[Jan Mikkelsen:]

I have not got any feedback, Jim, that indicates that the decline, anyway, should be reflecting any kind of the treatment outcome there. So I have not seen that part in this. But what you will see is that everyone has been normalized to the 50 account. And I think that is where we see the norm generation general population. So when you have a number, you basically transform it into a normalization.

[James Birchenough:]

Got it. Okay. Yes, it just looked like the baseline was at around 47 for placebo and then dropped down to maybe 42, and that was part of the delta with the treatment effect at week four. So I was just trying to understand that a bit better.

[Jan Mikkelsen:]

Exactly. But I think this is how you make the different domains and then make it over in a summary scheme where you normalize it to a norm scheme. And this is where you basically will see this kind of difference coming in.

[James Birchenough:]

Got it. Okay. And then just in terms of going beyond the 6-month data this quarter, the interactions with regulators. When should we hear back on the results of those interactions? And is breakthrough designation part of the discussion?

[Jan Mikkelsen:]

So currently, we are only discussing with regulatory agencies, our first 4 week data. There was the fixed-dose, double-blinded part. And in this discussion, we had not even included our SF-36 data. What we have discussed is how do we look about our 4 week data with basically are proving one single thing that we have with replacement therapy. The regulatory feedback where we have got regulatory feedback now from the U.S.. We're getting, in beginning of September, regulatory feedback for different European agencies. And out from this feedback we got from U.S., that basically are understanding, yes, this is a replacement therapy. I believe there is an essential data target that will come up when we can come and discuss and send in our six month data in addition of the element we have from our SF-36 for the first four week double-blinded period. And also our disease-specific PRO, which we also will include as soon as we have got the 6-months data.

[James Birchenough:]

And maybe just one final question, just on the adult growth hormone deficiency. Could you maybe give us a sense of the burden of the abnormal body composition in adult patients with growth hormone deficiency? And what's a clinically relevant change in that metric? And what is the consequence of that? And I'm imagining there are drastic metabolic consequences of those change parameters. But maybe just a bit of background, if you would, on just the body composition metric and what level of change would be meaningful?

[Jan Mikkelsen:]

Yes. You can say that in pediatric growth hormone deficiency, we measure height, but it is not the same thing to say in this patient population that body composition is also extremely important. But as a primary endpoint, your basic is always measuring high velocity for 1 year as an primary outcome. If you go to adults, of obvious reasons, they are not growing in height but typical in a different dimension. And this is where you are often measuring a decrease in truncal fat because growth hormone has a direct effect of breaking down truncal fat. They also have major impact on other elements like a patient-reported outcome and also have impact on cardiovascular parameters, has impact on exercise capacity. But from a traditional perspective, how it always have elevated as a primary outcome, growth hormone treatment has been done in a pediatric population by high velocity, and in adult population on the decrease on truncal fat typical as a percent or absolute amount and increase. And secondary is something like increased lean body mass. This is not the same thing that you always would expect that overall positive effect you can get on endocrine health by growth hormone treatment is also expected to be associated with this decrease in truncal fat.

[Operator:]

Our next question comes from the line of Taz Ahmad with Bank of America.

[Tazeen Ahmad:]

Okay. A few questions for me, for SF-36, in the three doses that you studied, the 15, the 18, the 21, can you give us an idea of how the response has changed as you went from the low dose to the higher dose? Just trying to get a little bit of granularity on that. Specifically, can you talk about whether the highest dose did show the best results? And then I have a couple of follow-ups.

[Jan Mikkelsen:]

I have not seen the breakdown directly on the 3 different patient group. It's mainly being done on PTH arm and placebo arm and it was how the primary analysis was done. I am not sure there is any kind of difference between different groups, because that has not been brought up to my attention. So I actually think there will be a same positive effect on all the three different groups.

[Tazeen Ahmad:]

Okay. Going to GHD for a second. So you have Phase III now ongoing in China, and a Phase III starting in Japan soon. Can you give us a little bit more color on the time line for how you're thinking about when those studies should readout? And then to follow-up on that, we traditionally have a sense of rare disease launches in Japan and price points. But can you talk to us a little bit, Jan, about how you're thinking about the market in China?

[Jan Mikkelsen:]

Yes. TransCon Growth Hormone is being evaluated by our strategic investment, VISEN Pharmaceutical, in Greater China. They are in a situation where they are enrolling patients. They expect that in the end of first quarter next year, it will be fully enrolled. And therefore, you can basically expect that after 12 months, you will see -- and some months to clean data, you will see the endpoint. If we go to the -- Japanese trial is a smaller trial. The Chinese trial is about 150 patients. In Japan, it will be much, much, much less. And we will start to enroll this patient group here in filing the IND equivalent in Japan end of this year. The growth hormone market in Greater China and Japan are interesting because it's basically number two or number three single largest market. And the growth hormone market in China is as typically dominated a lot with local player where there is 1 company that's providing, I think, the vast majority of the growth hormone. And what is interesting is that we can come in, in this interesting market, which is very different compared to a traditional Chinese market because 75% of that is basically not in the hospital segment, but basically a direct payment from the caregivers. So it's very, very different market compared to the general segment. And size of it is pretty large. Our best estimation is about USD 600 million to USD 700 million is the established Chinese market now and actually growing really large every year. The Japan market is nearly in the same size and also have been pretty well-established for many years. So when we think about TransCon Growth Hormone, and really, we want to be the leading brand, we want to be the leading brand in a global manner. This is one of the reasons why we have hired a person like Jesper Høiland, which is coming from a global commercial background. And want to implement our rare disease endocrinology products on a global basis. Some of the countries, we will go direct as the U.S. and selected European countries. Other places you will see, we use our innovative way of really building up strategic alliance where we at the same time can be part of really getting the value that we are creating, like we did with VISEN Pharmaceuticals in Greater China. And you will see this kind of way of thinking be implemented in a lot of other geographic regions where we accept that we need to have local knowledge, local people really to make it to a leading brand.

[Operator:]

Our next question comes from the line of Alethia Young with Cantor Fitzgerald.

[Alethia Young:]

One, can you talk a little bit about why you kind of decided to focus first on TLR 7/8 versus maybe like IL-2? I just wonder if there's anything you're seeing preclinically or commercial that kind of makes you think about the landscape. The second question is talking a little bit about the CMP trial, has it been potentially impacted by COVID or is it just an element of dose escalation? And then my third question is, just have you gotten any feedback from the FDA on the growth hormone submission since you filed probably about late June?

[Jan Mikkelsen:]

Yes. Let's start from the backlog of your question because then I can easily remember them. So you're right, the 60 days period has passed and Dana, please inform.

[Dana Pizzuti:]

Well, right. So the agency has confirmed that they filed it, but we're still waiting for the day 74 letter. So that will disclose what the review period will be, whether they think we might go to advisory committee or any other issues they've identified, but they have confirmed that they have filed the application.

[Jan Mikkelsen:]

Second question related to TransCon CMP. I don't think we have disclosed any kind of information about when we expect to have and what we call the cohort where we expect to see our own expectation to efficacy. We have not disclosed that, and we are still on track to follow the pattern that we have laid out. The only thing we have disclosed was we expect to initiate a trial, which is a double-blinded placebo-controlled trial in achondroplasia patient down to the age to 2. We have disclosed that we expect to initiate that end of this year, we call it ACcomplisH China, and we still expect to initiate this trial by end of this year.

[Alethia Young:]

My first question was on TLR 7 and 8.

[Jan Mikkelsen:]

That is a good question in it. And the 2 project was competing at the same time frame. And basically, both of them, we believe, is transformative, high-value product opportunity, very different in concept, but one, is our TransCon TLR 7/8, where we basically can provide a long-term exposure inter-tumor for weeks, months of an agent that can turn tumors from being basic unreactive to reactive. We believe that it's a really paradigm shift and never been done before. What we're doing with our bios IL-2, really believe that it's going to be a best-in-class product opportunity. Move both of them up both to a unique position as our 2 first most unbanked product opportunity in our oncology. That one is coming before the other one. It's basically out from -- the practical perspective is that we need to have a product opportunity being going to clinical operation, initiation of trials, filings and other elements like that. And we will have one coming end of this year and the other one will come around 6-months after. So there's nothing that has changed for that. We are extremely exited on both of this product opportunity and continue to build up a unique pipeline in oncology.

[Operator:]

Our next question comes from the line of Trevor Allred with Oppenheimer.

[Trevor Allred:]

A couple for me. So following your recent capital raise, are you guys thinking about doing an M&A? And if so, what therapeutic category do you think you're focusing on? And then also, are you hearing anything about the pace of enrollment that VISEN is having in China? And how do you expect that to translate to your other trials that you're enrolling?

[Jan Mikkelsen:]

When we are having our portfolio review, we just had it here now on our oncology pipeline, we're looking on this unique product opportunities we can build. We're thinking about how we have built Ascendis Pharma to the stage we are today. We're doing by the TransCon technology because we don't believe that we have not seen other technology where we basically can make highly differentiated product opportunities, really addressing major unmet medical need, but still having a high success rate because the TransCon technology enables us to be in a position that we can work on validated target, validated parent drugs. Why should we ever go away from that and starting to be like anyone else? We have a huge competitive edge with our TransCon technology, and we will continue to build on the algorithm that has proven so successful and because there is so many still low-hanging fruits that we can address. So I don't expect us to see and move into any kind of M&A there. Related to how we are executing in other geographic region, for example, to our strategic investment in VISEN Pharmaceutical, I think they have a very highly talent company setup and they are working in the same standards as we do. They are working with the same dedication. So I actually believe they are coming, and you will see the same kind of results coming out of their pipeline with our product, as you've seen coming out of Ascendis.

[Trevor Allred:]

Okay. And any impact that you're seeing from enrollment from COVID-related things with VISEN? And then do you see that translating -- like those learnings translating to anything that you're going to be doing with your initiations later this year?

[Jan Mikkelsen:]

I have to believe that if you look on the Greater China, I still think it's one of the areas where it have less COVID-19 issues compared to other areas. And we have not seen any kind of a restriction after the first quarter in Greater China, how really to enroll the trials.

[Operator:]

Thank you. There are no further questions in the queue. Ladies and gentlemen, this concludes today's conference call. We thank you for participating. You may now disconnect. Everyone, have a great day.