Ipsen S.A.
Q4 2021 Earnings Call Transcript

Published: 11 Feb 2022

Operator:

Good day and thank you for standing-by. Welcome to Ipsen, full-year 2021 Results Conference Call. At this time, all participants are in listen-only mode after the speaker's presentation, there will be a question-and-answer session and to ask a question, . Please be advised the meeting is being recorded. I would now like to hand the conference over to your host and speaker today, Mr. David Loew, please go ahead. Thank you, Operator. Good afternoon or good morning, everyone. I'm delighted to welcome you to our full-year results call. I'm David Loew, Chief Executive Officer of Ipsen and it's a real pleasure to be here today, to run through our performance and updated mid-term outlook. Please note that our presentation is available on ipsen.com. Please turn to slide 2. This is our Safe Harbor statement, which outlines the routine risks and uncertainties contained within this presentation. Also, any commentary on growth you'll hear today will be based on constant exchange rates, unless stated otherwise. Please turn to Slide 3. I am joined today by our CFO, Aymeric Le Chatelier, as well as Howard Mayer, Head of Research and Development. Howard will be with us for the Q&A session later. Please turn to Slide 4. Here is the agenda for today's call. I will start our presentation with an overview of the business after which Aymeric will take you through our financial performance in the year as well as our 2022 guidance and updated mid-term outlook. After concluding our presentation, we'll be happy to take your questions. We are planning to finish before the end of the hour. Please turn to Slide 5. Let's begin with the business overview. Please turn to Slide 6. Our focus is on specialty care and free therapeutic area, oncology, rare disease, and Neuroscience. This emphasis is an important part of our vision of being a leading global mid-sized biopharmaceutical company centering on transformative medicine. Based on what we announced as part of our Capital Markets Day in 2020, we have now finalized the strategic review of our consumer healthcare business and have entered into exclusive negotiations with Mayoly Spindler for its sales. This is a major step forward in the execution of our strategic road map towards building a more focused Ipsen. Aymeric will provide more details later on. We're happy with this outcome, as it provides a strong platform for this division to continue it's journey. Please turn to slide seven. We continue to perform in line with each of the pillars of the strategy that I unveiled in 2020. Firstly, we maximized all of our key brands with total sales increasing by 12% in 2021, led by the success of specialty care. We strengthened the pipeline with the completion of seven external innovation agreements covering oncology, rare disease, and Neuroscience. While the record core operating margin of 35.2% was supported by early benefits from IRA efficiencies program. Finally, we made good progress with our focus on culture, on the pins by the strengthening of our leadership team during the year. For example, we appointed Stewart Campbell, as our President of our North America business. Over a 20-year career, he has led global and local commercialization functions in oncology and specialty care markets, most recently, at Roche Genentech. Furthermore, Mari Scheiffele, who was appointed to lead our International Specialty Care business, also has a diverse background, combining her strong foundation in science with 20 years in the healthcare industry and then joined us most recently from Novartis. Please turn to slide 8. Turning firstly to our key brands, it was another good year for Somatuline with sales growing by 7%. SSA markets performed well through the pandemic and we continue to take share based on Somatuline strong clinical profile, and differentiated delivery system. In the U.S., which represents just half of Somatuline sales, there were no launches in 2021, we noted the approval in December of pharmaceutical alternative through the 505B2 pathway. In Europe, there was a very limited impact in 2021 from generic SSA's, where the launch in Germany of generic lanreotide led to a market share of only 4% by the end of the year. We also saw generic lanreotide with tenders in Denmark and Norway. In the rest of world markets where there has been no real change in the competitive landscape, we expect a continuation of strong growth. For 2022, we anticipate further launches off generic lanreotide in other countries in the European Union, as well as increased competition in the U.S. Please turn to Slide 9. Cabometyx continues to be a key contributor to our growth. With sales up by 23% in 2021, we remain fully confident of achieving peak sales of at least $700 million. Through the year, there were strong volumes across most geographies that was also an accelerated ramp up in the rest of world countries, and why the reimbursement coverage helps to reinforce Cabometyx position as the TKI of choice in second line renal cell carcinoma. The launch in Germany of the combination of Cabometyx and Nivolumab in the first-line setting, is progressing well, if you look across the monotherapy and combination settings, Cabometyx achieved at 18% exit share in Germany of new patients at the end of the year. We're all looking forward to further reimbursement and launches of the combination in a number of other key European countries this year. Please turn to Slide 10. Decapeptyl's 17.5% sales growth in 2021 was proven by the excellent performance in China, it's also a result of the recovery from the pandemic. Outside China, we grew Decapeptyl's market share and continue to focus our efforts on the six months formulation. Onivyde sales grew by 7%, partially reflecting higher sales to our ex - U.S. partner. As you know, these sales can vary by quarter. While volumes in the U.S. also performed well, growth was limited by the effects of the pandemic in the U.S. with patients still struggling. For example, to get timely apartments for scans and consultations impacting rates of diagnosis. We expect this to ease in 2022. Please turn to Slide 11. We also significantly increased sales outside of oncology, these per sales grew by 26%, partially helped by the recovery from the pandemic. A strong performance in aesthetic was seen in all key Ipsen and Galderma markets and the full recovery from the pandemic was accompanied by favorable long-term market dynamics. These included the expanded access to services, growing consumer purchasing power, the increasing focus on wellness and beauty, as well as new patient segments, including man and the younger people. Our therapeutics business also performed very well and we continue to focus on what is a significant unmet medical need, concentrating on specificity indications and improving on the poor level of penetration of neurotoxin. Please turn to Slide 12. When I first laid out our strategy just over a year ago, I said that building our pipeline was central to our future growth. But I'm delighted that business development activity in 2021 was right across our three therapeutic areas. There were three pre -clinical oncology transactions completed in the year. These included agreements with Axens Therapeutics, BAKX Therapeutics, as we expand further into hematological malignancies, including a focus on acute myeloid leukemia. In Phase 3 development, we added in elafibranor rare disease and we look forward to a Phase 3 data readout next year. In Neuroscience, the addition of Mesdopetam in mid-stage development accompanied the yields in the preclinical space, including an exclusive collaboration with Exicure. This deal gave us exclusive options to spherical nucleic acids currently on the discovery evaluation for Huntington's disease and Angelman syndrome. Please turn to Slide 13. Our pipeline is growing in phase one, two the development of longer acting neurotoxins in aesthetics and therapeutics is progressing well. While in Phase II, we have further opportunity in FOP with IPN at 60130. The Falkon trial dosed its first patients earlier this year. We also anticipate Phase IIb data from Mesdopetam later in 2022. There are clearly a growing number of Phase III opportunities for Cabometyx and Onivyde. And we anticipate the busy period of news flows disc and next year. Just as a reminder, by lowest data for the Cabometyx combination in hepatocellular carcinoma is anticipated this year. But based on preliminary OSA to the probability of reaching statistical significance at the time of the final analysis is anticipated below. The focus in registration is on Palovarotene, which is anticipated for resubmission to the FDA in the first half of this year. We will also continue the review process with the EMEA, which is a clock-stop period. Discussions are progressing with other regulatory authorities around the world. Please turn to Slide 14. We made further good progress with our CSR agenda in the year. Within the employees pillar, we have a balanced gender target ratio for our global leadership team by 2025, that ratio has already reached 42%. As an employer, it's was awarded external and independent recognition awards and by the end of 2021, 19 countries out of 38 have been recognized. Turning to communities, you may remember that our revolving credit facility includes a key CSR element, favorable results by H1 versus CSR base targets are rewarded with charitable donations. And one of these was awarded to international health partners, a charity supporting people in some of the world's most challenging places to get the medicine they need. We also saw a strong level of engagement in our and motion initiatives supporting patient associations, as well as our community day. Finally, within the environment pillar, we announced our objective to half absolute greenhouse gas emissions by 2030, as well as worked closely with our partners to reduce science-based so three initiatives over the same period. With that, I'll hand over to Aymeric. Please turn to Slide 15.
Aymeric Le Chatelier:

Thanks, David. And we now advance to our 2021 financial performance, as well as the detail of our 2022 guidance and updated mid-term 2024 outlook. Please turn to Slide 16. We delivered a strong performance in 2021, leveraging of sales growth to improve the core operating margin and generate significantly more cash. Specialty Care performed particularly well, while our core operating margin grew by three points, supported by our strategic focus on growth and efficiencies. The on cash-generation led to an increase in free cash flow of 25%, while our EBITDA was up by 20%. As a growth business, we are determined to maintain or discipline over course, working capital and CapEx, so that we can further boost the full to execute our plan for external innovation, which is our primary capital allocation priorities. Finally, we are pleased to announce that the Board of Directors is opening a dividend of €1.20 for 2021, representing a 20% increase over the period -- the prior period. Please turn to Slide 17. Looking at our cost performance, you can clearly see operating leveraging our P&L and the record level of predictability over certified results. Sales growth of 12.3% at constant section rate was aggressively impacted by foreign exchange rates, mainly from the U.S. Dollar and some currencies in emerging markets. At actual rates, our sales growth grew by 10.7%. Our gross margin grew by one percentage base, driven by favorable movements in mix and manufacturing variances, as well as the growth in other revenues, particularly reflecting increase volatility from partners and mainly get their map for this spot. Turning to R&D expenses, we remain focused on the long-term growth of our pipeline and the investment in lifecycle management, Palovarotene and the longer acting neurotoxin, which led us to R&D ratio close to 15%. And lastly, we were pleased to improve the ratio of SG&A cost to total costs by 1.4 points to 36%. In the next slide, I will go through the detail of that performance. Please turn to Slide 18. In 2020, we committed to delivering efficiency and overtime, improving the ratio of SG&A costs 2X. You can see here the progress we've made since 2020. We have made good early in odds with our efficiency program with benefits seen across procurement, project prioritization, restructuring and digital initiatives. We are spending smarter, simplifying our operation and accelerating our transformation. We also benefit from hedges covered in expensive cost during the company as well as lower medical and marketing activities. In two years, we have improved our ratio of SG&A to total net sales by 3.5 points from almost 40% to 36%. We do expect to deliver further efficiency in 2022 offsetted anticipated normalization of activity after the pandemic, as well as investment for growth. Please turn to Slide 19. Our improved P&L and cash performance strengthened our balance sheet further last year. We ended the year with a net debt at €126 million, meaning that today, we are more than 2 billion available for external innovation, after more than 200 million spending 2021 for business development, decreasing the recent deal announced in December for Elafibranor. This Firepower, is better than net debt below two times EBITDA and does not include the proceeds from the CHC business. Please turn to Slide 20. Beginning the CHC business, as you can see we are delivering on our strategic roadmap and the proposed offer for Mayoly Spindler, represent an enterprise value for our CHC business of €350 million, including an earn-out contingent payment of €50 million. We expect to close this transaction before the end of Q3, subject to regulatory approvals and customary closing conditions. Please turn to Slide 21. This slide show you the impact of the transaction with CHC on our profit margin given the specific profile of the two activities. Excluding the CHC of 2021 total sales were around €2.6 million with little R&D investment allocated to CHC, Ipsen ratio of R&D costs to total sales, excluding CHC would have increased to 16.1%. The ratio of SG&A to cost however, will have improved by 1 point to around 35% overall, this movement will have had the effect of increasing our core operating profit by around two percentage points on 55% to 57%. It is on that basis that I will now provide you on guidance of 2022. Our expectation for this year and turn to Slide 22. Our expectation for this year, which excludes as I explain the contribution from the consumer health care business up for continued top-line growth and a robust core operating margin. We have two key assumption, as David mentioned before, we do expect further launches of generic longevity that in other countries, in Europe, as well as increased competition in the U.S. We also expect to see the ongoing global return to normal healthcare systems, with anticipate based on those assumption, total size was more than 2% at consult actual rate, and the favorable impact of 2% from currency date on deliver of exchange rate last month in January. We also anticipate a core operating margin of more than 35% of sales. This guidance excludes any potential impacts of incremental investment from external innovation transactions. Please turn to Slide 23. Turning to our mid-term outlook to 2024, we are today updating our expectation to exclude any contribution from the CHC. A total Capital Market Day in 2020, we stated an anticipated total sales growth, between 2020 and 2024, between 2% and 5% per year, as consultation rate. As we continue to deliver on our road map, and that's what you seeing outstanding hazard in 2021, we are delighted to update that to an expectation of the CAGR between 4% and 6% between 2020 and 2024. This assumes on the the approval of potential risk-adjusted additional indication from our pipeline. Beginning the Opex line, we maintained our commitment to invest in R&D supported by SG&A efficiency. For R&D costs, we expect the ratio to total sales over the period to increase. Assuming additional external innovation production. We do however, also expect our SG&A cost ratio to decrease further over time, driven by our efficiency program. Finally, regarding our balance sheet to fuel our external innovation ambition, we expect to generate cumulative remaining firepower of €3.5 billion by 2024, including the proceeds from the sale of our CHC business, and based on the net debt two times EBITDA. So now I will turn back to David for the conclusion. Please turn to Slide 24.
David Loew:

Thank you, Aymeric. We're now coming to the conclusion. Please turn to Slide 25. You can see from our updated mid-term outlook that it's an ease, a growing business, and we have a strong platform to sustain that growth. We do recognize the challenge with Somatuline sales from the entry of SSA competitors in both Europe and the U.S. But as you can see on this chart that we first presented in 2020, our growth plan incorporates this gradual impact. Our core and innovative brands are all performing extremely well and we will continue to grow. We have the infrastructure to support these brands and there are plenty of opportunities to unlock more potential for our pipeline and commercial execution. Finally, external innovation is a key factor, and I'm pleased with the progress we're making there. Please turn to Slide 26. We are all -- we are executing in line with our strategy and with today's news, we are becoming a more focused it's -- we delivered strong results in 2021, starting with top-line growth across all of our core enable innovative brands. We achieved a record core operating margin last year, and I'm delighted with the early results from our efficiencies program. This means we now have an even stronger balance sheet to fund our external innovation plan. Officer requires a year for the pipeline, we now enter a period of several clinical development milestones. We are looking forward to Phase III data readout for Cabometyx and atezolizumab in second-line non-small cell lung cancer and Onivyde in second-line small cell lung cancer. We are on track to refile Palovarotene in the coming months in the U.S., and Mesdopetam is anticipated to see Phase 2B data later this year. Finally the execution of our external innovation strategy led to the completion of seven transactions last year, right across the three therapeutic areas. Our strength and capacity and firepower give us an excellent platform to execute further in 2022. Thank you for listening. Aymeric, Howard and I will now be happy to take your questions. Please turn to Slide 27. Operator, over to you.
Operator:

Thank you. And your first question is from Jean-Jacques Le Fur from Bryan Garnier. Please go ahead.
Jean-Jacques Le Fur:

Good afternoon and thank you for taking my question. Actually I have 3 questions if I may. The first one is regarding the CHGG divestment and try to understand to have the impact on COGS since I've seen this business has some factories and so on. The thing on that is do we have an idea of deliver of depth, you want to dive us to in? This is my first question, the second one is, I know you are reluctant to do that, but could we have an idea of the split off so much within sales between U.S, Europe and the rest of the world to be turned this, the where you are now? And lastly, is that in the press release you mentioned an entire amount of about €9 million due to an unfavorable clinical study. So which trial and drug are consumed by this impairment? Anything? Okay. I think, Aymeric can answer those questions for you since they are mostly a financial nature.
Aymeric Le Chatelier:

So thank you Jean-Jacques. Regarding the CHC, so you are in the presentation on the Slide 32, the full detail of how much CHC is contributing to our P&L and what is the new Ipsen excluding the CG. So regarding your question on COGS, if it is true that the gross margin of the CTP that is much lower or on 67% as compared to 85% for the overall group. And so 87% for the Specialty Care business. So yes, they are significant improvement of our gross margin for excluding the your second question related to the convection. The convection is going to be debt and cash fee, we are expecting an on your question is are we going to get most of the autopilot value and the answer is yes. And I can also say that there will be limited tax to be paid given the early curve-out that has been done for the business, for the proceeds are going to be close to the enterprise value. Your second question was related to the split of Somatuline. I think, we already provided that information as the schools who called. So overall, we have a good 50% of the sales, which are coming from the U.S. Then you have around 30%, which are coming from Europe and the rest of the world accounts for 20% of the sales of Somatuline. And your last question, it's a minor impairment, so there is nothing behind. I mean, it's a 9 million adjustment to the fair value of some of the intangible according to IFRS.
Jean-Jacques Le Fur:

Okay. Great. Thank you. Very clear.
Operator:

Thank you. Your next question is, from the line of Michael Lasser from UBS. Please go ahead.
Michael Lasser:

Thank you very much. Michael Lasser from UBS. Two questions, please. 1. Bigger picture, David, you outlined the deals that Ipsen was able to do last year. So very active in BD, you've now managed to get to a very clean solution for consumer health. I was wondering if you could talk to what you've changed, what's allowed you to become much more active and frankly successful with the BD strategy than maybe previously was the case. Any comment will be great. And your commentary around expectations for branded competition in the U.S. for Somatuline. How do you expect that is going to look like? It's a different device from the competitor, they'll probably have to do some patient management effort as well. So how do you think that will happen? And at what cadence do you think that could happen? Thank you.
David Loew:

Yes. Thank you. Two great questions. Indeed, we're proud that we were able to make these seven deals and we will continue to increase that number. And the way we have done this is that we actually beefed up quite significantly the business development team, as well as the external innovation team on there Howard. We have also strengthened the deals that the teams in terms of the quality of, getting people attracted to Ipsen that really know how to make deals I mean, if Philippe Lopes has a very long deal sheets and experience that he brings in and he has been able to attract people. And then, Howard recruited Christelle in as the Research Head and she also attracted several people in the External Innovation Space. So I would say, that what's one point. The second point is, we have also changed the methodology. The themes in the past, perhaps spend a bit too much time on doing very deep dives on things where from a certain distance I would say, we might have come to a conclusion that arbitration quicker rather than diving deeper and making a triage earlier on, on which are the things we want to focus on. Because we're a mid-sized company. I mean, we there was so much we can digest right in terms of workload. So by being more targeted, I think that's really helps to increase. Again, the ones that we think are interesting. So I would say, those are the most important pieces there was of course also in a way, a increased appetite again from the boards with Clementia, there was a bit over residents to doing late-stage deals. They wanted to achieve some trough with new CEO and you'll hear research head and et cetera. And I think we have proven to the board at we are diligent. We're fully transparent. We are being careful on how much money we bet on what and we try to really do it kind of milestone-based payments to keep the upfront in a reasonable terms and then have more milestone and royalty driven deals. That's what you have observed, for example, also with the latest deal that we have just signed with GENFIT. On your second question regarding the branded competition on Somatuline. Indeed, a 505B2 means that it's not a generic and it cannot be replaced just by the pharmacies. It's difficult to say how Cipla is going to launch it because in a way, if you have a different looking device, you're right, you need to do with some patient education. And we have not seen them yet starting to do that in a more massive fashion. They seem to be focusing more on the pharmacists. So it's something that we will have to watch. What are they going to do? And we will of course, try to continue our differentiation strategy with the new device that we're having. So in a way that's what we're going to focus on, but we have to see how they behave and what they're going to do. So it's a bit early days. I think what gave us courage is that despite advanced having done a fairly concert that for it in Germany, they got only 4% market share.
Michael Lasser:

Thank you.
Operator:

Thank you. Your next question is from the line of Elizabeth Walton of Credit Suisse, please go ahead.
Elizabeth Walton:

Hi good afternoon. Elizabeth Walton from Credit Suisse. A couple of questions, please. Firstly, if we can have another question on Somatuline, you had a solid excessive sales in 4Q. It looks like limited impact in generic so far. You mentioned this 4% share gains by competitive in Germany. Perhaps you can share your latest competitive intelligence view around the competitor launches in Europe. What other markets could we see launching with generic launching this year? And is there a reason why we've seen such limited impact in Germany? Is that something that's related just to the timing of the competitor launch or something else? And then just secondly, on Palovarotene, we still were surprised approval in Canada earlier this year. I am just curious, has this changed your level of confidence at all in the U.S. or European approval? And I see that you've confirmed resubmission timeline for the front half of the year. Should we also expect to possible advisory committee meeting in the front half this year as well? And then finally, if I can just squeeze a third question in. To expand a little bit in terms of your ambition for external innovation clearly it's a key pillar of your strategy for growth, due to seven deals last year, but there's still definitely room in your pipeline to build on, perhaps you could talk about how you see the M&A markets at the moment. Have you seen the perhaps any changes in attitudes of biotech CEOs undertaking partnerships given the current market dynamics. Thank you.
David Loew:

Very good. Quite a good list of questions. You're right on Somatuline. We have seen a very limited impact and you alluded also to Germany asking for the reasons. Clearly advanced has started to -- has for the launch, built up a whole organization. But I think our differentiation strategy works. We have also had a good key account management strategy. I would say, so those are the typical tactics that if you execute them well, you can hold grinds and this is what has happened. In terms of competitive intelligence, in this field it's really hard to say what happens when. As I said, we are assuming that Advance is going to launch in other markets. We see recruitment activities of employees in the field happening in France, Spain, Italy for example. So remains to be seen when they're going to come. Are they still going to have enough capacity, is another question. Because they could have launched the -- since a long time in many, many, many, many more markets and so that has not really happened. But there is a bit of a question mark there in terms of the capacity that's Pharmathen, which is the company which is sourcing for demand, so really has and Pharmathen is also sourcing SIPLe(ph) from what we know. So it's a key question and it's hard to judge how much capacity they really have and how much they can add in what time. I mean, what we do know it's a hard to produce drug, it's nothing easy this Autogel to produce it. And the device that they are having is clearly different to ours, it needs more steps. You have to also put or screw this arrange onto the device that they are having. In our case you have to make steps to prepare the device, we consider this as an advantage and we also consider our device, as being more stable because it's larger and it's better fitting into the hand. The advanced device looks a bit like our former device with some small differences, but it's more like the very thin device. On Palovarotene Canada, so we have communicated that we intend to resubmit in the first half. Are we still anticipating an advisory board in the second half? Yes. The answer is yes. I think even though it's more confidence, I think it's fair to say that the big regulatory authority, SAVA and DAVA, they make their own decisions, right? So we have seen situations where for a couple of some other drugs and the EMEA has decided differently than FDA is across. So it's a bit hard to get. But what I can say is that the analytics that we have conducted in addition have been very satisfactory. We are preparing everything now. As we can to resubmit the additional data and then we're going to inform the market and as soon as we have made it and we get the acceptance of the filing for FDA regarding your last question on the external innovation, I confirm that this is of course, one of our big priorities. What we're seeing is that the market is starting to change where last year we felt it was extremely overheated. We have seen recently the biotech stocks starting to come down faster than the drones or Naztec. We have also seen that some of the IPOs did not go that well. We are hearing that some of the biotechs are starting to have first difficulties to refinance. So in that environment, if that is going to get tougher and, for example, if interest rates would increase in the U.S. and eventually one day in Europe, it would probably be helpful for us because in fact we have a big start firepower and if the valuations come down a bit, that provides opportunities for us. We have seen good discussions with the biotechs, JP Morgan just happened, though we are always in discussions with several companies. Of course, we can't say where we are in any given deal, but things are ongoing. And we will be a big opportunity and the big priority for us.
Elizabeth Walton:

Thank you.
Operator:

Thank you. Your next question is from the line of Richard Crozier of JP Morgan, please go ahead.
Richard Crozier:

Hi, thanks for taking my questions cheaply. First one on deck capex. So just -- its some idea behind the continued strength from the products and whether you see that continuing. And also, as we see the markets may be improving as Omicrom comes through. Maybe China has a difficult transition to go to so. How do you see that impacting the capacity of this year in 2022? And then second question, just on Galderma and the arbitration and the agreements there. Could you maybe give us a little bit more color what's lying behind that arbitration and how we should think about those going forward? Thanks very much.
David Loew:

Right. Thank you, Richard on Decapeptyl, we are continuously gaining market share in Europe, Asia, and in China, you also have a very, very strong development of the market itself. There is still lot of many untreated prostate cancer for example. So that market has a very strong growth dynamic and we're benefiting from that as well. But the growth is by far not only coming from China. As I said, there is a lot of growth also coming from Asia and from Europe. Now to your crystal ball question on, okay, how is China actually going to get out of the situation of having basically shut down their borders? It's hard to say what they are going to plan. If I think a bit back to my vaccines time, I think if I would be the Chinese government, I would start to open up off to the Olympic games in the spring because in fact, if they are going to get a wave, first of all, the wave is going to be less severe than if everybody is inside, in the spring people go outside. And the second reason why I wouldn't do that is that actually with Omicron, it's almost like a good situation for China now because we have seen that their vaccines were not as potent from what we have observed with BioNTech or Moderna. And in that sense, they probably could decide to say, okay, even if we don't have people particularly well protected, having Omicron coming into the country is probably not a disaster, I mean, we have seen in the Western markets that with the Omicron, the infection has really skyrocketed but actually the hospitalizations and the death rates are not dramatic. So it's going into an endemic phase and therefore, I don't think this is going to really affect very significantly the Decapeptyl sales in China. So long answer to come to a conclusion of what happens on Decapeptyl sales in China. On Galderma, as we have said, this is of course an arbitration and in any arbitration situations you can't give a lot of details. So it's just the difference in view on the strategy of the filing on QM and then on the territories. It's really advised some of the smaller territory so it doesn't affect the very large territories. And -- so I think that answers your question, right? Do you have a question on Dysport?
Richard Crozier:

Yeah.
David Loew:

In general, you mean?
Richard Crozier:

Yes, just in general. Yes.
David Loew:

Yes, yes. I think there is a good potential on Dysport, both in aesthetics, because the market, as we said, it's growing extremely well, but also in the therapeutics because the therapeutics market will continue to grow, and as people are growing older and there are a lot of untreated patients, still, that I think we need to get better as the healthcare system and the industry to really work on that, then I think more people being treated in the treatment space. So I'm mostly for Dysport.
Richard Crozier:

Thanks.
Operator:

Thank you. Your next question is from the line of Tipo Botwin of Morgan Stanley, please go ahead.
Tipo Botwin:

Thank you for taking my questions. The assessment in your guidance for 2022, just -- if we look at the bottom end of the guidance, just , I know you're not going to give a product-by-product guidance, but what does it imply for Somatuline? Can we simply assume that these bottom end of the range that you mean some decline for Somatuline in the U.S. and in Europe. That's my first question. Second question on the consumer dealer. Just if you could clarify exactly because you aren't on negotiation. What are the chances of that actually getting through, and if you could actually give us some idea of the condition for the earn outs. And then my last question on the non - GAAP team analytics Senior pipeline, do you have any agreement on Galderma for these under aesthetic indication or do you freely retain the right on Visa and could you potentially partner later on? Thank you.
David Loew:

Okay, so perhaps on the guidance and on the -- do you want to take them, Aymeric?
Aymeric Le Chatelier:

Yes, so regarding the guidance, yes, you're right to say that we're not providing guidance by product, but this 2% at least growth for 2022 assume as you've seen on our earning assumption, that they will be further competition for Somatuline of generic or branded generic on both Europe and the U.S. So this will imply that there will be some decline of Somatuline in 2022. Regarding CHC, yes. As you know I'm entering into negotiation, is mainly the way to cut you a deal from a French social operating representative point of view. Clearly legally, there is no deal. But there is a limited number of condition. And I will say, that the certainty of being able to complete that deal is very high. And even I mean, we said we're going to complete it by the end of Q3 and we are expecting to be able to close it potentially before. Regarding the earn-out, we're not going to provide the detail of the earn-outs, but this is basically based on the performance for the next few years of the existing CG Ipsen business.
David Loew:

On the neurotoxin, as you know from our document in 2014, the agreement that was done with Galderma, where we have an alliance with them which is focusing on all the neurotoxins that we have together. And we have the IPN marketing authorization on QM and Galderma, in that sense, our distributor, has developed the product. Galderma is really focusing on aesthetics. There are some very small territories where Ipsen still has some aesthetic business and you have seen that the arbitration -- one-off through arbitration is focusing on this. And then on the treatment space, that's really the space that Ipsen is focusing on. So in the sense, Ipsen and Alliance, if you want. And so I think the Alliance has actually delivered very well. I mean, you see the growth of Dysport. Dysport is having very strong growth in aesthetics and in therapeutics in fact.
Tipo Botwin:

Thank you.
Operator:

Your next question is from the line of Sachin Jain of Bank of America, please go ahead.
Sachin Jain:

Hi there, thanks for taking my questions. I have three topics, if I may. Firstly, just back to Somatuline. Could you comment whether you are aware of any similar product within the wholesalers and that for what portion of 2022 you're assuming Somatuline competition for? And then just following up from your comments of some decline for Somatuline in 2022, just wondering whether the erosion you are seeing for 2022 is better or worse in the erosion you see amount to '24. What I'm trying to get a sense of is you've clearly seen limited competition to-date in Europe and you see most masticate on the U.S. So just wondering what upside that represents to your '24 candor? Second question, just back on Palovarotene in Canada versus U.S. EMEA. On the soundness of different regulator, but the data you've assimilated for the U.S. to the Canadian authorities, asked for or did you submit any of that data? It's just give some confidence in that process. And then final, just big picture, David, you've mentioned a number of Campo and Onivyde rains. Just wonder if you could just pick out one or two that you are most confident in and that you think are most important. Thank you.
David Loew:

So on the Somatuline, I have to say, I didn't quite catch your first question. You said something about the wholesalers, this is like where the sales go through?
Sachin Jain:

Sorry. I was just wondering when you're aware of any singular products having been shipped to wholesalers as yet. And therefore, walk portion of 2022. We could see competition. I'm just trying to get an idea of competition phasing through 2022 from the competitor.
David Loew:

So far we have only heard about one institution where they ship, that's the latest news from yesterday night. So there is no widespread shipping going on so far from our information, so in a sense, that's good news for us there. Then your question on the decline of Somatuline in 2022. So that's a pretty arithmetical question because you linked it back to our guidance that we gave in 2020 and are on the erosion curve for 2024 and 2022. And so if that was a better lift, there is a slightly better performance than what we had assumed which is why we have also seen a better performance in '21 that explained it, why we have up the guidance and so now for the outlook for 2022, '23, 2024, it's hard to compare an outback to that four costs that I would have to go back and we would have to recalculate that whole thing, but I would say that with the appearance now at the confirmation that there is a generic in the U.S. Of course, we always want to be careful in how we guide, because our competitive intelligence can't be a fly on the wall. If the AOL phase to know where when our other competition coming. And so it's hard to predict that it's also hard to say exactly how much more volume we'll format and be able to deliver one day. So that I don't really -- can't really answer that point. But obviously, that it's a 505B2 is something which is definitely giving us more comfort than it would have been a full-fledged generic. On the Palo, Canada, though, the situation was that, we absolutely kept informed the Canadian authorities on what the questions were on the U.S. Canada was satisfied with the data that they had. And based on that data, they felt they could make a decision. Though that's when they came now to the conclusion and they approved the drug for Canadian FOP patients. On your question on Cabo or Onivyde, perhaps since we have Howard on the line, I can also pass this question to Howard. I mean, I read that you -- of course, we all don't know how data is going to look and we all learned in our careers that until you hit the enter and you have the unblinding, you really don't know, but I mean, perhaps Howard, you can give a little bit of flavor to this.
Howard Mayer:

David, I'm sorry, I was concentrating on Palovarotene question. Can you can you repeat the question about Cabo and Onivyde, please?
David Loew:

Question on Cabo and Onivyde, not certain if I got it right, was like okay how confident are we for two upcoming blindings in lung cancer, right? I mean, Onivyde to small cell lung cancer and Cabo is non-small cell lung cancer, I mean. I hand it over to you.
Howard Mayer:

A - I think the Cabo contacts 01 study was launched because of compelling or our data in the Cosmico 21 study in that population, so that population was expanded to conduct a Phase III study versus docetaxel in patients who progress on I-O and platinum-based therapies studies enrolled. And we are reasonably confident of the readout, which should be later this year. The timing, depending on the OS, events that come in. In terms of Onivyde in small cell lung cancer, the DMC met and review the futility data and told us that the study can progress. And so the study again, is fully enrolled and we should have data from that study later this year.
Sachin Jain:

Thank you.
Operator:

Thank you. Your next question is from the line of Kyle PowerBack from Goldman Sachs. Please go ahead.
Kyle Powerback:

Thank you for taking my questions. Two broad areas, please if I may. The first one is coming back to business development M&A. I'm told you clearly have a lot of firepower as you are alluding to -- and you have done a lot of transactions recently, but just as you sit here right now, can you help us frame the what do you see as the highest priority from your perspective, either from a therapeutic area perspective, or from a stage of the asset perspective? Do you think given what you have from a firepower angle, is that a sweet spot for Ipsen that you can potentially try and benefit from here? So that's the first one. And then the second one, just coming back to Richard's question on the arbitration. It's quite unusual for two partners who worked for 15 years to enter into arbitration around the filing strategy before the drug gets filed. I'm just wondering if we can get some sense of your perspective on the way you think, kind of, how you would like to have done the filing. What do you think Galderma was planning to do differently and where do you see a potential outcome there? Thank you.
David Loew:

Thank you. . So on BD in terms of the highest priority, I mean, given that we have Somatuline 505b2 in the U.S., clearly we will try to focus a lot on something in oncology or hematology and as Stage 3 or -- on market compounds but that does not preclude at all, of course, doing other deals. I mean, you have seen us just do before the holidays the GENFIT in the rare disease which was a Phase III deal and which is going to unblind next year. So we will absolutely also look at other therapeutic areas and other stages of the disease. We have to refill the pipeline across all stages and you know that, of course, it's also not just a quality question but it's also a number game that you have to have more in pre -clinical that you actually get them over the finishing line eventually, later. So it's going to be a mix but clearly we're going to really try to find something also for our oncology or hematology, including the U.S. In terms of arbitration, I can't really elaborate more around this. I mean, you know how this is, when you are in an arbitration process, people don’t make comment. So that's where we are.
Operator:

Thank you. And your next question is from the line of Richard Parkes of BNP Paribas.
Richard Parkes:

Hi. Thanks very much for taking my questions. Firstly, just conceptually just interested to know how you factored in Somatuline pressure this year into guidance. Because obviously guidance isn't a range, it's essentially a floor, so should we view guidance of factoring in a worst-case scenario where competitors on capacity constraints, on what you think the outlook is naturally will be in that scenario or there's still upside and downside coming to in practice to that? And that's the first question, then second question on Palovarotene. In Canada, the label is quite favorable in terms of Asia invitation and clearly the Canadian authorities feel comfortable, but the grave plate closure risk can be managed through monitoring, which is a little -- I'm just interested, because it's a little bit in contrast to some of the expert feedback we had was concerns over some rare but serious consequences of early growth plate closure including impacting openly grow. So I'm just wondering what -- why that maybe a misconception amongst some of the expert community on how you hope to be comfortable with monitoring is sufficient to manage that risk? Thank you.
David Loew:

Thank you, Richard. On Somatuline, I think Aymeric you can answer that, and then we go to Howard on Palovarotene. Notably, I want to correct these oregon growth problem misperception that is wrong but Howard elaborate on that.
Howard Mayer:

Regarding your question, I think your question you talk about guidance which you mean the outlook, and I think that the range we're providing, the 46% mainly account for the risk-adjusted value of the life cycle management of our products, and we are assuming in our scenario what we've said in our guidance for 2022, which means that there will be increased competition. But at the same time, they're going to be a progressive erosion for Somatuline by 2024.
Richard Parkes:

Howard, you already label and this perception on the modern growth.
Howard Mayer:

But I think there really isn't an impact on modern growth. Just to be clear, that the impact is on premature physio-closure in growing children. And the label in Canada has approval for pediatric patients greater than or equal to eight years of age in females and greater than or equal to ten years of age in males. And I think that -- and obviously with the proper monitoring, there's a boxed warning for monitoring every three months. But that was one lease and in which they are comfortable and I think the other issue is that, these pediatric patients are on average about 80% skeletally mature. If you look at the data, the incidence of PPC and those patients is lower than the risk of PPC in younger patients. For all of those reasons, I think they believe that -- and we believe that the benefit risk deports consideration for use of Palovarotene in that age group with the appropriate monitoring.
Richard Parkes:
David Loew:

It's like, it means that these kids are already taller than the other kids. And so if they now need to think about what -- between choosing -- you might have a premature closure, we like 23% chance, or you might see your disease progress with a 63% chance. All the families and patients that I talked to, they actually said, Look, I mean, as long as the doctor keeps me informed, I can make an informed choice. And I think that it's very close to our hearts that there is going to be an informed choice. I think that's very important, but all actually families and based on that, I talked to, we say it like, look, I mean, it's clear that these disease is so crippling that I will refer that my child is taking it at the age that is in the Canadian label impact. So that's the feedback we have from patients associations, but also a lot of the . But
Richard Parkes:

Thank you.
David Loew:

With it, that's going to be our last question, unfortunately. We need to wrap up the call. I would like to thank you everybody. I'm wishing you a nice weekend. Bye bye.
Operator:

That concludes presentation today. Thank you for participating. You may now disconnect.

Ipsen S.A. Q4 2021 Earnings Call Transcript

Other Ipsen S.A. earnings call transcripts:

Ipsen S.A.
Q4 2021 Earnings Call Transcript