Ascendis Pharma A/S (ASND) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ascendis Pharma third-quarter 2016 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded.

I'd now like to introduce your host for today's conference, Mr. Scott Smith, Chief Financial Officer. Sir, please go ahead.

Thank you, operator, and thank you, everyone, for joining our call today. I'm Scott Smith, Chief Financial Officer of Ascendis. Joining me on the call today are Jan Mikkelsen, President and Chief Executive Officer, and Dr. Jonathan Leff, Chief Medical Officer.

Before we begin, I would like to remind you that this conference call will contain forward-looking statements that are intended to be covered under the Safe Harbor provided by the Private Securities Litigation Reform Act. Examples of such statements may include, but are not limited to, our potential to become a leading integrated rare disease Company, our goal to produce multiple potential best-in-class pipeline opportunities, statements regarding our strategic plan, our goals regarding our clinical pipeline of rare disease endocrinology programs, and statements regarding the plans for our Phase 3 heiGHt Trial of TransCon Growth Hormone.

These statements are based on information that's available to us today. Actual results or events could differ materially from those in the forward-looking statements, and we may not achieve our goals, carry out our plans or intentions, or meet the expectations or projections disclosed in our forward-looking statements, and you should not place undue reliance on these statements.

Our forward-looking statements do not reflect the potential impact of any in-licensing agreements, acquisitions, mergers, dispositions, joint ventures or investments that we may enter into or terminate. We assume no obligation to update these statements as circumstances change except as required by law.

For additional information concerning the factors that could cause actual results to differ materially, please see the forward-looking statements section in today's press release and the risk factors section of our report on form 6-K that was filed with the Securities and Exchange Commission on October 18, 2016.

On today's call we will discuss our third-quarter results and provide a business update. Following some prepared remarks, we will then open up the call to questions. I will now turn the call over to Jan Mikkelsen, our President and Chief Executive Officer.

Thank you, Scott, and thanks, everyone, for joining our call. In the third quarter, we made key advancement in our pipeline. For the TransCon Growth Hormone program, we have enrolled the third patient in the Phase 3 heiGHt Trial.

We have also disclosed two new product candidates, TransCon PTH and TransCon CNP. For these two new rare disease endocrinology programs, we presented preclinical data for the first time on September 13, 2016 at the R&D day in New York supporting their potential best-in-class product profiles.

During the quarter, we outlined a specific roadmap known as Vision 20/20, which described how we aim to establish Ascendis as a leading integrated rare disease Company. We believe we can do that in a lower-risk manner while addressing significant unmet medical needs in high-value rare disease areas.

A key component of our recent 20/20 is to focus on rare diseases, where we can apply our TransCon technology to clinical validated parent drugs and create clearly differentiated product that address large markets. We plan to build out a pipeline of at least three product candidates in each therapeutic area of focus. We recently announced that our first rare disease pipeline would be in the endocrinology space.

We believe that the Ascendis approach to R&D creates a pipeline of lower risk, higher value product candidates. We believe it also allows us to create certainties across a single therapeutic area, a strategy that has been demonstrated to drive efficiency throughout the drug development process from R&D to commercialization. We believe that fast focusing may be the single most important factor to build and sustain a true long-term competitive advantage.

As you know, the ultimate goal of Vision 20/20 is to build a commercial integrated Company primarily focused in the US. Our current rare disease endocrinology pipeline of three product candidates present multiple options for building this commercial focus. If our product candidates are approved, we believe that we will be able to leverage a single, specialized salesforce to officially commercializing our product in the US. Furthermore, by liberating strategic collaboration, as we have in place to date with Genentech Roche and Synovic, we have more opportunity to accent the reach and impact of our TransCon technology platform in large disease area.

We are proud of the strategic franchise we have developed in the rare diseases endocrinology, and the progress we have made this quarter on all fronts. We have imitated size and enrolled the first patients in the heiGHt Trial. We're also advancing two pre-clinical candidates for expected filings of R&D equivalent for TransCon PTH in Q2 2017 and TransCon CNP in Q4 2017.

We have also successfully completed an equity offering and net proceeds of around $120 million, providing us with additional capital to advance our goal wholly owned pipeline towards multiple value-creating milestones.

Now let me turn the call over to Jonathan, Chief Medical Officer, for a more detailed review of our pipeline.

Thanks, Jan. This past quarter has been an exciting and productive time for our Company as we've advanced our pipeline and made key hires in our clinical developments and regulatory groups to add depth and expertise in endocrinology. Many of you may have attended our R&D update in September where we reviewed three of our internal pipeline programs: TransCon Growth Hormone, TransCon PTH, and TransCon CNP. Today I'll briefly review each program, starting with the important progress that we've made with our Phase 3 TransCon Growth Hormone program.

We are pleased to announce that the first patients have recently been enrolled in the US in the global heiGHt Trial, our Phase 3 trial of TransCon Growth Hormone in children with growth hormone deficiency or GHD.

Similar in design to our phase 2 trial in pediatric GHD patients, the heiGHt Trial is a randomized open-label active controls Phase 3 trial. The heiGHt Trial will compare outcomes in newly diagnosed children with GHD receiving once weekly TransCon Growth Hormone to those receiving injections of daily growth hormone therapy. The primary endpoint is height velocity at 12 months. Patients will have the option to enroll in an open-label extension to collect long-term safety and efficacy data.

Following the positive interactions with the FDA and EMA earlier this year, we have continued to complete international regulatory submissions. Our recent focus has been on-site initiation and activation. We have secured numerous institutional review board approvals and are conducting site initiation visits on an ongoing basis.

We also recently held an investigator meeting with physicians and clinical trial staff from sites including Australia, New Zealand, and the US. At this meeting, enthusiasm for the heiGHt Trial, the TransCon Growth Hormone program, and our endocrinology pipeline in general was high. We expect to have more visibility on the enrollment timelines in the first half of next year and will update the public accordingly.

As a reminder, the objective of the heiGHt Trial is to compare our long-acting growth hormone to daily growth hormone from a safety, efficacy, and tolerability standpoint. Our Phase 3 trial builds upon our randomized active controlled Phase 2 pediatric trial, which demonstrated the TransCon Growth Hormone and comparable safety, efficacy, tolerability and immunogenicity compared with daily growth hormone.

You may recall that our TransCon Growth Hormone product candidate delivers growth hormone that is unmodified. This means when released by our TransContechnology, the growth hormone can diffuse freely into the tissues and carry out the effects of native growth hormone, receptors for which are present on nearly every human cell.

With the patient in mind, TransCon Growth Hormone is designed to be stored at room temperature and to be administered as a single injection via an auto injector with a small needle and small volume to provide comparable tolerability as daily growth hormone. Our device is in final testing and is expected to be ready for the extension phase of the heiGHt Trial and for commercialization.

At our September R&D update, we also reviewed the preclinical data and discussed plans for two new programs: TransCon PTH and TransCon CNP. Both of these new product candidates leverage our TransCon platform, which can be applied across a broad range of targets.

The first of these product opportunities is TransCon PTH for hypoparathyroidism, a rare and serious endocrine deficiency disorder that can result in a variety of neuromuscular, cardiovascular, and other symptoms. The disease affects approximately 77,000 patients in the US, resulting in significant comorbidities, disease burden, and low quality of life.

Current standard of care includes large doses of calcium and vitamin D, and for patients who cannot be controlled with calcium and vitamin D, NATPARA is the only approved replacement therapy for hypoparathyroidism. However, neither calcium, vitamin D, nor NATPARA fully control the disease.

In particular, these treatments may fail to address some fundamental abnormalities, such as high urinary calcium levels and volatility of serum calcium levels. NATPARA also substantially increases bone turnover, leading to loss of cortical bone mass over time.

Prior clinical research, largely from the National Institutes of Health, has provided a road map for a target product profile that may control all aspects of the disease. We have created a product candidate, TransCon PTH, which is designed to follow this road map and overcome limitations of current therapies by providing constant PTH exposure in the physiological range. We think this approach will achieve an effective replacement PTH therapy to more fully control the disease.

Importantly, data we have generated to date in primate studies has demonstrated pharmacodynamic effects over 24 hours. Furthermore, in a rat model of hypoparathyroidism, in contrast to NATPARA, TransCon PTH normalized serum calcium and phosphate levels.

Our next step with TransCon PTH is submission of an IND or equivalent regulatory filing, which is planned for the second quarter of next year, followed shortly by initiation of clinical developments. Our Phase 1 study is expected to be a single and multiple ascending dose study in healthy volunteers.

Turning to our next product candidate, we have also developed a long-acting C-Type Natriuretic Peptide, TransCon CNP, which we believe can help induce growth and manage the numerous comorbidities associated with achondroplasia and associated skeletal dysplasias. Achondroplasia is a skeletal disease characterized by disproportionate short stature and is the most common type of dwarfism.

The morbidities of this diseases are extremely serious. Patients may suffer a lifetime of health challenges and experience higher mortality rates. There are currently no approved medical treatments, and patients suffer numerous surgeries to alleviate the skeletal abnormalities. In addition, patients often elect to undergo surgical limb lengthening through a series of painful operations which highlights the unmet need.

The cause of achondroplasia is well understood, as a signaling defect in the FGFR3 receptor pathway, which normally negatively regulates chondrocyte growth. In the disease state, FGFR3 becomes constitutively or constantly active, thereby inhibiting chondrocyte growth.

C Natriuretic Peptide, or CNP has been shown to block the inhibitory signaling effect of FGFR3, enabling chondrocytes to return to more normal growth. In fact, early-stage clinical data suggests daily treatment with a CNP analog, currently in development, resulting in improved height velocity in these patients. However, this CNP analog has a 20-minute half-life, and achieves therapeutic CNP levels only for a portion of each day.

Our long-acting CNP pro-drug, TransCon CNP, is designed for once weekly delivery, achieving sustained therapeutic CNP levels for seven days, with a lower Cmax, which may result in improved efficacy with reduced potential for episodes of hypotension, which has limited current investigational therapies.

In relevant animal models, we have shown no change in blood pressure following administration of TransCon CNP. We have an ongoing primate study for which we reported interim two-month data at our R&D day in September.

We look forward to top-line six-month results of this study, which are expected during the first quarter of 2017. These and future studies aim to further characterize efficacy and the risk, if any, of hypotension. For TransCon CNP, we plan to submit an IND or equivalent filing in the fourth quarter of 2017 to support clinical development soon thereafter.

All three of these endocrinology-focused product candidates present compelling opportunities in areas of unmet need. I am personally very enthusiastic about the prospects for each of these product candidates and their potential to address unmet patient needs.

Now Scott will provide a financial update.

Thank you, Jonathan, and thank you, everyone, for participating in the call today. Turning to our third-quarter financial results for the period ending September 30, 2016, let me review some highlights.

For the third quarter, we reported a net loss of EUR18.3 million or EUR0.72 per basic and diluted share compared to a net loss of EUR7.3 million, or EUR0.30 per basic and diluted share during the same period in 2015.

Research and development costs for the third quarter were EUR16.5 million compared to EUR8 million in the same period in 2015. Higher R&D costs in 2016 were primarily due to manufacturing and other costs related to the initiation of the Phase 3 heiGHt Trial, as well as cost to support our two pre-clinical product candidates, TransCon PTH and TransCon CNP.

General and administrative expenses for the third quarter were EUR2.6 million compared to EUR1.4 million in the same period in 2015. This increase in G&A is primarily due to additional personnel to support the increasing requirements of a publicly traded Company.

We ended the quarter with a reported cash balance of EUR74.5 million as of September 30, compared to EUR90.8 million as of June 30. Subsequent to the quarter end, we received net proceeds of approximately $127 million from the recent sale of ADSs and a follow-on offering. We are pleased to have successfully completed this offering, which welcomes a number of new investors and provides additional funds to support the clinical development of TransCon Growth Hormone, TransCon PTH and TransCon CNP.

Proceeds from the offering will also be used for working capital, general corporate purposes, and to expand our TransCon technology franchise, which we continue to view as attractive for future strategic collaborations.

Now let me turn the call back over to Jan.

We have made important progress during 2016 towards our goal of becoming a leading rare disease Company. We presented a clear long-term strategy with Vision 20/20, announced our focus in rare disease endocrinology, advancing TransCon Growth Hormone into Phase 3, and expanded our pipeline with two additional candidates in a single area of therapeutic focus.

Looking towards 2017, we have important milestones, including an expected update on heiGHt Trial enrollment and advancing both TransCon PTH and TransCon CNP to clinical development. We're looking forward to seeing many of you at investor conference in 2017, starting with the JPMorgan Healthcare Conference in January.

With that, operator, would you please open the call for Q&A?

(Operator Instructions)

Our first question comes from the line of Jim Birchenough with Wells Fargo.

Hi guys, thanks for hosting the call and congratulations on the progress. On the heiGHt Trial, could you maybe remind us how many sites you're planning to enroll, how many sites are enrolled already? And if you have some sense when you look at these sites, how many new patients, in aggregate, do they treat with growth hormone deficiency? Thanks, I have a follow-up.

Thanks, Jim, this is Jonathan here. We've previously said that we want to be very aggressive. We know this is a difficult area to recruit, we know there's competition in the space, and we know these patients are, as of yet, undiagnosed even.

So it's not like you've stockpiled patients in sites. So we have typically thrown around numbers like 80 to 100 sites, but we're finalizing our feasibility. So we don't have a final number. It will probably be in that range, which is a big number; it's an aggressive number in order to recruit the study in a timely fashion.

We have many sites that are on board already that are being initiated on a weekly basis. I don't think we should provide numbers every week or we'll have to give monthly updates on that, but we are in the early phases of actively initiating a bunch of sites around the world. We are a little bit ahead of pace on -- in the US side and Australia and New Zealand. Europe, as you probably know, takes much longer for the regulatory submissions.

In terms of new patients, it really varies. I think during the feasibility assessments, there are sites who will say that they see one to five patients every month, maybe six per year. Some are less than that, some are more than that, but, of course, it's all up for chance, as these are undiagnosed patients and it depends on the established referral patterns.

Thanks for that, Jonathan. And then just on the other program on CNP and PTH programs, what are the gating -- are there any major gating items for either of those programs to file the INDs? And I'm assuming preclinical talk is far along. Could you maybe just give us some sense of what the gating items might be to filing the IND, so we have a sense on how concrete those time lines are?

Sure. So it's really just the usual stuff; so it's the toxicology programs that are underway, on target and waiting for the final reports on those programs. It's the CMC changes and tweaks that you routinely make at this stage of a product, and all that work is being conducted and will be finalized shortly. So everything is on track is the short answer, in the usual areas that require support for an IND or equivalent.

We may, in fact, choose to conduct the study outside the US where there are some favorable regulatory and budgetary timelines. So we retained that option and we will deploy that if it looks to be to our advantage.

Great, thanks for taking the questions.

The next question comes from the line of Joseph Schwartz with Leerink Partners.

Thank you. Hi, everyone, this is Brett Larson dialing in for Joe. And congratulations on the initiation of enrollment and dosing, it's great to hear. I had a question on the safety monitoring front for this study. And curious if you could speak a bit about how frequently patients will be monitored, if there's any additional monitoring between the outlined site visits. And are there hard cut-offs in place for the IGF levels or the duration of elevation that would lead to a dose discontinuation for patient, and how that's being managed in the study?

Sure. So the patients are seen a little more frequently upfront on a monthly basis, and then eventually, it goes to Q3 months, which is typically how you treat these patients in standard of care. Nothing unusual for that in terms of frequency.

There are limits on IGF levels, so we'll be monitoring any IGF excursions. There are dose adjustment rules should the excursions exceed two or three on a continued basis. So there might be just transient elevations in a given patient; you see that with daily marketed growth hormone therapies. Usually docs don't act on that. But if it's persistent and elevated, then there might be dose adjustments and there are accommodations for that in the protocol.

So then if a patient comes in that's say, a week-13 visit and isn't scheduled to come till again till week 26 and demonstrates a point estimate an elevated IGF, does anything change in terms of monitoring over the coming days or additional visits? Or does that patient stay on schedule and return on Q3 months?

Depends how high it is, so if it's elevated, it will often just get repeated. And then often, by the time it's repeated it will likely come down if it's elevated to begin with. We expect very few excursions actually with the doses that we're using in the study as guided by our Phase 2 results where we saw infrequent excursions above 2 or 3. And the few that we saw were really at the 0.3 milligrams per kilogram per week dose, which is not being used in this study.

Okay, great. That's very helpful. Lastly, can you speak a bit to any work that you're doing at this point with patient advocacy or support groups in preparation for broad trial enrollments? I know that you said that a lot of -- in most cases, these will be patients that have been yet to be diagnosed, but curious to hear of any activities in that space.

Yes, so this, unlike other orphan diseases, is not a space where advocacy plays a big role in recruitment. It often does, but here, as you say, the patients have not even been diagnosed and there's already treatment options that are readily available. So usually, advocacy does not play a big role. After a patient is diagnosed, they typically go on therapy within weeks, and it's pretty straightforward which therapy you go on; there's only one. There's many choices, but it's all the same. So at the appropriate time, we'll begin to engage advocacy groups, but we don't think it will have a big role in the recruitment.

Okay, great, thank you for taking my questions.

(Operator Instructions)

Our next question comes from Liana Moussatos with Wedbush Securities.

Thank you for taking my questions. The first one is for heiGHt, you mentioned that there are a lot of patients that aren't diagnosed yet. Are you putting in -- starting some programs in order to diagnose patients?

And then my second question, you were talking about mechanism for the TransCon CNP program. And you mentioned that in animal models you did not see hypotension. Are there any other benefits to having a seven-day dosing besides convenience and the blood pressure? Theoretically, any other benefits that you see?

Okay, so this is Jonathan, then I'll turn it over to Jan for the second question. We do not have programs in place to diagnose patients. That would be extraordinarily difficult. These patients are sporadically diagnosed any and all places. It's really hard to predict.

What we do, do is we go to large practices that tend to have a big catchment area where they are naturally funnelled in from wherever they're diagnosed. That works out in the US, especially well outside the US, notably in Eastern Europe where there's many, many fewer centers that actually diagnose and treat these patients.

We don't feel that we need to, and it would be extraordinarily challenging I think to try to support the diagnosis. And then, some of them might even go to other studies, so we'd be doing the work for our competitors. So I hope they do that work; that helps us out. Jan, can answer the second question?

Going back to our CMC project, I think when we started to develop the CNP project, we were looking on the peptide, and we saw it was an extremely interesting peptide, how we can address diseases to the [FDR], [three] (inaudible) of [FDR to receptor].

What we saw with the CNP peptide is a very, very short half-life of about 20 minutes if you administrate that to humans. So what we wanted to do is that at the same time, we also saw a limitation. If you have too high peak level of CNP, you actually getting hypotension.

So you can say you have the worst case of the dilemma. You have a very, very short half-life peptide, and when you're really giving high peak dose, you actually get a side effect with our hypotension. So therefore, you actually limit the effective dosing profile, how long time you actually can get pharmaceutical relevant [covers] during a 24-hours cycle.

So what we did with the TransCon technology was actually developed product where we actually can get [accepted] the kind of [coverage], the [exactly the same kind of] exposure, not only for 24 hours, but only with a single injection for one week without any kind of risk of hypotension. Therefore, we are in a position that we can optimize this treatment.

So we can hopefully see a better efficacy with the TransCon treatment compared to what we have seen currently with the CNP treatment to date without any kind of limitation compared to dosing. This is the target product profile given and treatment for patients in, I think our target initial indications will be [contemplation] with a treatment that can give optimal efficacy without limitation related to side effects, for example, hypotension. And then, at the same time, having an optimal convenience dosing profile with once weekly.

Thank you, very much.

That concludes today's question-and-answer session. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.