Theravance Biopharma Inc (TBPH) 2020 Q4 法說會逐字稿

Ladies and gentlemen, good afternoon.

I'd like to welcome everyone to the Theravance Biopharma Fourth Quarter and Full Year 2020 Conference Call.

(Operator Instructions) Also, today's conference call is being recorded.

And now I'd like to turn the call over to Gail Cohen, Vice President, Corporate Communications.

Please go ahead.

Good afternoon, and thank you for joining the Theravance Biopharma quarterly and full year 2020 conference call to discuss our business.

As always, I remind you that this call will contain forward-looking statements, which will involve risks and uncertainties, including statements about our development pipeline, expected benefits of our products, the anticipated timing of clinical trials, regulatory filings and expected financial results.

Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in our filings with the SEC.

And now I would direct your attention to Slide 3. Joining us are Rick Winningham, Chief Executive Officer; followed by Frank Pasqualone, Chief Business Officer; Brett Haumann, Chief Medical Officer; and Andrew Hindman, Chief Financial Officer.

Following our prepared remarks, we will open the call for questions.

Now I will hand the call to Rick for opening remarks.

Thanks, Gail.

Good afternoon, and thank you for joining us.

To begin, I want to highlight the resilience and the persistence of the Theravance Biopharma team in 2020, a team that drove our programs forward and helped us lay the foundation for 2021, which we believe will be a transformational year for the company.

If you've been following Theravance Biopharma, it would come as no surprise that during our fourth quarter and year-end presentation, we're leading with YUPELRI.

YUPELRI is the only -- first and only once-daily nebulized bronchodilator approved in the U.S. for the maintenance treatment of patients with chronic obstructive pulmonary disease or COPD.

YUPELRI reached stand-alone profitability as reported last quarter and continued to grow market share each quarter last year despite a respiratory pandemic.

This profitability measurement is based on accounting for consolidation of our 35% of the profit/loss split with Viatris, formerly Mylan, and then factoring in additional YUPELRI expenses by Theravance that are not shelled with -- shared with Viatris.

Viatris and Theravance Biopharma commercial teams accomplished this during an ongoing COVID-19, viral surges while always remaining mindful of the health and safety of our teams and the communities that they serve.

Our market share continued to grow in the fourth quarter, and Frank will share the details of our progress with YUPELRI in 2020.

YUPELRI is one of the key pillars for transformational change.

Moving to Slide 4. The second major pillar for transformational change is our pipeline.

And today, we'll focus on TD-0903, an investigational nebulized lung-selective pan-JAK inhibitor to treat patients hospitalized with acute lung injury due to COVID-19 who required oxygen at the time of enrollment.

This is part of our inhaled JAK inhibitor portfolio.

The Theravance Biopharma team moved 903 rapidly from preclinical stage into the clinic last year in response to the global pandemic.

Our press release today shared the encouraging initial clinical data from the first part of a 2-part, placebo-controlled, randomized Phase II study, including numerical improvements in clinical outcomes, shorter hospital stays and fewer deaths when compared to placebo.

TD-0903 was generally well controlled and demonstrated evidence of improvements in several relevant inflammatory biomarkers with low systemic exposure at all doses.

Part 1 of the Phase II study enrolled a small number of patients consistent with other dose escalation studies and wasn't powered for efficacy.

Importantly, Part 1, as I said, is a double-blind, placebo-controlled study in contrast to some of the early open-label COVID-19 studies, and we allowed all patients, including those on placebo, to be on standard of care treatment, including oxygen, anticoagulants and dexamethasone.

Brett will walk through the results of Part 1 in more detail shortly.

In the past year, we pioneered pan-JAK inhibition at the lung and garnered an incredible amount of data and insights.

Our team is working diligently to put the puzzle pieces together to help make a difference for patients suffering from respiratory conditions, both acute conditions and chronic conditions.

Since we last reported, we completed the additional analysis on TD-8236, a dry powder, lung-selective pan-JAK inhibitor in asthma, taking a deep dive into the gene signature and biomarker data from the Phase Ic study.

The gene pathway analysis and biomarker data are consistent with target engagement in the lung.

The robust body of scientific evidence from TD-8236 and TD-0903 provide confidence for us to continue the lung-selective inhaled pan-JAK inhibitor program for asthma.

However, based on our current understanding of 8236, we've decided to pause that clinical program for TD-8236 in its current form and apply our 8236 and 0903 learnings by refining the form of 8236 as well as expanding the number of molecules in our portfolio of inhaled JAK inhibitors suitable for dry powder inhalation drawn from our ongoing research efforts.

The full data set for TD-8236 will be presented at future scientific meetings.

Turning to our later-stage programs.

We continue to expect ampreloxetine's Phase III results for symptomatic neurogenic orthostatic hypotension and izencitinib Phase II results in ulcerative colitis and Crohn's disease to read out during the third quarter 2021, likely in 3 separate press releases.

And finally, as I highlighted during my presentation at the Annual JPMorgan Healthcare Conference last month, the third pillar of the transformation we expect to see in 2021 is our changing financial profile.

And Andrew will end the presentation with a financial update that includes 2021 operating guidance.

So now let's move to Slide 5, and Frank will speak to the commercial team's progress with YUPELRI.

Frank?

Thanks, Rick.

Remember, YUPELRI is indicated for the maintenance treatment of patients with COPD.

It's the first and only once-daily, nebulized, long-acting muscarinic antagonist that provides a full 24 hours of control for patients.

In the second full year since its commercial launch, YUPELRI continued to experience solid net sales growth on an annual basis in 2020.

This was achieved through our combined commercial sales and marketing efforts with our partner, Viatris, formerly Mylan.

Theravance Biopharma and Viatris co-promote in the U.S. with our combined sales infrastructure targeting health care professionals that treat the universe of COPD patients suitable for YUPELRI.

We cover the hospitals.

Viatris covers the community.

YUPELRI year-over-year sales grew by 159% compared to 2019 in the face of many obstacles related to the pandemic.

Turning to Slide 6. Since the launch of YUPELRI, we've gained share in both the hospital and the community setting.

Many patients with COPD experience an acute episode serious enough to require a trip to the hospital for immediate care.

The hospital then becomes a key point to switch a person with COPD from a handheld inhaler to YUPELRI.

Data shows that most patients that receive YUPELRI in the hospital are discharged with a prescription to continue treatment, allowing for continued YUPELRI therapy post discharge.

You can see by the market share and its growth the strategy and collaboration between the Viatris and Theravance Biopharma teams continue to work effectively at converting business from competitive products to YUPELRI.

On Slide 7, we break down Theravance Biopharma's implied 35% share of net sales for YUPELRI during Q4 of 2020, $13.6 million and totaling $50 million in revenues for full year 2020.

Remember, the Viatris, Theravance Biopharma commercial partnership is a 65-35 profit and loss split, so this only shows our implied 35% of the YUPELRI sales.

It's been reassuring to see that while the COVID-19 pandemic affected YUPELRI sales growth in 2020, specifically in quarter 2, we recovered to growth in the second half of the year.

Additionally, we continue to be encouraged by market feedback and performance indicators, including hospital formulary wins, patient uptake and market access over the past 12 months.

And we continue to track key performance metrics since launch.

A total of 627 formulary and nonformulary accounts have ordered YUPELRI, and 2/3 of these accounts have reordered at least once.

We've recorded 198 formulary wins covering over 400 accounts with a formulary win rate of 91%.

85% of these formulary accounts have purchased to date owing to a lag between formulary approval and ordering commencing.

YUPELRI's commercial coverage has increased to 74%, and we continue to provide exceptional medical information support to our customer base by fulfilling 100% of health care provider requests in under 30 days since launch.

We remain encouraged by health care industry indicators, the market and customer response to YUPELRI.

Promotional efforts fueling YUPELRI's growth, including an emphasis on digital innovation, will continue to expand as we work through the future stages of the pandemic.

To be able to demonstrate month-over-month share gains despite COVID-19 speaks to the unique attributes of YUPELRI, the patient needs in the market and the strategies and promotional investments we have in place for the brand.

So now I'll turn the call over to Brett to delve into the TD-0903 data.

Thank you, Frank.

Turning to Slide 8. TD-0903, a lung-selective nebulized JAK inhibitor, is currently in development for the treatment of hospitalized COVID-19 patients who require oxygen support.

0903 has the potential to inhibit the pulmonary inflammation that's associated with severe COVID-19 disease in an effort to reduce the number of patients who require admission to ICU for assisted ventilation, the duration of hospital stay and the risk of death.

As previously reported, when the pandemic took hold around the world early last year, we moved 0903 quickly into the clinic, where we evaluated a range of nebulized doses after single and multiple doses in a Phase I study in healthy volunteers.

Moving to Slide 9. The healthy volunteer data showed 0903 to have a favorable safety and tolerability profile and low systemic PK.

This data allowed us to initiate a 2-part Phase II study.

Part 1 was a placebo-controlled, double-blind, multiple-ascending dose study evaluating 3 nebulized dose levels: 1, 3 and 10 milligrams in hospitalized patients with COVID-19 compared to placebo, with 8 patients in each cohort.

Today, we are sharing the initial data from Part 1 that has informed our confidence to progress to Part 2, a larger placebo-controlled study of 198 patients testing the 3-milligram dose of 0903 added to standard of care.

Part 2 is actively enrolling patients, and we expect to report results in the second quarter of 2021.

Turning to Slide 10.

Part 1 is a small sub-study intended to assess safety, PK and exploratory clinical measures but has, nevertheless, provided us with directional information about the potential of 0903 in COVID-19.

0903 was well tolerated in hospitalized COVID-19 patients as it had been in healthy volunteers in Phase I. There were no drug-related serious adverse events, although 1 patient in the 10-milligram cohort met predefined stopping rules and was withdrawn as a precaution due to an isolated incidence of high ALT.

This patient recovered with no additional consequences.

From a clinical perspective, it was encouraging to see 0903 show a positive trend versus placebo on a number of parameters, including improved clinical status, shortened hospital stay and fewer deaths, albeit in a small number of patients.

As reported in our press release today, we saw a reduction in mean hospital stay from 22.5 days on placebo to 15.3 days for those patients on the 3-milligram dose and 15.2 days for those patients on the 10-milligram dose of 0903.

In terms of mortality, we know that hospitalized COVID-19 patients have an increased risk of death.

And in this study, there were 2 deaths in the placebo cohort, 1 death in the 1-milligram cohort and none in the 3- or 10-milligram cohort.

We also saw evidence of improvement in several biomarkers.

And in keeping with our lung-selective approach, we saw low systemic exposure at all doses.

Moving to Slide 11.

This histogram shows the clinical status score for each dose during the 7-day treatment period: at a score of 5, shown in salmon pink, indicating the clinical status on admission; with darker shades of red showing levels of deterioration; and levels of gray and blue showing levels of improvement.

Now I must continue to remind you, this is a small study group, but what is noteworthy is that the number of patients in the placebo group continued to decline after admission into the hospital, with 50% requiring intubation by day 7. In contrast, none of the patients in the 0903 cohorts declined during the 7-day treatment period, and some patients show evidence of improvement.

Turning to Slide 12.

The numerical differences between placebo and 0903 cohorts continue for the remainder of the 28-day observation period, with the treatment effect more marked for the 3- and 10-milligram cohorts than the 1-milligram cohort.

Moving to Slide 13.

0903 also demonstrated the same consistent PK characteristics that had previously been seen in the healthy volunteers, with low dose-dependent concentrations in the blood following once-daily administration for 7 days that were well below those expected to inhibit systemic JAK pathways and consistent with our intended profile for this lung-selective nebulized pan-JAK inhibitor.

Note that we administered a loading dose on day 1 of double the dose in the 1- and 3-milligram dose groups in order to achieve steady-state levels more quickly in the lung in recognition of the fact that hospitalized COVID-19 patients on oxygen are prone to deteriorate quickly after admission.

Turning to Slide 14.

The data from Part 1, including safety and exploratory clinical data across all of the doses, informed our decision to progress the 3-milligram dose into Part 2 of the study.

If the data from Part 1 is ultimately predictive of what we see in Part 2, including these data showing the improvement in oxygenation in the blood with the 3-milligram dose compared to placebo over the 7-day treatment period, then 0903 could potentially offer an important additional treatment option for hospitalized COVID-19 patients.

Importantly, 0903 offers the potential for broad pan-JAK anti-inflammatory therapy in the lung without increasing the risk of systemic side effects that are associated with other JAK inhibitors, including the risk of blood clotting, already a high-risk in patients with COVID-19.

0903 also targets the lung inflammation caused by COVID-19, not the coronavirus itself, so it should not be affected by which mutational strains of COVID-19 caused this acute lung injury.

In fact, 0903 could potentially produce similar anti-inflammatory effects in response to other sources of acute lung injury, including influenza, parainfluenza and other coronaviruses such as MERS and SARS.

We look forward to updating you on our progress with 0903 next quarter, when we expect we'll have data from Part 2.

I'll now turn the call over to Andrew for the financial update.

Thank you, Brett.

And before moving to our financials, let's start with an update on GSK's TRELEGY on Slide 16.

As a reminder, TRELEGY is the first and only once-daily, single-inhaler, triple-combination therapy approved for the treatment of COPD and asthma.

Theravance Biopharma receives upward tiering royalties on global net sales of TRELEGY.

At present, 75% of the income from our economic interest is pledged to service principal and interest payments on our outstanding 2035 nonrecourse notes, and the remaining 25% of income is retained by us.

During GSK's recent earnings call, they noted that TRELEGY continued to lead the market as a single-inhaler triple therapy with full year-over-year global sales growth in 2020 of 60% over 2019 results, generating global net sales of $315 million during the fourth quarter of 2020 and $1.1 billion for the full year.

Moving to Slide 17.

Here, we provide our 2021 financial guidance, providing a new format that focuses on key operating expense categories of R&D and SG&A, excluding share-based compensation.

We believe this change provides greater transparency in how we are allocating capital and will begin to highlight the changing financial complexion of our business.

For 2021, R&D expenses, excluding share-based compensation, we expect to invest between $195 million and $225 million relative to an actual expense of $230 million in 2020.

For SG&A expenses, excluding share-based compensation, we are providing a range of $80 million to $90 million relative to an actual expense of $77 million in 2020.

Regarding the timing of expenses throughout 2021.

For R&D, in particular, we expect greater spend during the first half of 2021 due to the completion of the ampreloxetine and izencitinib studies in Q3.

With that, I'll turn it back to Rick for some closing remarks.

Thanks, Andrew.

Moving to Slide 18.

I remain grateful for the work of the Theravance Biopharma team and what they've been able to deliver, for their passion, dedication and commitment in 2020 as we move into 2021.

We anticipate 2021 will be a transformational year for Theravance, thanks in part to YUPELRI with its capability to continue to grow market share and sales and beyond -- in 2021 and beyond.

GSK's TRELEGY, in which we have an economic interest, continues its strong commercial launch, each central to our changing financial complexion.

Our lung-selective JAK inhibitor, TD-0903, with encouraging data in the Phase II Part 1 and Part 2 data not far behind with results expected next quarter, is also part of the picture.

Therapeutics, anti-inflammatories will continue to play an important role in the COVID-19 fight, making the investigation of TD-0903 that much timely or more important.

3 critical data readouts in Q3 2021: Ampreloxetine Phase III for symptomatic neurogenic orthostatic hypotension, izencitinib in Phase IIb for ulcerative colitis and Phase II for Crohn's disease.

A very busy third quarter for the company.

Over the past few years, our knowledge of organ-selective drug design applied to [modifying] inflammation in specific tissue has increased significantly.

Whether targeting tissues in the lung, the gut, the eye or the skin, we rely on our proven development and our commercialization -- commercial expertise, complemented by strategic partnerships and a strong capital position to create the value-driving catalysts that we expect to see in 2021, a transformational year.

I'll now hand the call back to the operator for questions.

(Operator Instructions) We'll have our first question from Geoffrey Porges with SVB Leerink.

Quick questions, if I may, a few.

0903, Brett, could you just remind us of the frequency of dosing over the 7-day course?

And then, Rick, could you perhaps give us an update on the arbitration with Innoviva, the timing for resolution of that?

Another question for Brett.

Look, there's obviously been a bit of noise about JAK inhibitors and their safety.

I'm just wondering if you have been contacted or have any requests from the FDA about CV safety observations, studies or anything that you might -- any additional requirements that might be imposed on you for izencitinib?

And then Rick, lastly, could you just comment on the process and timing for an opt-in decision from J&J after you get those Phase III results?

I know it's not till Q3.

Yes.

Absolutely.

I'll address both of my questions, and then I'll turn it over to Brett.

Well, in the arbitration -- the arbitration is the hearing, and we finished the arbitration hearing.

We have yet -- we have to file a brief in closing arguments.

We'd expect results from the arbitrator in the -- late in this quarter or early in the second quarter.

And because of the confidentiality provisions, the LLC agreement, I really can't go beyond that right now.

So that's where we are with the arbitration.

We expect to see it resolved here over the next several weeks.

In terms of the process for timing on the J&J opt-in, what we do is we deliver a data package to them that begins the trigger of a 90-day clock for opt-in.

We've worked with J&J very closely throughout this process.

I think they've been an extraordinary partner in the IBD program.

And the -- so the -- we've already developed what that package is.

The information that's included.

All of our programming has already begun so that once the study is closed and we have data, we'll be able to turn that data package into J&J very quickly sort of to start the clock.

So those are my 2 questions.

Now I'll turn it back to Brett for the 903 commentary on dosing frequency first.

Brett?

Thanks, Rick.

And Geoff, thank you for your question.

In terms of frequency of dosing, we administered the first dose as patients came into the hospital and were admitted requiring oxygen.

And then subsequent doses were given once daily every morning for the remainder of that 7-day period or until patients were discharged from hospital.

So if they left sooner, then they would obviously receive the number of doses before being discharged.

But up to 7 days of dosing, and it was a single administration each day.

It was delivered by a nebulized device, and one of the benefits of that nebulized device would be that it can be given to patients who are in oxygen, but it could also be given to patients who go on to a ventilator.

We actually didn't see any of our patients go on to a ventilator in the active group.

But if it were required, you could introduce the nebulizer into the ventilation circuit as well.

Where in terms of [JAK inhibitor] safety, you were asking, Geoff, about presumably the most recent data which is around tofacitinib from a recently published MACE study.

And we've not been contacted by the FDA since that data came out, requiring any additional safety observations or any additional monitoring.

We do have an established surveillance program in place looking for a broad range of known JAK inhibitor risks.

Of course, with our own approach, we believe that the lung-selective or, in the case of izencitinib, the gut-selective approach should reduce the risk of systemic side effects.

But nevertheless, because they're well established, we continue to monitor for those on an ongoing basis on all of our programs.

But we've not had any additional requirements from the FDA beyond our routine surveillance.

I think one last thing to add on that is that, of course, the tofacitinib MACE data was generated in patients with rheumatoid arthritis and follows on a long history of data having been generated in the RA space with either tofacitinib or -- in the case of baricitinib, filgotinib, a lot of the data coming into their safety database comes from the fact that they're treating other systemic conditions like RA.

In our case, with izencitinib, our focus is entirely on a gut-selective program, so we don't seek to treat patients with conditions in other parts of the body because, in fact, we believe that our therapy remains organ selective.

So there are elements of our program that distinguish us and differentiate us from the existing products like tofacitinib.

Our next question is from Marc Frahm with Cowen and Company.

Congrats on the quarter.

Brett, just digging into the 0903 data a little bit.

I know you mentioned, this is on a background of standard of care, but of course, it seems like standard of care for treatment of COVID-19 changes every day.

Can you kind of describe what the patients in the different groups were actually receiving in terms of how much steroids?

Were any of them getting remdesivir or some of the antibody therapies that are out there?

And were there any differences between the groups in those therapies?

Thanks for the question, Marc.

Great question.

And in fact, I should point out that we were running the study in the late summer and into the fall of last year.

At which stage, dexamethasone has become established as a standard of care therapy.

It wasn't established in the first half of last year and nor were a placebo-controlled study.

So if you go back and look at the first generation of studies that were run, they were not placebo-controlled, and very few of them had background steroids, including the baricitinib study.

So our study has got a high degree of background use.

In fact, almost all of our patients were on dexamethasone at the standard 4-milligram dose every day.

All patients were also receiving anticoagulant therapy because, by the time our study started, it was fairly well understood that clotting was a background risk factor.

Now we started our study in the U.K. and then moved into parts of Eastern Europe, Moldova, Romania, Ukraine, where remdesivir was not an established standard of care.

We've subsequently moved the Part 2 study into a much larger range of countries, including the U.S., Brazil, Argentina, South Africa.

And we've seen not only a broader reach across sites, but we're now also seeing a more established use of remdesivir.

So the Part 2 study is likely to include a greater use of remdesivir, but we saw very little of that in the Part 1 study.

We also deliberately excluded patients on izencitinib in Part 1 because of the potential for interference with IL-6 and because, in truth, we weren't confident that izencitinib had actually established itself as a standard of care.

I think there's still a question mark about that.

So for Part 2, izencitinib remains a contraindicated therapy.

But the use of dexamethasone...

How about toci?

Brett, you mentioned izencitinib, I think you were...

I'm sorry.

I beg your pardon.

I'm thinking of tofa.

Yes.

I'm confusing therapies.

It's tofa -- yes.

Toci is the drug I'm referring to.

Okay.

And what about -- I guessing...

But...

Yes.

I'm guessing, since remdesivir was not standard of care in most of the places, then also the antibody therapy was also not being pursued in most of these sites.

That's correct.

I think what we've seen is that therapies such as convalescent plasma or tofacitinib, baricitinib are being reserved really for patients who cannot tolerate dexamethasone.

And that's consistent with current guidance which is now emerging based on evidence that's been generated over the last 6 to 8 months of different therapies.

Okay.

Great.

That's very helpful.

And then with the reformulation work on 8236, I guess, what's the goal with this reformulation?

What's the target profile you're shooting for?

Is it longer duration of exposure or shorter?

Just what are you trying to accomplish?

Yes.

I think -- well, we're trying to accomplish a number of things.

I think people can oversimplify a bit the optimization of parameters for inhaled medicines.

Obviously, with JAK inhibition, we're into a new class.

Some people might focus on potency.

Well, potency is 1 attribute.

It's an important attribute, but it's about 1 of 15 attributes that you need to optimize in order to deliver a successful respiratory medicine.

So when I said form, this wasn't so much formulation as it was sort of the physical characteristics or crystallization of 8236.

And I don't want to go into this too deeply because, merely by describing it, we'll begin to give perhaps competitors an understanding -- a better understanding of what needs to be done.

But nonetheless, it's 1 or 2 of these 15 parameters that were -- that we think can be further optimized, either with a different form of 8236 or with one of the other JAK inhibitors that we've got in the -- coming out of the research efforts.

Our next question comes from Douglas Tsao with H.C. Wainwright.

Just if you could, Brett, maybe walk us through the decision to proceed with the 3 milligram versus the 10.

It seems that -- perhaps on some of the metrics, it seems like maybe the 10 -- the 3 does better sort of in the first 7 days or by day 7, but by day 28, you start to see some sort of somewhat better trends in the 10 milligram.

Although, I get it, that these are super small numbers.

But in that same vein, why not potentially investigate the 10 milligram?

Yes.

Go ahead, Brett.

Thanks.

Great question, Doug.

And really, I think I'd start by describing the way in which we approach our assessment of all of our JAK inhibitors, which is to look at therapeutic index.

So we put a great deal of emphasis on the evidence that we are seeing on the safety side as well as on the efficacy side.

I mentioned that one of our patients in the 10-milligram dose group triggered a stopping criterion for an isolated elevation on one of the liver function tests, ALT.

Now it's not clear whether that was actually associated with therapy or not.

There are other reasons why patients can have elevations in lung -- in liver function tests in hospital.

But other than abundance of caution, we acknowledge that, that patient had met that stopping rule.

When we looked at the treatment differences between 3 and 10 -- I think you've described it well -- there were some modest differences between the 3 and 10.

They both seem to sit apart from the 1 milligram, and both were providing comparable benefits.

So on balance, we felt that the 3 would have an optimal balance of both safety and efficacy.

I remind you that we did give a doubling dose in the 3-milligram group as well.

So actually, those patients get 6 milligrams in total on the first day.

We did not do that with a 10-milligram group because, there, our modeling has suggested they would not need that loading dose.

But the 3-milligram group do get that extra shot in the arm, so to speak, or inhalation to get them up to a steady state more quickly.

And for those reasons, we felt that the 3 was really optimal for further assessment.

Okay, great.

That's really helpful.

And then just turning to YUPELRI, if I look at the trends in terms of the hospital market share, it looks like, in the third quarter, it decreased a little bit and then really came back strongly in the fourth quarter.

I know that there was some talk or sort of confusion around sort of the use of a nebulized therapy in the context of COVID.

Do you think that was what attributed sort of that step-back in the third quarter?

Or was it just the lack of access just given the situation in terms of salespeople being able to get into institutions to talk about the product?

Frank, do you want to handle that?

Sure.

It was mostly attributed to pulmonologists being very, very busy treating patients with COVID-19 coupled with the lack of access to health care institutions and, quite frankly, doctors' offices that were closed.

The other factor that compounded it is pulmonologists -- based on our marketing research, we know that pulmonologists are reticent to change therapy or initiate a new therapy unless they do a real live exam, including spirometry, in other words, not telemedicine.

So all of those factors caused the dip that you see there in the third quarter.

It recovered nicely in the fourth quarter, and it appears the recovery is continuing in the beginning of 2021.

Okay.

And then just, frankly, as a quick follow-up.

I mean, I know towards the end of the year, we did see another surge in infections, and that seems to be fortunately coming down pretty -- quite dramatically.

Did you see any sort of impact on trends at the end of the fourth quarter and into the first quarter?

Or has -- was it really just limited to that third quarter?

Well, the -- yes, we -- the business recovered nicely in December.

In fact, December was our biggest month of all the months involved in the pandemic, in other words, dating back to March.

And we also see a desire on the part of pulmonologists to want to see patients, to want to have patients come in, get checked out because they haven't checked out in quite some time.

So we are seeing -- as the country is seeing a bit of a recovery and the vaccines are beginning to roll out, we're seeing a requisite increase in the number of visits to pulmonologists.

Our next question comes from Liisa Bayko with Evercore ISI.

Can you maybe talk a little bit more about how you're thinking about read-through from anything you've seen with COVID into the asthma program and maybe a little bit more about what you're doing to tweak the asthma program and what we should expect on timing there?

And then I'll have one more question after that.

Yes.

I'll start, and then I'll transition it over to Brett.

I mean I think, clearly, the biomarkers in 903 that we saw move the other -- a number of other metrics that we follow that give us an understanding of how a JAK inhibitor can be used in an acute hyperinflammatory state like COVID, it informs the asthma program.

The other aspect of this, I mean, the work over the last couple of months that's been incredibly informative, was really dissecting the gene pathway data from the Ic study.

And I think this -- we were having broadly and directionally the effect that we wanted to have on a number of gene pathways.

And keep in mind, if you remember the Ic study, these patients were on inhaled corticosteroids.

And we were seeing a change in proteins on top of what these patients were experiencing on steroids.

So this was another important piece of the puzzle.

Brett?

Thanks, Rick.

And just to add to what Rick was saying, Liisa, in the asthma program with 8236, we now have consistent evidence of target engagement, whether we look at nitric oxide that's excreted in the breath or if we look at cytokines that are released into the fluids that fills the lungs or even in the gene signature data.

All of that is telling us that if we deliver a JAK inhibitor into the lung, we're able to modulate that inflammation.

So that's for 8236.

Clearly, this data with 0903 in COVID-19 gives further validation to the fact that we're engaging the target.

We've seen some improvements in markers of inflammation in the blood of these patients that tells us that their clinical improvement is being matched by improvements on some of these key markers, for example, CRP, which is a marker of inflammation in the body.

So if we take those 2 different signatures from these 2 different molecules, albeit in different disease states, I think it's giving us a greater understanding of the ability to modulate inflammation in the lung in these different conditions.

One last thing to add is that, of course, 0903 prior to COVID was being developed for a chronic condition.

It was being looked at for lung transplantation.

And although the COVID signal is an acute condition, it obviously gives us some encouragement that this anti-inflammatory mechanism may be of utility in chronic conditions as well, such as in reducing the rejection rate in lung transplantation.

I think the other -- just to close, Liisa, and this ties it back with other published -- publications that we've had.

We've seen now in the COVID-19 study a reduction in CRP, a systemic marker of inflammation.

And as a reminder, the izencitinib Phase Ib, even though the drug was almost completely contained to the intestinal tissue and very little drug in the systemic circulation, we also saw a reduction, a marked reduction, in CRP in patients with ulcerative colitis.

So we know that we're reducing systemic markers of inflammation by simply focusing on the organ that is inflamed.

Okay.

And so I guess, as it pertains to the asthma program, what are the next steps then?

Yes.

Brett, do you want to start, and then I'll close?

You're on mute, Brett.

Apologies.

Sorry.

I think as Rick was saying earlier, Liisa, we're really taking the learnings from these programs.

We've decided that for the lead form of 8236, we're going to pause that development program.

We're investing our efforts in the portfolio of JAK inhibitors that could be brought forward to evaluate in asthma and in other inflammatory conditions but really looking to pick the best candidates amongst these.

This is something that we have previously done, for example, in the beta agonist program, where we considered several iterations before landing on the optimal performing agent, which actually went on to become a component of BREO, ANORO and TRELEGY.

So this approach of looking for the best rather than first past the post, I think, could be really well applied to JAK inhibition.

And just to add to that, I think that's -- and that's where our focus is.

Our focus today is on the development of a medicine that can stand the test of time in a chronic condition that is delivered via dry powder inhaler for asthma patients.

And we have an understanding of how good that drug has to be.

And I think the quality of the drug itself certainly creates a barrier of entry for others.

So the next step, quite simply, are working through the 8236 in another form and bringing the other potential DPI JAK inhibitors forward into translational science and then continuing to move 903 forward and, most importantly, getting the data from Part 2 of the Phase II study, which is going to give us a larger data set than what even we've seen today.

However, the Part 1, just to underscore the Part 1 data, that we do have is now a JAK inhibitor, not in a disease model but in a disease, and showing -- albeit small numbers, showing an effect of reducing inflammation in the lung in that disease.

Our next question comes from Anupam Rama with JPMorgan.

Just a quick one for me on izencitinib.

The press release noted, and I think you guys talked about on the call that the UC and Crohn's disease readouts, they're going to be provided separately in 3Q.

Can you maybe talk to us a little bit about the cadence of the disclosures, if you can?

And my kid might have a follow-up.

I'm not sure.

Andrew, you want to touch on that?

Sure.

Yes, Anupam, the -- really, unfortunately, we can't give you much more granularity right now.

The studies are ongoing.

And we'll be as forthright and transparent in the communication as we can be.

We understand the criticality and the materiality of the data for both studies and also for ampreloxetine.

So -- but unfortunately, we're not going to be able to get more granular right now.

Our next question comes from Vikram Purohit with Morgan Stanley.

So my first one was a follow-up on izencitinib, specifically with regards to the J&J opt-in.

I was wondering if you could just kind of clarify for us for that 90-day period that you mentioned that J&J has, is that 90 days per indication?

Or is the process more that they get a data package that combines both data sets for UC and Crohn's, and then they have 90 days based off of that data package to make a decision for both indications?

That's my first question.

Yes, it's a good question.

Yes, our -- we anticipate delivering the data package that has both sets of data in it to J&J for their decision.

Understood.

And to the best of your understanding with J&J, are they going to be making separate decisions for UC and Crohn's?

Or is it a decision for a broad development program in IBD based on both data sets?

Well, I think they'll consider both data sets.

I don't have a perspective on whether one is more important than the other.

I think there they're going to be looking at both data sets.

Obviously, the ulcerative colitis data set is a more advanced data set being in Phase IIb.

And now we're actually rolling patients out of the IIb program into the Phase III maintenance study, whereas the Crohn's study is a Phase II sort of proof-of-concept in Crohn's.

And I'll just ask Brett to add anything.

Yes.

Just perhaps one additional comment, Vikram, and that's that it's not a sense that we don't know who we're talking to with our Janssen colleagues, and we'll pass this data over to some strangers that we've never met.

We're working day to day with these individuals on the ongoing conduct.

They had an integral part in the original design of these studies.

And this has been a real hand-in-glove partnership.

So we continue to work very closely with them in anticipation of these readouts so that, that 90-day period is really used to maximal effect in them getting [stuck] into the data.

A lot of the planning work that is going into this right now is being done in very close collaboration with Janssen really to look to make best use and make that an efficient window of time.

Okay.

Understood.

That's helpful.

And then just one follow-up, shifting gears to your earlier-stage programs like 5202 and the inhaled ALK5 inhibitor you've spoken about previously.

Just wanted to get a sense of what the status is with those programs and what the next milestones are that we should be looking for.

In 5202, we continue to work through Janssen on the next stage -- with Janssen on the next stage of that program, likely targeting a development pathway in celiac disease.

With the ALK5 inhibitor, we've been going through a Phase I single-ascending and then multiple-ascending dose-ranging study of the inhaled ALK5 inhibitor.

We're continuing to work through that.

And before the end of this year, certainly, we should have a Phase Ic or b where -- however we'd like to characterize it, with some exposure in patients with idiopathic pulmonary fibrosis in that program.

So Brett, anything to add there?

No, I think you summarized it well, Rick.

Nothing to add.

Our next question comes from Brian Skorney with Baird.

Two questions.

I mean, to start, I guess, I think the other week, Glaxo filed a pretty brutal 13D on Innoviva, and I'm just wondering if there's anything to take away from this vis-à-vis the arbitration decision.

I think it's the first time like we've sort of seen publicly Glaxo weigh in, and they kind of call out very specifically that Innoviva's intent seemed to be divergent with what the intent of the [parties] were at the time of separation.

So is that -- I mean, is that admissible?

Is Glaxo a party to the arbitration?

Do they have sort of a role in testifying here?

Yes, Brian.

Listen, thanks for the question.

I really can't get into the arbitration process itself.

I think we didn't -- we're surprised as anybody with regard to the filing.

And to get more color on it, the filing, I think it probably should come from GSK because, again, we weren't aware that it was going to be done.

So...

Got it.

And then if I can ask a question on 0903 just in terms of the ALT threshold that achieves -- the stopping criteria at the 10 mg dose.

Can you outline what that threshold was and then whether or not there was any concomitant bilirubin increases?

And then have you guys looked at all at systemic administration of 0903 in any of the animal models?

And if so, is liver the end organ tox there?

Thanks, Brian.

I can describe the ALT increase.

We put a threshold across all of our protocols actually for 4x the upper limit of normal, and this patient triggered it only on ALT.

There was absolutely no change on AST, bilirubin or any of the other liver function parameters.

So there was no highest rule trigger or any clinical manifestations with this patient at all.

It is purely a single biochemical derangement.

But because we continue to monitor for these things and because it was stipulated in the protocol, we withdrew therapy as a precaution.

We are -- certainly, if you look at our preclinical tox, these molecules are actually designed to be labile.

So they don't generate very high levels in the systemic circulation.

They breakdown very quickly when they get into the systemic circulation.

Liver toxicity is not a concern in our animal models.

And so this was really just a standard surveillance in the clinic.

It was not done specifically because there were any preclinical concerns.

Our next question comes from Joseph Stringer with Needham & Company.

I just wanted to switch to ampreloxetine and nOH.

Given that Northera will be off-patent in 2021, I'm just wondering if you could comment on potential thoughts on pricing given sort of the 2 opposing forces of a generic entry and that potentially better profile for ampreloxetine.

And secondly, how does the generic entry potentially affect the target patient population for the drug?

Do you -- would you see it as more inadequate responders or treatment-naive patients?

Maybe some color on that.

Yes, I'll start and just give Brett a heads up that I'm going to come to him after a couple of remarks.

I think we see ampreloxetine as a dramatically different medicine than the Northera or droxidopa.

The fact of the matter is, in the label, the effect of Northera does not last very long in terms of effect on OHSA 1 because it's really an agonist.

So there's probably some tachyphylaxis that, in fact, happens with longer exposure to droxidopa, and you see cycling coming in and out.

Whereas a drug like ampreloxetine is once a day, it effectively operates like an antagonist, making use of the body's own norepinephrine, whereas droxidopa effectively introduces exogenous norepinephrine mimetic into the system.

So I think these are dramatically different medicines.

There's a relatively small number of patients that are treated with Northera day in, day out that have nOH.

We would see that -- ampreloxetine finding a home in a much larger patient population.

And hopefully, we'll see what we've seen in other studies with ampreloxetine that we don't see supine hypertension that, in fact, plagues droxidopa's use.

So Brett?

Yes.

I think you said it well, Rick.

Again, this is about therapeutic index just as it is with the rest of our portfolio.

And ampreloxetine is really optimized to drive the efficacy when it's needed, to take the body's own endogenous norepinephrine and to allow it to last for longer.

That tends to occur in the early part of the day or when patients are eating, and their levels of norepinephrine need to be high during that part of the day.

So ampreloxetine maintains those.

When patients go to sleep at night, the nervous system shuts down, they're not producing as much norepinephrine, and our drug will not potentiate any additional effect because the body is not producing norepinephrine.

So it's a much more physiological response, and we think that will translate into better efficacy, more sustained duration of therapy as well as better safety, lower risk of supine hypertension when patients are sleeping at night.

Those should set us apart from droxidopa.

We know, for example, even today, that if we see efficacy at 4 weeks in our pivotal Phase III study, the FDA would view that as distinct and improved on the Northera data, which has only shown efficacy at 1 week.

One last point to make is that the Northera label, in fact, is a conditional approval.

They still don't have full approval because there's an outstanding dataset that's required with the originator company, with Lundbeck.

One of the question marks around the introduction of generics is what will happen if Lundbeck as the originator isn't able to support the labeling requirements and what implications that may have for generic substitutions as well.

So for all those reasons, we still remain really committed to the ampreloxetine program.

We think it will be highly differentiated from Northera.

It appears we have no further questions on the phone.

I'd now like to turn the conference back over to Mr. Winningham.

Please go ahead, sir.

Yes.

Thank you, operator.

And I'd like to thank everybody for joining us with this -- for this call.

We're very excited about the year ahead, what we have the capability to do as an organization, and we look forward to updating you as the quarters roll by for 2021.

Please have a good day, and stay safe.

Thank you.

This concludes today's conference call.

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Everyone, have a great day.