Akero Therapeutics, Inc. (AKRO) Earnings Call Transcript & Summary

All right. Good afternoon, everyone, and thanks for joining us at the Morgan Stanley Global Healthcare Conference. I'm Mike Ulz, one of the biotech analysts here. And it's my pleasure to introduce Andrew Cheng, CEO of Akero Therapeutics. Just as a quick reminder, the format for today is a fireside chat. But before we get into Q&A, I just need to read a quick disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, Andrew, thanks for joining us today, and I thought maybe we could kick it off with just some introductory comments and then we can get into the Q&A.

Sure. So first of all, thank you for having me today, Mike, and it's my pleasure to be here at the Morgan Stanley Healthcare Conference. Just maybe some high-level introduction, just Akero's small California-based biotech company focusing on NASH and our lead asset, which is called efruxifermin is heading into Phase III in the second half of this year, and we also have a readout due next month in cirrhotic patients from the Phase IIb study called SYMMETRY. And I'll stop there and turn it over to you.

Perfect. Maybe we can start just with SYMMETRY. Obviously, a lot of interest there. So maybe talk a little bit about the trial design. And I guess we're expecting a date in October?

Yes. So this trial is a very straightforward Phase IIb trial. It's 182 patients, randomized 1:1:1 to placebo 28 milligrams, of efruxifermin of 50 milligrams. These are patients with biopsy-confirmed NASH. That is that they have F4 NASH, they're cirrhotic and they're Child-Pugh Class A. These patients, also known as compensated cirrhotics, they're dosed for 36 weeks. And the primary endpoint is one stage improvement in fibrosis without worsening of NASH. And we're also looking at key secondary endpoints such as NASH resolution and a number of other biomarkers.

Got you. And I guess the key question on everyone's mind is just what gives you confidence that SYMMETRY will be successful.

Yes. So that is a question I've gotten more than once today in our [ wonder ] ones. But as you can imagine, it's a Phase IIb study. And so thankfully, for us, we have positive data from a small Phase IIa study. Maybe I'll talk a little bit about that. So we initiated this trial, which is a 30-patient randomized trial looking at 50 milligrams of EFX versus placebo was randomized 2:1. And at this time, that we initiated the study, patients were being dosed for 16 weeks and was primarily intended to be really more of a safety and tolerability study. However, during the trial, we read out on our BALANCED study, where there's three doses, but without getting to veranular, roughly about 50% of patients had a 1-stage improvement in fibrosis after just 16 weeks of dosing with efruxifermin. So as once those results became available, we received a request from some patients and some investigators in this trial to do an end-of-study biopsy, which we hadn't planned for. And we're very responsive to patients' requests, and we went ahead and amended the protocol and invited patients who are willing to do that to have a week-16 biopsy. And about 60% of the patients agreed to go ahead and have that. And -- so that 17 patients; 12 on active, 5 on placebo. And what we showed is that about 1/3 of them had 1-stage improvement of fibrosis and a different quarter of them, so 4 out of 12 and 3 out of 12 demonstrated NASH resolutions. So when one looks at the two FDA registrational endpoints, after just 16 weeks of dosing, roughly 58% of patients hit one of those two [indiscernible] except for that short period of dosing. So people ask, well, is was there a selection bias, it's a small sample size. How confident are we? Well, we went ahead and looked at the other biomarkers, markers like Pro-C3, which is a marker of new collagen synthesis. We looked at via ultrasound with FibroScan. And we also looked at other markers, which is called the enhanced liver fibrosis score, which is a composite of a number of biomarkers. Each of those scores were statistically significant for the active arm versus placebo, and most importantly, no different for those who elected for a biopsy versus not. So taken together, it really shows that we believe the result to be somewhat if all [ antifibrotic ] likely would have seen a hopefully similar result. And then we also compared those biopsy -- those biomarker results with the results we saw with HARMONY. HARMONY is a pre-Cirrhotic F2/F3 study, and we dose those patients for 24 weeks and very similar responses, not exactly the same, but directionally, the results in the Cohort C Cirrhotic Phase IIa study really lined up very, very nicely and corresponded to what we saw in the 24-week dosing. And our takeaway from that is that, by and large, the drug looks the same regardless of the population. It's -- and that's one of the appeals of efruxifermin is that there's a direct acting antifibrotic as well as an anti-metabolic property. It's very good at reducing liver fat. So when we think about the existing Phase IIa data, both on biomarkers and on the biopsy values that work in that direction, and when one thinks about what we're doing in SYMMETRY, we're dosing for twice as long, 36 weeks. So it gives us an additional ability to further demonstrate an effect. And lastly, one thinks there's a -- we have a competitor who has also seen a similar result. They had a Phase IIb study where alpha was primarily F2/F3 patients. There was a bunch of about a dozen patients who had F4, and they were also dosed for 24 weeks, so longer than we had in our proof-of-concept Phase IIa trial, but they saw about a 45% 1-stage improvement of fibrosis. So there are multiple data sets together that when we look at this. It seems that with FGF21 and specifically efruxifermin, it gives us some degree of confidence that the Phase IIb will read out.

Makes sense. Maybe just -- maybe back to Cohort C, 16 weeks, a very short period of time. I guess, just put that period of time into context and how I guess, how encouraging the response was in those difficult patients?

Yes. I would put it in the category and of course, I have some degree of bias, but it's pretty remarkable. Because when one looks at the history of patients because the medical need is so acute in these patients, they have a 50% mortality at 5 years. Many companies, even my former company, Gilead, have tried multiple different mechanisms, multiple little different durations, some as long as 1.5 years up to 2 years. And unfortunately, for these patients, the response has really been placebo-like in nearly every attempt. And so it's been very difficult for these patients, because they're facing a pretty high mortality rate, yet at the same time, really, they haven't had any success. So the idea that in 16 weeks, we could see a change. And even for these 4 patients that will have 1-stage improvement in fibrosis was pretty remarkable.

Can you maybe talk about why F4 has been so challenging. And what why FGF21 seems to be telling us a different story?

Yes. I think basically, it's because the fibrotic burden, the amount of collagen within the liver is so great. So really, in order to have a response, you really need a compound that can directly attack collagen. And FGF21, specifically EFX, works that way, because it inhibits the synthesis of new collagen that is that hepatic stellate cells inhibit the transformation to myofibroblast, which are the cells that lay down collagen. So in one way, you are inhibiting new collagen synthesis, yet you're allowing the degradation process, the resorption of collagen fibers to continue unabated. So here it is, you're not adding to the burden, but you are removing the burden. So net over time, you are able to improve fibrosis.

Got it. For SYMMETRY, you're looking at two doses, 28 and 50 maybe. Maybe just describe why you're looking at two doses when cohort C, you sort of looked at the higher 50-mg dose.

So I think the main reason is really it's still a Phase IIb study. Although we studied it and didn't see a real difference in safety in the pre-Cirrhotic population, our study HARMONY that read out about this time last year. This is a different population. They're F4, they're sicker. They -- and I don't mean solely within the liver disease, which, of course, they're more fibrotic, but they have more advanced disease in diabetes, more than advanced cardiovascular disease. They have just more metabolic problems, and they're more fragile population. So we don't know whether there will be a difference in safety with 28 milligrams versus 50 milligrams. So I think that's the reason we're continuing it.

Makes sense. As we think about the upcoming readout in October, maybe we could focus on just the efficacy side of the puzzle here with the efruxifermin. And if you could talk about differences in the design of SYMMETRY versus Cohort C that might influence for the benefit on fibrosis, either positive or negative? I know you touched on one of those already.

I think one of the important differences is going back to perhaps why sort of belabored the description of Cohort C is that it was a trial where patients were initially came into the study with historic biopsies. And because we hadn't intended on doing a second biopsy, these patients were allowed to enter the study with up to 2 years, a 2-year-old historic biopsy. So they may have been cirrhotic for a longer period of time, and roughly 90% of the patients had a historic biopsy when they came into the study, because that was really by design. Now in contrast, this trial has slightly different percentages. A, the historic biopsy duration can only be 6 months. As a result, we estimate that it's about 1/4 of patients, not 90% that have a historic biopsy. So 75% have what we call de novo biopsy. So these are patients who are coming into the study, just learning or they need a fresh study -- biopsy to come into the trial because maybe their older biopsy is greater than 6 months or they -- for instance, there may have been patients who screen for our Phase IIb F2-F3 study called HARMONY that read out last year. And they found out low and behold, they thought they were F2-F3, but they weren't. Their biopsy was F4 and they progress to cirrhosis and now they could have rolled into SYMMETRY. So the biopsy duration is one of the important differences in the trial. And I think when we think about the other parameters, they're largely pretty similar to the Cohort C. We have made a lot of changes, because it's a Child-Pugh A compensated cirrhotics. So we're really guided by that same framework.

Make sense. And maybe we can talk about the other side of the equation here, which is the placebo response, right? Historically, we've seen some variability here. Maybe talk about what your expectations are there.

Yes. So this is a very top of mind question among investors and with good reason. There's been a lot of variation depending on who's done the study and a lot -- some of it has to do with just the nature and difficulty with biopsies as an endpoint. Historically, most companies have used a single leader for biopsy that is just a single pathologist that would assess all the samples. In Q1 of '21, the FDA sent out guidance or instructions, more than guidance, to most of the companies that were -- had submitted our protocol to them, giving a very clear description of what they wanted to do in order to minimize intra and inter-reader variability. And they ask for at least two readers to read each sample in a blinded fashion and have adjudication on all of the end points All the components of the NAFLD score otherwise knows NAS as well as the fibrosis. So in HARMONY, we follow that same procedure. And so that same procedure is being done in SYMMETRY. And that's not true for most of the studies. And so with the older protocols at a single reader, that may have contributed to some -- the variability. To my knowledge, there's only been one study of late that has used dual readers, and that's the Intercept REVERSE study that was in cirrhotics that read out in December of last year. Unfortunately, they didn't demonstrate it, a difference compared to placebo, but the placebo rate in that study, which is the largest study to date was around 10%. So when we think about where the placebo rate is for the larger studies, we feel it's in the sort of 10% to 15% zone, likely a little bit lower, on the lower end rather than 15%.

Makes sense. Maybe just a follow-up on how you're reading the biopsies. You're using consensus REITs. Maybe just talk about, in general, when you do consensus versus like historical reads in the past, is it you kind of get the same average, but less variability? Or do you get a reduction kind of in the point estimate?

I think you're getting less variability between the readers because there's a biopsy analysis plan where things that may be unclear, they agree [indiscernible] how they're going to adjudicate these things. They both look at it ahead of time. Also, keep in mind that there is a baseline sample that's circulated throughout the reading process, so there's no sequence bias. Of course, when the readers know or the first day they -- on the first biopsy, they ever received is probably a baseline sample. It's not going to be an end-of-study sample. But the real challenge is once screening has stopped, how to analyze those samples? Do they all assume that they're the posttreatment biopsies? And that's where, by circulating the baseline samples throughout, it makes it more difficult for them to know, hey, is this placebo or just one of those circulating baseline samples? So it's how they address the sequencing bias.

Got you. So we talked about what to expect on the treatment side, what to expect on the placebo side, I guess now the big question is the difference and kind of what's meaningful there, particularly on fibrosis improvement? And how do you think about that?

Yes. So investors have also asked what we think about -- so I think the important thing is to think what's the comparison. So is there a bar that EFX has to pass? And to that, I would look, what are the other approved agents or study agents that have been successful in this field? And quite unfortunately, the answer is 0. I mean so EFX doesn't -- there's no other compound that EFX has to be better than, because nothing has worked quite simply. And so when one thinks about it. We're hoping that the compound is statistically significant versus placebo. And whatever that result would be, we'd be pleased. So I think another way to look at it is we don't look as if we hit stat sig, there's no such thing as modest efficacy, modest implies that it's less than something else. Well, there is nothing else better quite simply. So we're -- it's a difficult disease to treat with a difficult population but a very acute medical needs. So we're hopeful that we'll be statistically significant. I think we'll be pleased with that.

Got you. Maybe we can shift now just to your Phase III program. Maybe just walk us through the different studies there and next steps to getting those underway.

Sure. So we had an end of Phase II meeting with the division in March, and we had broad agreement on really the three columns that will make up our Phase III program. They agreed that there would be a -- what we call SYNCHRONY, overall, it's called the SYNCHRONY program. And one study will be an F2-F3 study. And so in pre-Cirrhotic patients and the primary endpoint will be 1-stage improvement of fibrosis and no natural solutions. So it's a composite endpoint. And we chose that, because it allows us to have better powering when it comes to placebo rates as we've demonstrated in the HARMONY Phase IIb study. We also agreed that we'll be studying two doses across the program. So that's a broad brush agreement. We proposed the second study with what we call SYNCHRONY Real-World. So a study that's really based on noninvasive diagnosis and following patients noninvasively. So it's something that really prepares us for the day, because liver biopsy is uncommon in clinical practice, and there's no real reason we need to develop the noninvasive framework to help guide physicians on how this drug is to be used post approval. And lastly, we agreed on a what we call SYNCHRONY outcomes. And that is an outcomes-based study with F4 patients. And the thinking is that current guidance from the FDA is that patients with F4 disease, one station proven of fibrosis is not an approvable endpoint for accelerated approval, only outcomes are approvable. And so that study would be based an outcome, so that it will be based on clinical endpoints, that is hepatic decompensation endpoints, ascites, hepatic encephalopathy, esophageal varices, hepatocellular carcinoma or death or liver transplant to those points.

Maybe just on the outcome study in F4, is there potential for a faster path to market for F4 patients?

So I think a lot of it depends on the outcome of SYMMETRY. We sort of discussed with the agency that we would agree to not agree basically. We'd have no discussion, because the F4 study SYMMETRY would help inform us of next steps when it comes to the outcomes approach. So I think the FDA as per the guidance is somewhat skeptical of mechanisms in this disease. But rather than argue about something in the absence of data, we said we wait till we have data. So we will talk with them once we have SYMMETRY results.

Makes sense. Maybe back to the Real-World study and the noninvasive sort of fibrosis scoring, and maybe talk a little bit about the current state of the art there. How feasible is it to have sort of a noninvasive approach when you potentially launch?

Yes. I think right now, there's not one noninvasive measure that works from F1 to F4. I think the field is still looking for something that will be ideal. Really, what they would like is something that's simple and easy and hopefully cheap to diagnose. There are some things that look a little bit better than others. Surprisingly, the F4 population is the easiest to diagnose noninvasively, because the liver is pretty distinct when one thinks about the amount of liver stiffness that's there already. Once you get above certain kilopascals, things are more likely not to be correct. So there are other measures that people are continuing to look at, but it's typically evolving. What the field really needs is a noninvasive that correlates very well with histology. Well, that's what the division would like. So I think the field is still evolving.

Got you. Maybe we can shift a little bit to the HARMONY data you showed last year and F2-F3. And maybe just at a high level, sort of remind us some of the key data points there and why the data was so compelling.

So I think on a high level, this is one of the -- up until HARMONY read out about this time last year, unfortunately, a lot of the NASH compounds that were in development hadn't met with a lot of success. A number of them were unsuccessful. And so it was important when we demonstrated the significant difference when it came to 1-stage improvement in fibrosis, which is the metric that most physicians care about. And we saw roughly a 40% improvement in fibrosis on the treated arm, a roughly a 20% placebo effect. So about a net 20% effect size, which is among the best results that the people have seen and investigators and physicians have seen in the field. In addition, when it came to NASH resolution, I think no one expected us to show a 76% NASH resolution, which is the other FDA approvable end point, compared to 15% in placebo. So at the highest dose, approximately 62% effect size. So I think those results overall really encourage people to think that NASH is something that perhaps, this is a compound that has a pathway towards approvability. And I think you got a lot of patients, physicians and investors quite excited.

You made the point about fibrosis improvement being the more preferred endpoint. Can you talk about why that is?

Yes. So fibrosis improvement is correlated with mortality. And so people understand once they approve fibrosis, it changes your -- let's call it, clinical outcomes in a way that NASH resolution is not as clearly.

Makes sense. In F2-F3, maybe you can talk a little bit about the competitive landscape. Currently how you're positioned right now? And I guess also post the recent ADA meeting, there was just growing -- worried about competition from GLP-1. So maybe you can sort of address those questions.

Sure. There are a couple of things there, so let me try to remember all three of them. But I would just say that since the HARMONY data last year, there's been quite a round of success. There was success for the [ MediGoal ] Phase III program. They read out both, positively for NASH resolution and 1-stage approval of fibrosis, which was fantastic for the field. There was also 89 bios and [ living ] data that read out in March of last year, that was also positive. So a good run of success from the field, albeit [ MediGoal ] is really the only compound that has Phase III results. Unfortunately, we did hear earlier this summer that -- or in June that the INTERCEPT product was not approved ultimately despite their reassessment and advisory committee. So -- that product has gone away, but we're hopeful that there will be a product approved for NASH next year. I think we're due to hear fairly soon about [ MediGoal's ] application, which they submitted in July. So I'm hopeful that there will be a drug for patients. In terms of the competitive landscape, I really feel that this is a medical need is so broad. This isn't a field where there's going to be one drug, and that's what everyone's going to take as long they want. This is very similar to diabetes, where there's armamentarium for patients and that physicians and patients will be able to choose what works best for them. Many people still use metformin, but not everyone uses sulfonylureas as much. They've moved on to DPP-4 inhibitors. So they moved on to GLP-1 or GLP combinations. And maybe that leads into your next question, which is that there was data out of ADA about a GLP-1 triple agent with a GLP and a glucagon component in that, and the results is mostly driven for weight loss. We're quite remarkable that the weight loss was north of 20%, which I don't think it was that long ago that, that was seen as perhaps a bar that was unachievable. And so that's pretty spectacular. There were some results where they looked at liver fat. And the liver fat normalization was quite high, depending on which dose they looked at. And I think there were some individuals, some investors who ask me, "Well, what does that mean for you? You're the CEO of a NASH company. You might not have anybody to treat, because this kind of regimen could cure obesity." And we've all seen analyst reports, not yours, but others that have said that this could be a $100 billion market. I think there'll be more than one analysis come out that way. And what that means for NASH? I think when we think about the percentage of Americans that are obese or overweight, the number is 30%, 40% depending where you are. I think it's quite a ways away to the idea that obesity could be cured, could these drugs have an impact? So I certainly believe so. But will obesity be eliminated in the United States? I find that perhaps a little unlikely. And the impact that will have on the NASH hopefully, if it was limited, that would be great. But I just don't see that as occurring. And the number of patients that do have NASH, it's roughly about 1/5 of patients with fatty liver disease, and that's roughly about 75 million Americans, even if obesity is brought down. So overall, I think the NASH market will still unfortunately be there, meaning that patients will be progressing getting fibrosis despite these agents. Elimination of obesity, I think is overly optimistic.

Maybe one last 1.5 minutes, [ Cheng, ] last question. Earlier this year, you shared some combination with data with the GLP-1. Maybe just talk about some of the key findings there.

Yes. So GLPs, although they've been approved for obesity fairly recently, they've been on the -- in the toolbox for diabetologists and endocrinologists for quite some time. So because they're already approved, and so many of our patients were using it, and in addition, they're associated with some degree of GI side effects as is EFX, we decided to combine a short study, 30 patients, looking at the combination of GLP-1s. Everyone taking GLP-1s and you're adding EFX or placebo. And what it really showed is that despite there being on -- these patients being on at least one GLP-1 for the average time was more than a year when the addition of EFX led to pretty stark improvements. Numbers like reductions of liver fat of 65% despite there being 11% liver fat at baseline, meaning that the GLP-1s had made a difference, but they hadn't normalized at liver fat. The addition of EFX allowed those patients to normalize their liver fat in 90% of patients after just 12 weeks. We saw improvements in lipid parameters across the board, reductions in triglycerides, ApoB, increases in HDL, decreases in LDL and non-HDL cholesterol. We also saw improvements in diabetic parameters. And that's because EFX lowers insulin resistance. And that's something that patients who are taking GLP-1s are suffering against. They're trying to have as much insulin secreted as possible, but that insulin when it gets secreted is fighting a wall of insulin resistance. And by decreasing internal resistance, it makes the existing GLP or insulin secreted work better. And we saw decreases in endogenous insulin secretion as measured by C-peptide. So in many ways, the addition of the EFX improved multiple parameters for these patients, and it also continued their weight loss.

Good. Looks like we're out of time. So why don't we end it there? Thanks so much, Andrew. Appreciate your time.

No problem. Thanks for having me, Mike.