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

All right. Well, good morning, 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 for Akero Therapeutics. Before we get started, I just need to read a quick disclaimer. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. And with that, Andrew, maybe I'll just turn it over to you to make a couple of intro comments for people that might not be familiar with the story, and then we can hop into Q&A.

Sure. So Akero is a Phase III clinical company, and we're in the middle of our 3 Phase III programs that will start, and we're started, and we'll talk about that during our chat. So maybe I'll stop there and turn it back over to you.

Yes. Sounds good. And I thought maybe just to sort of start off the conversation, maybe talk a little bit about NASH, maybe a quick background there in terms of the market and sort of how things have evolved over the past few years and where the opportunities really are.

Yes. So NASH is -- I used to say up until last year that it was the most prevalent disease for which there was no approved drug, but Madrigal was the first who got Rezdiffra approved in March of 2024. And then last month, we're in September, Novo had semaglutide approved for -- both for F2 F3 match. So now there are 2 drugs approved for this disease, and that's only in the United States. I don't believe there's an approval anywhere else in the world for those 2 drugs.

Maybe just talk a little bit about the mechanisms of action of those 2 approved drugs and how you're different from them?

Yes. So Rezdiffra is a thyroid hormone beta receptor agonist -- it works exclusively within the liver, increasing liver oxidation and basically reducing liver fat. Semaglutide, obviously, many indications, obviously, for weight loss and for type 2 diabetes and for sleep apnea. I'm sure there may be some other things that I've not captured because there are so many indications and there's data on it since it's an old drug, but it GLP-1s in MASH work by weight loss, and therefore, they reduce liver fat and mechanisms, both Rezdiffra and semaglutide once they remove liver fat from the liver, allows what they call NASH/MASH resolution to occur. So as a result, the liver, unlike other organs, does regenerate and therefore, it can heal itself and thereby resolve fibrosis via that healing. So a more indirect mechanism that takes a little bit longer.

And your approach is?

Yes. So we also are very effective in reducing liver fat. So we have that component. Perhaps more importantly for this patient, we're a direct acting antifibrotic. FGF21s work not only within the liver, but also work external the liver to improve insulin sensitivity, regulating whole body metabolism and directly inhibit hepatic stellate cells that transform into myofibroblast that lay new collagen down. We inhibit that process, and we've been demonstrated in clinical studies that we're very effective in inhibiting new collagen synthesis.

So maybe that's a good point to sort of transition to some of your prior data and maybe we start with the SYMMETRY study, you announced 96-week data earlier this year that was very promising and groundbreaking. So maybe walk us through some of that and what made it such a groundbreaking readout.

So Mike, it's a really good question. I think for many, many, many years, it's been taught in school to both medical students and GI fellows that cirrhosis is irreversible. But in January of '27, our SYMMETRY study, which took patients who were F4 cirrhotic patients who had compensated cirrhosis as on biopsy. They were Child-Pugh A. That those patients when treated with efruxifermin in our FGF21 analog for 2 years, we demonstrated a statistically significant improvement in fibrosis moving from F4 to F3 of 39% in the treated arm, 50 milligrams compared to 15% on placebo. So roughly a 24% effect size and which was statistically significant, whether you look at that analysis, which is the -- what we call the complete analysis or you look at the ITT analysis, we demonstrated a roughly 18% effect size that would be 29% versus 11%. And those data were frankly, remarkable for us to see that difference and obviously, for the patients as well in the trial and for the larger community.

Can you talk maybe a little bit about some of the feedback you've gotten on that data set and how it's impacting?

Yes. So our investigators, of course, since they were there their patients were extremely pleased. We had some investigators who've been doing this a long time, and they've never been able to say to a patient who's cirrhotic, you're no longer cirrhotic as something that they've waited most of their career to say. And fortunately, for most of these F4 patients, the 5-year mortality is 50%. And so for once a patient had that diagnosis of cirrhosis, the physician would sort of give them the unfortunate news and say that the things that we have to, we're going to do what we can, which is nothing. There are no approved therapies and that eventually, they would try to get them on a liver transplant list because that's really the only option for these patients. And as you're well aware, there are insufficient number of organs and not everyone due to comorbidities as a candidate for transplant. So it's a pretty difficult diagnosis to share with your patients, especially when you have no treatment options and the future is not rosy.

Yes. Makes sense. Maybe we can talk a little bit about just fibrosis improvement in terms of what's considered clinically meaningful and maybe we just start with F4 patients because that's where we are.

Yes. So I think, frankly, any improvement is clinically meaningful in these patients because the consequences are so dire. But certainly, having a 24% effect size it's very clear at something that physicians would be very happy to being able to share that benefit with their F4 patients.

Very groundbreaking data. And maybe a similar question, how do you think about what's clinically meaningful in maybe less severe F2, F3 patients?

Yes. Again, the real F2 patients are a little different. They have a little more room, but the critical issue for patients who have advanced cirrhosis -- excuse me, advanced fibrosis, which is not yet cirrhotic is that for F3 patients, they're concerned about becoming cirrhosis, becoming cirrhotic and having cirrhosis. So they are -- for F3 patients, again, I think any amount of improvement is important, but a clear -- when you look at the -- maybe it's a better way to answer your question, Mike, is to look at the 2 approved drugs. If you look at Rezdiffra, I believe it has -- their FDA label has about an 11.5% improvement over placebo, so the effect size. And I believe that semaglutide, which was just approved, has about a 14.5% effect size based on the ESSENCE study that they prepared or presented last year and was recently published in New England.

Maybe just can you touch on sort of your F2, F3 results and kind of how those compare?

So when you look at our data, we had roughly a 2-year data in HARMONY, which is published last month in the Lancet, we demonstrated in the completed population a 52% effect size, 75% 1-stage improvement in fibrosis on the 50-milligram arm over 2 years, and that's compared to a low 20% in the placebo arm. So a 52% effect size in the completed analysis and in the ITT analysis, roughly a 30% effect size. So considerably greater than what's been approved to date.

So you're definitely seeing some very strong effects there on the fibrosis side. Maybe we can talk a little bit about what you're seeing on the safety side and maybe...

So we would say that it's -- our safety profile has been pretty consistent in both the cirrhotic and pre-cirrhotic populations. The most common adverse events are diarrhea and some degree of nausea. Those are the things that we see most commonly. We would say that over the 2-year period, the patients in the study are able to tolerate, for instance, in SYMMETRY, we had a number of discontinuations on the 50-milligram arm early in the study through the first 9 months, yet over the final 60 weeks of the study, we only had 1 patient in the 50-milligram arm discontinued for diarrhea. On the other hand, what we have seen in both -- in over 2 years in both studies, we've seen some decrement in bone mineral density, in general, roughly about a 5% effect size. over placebo. And these are patients who are mostly postmenopausal women, but it's something that -- and unfortunately, they were also untreated during the study. So I think that's something as we look in Phase III, we're encouraging our patients to have today vitamin D and calcium as well as if there's signs of BMD loss regardless, it's blinded, of course, to seek endocrine referral because the bone mineral density is a slow process, but it is treatable.

So in the Phase III, you'll be able to sort of manage this, you think?

We're encouraging our hepatologists to refer to their endocrine friends.

Makes sense. Maybe we can shift gears now just to your Phase III SYNCHRONY program. You have multiple studies going on there. There's 3 different studies. So maybe to start just sort of a big picture, walk us through those studies and the purpose of each.

So the first study is what we call SYNCHRONY real world. And what that is, is a population that is biopsy-confirmed NASH, but they're followed noninvasively. And in a way, this is what the real world is. Patients come in and they're not -- and you can see this with Rezdiffra and likely with semaglutide already. They don't rely on biopsy in the clinic today for nonclinical trial patients. They use noninvasive measures, whether it's an ultrasound or they look at some laboratory markers to track their progress. And so we're doing that in this population. So the purpose of that study is really to provide data to physicians and the FDA as to how would this drug be used if you weren't using biopsy. So it's a very clinically supportive and helpful study to guide -- or this is what you can expect if you look at this through these noninvasive measures. On the other hand, the FDA doesn't accept today noninvasive measures for registration. So the second histologic study or second study in F2 F3 patients is what we call SYNCHRONY histology. And that's very similar to what we've seen with the HARMONY trial. That is it's a biopsy-concerned F2, F3 patients with MASH and they're treated for 52 weeks, and they have a paired biopsy at the end of that time to see what the percentage of patients who have stage improvement in fibrosis is and/or NASH resolution. Those are the 2 FDA accepted endpoints. And then the final study is more similar to the SYMMETRY style, which is in F4, so compensated cirrhotic patients, Child-Pugh A, and we're following them with biopsy for 96 weeks, just like we just touched on in SYMMETRY, and -- but they will also be followed for clinical outcomes. And so they will -- a subset of patients will get the biopsy and then all patients will be followed for clinical outcomes. And that component of the trial is event-driven, so we don't know the actual duration of the trial. It's really driven by to reach the prespecified number of clinical events on both placebo and active.

You're going to read out sort of the first study, which is real world, again, noninvasive in the first half of next year. So from -- I guess, what should investors focus on there? And any sort of read-through to some of your other studies?

Yes. So I think at that study, it's primarily a study of safety and tolerability. So I think we'll recall that the Phase IIb studies were in pre-cirrhotic patients were roughly 125 patients, a 3-arm study, both 28 and 50 milligrams on the efruxifermin arms and in placebo. And then the SYMMETRY study was 3 arms again, but 180 people, so roughly 60 per arm. This study is only 1 dose of active, which is 50 milligrams, but it's randomized 2:1. So there will be 400 patients on 50 milligrams for a year. So this will be the largest data set that we have on 50 milligrams for that duration. So I think the overall, it will be helpful to see what the safety profile is. And hopefully, it will be very similar to what we already know. And recall that there are noninvasive measures that are being used, and we measure them in both pre-cirrhotic and cirrhotic. So it's -- I think what investors should focus on is how similar this data set is to what's already known. That will be the most important thing to say that we have a good understanding of what this drug does in a much larger group of patients over the 1-year period.

If it's primarily for safety, are there any sort of data points we can look at that might read through to efficacy or just further increase sort of our confidence there?

Sure. I think we've talked about last fall at the American Society of Liver Diseases, we had a poster presentation that talked about correlating noninvasive measures, specifically the change in the ELF score, enhanced liver fibrosis score, which is a composite of 3 measures as well as FibroScan, which is an ultrasound-based measure and how that correlates with 1-stage improvement of fibrosis. So I think in this way, there's a little bit of subtraction in the sense that you won't have fibrosis to correlate, but you have 2 of the 3 measures. I think there's some degree of efficacy that could be inferred from those. But as a reminder, these markers are imperfect, and we showed that last fall, the trial through the eyes of pathologists showed 75% 1-stage improvement of fibrosis over 2 years, the correlation with patients who had both a 30% improvement in FibroScan and had a 0.5 decrease in ELF score was only 42%. So there is still these amount measures noninvasive measures still leave quite a bit of fibrosis on the table.

And maybe we can shift just to histology again, your F2 F3 study plan to share data, I think, first half in '27, so sort of a year later. Maybe talk about your decision to use a composite primary endpoint there?

Yes. So as I mentioned earlier, in that study for registration, the FDA allows either 1-stage improvement in fibrosis or NASH resolution to the registrational endpoints. And so you can satisfy either or. The European Union requires an and you need to be statistically significant on both measures. For issues -- statistical issues, we chose the and mostly to satisfy the European Union, but the FDA understands that there's also the individual components that will be measured and shared publicly. So I think we don't see a bigger difference. I think there's the ability to satisfy one or both regulatory agencies was how we chose the and.

Yes. So that's one difference between your sort of Phase II study. Any other differences in Phase III versus HARMONY?

So I would say HARMONY, there's one big difference is the HARMONY was almost entirely United States, 95% plus were U.S. sites. As is common in Phase III studies, this is being conducted throughout the world. So it's a rest of world study. And also the most importantly, the drug product. So in the Phase II study, it was a frozen solution in an earlier formulation that required that patients come into the doctor's office once a week for 2 years, 96 visits to have a nurse or office staff inject them 1 milliliter subcu. The Phase III program is using the commercial formulation that it's a dual chamber injector. So it's given to the patient so they can inject themselves at home. It doesn't require multiple office visits. So it's obviously much more patient friendly, and we're looking forward to seeing that in clinical use.

In terms of the different geographies, U.S. versus European patients, have you noticed any differences in any of your other studies between how those patients respond?

We don't have any other data. All the Phase II studies were done primarily in the United States, so both Phase II studies. And so it's really -- recall that the Phase III studies are being done in United States, Europe, Latin America, Asia as well, so -- as well as the Middle East, the Middle East. So it really is a global study for both Phase III programs. So we don't have any data in Phase II to sort of compare and contrast.

Would there be any reason to think you might see different responses on fibrosis for some of that?

There's no reason to think that would be true. We've not seen that in other programs, whether it's the Intercept program that read out or the semaglutide program or the Rezdiffra program. To my knowledge, they have not shown differences geographically.

Makes sense. Maybe we can just shift gears to outcomes now. That's your, again, F4 study. You have a biopsy cohort. But maybe just you started enrolling the study, I think, last September and maybe talk a little bit about how enrollment is sort of tracking there.

So as you can imagine, you asked earlier how physicians and investigators felt about our data given the fact that there's nothing approved for these patients. And unfortunately, it's -- there's a 5-year 50% mortality for the patients. So once we had 2-year data showing a statistically significant difference, it obviously is very beneficial for enrollment. And so we had a spike in enrollment, and we're pleased with how things are going.

And I guess just given sort of the strength of the SYMMETRY data, are you considering making any adjustments to sort of the design of the outcome study? And what's the latest?

Yes. So once we have the 2-year data, we are able to sort of look at what kind of patients were successful in 1-stage of [indiscernible] fibrosis over that time. And we are putting together an amendment and the protocol to, how should we say, enhance the entry criteria for those people who are more successful. For competitive reasons, we're not getting a lot of clarity of what it is exactly that we're changing, but it's another measure of how helpful it is to have the data versus going straight into Phase III with no Phase IIb data.

So it's more of selecting the right patients that are going to do the best on the primary endpoint?

Exactly.

Is there any opportunity to maybe shorten the [ end ] here just because the data was so robust and kind of off the charts.

It's something we're looking at as well. But again, we haven't -- the amendment isn't final, and we're not giving a lot of clarity on that.

Okay. And then in terms of timing of the results, I know you have to kind of process.

Yes. We are very close to giving guidance, but we haven't done so yet. We want to get a little further along in enrollment before we say something publicly as to when we would expect results similar to what we've done in the first of the 2 Phase III studies, SYNCHRONY real-world and SYNCHRONY histology.

Do you have a meeting set up with the FDA yet? Or is that...

We don't have anything calendar with the FDA. Recall that we had an [ end ] of Phase II meeting already. They've already reviewed our protocols in the past. And so we're very comfortable with where we're proceeding with our development plan.

Yes. And then in terms of just the F4 study and the biopsy results and the potential for an accelerated approval, what's your current thinking there?

So in Europe, we're very comfortable that they've told us that we have an accelerated approval pathway with histology in cirrhotic patients. The FDA guidance isn't consistent with that. However, the FDA approved our protocol with the 2-year biopsy. So we view it as we're going to submit these data to the Europeans. And once we have the results, we'll probably share that with the agency, and we'll cross that bridge once we get there.

Okay. What's the probability of an accelerated path? I think it's very different.

No, I think it's very difficult to assess what the regulatory agency would do in the future, especially in light of some of the changes that occurred with this change of administration, one really can't predict accurately.

Yes. No, it makes sense. There's also other agents, FGF21 sort of in development. So maybe talk a little bit about how your program compares to them the differentiation there?

So to my knowledge, there's only really now one other FGF21 -- excuse me, there are 2, one from a company called 89bio that's also in Phase III. They have a program for cirrhotics as well. They're looking at biopsy at 2 years. And there's a company that used to be known as Boston Pharma that was acquired by GlaxoSmithKline in May of this year. They, I believe, are moving forward into Phase III. It's not clear whether they're moving forward to both F2 F3 or only -- or excuse me, F2 F3 and F4 or only F2 F3. I think we haven't heard much since the acquisition. So we'll see what happens.

And Novo was the third one that they sort of discontinued their program, but just -- any sort of read-through you think at all to the target?

Correct. I think when we think about other compounds, the Novo Nordisk compound was zalfermin was discontinued and they announced in August on their quarterly earnings call. What I would say is that recall that BMS had an FGF21 called pegbelfermin that was also discontinued. Merck as well as Roche and Pfizer many, many years ago had 2 FGF21s, all of whom were discontinued. I think what it really highlights is that the data are not -- can't easily be interpreted as reading through to other compounds. So until you have the results, you can't be certain that your FGF21 will be successful.

Makes sense. Maybe we can talk more about just the market opportunity and you've had Rezdiffra on the market, as you mentioned, and kind of what's your take from their launch so far?

I've always been a champion and I salute Bill Siebold and the Madrigal team. They've really surprised us, and I believe investors on how well they've done in the field. And each quarter, their earnings expectations have surpassed what Wall Street just thought and hats off to them, they've really launched the drug really, really well. And it shows to me that in a market that didn't exist prior to Rezdiffra being launched and they're having non-pharma type budgets, they can be extremely successful with a focused U.S. sales force. So I think there are definitely read-throughs for us as we think about our market opportunity, especially as now that Novo is pursuing NASH for F2 F3, I think the market will grow because Novo is an extremely successful company and the metabolics is something that's core to what they do, and they will also grow the market as well. And so this is one situation where it's -- the market is really in its infancy with only 2 products available that are only indicated for F2 F3. So we see this market is still having a lot of untapped potential.

And where do you see your opportunities? Do you still have opportunity in F2, F3? Or is it?

So I think when we talked about this earlier, Madrigal has an effect size of about 11.5%. And then Novo Nordisk based on their clinical trial results is a little bit better at about 14.5%. So unfortunately, although those are good numbers, it still leaves the majority of patients on who might be treated with either of those drugs based on their clinical trial results not having a 1-stage improvement in fibrosis. So like any other field, which is just getting started, with incremental innovation, there are better results potentially for patients. And so we absolutely feel, as I mentioned earlier, on an ITT basis, our drug has roughly a 30% effect size, so considerably bigger than either the 2 agents that are currently approved, and we look forward to demonstrating that in Phase III. And of course, nothing is approved for F4. So we feel that, that's something that's very robust and a high medical need for us and patients.

Do you think these other mechanisms could be successful in F4? Or is it going to be challenging?

Well, let's stick to the data. And semaglutide in the summer of 2023 presented their own data where they looked at treating F4 patients with GLP-1 in -- and over that time, unfortunately, their data was pretty similar to everything else in the field today, which is that their data was placebo-like. In fact, numerically, placebo, the placebo response exceeded the semaglutide response. And we think that makes sense because when one thinks about the mechanism of GLP-1s, it's weight loss driven, and it's about removing liver fat. But recall in cirrhotic patients, there isn't that much liver fat to remove. Most of the hepatocytes have been replaced by fibrosis and weight loss isn't effective as they've demonstrated in removing fibrosis over that time frame. And so that may be something that was also seen by other agents. And so when one thinks about other GLP-1 agents, which improve on weight loss, and lead to greater weight loss than, let's say, semaglutide, they're likely unfortunately to face the same challenge is that just because you're better at reducing weight loss, weight loss itself doesn't work, they're unlikely to be effective in treating cirrhosis.

Makes sense. Maybe in the last few minutes here, we could ask a couple of sort of macro questions here to get your perspective. Just with China's rise in biotech innovation, how are you thinking about your competitive position here? And will this influence your R&D or BD strategy going forward?

So we agree that the innovation coming out of China over the last 2 to 3 years has been remarkable when one thinks about some of the clinical trial results and some of the partnering that's taken place. For us, it really highlights while we're aware of some FGF21s coming out of China, we're unaware of any that have Phase IIb data -- and I think as we talked about the Novo compound, in particular, it's very, very important, whether -- just not, no, not picking on Novo. It's just Novo, BMS, Roche, Pfizer and Merck have had other FGF21s that were unsuccessful in the clinic. So I think until we see clinical data, I think early-stage data with other FGF21s is an open book. It's -- the story has yet to be told. So I think there's just the importance overall of having results that are very definitive.

Makes sense. Maybe we can move to the next sort of macro question. How are you currently leveraging artificial intelligence or thinking about AI's future disruption potential in the industry?

We're already using artificial intelligence as one of the presentations we made last year at the American Association for the Study of Liver Disease, AASLD, we had partnered with a company called HistoIndex, which used AI-guided pathology analysis, and we use that to correlate with the human pathologists that looked at our biopsy samples. And for the 50-milligram dose, we saw a high degree of correlation. They saw that roughly they had about measure about 80% -- low 80% one-stage improvement fibrosis compared to the pathologists, 75% for the 50-milligram dose. They were more specific in which regions of the liver showed that whereas perisinusoidal or otherwise. So we're already using AI. I think it's -- right now, the challenge for AI is that the FDA is not accepting AI-guided pathology reads for histology samples, but it's already a factor for us because we do see the future where that becomes -- the challenge is that biopsy isn't used clinically, but could it be used in clinical trials? It could.

Okay. Great. It looks like we're just about out of time. So why don't we wrap it up there. Thanks so much, Andrew. Really appreciate your time today.

Happy to be here. Thanks for inviting me.