Ascendis Pharma A/S (ASND) Earnings Call Transcript & Summary

Good morning. Welcome back to the Bank of America Healthcare Conference. So I am Tazeen Ahmad. I'm one of the senior SMid biotech analysts here at the firm. It's my pleasure to have our next presenting company, Ascendis Pharma. Sitting up here with me are 2 members from the management team. We have Jan Mikkelsen, who is, of course, President and CEO; as well as Scott Smith, who so is CFO. So gentlemen, good morning. Thanks for joining us.

Thanks, Tazeen.

Thanks, Tazeen. We're happy to see you again face to face.

Yes, after 3 years. So maybe let's start. Jan, if you could give a quick overview of the company, your platform, your main programs. And then I think we could go straight into Q&A after that because I'm sure people are interested in hearing about the growth hormone launch trajectory. So if that works for you, we can just do it that way.

Let's do that. So Ascendis Pharma is a Danish company. We built on a platform technology called the TransCon technology. We have developed our specific algorithm for product development. And we have now built up a pipeline first in rare disease endocrinology, our TransCon Growth Hormone, our TransCon PTH and TransCon CNP. We have advanced these 3 products opportunity for preclinical now, where we have approval on TransCon Growth Hormone in U.S. and in Europe. We have trade now, SKYTROFA. And we launched for about 1.5 quarter here in the U.S. TransCon PTH, we basically got our Phase III data last quarter. All of the data went up to our expectation. We met all the primary and all the key secondary endpoints. The last one is our TransCon CNP. We are advancing that now in Phase II trials. And later this year, in Q4, we expect to be in a position that we will have data from, I think, it's about 70 to 80 patients. That will be 1 year, double-blinded, placebo-controlled trial. So then you can ask a question, how can we, as a company, basically in a position that we can in one single therapeutic area start with 3 preclinical product opportunities and then development to a stage where we basically got 1 approved, both in Europe and U.S. The second one is now with positive Phase III data we are filing in Q3 here in U.S., in Q4 in Europe. And we expect for the third one, also to Phase II data here at the end of the year. And it's built on our TransCon technology and our algorithm for product innovation, where we basically can make highly differentiated product opportunities that no one has ever had made. Basically develop best-in-class product opportunities, but we can do it in a high success manner, not having the typical 5% change when you started preclinical. This is industry standard -- the 5% on it. We have managed to take 2 products in a row from preclinical to positive Phase III data. And when I mean positive Phase III data, I mean that we met all primary and secondary endpoints. So we're now sitting with in rare disease endocrinology, one launch product, one that we will expect to come with the market in the next year. And then TransCon CNP will come to the market in the next coming year. We are in a position that we basically are applying now the same algorithm for building up a pipeline in oncology. And later this year, we will have the Phase I/Phase II data for our first 2 advanced oncology products. We have divided in 2 different means what we call want to kick start the mute system inside solid tumor. So through the TransCon technology, we have a technology platform where we basically can place inside a solid tumor a well-known compound, and we can sustain and release it for weeks. So we basically kickstart the mute system inside the tumor and basically transfer that out to a systemic treatment. Never seen before. It's a paradigm shift. This product is now in clinical trial. And later this year, we will not only give you a lot of data with either to biomarkers, but also outcome data. The second product opportunity is what we call the best-in-class IL-2. I love this product. But it's never been possible to balance what we call the efficacy to safety. I have seen a lot of attempts to that. But from the science, I never believed in it. What we have designed is a compound where we basically are removing the alpha, keep it highly potent, but have a product technology delivered in such a manner that we never get the high Cmax associated with the side effect. We're now moving forward in clinical trial. We're already in a position where we have hit 80 micrograms per kilo dosing. We have gone to the first 3 cohorts. We have basically managed to have every cohort finalized between 6 to 7 weeks. New record in my view. Really show the dedication for the physician and the after assessment for this product opportunity. This is the data we will come out with in the end of the year. Then we move into the third product here which we will disclose in the last part of the year where we're applying the same TransCon technology, the same way of doing innovation with our proven algorithm, and we will disclose that. So this is how we have, as I said -- but besides that, having this, what we call pipeline that basically are so mature that we basically are in steady state. We take product out every year to the approval and then we come up with new products. So we basically have already expensed. But perhaps what is more important for us, through Scott and his vision always to have a situation we need to be having a very, very strong balance sheet. We ended this quarter with $1.1 billion in cash and short-term cash, meaning is that we are in a position that we basically can see how we are as a company can go through the transition, starting and turning into a profitable company without really need to address the capital markets again. This is a deterioration we have been in. We basically have been extremely successful in our pipeline building. We have made highly differentiated products no one else has seen, but we also managed to do it in a way that we really have a strong balance sheet. That was the introduction.

Okay. So just to clarify, you said you'll never have to tap the capital markets again?

I don't think we need to.

That's good. All right. So maybe let's start off with your new launch that's underway for growth hormone. You just reported earnings yesterday. So thanks for doing that right before we met. And so let's talk about the achievements of the zones. I don't know if, Scott, maybe you want to start and Jan, you can add some thoughts. But look, we have followed the company since IPO. And everything that you have promised on the clinical front you've delivered and exceeded. So now that you're a commercial company, what are the challenges of trying to set proper expectations for investors with this launch trajectory because no matter how you say it, you've been talking about having a more muted view of the cadence of the launch now for, I don't know, well over a year. But it does seem like sell-side estimates, at least for this year, are probably high relative to what you'll be able to achieve. I'd love to hear your thoughts on that, Scott. But what do you think needs to really change in order for revenue -- reported revenue to be meaningfully higher than it has in the first 2 quarters?

I think let me come with an overview first, and then Scott can go down to all the numbers because he is really good at numbers. Let me take it -- when we started launching SKYTROFA here in the U.S., we launched it out from the perspective that is a best-in-class product opportunity superior to the current standard treatment. We are providing a better outcome for the patient, not only a convenience of a daily product. We know that patients love the product. They have seen the benefit of the right onco. What do I have followed in a launch? I followed if the physician also are prescribing it. To date, what we have reported, we have seen more than 1,200 prescriptions. What do a prescription mean? It means that prescription is coming for 1 year. This is not a repeat prescription. Every prescription is typical covering for 1 year. Second thing we see, do we get more prescribers? Yes. Do the physician that prescribe it make multiple prescription? And is that increasing? Yes. So this is what I call the acceleration. So we see a prescription pattern going up. Then you think about the addressable market. In growth hormone deficiencies, that's about 25,000 patients, typical on treatment about 4 years. The majority of patients we see now is coming from switch patients. So when you think about the addressable market, if you have a patient that has 1 year back in treatment, would you change it? No. If you have 2 years left, maybe, I will not do it. If you were a patient that's just starting the first year or something like that, I would consider this is a much better treatment option for this patient. So when you compare that to our prescriptions that we have of 1,200, I think we're doing pretty well after one quarter. You can calculate it.

So I think that's what it is. I think that the number of prescriptions is impressive, 400...

Not finished yet.

But you have 400 -- you have over 400 unique prescribers. So what you're reporting, there's a disconnect between that versus the number of people that clearly are interested in using the product. So the question that I've been getting inbound is, how is that accounting working? Is there a free drug? Is there -- how are you accounting for the sales of the product?

But I think that this is our fault because we didn't do the right communication, the right understanding of this market here because it's very different compared to passing knowledge of our oncology areas. First of all, when we reported for the first partly quarter to now, we have doubled the sales. So if you're just adding double sales every quarter, then you can also, in my view, easily get to a great number. The other point is that saying you can report net in a different way. What we are reporting net is real net. We, for example, taking into account future rebate. We take that off now. Recall, end of the year, we take it off now. So we don't need to be in a position which I have seen company coming in, yes, we reported some net review, but we just need to change in the end of the year because we were not really in it. We're not doing that. We are here to be sustainable. The other thing that is realizing is that when there is a prescription, there's a lag period before this patient got going being turned over to a commercial patient that basically are taking and getting SKYTROFA from the pharmacist. And as I said before, the majority of patients we're getting now is coming from switch patients, meaning that many of them, for example, need to get rid of their supply of daily growth hormone. Some of them have 1 month. Some of them have 2 months left. Some of them have 3 months left. They need to get [indiscernible]. So basically, when you look at our numbers that we take into this balance sheet, there is a delay compared to the prescriptions based on conservative way how we basically are giving in the number. And I think if I look in a launch, I look are the physician taking this and want to prescribe it? And they're doing that. And then I know after some time, because we dedicated to that, the physician are dedicated, and they don't make a prescription without a strong belief. This turned out to be a commercial patient at the end because that's only the way they can make a sustainable supply to this patient. But there's a lag period in the system, and this is what you see here. And this is a why I only following one single element, their prescription pattern. Are the physicians continue to prescribing this product? And do we see any fatigue? Do we see new prescribers? Do we see continued prescription because they see the benefit of it. That is what I'm following. How we book revenue and how we do it, this is a way where you take up a lot of company consideration what you want to be recognized, how conservative you are, how you book it and other things like that. And is there a lag period between the transfer of a prescription into the day the patient pick up the SKYTROFA from a pharmacy. And that is -- and I know it, everyone should know it, but we perhaps didn't explain that sufficient good enough. And this is why I feel confident with the number we're getting. I feel it sounds pretty good. You can do the math yourself. 1,200 out of 25,000, where potentially there's only one. So we will get the new patient because the new patient takes time. They need to go to what we call a classical way to get that diagnosed. They need to go to a test. They need to go x-ray and everything. It takes time for them to qualify, but the other part of the group have lag period. Through the complexity of the U.S. reimbursement system to the complexity to utilizing already started drug and other things like that. And I think that is the misconnected data between the numbers.

Okay.

Anything to add Scott?

Yes. I mean, I think you said it well, Jan. I think what gives us comfort is the prescription written by the physician is for 1 year. So you're actually building off each prior quarter of revenue. You don't have to like maybe an acute drug start from 0 again.

So when you say the script is being written for a year, how much supply does a person -- does a patient get each month? And you're saying for a year, meaning that it doesn't have to be -- the prior auth doesn't need to be renewed for a year or that they will come?

They don't have to go back to the physician and get the physician to renew the prescription for the year.

And how much supply do they get in a month, the delivered monthly supplies?

It can depend on the plan, but typical, I would say, for 1 month.

Right. So it's automatically delivered to the patient every month, right? Okay. In terms of the way that you're accounting and you've given us a lot of detail on the conservative methods that you use for accounting, do you see yourself continuing to use that approach to account permanently?

That's a good question, and this is why we're building up the vendors on it. It could be in the end of the year we are reversing our number to a higher number because it was not necessary to give the needed to discount. And then we will have a higher -- but I personally believe it's better to do it in that way instead of the opposite way.

Okay. So have you done an analysis, if you normalize the way that you're accounting for sales to the early days of the launches of the currently available daily growth hormone injections, how would that, if you were to overlay the launch curves, how would they compare?

I don't think most of them got a launch in the 80s. So that is far away to try to compare this curve.

I mean that part I appreciate and understand. But just in general, the general, I guess, direction of uptake. Would you say that they also had initially flat uptick until a certain level was reached?

I think the dynamic we see is pretty expected to this kind of product in this kind of launch. I don't see any expectation of what we call the lag period in this way. And I think it's very reasonable. It's easy to explain and it's easy to understand.

Okay. So when you're saying that most of your patients are coming from switch, is there a particular growth hormone daily that they're switching from?

Not to my knowledge. I've not seen any -- I think it's general for everywhere.

Okay. And so I think that people would appreciate having a sense of how you think of the big pie that exists right now. The worldwide opportunity is, what 3.5 billion right now?

Yes. So we're coming with a series of product opportunities in rare disease endocrinology. The growth hormone launch is very different compared to PTH. Growth hormone launch is to -- launch in an established market. The established market is about 1.4 billion here in the U.S., and I am only talking U.S. on world basis, it's about 4 billion. What we really want to do? We want to increase that pie. And this is why we take the long-term view. We are not here to decrease the growth hormone market. We are here to have a long strategy that really are providing the benefit to the patient, the benefit to the physician, that benefit to the society. We then improve treatment regime. And this is why we believe we can increase the growth hormone market with a margin every year that is different compared to the current 1% to 3%. And this is what we're also integrating in our long-term strategy for this product, not to be in a position that we are destroying the total market, but increase the market value of the entire growth hormone market. When we come to PTH, it's completely different launch. We're launching into a patient population just here in the U.S., more than 80,000. We are launching where there's no treatment options. We know that the patients are waiting to get this product opportunity. We have seen just in our first time in my life, and I will never see it again, I know, where we -- after 2.5 years in an open-label extension only lost 2 patients. And that is because we are getting their life back in a normal manner. We are launching in that with there is no other treatment options. We expect to launch that in the next year. And from that, it will be completely different launch dynamic. The launch dynamic we see in an established market is that is patient on already established treatment, and they basically are phasing for one treatment or to the other treatment in a phased manner. And this is why you see this dynamic. So when we talk to the expected launch of TransCon PTH in the U.S. next year, we will talk about complete different launch dynamic because this is where they are different to come in directly into a market where there's no treatment options.

Okay. Maybe sticking still to growth hormone. Where do you think gross to net will level off by the end of this year?

What we have with growth hormone, TransCon Growth Hormone, is the normal profit margin you see in endocrinology system in this way. This is a normal profit margin.

So what would that be over the range of it?

You can make that out yourself, but this is what we see with normal margin.

We've been modeling north of 30% COGS.

That is more of an antibody. This is a high end of the antibody. Antibodies typical up in that level, typical endocrine hormone is on a lower level.

Scott, [indiscernible]?

Yeah.

Okay. So it's still early. So how do you think about where the biggest opportunity is in the initial part of your launch? Like what's the low-hanging fruit?

The low-hanging fruit especially is the patients. Because they are already diagnosed.

Well, I guess, what percent would that be?

I took it up in the beginning of saying that's 25,000 patients. If you have 1 year left, I mean it's our physician, I will not change. If there are 2 years that potential, I will say the opportunity is half of this patient group. But this time because it's the entire go turns around in a cycle of about 4 years, then most of the patients are basically being transferred over to new patients.

And how do you think about the European market opportunity and the dynamics of that launch, how about look relative to what you're seeing so far in the U.S.?

The European launch is always very, very different because it's a huge heterogenic market in Europe, where there is a big difference launching in Germany compared to launching, for example, just in Spain, 2 large countries in this way. And areas where you have much more high value and others which are more competitive to launching. And this is what we were waiting for. We were waiting for the situation where we have 2 unique product opportunities. There's no doubt PTH will be much, much larger product in Europe than growth hormone. is there is a huge patient population that is an expected much higher price on a PTH program from that. And there is not basically any treatment option. And there is a huge benefit to really addressing also long-term complication because as -- because the way of thinking 98% of all German states in Germany, not leaving from one health plan to the next health plan as you see here in the U.S. So from that perspective, we were waiting to building out a packet of 2 product opportunities now with proven Phase III data and then be building our launch planning out from that. And that is what we're doing now. We're really building the launch planning now how to come out and penetrate it because now we have the positive Phase II data for both programs.

So what are the next steps for HPT?

What do you mean by that?

When should we expect applications and all of that to be in place? And when do you think you'd be starting to record sales?

In Europe?

In general.

Scott?

Well, so the filing is on track for the NDA in Q3 and then the MAA submission in Q4 this year.

And would you expect in the U.S., an accelerated path or priority here?

I think we qualify for it. But the question is that I cannot promise anything. I think we will qualify for it, and we hope that is a dialogue that we will have. We see an unmet medical need here in the U.S. We see no treatment option. We see all the benefit we have from getting our primary all key secondary endpoint. So from that perspective, I think we have a situation where I believe from a patient perspective we should qualify.

How much bigger do you think the HPT opportunity is relative to growth hormones within the U.S.?

Much larger than the way I believe. If I look at from the patient perspective, and this is always where I like to focus. We have not seen any kind of subpopulation of the 80,000 patients where none -- where all of them are benefit of a PTH treatment. When we look on retention, we have patients that are coming from all the different demographics in our Phase II and Phase III trial. All of them have seen that benefit. So I cannot disqualify any patient group not to see the benefit of it. So if I was a physician, I would say, over 80,000 should be come in treatment with all the 80,000 being commercial life, that is a different question. But I think we will do the best that we can serve as many as possible. So if 30%, 40%, 50% are going to a good commercial life, then I also think we will be very, very successful.

So just given -- do you think that the -- I guess, the steepness of the launch curve for hypoparathyroid would be higher than what it's been thus far for growth loans?

As I said, I believe there is a very, very different launch dynamic for the PTH compared to what we see with growth hormone. Completely launch dynamic. First of all, there was 5,000 patients that basic were on a treatment in U.S. They got disconnected from the treatment. There was a program that gave some relief for less than 500. So these patients are waiting for an opportunity basically to come back on a treatment option that is highly differentiated to what they really have seen before. And this is why we believe there is a complete different launch dynamic that will be in that compared to SKYTROFA launch, not to say we're not satisfied with what we saw in the launch dynamic schedule.

Maybe lastly, how are you thinking in general about pricing for hypoparathyroid relative to where sell-side estimates might be right now?

You can say that's already established benchmark from product. And I think we have a superior treatment compared to that product. But we also will come out with what we did with SKYTROFA and responsible premium pricing for both products. And I think we will follow the same trend with TransCon PTH.

Okay. We have plenty more to talk about, but unfortunately, we are out of time for today. So thank you both for joining us, and thanks, everyone, for participating.

Thanks so much.

Thanks so much, Tazeen.