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

Good morning, everybody. Thanks for joining us for our first day of the Bank of America Healthcare Conference. I am Tazeen Ahmad. I'm one of the senior SMid biotech analysts here at the firm. It is my pleasure to have our next presenting company management with us from Ascendis. We're happy to have several members of the management team sitting right next to me is, of course, the famous Marie Hartoft. Good morning. Thank you for joining us. Also listening up to me is CFO of Scott Smith, and of course, Tim Lee from Investor Relations. So I think Tim is going to read a disclaimer and then we'll go straight to Q&A.

Thank you. We may make forward-looking comments during this presentation, including statements regarding our projections for SKYTROFA revenue in 2023, our plans regarding TransCon PTH and our other product candidates, our cost control measures and productivity improvements. Actual results may differ materially from those expressed or implied, and you should not place undue reliance on these statements. For information concerning the factors that could cause actual results to differ materially, please see the Risk Factors section in our most recent annual report on Form 20-F.

Okay. Excellent. Thank you, Tim. So there's a lot going on in Ascendis Jan we have a lot to talk about. I think one of the first things we should discuss is the launch trajectory for SKYTROFA, which this past quarter beat everyone's expectations significantly. So I'm hoping you can give us a little bit color on what occurred in 1Q that maybe we -- and maybe even you weren't necessarily expecting. And what gave you the confidence to provide full year sales guide in year 2 of the launch when as early as January, it did seem that you were a bit more tentative on that idea.

First, thanks a lot Tazeen for inviting us. It's always a pleasure to be here. Yes. We launched SKYTROFA under the strategic perspective that we wanted to grow SKYTROFA to the leading brand in value in a growing growth hormone market. There was really the 2 key fundamentals that really have taken out in our execution, in our lungs and how we're running the SKYTROFA commercialization. And first of all, when you launch a product like SKYTROFA one of the element that you always are waiting, when do the physician really feeling confident in to your product strengths. And as we're dealing with linear growth in many cases, sure, we also treatment for endocrine benefit. You really need to observe about 9 to 12 months before you really get the convinced that you have a superior product that really giving the right outcome. So what we're realizing now is that many physicians are coming to the states where we have taken a patient on a daily growth hormone, taking lower to SKYTROFA and really seeing how our product strength is really proving out. They also got confidence in Ascendis Pharma, not only how we really are introducing our product to the patient to our hub, but also in our solid supply chains. We have always been [indiscernible] product. We have never been in backlog. We've always been reliable. The point that also helping us is that there has been a consolidation of the daily growth hormone market for many years. It's actually started for 3 or 4 years. There was multiple daily growth hormone player. The growth hormone market was actually the first biogeneric market. People complete forgot it. But it was the first biogeneric market with 5 or 6 players doing the same identical product. Many of them are now pushing back. There's only 3 products with sales force out in the U.S. market. This is Pfizer, is Novo Nordisk on -- and Ascendis. So what we're also seeing now is this consolidation in getting more and more a more intense and really seeing the effect of it potentially why we also see the shortage of daily growth hormone now because many of them have really turned down on that business. So I believe what we saw in the Q1 is some kind of element of multiple factors. There's some way add only to wanting our strategy really to build SKYTROFA as the leading growth hormone product in the market in a growing growth hormone market is really going to be realized. So I have no doubt that is pharma will build SKYTROFA a blockbuster product.

Perfect. So you had something like an 80% sequential growth from 4Q to 1Q. Your full year guide was above what the Street had been expecting for this year just given the trends from last year. But that being said, it does seem like perhaps your guide could be a little bit conservative because it does assume much slower sequential growth going forward for the rest of the year. Now is that something because you're still trying to understand how the market is going to evolve through the year? Or is there something specific that makes you think that there will be growth, but not necessarily the type of exponential growth we saw in this first quarter.

We want to be reliable when we come out with any forecasting. So we built our forecasting on a simple algorithm, our experience saying when a patient start on SKYTROFA that patient stay on SKYTROFA. We see very rare small amount of patients stopping when they got started on SKYTROFA. So we did the simple calculation. We took Q1 sales, multiplied it with 4. And then we said we added about $35 million last year in sales. So we came up with this simple number that was built on that we will keep what we know from the data we have seen when they start on SKYTROFA will continue on SKYTROFA. And we will add the same number of patients to -- that we did in '22. If we come to a situation after Q2, where we believe that is going to change, if we believe that it's different, we will come with a change in our thinking about what the whole year revenue basis will be. And also people will ask me, yen, why are you coming out with somebody coming with forecasting? You've never done that, you always say you never want to do it because I'm feeling more and more reliable on the numbers. I don't want them to come up and give you a number and you say, this number can you really do it or not do it. I want to come up with numbers when I feel reliable and I can live up to it.

Okay. So I guess with that in mind, there is, of course, the pediatric launch, which is still in the relatively early innings, but we've known each other a long time since the IPO. And going back there, I would say some of our conversations revolved around the potential for adults to also want to take growth hormone. So for people that might not be as familiar with this category, what benefit would an adult have in taking growth hormone replacement?

Yes. Mainly pediatric growth hormone deficiency. When we go up to adult growth hormone deficiency, then people have an association on is that the same patient population that basically move from pediatric to adult. It's not really true that adult growth hormone deficiency population is basically a patient population that come from a quite different demographic typical, it comes from trauma, it comes from the oncology side where there is an impairment on the pictorial plane. The major, you can say, comorbidities from the lack of having growth hormone. Many of them are cardiovascular, no many them are exercise, many them are mental and other thing. So it's really a high physical burden to do it. This segment is largely underpenetrated today. We believe that's only between 10% to 20% of the patient basically are on treatment today. Basic lack of the use of daily treatment, which are really demanding for this patient population. And therefore, they start to be less compliance and then for the lit effect, and therefore, we stop to treatment. So what we see a huge opportunity to penetrate this market segment with a 1 3 product that really could provide the superiority that we like to see. Going back to what I will call the SKYTROFAs element and what we want to show, we have eroded all the patients, the acumen rolled in more than 10% because there came to any patient in in the end that we overrode the trial is that the largest Phase III trial that has been done. We have 3 arms. We have 1 that is a placebo arm because we need to compare to placebo from rector perspective. Then we have the SKYTROFA arm and then we have our daily growth hormone now. Why do we believe it's so important also to have the daily growth hormone arm because it's randomized 1:1:1 because we believe that there was 2 long-acting growth hormones in the here that try to come to the market here in the U.S. One shows that it was not better than placebo. The second one only got half of the effect compared to daily growth hormone. So if we can prove that we have at least the same effect like daily growth hormone, we really can prove we're really providing the integrated endocrine benefit everyone expects from a somatropin treatment. That is exactly why we designed it in this way. We made it so large randomized 1:1:1 because we really want to benchmark it against the daily growth mode. Even from a regulatory perspective, we just need to be better than placebo. And this is why we're extremely excited that in Q4, we will have the data here. We're just waiting to get the last patient true, and we will come up here in Q4. You give us also an benefit out to the pediatric growth hormone deficiency because in one of the element you also want to treat in the pediatric segment is body composition. And we can also prove that now that we really have this endocrine benefit too.

Okay. Now as we think about the evolution of the space, you're going to have competition. So right now, you are the only once weekly, but Novo Nordisk is going to provide you with competition. How does that come into play and your thinking about the market opportunity specific to SKYTROFA?

Yes. When you talk about competition, I believe I will separate it in 2 different segments. The long-acting products and with daily products. So when I go to the long-acting product, there's no doubt when we compare us against Novo Nordisk. We have best-in-class properties. You can just look on the Phase III data that is for pediatric growth hormone deficiency. We were better than daily growth hormone, that were worse on an absolute mean in outcome. So every parameter, you can see we're the only one that provide the same as somatropin. So from the competitive comparison, there's no doubt we have a best-in-class property in this. And I think we also will continue proving that with the adult data end of the year. So what I see when they're coming, perhaps one more long-acting product in to that, you will see a consolidation and elimination of the daily growth hormone much faster than before. I don't think it changed anything of our perspective what we believe that will be the penetration and the value of SKYTROFA.

So it's obvious with the benefits of a once-weekly dose regimen are. But is it your view that all of the current patients that are on daily as well as future new patients would opt for the weekly? Or do you think there will be a segment of the market that will still continue to do the daily injections?

If we go back and look on what we call life cycle management inside the endocrinology, it's only on time before you basically eliminate the daily growth hormone or the daily treatment. Everyone is always turning over to the more long-acting product.

I mean how long do you think that could take? And some of these bigger companies that you mentioned, obviously wouldn't go down without a slight, I suppose. Do you think that they could try to take advantage of pricing in order to maintain share? And if they did, what would be your thought about that type of an approach?

What we have seen in the daily growth hormone market, there was actually the case study when both Teva and centers came in with biogeneric daily growth hormone treatment. And that basically came in with the same element that you described that came in with a 30% discount. After 2, 3 years, there was still less than 2% or 3%. No market share. So Teva went one way and senders went the other way. Centers went over to what we call branded biogeneric meaning is that they go out and make the same branded product, the same nice pen device we're seeing support hope and everything. Teva went down in price. And what happened Teva went out and Centers is still in the market. So it's not really a market segment. There's some where you can define that it's just the lowest price because there's no automatic substitution. There's no automatic substitution that you see in a generic small molecule era. Everything needs to be branded, meaning is that the doctor needs to make the axle prescription to really to get their products sold.

Okay. So let's maybe move on to parathyroid hormone. You recently got the CRL from the FDA, which, at least to us, we were expecting, just given the time lines to when they told you that they couldn't continue conversations relative to when the PDUFA was. But can you share with us, in the latest -- like specifically, what was the language or the deficiency singular that was identified by the agency.

I think, Scott, he has an excellent wording. I like him all is to do the [indiscernible]

So in the letter, the FDA cited concerns related to the manufacturing control strategy for variability of delivered dose in the TransCon PTH drug device combination product.

Okay. There was a factual wording that went directly into the press release. So what do that really say to us. First of all, there is no concern to any safety or efficacy data in our ongoing clinical trials. We have Phase II patient that's continued now up for 3 years now. We have Phase III patient continue in open label extension. We have [indiscernible] few dropped out. We have still 145 patients on treatment now up to more than that. More important, we're enrolling new patients in our ERP, new patients here in the U.S. every week, patient that is coming in. So no concern related to the data that has ever been shown or being generated from our Phase II, Phase III or molten extension ERP program. So what we're talking about? We're talking about a theoretical concern on extremes and illustrated in a simple manner because it's not something we ever would see in any clinical trial. In a typical controlled strategy, you have 2 key parameters. You have one key parameter is the drug content. The other key parameter is dose across it. And when we talk of extreme, for example, on an injectable like TransCon PTH, then you talk about drug content, then you have some variability in drug content. You can have -- when you produce it. The other thing is that you also will have the ability in dose accuracy. This is basic -- in our case, is the pen device, what is the variability on the pen volume of the pen device. So when you talk about next, then you can take one high extreme is the highest level of drug content multiplied with the highest dose volume you ever can be expelled. This is one extreme. Then you go to or extreme, you take the lowest drop content, the lowest expert volume. And then you add to 2-year stability, then you have 2 extremes. Would that ever happen in real world that one patient will go for this extreme, the highest drug content, the highest expert volume and the day after manufacturing, getting this injection. And then the next day we get a pen from the lowest drug content, lowest expert volume and 3-year storage. Theoretical to all mathematic calculation is something, I think, a cancer being hitting by lighting is higher. This is why we never will observe this kind of thing in our clinical trial or potentially never will be observed. But I'm 100% that is a theoretical concern. We need to do a justification of this theoretical concern. We mainly do it by collecting data, doing analysis because it's not something we ever can observe. So we will do that mathematic modeling about what is the effect on this, do the clinical justification for it and do a risk-benefit analysis and also implement different ways where we can somewhat monitor if that really would happen ever in real life. This is a bad thing we're working with FDA in a very collative manner to find a way to find a solution. There is no doubt TransCon PTH will be approved in my view. I believe it's a product that really should be out in the market. The patient that getting treated at that is to continue because we see the benefit. The physician recognize the benefit of this product. So we just need to find the pathway to get this out to the patient here in the U.S.

Okay. So let me interrupt you for one second because you said a lot I do want to maybe back up for one second. So the device, I think, is important to note is already used by other products in diabetes. So I think some of the questions that we've been getting is that this is already a known device, why is FDA now concerned about some theoretical risk, which, as you just said, is highly unlikely, if not impossible to happen in a real-world setting?

Yes. I actually see it more and more. So another company at a CIL in the same manner on a new product. And I think you can then ask why do you not see that in the diabetes because it's basically a diabetes issue. We developed this compared to all the isotainers and everything on that. I think it's because there is a lot of what we call treatment knowledge, treatment experience with diabetes insulin and everything like that. So then note what you call the more related to the expected safety concern. When we come out with a new product, we will be first in class. We will be the first one that's coming off with a treatment in hypopara. There is another product being in the market, but it was an adjunct where you only couldn't substitute partly something on the ordinary treatment. So out from that, we're first-in-class coming up with the treatment of hypopara. So we basically have not all the safety knowledge. We don't have all the experience that you will see. And this is what we need somebody to build up, convince, make the right argument make the right calculation about what is the impact on this kind of a safety aspect. And I think this is one you always will see when you come up in a first-in-class treatment. That is like a new open way of treatment payment. We have seen the benefit that patients getting for this new treatment. We have seen why we only have less than 10 drops out of 10 years after 2 trials. That is exactly why they stay on treatment in this area. And -- but we also know to say first-in-class is always a little bit more complicated because you come into new discussion, new aspect. We don't see the same issue in Europe because they are much more following what we call the guidance with rules and regulation related to a different standard. So we are not seeing the same issue being raised in Europe.

Okay. That's important. So...

Or other places in the world. Japan, too, we've never seen the item.

So I guess sticking to the U.S. for now, you have up to 3 months to put together your binder and submit it to the FDA request a meeting. So I think people are trying to triangulate time lines here. So our going assumption is that you were able to submit data to the FDA and have an approval and launch within a year. I think there's some that believe it could take less time than that. But as we sit here today, have you started doing any of those theoretical modeling exercises?

Yes. We're working every day are during every 7 days of the week on this year and be quite sure we as fast as possible can submit the integrated package to the FDA. And after we have submitted that FDA has up to 30 days to give us a grand dose Type A meeting. And after that, we can submit an application again, where the only review point will be this deficiency.

Okay. So do you think it will take you the length of the 3 months in order to submit your binder to the FDA?

I hope not. I think we can do it faster. I hope not.