DBV Technologies S.A. (DBV) Earnings Call Transcript & Summary

Okay. Great. Let's go ahead and get started. Welcome, everyone. My name is Vikram Purohit. I'm one of the biotech analysts with Morgan Stanley Research. And happy to have with me today, Daniel Tassé, CEO of DBV Technologies. Daniel, thank you for joining us.

Thanks for having me, and good morning, good afternoon to everyone.

Great. And before we go ahead and get started, let me read a quick disclosure from our side. Please note that this webcast is from Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you are a member of the press, please disconnect and reach out separately. 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. With that, let's go ahead and start our discussion with Daniel.

So Daniel, I thought that the best place to start to level set everyone would just be if you could provide a brief overview of Viaskin Peanut, the company's platform and the regulatory path that the product has had throughout this year.

Very good. Well, so again, thanks for having me Vikram. Viaskin, the technology, is a breakthrough concept by which the human skin can be used as an immune organ, that there is a possibility of using Langerhans cells and Treg recruitment by exposing the human skin to allergen and doing that, induce a measured and significant desensitization to the allergen. So that's what we call the Viaskin platform. It's proprietary to us, as you know, and our first product is for the treatment of peanut allergies on the device in peanut. The product was submitted to the agency, to the FDA late last year, and we, for sure, received the CRL on the September 16 -- sorry, on August 3, which we're in the process of addressing right now, which I'll be happy to discuss in greater detail. And we remain very confident in the technology. We believe that the misunderstanding with the agency can be resolved. The agency is asking us to do a number of things that we believe are very much feasible and are looking forward to the next tranche of dialogue with them, which will take place for the next few months as to provide clarity to future patients on the pathway to get a product approved.

Okay. Understood. And could you break down, especially for those who have been following the story maybe very closely, exactly what the FDA asked for when they issued the CRL in August?

Yes. So if I can just maybe rewind the regular process to mid-March. In mid-March, we were informed by the agency that they wish to cancel our Advisory Committee, which had been planned for mid-May because -- and they expressed to us, in a verbal conversation, concerns, "that the intersection of patch adhesion and patch efficacy." That is data where we have a lot of information to share with the agency, which we very quickly -- we submitted to them on April 9. We also, for the sake of making sure that the discussion was as fruitful as possible for opinion leaders, for patients, patient advocacy groups and for investors also, to make sure the deal was also published in peer-reviewed publication. That was done in the May-June time frame. So that what we shared with the agency about our product, product profile and how the protein payload is delivered to the patient's epicutaneous tissues was well understood. Despite that, there was not much dialogue with the agency from that point in time on until August. We received the CRL in August, and we're in the process of responding to the specific comments of the agency that were in that document.

Got it. And for when you do meet with the agency, what are the areas of clarification that you would like to receive from the FDA in order to be able to progress Viaskin Peanut?

Yes. There is really 2 areas of discussions that are key to us here. If I can take you maybe half a step back, Vikram. We very much believe that Viaskin Peanut, as designed currently, is approvable and is beneficial to patients. That being said, the agency in the CRL is asking us to make modifications to the patch as to improve adhesion. Now our technology is rather flexible. What we've built as far as manufacturing capabilities was not just for our first-generation product, which is a Viaskin Peanut, but products that would follow on the back of it. We have, as you know, a commitment to a rich pipeline in food allergy. So we have a manufacturing technology that has some flexibility into it so that we can modify the patch. And I'll be happy to tell you more about that, if that's of interest to you and to the audience here, so that we can come back to the agency with a patch that, by being modified, will adhere better, which brings the 2 big questions. What are the objective criteria we will use to select a patch that is -- provides better adhesion? We want to make sure that DBV and the agency are of one voice. What those criteria will be the first question. And the second one is, what is the evidence that the agency will require about the performance of the modified patch that will be satisfactory to them as to provide, and I'll use the word bridging here. It may not be the regulatory term, but to bridge the modified patch to the one we submitted to the agency last year. So those are 2 big questions for us.

Understood. And maybe it would be helpful if you could educate us all a little bit about the basic structure of the current patch. And what aspect of the patch you see is modifiable to potentially meet the agency's desire for an updated patch?

That's a very important question. So our patch, really, is made of 2 components that are -- that have very distinct function. As you know, we do not have a transdermal patch. We are not trying to drive pharmacotherapy into the circulation through the skin as a means of bypassing the GI tract, which is what every other patch in the market is meant to do, unless they have been the topical patches that are delivering, obviously, anesthesia, locally. There is no analog for our technology. So the first component of our patch is a foam ring. It is about the size of a quarter. And that foam ring creates a chamber that allows perspiration, water molecules that are released from the skin to stabilize the allergen, the peanut protein in this case here, as to allow that peanut protein to migrate slowly through that chamber. That chamber does not touch the skin, the ring does. The chamber does not touch the skin, as to provide the absorption of the allergen into the epicutaneous tissues, and with that recruit the immune response that I described earlier on. So that's, call it, the active principle of our patch. There is also an overlay on top of it that serves to protect that foam ring, allows to flatten it a little bit so it doesn't stick out quite as much off the skin of the child as well as providing more adhesion as to hold it down firmly. So in our ability to modify the patch, we can't touch both elements. We can make the foam ring to be bigger. We could use a foam material that is stickier. So we can make modifications there as to make the chamber to be essentially more adhesive. And we can also make changes to the overlay in size and in shape as to provide more of that protective adhesion that is meant to really protect the foam ring. So both of these are feasible. We have quite a number of tools that we can pursue, all of which would not be very onerous when it comes to time or capital because again, the technology was built with some flexibility. Does that answer your question? Is that helpful?

That is helpful. And as a next step, to the extent you can discuss it, has there been any initial indication from your internal work about which modification to the structure of the patch may be beneficial or advantageous going forward? Or is that still something that's internally in the works?

No. It's internally in works. It's progressed quite nicely. I would rather share with the FDA first before we share with the broader public, obviously, because we want to be of one voice with the agency here. But our ability to modify the patch is significant in ways we believe will be -- will make a difference in patch adhesion, and also manage the delicate balance also between adhesion of the patch and pain on removal because one of the great features of Viaskin Peanut, as you know, is that we had over 98% daily compliance. Now patients on average use the patch 360 days in a 365-day study. So comfort on application and on removal is also very important here. So there is a number of elements we have to trade-off here, but we think we have very good clarity on what can be done to achieve, again, a patch modification that remains very optimal in weighing all those considerations. That's a dialogue, we wish to help the agency first.

Understood. And once you have an updated patch that's in the works that you think could be suitable. How would that -- how do you envision that back and forth with the FDA going? What's it like to kind of have like a basic prototype or something in hand?

Yes. We certainly will -- probably plan to have more than one. Again, I would rather come to the agency with the art of the possible. Again, Vikram, here I reserve every right to do U-turn on this and -- a month down the road, realizing that's not the right approach. But in the spirit of having a partnership with the agency and also a partnership with the opinion leaders in the patient community, so there is many people who contribute to this debate here. I think, first, to look at a number of modifications, asked to understand what are the trade-offs that come with it would be the way to approach it. As I said, the first objective or discussion with the agency is to establish what would be objective criteria by which we would wish to modify the batch and have the agency essentially bless what that approach would be. So by definition, this would accommodate a number of modifications. But as I said, this is our thinking at this point in time. We could choose to do something different, but it strikes me as being the soundest way to not only manage the delicate elements of trade off. There's an element of art to this beside -- and craft. There's art and skill to it and also to make sure the agency inputs into it. Does that make sense, yes?

That makes sense. And based on the feedback you received so far from the FDA, could you clarify how the agency is thinking about patch adhesion in relation to the miss on the lower bound of the confidence interval that we saw in the Phase III PEPITES study?

Yes. Well, the agency makes reference in the CRL to that miss on the lower bound confidence interval, as we would expect would be the case as the CRL outlines, obviously, all the elements of the shortcomings that the product could have. And we read the CRL as one where the agency wants us to fix adhesion. It's implicit, I think, to anybody that if a patch adheres better, the efficacy would be improved. That's the thesis that underpins the agency's CRL. And as I said, despite the fact that we believe the patch we have right now is of benefit to patients, that being said, our ability to modify something that we can do and are willing to do in the spirit of getting the product approved for patients as soon as possible.

Got it. And could you remind us what the current IP runway is for Viaskin Peanut, and whether you think a new patch -- or an updated patch rather could carry additional IP with it?

It's very likely that a new patch would carry additional IP since a lot of our IP is around manufacturing processes and patch design. Let's not forget, this is also a biological product that will have 10 years of exclusivity on approval. And it's also because, again, we have the benefit of not having any analogs. AB rating using PK data is not possible for generic eventually. So there is also a regulatory pathway for competitive eventually that would be a bit complex that would be. So we like our ability to be able to provide exclusivity for the product with more than sufficient runway to make this delay, and the capital we need to deploy to resolve it to be something that can be easily accommodated within the exclusivity window we have for the product.

Okay. Understood. Maybe now let's shift over to Europe. What's the status with Viaskin Peanut in Europe? And what are the next steps there from your perspective?

Yes. We have always said we're planning on filing Europe before the end of year. As you know, there is a means for dialogue with the agency in Europe before you choose to do so. And our plan would be if the EMA is amenable to it, it would be to file with the patch that we currently have in front of the agency, not the modified patch we referred to as being the current Viaskin Peanut patch, is what we would plan to register in Europe. And we expect to have an update for investors and patients by the end of the year.

Understood. So to clarify, you think it's possible that the current patch can be approved in Europe, assuming that process trends that way in Europe, while you have maybe a modified patch potentially up for approval and commercialization in the U.S.?

Yes. The -- we would be comfortable with 2 different patch designs. Again, as I said, our manufacturing capabilities would not make that to be a significant handicap when it comes to operations or cost of goods. And if the FDA wishes for a different design and that's important for them to secure the product's approval, then we're more than willing to work with them in modifying it. But again, we very much believe that Viaskin Peanut, as designed today, is very much beneficial to patients, and that's obviously the case we will prosecute with the EMA regulators.

Understood. That's helpful. And maybe looking at the rest of your pipeline as well, how has the CRL and the feedback from the FDA impacted your view of earlier-stage programs like Viaskin Milk and Viaskin Egg?

Yes. We took a prudent approach to Viaskin Milk. It's our next product. We're ready for the end of Phase II discussion with the agency. We made a decision, though, about a year ago, to put that on a bit of a back burner because our patch technology, again, is unique with no analogs. We assess that to have the regulatory pathway play out in the U.S. would be quite informative to what the agency wants from a CMC point of view as well as from a clinical point of view. And that we would be best served and also prudent stewards of our investors' capital by waiting to have the end of Phase II discussion with the FDA on the milk product after we got more clarity on their view of the Viaskin technology for peanuts. I think it turns out to be the right decision. So we are looking forward to moving -- we're looking forward to moving forward with the milk product, but that will come a bit later on. And the same applies, obviously, to the rest of our pipeline and applications, to egg, tree nuts, and we have also a number of applications that we've been considering outside of food allergy, as you know, which remain very promising. And our basic scientists continue to work on those applications outside of food allergies.

Understood. If possible, could you maybe expand on what areas outside food allergy you think would be suitable, or from an initial look, amenable to the Viaskin prized technology?

Yes. We -- some data has been published on the use of the technology in vaccine and vaccine recalls. An opinion leader once said that if our 2 founders had been virologists, we'd be a vaccine company right now. But our 2 founders were pediatric gastroenterologists, so we're a food allergy company. But the application of the technology is quite broad. We've looked at myasthenia gravis. We've looked at celiac. There is a number of, essentially, If you think about immune conditions that are mediated or impact the GI tract are an interesting set of conditions of human disease, essentially, that we may wish to target with our technology, given the fact that, not oversimplify it, but the human skin, in many ways, is perceived to be the human GI tract flipped inside out when it comes to cell structure. So a lot of what can be achieved through -- in inducing an immune response through oral technology could be achieved also with skin technology or at least, with the EPIT technology. And that's essentially the core thesis to applications of EPIT outside of food allergy. And we probably have, right now, 15 or 18 academic collaborations looking at different elements of this deployment of the EPIT technology outside of food allergies. So preclinical, obviously, I'm not announcing any clinical program at this point in time, but enthusiasm for the applications is significant.

Understood. And going back to the earlier question about the earlier stage pipeline. Do you think that there is relevant experience and data there that you could use even if you decide to use an updated patch for future programs with milk, egg, et cetera? Or would you think -- or should investors think about that as maybe a bit of a restart for those programs?

No. When thinking about a restart. It's a fair question if the parallel between our platform was to a new -- a nuance that fails in a clinical study or gets kicked back by the agency then you need to go back very often to essential organic chemistry, right, in medicine chemistry and synthesize something different with a different side chain or binds to the receptor differently. That's all what we have here. Our technology, which is the patch technology, is modifiable as to bring different allergens to the skin, and provided these are properties that are necessary here. So the core belief, an allergen applied to the skin the right way can induce the right desensitization remains very true. What we have to work on now is the engineering patch design, patch manufacturing side of it, which is a lot easier to control and to play with than would be basic chemistry. So given the fact that the API doesn't change, it remains delivering a protein payload to the skin, the fact that we have to modify the patch in the eyes of the FDA, which I think is your question, is not a fundamental setback to other applications of the technology in other diseases. Does that make sense?

That make sense.

As I said to one of your colleagues once that we sent a man to the moon on 1960s' technology, we'll figure out a way to make the patch stick to the skin. It's a fixable problem.

Understood. And at this point, let me take a break and see if we have any questions from people on the line. [Operator Instructions] I'm not seeing any yet, so we can just keep going with our conversation. Maybe we circle back to Viaskin Peanut then. And perhaps, you can kind of lay out the time line, something we did touch on. Kind of going forward, what do you see as the most -- the cadence of steps here?

Yes. It's an important question, Vikram. As you know, being allergenic extract, we are not a PDUFA product -- a PDUFA-paying product. Although we have break through designation in all of our interactions with the agency since the very start of the program. The agency has managed the time lines and time expectation as it were a PDUFA product. So with that as being the core thesis about the next steps in responding to the CRL, as per regulation, a sponsor has 90 days after receipt of a CRL to ask the FDA for a Type A meeting. At the time of the request of the meeting, a briefing document needs to be attached to it. So to us, the rate-limiting step is clarity on what is it we want to modify about the patch and the endpoints we wish to measure as far as selecting the best patch. That needs to be done within 90 days, which would take us to late October, given the type of the CRL came in early August. The Type A meeting would be granted within 30 days. And then the minutes of that meeting would be available within 30 days also, which means that by the end of 2020, we expect and hope to have clarity from the agency and where the next steps will be in modifying the patch. And we expect it's going to be an ongoing dialogue also, very much in the spirit of breakthrough designation as we put forward patch design and criteria for selecting them. That invites, obviously, a follow-on discussion on the patch we've decided to use, and then the generation of clinical evidence to provide the provability. So that the time line that we're looking at right now.

Understood. Okay. And could you also remind us about what you've said about current cash balance runway?

Yes. The -- we've ended -- again, it's an important question. We've ended Q2 with EUR 226 million as our cash balance, which is not an insignificant amount of money for a biotech company. As you know, we've announced on June 26, a restructuring of the company, has allowed us to sort of cut back our cash burn and focus on the things that matter very much. Obviously, number one is CRL response. Number two is EMA filing, and every other clinical program we have is ongoing. Now thinking through what the pipeline can be that basic research needs to continue in all the core capabilities we've built and insights we've built into the U.S. and European market, obviously, are things that we were protecting. But it has still left opportunity for a lot of cost cutting is ongoing right now. As you probably know, being a French-American company, the lot of the infrastructure is in France, where downsizing are managed much more slowly in a process that's quite deliberate that requires negotiation with the work council. Those have begun back in late June, and we expect that all closed out by the end of October, early November, which dovetails quite nicely with clarity on what the agency needs us to do as to secure approval of the product so that we expect at the end of the year to be able to provide not only how much more runway we have with a treasury position that's far from bad. But on top of it, clarity in what the agency will require from us, so that we can translate all of that essentially to a de facto cash runway for investors here. At the core of what we want to do is, again, be good stewards of the capital investors here and try to minimize completely, if possible, any need for financing, any financing overhang that would be in parallel to the CRL remediation. I'd like to remediate the CRL, if at all possible, without having, obviously, to tap into capital markets. That's our objective. Obviously, specifics to come in a few months.

Understood.

Is that helpful, yes?

That's helpful. Let me do another quick check for questions. [Operator Instructions] Okay. Well, seeing none, Daniel. Maybe we can -- if you have any closing remarks or any key things that people should keep in mind. We can close with that.

If I may. So again, Vikram, thanks for the questions today. Yes, I would remind our investors and so to remind also our prospective patients that between now and the end of the year, there are 3 big elements of information that are key. One, obviously, is clarity on the regulatory pathway with the FDA. The second one is clarity on our cash runway and how much headroom we will carve-out for ourselves. And lastly, we should have returned from EMA on our ability to file current Viaskin Peanut in Europe. So with the regulatory pathway in Europe, as you know, there is now typically 13 to 14 months on average for approval -- for product from filing to approval, which obviously makes for an interesting opportunity for us to hopefully commercialize in Europe, if things go as planned in the not-too-distant future. So we will have clarity on all 3 of these events between now and year-end, mostly backloaded towards the end of the year, and I'm looking forward to sharing that with the broader community.

Okay. Great. Well, thank you, Daniel. Appreciate your time.

Most welcome. Thanks so much, and everyone, thanks for your time this morning.

All right. Thank you, everyone.

Bye-bye.

Bye.