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

Hello, everyone. My name is Evan Seigerman. I'm the senior biopharma analyst here at Crédit Suisse, and welcome to day 3 of our virtual Global Healthcare Conference. We are looking forward to hopefully seeing everyone in person next year. But with me today, I have DBVT, and from DBVT, I have CEO, Daniel Tassé. Thank you, Dan, for joining us.

Thanks for having me.

I believe the last time we saw each other was in January, where I was joking that you gave me some peanut M&Ms, how appropriate. But it's been quite a year. I kind of -- it would be great if you could just get us up to speed as to where DBVT is now and kind of what to look forward to, and then I'm going to pepper you with a bunch of questions.

That's fair. So Evan, thanks for having us, and again, good afternoon to everyone, or good morning for those of you who are a few timezones away. Well, we know the technology, we're trying to exploit the immune properties of the skin using a technology called epicutaneous immunotherapy, and the platform is referred to as Viaskin, our first product is Viaskin Peanut. We received a CRL from the FDA on August 3, and the CRL was essentially the agency asking us to look at redesigning the product as to improve the adhesion performance of the product. And I'll be happy to jump into more detail on that front, if you wish, Evan. Being a non-PDUFA product that has always been treated along PDUFA guidelines when it comes to agency engagement, we saw we had 3 months to ask for Type A meeting, which we have done. The meeting has not taken place. We expect it to take place before the end of the year. And our plan is to come back and communicate to investors and to the world, focusing the minutes of that meeting on where we are in resolving the issue of adhesion as identified by the FDA.

Okay. So I guess, let's focus a little bit on your product, remind people what the Viaskin Peanut product is. I know that the peanut space has evolved significantly over the past year with the approval of Palforzia. And I know these are very different products, but I think it's important to highlight how your product works and why it's different from Palforzia. And how you see the space kind of moving in the next couple years.

Yes. So epicutaneous immunotherapy, the Viaskin platform, is -- the whole idea is that by exposing the human body through the epicutaneous tissues to the skin to miniscule amounts of peanut protein, you get a recruitment of Langerhans cells in a modulated, targeted T cell response that allows the children who suffer from peanut allergy to stop recognizing peanuts as essentially a bad thing. And over time, you build a tolerance of peanut allergen. By definition, it is long-term therapy. You would expect the results after 2 years, 3 years, even better than after 1 year. As is the case with SCIT and SLIT for other forms of allergies anyways. But making the importance of having a product that is friendly, easy to use, with a very favorable adverse event profile to be quite important, given the fact that the chronicity of treatment, the ability to stick to treatment, is very important to the outcome. And as you know, our pivotal data, which is called PEPITES, was published back in late 2017, but most importantly, in January of this year, we published the 2-year open-label extension to our pivotal trial, which validated the core hypothesis. As you use our product for a longer amount of time, you see an improvement in clinical response. And just as importantly, we had very high compliance treatments and very few dropouts over 3 years because the product actually is relatively easy to use. Let's say, it's quite easy to use. Is that helpful, Evan?

Yes. No, that is quite helpful. Yes. So thinking about the CRL in the U.S., I know you're still kind of in -- not so early days because it was in August, but what are the issues here? And how do you plan on resolving them, I guess?

Yes. The FDA identified that the patch adhesion performance was not what they expected, and there are essentially 2 fundamental ways we could have approached it at the CRL: one is to go back to the agency, see what we disagree with their interpretation of the data. As you know, the data around patient adhesion or patch adhesion and clinical performance was published in peer review literature back in the summer. The other approach is to see whether or not modifying the patch, in a way that would be acceptable to the agency, would be a more fruitful way forward to work through the CRL. And after thinking it through very seriously, we decided that since modifying the patch is something that our manufacturing technology allows us to do relatively easily, for us to go at redesigning elements of the patch as to improve the adhesion performance and to go and discuss with the agency that approach, is what we've chosen to do. And that's essentially what is the content of the Type A briefing package that we wish to discuss with the agency. To maybe add a bit of color here, Evan, as you know, for those who know the patch, our patches are made of 2 components. One is a foam ring with a backing that creates a condensation chamber on the skin of the child, allowing for humidity coming from the child's skin to solubilize the protein and allow it to be absorbed into epicutaneous tissues to start that immune response. We're not going to change that. That's -- we look at that as being the mechanism of action of our patch, and we don't wish to change that. But around that is a dressing that is meant essentially to protect the inner ring. And our ability to make that dressing to be larger, to be of a different shape, round or oval, removing the corners that we have with our current patch right now, which is square-shaped, are means by which we believe from having done testing to improve the patch adhesion. And in doing so, better protecting the mechanism of action condensation chamber, and in doing so, bring a product redesign that is going to be attractive to the agency, but at the same time, not jeopardizing the clinical profile we've put forward.

Okay. So that's actually quite helpful on my understanding. So the active part kind of inside that inner ring, I'm looking at a picture off the screen. That's not changing. That's where you're getting the efficacy?

Correct.

So that's -- so there's no issues with that. It's just their concern that the current design as a square may not be, I guess, for lack of better words, sticky enough or stay in place for the 2 weeks to the level that they would like to get the full exposure. Is that what we're thinking about here?

That's correct. Yes. The patch, as you know, is worn daily and the Phase I data we show that if the patch is worn for more than 12 hours, the protein payload has been delivered. The clinical data we've published seems to validate that. So that's correct. We -- whether or not the adhesion is a function of the shape of the patch or the size of the patch, the agency did not opine on that. But we do believe, and it's commonsensical to say that if patch was larger, there's more of this dressing, which is adhesives. And by making it in a shape that is different than square, you may also reduce the risk of mechanical pull from a child that is active. And obviously, the corners get caught on their clothing. So that's the way we're approaching the redesign of the patch. The way you can think about it is the motor hasn't changed. We're trying to make the suspension a bit more comfortable, if we were compared this to a car, essentially. So...

Okay. No, that's helpful. And once you redesign the patch, what type of additional human factor testing do you need to do to get it ready to resubmit?

That's an important question. The human factor studies need to be redone. The moment you modify any patch under the regulations, the CFRs, we need to do a human factor study. The question is how do we make sure that the modifications we're contemplating happen to meet the needs of the agency? So our approach to the agency is essentially frame it as 2 questions. The means by which we will select the best modification of the patch, is that acceptable to you? Question one. And question two, what is the evidence that is required as to support the clinical profile of this modified patch? And here, obviously, that's a big discussion we'll have with the agency. On one end, it's relatively straightforward, basically adhesion data. On the other end, would be a full clinical trial, and there's a lot of place in between. That's a conversation we need to have with the agency.

Okay. So I mean I guess it's probably too early to speculate exactly what you need, but do you see a need for a whole full-scale clinical trial? Or is it somewhere in between to make sure that you're -- it's adhering and you're getting the same type of absorption?

Yes. So we don't believe we do. Again, I'm putting forward my opinion...

Of course, of course...

Well informed by my team, well validated by outside experts, but the other half of the discussion is the FDA has not taken place. I don't wish to speculate what the agency will see. We believe that there is a good rationale by which the clinical evidence required to essentially bridge, and this is my terminology here, be modified Viaskin Peanuts to the one that was filed with the agency, can be done with a clinical package that is more modest than that. But I would rather not speculate anymore until I've talked to the regulators, who at the end of the day, have the last word here.

Fair enough, fair enough. So let's -- anything else with the U.S. I know kind of you're on standstill until you get that clarity. Any other kind of thoughts or...

No. The team has done a nice job. Again, we're looking forward to discussion with the agency. And that by agreeing to modify the patch, we expect to create the kind of give and take, very much in the spirit of breakthrough designation that is key to get this important therapy to patients.

And then I guess moving on to the EU. So you've had some success there -- or you may have some success. I guess what are the differences between the way the EMA looks at it versus FDA? And why might the EMA approved whereas FDA was a little more cautious?

The -- well, the best way to answer that question is the EMA knows everything the FDA knows because we filed afterwards. So it's fair to assume that the briefing package we brought to the EMA, obviously was fully informed from the U.S. CRL. We see 3 big differences between the dossier we've sent to the EMA and the one that the agency has reviewed. The first one is that the EMA strongly recommended that our 3-year data be part of the submission, which is not -- was not part of our FDA submission. So if you believe in the mode of action, the 3-year data becomes important as validation of how our product works. So our -- what we call the PEOPLE data, the 2-year open-label extension to our PEPITES pivotal trial is part of our EU submission. That's one big difference. The second one we've touched on, we submitted this after we've had discussions with the agency on the adhesion, allowing us essentially to explain the adhesion experience and adhesion expectations to the EMA very differently, and that our patch is a QD patch. It's a once-a-day patch, not a 24-hour patch. And then the last element is that historically, the EMA has never expressed the need to demonstrate super superiority to placebo in the clinical study, the 15% lower bound CI. That was a question with the FDA. Although it's part of our primary endpoint, it would be very clear. Our primary endpoint in our SAP defines the 15% lower bound CI universally for all registration documents, but it was not a question asked of the EMA when we had the end of Phase II meeting. So those are the 3 big differences.

Okay. And just remind me, time lines in Europe? Kind of when we could expect to see some action by EMA? And then I want to kind of get into some of the commercial thought in Europe.

Yes. So as you know, the EMA process is 210 days, plus clock stoppages, the 2 big clock stoppages being at day 120, which is the first set of questions. And the second one at day 180. So the day 120 questions will be the next big, I say, perspective on the EMA's view of the product. And on average, but there's a big delta around that number, an EMA review averages 13 to 14 months, including stoppages. Obviously, it could be much longer than that. So at this point in time, we're not speculating on when the approval would come, but pointing out to investors that the average EMA product review is a bit more than a year.

Okay. And then kind of on the commercial side of things, how do you think about commercialize in Europe? Obviously, very different than what you'll have to do, hopefully, in the United States at some point. But how do you tackle launching a drug in Europe like this?

What the -- what's important to be able to deploy resources to launch a product is a market big enough to make the investment necessary in the infrastructure to be a reasonable investment to pursue, versus on the other side, do we find a partner that already has that infrastructure and can essentially bring that to bear. We're willing to look at both. We will be studying both, doing it ourselves versus commercializing through a partner here. The -- what's important to keep in mind is, although the EU market -- no, it's not although. The EU market in epidemiology is essentially as big as the U.S. market. And although the pricing factor in the EU is, as a rule, less than what you see in the U.S., the fact is we have good quality of life data to bring to bear here so that we're confident we can expect a very fair price, making the ability for us to commercialize it ourselves to be very much an option here. That being said, discussion on a potential partnership is very much the -- on the picture. Is that helpful?

That is helpful. Yes. That is helpful. And I think kind of just looking at the EU, yes, there's a lot of -- there's multi factors. I guess what's the -- what helps you determine between partnering versus doing it yourself versus some sort of hybrid approach to commercializing?

Yes. I guess there's 2 factors, and this is sort of a CEO platitudes from central casting here.

Fair enough.

But no, it's been often said that partnering an asset is a bit like foster parenting, right? So somebody else will take your baby and take it to grow up and go to college. So you have to find a partner that has not only the expertise, but there's also a kinship when it comes to how we look at the market and the opportunities. So the right partner is really important. Once you find a right partner at that point in time, the economics also matter. The difference being, obviously, you get returns more quickly through commercialization. You don't have, obviously, to make the upfront investments and the positive cash flow comes later on. So there's an economic analysis of NPV and cost of capital that comes on the back end of that. But that analysis is meaningless unless you found the right partner.

Right. Okay. No, that's helpful. And along those lines on kind of the structure of the company, I know you initiated a global restructuring in June. Can you talk about the progress and some of the rationale behind that? And how the new DBV will help potentially set up for a commercial success in Europe and hopefully, getting the U.S. approval across the finish line and launching in the U.S.?

Yes. The restructuring took place in the back of the CRL, obviously being a set back in time, it made sense for us to be particularly prudent obviously with our shareholders' money to deploy it best as possible. The restructuring, as would be any well-run restructuring, the idea, obviously, is to hold on to core competencies that are critical for our success, which is the ability to obviously run our clinical studies, continue advancing our basic science, keeping good insight into the U.S. market and keeping good insight into the EU market, so that we've been attentive to. A lot of other things, though, that DBV chose to do internally that could be done just as well using sensitive third-party collaborations, and this is where we've done a lot of our focus when it comes to restructuring. Out of that will come the company that is just as capable, more agile and with a longer cash runway. As we have announced in our press release about a week ago, Evan, as you know, we expect that the fruit of the restructuring gives us operating runway until the second half of 2022, and 2 years in biotech terms is not a bad position to be in.

No. And just remind us how much cash you have on the books? And...

At the end of Q3, we're EUR 189 million.

And do you think that's enough to get you through, what was it, second half of 2022?

Second half of 2022, yes. On the back of the restructuring, we expect to be able to reduce our cash burn to make sure that everything that matters is done and without sacrificing the ability to keep on creating value.

And with that restructuring, have you done anything -- paused or kind of deprioritized Viaskin Milk or Viaskin Egg?

No Viaskin Milk and Viaskin Egg were already naturally paused by the CRL, given the fact it's the same manufacturing technology, eventually, there's a lot to be learned by getting the first product approved, and everything from regulatory pathway, clinical development, manufacturing strategy. So we had already paused these anyway. So that's not a change from what was beforehand on the back of the CRL.

Okay. No, that's helpful to know. And then taking a step back, we can talk about milestones and what's next for DBVT in a minute, but I want to explore a little bit about the peanut allergy market in the United States. As we were talking before the session started, it's changed because of the launch of Palforzia, and you mentioned to me that you think it's not a zero-sum game. Why don't you expand on then how you see the peanut allergy market evolving with Palforzia, with homegrown oral immunotherapy and potentially Viaskin Peanut maybe in the next couple of years?

Yes, sure. Well, let's start with epidemiology, Evan. There's about 1.1 million kids who suffer from peanut allergies between the ages of 1 and 11. So every age cohort is roughly 100,000 kids or think about the annual incidence is 100,000 new patients. And now we are targeting 4- to 11-year old patients as our indication with Viaskin Peanut. So that cohort is roughly about [ 850,000 ] kids. So that alone, the number is so large that any 2, 3, 4 companies that have a good product could carve out a very successful niche here. So that's on the basics. But there's something unique, and I think particularly attractive for patients and for their parents and their loved ones with this market, is the fact that the 2 products, oral immunotherapy, whether it's under a protocol, as Palforzia is, or done by clinicians in their own practice is a very different approach to treatment than would be Viaskin Peanut. And in our market research, we see that one approach, oral immunotherapy, is attractive to some families and Viaskin peanut, that concept is very attractive, usually, to very different families. And it has a lot to do with family lifestyle, with the other needs of other kids in the household. As you can appreciate, oral immunotherapy, requires a visit to the physician's office every 2 weeks for the up-dosing, the titration up in dosing. And although that's a 24-week protocol, as you know, it took in Palforzia clinical studies to about 8 months they get there. So that's every 2 weeks, go to the doctor's office until you get to the right dose. And the administration of the dose every night also requires no prudence, the child to be calm and not have elevated body temperature. Now that being said, that is a solution that's very attractive to some families who are willing and capable of putting that kind of attention behind it. What makes our product attractive is that this beautiful gesture, and it's emotionally very important for the parents every night, to just put the patch on the back of their child. It's a warm, loving, delicate gesture. It's very important, the psychology here, and it's a simple thing to do every day to say, I'm doing everything I can to protect my child without having to worry about going to the doctor every 2 weeks, without having to worry obviously about not giving the medication while the child is coming out of the shower, coming back from basketball practice. So that's why we see 2 products that are very distinct and answer to the needs of distinct segments in the marketplace. And I think it's wonderful for patients to have options.

So it's clearly not a zero-sum game. I guess when you -- I know ahead of the potential PDUFA before you got to CRL, you were doing some work looking at the market, specifically talking with payers. Can you just remind us kind of how payers view this market? Assuming that this is eventually approved in the United States, I'm unsure those conversations would pick up. But how have they identified unmet need? Talk about the profile of your product and where they see this potentially fitting in within the broader treatment paradigm for peanut allergy?

Yes. The receptiveness of payers to our product is very high. There was a recognition that is an unmet need, that it is a patient population, children, that is one where payers are particularly sensitive to the fact that this is a population that needs to be -- solutions to be brought to them. And that our product profile seemed to be very attractive to them. There's always the question of price, obviously, plays an important point here. But we do understand the health economic value of the product. I think it's one that's possible to communicate to payers and to arrive at a price point that is attractive for DBV, while at the same time, being very good value for payers. And in doing so -- as long as we do every other thing that needs to be done, to helping with co-pay and with distribution and all of that, but to arrive at essential value proposition that is rich and attractive for the payers, and thus, the parents, and at the same time, attractive for DBV shareholders.

Excellent. And just looking ahead, any kind of other thoughts on the DBV program? Anything that we've missed? I know we've talked about the CRL, the opportunity in Europe, kind of the differentiation. Anything else that's really salient you to get across to investors before we wrap it up and just talk through some milestones?

Yes. Sure. The one thing I would add is besides -- since I've quantified the 1- to 11-year old market, and we are launching 4- to 11-year old. But obviously, we have a study ongoing called EPITOPE, with the very same patch we have right now in the 1- to 3-year-old population, which is also an important one. It's particularly important when it comes to the psychology of the condition, given the fact it's often the age of diagnosis. Most kids have their first scary contact with peanuts, if they are allergic, between the age of 1 and 4. So the 1- to 3-year old population is not only important because it's a cohort of 300,000 kids when it comes to epidemiology. It's particularly important because it is the time in the child's early childhood where the parents may want to take action at that point in time. So that's something, obviously, that the study has been rolling very well. Obviously, slowed down a bit, like all clinical programs have because of COVID, but it's back on track now, and we're looking forward to reporting those results once we have them.

So just to wrap it up, just can you go through some key milestones that we should look out for over the next, say, 1 year to 18 months? Actually a little far off, but just things that on the radar -- on our radar that we should really be focused on?

Yes. There's 3 important things on the radar in the next 6 months, if I may say so, and that's 6 months with all 3 of them. Obviously, the outcome of our discussions with the agency post Type A meeting will give indications to what is the pathway for us to refile the product. So the communication will take place once we get the minutes back from the FDA. So that should take place by certainly early 2021, if not late in the fourth quarter. Two, obviously, is the day 120 questions from EMA, which will validate, we hope, that we're on the right track here. And the last part will be with our Q -- our year-end financial results, more detail on the restructuring, so that investors' ability to really understand the change we've made and how that projects the cash burn will be fully informed once the [indiscernible] has been ratified by the French Labor Ministry.

Excellent. And with that, I don't have anything else. Any final thoughts before we end the session?

No, no final thoughts, except to thank you again for your time today.

No. Of course.

And I second the motion of doing this live as soon as possible.

I know. Well, fortunately, we have good news this week with the vaccine, so maybe that will continue. And hopefully, we can share a beer or peanut M&Ms in the future?

Maybe peanut M&Ms first, and the beer afterwards. It's not a very good mix. I like the presence of the idea though.

Fair enough. Fair enough.Well, thank you so much for your time, Daniel. I appreciate it. Thank you for joining us today. Bye now.

Thanks, everyone. Thank, Evan. Bye-bye.