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

Okay. Good morning, everyone. My name is Rajan Sharma. I'm the European biotech analyst here at Goldman Sachs. Pleased to have with us this morning, DBV and CEO, Daniel Tassé. Daniel, thank you for joining us and making the trip over.

Thanks for having me.

I mean, could you just kind of make a few introductory high-level comments and then we can dive into the Q&A.

Happy to. So DBV Technologies is a company that is specialized in immunology, specifically food allergy in children. The company was found about 15 years ago on observation made by our scientific founders that the human skin is actually very powerful and logical organ, particularly to help desensitize against allergens. And their focus was on food allergy, given the fact that there were 2 academic pediatric gastroenterologists, so they saw the consequence put out in the practice a lot. So that's the genesis of the company. Our product is a patch worn on the child's back, that delivers measured quantities of antigen, which trigger a desensitization.

Okay. Perfect. And could you maybe just kind of talk us through the development for your patch for Viaskin Peanut to date? [indiscernible] there's been a bit of a mixed development history. So could you just kind of walk us through that, what the challenges have been and where you feel you are today?

Yes. We refer the very rich development history. I don't know what you mean. Currently, we are developing 2 slightly different patches, the original patch to support a BLA in children aged 1 to 3. So this is Viaskin Peanut in toddlers. And in parallel, developing a modified patch, is slightly larger for children 4 to 7, also for children with peanut allergy. The reason we have 2 patches is the original submission that the company made back in 2019 played out as being a complete response letter by the FDA, where the agency asked us to redesign the patch on their belief, and it was a reasonable belief on their part that a patch would adhere to the skin better, might give better efficacy. So we chose to redesign the patch and in doing so, have the opportunity to split the BLA in 2. So we have BLA in toddlers with the original patch and in older children with the modified patch. One simply requires supplemental safety data for toddlers. The efficacy has been demonstrated quite remarkably. The agency wants supplemental safety data, which we expected. That study will be starting later on this year. And in children 4 to 7, we're running a new efficacy trial with the modified patch, and that trial has been enrolling patients since February, we expect the data readout in the first half of 2025.

Okay. And I guess practically in terms of the 2 patches that you have, could you just kind of run us through what the differences and similarities are there?

Yes. The engine of the patch is exactly the same. At the heart is a foam ring about the size of a 25 U.S. quarter, where the 250 micrograms of peanut protein, so the allergen being delivered percutaneous tissues is sprayed. So in both the modified patch and the original patch, it's exactly the same. The modified patch is larger and is round as opposed to square. And the reason for that is that the corners of the patch were sometimes responsible for the patch lifting. We want children to move and play, that was an issue. And having also a load or overlay about 58% larger made for a patch that adheres better. So the basic difference between the 2 patches is not the engine, the engine is exactly the same. But since the suspension around it, that is smoother or larger in the older children.

Okay. And then I guess if you think about the development to date, I think kind of adhesion has been one of the issues that the agency has kind of flagged. Could you maybe just, again, kind of run through the history there. And then more importantly, I guess, where you are now and how confident you are in kind of solving for that?

Thank you. It's an important question. And you framed it the right way. Adhesion was the issue as defined by the agency in large part because the company did not, this is 5 years ago, do a very good job of explaining that it's really not about patch adhesions, but wear time. since we're trying to deliver an antigen through cutaneous tissues and that's the repeat exposure, the patient's biology to the allergen that is responsible for desensitization, wear time, how long is the patch on to deliver the antigen was the key question here, which is not the way the company had framed the pivotal trial in children 4 to 11, bringing the agency to ask us to redesign the patch. Quite simply, we've had very good discussions with the agency over the last few years to redefine adhesion as really measuring and optimizing wear time. you have seen we've had the data published at the Eastern Allergy Congress last month, showing that our patients average 22.2 hours of wear time on active, 23.7 on placebo and 90% of patients had a wear time that is more than sufficient to be placebo on top of the confidence interval and clinical response here. So where we are now with the agency is to make sure the instructions for use are clear, wear the patch for a whole day a minimum of 20 hours. But that is not a primary endpoint or a co-primary endpoint or an approval endpoint. It's something we're instructing patients to do to optimize clinical response. Our data shows these patients will respond better, but even patients who fall short of 20 hours are responders, which is exactly what we want, a richer data set to inform label and discussion with the agency. Does that answer your question?

Yes. And I guess are you now confident that you have at least a plan in place for the agency because I guess it's more of an agency discussion as opposed to a trial...

Correct. And the answer is yes. The discussions with the agency have been very fruitful, very productive since last fall. There's an understanding now that it is about understanding, optimizing wear time. And as I said, the agency agrees that this should be an element of the overall risk-benefit assessment, but adhesion per se is not an approval criteria. The parallel I would draw is we know patients using once a day oral solid for whatever the [ intention ] might be, are better responders to take the drug every day. Some patients only take it 5 days a week and the fact that they don't respond quite as well is something that measures for the overall treatment benefit but there's obviously no debate whether or not the product should be labeled for patients who don't take the drug on Wednesdays and Fridays quite simply. So that's where we are with the agency, very much in the right place. So that adhesion will contribute to the understanding products performance and should inform the label, but it's not an approval endpoint.

Okay. And in terms of VITESSE, which is a trial in the 4 to 7 year old, so as you mentioned kind of that was started in September, there was a clinical hold. It's been lifted and you're through that. But could you just remind us in terms of the request from the agency and what you have to do to kind of get back up and running there?

Correct. There were 4 comments by the agency, 2 what we call mechanical. One was capturing adverse event of special interest, definitely we were planning on doing it. We're going to do that anyway, so it's not an issue. The other one is the agency wants 600 patients on Active for the safety database. So we've agreed to do a supplemental safety study. We're not making a pivotal trial larger. We're just adding a safety study to give them 600 patients on Active, that was easy enough to do. And the 2 other topics is exactly that, is how do we assess adhesion and what is minimum wear time. Through that discussion, we've agreed to the rules on adhesion, and we've agreed to make the minimum wear time 20 hours. The agency lifted the hold. So obviously, they are satisfied with our answer. All the analysis we've done, detailed analysis we've done from existing data makes us very confident that what is embedded in those adhesion, essentially performance criteria is something that we will achieve.

Okay. And then in terms of that population that VITESSE is looking at the 4 to 7-year-old, so what do you need to do there now? So the trial is running? Where are you in terms of timing there?

Yes. The trial is enrolling nicely as we would expect would be the case. We have shared with the markets we expect last patient first visit to be in the first half of 2024. So essentially 12 months for enrollment. As you know, these are 12-month study. So patient on treatment for 12 months. The way efficacy is established in food allergy, as you know, Rajan, there's a food challenge done at day 0, established at what dose of peanut allergen does the child express strong symptoms of systemic reaction. And then 12 months later, whether that dose has gone up essentially is a threshold for efficacy. So last patient first visit the first half of '24, last patient last visit top line results in the first half of [ 2020 ].

Okay. And then there's a safety trial that needs to be done in that population?

In that population, also, the same strong be about 300 patients, randomized 3:1 active to placebo. That trial is a 6-month trial. So the enrollment would be quick because there's no food challenge. So parents tend to prefer safety trial to efficacy trial in this space. It's a 6-month assessment or a 12-month assessment. So our plan is to start the safety trial once we pass last patient for the visit on the efficacy trial, let to compete with ourselves for patients, and we should easily be able to recruit that trial and dovetail it nicely into a timely BLA submission at the same time.

Okay. So just to recap on timing there. So BLA submission, are you expecting that?

We have not given guidance on that yet. The reasonable math would be that the top line results in the first half of 2025. We need a few months to put the BLA together. So you can do the math here. Our plan is to be much more specific with timing of BLAs as the trial progresses and our ability to validate that those assumptions are correct [indiscernible].

Okay. So that's the 4 to 7 population. And then in the younger population, could you just kind of lay out where we are there?

We do. And this has been the big news, obviously, and that becomes a significant upside to the business case, investment thesis for the company. Since the FDA was satisfied our efficacy trial in children 1 to 3 answered all the efficacy question. We just need to do a supplemental safety adhesion trial. That protocol has been sent to the agency. We should hear back from them soon. We don't want to start the trial until the FDA signed off on it. So we're perfectly aligned here. We expect the FDA was going to be okay with a 6-month trial, we've been okay with 6 months trials in the past, but that has not been confirmed. Again, enrollment should be pretty quick, 6-month trial we expect. So here, we're in a position where it would be reasonable to add it all up and have a BLA submission in toddlers that could come actually before we even have top line results in 4- to 7-year-olds. That's pretty significant because it could accelerate launch significantly, one. 2, it's a hugely important market. The age of diagnosis of food allergy and peanut allergy is between the age of 1 and 4. And we understand why that is because it's the age of where we want our kids explore new food as part of their growth and development. And thus, the observation that they may suffer from the food allergy manifests itself typically at ages 1 and 4. It's also an age where the child obviously is in no position to ask questions of the babysitter or to advocate for themselves here. So the sense of vulnerability, the fact that the diagnosis is very recent, and it's a toddler, still in diapers, still rolling around on the floor is very much why we think this is a hugely important indication for us because in our market research, parents' willingness to initiate treatment in that population is very high. Add to that the fact that [indiscernible] data showing that early intervention in allergies is much more likely to have a significant benefit and maybe a, well, I won't go as far as a permanent benefit as a reasonable hypothesis has not been shown, but the biology is particularly intriguing that age.

Okay. And then maybe, sorry, just to jump back to VITESSE in the 4 to 7 and the safety trial there. So the protocol hasn't been agreed with the FDA for that?

The 6 months of observation has been agreed. The protocol has not been reviewed by the agency yet, but we're doing that in parallel to the study with the 1- to 3-year-old. Essentially, it's the same protocol except for the inclusion criteria for age. [indiscernible] been agreed to.

Yes. Okay. And then maybe as we start to think about kind of the commercial opportunity here. And I guess, firstly, you obviously have 2 patches in theory and separate indications, 2 separate labels. So how do you think about those products coexisting...

It's a very important question, Rajan. I think there's 2 dimensions to that, that we're comfortable with. One is the indication is 1 to 3 and 4 to 7 at the age of initiation of treatment. So when a child on their fourth birthday, does not need to switch to the new patch, they can continue on the old patch if they choose to do so. Same thing children, I mean, 2/3 of the kids in a long-term extension are past the age of 7 simply because of [indiscernible] when treatment was initiated here. So the ability to have both of them coexist as a labeling commercial issue is obviously not problematic. When it comes to manufacturing, also, the 2 patches essentially come up the same production line with the last part of the cutback with patches cut assembled and packaged is what the changes are, making it easy for us to manage yield and manage productivity and cost of goods and easily switch from one to the other as a functional demand year. So we don't expect having 2 patches will be a factor on product availability or cost of goods.

Okay. And in terms of pricing, have you thought about that?

We have. We're in no position to announce pricing at this point in time. As you know, you find the label matters a lot because your claim structure is what supports the ability to extract the right price of the marketplace here. As you know, the one approved product [indiscernible], the [indiscernible] therapy product by Nestle launched and is currently priced at have been more than $1,000 a month in the U.S. That's a price that we think makes a lot of sense whether or not we choose to have a discount to that, a premium to that. None of that has been decided here. But the ballpark price has been established by PALFORZIA is a helpful reference point, particularly since Aimmune and Nestle did a nice job of getting good formulary coverage, reasonable co-pays and all of that. So the reimbursement of that product is one that's been quite strong and thus, a helpful reference point to us as we explore pricing, but no decision has been made.

Okay. Okay. Maybe we'll talk a little bit more about kind of the competitor. But in terms of the commercial opportunity, as you see it, how do you kind of think about that? Could you help us just understand patient numbers and all those things.

Yes. It's an important market. There are, in the U.S., 290,000 children diagnosed with peanut allergy in the age of 1 and 3, who will not outgrow it. About 20% of children diagnosed with peanut allergies will outgrow it by the age of by the time they go to school. But 80% of them will live with it for the rest of their lives here. So it's helpful to us to look at a fact of the epidemiology market of children diagnosed unlikely to outgrow it. That's 290,000 kids in the U.S. in the age of 1 and 3. It's 280,000 kids from the age of 4 and 7. We will have thumb about 100,000 children in the U.S. per year per script on when year of age is the epidemiology here. So the market is 670,000 kids. It's an important market. About 70% of them are seen by allergists, and the allergists are the treating physicians. Pediatricians don't treat these patients, don't have an interest in treating them, will refer to the allergist. And in all of our market research, which juxtaposes quite nicely with what we know about clinical response for all forms of immunotherapy, younger children tend to respond better. It's really the case with, it's continuous immunotherapy, what we do here. So the ability to penetrate a significant part of the epidemiology into a significant business is we think rich. The unmet need is high. It's the age where parents are most concerned. It's the age which children are most likely to respond. It's the age where payers are most likely wish to pay for it on top of it. and the prescribing opportunity is highly concentrated since the majority of these kids are seen by about 4,000 [indiscernible] physicians in the U.S. here. So it's an interesting market dynamic of large [ epidemiology ], no incumbent to be displaced and high unmet need, good KOL support. So as a microcosm of commercialization, we think it's a very attractive market.

Okay. And just to go back, you mentioned kind of the payer piece. And what is the value proposition here?

Another very important question, Rajan. I'll point to the work that was done by Dr. Ruchi Gupta at Northwestern, Dr. Gupta is an allergist, pediatrician and health economist who has looked at what is the burden of food allergy in children in the U.S. All food allergies. We think peanut behaves the same as you see egg or sesame or milk, about $4.6 billion, $4.8 billion a year in the U.S. are the direct costs associated with food allergy. That means the cost of medical visits, emergency room visits, ICU visits, EpiPens, EpiPens that expire need to be replaced. That's about $5 billion. She also estimated about $20 billion is the indirect costs, the psychosocial burden and impact of food allergy, which plays out as children being excluded from activities at school, the fact that they have to sit at different table, that very often they cannot go to summer camp because they're foot allergic. And a big part of it also is often the impact on the family where 1 or 2 parents often sacrifices their career part of their career to take care of their children. So that adds up to $20 billion. So there's $25 billion of value to be addressed by treating food allergy in the U.S. with obviously peanut being a significant segment of that. as we think about value creation and thus, our ability to get a fair price for both ourselves and obviously for the healthcare system, we are looking at tapping into the avoidance of direct cost, a child wearing our patch is much less likely to wind up having to take a trip to the hospital. This is with a food challenge [indiscernible] here. So there's avoidance of direct cost, obviously. But just as important, would argue more importantly is the reduction in family stress that every day is the day you fear, your child will eat something with peanut with serious consequence this year. And that's what we're trying to provide in value and all of the health economic work that we've done very much validates the fact that putting the patch on every day as an element of extra protection for the child contributes richly to reducing the sense of fear, and that's an element we'll be targeting also as we look at pricing the product.

Okay. And to the extent that you're right now given that there's kind of no label, for example, have you been able to engage with payers and kind of get a sense of how they'd be thinking about.

Yes, we have. We've done that work directly by engaging with them as part of our pre-commercialization efforts. And also we've had the good fortune of observing what has been done with the one approved product in the marketplace right now. As I said, they've done a good job of getting healthcare coverage here, which reinforces what we believe when we were originally looking at launching the product, that being a pediatric population, highly vulnerable and the opportunity also to address this, there's a family-wide benefit to protecting the child quite simply is something that payers recognize and seem to be weighted.

Okay. And I mean, touched upon the competitor product that's in the market right now and I guess hasn't necessarily been kind of a rapid uptake there. So do you perhaps kind of give your take on the commercial opportunity or what kind of the way that, that product performs and how you think you're differentiated?

Yes. First of all, we make it very clear. All of our interactions with patient advocates, parents, opinion leaders, they want treatment options. It's the same as we've seen in the other therapeutic area in medicine. Patients want options. So the lack of success of PALFORZIA, the OIT product is not good news. The commercial success of Viaskin is not a function of the success or mis-success of our competitor. There's 670,000 patients that treat out there. So there's obviously a significant opportunity for anybody in the marketplace here. What we have seen is that the product, OIT or [indiscernible] OIT by Aimmune, now Nestle was being offered quasi-universally to parents when their child was diagnosed with peanut allergy. So the issue was not that doctors did not know about it or not willing to prescribe it, they were. That's on the front end. On the back end, as I said, they have good market access, good reimbursement. So the issue was not that it was prescribed and not paid for, it was paid for. The challenge with oral immunotherapy and you will hear that from any physician who does OIT at scale for whatever allergen, whether it's peanut, milk or tree nuts is it's very burdensome to the family. You have to give the dose of the allergen at the same time every day. The up-dosing is done with a doctor visit at the last 2 or 3 hours, if you miss therapy for a few days, you have to go back to the previous dose that's adopted the visit also. There are anywhere between 15 to 20 visits over 6 to 9 months to get to your maintenance dose and the odds of anaphylaxis or systemic allergic reaction on treatment is significant as we give every day a significant quantity of allergen to a child that's allergic to it. So that contributes to a burden that is perceived by many family to say the clinical results are important. This could be beneficial to my child, but the ability to get an outcome is a function of compliance with treatment and that's where we think we have a significant advantage over what's in the marketplace right now. We have a victory, we have superb safety, but we have a product which is possible to be compliant and thus get an outcome out of it. efficacy safety decoupled from compliance will not give you an outcome, and this is where we like our competitive profile. Okay. Does that make sense?

That makes sense. Okay. And then there's obviously a few of the kind of assets that are a little bit earlier in development kind of potentially looking at the peanut allergy space. So could you maybe just kind of talk through what you're seeing there and how again, you think you're positioned?

Yes, happy to. Viaskin is the name of our platform, the ability to expose patients who suffer from food allergy to the allergen or mix of allergens that are responsible for their pathology. So the core of what we do here. Peanut is the most common food allergy. Milk is the second or the third most common but perceived to be the riskiest the number of patients who wind up in the ICU or fatalities associated with milk allergy is higher than it is with peanuts. And if you were chatting with Pharis Mohideen, my Chief Medical Officer, he will tell you, the first question we get from allergist is, okay, how things going with peanut. And the second question is always how are you progressing with milk? It remains a very, very high unmet need. So that program is going to be entering Phase 2b sometime in 2025. We've already exchanged protocols with the agency. We know what we want to do for the Phase 2 program here. So that's going to be our second program. And behind that, we'll probably be cash with our third product. So we had as a core approach here to the regulatory clinical environment is to learn everything through peanut of what regulators in the U.S. and in Europe would want as to manage the intersection of clinical development, regulatory pathway in a way that was optimal, minimum wear time and adhesion make a perfect example of something we want to understand fully, now that we understand that, now that we have alignment with the agency to take those lessons to the milk program becomes important. So right now, we'll be putting a lot of resources to work on milk and after that cashew starting this year.

Okay. And I guess there's some other products in development in peanut allergy from kind of competitors. And is there anything that you're learning from a regulatory perspective there?

Another important question. There's a lot we hope to learn. And again, this brings us back to a question asked for on the comment I made, patients, and there's a lot of them need alternatives. And although there are 670,000 kids between ages of 1 and 7 with peanut allergies in the U.S., sometimes just peanut allergy, some also have eczema, or atopic dermatitis or severe asthma. So the [indiscernible] for each of these children is slightly different. So we need alternatives here. There's some interesting work being done on 2 fronts to look at treatment of children with multiple allergens and there's 2 approaches out there, OIT, broader OIT, the other one is to look at biological antibody. We're looking at the interaction between the sponsors and the FDA on how to develop a multi-allergen approach to treatment because [indiscernible] to put more than 1 allergen on our patch is not the complexity here. It's the regulatory and clinical pathway to satisfy the agencies that is key here. So there's interesting role being done on that front. It's still very early on, but I wish them again, best of luck because their success will provide us a clinical regulatory pathway that could allow us to bring more alternatives to those patients very much...

Okay. Okay. Going to enter into the last 5 minutes, but I think you should probably just touch on cash and liquidity and where you are and how you think about the run rate that you have?

Yes. Thank you. We have $193 million at the end of the last quarter. As our treasury, we had a successful financing last June, as you know. That money sufficiently take us significant to 2025 here. And with that, our ability to progress a lot of the programs I discussed with you. What has changed and it's a good change is with the ability to accelerate launch in 1 to 3 year old with the FDA signing off on the efficacy data from [indiscernible] means that we now have to look at pre-commercialization efforts. And as we all know, this is an area where you want to make sure you do things right. And if anything, more aggressively than needed because obviously, that keeps on giving, if you do that the right way here. So we're in a good cash position, cash into 2025. But as we look at accelerating the pre-commercialization efforts of the product, we may look at kind of back to the capital markets later on.

Okay. Okay. And just to kind of be clear on the cash that you have right now. So do you think that's sufficient to complete VITESSE, the safety trial in that 4 to 7 and then the safety trial in the younger population as well?

We have enough cash to the whole program in 4 to 7 efficacy and safety trial. The safety trial and the commercialization in 1- to 3-year old is the new variable that falls under pleasant surprises. And the reason why, again, we're in no rush to raise money. We've got all the money we need to progress all of this, but is inviting obviously us thinking about financing the company. That includes, obviously, other ways of using financing besides obviously diluted financing. And there we have an asset that's important for the European markets also, and we could imagine that that's obviously have...

Okay. And on that topic, commercialization. So you're commercializing a loan, you've taken the decision to do that in the U.S. Can you just talk through what the commercial infrastructure looks like, how you intend to bring this product to market?

Yes, happy to. As I said, the great measure of patients right now is treated by allergists, which are 4,500 in the U.S. And so that audience of potential prescribers can be reached with anywhere from 60 to 80 sales reps plus an account team behind it. So the commercial team does not need to be very large to effectively target those physicians. A big part of the marketing mix, obviously, or the launch mix would be social media in forms of DTC given the fact that parents will be, obviously, at the end of the day, the real consumers deciding for their child. That's a big part of the mix here. But what we see, as I said, is a very attractive market of very large epidemiology treatment being concentrated at a subset of patients the patients or physicians that we know very well and no incumbent that needs to be displaced here. So it makes for a very attractive market in the U.S. We plan it to do it ourselves with the commercial infrastructure that would be one that I think you think of no specialty medicine as opposed to sort of a general sales force.

Okay. And just maybe to push a little bit more on that, what could a specialty kind of sales force, if we think about numbers of reps...

60 to 80...60 to 80 sales rep, commercial infrastructure of 120, 150 people by the time we put in no market research and territory management, all of that. But again, it's a significant investment for a company of our size, and we would be doubling an employee, and that's why we have to look at being smart with raising capital in a timely way, but something that we are quite confident we can do very well. by ourselves given the fact that it's a market we know very well. We know prescribing physicians very well. We've been talking to them for a long, long time here. So we like the commercial opportunity, and we're convinced that us doing ourselves in the U.S. is the right approach.

Okay. And ex U.S., I think you've briefly touched on it. How do you think about Europe, for example?

Yes. The market construct, what I mean here, who treats these patients in different countries in Europe varies greatly. Treating physicians in Germany are not the ones we see in the U.K., the ones that we've seen in Belgium. So it needs a much more of a bespoke commercial strategy in each of these markets. So here, a partnership may make better sense, that decision is not made yet, but we will look seriously at a partnership model and potentially in Europe to find a partner that already understand the individual sort of nature of the market construct.

Okay. And then I guess, looking a bit further on from Europe, Japan, APAC, China, how are you thinking about that? Is it...

They're not terribly important markets for peanut allergy. This is not something that's endemic there. Milk is a different story altogether though, quite simply, as would be cashew and that would be egg and [indiscernible] here. So the commercial attractiveness of Asian markets for peanut is modest. But that being said, we are strongly willing to engage discussions because the rest of our pipeline is much more directed to indications that could be attractive in geographies.

Okay. Perfect. With that, I think we're right on time.

Spot on.

So Daniel, thank you very much.

Rajan, thanks so much. Thanks, everyone, for attending.