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

Good morning, everyone. So before we begin, we are required to make certain disclosures in public appearances about Goldman Sachs relationships with companies that we discuss. The disclosures relate to the investment banking relationships, compensation received or 1% or more ownership. We are prepared to read aloud disclosures for any issuer upon request. However, these disclosures are available in our most recent reports available to U.S. clients and our firm portals. With that, thank you, everyone, for joining. Good morning. My name is Rajan Sharma. I'm part of the healthcare research team here at Goldman Sachs in Europe. I'm pleased to have Daniel Tassé with us this morning, CEO of DBV, Daniel, thank you for joining us.

Good morning, Rajan. Thanks for having me.

I guess maybe to start for those perhaps less familiar with the company, could you maybe just give us a high-level introduction of DBV technologies and the areas that you're working in?

Yes, happy to do so. So DBV is a immunology company, focusing essentially on food allergies in children. The company was founded by 2 pediatric gastroenterologists who figured out 15 or 20 years ago, that the human skin actually is a pretty powerful immune organ, can be used to tolerize against allergens. And with that came a platform known as epicutaneous immunotherapy. Our form of it, which is the only one that's being developed is called Viaskin. It's a patch worn on the back of the child scapula, the scapula is important because this is where the highest concentration of the Langerhans cells we're trying to recruit, to essentially induce this tolerization against the allergen. The patch has a minuscule, microgram amounts of peanut protein, against their packing and the patches applied it creates a condensation chamber, where the humidity of the skin is sufficient to [ solubilize ] the protein, have it drop onto the epidermis, where this recruitment Langerhans cells then mobilizes Tregs, and with that essentially the desensitization to the allergen wherever the exposure may take place. This desensitization takes place over time. And as we'll talk about later on, have shown pretty impressive clinical results.

Yes. And I guess just on that piece, and I hope you don't mind me saying, it's been kind of a bit of a mixed development history that you've had with Viaskin Peanut. Could you just maybe walk us through the history and where you are today?

Quite simply. And it's a very fair way to put it. We're currently pursuing 2 BLAs in parallel: 1 in children, 1 to 3 and toddlers; 1 in children, 4 to 7, the checkered development history is the result of our original application in children 4 to 11, received a complete response letter from the FDA. This was in August of 2020. Some background is important here. Our product is reviewed by the vaccine division at the FDA. Although we're not a vaccine, there is in the model of intervention that we're trying to induce a measured immune response, as to protect the child against something that might happen in the future, here being accidental consumption of peanuts since our lead product is Peanut. And in 2020, division was obviously quite busy and has been for the bulk of last 4 years with the COVID pandemic. So anyways, we got a CRL [ mostly in ] 2020. The company had not done a good job, to be honest, of characterizing the patch-driven experience, how important was the length of wear to clinical response. So that was our bad, that was explained to the agency, the previous management team, I need to mention that. And when that came, CRL, the agency asked us to redesign the patch, so that it would adhere better to the skin, which we've done. So that has contributed to that checkered history. It was also checkered in a touch slower than we all hoped, because until last month, when the vaccine division finally declared that they had caught up to the COVID, essentially backlog, the review of our dose has always been rather slow.

That's helpful. Yes. And then you talked about kind of the 2 settings, that you have the 1 to 3 year olds and the 4 to 7 years. Could you maybe just talk about how the strategy defined in each of those?

Absolutely. So first of all, for us and for investors, there's an element sort of hedging by having 2 separate BLAs as opposed to BLA in a supplemental BLA. We made the acceleration or slippage of one or the other to not be essentially a factor here in value creation. So the 2 are independent track, pretty much tracking nose to nose when it comes to filability would probably program in 1 to 3 being slightly ahead here. So Viaskin Peanut in toddlers 1 to 3 is with one patch, the original patch. And in 4 to 7 is with the modified patch the agency asked us to pursue. And when it comes to the clinical program, efficacy in 1 to 3 has been shown in a study called EPITOPE that unblinded about 2 years ago, was published last May in the New England Journal of Medicine. Let's be clear, this was a big deal, this study, and showed significant clinical response, and we'll discuss again later on, if you wish, continued improvement through the second year. So efficacy has been shown. The FDA wants us to do a supplemental safety study, not because we're chasing a safety signal. There's been really no safety signals seen in our program ever. The agency wishes to have 600 patients on active for [ pre our ] guideline, which we're fine to do. And thus, the supplemental safety study will be called COMFORT Toddlers, is currently being discussed with the agency to be finalized, initiated. So the completion of that study is what is limiting to us deposing a dossier yet, in 1 to 3. In 4 to 7, the efficacy trial is ongoing, recruiting nicely. We should have last patient first visit next quarter in Q3 of this year, it's a 12-month study. We expect to have top line results in Q3 of 2025, the agency also wants 600 patients on active, so there'd be a supplemental safety study called COMFORT Children here. And that study will start a bit later on this year. Since it's a shorter study, always easier to recruit, we can drive both of them in parallel as to land with data readout on both of them are on the same time. Is that helpful? A lot of information, my apologies for that.

No, that's helpful. And then just on the safety piece that's running in parallel with VITESSE. Where are you in terms of kind of timing on that? Because previously, you didn't want VITESSE to compete with the safety trial and vice versa, right?

Correct. Yes. So our plan is to start that COMFORT Children study sometime in the second half of this year. Okay, since VITESSE is a 12-month study, the safety study, the 6-month study, we can start the safety study later, but 2 studies coming at the same time, recruitment for safety studies is always easier in food allergy. For those of you that are familiar with food allergy, the way efficacy is assessed is, through a protocol that can be very demanding for parents and for families. The children giving escalating doses every 20 to 30 minutes of peanut protein, until they're sick. And that becomes essentially what is known as eliciting dose. So that's a very stressful for families. The kids don't like it, obviously, and they do that all over again after 12 months to see the number of step changes to assess efficacy. Safety studies don't have a food challenge. That's a lot easier to recruit. So our plan is to start COMFORT Children later on this year, and we expect both data sets to read out in the second half of 2025, anchoring a BLA.

Okay. And COMFORT Children, you're fully aligned with the agency on that.

We're still in discussion with the agency on COMFORT Children. But since we're in discussion with COMFORT Toddlers, a lot of the key elements we want to finalize with agency will play out through a discussion also. So we see COMFORT Children as not being -- agreement with the agency in COMFORT Children is not rate limiting our ability to start that trial.

Yes. Okay. I guess just on those 2 points because your COMFORT is obviously a key focus in terms of having the alignment there and getting that running. What are your latest -- I mean, where is the discussion with the agency? Are there specific pieces of the trial or the protocol that you need to agree on?

I want to make -- so the -- the short answer is no. But the -- these studies are extraordinarily complex to run. As you can imagine, our product is a drug device combination that has absolutely no analog at the agency. And thus, we want to make sure that we're absolutely aligned with the agency on every element that is essential for their review. To put it differently, we want to make sure that once we start any of the 2 stress COMFORT studies. There's only clinical risk to be assessed, i.e., what are the odds, we're going to fail the safety study with Viaskin, which is very slim. The product has shown a rather impressive safety profile to date. But we don't want any review issues. For those that are familiar with DBV, when we initiated VITESSE in the fall of 2022. We thought we had [ fully aligned ] with the agency. We went with a partial clinical hold because of some misunderstandings. I want to make sure this does not happen again. So we're in active discussion with the agency on COMFORT Toddler. All the key elements have been agreed, size, placebo to active ratio, inclusion criteria, all of that has been agreed, but the fine details, I want to make sure are completely buttoned down and completely agree with the agency before we start the trial. So given that complex regulatory history you've defined here, we're leaving the market, patients and obviously, investors with simply assessing what is the clinical risk of us not succeeding in a safety trial, which I think is a much fair bet than going into this with any element that has not been buttoned down. [indiscernible].

Okay. And I guess -- that makes sense. And I guess COMFORT Toddlers, COMFORT Children. How confident are you that once you're aligned on COMFORT Toddlers and that is also kind of a level of confidence on being aligned for COMFORT Children?

Very high because the minutia of the protocol, which is where we want to make sure there's no misunderstanding, are essentially the same between the two studies. And the agency has communicated to us that how we approach one study is the way they want us to approach the other one here. So the discussion on COMFORT Toddlers are very much determining what would be the key elements, the likely key elements in COMFORT Children.

Okay. And then just on the agency itself and you kind of talked earlier about how there are some constraints from a resource perspective or a change of focus during 2020 as we'd expect. To what extent has that been resolved now? Or do you feel -- because I mean you could make the argument that the length of time it's taken to align on the study design is quite potentially, of course, for concern. So what would be helpful to understand is how much of that is actually in a misalignment or getting the trial aligned versus resourcing at the agency.

The bulk of it is resourcing at the agency. Dr. David Kansler, who is the new Head Director of the Office of Vaccine Research and review, our regulator, publicly on April 30, said that it's official that division has finally caught up to the backlog with sponsors. They should come back to have actually meetings, as you know, with OVR, the bulk of the exchanges between sponsors, DBV and other sponsors and that division has been through what we call response only. And as you know, that's not as efficient as scientists to scientists, biostatistician to biostatisticians sitting together and working things through, but that was only announced a month ago that, that backlog was behind us. We've seen parallel and engagement when comes our products around toddlers that is at a pace that finally satisfies me.

Okay. And I know it's kind of a difficult question for you to answer, but what are your expectations in terms of timing here? What's the base case that you're working to internally?

Thank you. In children, it's better determined through what's rate limiting here is the study VITESSE. So we expect to have all data we need to support a BLA in the second half of 2025, assembling a BLA. It takes a couple of 3 months. It will be a 10-month review. So you can guide to essentially with this leads us. The path for 1 to 3 essentially parallels that, we had expected to start the study in the first quarter of this year. It should start obviously, we believe, in the next few months, although until we've come to agreement, I don't wish to guide to that. It's a 6-month study, not a 12-month study. Recruitment, we expect will take 8 or 9 months. So leading us again to roughly the same time frame as we have in the children BLA, when it comes to filing. So that's the way we sort of -- guide is too strong a word, but indicate what is essentially the time frame here. Is that helpful in these two questions?

That makes sense. And then I guess just in terms of thinking about the efficacy piece, I mean, we're focused on the safety today. What gives you the confidence there that this is -- and we'll talk about kind of competitive landscape a bit later, but just -- this has been a market that tried to address in the past. And what gives you confidence that Viaskin Peanut is the product to do that from an efficacy perspective?

Well, data quite simply. In toddlers, the study that was published in the New England Journal of Medicine, the study down as EPITOPE. We've shown 67% efficacy in the primary endpoint at 1 year of treatment. Placebo is 33.5%. And besides having minuscule p-value, what matters to this division is a delta, to lower bound of the confidence interval that LEAP has to be 15%. We hit 22.4%. So the study was highly significant statistically. So efficacy that was very strong compares to the top line efficacy rates we've seen with Palforzia. We've been seeing with Xolair, although Xolair, the 67% was only for Peanuts only, not for all three averages, and that was only 47%. So it's very much in the ballpark of what the market has seen as the important numbers. I would argue even more importantly we have had no discontinuation because of treatment-emergent adverse events in either year 1 or year 2, the open-label extension. And this is something that's important to remember here, an outcome in treating food allergy requires treatment compliance. And you're not going to achieve treatment compliance with their adverse events or the protocol for using product daily is burdensome to their family or product is not. We had no limitations to daily living in any of our studies. So put the patch on and go be a kid and play. So we believe that this is a particularly attractive treatment option. The efficacy is where the head space of the market is. The adverse event profile is clearly superior and that should lead to the outcomes that parents want to see, which is a treatment that's easy to use day after day after day after day. I will also add that EAACI, the European Academy of Allergy and Clinical Immunology, I was last week in Europe. And for those who might have seen, but EAACI has updated their guidelines for the treatments of peanut allergy. And those guidelines state that EPIT is suggested to be used with a high level of evidence, commensurate with levels [indiscernible] for OIT, which has had a number of studies, once available. So we're actually very pleased to see the progress, not quite approved yet in Europe is on the EAACI guidelines with a level of evidence that is comparable to what we have with OIT, which has been around for over 100 years, as you know. And I think it's a testament to the work that's been done by the team, in building what is a really very robust data set with our product. And I think adds to this pattern of evidence accumulating, that this an important treatment.

Okay. And helpful, it is. But I have a few follow-ups as well. So in terms of just kind of the competitive dynamics that you touched upon Xolair and Palforzia. Maybe if I take Palforzia first, what do you think is kind of the key differentiation for Viaskin Peanut if and when that comes to market?

Yes, ease of use and ease of human compliance. Oral immunotherapy has been around for a long time. It's a very important, very helpful tool to be offered to families, assuming the family is going to make it work for them. There's good evidence that's been made public, that showed that Palforzia, so protocolized oral immunotherapy was being offered by allergists to the great majority of families who had a child that was diagnosed with peanut allergy, but 80% of families refuse to go on therapy, because one concern about adverse events. As you know, the risk of anaphylaxis on treatment is significant, which is why there's risk evaluation mitigation strategy plan that parents have to opt in to get the product. And the fact that it's a very burdensome for 3 hours a day, your child has to be at rest, which for a lot of families, it's just difficult to do. So the product was being offered, parents declined it. Also, the good people launched Palforzia, did a good job when it comes to managed care access and reimbursement, the product was a very solid formulary position, good access majority of lives in the U.S. at a price. I thought they did a very nice job of it. So again, the product is offered, the product is reimbursed. The product is just not used because there's just something burdensome about it. The fundamental difference between Viaskin Peanut and Palforzia is this ease of use. It takes 20 seconds to put the patch on your child's back. Market research shows that it's actually something that parents appreciate greatly, because it's a warm loving gesture. There's a protocol to where that helps parents on a daily basis or reinforce that they're doing everything they can to protect their child by putting the patch at bedtime, or in the morning before they go to school or after bath. . And that is essentially what is fundamentally different between our products and oral immunotherapy. And it's important not simply as a daily thing. It doesn't take 3 hours from my day if you want an outcome with chronic therapy, you need treatment compliance and our product leads to that. There's very little discontinuation, as you know.

Okay. And then [indiscernible], obviously, the market reacted pretty negatively to the news earlier this year, I remember you and I spoke, and you weren't overly concerned about the competitive risk there. Could you maybe just characterize why?

Yes. Well, it's an injection that is meant to block non-IgE cascade in young children, our market would be children 1 to 7. We don't hear from allergists that they would use a monthly or bimonthly injection, which know there's a fear of needle, but the pain -- most importantly, monoclonal antibodies or endpoint treatment options, but they're not disease-modifying. And in young children, disease-modifying treatment would seem to be preferred, including all of immunotherapy. So blocking IgE in a developing immune system is something that will be done only in rather exceptional cases. So we're happy that Xolair is approved, because there's a dialogue that you could imagine needs to take place between the parents, the child, the physician around lifestyle, what it means, burden, ability to comply with treatments needs to take place. The more options are available to animate the dialogue, the better off the market is, the better off parents are, although in this case, Xolair is now an alternative to the patients who're using our product, it enriches the marketplace where parents are crying for treatment options.

Okay. That's helpful. And then just while we're talking about kind of commercial, what do you think is a commercial opportunity for Viaskin Peanut? Is this kind of a $500 million product? Is it $1 billion? Is it $2 billion, is it $3 billion?

The -- I'll describe what we see is the epidemiology and how it's actionable. And as you guide to Palforzia's price, I'm not announcing a price today, but they did a good job of getting good market access at around $1,000 a month in the U.S., as you know, a bit more than that. We think the market is really, really important. Epidemiology sort of start off with, there's about 100,000 children in the U.S. per year strip of 1 year of age, that will be diagnosed with peanut allergy. So we estimate that there are 290,000 children, age 1 to 3, 380,000 children aged 4 to 7. Those are our 2 BLAs. So close to 700,000 children with peanut allergy, take any reasonable penetration in that market against any analog for a breakthrough therapy, look at how Palforzia's price is and you get to a product that we are pretty confident it's going to be very significant in sales. The commercialization also is not a difficult commercialization model, since most of the children are treated by food allergists in the U.S. is about 4,500 of them. They will probably treat between 70% to 80% of those children. So there's also the ability to concentrate our commercial effort on an audience we know very, very well. Very well, we've known them for a long time that we think adds up to commercial opportunity that is quite significant, relatively easily actionable with a product that to most families will be very easy to fall into their daily living.

Okay. And on the pricing piece, you obviously have 2 patches, so in each population. How do you think about pricing of each of those? Is there any reason it could be different?

There are reasons why it could be different. Let's start with what they have that are similar, the efficacy, safety profile, ease of use is the same. So that would argue for pricing that is in the same ballpark. And again, with all the proper caveats here, I'm not announcing a price. As you know, pricing is finalized in the last few weeks before you launch, because the label, the words on label are really, really important, which we don't have at this point in time. If there is a difference, Rajan, it's an important one to imagine and one that very much excites the allergy community and patient advocacy groups is the fundamental disease-modifying potential in toddlers. There's reasons looking at EPITOPE signature to see that an intervention in children 6 months, 12 months, 18 months, could be disease-modifying again, to be verified. We do have at the year 2, as you know, the first year of open-label extension in toddlers has shown that 56% of children could make it right through the full challenge, which is 12 to 14 peanuts worth that is not an accidental peanut consumption at that point in time, made it right through the food challenge without having the symptoms that will bring the establishment of eliciting dose here. And there's certainly a lot of energy within the allergy community to look at what would be that very important 2- or 3-year study starting in children at high risk. So imagine the LEAP patients, essentially when the LEAP trial was done a few years ago. But instead of using oral immunotherapy you would have the patch. The oral immunotherapy is no compliance is very difficult. The patch every day, we believe, would be much smaller. We're not there yet, that would be a post-approval study, obviously. But if that could be shown, obviously, we would then show a dramatic difference in benefit, which is why we're keeping the question of finalizing price to be very much open and as it should be, should be driven by clinical data.

Okay. I think that's helpful. That is helpful. And then on commercial strategy, how do you think about that? Is the base case again that your market and commercialize this product alone or are you open to partnerships.

We're always open to partnership. Our default position after much thought in the U.S. as we will commercialize it ourselves, for the reasons I mentioned earlier on, the allergy community, we've known -- we've been already launched this product for a long time to put definitely. So we've built really a super relationship with the allergy community. We've also done a lot of market research to understand the psychographics of families, the segmentation of what families want, that is important to understand also that we think is rather sophisticated. And with a relatively small audience to be essentially targeted, we believe it makes good sense for us to do it ourselves. Moreover, there is no established large company that has built a franchise in this space that would argue for a trade-off between, they get a piece of the pie in exchange for acceleration to peak market penetration. So we believe in the U.S. we would be best served by doing it ourselves. But obviously, we would be silly not to listen to alternatives. In Europe, we are now looking at, instead of a partnership model there. Because every market in Europe has a very different structure, when it comes to how care is given and who prescribes treatments for food allergy. And that sort of balkanize the market reality may argue instead to find the right partner in different markets. But again, that's something that we're assessing at this point in time.

Okay. Perfect. Maybe just switching gears a little bit to kind of strategy. Recently, you've appointed a Chief Regulatory Officer to the management team. Could you maybe just kind of discuss, firstly, I guess, why now was the right time for that? And secondly, why you felt that there was a need for that addition to the team?

Yes. Let me start about why he was the right person. Dr. Rob Pietrusko has been in the industry for 40 years, has had 35 products approved. We believe one in every division at the FDA, both CBER and CDER, that man has extraordinary experience. Bob is also very much involved at the policy level. He is chair or Co-Chair of the Alliance for Regenerative Medicine. So he's somebody who just understands the FDA and the EMA very well. Somebody also have I have known for a long time, we -- this dates us, but we got [indiscernible] both of us 30 years ago. Those of you who would sign a side of children with otitis media. And Aegis brings a. [Audio Gap] With us since the fall of last year, and they decided to join us [Audio Gap] these discussions with the agency. Moreover, . [Audio Gap] Ability for regulatory, we'll get. [Audio Gap] As we get closer to launch here. So it just made sense essentially to bring Bob on board value creation for our company will come first through alignment with the agency, and then with product approval to bring his expertise on board just made sense. He is a good guy too.

We're into the last 5 minutes, and I know it's time for time. I just wanted to talk about cash, so could you remind us, where you are in terms of current liquidity?

We had $101.5 million at the end of last quarter. We have guided this would take us to the end of this year. The fact is that we are essentially -- since we have not started those studies, obviously, we're not burning cash as per guidance. So we have some cushion there. And we will need capital to finalize the VITESSE study and to finalize the 2 BLAs. Our plan is to come back to the market, obviously, once we have a complete alignment with the agency on the regulatory pathway. That hasn't been the overhang on DBV for way too long, and we've made the choice, and I remain steadfast in that choice. Let's get to a full agreement with the agency, share that with complete transparency with the market with investors. We believe that's going to be providing quite a bit of support and flip to the stock. We're also going to be very smart about financing the company in bites and in steps, obviously, to minimize dilution our top investors have stayed very loyal to the company, very much committed to the company. I want to be very respectful of that as we look at raising capital over the next 6 months or so.

Okay. And in terms of the options that you have in order to kind of raise capital, how -- what do you have available? And how are you ranking those in terms of preference?

Equity is always easiest obviously. But here, we have to be attentive obviously to our current investors. We have an ATM available, we could raise equity directly. Partnership in Europe remains the way we also look at financing the company. And in the forms of equity financing also, as I said, we're looking at ways of doing it so that the step-by-step evolution of our [ capital ] raises is again sensitive to the needs of investors. [indiscernible] Again, to share my [indiscernible] We have alignment with the agency. My confidence that our product is going to perform in the clinic, and with that perform commercially is very high. But at this point in time, that would be, I think, improvement to do.

Okay. Maybe when -- if you go to the market to raise capital, is it -- are we you need a clinical readout to kind of raise on the back of that? Or recently, do you kind of pipe through that data, how do you [indiscernible] each of those options?

Well, what we talk to investors is clarity of alignment, uncomfort, toddlers is the key catalyst. So financing around that is something, obviously, we would be thinking about. Last patient first visit in Q3 of this year, which means we're 12 months away from data readout and 12 plus a few months away from a BLA in children 4 to 7 is another catalyst. We'll have year 2 of the open-label extension, year 3 of treatment in toddlers in the fall. That becomes important also, we'll have the data readout of VITESSE in Q3 of next year. So between now and 15 months out, we have one regulatory event. [Audio Gap] Readouts, or clinical milestones, I should say, that we think could be important in anchoring and financing.

Okay. And then 2 questions. That makes sense. And then very quickly in the last minute, there are other things in the pipeline. You've kind of investigated Viaskin Milk in the past. Right now, should we assume that the total focus is just on Viaskin Peanut?

That is correct. We want to be good stewards of our shareholders' money. So Viaskin Peanut is getting all our attention. Milk we're ready to go in to EoE and cow's milk allergy in Phase IIb studies. Those protocols have been discussed and agreed with agencies. We're good to go on that front also. And soon, we're talking also about our program in celiac, preclinical, that seems to be also very, very promising. So there's more to come. But all of that will be mobilized once our cost of capital comes down on the back of this regulatory certainty, which we own in the marketplace.

Okay. Perfect. I think we're pretty much right at time. So [indiscernible] well timed on you. Thank you, Daniel.

Enjoyed the discussion very much. Thank you, everybody, for joining us today. .

Thank you.

Thank you. .