Disc Medicine, Inc. (IRON) Earnings Call Transcript & Summary

Thank you. Good morning, everyone. My name is Sean Laaman. I'm the Head of SMIDCAP Biotech Equity Research here at Morgan Stanley, and welcome to our Global Healthcare Conference. Before we begin, just to make you aware of some important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. And if you do have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have the pleasure of welcoming from Disc Medicine their CEO, John Quisel. Thank you for your time today, John. A pleasure to host you. Great to be here. Thank you. Thank you. Maybe just some macro considerations to start with. We're doing this for all our capco companies, but how is the rise of China Origin Innovation, if at all, changing your competitive positioning and your R&D and business development playbook, if at all?

It's a great question. You know, I think we are fortunately unaffected so far. We don't see anyone else developing GlyT1 inhibitors for our lead indication in porphyria. And similarly, that's true in the second indication in myelofibrosis anemia. We haven't really identified any competition from that sphere at this point. And as you know, these are all now... Our pipeline programs are all transitioning towards Phase 3, and the lead program has Phase 3 readout and hopefully a commercial transition shortly. So I think we've managed to kind of get beyond that competitive wave, at least at this point.

Okay, and what about AI and its adoption? You know, are you adopting AI within your business? What sort of impact do you think it can have?

Yeah, we are working on that. It's still early days, I think. It runs from the menial to the really, you know, well, even the menial is quite important actually. But as you know, in a rare disease setting, one of the most important factors in driving towards peak revenue is literally, if you have a good therapy, being able to identify where the patients and their treating physicians are located. I think that's an area where there's a lot of interesting new tools being developed.

Sure, thank you. And last question before we dig into the meat of Disc. Maybe it is quite high on your agenda, which policy variable is it? FDA, Medicare negotiations, MFN tariffs, global pricing? Which policy variable do you think will have the most impact?

I mean, we do think a lot about MFN pricing. It impacts the price, perceived value of overseas markets, which itself impacts ideas about whether you might partner or develop on your own an asset such as Bitopertin. We are clearly committed to building in the U.S. market on our own. But, you know, strategy is still evolving in terms of overseas markets, and MFN has an impact on that.

Sure. Thank you. Now to get into this specifically, thank you for doing that, but a bit of Peripharin EPP and looking, I've got a couple of questions here in the Apollo readout and the regulatory path, but I guess sort of following the June Type A meeting, can you share any more detail about the feedback you received during that meeting in terms of what the FDA is looking for?

Yeah, I mean, I think broadly speaking, we and they are both focused on the Apollo Phase 3 trial. I think, broad alignment around the endpoints. That's really about all there is to it. I think we're just in a position now where we need to deliver what's hopefully fantastic data from the Phase 3 trial.

Thank you. And on the powering, we understand that Apollo is designed to detect roughly an 11-hour time in sunlight difference. Can you walk us through how you arrived at that powering assumption? What gives you confidence that the placebo-adjusted delta holds up in a larger, more geographically diverse study?

Yes, I mean the objective of the drug is to reduce the protoporphyrin and give these patients the freedom to spend time in light if they choose to do that. And that endpoint is designed to detect the time that they choose to spend. And I'm using the word choose to emphasize that it's a voluntary endpoint, right? What we saw in Phase 2 is that by and large over time, patients who are on the active arm tend to choose to spend more time in light. And we see that trending upward. You know, the placebo-controlled trial in the U.S., the Aurora trial, was 4 months. In the last month of that, you see an upward trend. When you look at the 6-month open-label trial in Australia, you see that continuing. And when we look now at snapshots of data from the long-term extension trial, where to be honest, the data quality starts to erode a little bit on these diaries, but nonetheless, what you see is patients with just spending vastly more time in light. So it appears it's kind of what you would expect. The drug gives people the biochemical ability and light within a matter of weeks. But then for patients who've spent their entire life avoiding sunlight and often designed their entire lifestyle around that, having that newfound freedom takes a while to adjust to. So back to which month do we, so we're using the last month, this month 6, because we think it's a good place where you get beyond the placebo effects, but also you give patients time to adjust their behavior to detect a difference of the drug therapy. But what we chose to use for our projected effect size, we didn't use the last month of the Phase 2 trial. What we did is we basically took months 2, 3, and 4 where you're still just starting to separate from the placebo group and use that as our projected effect size. So essentially as long as the patients behave like any of months 2 through 4, or at least an average of months 2 through 4, from Phase 2, then our powering calculation should be robust to that. And if they're doing what we expect, which is actually spending more time, further from placebo when you get out to month 6, then we should be in an advantageous situation.

Sure, thank you, John. On seasonality, U.S. patients exit at all times of the year. But the majority of ex-U.S. patients are expected to complete in spring and summer. And if you noted, roughly half the geographies that weren't in Aurora now synced up. You know, given more patients completing the higher daylight months, how are you thinking about the seasonality impact?

Yes, we think it's well represented in the Phase 2 data. So that placebo-controlled trial conducted in the U.S., 25 patients running from Seattle, Boston, down to Miami and Texas. So I think representing a lot of different seasons, a lot of different geographies, a lot of different light intensities. So all that I think is already represented in the Phase 2 data that we used. We also know that the seasons didn't have a dramatic effect. We can detect a difference with the drug both in the winter and in the summer. I think our intuition is that, and the data bears this out, is that the delta is larger in the summer. And so I think it's what we see here in the way the enrollment played out is that the U.S. patients are a pretty broad smear across the seasons. And like you mentioned, through the accident of very rapid enrollment, the European patients ended up concentrated as completers across the summer. And I think we don't know for sure, but our guess is that should be favorable to detecting a drug effect.

Sure, thank you, John. And on the clinical meaningfulness language that we observed in the CRL, can you share about what this means for the Apollo readout? And would it be achieving stat sig on the time in sunlight endpoint?

Yes, I mean the key here is that exactly. With the co-primary endpoints are PP9, which would be shocking if we missed that, and then the sunlight endpoint, which is where we really powered the study, and in doing so of course overpower the PP9 hitting those two co-primary endpoints.

P-value less than 0.05, that's the key. Sure, and I guess given the pro work, essentially every patient felt better. How much does the patient experience in real world advocacy that builds up after the CRL reinforce the case regardless of how the primary endpoint reads?

Well, right. I mean, so with the CRL, I think that really activated the patient group's deep frustration around that result. And so you see a lot of media reports now with patients coming forward and telling their story about the disease. I think they're trying to make sure that, you know, the seriousness of what they're living with is made more public perhaps than it has been before. And then many of them are even choosing to talk about their experiences on Bitopertin, and those have been remarkably positive stories. And I guess what we take in from all of that is that, you know, there is a meaningful impact here with the drug and the challenge we have really is just detecting it with our endpoints, right? That's converting that patient experience into clinical output. But I would argue that's a vastly better place to be than if you don't really know what your drug's really doing, right? I feel like we have very good insight into what it's doing for many of these patients and gives us a lot of confidence that the math.

We've put into designing the Phase 3 trial will work out correctly. Sure, thank you. And thinking about the Helios B study, the extension study, you know, how much was there a way to think about that in terms of de-risking some of the data that we might observe from Apollo?

Yes, well, it's certainly helpful to see, you know, for example, the protoporphyrin 9 suppression continues essentially uninterrupted for apparently years on end. And that, as I mentioned before, people tend to increase the time they spend in light the more time they're on therapy, which I think is evidence of perhaps people adjusting their lifestyles in a way that is very meaningful. Those things are all very encouraging. And simply the rate at which people choose to go into that long-term extension. We've talked about in Phase 2, we had about 86 out of 100 patients choose to roll over onto the long-term extension. We've talked about the enthusiasm there was in the rapid enrollment in the Phase 3 trial, such that now we know the last patient last visit is in this month. And so at this point we start to have insight into the rate at which patients have chosen to roll into the long-term extension out of Phase 3. And it's literally only 2 patients have chosen not to, which out of 180 plus eligible patients, I think, shows an astonishing level of enthusiasm and interest in receiving this therapy.

Okay, thank you, John. I've got a couple of questions here on the commercial opportunity for Bitopertin and the competition. But assuming approval, how do you think about sizing the U.S. EPP opportunity and the number of patients you'd realistically target at launch? And is it patients on Scenesse or treatment-naive patients?

Well, the patients on Scenesse is, in our view, a pretty small number. It's not easy to estimate, but I would say on a year-to-year basis, it's probably no more than we have already in our clinical trial neighbors. And then, so obviously that is a group that will want to offer Bitopertin to you in a launch situation. But I think what's more interesting is the patients that we see, at centers of excellence. I think we reported something like 600 patients at the top 10, 15 centers, and that's been validated by our field force. So validated on the ground, not purely based on claims data. That's an excellent place to think about launch potential. That doesn't get you, of course, to the kind of peak sales that we're hoping to achieve here, but it certainly gives you a place to start from and then we're continuing to kind of engage with accounts using the claims data as our guide, right, going to the physicians who are reported to have a decent number of patients and working down that list. And we see a decent correlation between the two. It's not perfect. The claims data is never exact to the current real world situation but I think.

Directionally, it looks like it's going in a good direction. Sure, thank you. And what does the cost structure of the launch look like? Should we expect a ramp ahead of the approval?

Should we expect them, sorry, what? Oh yes, yes, oh yes. I mean, you know, our cash runway is into 2029. We assume no revenues in that model, but we have fully loaded in commercial expenses.

Sorry, the cost structure of the launch as you're thinking about the infrastructure etc, etc.

Oh yes, I mean. And some of those commercial expenses are going on right now as we speak, you know, around disease education, engagement and then as we get across the data assuming everything looks good, then those activities will continue to ramp as we head towards launch.

Wonderful. And how do you think about scaling that if, you know, the PV and MF opportunities, how do you think about scaling that infrastructure?

Well, I think some of the home office infrastructure scales very well. I'd say the field force infrastructure will probably be different. We'll, you know, as originally planned, 24 reps to focus on the porphyria population. I think when we get to myelofibrosis and polycythemia vera, those two indications are directly overlapping in terms of positions. So that's one sales force to address those two patient groups, but that's probably a different sales force specialized in the hemonc space versus the porphyria space.