H. Lundbeck A/S (HLUNB) Earnings Call Transcript & Summary

Good afternoon. I'm James Gordon, JPMorgan European pharma and biotech analyst. And today, I've got the pleasure of introducing the Lundbeck presentation. So we're going to hear from Lundbeck's CEO, Deborah Dunsire, and we've got a 20-minute presentation, and then we'll leave 20 minutes for Q&A, which is going to take place in here. And you can try and log your questions on the website or you can put up your hand, and we'll take your question. With that said, thanks a lot for joining us, Deborah. Look forward to the presentation.

Great. Thank you, James. Well, happy new year to everybody. It's great to be back in-person in a lot of ways, and I'm very, very happy to be presenting Lundbeck here today. So you've seen our forward-looking statements, so I don't have to spend any time on those. It's exciting times to be active in neuroscience, and Lundbeck has been -- has a heritage in neuroscience over the last 70 years, but the market is really moving and changing, and we've seen growing knowledge of the biology of different diseases. We've seen evolving technologies coming to bear in neuroscience, new drug modalities coming in that afford us the opportunity to drug new targets. We've seen over the years increasing regulatory approvals. Neuroscience has been second only to oncology for a number of years in regulatory approvals. And of course, new investment coming in as a result of all of the things I've just spoken about, fostering new company growth from venture investment. And so we see what we've been talking about for a long time that this is going to be the era of neuroscience as we go forward, and Lundbeck is well poised to be able to capitalize on those opportunities into the future. We have a very strong revenue-generative business with 4 strategic brands. Those are our patent-protected brands, forming 65% of our business, and this is through the 9 months. We're not reporting full year figures yet. That happens February 8. But we've seen very significant growth of these strategic brands, but we also stand on a very strong base of mature products, which have had a very long ability to deliver sales and very good profitability, and those brands have continued to be very resilient. Our strategic brands grew 19% in local currencies through the first 9 months, and we anticipate the balance of 2022 has remained strong. Our new strategic brand, Vyepti, in the prevention of migraine, both chronic and frequent episodic migraine, launched in the U.S. in April of 2020, an IV therapy into the teeth of a global pandemic. But this drug has continued to grow in quarter 2, and quarter 3 last year, it was 1 of only 3 brands in the prevention of migraine space that grew, Vyepti being the only of the CGRPs and the other 2 are the more recently launched gepants. And so we see that we're over 5% in volume market share. Vyepti is as an IV therapy, it's not discounted significantly, and so it is the most expensive of the migraine products. So we have a higher proportion of the value market share. And we're very proud that patient persistency on Vyepti, people getting their second dose at 3 months, their third dose at 6 months, their fourth dose at 9 -- in the 9-month time frame, exceed the rate of other therapies, Botox or other CGRP therapies for the persistency over time. We are rolling out Vyepti globally. Lundbeck did all the world to get the approval in Europe and other markets outside of Europe, and we got the approval in February of 2022 and are beginning the rollout throughout Europe. So we launched in 9 markets in 2022, and you can see them listed. And in some of the markets that we're launched late in 2021, UAE being the first of the markets outside the U.S., we've achieved a 13% market share. That is a figure we're very, very proud of. And what we've seen in every market that we've launched, it's the profile of Vyepti really delivers for patients. So it is really delivering on that efficacy benefit in those most impacted patients. We've got another 8 launches planned during the year of 2023. An old favorite, our biggest product at the moment, Brintellix/Trintellix has been underpinned by tremendous growth, particularly in Europe and in Japan. Now coming to Japan, it was most recently launched there in the end of 2019, and it's growing very, very strongly with a 9.1% value market share having grown 3.3 points in 2022 alone. Now we've partnered with Takeda, and they are the lead partner in Japan. So we -- they cover mainly the GPs, we cover psychiatrists. It's Lundbeck's first foray into having our own commercial presence in Japan. So we're delighted with the progress, and we expect continued strong growth for Trintellix in Japan. Europe and international markets also saw a very strong growth in 2022. We've seen that particularly in the GPs segment, where we've had some additional sales reps that we've been experimenting with putting in, in Europe during the '19 timeframe. And that's been where patients after COVID seeking mental health care have been seen first by the GPs, and that's what has allowed Trintellix to really grow strongly, and we anticipate that continuing. The U.S. was relatively flat in 2022. We did have a restructuring together with our partner, Takeda, who is also the 80% cost share partner in the U.S. during end of '21. And it took a long time for Takeda to come through that restructuring. So we had a lot of territories in the Takeda field force open in 2022. So that is now corrected. And so we anticipate Trintellix will come back to growth, but at a low single-digit rate. Rexulti has been a tremendously strong grower in 2022. As you know, Rexulti is approved in only a few markets for both schizophrenia and MDD. U.S. is, by far, the largest of those. It's also approved for both indications in Canada, Saudi Arabia and Brazil. And the MDD indication has really anchored the growth. That is the real driver. And in the U.S., in 2022, we saw extremely strong growth for Rexulti, and we -- this is an adjunctive therapy added to other therapies, baseline SSRIs, SNRIs. And with the telemedicine wave, psychiatrists have really stuck with that. And in a telemedicine consultation, they're much more willing to add an adjunctive therapy than change therapies, and we think that has benefited Rexulti. Canada has also been a dynamic grower as has Brazil with those 2 indications. Now of course, there's a lot to talk about with Rexulti with the new indication coming, and we'll come to that. We just, on Friday, received the priority review designation, our day 60 feedback after the submission of the file. FDA came back and said, they were accepting for filing and granting a priority review. They advised us to be prepared for an advisory committee, and we were already in preparation for that. We had the third of 3 Phase III trials read out with a very strongly positive significance versus placebo. So that -- the totality of those 3 trials is submitted to the FDA and delivers the first therapy potentially for the treatment of agitation in Alzheimer's disease. The symptom that singularly is most impactful in moving people from at-home care into institutional care. And so if we can keep people at home with their loved ones for longer, that's beneficial for families, patients, but also potentially for the economics, and there are no approved therapies. Our PDUFA date is May 10. We will be investing significantly behind this launch. It's a tremendous opportunity given the number of patients, and we have communicated that together with our partner Otsuka, we anticipate alliance sales for this indication with full patent expiry of over $1 billion in gross sales. So very exciting opportunity ahead for Rexulti coming up this year. We also have 2 Phase III trials in post-traumatic stress disorder that will read out later in the year, so just around the midyear. These 2 trials have been running for a long time. COVID was a very difficult time to accrue PTSD trials, but we are happy that we will be able to wrap up the accrual and deliver the headline data for these 2 Phase III trials later this year. It's, again, an area of very high unmet medical need. Only 2 SSRIs are approved in this indication. We're looking at adjunctive therapies on top of sertraline, so a bit more analogous to MDD for Rexulti. So we're eagerly awaiting the outcome of those trials with the potential for yet another indication expansion for Rexulti. In my career, and it's over 30 years now in this industry, I've never had 2 PDUFA dates within 4 weeks of each other. And PDUFA date May 10 for Rexulti, our PDUFA date for the 2-monthly version of aripiprazole, the long-acting, is April 27 for the FDA. We anticipate approval of this 2-monthly version in Europe mid this year. In Europe, it will be called [indiscernible]. We don't yet have a trade name in the U.S. The once-monthly formulation has been growing. It's done very well. We're over 30% market share in a number of countries. And the 2-monthly version, we anticipate will offer patients and physicians the opportunity to get a longer time of therapy, which in schizophrenia is very important, given that patients are often noncompliant. This 2-monthly version is patent protected out to 2033. The once-monthly version does lose in Europe in 2024. We're also -- we have also submitted in Canada, and we anticipate the approval in Canada in, I think, the third quarter of the year. So we've got some great growth ahead of us as we maximize these strategic brands and then capitalize on the opportunities that the advances in neuroscience afford. Lundbeck is going to be focused in our core strength in neuroscience, but that's broadly. It takes in specialist psychiatry, specialist neurology, rare disease neurology, and we're looking really at trying to have biomarker-driven targeted indications where we can have a specialist call point and not have to build large GP sales forces, really looking for transformative therapies in areas of clear unmet medical need. And we're working on finding and bringing forward in our pipeline or accessing from the outside areas with strong biological rationale that we can derisk through biomarker-driven development. So here's the overview of our pipeline, and you can see it's divided into 4 areas. And those are the areas that we work on within our internal discovery space, focusing on our heritage of neurocircuitry, but adding neuropeptide, neurohormonal signaling as we have with the CGRPs, and then bringing in the euro immunology, which is new for Lundbeck. So really an area of biology that we can open up. There are many, many diseases driven by the inflammatory process. And then we also have the protein misfolding, protein degradation, and we are -- we have a very rich Phase I pipeline, and we have 2 molecules in Phase II and then a number of life cycle management programs in Phase III. And I'll talk about a couple of those as we go forward. We made strong progress in 2022 in our pipeline, and I've spoken about a number of those different areas of achievement. We completed the enrollment to our PACAP trial in Phase II and the ASmAb trial and PACAP actually completes early this year. But we also have put our first products into the neuroimmunology, the CD40 where we're -- we've begun Phase I. And we just before the end of the year got the first patients in the neurohormonal ACTH antibody trials. We've also brought in new modalities like the small molecules interfering with RNA. So talking about our PACAP inhibitor, the place we've taken this biology first is into migraine. Migraine still has unmet medical need. The CGRP has made a huge step change, but even with those great drugs, there are still patients who don't receive full treatment. Taking the PACAP forward, investigating that biology, we have done a clinical trial looking at the mechanism. So administering PACAP, seeing the vasodilation, the impact of PACAP on the patient and then administering our antibody and showing we could diminish that so that we do know that we're interacting, we're getting that good interaction with PACAP. And now we're doing the clinical proof of concept in migraine. But what's interesting about PACAP is that it has a richer biology and has potential not only in migraine pain, but also in bringing in other types of pain and including -- areas that include parasympathetic activation or mast cell degranulation and some part inflammatory components. So we could see a broader range of indications coming for PACAP, but of course, that -- it's early, and we're just going through and understanding how this biology can impact. The second of our Phase II programs in the rare disease called orphan indication of multiple system atrophy, which is a synucleinopathy. Part of the framework of synucleinopathies, which include Parkinson's disease and Lewy body dementia that we've chosen to focus in MSA right now with an antibody therapy that targets the seeding species of alpha-synuclein. So we feel very good about this antibody where it binds on the molecule, and we've got this proof-of-concept trial fully enrolled. We'll monitor patients for over a year because it is a neurodegenerative disease, so we need a little bit of time. But this could be a transformative therapy for patients where there is no therapy right now. As I said, we put our CD40, the first of our neuroimmunology programs. CD40 inhibition has been proven clinically in other areas like Sjogren's disease, SLE, rheumatoid arthritis. So there are assets. So we know that the biology can work on inflammation. We're going to be taking it into neurological areas, and we've got an interesting candidate that binds to CD40, but has unmodified albumin binding. It's a fragment. So a slightly different profile than a regular Fc binding for the asset. So a very interesting molecule that could have multiple indications as we go forward. So moving through the Phase I for that. And then just having started in neurohormonal areas and anti-ACTH antibodies, so acting on the hypothalamic pituitary adrenal axis. And again, exploring that in Phase I, if we can show the effect to normalize the homeostasis in that pathway, then we can look at a variety of indications there also. So when we think about 2023, Vyepti is going to continue to roll out with new launches around the world. We're launching a 2-monthly version of aripiprazole in 3 regions. Brexpiprazole, Rexulti into Alzheimer's agitation in the U.S. and then submitting potentially in Canada. And then delivering the headline results from the PACAP and the PTSD trials later this year. So when you think about Lundbeck, you can think about a company that has a very strong competency and heritage in neuroscience, singularly focused in that area over the last 70 years. And looking forward, to being able to capitalize on the evolving understanding in biology in neuroscience using that competency into the future. We've got great strength in our strategic brands, great cash generation going forward and a really scalable global footprint on which we can build this business into the future. And of course, at the center of everything we do is keeping that focus on our patients and restoring brain health so every person can be their best. So with that, I'll draw to a close and open the floor for questions. So if you'd like to come and sit down, please feel free there's chairs down in the front and in the middle.

Does anyone have a question they'd like to kick off with? In that case, maybe I'll start with one, which would be -- so you mentioned on Friday that you're going to have -- expect to have an AdCom for Rexulti for AA. Is that a surprise? And what do you think is going to be discussed at the AdCom?

No, I don't think it's a surprise. I mean, obviously, this is a new indication. So the agency probably like to discuss it. We will see during the review process. I experienced that FDA is still more flexible when it comes to AdComs. Now, they call it in when they think it's needed, and we'll see during the process. I think the more important thing was that we got priority review. So it is faster views that signals that, first of all, they think we have submitted something that's worth looking at, and also that we see the pressing medical need in this field. So they really like to see something going through quickly here. So I think that everything was quite what we expected, and of course, it was positive, all of it.

And is it as simple as you get the approval or you don't get the approval? Or are there some subtleties in terms of warning for the front page? Or exactly what indication you could get? Are there any subtleties we should be thinking about?

Now the indication we're going forward is very straightforward, agitation in Alzheimer's disease. And the primary readout is, it's not established, but it's the standard readout that people use in this field, the CMI scale. So I think in terms of what we're after, I think it's pretty clear. It's that indication, it's not psychosis, which is related. It's relative of agitation, but it's really not that part. It's really the agitation that we're after. And I think in terms of our data package, it's a pretty robust package, 3 Phase III trials. And I also like to emphasize that we had a very, very strong tolerability data, which is extremely important here because there is this cautionary black box indication for use in elderly of neuroleptics. And here, we have a data package from 3 trials where we pushed the doses up to 3-milligram in the last trial. And overall, that data package really showed a tolerability that was not very different from placebo. So it's -- the class label is hard to get out, but we have a mechanism of action that is partial dopamine agonist. So it's really -- the mechanism action explains why we have better tolerability. So we're really looking forward to that risk-benefit discussion as well.

And you frame the commercial potential. I think you said $1 billion as the gross sum. What does that assume? Does that assume just conversion of people who are getting atypical antipsychotics at the moment? Or are you assuming big market expansion? And also, slightly unusually, gave a gross rather than net figure, so what is the thinking about gross to net when we do that calculation?

Well, we know that the gross -- there's already a gross to net on Rexulti and over years, that tends to rise. So I think that's an important. Well, it exists with all the oral therapies, right? And -- sorry, say that...

Just in terms of what went into that, have you assumed big market expansion and people using this class of drugs? Or is it more just taking share from existing products?

No, there's certainly not enough use of existing products to justify that. So it is certainly an expansion. And I think as Johan referenced the black box warning, there is a reticence for people to use antipsychotics in the elderly because of that black box warning. And this will be the first drug that has this proven safety and tolerability in the elderly population to be able to justify the utilization. So we do anticipate an expanded usage because we have the safety and tolerability.

And is there any scenario where you don't have a black box so it's sort of differentiated on that basis?

My personal opinion, and Johan, I think we share the same one. Once a black box warning is put in place, it's very difficult to take it away. There's not a lot of upside to the agency to do that. And certainly, black boxes have not limited the utilization of safe and effective therapies. So I would not anticipate the black box going away. I'd be very pleased if it did and that would certainly differentiate, but I think that's a very high bar. Do you have anything to add?

No, I think it's perfectly right. I think we have to really just emphasize the clinical data we have in the clinical section. We'll emphasize that. And we have, of course, presented the data now at 2 major Alzheimer's conferences, and it was extremely well received. So I think the superspecialists, particularly the geriatric psychiatrists, they really appreciate the profile we show here. They really see that differentiated against what they can use today. So I think we have to live on that recognition rather.

And there is another product that had some data recently. It's Axsome product for Alzheimer's agitation. Do you see that for [indiscernible]? Is there really a scenario where they might get approved on the data they've got already? Or do you think they'll be a long way from the market still?

I think that's going to be up to their discussions with the FDA, and I won't comment on that. Certainly, what I can say that Lundbeck and Otsuka have done together is a very comprehensive and robust program based on 3 Phase III trials with a very thorough exploration of the doses. And I think that, that is what FDA asked for. That's what we've given them. And I think that -- I don't think they will ask less of other compounds in the field. This is a vulnerable patient population.

You mentioned having another PDUFA coming up, which will be for the bi-monthly version of Maintena. So what is your thinking for that product in terms of the conversion from monthly, how quickly would that go? And you only have a relatively finite period to swap over. Would that be the end of the conversion once there's a generic of the monthly?

So answering the second question first, I don't think it will be the end of the conversion. I think that even if people got a generic once monthly, there is still a benefit to -- particularly in a schizophrenia patient, having patients stay on therapy longer and not have noncompliance or recidivism. So I don't think it's the end of the conversion. We have patents that were issued in the U.S. that go out a bit longer than '24. So it's a shorter period of time in Europe. When we look at other molecules, long-acting molecules that have had successive launches of increased coverage time, you do see that the -- overall, the class, the brands grow, but the distribution changes. So it's not a complete switch of one to the other. The once-monthly will probably be the starting place for most people, but it doesn't stop you going directly onto the 2-monthly version either. So Europe will be a bit more challenged because they have a shorter period of time to establish the profile. So I would anticipate the use of the 2-monthly in Europe overall will not grow as strongly as it will in the U.S.