Ipsen S.A. (IPN) Earnings Call Transcript & Summary

Good morning, good afternoon. Welcome to the 39th JPMorgan Healthcare Conference. I'm Richard Vosser, European pharma analyst with JPMorgan, and it gives me great pleasure to introduce David Loew, CEO of Ipsen for this presentation. [Operator Instructions] With that, I'd like to say it's a great pleasure to have you with us here, David. And over to you.

Thank you, Richard, and good morning, good afternoon and good evening, everybody. I'm joined here with Aymeric Le Chatelier, our CFO; and Howard Mayer, our Head of R&D, who are going to also come in once we go into the Q&A section. Let's go to Slide 2. Before we begin, here is our safe harbor statement, which outlines the routine risks and uncertainties contained within this presentation. For those of you not so familiar with Ipsen, I have joined Ipsen in July as the new CEO, and we have gone through a deep review and debate on where we want to focus, what our strategy should be and our vision. So let me go to Slide 3, where I outlined you our vision. So we want to be a leading global midsized biopharmaceutical company with a focus on transformative medicines in oncology, rare disease and neuroscience. Next slide, Slide 4. These are the key 3 therapeutic areas that I just outlined. We have declared at our Capital Markets Day in December, the Consumer Healthcare as noncore. And we are, in fact, performing a strategic review on this area. More to come in terms of timelines and the result of that strategic review. Let me start, therefore, with the 3 key areas, oncology. So here, we want to really strengthen our positioning. We have already a good position with several leading drugs like Somatuline, Decapeptyl, Onivyde, Cabometyx. And we want to continue to build in this therapeutic area because we think this is a highly attractive area, has a high unmet medical need and is growing very rapidly. Then we want to also expand our scope in rare diseases. We already have a good platform with acromegaly. Now we are about to file the palovarotene drug in FOP, and we intend to go beyond endocrinology and bone diseases. And we want to also really excel and accelerate in neuroscience, where we have our neurotoxin Dysport with an indication in aesthetics done by Galderma and the treatment where we are taking care of it in spasticity. We have a solid pipeline that we want to accelerate. We have a long-acting compound, which is going to enter into Phase I in that space. And we also have TSIs, which are going to address pain. Now we build on very solid foundations in specialty care. And we are truly thinking we are positioned for the long-term success. The reason why I say this is that when you look at our assets, the current assets that we have, they are either best or first in class, where we are active, we have generally a #1 position in all markets around the world or a #2 position in Somatuline, Decapeptyl, for example, is #1. Dysport has a 2 position in neurotoxins. We focus mostly on tumors which are smaller in size, more niche markets with high unmet medical needs, and we have a portfolio which allows still to do a lot of life cycle management and to seize additional opportunities. We have a truly global footprint. We have 1/3 of our sales coming from the United States, 1/3 from the key 5 European markets and then 1/3 from the rest of the world. And we are actually going to even increase that geographical footprint. We're going to open up an affiliate in Japan or, for example, expand also in Latin America and the Eastern Middle East. And then we have a strong proven commercial capabilities, which have resulted in this leadership position around the world. Now when we were working on our new strategy and priorities, we declared 4 key priorities that are going to carry the strategy. So the first one is, we want to bring the full potential of our innovative medicines to patients. Second is, we want to build a high-value, sustainable pipeline. The third is we want to deliver efficiencies to enable targeted investments and growth. And the fourth one, we want to have a culture that we want to boost of collaboration and really achieving excellence. So let me walk you through these different pillars. On the first one, deliver the full potential of our brands. We want to maximize our -- the value of our core products, so Somatuline which still has the potential in front of itself, we have launched a new device at the end of 2019 in the United States. Of course, there might be generics coming on the market first in Europe and then towards the end of this year in the United State, but we also know that the production technology is quite difficult to replicate, and we have seen that one of our competitors, Sandostatin from Novartis that has seen some generics in Europe, these generics have not been launched everywhere, and they are penetrating only to a certain degree and now have stagnated. So we are going to continue pushing Somatuline until the appearance of several generics. Decapeptyl, mostly for prostate cancer being used here. We have a 6-month formulation that is patent protected and that we are now shifting the market towards because prostate cancer patients needs then less injections. And then we have Dysport. As I said, we use it in aesthetics with Galderma, bringing it to the market and ourselves in the treatment of spasticity. In fact, here, we think we have still quite a lot of potential because only about 15% of patients who have developed the spasticity are currently being treated. So the market has plenty of growth. Of course, the market is now a bit depressed because of COVID and patients can't go really to the hospitals. But after COVID is over, let's say, hopefully by the autumn, we're going to see Dysport come back to strong growth again. And then very importantly, our launch products, Cabometyx, where we are going to launch it in first-line renal cell carcinoma in combination, and where we are also going to see this year the unblinding of the hepatocellular carcinoma data, very excited about both of them. We will see more indications to come, and I will walk you through that just in a minute. Then on Onivyde, we have post gemcitabine in pancreatic cancer as solid second-line penetration. We're excited to see now the recruitment of the first-line pancreatic cancer indication as well as the small cell lung cancer indication. In small cell lung cancer, we're going to run an interim analysis this summer. And if positive, we could file that very rapidly, if not, we're going to file it in 2022. We're also going to launch palovarotene. We are planning to submit now, beginning of 2021. Our hypothesis is that we should have an approval by the end of the year. Of course, the label is going to be a question of negotiation, most probably with FDA and the NDA, but we are now hopeful that we can bring this over the finishing line. And then we are going to expand the geographical presence. As I said, we're building up an affiliate in Japan and expanding also in several other geographical markets, and we are going to really work on becoming better in the executional excellence. Now going to our second pillar, where we want to build the sustainable long-term pipeline, I would like to start with our current pipeline. You can see that we have several products now in the registration process. So the combination with nivo in first-line renal cell cancer, where the submission activities are growing very well. We should potentially get an approval even earlier than midyear, what we have declared in December. We also will see the approval of Dysport in solution, in Global Alliance as well as Dysport in urinary incontinence. And then in Phase III, we have a whole program in hepatocellular combination trials. We have it in lung cancer in second-line metastatic castrate-resistant prostate cancer as well as in Onivyde that I just talked about. And then palovarotene, as I said, we are going to submit now early this year. In Phase II, we have another drug for FOP and ALK2 inhibitor, which is going to start to recruit the pivotal trial now beginning of this year. And then we have in the early space, several drugs that we are excited about, mostly also the long-acting neurotoxin that we are going to start bringing it to patients at the beginning now of 2021. We have a very long duration that we have seen and good tolerability also in animals. So it's going to go into Phase I now at the beginning of the year. You can see that we have quite a lot in the later stage. In the earlier stage, it's clear that we have to bring more innovation in through external innovation, and I'm going to just touch on this in a second. In terms of providing you a bit more details on by when we are intending to submit the new filings. As I mentioned, the first-line RCC is well underway, should get the approval fairly soon now at the beginning of the year. Then we have the hepatocellular combination trial with atezolizumab that we're going to unblind mid of this year and then submit at the beginning of next year. We are also going to submit then the lung cancer second-line and second-line metastatic castration-resistant prostate cancer in 2023. Our guidance, risk-adjusted peak sales has been changed. So because of the results and these submissions, we are guiding now at risk-adjusted peak sales above EUR 700 million. Obviously, renal cell is a big chunk of this because the other indications are still heavily risk-adjusted. But once they're unblinding, we are going to see that potentially can exceed the EUR 700 million if that risk proves to be not there and these indications are working. On Onivyde, we are going to submit in second-line small cell lung cancer in 2022 and in first-line pancreatic cancer in 2023. Here, we're guiding risk-adjusted peak sales of above EUR 300 million. And on palovarotene, we are filing, as I mentioned at the beginning of this year in chronic and episodic FOP. The guidance of the peak sales is still a bit out. We will wait until we have more clarity on what kind of label we think we're going to get. Let me move now to the external innovation. I told you, we need to really fill the pipeline across all stages, some in the late stage because we also want to make sure that we have some late-stage compounds coming in. Since we don't have Cabometyx in the United States, so we want to refill the pipeline also in the late stage, but then mostly in Phase II, Phase I and preclinical. And what is going to be our strategy, in oncology, we're going to focus not only on solid tumors, which was our strategy until recently, we have now changed our strategy to expand also to include hematological tumors. In order to not get really into a heated race with large multinational companies in cancer, which is a very overheated space. We are going to focus on niche tumors or biomarker-driven segments, if it's in larger tumors, and we are not targeting like the HER2-positive 15% to 25% tumors, but we're talking about the 1% to 2% biomarker positive, and we're going to also focus on continuing to develop the life cycle management of our compound. In rare disease, we are going to go beyond endocrinology and bone disease. And we are going to focus on established, but also innovative technologies, including some gene-based modalities. In neuroscience, we're going to try to accelerate our in-house pipeline, especially the long-acting toxins, but also the TSIs, and we're going to focus on some rare neurological disorders. For all that, we have a cumulative firepower of EUR 3 billion by 2024. Now we are committed to growth short, mid and long term. You can see that -- and this is a bit schematic that, of course, Somatuline might be facing generics in the near future. So it's going to start eroding. It's not going to be a fast erosion because of the difficulty to produce it as well as other factors like there is a very small evolution of the new patient pool. It's only about 10% to 15% of patients in net tumors are new every year. So if a doctor wants to replace drug by a generic, if they come, then they would most probably focus on your patients. So we see a gradual slower erosion curve here. And this is being compensated by our core brands like Decapeptyl, for example, or Dysport and the innovative brands like big growth engine Cabometyx, but also Onivyde, and it's going to be supplemented by the external innovation. Now our third pillar is we want to really implement an efficiency program. And these efficiencies can be generated by a smart spending approach. We have about 15,000 suppliers, that's far too much. We will have to reduce our supplier base as an example. So we are fairly confident we can actually achieve these efficiency savings. We are somewhat above the SG&A spending of the industry. So we are going to go and align ourselves more to a more tightened approach in the go-to-market, but also in our general administration. And then we're going to also find manufacturing efficiencies as well as finding digital enablement. We have seen clearly on the COVID that there are different ways how to do that. So we don't always need, for example, sales rep and go everywhere, but we can have hybrid models as well as, for example, manufacturing 4.0, where we can do much more predictive analytics. And this is going to be supported by a more simple operation model, a real focus on excellence and execution and a transformed R&D organization that Howard Mayer is implementing as we speak. So Slide 13. That's our fourth pillar, where we want to focus really on increasing our capabilities and having a culture of driving value for patients and society. We can get better at true patient centricity. And I means it's not just being patient-centric through empathy, but actually a deep understanding on what are the patient flows, what's happening in the health care system, becoming more assertive as a partner in discussions with physicians or with nurses or payers on how the health care system should really be serving the patients. Then we want to attract and develop highly engaged talent. So we're going to have more across development opportunities. We will nurture a culture of focus and high performance. So we have to do really things which move the needle and not do too many things. And we have to get a bit more performance-oriented, which comes down to decision-making, for example, where we can be become more decisive and have people more accountable. And we're going to lift up the level of expertise in the company and foster collaboration. Now on corporate sustainability, we defined 3 pillars. The first one is focusing on employees being, for example, a best place to work or having better gender balance and more internal promotion then on connecting well with our communities as well as focusing on becoming more green. I am very passionate about this. I think companies need to engage into this. If not, we're not going to achieve the climate goals that we have set ourselves. Now we have included the key performance indicators into the compensation of the management in the long-term incentive plan. And we have also included it in the criteria of our credit facility. So we really mean it serious. In terms of financial guidance, we have guided on a compounded annual growth rate over the period of 2020 to 2024 of growth between 2% and 5%. It depends, of course, a little bit about the appearance of potential Somatuline generics, that's probably the biggest swing item. Then we are committed to invest in R&D, supported by SG&A efficiency. So we are going to be not totally able to compensate it, so there will be a slight increase on R&D if we do more external innovation. And we have, of course, the EUR 3 billion external firepower. So in summary, we're going to focus together for patients and society, really on the key 3 these areas, oncology, rare disease and neurological disorders with really transformative medicines. And we want to build up a more sustainable pipeline with more external strategy, and you have seen, it's a very targeted strategy, become really more focused and agile and having efficiencies that we are finding and being really a great place for talent and committed to patients and society. So with this, we're opening up now for questions and answers. And as I said, I'm being joined by Aymeric Le Chatelier, our CFO; and also Howard Mayer, our Head of R&D.

Thanks very much, David. [Operator Instructions] Perhaps, firstly, you talked about business development and M&A. And perhaps you could talk about, and you talked about a focus in terms of niche oncology areas. But just maybe you could broaden that out and talk about focus of near assets and far assets, and where you're sort of thinking about the sort of the timing of targeting that M&A? Do you need on-market products or near to market as well as building technology platforms and further out products?

So we are trying to get some near-to-market products, especially for the United States. On-market products is, of course, very hard to find to that because everybody is looking for them. But what we are also going to try to do is to build up core promotion deals, for example, in the United States. So that if we would, one day, see a generic Somatuline, it gives us a little bit the oxygen to work through that phase and not having to be desperate to make deals and overpay them. So we want to really be financially disciplined on this. Then as I mentioned, we are going to look also at some new technology basis and we are working through that as we speak. And we're also going to try to refill the pipeline really also in the early space. Because long term, that's very important to be sustainable for Ipsen in the long term. I don't know, Howard, if you want to add anything to this.

No, just to echo what you said. I mean we're obviously very interested in both late-stage and early-stage assets. We actually did 2 early-stage deals last year with preclinical deals. We don't have a discovery platform except in neurotoxin. So it's really important for us to partner with other institutions in our other areas. So we did 2 deals in oncology last year for products targeting the MAPK pathway, which fits nicely into our strategy. So we're just generally looking at both preclinical and late-stage assets in those therapeutic areas.

Great. And one of the assets that it was brought in before, but you've talked about palovarotene. And that seems like the FDA and the path to market is a little clearer, maybe then it was certainly 6 months ago. So maybe you could just talk about how you see that opportunity and the just position of adult patients, younger patients and where we are with that dialogue?

So David, should I take one?

Yes, you can take this, yes.

So we've had ongoing dialogue with FDA and EMA. We had pre-submission meetings with both. And as you say, it's clearer now. They have both agreed that the data supports filing an application for palovarotene for the treatment of FOP. We've agreed on the structure of the submission, the content of the submission. And our plans are to file the totality of data, both from the MOVE study, which is the Phase III study. And also the Phase II data in both episodic and chronic dosing. And obviously, as David said before, the label is going to be a review issue, including the inclusion of skeletally immature patients, but we are filing all of those data and have agreed with regulatory agencies on the content of the submission and what they're expecting to see.

Just to add for our audience. I am -- clearly, with interacting with patient groups, with the family members, with young patients and older patients, the unmet medical need is very, very high, and these patients are really desperate because the impact on their life is tremendous. I mean, you can have bone growing in all different parts of your body where it shouldn't be growing. So for example, in your jaw, and you cannot eat normal food anymore. Or for example, it can suddenly affect you in your hips and you land in a wheelchair or it can even compress your lungs and you can die early. So it's a terrible disease. And I think palovarotene has shown that with the reduction of the 60% in HO formation that it can probably do a lot of good.

And one of your other growth drivers or perhaps a big growth drivers, Cabometyx, and you highlighted that RCC is soon around the corner. Maybe as you approach that approval, how should we think about the switch from sort of second line use of Cabometyx into that first line and the rollout of that, and how you see the competitive environment?

So what's going to happen is that once we have the approval, we can launch basically immediately in markets like Germany where you don't need to go through the payer hurdle before you can launch. There is this first year where you need to then to negotiate, but you can launch immediately. What we are seeing is kind of 2 dynamics there. There are physicians who are very excited on this regimen because it's a very potent regimen, and it's well tolerated. It has shown great improvement in quality of life. And they see it really as kind of a best-in-class from what we are hearing. There are some decisions who's a little bit more on the fence because they want to wait because when you look at other combination regimens like IO-IO with nivo EP, we have seen that you progress potentially much faster, but there are long-term overall survivals. So perhaps you can achieve a cure with that regimen. So some of the KOLs little bit on the fence, that's kind of the more conservative ones. They think about it, okay, we want to see more long-term overall survival with Nivo-Cabo, and we are going to actually deliver that in the upcoming conferences. So we are excited about this regimen. The pool in first line is, of course, much bigger than in second line. It's typically -- when you go from first line to second line, you lose about 40% of the patients. You also have a much longer treatment duration in first line. So in the markets that are going to launch rapidly, we will see a rapid lift off. In the other markets, what we're going to see is while they do the payer negotiations, they're going to continue gaining market share in the second line. Because in fact, of this delay, the IO-IO or the IO-TKI like KEYTRUDA Oxy, they have been moving there before. And so, therefore, that creates the space for Cabo in second line in the short term. And then midterm, they're also going to go into first line.

And maybe one more for me. And there are a couple of e-mails from investors coming through. But one more from me, just on liver cancer, just to build out on Cabo. You talked about data midyear. How should we think about that opportunity? You've talked in the past about patents in China or no patent in China, but you mentioned in the presentation building out in Japan, clearly for FOP, but is there an opportunity in Japan as well for Cabo? And how should we think about the HCC opportunity?

Yes. So first of all, I think in our guidance, we have really modeled the sales for hepatocellular risk-adjusted from the Western market. So that's still an attractive market. We have launched CABOMETYX in monotherapy, in hepatocellular in first and second line, and that has seen a nice pickup. Now we are excited if the results pan out positively then also launch in the western markets there. Now of course, in China, you have a much higher incidence of hepatocellular carcinomas. The situation there is that we don't have a pattern of the molecule itself, but we see that the patent law in China are being strengthened, and we are looking into, can we have a combination patent with TECENTRIQ and that would open up also an avenue there. We are still recruiting that trial for China. So a China-specific approval is going to come. And then for Japan, that's not our territory. So we haven't built up in Japan.

Okay. Apologies. So a couple of questions. One of those is going back to FOP and palovarotene from investor. The person is asking, for FOP, I understand that the peak sales depend on the label, but could you put some bookends around the estimate?

Clearly, so we're going to guide when we're going to guide. So I think you need to just be a bit patient there.

Fair enough. Fair enough. The next question from investors on Onivyde, and they're asking for you to compare Onivyde in second-line small cell with Jazz's Zepzelca and your thoughts on the competitiveness?

Yes. Howard, do you want to take this one?

Sure. So just starting with the ORR program, we are almost completed actually with enrollment. And as David said, we're looking to potentially file in 2022. And as we said at Capital Markets Day, we have a potential accelerated approval path for that as well, which could be earlier. When you look -- I mean, within the limitations of cross-study comparison, our objective response rate is 44% versus, I think, 35% for lurbinectedin. And they actually announced that they didn't meet their endpoint in their clinical study, but their clinical study is actually with doxorubicin versus chemotherapy. It's slightly different than ours, which is a head-to-head study of Onivyde versus topotecan. So we feel cautiously optimistic about our chances, particularly because of the objective response rate we saw in the Phase II part of resilient, which was a 44% ORR.

Excellent. Maybe just moving topics and just thinking about Dysport. You highlighted, this has been a very strong growing product for Ipsen. It has seen some sort of slowdowns for COVID reasons. But maybe you could talk generally about the profile you see in terms of growth here going forward for Dysport. And then maybe characterize your long-acting product and what that can bring to the table versus [indiscernible]

Yes. Let me start with Dysport. So we have seen very nice growth rates with Dysport. Because, in fact, there are 2 reasons why you see these growth rates. One, there is a higher demand in aesthetics. We see more demand around the world for glabellar line injections. Clearly, we also just recently got the approval in China that Galderma kind of launched there. So there is going to be more growth coming from aesthetics also once COVID goes away, of course, the activity is going to increase. And then in spasticity, we are going to see further growth because of the market dynamic. So there are -- you need to really train the injectors base, and we are working on that, on doing that and expanding the injector base because there is a bit of a bottleneck in the infrastructure, and we want to really expand that. And we see, of course, also with the aging of the population that the strokes can really trigger a spasticity, multiple sclerosis, for example, can trigger spasticity and while injectors are becoming more comfortable, they can really use more Dysport. So these are the 2 factors. And I think in spasticity, there's still quite a lot of potential because as I said, the health care system today really fails these patients. And I think we need to work all together to make it happen that more patients are getting the treatment. Today, of course, on the COVID, they can't go to the hospitals and they can't get injections because the hospitals want to keep out patients that are not absolutely vitally threatened to come to the hospitals. And then on long-acting. Howard, do you want to elaborate a bit on the long-acting, why we're excited?

Sure. We're very excited about our long-acting neurotoxins. We have actually 2 recombinant long-acting neurotoxins and basically 2 strategies to deliver differentiated duration of efficacy versus standard bacterially derived botulinum toxins. And in relevant preclinical pharmacology models, these look to be highly differentiated versus traditional botulinum toxins. And these models have previously translated into the clinic. But we'll see what happens. We're very close to initiating studies with both of these in Phase I this year, as David said. So we're really excited about these and their potential to differentiate versus standard botulinum toxins.

Excellent. And one of the areas, David, you touched on was cost savings and improving the efficiency of the company. Maybe you could expand on that and sort of touch on sort of margins and how we should frame the margin debate going forward? There was some, I suppose, lack of understanding from our side after the Capital Markets Day. So just your thoughts on how to frame that?

Yes. So perhaps I have Aymeric also come in since we are being joined also by our CFO.

Yes. So David, and Richard, thank you for the questions. So clearly, I think is, as David said, we're really committed to growth first. And I think we're committed to also maintain our profitability. As we know, I mean, in the next 4 years, we're going to have a growth that will be between 2% and 5%, and we're going to face the potential generic competition for key product, Somatuline. So we see a pressure on our gross margin. And as David said, we're going to implement mitigation in terms of manufacturing efficiency to compensate as much as possible. But they're going to be erosion on the gross margin side. So we are fully committed to offset -- more than offset this decline in gross margin by generating savings on the sales, marketing, medical costs but also on the G&A cost. And at the same time, one of the top objectives, as David said too, is to really invest in our pipeline, and we want to be able to take the opportunity as you asked a question about the BD. So our R&D is going to be first dedicated to support our existing pipeline today, and we see that which will maintain the current level as a potential of sales for the next 2 to 3 years, but by '23, '24, there should be a significant decline. And that's where we need to secure additional early- to mid-stage assets to refill our pipeline. And that's going to impact the timing of the evolution of our profitability. It's clearly an objective to maintain the level that we've achieved recently.

Excellent. And Somatuline generics, you touched on them David, how -- those finish filing, how should we -- in Europe, how should we think about the timing? You touched a little bit, but sort of what's your visibility lie?

It's a bit hard to really say, I mean, we are performing competitive intelligence like any company is doing. But once you're in a regulatory process, it's hard to really get very, very clear data. It has been filed in '19, so quite a while ago. And so we need to wait now what is going to happen with any potential approval in Europe. What we can observe is that Teva did not register the competitor Sandostatin generic octreotide in more than 7 markets. And we can also observe that they penetrated between 6 and 38-ish percent in volumes but not more, and they started to stagnate that. So there might be a problem on the production capacity. So these molecules are not easy to produce in terms of API. We have also not just the API complexity, but also the auto gel, where it forms a depot under the skin. So that's also not very easy. We have also not too long ago, launched a new device which was very appreciated and greeted with very positive feedback. And of course, we have also patients power programs in place, especially important on the COVID where patients can inject at home, so that can generate those pharmacoeconomic benefits. So that's why we have to see how potential generic companies are going to launch and what they are exactly going to do.

Maybe in the last minute or so, just you touched on consumer and clearly under strategic review, but how should we think about the growth profile going forward? It's been probably quite hard hit by COVID and some price pressure. So just in general, how should we think about that growth?

So there are 2 factors. We have moved some of our former Rx drugs like Smecta into the OTC setting. And there, we had quite nice growth. We have gained market share. So we are performing well in the market share. But of course, the market has taken a hit because of COVID. People are not traveling, people wearing mask. So you have less diarrhea, you have less bacterial infections, virus infections like norovirus infections. And so these 2 factors have just depressed the market by about 20%, I would say. And we are now at the kind of a steady state on this, until COVID is going away and people are going to restart traveling and they are going to restart seeing each other. And that means that there is going to be a recovery effect, also COVID it goes away, which is going to create some substantial growth to come back with the market, and then it's the normal market growth again. So I would say, that's the growth profile of that we are seeing because several of our brands there are affected. It's not just Smecta for diarrhea, it's also, for example, Fortrans for viral cleaning, where if you have to go through an endoscopy, you will have to take that. And of course, the endoscopic examinations have been really lowered in the number, and they are going to come back also once COVID has gone away.

Fantastic. I think we're at the top of the 40 minutes. So it's been my pleasure to host you and discuss. Great to see you, and thanks everyone much for watching.

Thank you very much, Richard. Thanks for watching. Bye-bye.

Thank you very much.

Thank you very much.