KalVista Pharmaceuticals, Inc. (KALV) Earnings Call Transcript & Summary

Well, good morning, everybody. We're still running on time. So thanks for joining us for Day 1 for The Citizens Life Sciences Conference. My name is John Wolleben, senior analyst here, and we're pleased to have Brian Palleiko [ Benjamin Palleiko ] from KalVista Pharmaceuticals joining us. This is a company that we initiated coverage on earlier this year. We've been covering their hereditary angioedema space for quite some time, and I think this is one of the more interesting opportunities. I think we've seen that reflected in your stock price this year, which has really bucked the trend and done fantastically well. And I think more to come. So Brian [ Ben ], thanks for joining us here today.

Yes, I'm Ben. Thank you for having...

Oh, sorry.

Thanks for having us here. Nice to be at your conference. I appreciate the invite.

You mentioned hereditary angioedema. Talk to us about what you're working on at KalVista.

Sure. So hereditary angioedema for those who don't know, is a rare genetically derived disease. It's right around 150,000 rate worldwide. So we'd say commonly it's accepted is probably -- total addressable market in the U.S. is probably 7,000 or 8,000 people. It is treated commonly with 2 options really, one of which is to use on-demand therapies only. So basically, people feel an attack coming on, take a therapy, all of which nowadays are injectable or IV infused to truncate the attack, to stop the progression and make it resolved more quickly or they treat with a prophylaxis, which ideally reduces -- generally reduces the rate of attacks. And then -- but most of those people still have breakthrough attacks, and so they also use an on-demand. Very few people are so well controlled on prophylaxis. They don't use on-demand at all. And what we are looking to do is bring to the marketplace ideally in just about 6 weeks here, sebetralstat, which, if it's approved, would be the first orally delivered on-demand therapy. So a tremendous advancement in the space, offering all the efficacy of the current injectable therapies, but with an absolutely pristine safety profile and all the advantages of an oral tablet.

So the HAE market has been like a poster child for a rare disease drug development, has done really well. We've had more things coming to market. But I think what investors haven't really appreciated until maybe they're starting to now is that acute on-demand market. I think it's -- because the sales to prophylactic is higher. We have genericization in the acute market. But can you talk about that dynamic and the size of the acute space and how you think about that evolution?

Yes. No, it's a really good point, actually. The market nowadays, the distribution I just talked about a minute ago, about 2/3 of people in the U.S. treat with both prophylaxis and on-demand and about 1/3 treat on-demand only. Ex-U.S., which I won't talk about all today really unless you want to, is treated almost entirely on-demand. There's very little prophylaxis usage ex-U.S. The space, to your point, is getting -- the competitive intensity is going up at a fairly high clip. Right now, there's 4 therapies approved in each of those spaces, the on-demand and the prophylaxis-only market, but there's a lot of new therapies on development. And I did the math about last week or something. And potentially, there could be something like 17 therapies approved in the space in the next 3 to 5 years. So a lot of folks coming. The good news from our perspective is they're effectively all prophylaxis agents. And so in that sector of the market, which to your point, is driven by the fact that in the U.S., a lot of people use prophylaxis. The prophylaxis cost annually is quite high. They're all right around $0.5 million a year. So there's been a lot of companies focused on developing for prophy. In contrast, the on-demand space has actually had no competitive -- no innovation at all in at least 10 years, and that was an IV therapy approved back in 2015, RUCONEST. I sometimes describe us either as the quiet backwater of the HAE market or maybe a better description, Switzerland, because what you have in the on-demand space is none of those competitive dynamics. The other therapies approved are all detailed to a very low degree. No one is really aggressively going out and talking to physicians about the on-demand space nowadays. And so assuming we get to market here after June 17, we'll really be the only company going out and talking to the world about the dynamics of patient attacks and how they still occur and offering -- and getting any mind share at all with regard to the alternative for people to treat. On-demand space also has a very highly concentrated market leader, which is Firazyr, which is a subcutaneously delivered therapy or -- and it's also -- it's been genericized. There's a generic version called icatibant. That is probably 75% or 80% of patients total, the dollar volume is probably about half or 2/3 of the market nowadays. So it's a place where there really isn't a lot of attention paid to it. There's really nobody out there talking to people about it. I think we're bringing a therapy that will be absolutely dominant compared to the alternatives. And so we fully expect that we'll have a very -- the great combination of a high level of mind share among both physicians and patients with a therapy that actually can meaningfully enhance the treatment experience for people living with HAE today.

Can you tell us how sebetralstat works and then the clinical data? Can you give us a high-level overview about what you've shown in your program?

Yes. So there are really 3 targets for HAE. It's a fairly straightforward cascade. The 2 that are most commonly addressed nowadays, really, there's one that's dominant, which is plasma kallikrein inhibition. And basically, it attacks in a very simplistic way, attacks progress from what's called Factor XII activation to plasma kallikrein generation to bradykinin generation. And bradykinin is the bottom of the cascade, that's what actually leads to the swelling. Plasma kallikrein sits in the middle, and it's far and away the most popular target for therapies other than what's called C1 inhibitor replacement, which is what the IV therapies typically are. It sits in the middle and it's attractive as a target for a couple significant reasons, one of which is if you inhibit plasma kallikrein, you can actually inhibit the cascade going in both directions. And we've shown that sebetralstat as a plasma kallikrein inhibitor, first of all, prevents the creation of bradykinin, which is the ultimate instigator of the swelling. But also it has a feedback loop where inhibition of plasma kallikrein can actually inhibit or reduce the amount of Factor XII generation. So you get this more holistic impact on the attack progression of the attack cascade. And so that is probably the primary reason that plasma kallikrein as a target is so attractive. And again, most of the approved therapies nowadays target plasma kallikrein. Bradykinin antagonism sits at the bottom, Firazyr, the other on-demand therapy, notably is a bradykinin antagonist. There's one other company working on a bradykinin antagonist for both prophy and on-demand usage. It's obviously a valid mechanism. It's never been tested really chronically, though, in the prophylaxis space. So there's probably more to come on that. There's probably a little bit of a -- there's probably some open questions, more questions on safety with regard to bradykinin antagonism. The other key benefit of plasma kallikrein inhibition is it's utterly safe. Again, you've got thousands of patients, decades of experience in that. And there's absolutely no question that inhibiting plasma kallikrein has no deleterious effects in any other respect.

And can you remind us of your clinical data package?

Yes. So we expect sebetralstat, if it's approved, to be approved on the basis primarily of a single Phase III study. We ran that. We announced data on right a little bit over a year ago, about a year in February of 2024. That followed up a very well-designed Phase II study that announced data in 2021. Both of those studies were the largest of their type ever conducted in HAE. Now that's -- admittedly, that's a fairly low bar. The Phase III -- the Phase II was 53 patients. So it's a small space with small trials. But we've run at this point, the largest clinical development program ever conducted in HAE in terms of total numbers of patients, and I think actually in terms of total number of attacks treated and in terms of just the breadth of the patient population we've shown it in. The Phase III, in particular, what I would describe is a very differentiated, effectively groundbreaking study in HAE because of the way it worked. It was the first study in a number of different respects. Well, first of all, it was the largest Phase III, as I said, ever conducted, but it was also the first study to allow patients to treat all of their attacks. Every other study that's ever been conducted before or since requires attacks to get to at least a moderate level of severity before treatment. And that's basically done for clinical trial purposes. It's not really beneficial for patients because what it excludes are these attacks that are in this mild or mild-to-moderate range. And the problem is that's a lot of attacks. That's probably 40% plus of attacks, and they can actually be the hardest ones to show a clinical signal in, but they can still be debilitating. And so these other studies all effectively ignore this attack type despite the fact that, that's actually really important from a patient welfare standpoint. So we're the first [ study ] to do that. We also included adolescents in our study. And at the moment, there's only one other therapy approved for adolescents since IV delivered. So we're -- and adolescents have a very high rate of attacks comparatively because the disease really takes off in -- right around puberty, largely because of the hormonal changes going on then. So adolescents have almost the worst combination of relatively high attack rates and really no desirable therapies. We included adolescents in our study. We also allowed attacks of any location to be treated, which has not been commonly done. Laryngeal attacks can be -- are a relatively low proportion of attacks, but they're very problematic and occasionally, they can be fatal if they're not treated. We include laryngeal attacks on our study. And we've treated now, I think, the most laryngeal attacks of any company ever in the space. And then last but absolutely not least, we allowed people on prophylaxis to be in the study as well. And so no one else has ever tested their therapy in combination with prophylaxis to see what happened. We showed very robust data on top of all the other -- well, the 2 major prophylaxis therapies. And so that's important. So -- and we showed what I said earlier, has been an absolutely pristine safety profile throughout the entire development program. So the clinical data package, I guess, I would -- in summary, I would say, is extraordinarily robust. It's deep. It's broad. It's meaningful. It shows clinical differentiation from the other therapies out there. I mean it's certainly on par with the injectables, if not superior to them. Like I said, the safety profile has been pristine. And so as we roll out to market, the thing I like about this is unquestionably, no matter who -- if you're living with HAE, no matter how severe disease is, what else you're treating it with, how -- where your attacks commonly have, how severe they may be, anything, we've actually shown data that this can work for you in a meaningful way. And I think that's going to be a really significant differentiator now and in the future.

Can you talk about how you expect sebetralstat to be used in the real world? Because I think there's 2 dynamics. There's today where there's injectables that people don't like to use and they choose not to use them for a variety of reasons. You could -- it would be helpful to hear why. But then you have sebetralstat, which is easier to use. And then in your trial, you saw people treating mild attacks, which I think usually go untreated today. What were the instructions in your trial to treat? Or was it treat however you want? Because it was also in line with treatment guidelines, which say treat early, treat every attack. So how do we go from what's going on today versus what happened in your trial and what will happen in the future?

Yes. No, that's a really good question. The -- you're right. I mean, I guess I didn't say this before, but our trial was specifically designed to tie into the HAE treatment guidelines, which are exactly as you say, patients who consider treating every attack and when they treat, they should treat early. Neither of those things are actually done nowadays. It's commonly known accepted that only about half or 2/3 of attacks are treated nowadays. And I'm not suggesting that every attack should always be treated, but certainly more than half or 2/3 of the attacks should be treated. And that's an important issue in the patient world nowadays. Why don't they treat attacks? Largely because the current therapies are just too much of a challenge for them. I mean either they're IV delivered, which has got a whole set of problems on its own, but -- or there icatibant, Firazyr. And that's an efficacious drug if it's taken early. But the problem is it's injectable, so it hurts. It's really acidic, so it hurts as it disseminates. It also almost uniformly causes what's called an injection-site reaction where people will get the swelling at the site that can last for several hours and be quite painful. And because commonly, these drugs are injected in the abdomen, if people are experiencing abdominal attack, which is right around half of all attacks anyway. On top of the abdominal attack, pain, which can be severe, they have the additional pain of the treatment. So what you find -- and then you find these other just logistics of life getting away. It's a prefilled syringe. It's kind of bulky to carry. You've got no good place to put it. You can't just leave in your car. It's not always supposed to get hot. So you got all these challenges that result in people just not wanting to take it when they have an attack because they hope the attack won't be too severe potentially or because they don't have it with them. And so this is -- the treatment rates are truly really, really much lower than they should be. In addition, it's been shown that when people do treat, they treat entirely too late. On average, people rate around 3 hours to treat an attack nowadays. And HAE is interesting in that. There's this kind of golden hour when the attack is starting, and it really hasn't progressed yet because these attacks do kind of escalate in a kind of a sine wave fashion. And people know they should treat early. I mean it's commonly known. And if you treat with Firazyr early, it works well. But because of all those challenges I just talked about a minute ago, they just don't treat early enough. And so you have these folks waiting hours before they treat for whatever reason. And once you have swelling, these attacks do not resolve swelling. They are not diuretics. They don't -- that is just a biological process. And once your arm is expanded or you're having abdominal swelling, that's just going to take time to resolve. And untreated attacks or late-treated attacks might go on for 2 to 4 days. And so -- and people know this, but they just don't treat enough attacks. Clearly, our plan is to bring an option that is a tablet. It's really well sized. It's in a nice little wallet, so you can kind of keep it handy with you. And in contrast, what will happen is I'm sitting here now and I feel an attack coming on. It's much easier to reach in your pocket, pull out the tablet, take it. You don't even need water to take it, and treat it that way very early. And thereby, again, just shutting off the progression of the attack and making it now expand to the point where you get to significant swelling as opposed to having to go find a place to do a syringe and deal with all these other challenges.

How quickly were people treating attacks in your clinical program?

Really fast. The Phase III study is a Phase III. So there's packaging issues and there's diaries. They have to fill and all those stuff. And the Phase III, they treated right around 40 minutes from attack onset, which is pretty good compared to the 3 hours. In the open-label extension, where we've now treated something north of 2,000 attacks, again, the most ever, I think, anyone is treated in the clinical trial setting. On average, they're treating within 10 minutes of attack onset, which is remarkable in and of itself, but exactly what should happen.

It's like I'm sitting with my pill next to me, right?

I mean, honestly, I mean, what that means is they're carrying it with them, right? It's in their pockets, in their glove compartments, in their backpack, whatever. It's there when they need it. And that gives you just tremendous benefit. And they're treating -- by the way, I should also point out, they're treating something like 85% of their attacks nowadays in the open-label extension. So that 50 -- whatever it is, 2/3, let's call it, goes up by something more than 20% to the 80s, which is also exactly what should be happening.

Big picture, you're trying to treat attacks, and we have a whole other class of drugs and more coming trying to prevent attacks. How do you -- to that argument that your market is going to go away, what's the counter to that?

I think there's probably 2 things. One of which is there's been very good prophylaxis available to people for certainly 10 or 12 years nowadays. Cinryze came out in the early 2010s roughly. And in the clinical -- in the real world, it's probably got a 70% or 80% attack reduction rate. It's a good drug. Takhzyro came out in 2019. It's probably somewhere in the 80s to low 80s attack rate reduction. It's a marginally better drug. It has a better dosing profile, right? Cinryze is a couple of times a week. Takhzyro is a couple of times a month. Orladeyo launched in 2021, it's a tablet, it's daily. It's got lower attack rate reduction rates, but it's done quite well. Despite all of that, at least since 2019, which is about as far back as we can go, on-demand scripts have been essentially flat. There's just -- there's been no change in on-demand usage. And that reflects the fact that people aren't in droves going to prophylaxis. Again, they've had 10 years to switch to prophylaxis if they liked it. So that 1/3 of people who only treat on-demand seems to be pretty stable. Like I think they're content, and there'll be more content in the presence of sebetralstat. So that's my first data point. You've had some good innovation, very good drugs come along, high quality and on-demand has still got the same rate of usage as you had way before they came out -- or actually, that's not true, when they -- when some were there and better ones were coming. The second thing I'd say is if you look forward, again, there's a lot of therapies, right? Again, 4 out there now, 7 on the horizon, 2 of which will be approved in the next quarter or so. You're going to have a lot of players out there. But if you actually dig into the data, they're all good drugs, but none of them are dramatically better drugs. They all have attack rate reductions in roughly the same area, this kind of mid-80s, maybe high 80s. And in clinical trials, some will show a little bit higher, but in the real world, that's probably not going to be the case. But my point being, they're all kind of the same. What's differentiating all of them is just different dosing profiles, right? Now you're going to have twice a week or twice a month or once a month, maybe once every 2 months, but probably not or maybe once every 3 months or maybe 6 months. And there's a couple of folks coming out there and they have gene therapy at the far end, which is a whole different game. My point is none of them are going to fundamentally change the patient experience, right, except by making prophylaxis less -- some marginally less burdensome for them. And so whether -- again, this comes back to my Switzerland comment from a few minutes ago, we have shown in our Phase -- in our open-label extension that we work very well on top of Orladeyo and Takhzyro, which are plasma kallikrein, well once an antibody, once an inhibitor, prophylaxis therapies that are the 2 most popular therapies in the space nowadays. We will work, I'm quite sure, just as well with the other therapies coming along. And I don't see anything that's going to -- in the therapies to come that's going to fundamentally make these breakthrough attacks reduce in any meaningful way.

And then you mentioned PDUFA date around the corner a few weeks from now, June 17, I believe.

Correct.

How has that been going? We're hearing stuff in the media every day about FDA falling apart. What's been your experience? Any comments about communications, timing?

Yes. We haven't seen any of that. We're in regular contact with our regulatory program manager who's been routinely responding to us. We know factually that our lead medical reviewer is still there and the team that has been doing our review, we have been told this remains intact. The key parties that we've had to engage with have all been there. The FDA has been consistently timely in their responses to us. They have not missed any deadlines that they were expected to meet. And so as far as we know, we're just completely on track. None of this -- obviously, everyone hears about this software. We have, in a firsthand way, observed none of it.

Good. It's reassuring that the sky isn't falling. Can you talk a little bit about payer research and their understanding of sebetralstat, the unmet need and then kind of pricing bands you've been talking about, because I think that's the other interesting component with the generic out there? How does that fit into how this could be utilized or any restrictions?

Yes. The other benefit of on-demand is the fact that from a payer perspective, it's not the big -- it's a subset of a category they don't manage super tightly. That's actively right. And so when one of our interactions with payers, one of the things it shows is that what they're really more focused is prophylaxis, of course, because the cost of prophylaxis is just at a baseline dramatically higher. So when we talk to payers -- but obviously, you don't coast on that. When we talk to payers, we talk a lot about the value proposition, right? It's all the things I talked about. It's the fact that the data is good and the safety is really clean, and that people can fundamentally treat their attacks in the way they should in a better way. And payers care about cost, obviously. But the payers also care about patient outcomes. And they are trying to -- what they're trying to do is optimize patient outcomes for a cost basis. And so when we go in and we talk about the data and they know all this information about how people should take Firazyr, but don't and they take it too late, right? If you take Firazyr 3 hours after attack truncated, effectively, you've just wasted that money because you're not going to get any benefit from it. So payers acknowledge all this. And so when we go in and we talk to them about where the branded pricing is nowadays and how we'd expect to fit with in that framework, we don't really get any dramatic pushback. They know the value proposition is there. We're not trying to price it in some extreme level compared to what's out there nowadays. And we can offer patients better outcomes and all of which means that they're not distressed by this. And so as a result, we think our formulary access will be certainly on par with everybody else.

You did say icatibant, the generic is 75% to 80% of the market...

It is. But there's -- I mean, yes, so it is -- and the pricing is very low, I mean, right, icatibant is priced probably 1/4, let's say, maybe 1/3 of the branded Firazyr. The -- but that doesn't actually come into play. I mean there's lots of markets, migraine being a commonly used example where you have generics, but branded therapies launch and do quite well. We don't have to price against the generic therapy, and we're very comfortable about that. And by the way, as I said, there's plenty of branded therapies out there nowadays that also equally don't have to compare against the generic. Ex-U.S., that becomes more of an issue. But in the U.S., it's absolutely not.

In the last minute or so, one thing we're trying to wrap our heads around as we're thinking about a launch is this isn't a typical start a drug, stay on it, get count the patient. Can you talk about the potential choppiness? Anything you've learned from how patients treat attacks over time in your study? Or does demands outweigh that choppiness, like because you need attacks to treat and we don't know when they're going to come? So how should we -- how should investors think about a launch curve in a market like this?

Yes. I think in a smooth sort of way, it looks like the Firazyr launch did or someone like the Orladeyo launch did. I mean maybe not the dollars basis, but certainly and how the curve kind of goes. I will -- you are absolutely right, though. The average person living with HAE has right around 2 attacks a month. That's commonly accepted. And so -- but obviously, in the small end, you can deviate from that dramatically one way or the other. And so we're very cognizant of the fact that if you -- certainly, at some point, the law of large number says you get to that average and you kind of go from there. But in the early days, it's certainly likely to be the case, I will say, in fact, where you could have prescriptions higher than that basis or lower than that basis because to your point, people have to use it. Now once people get on their commercial plan, right, there'll be more routine and develops because most payers actually send a certain number of doses to people per month. So this all kind of gets back to the mean over time. But yes, in the first, whatever, few months, it could be meaningful variances, plus or minus, just based on what the actual commercial pay transition is and what the actual usage rates are. But like I said, and that -- as the patient number gets bigger and as you get on formularies, that all smooths out. Now we'll be talking about these numbers. I mean there won't be data to track, especially because QuickStart program for sure doesn't go through IQVIA. So we'll be reporting these numbers. But it could -- if people aren't prepared for that, right, it could -- it will probably look different than a prophylaxis set of curves. And so we do like to highlight the fact that, that's just inherent in the way it works. We're very confident it will smooth out over time, but there could be excursions. There almost certainly will be excursions early.

Yes. With our checks, I think docs that they expect 50% of their patients would prefer sebetralstat. So that demand long term is going to push everything higher...

Yes.

We're just running a little bit over, Ben. So thank you for giving us the overview. We got about 6 weeks. We're setting our calendar sort of on the date. We're looking forward to the approval and the launch, and we'll catch up, I think, at least once before then, but definitely in mid-June.

Great. Thanks again for your time.

Thanks, Ben.