Merck KGaA (MRK) Earnings Call Transcript & Summary

Good day, and welcome come to the evobrutinib RMS update call. Today's conference is being recorded. At this time, I would like to turn the conference over to Constantin Fest. Please go ahead, sir.

Thank you, Margaret. Yes. Dear ladies and gentlemen, a very warm welcome from my side. My name is Constantin Fest, Head of Investor Relations here at Merck, and I welcome you to this evobrutinib update call. It's great to have also here on this call, Luciano Rossetti, our Global Head of Research and Development; and Rehan Verjee, our President of EMD Serono and Global Head of the Innovative Medicine Franchises. In the next roughly 15 minutes, we would like to guide you through the key slides of this presentation and the following 15 to 20 minutes, we would be then happy to take all of your questions. As stated before, today the focus is on evobrutinib. And I would kindly ask you to reserve all your non-evobrutinib-related Merck questions for our earnings release Q4 and full year '19 earnings release in 2 weeks on March 5. Having said that, I'd like to now hand over to Luciano in order to kick off this presentation. Luciano?

Yes. Thanks, Constantin, and good afternoon, good morning, depending on where you're located. A warm welcome to this conference today which will focus, as mentioned already, on an update on evobrutinib, and specifically on our plans for the multiple sclerosis indication. My name is Luciano Rossetti, and I am the Global Head of Research and Development at Merck. I'm sure most of you are very well acquainted with our disclaimer that is printed on Slide 2. Nevertheless, let me highlight that all statements made in this presentation, with exception of those based on existing Phase II data, are all, of course, forward-looking. Associated risks and uncertainties include more restrictive regulatory requirements, risk of R&D and the risk of discontinuing development projects and regulatory approval. As you know, we cannot be certain that the anticipated results will be realized or even if it's substantially realized that they will lead to the expected consequences for our business. While we are under no obligation to revise such forward-looking statements, we will, of course, continue to solidify our understanding of the assets over the upcoming months and as such, we will make sure to keep you informed as we gain access to even more clinical data. Having said that, being the company that pioneer the use of BTK inhibitors in the treatment of RMS, we draw on an extensive patient database on more than 1,200 patients, spending over a period of 2-plus years, and you're going to hear a lot more later about this database. And now I want to introduce Rehan Verjee that will set up the stage for this conference.

So thanks, Luciano, and hi to everybody. So we're going to go to the agenda slide. And what Luciano and I want to take you through today is just a reminder of the way that we see the unmet need in MS and why we believe evobrutinib and BTK inhibition potentially has the opportunity to meet those needs. We're going to share with you the efficacy and safety data. This is an updated data set, representing now up to 2 years' worth of follow-up of not only safety, but of course, as we said, the efficacy, looking at clinical parameters and the traditional paraclinical surrogate markers in MRI. We're also going to then share with you I think our plan in terms of how we plan to continue to accelerate the development of evobrutinib and ultimately ensure its rapid introduction into clinical practice. And then finally, actually, just focus on some next steps because, as you know, the evobrutinib program is quite broad. We have additional studies also on the development in indications where we think BTK inhibition could be very valuable. And we'd just like to focus on those for a minute as well so that you understand some of the upcoming catalysts I think in 2020. Okay. So focusing I think on the unmet need. So now on to the next slide. As we look at the relapsing MS, in particular here, we definitely see that there's a need for new mechanisms to control the disease. And this is underscored perhaps best by the fact that even when you look at today, the most efficacious therapies, around 50% of patients continue to have ongoing residual disease activity. That's both clinical residual activity and MR residual activity. And so this -- what this really says is that there's a need not only potentially for more effective treatments, but certainly a need for potentially new mechanisms that could potentially address that residual disease in patients where high efficacy therapies are currently not basically fully suppressing the disease activity. In particular, we do also think that there's an opportunity, therefore, for agents that not only work on the peripheral immune compartment, but could potentially obviously get into the brain and address I think some of that resident CNS inflammation. Oral therapies are obviously incredibly important. We know the convenience of an oral therapy. It can be a major driver I think in treatment choice. And if you look today, basically, at the higher efficacy therapies and even the higher efficacy therapies in development, you see that basically, ultimately, specifically, I think if you just look at today, only 2 of the available agents are basically oral when you look at the mechanistic classes, right, the S1Ps and Mavenclad. So I think developing a new category of agent that can also be administered orally could really meet an unmet need and I think help basically more patients ultimately get on to a highly effective therapy. I think it's also important to underscore that there is no oral therapy to date that has actually demonstrated efficacy on progression versus another active therapy. And we think this is an important path to cross, okay? And then when it comes to benefit risk, we're also very aware, as you all, the systemic side effects obviously impact patient's ability to initiate and ultimately basically sustain and persist on their treatment regimen. And when you look today at the higher efficacy therapy that -- many of them are also associated with a pretty profound impact on the immune system, which come back as infections. So ideally, if we could basically have a therapy that control the disease, was oral, didn't have systemic side effects and didn't basically drive a significant increase in infections, you might be able to meet a true unmet need in the field of MS. So now if you go to the next slide. I'm going to summarize a little bit why we think evobrutinib actually meets that need. And then I'm going to hand over to Luciano, who's going to walk you through I think more of the data to actually substantiate some of these points. So I think the first point is that evobrutinib is a highly, highly selective BTK inhibitor that was discovered in-house. And of course, we were the first to put this into clinical trials, randomized clinical trials to validate its potential in MS. The map of the kinome, I'll leave Luciano to discuss. But I think even when you look at it, it's incredibly, incredibly clear that our in-house team have done a phenomenal job to make this incredibly, incredibly selective. As a small molecule, evobrutinib also does cross the blood-brain barrier, and I'll let Luciano touch on that a little bit more. And most importantly as well, when we looked at animal models, it also demonstrates incredible occupancy within the brain after a period of time, suggesting its potential to really have not only the peripheral effects, but also the CNS effects. From our 96-week data, so that's now into 2 years, we've got very good confirmation now I think on the clinical profile, in particular the efficacy profile on the relapses. And this is really important because this is enabling us to actually really, really estimate I think the potential effect size and of course, basically ensure that we have the right clinical program and have high confidence that this is an agent that is going to meet a high bar in terms of beating that active control and potentially delivering I think on a therapeutic target profile of demonstrating I think impact on progression versus that active control. I think what's also really important is as a consequence I think of the robust randomized clinical trial program that we have in MS, we've been able to really do a lot of the required analyses and actually really optimally select the dose, again, to ensure that we get I think the maximum response from the maximum number of patients that we possibly can and, thus, I think maximally deliver I think on the target profile that we're aiming for. It's also important to underscore, as we said, that evobrutinib is not only being trialed in MS, but that we have a comprehensive trial program. And so we have very good characterization I think of the safety profile. And for TKI, this is incredibly, incredibly important because now the safety database is giving us a lot of precision I think around the safety profile and how we can ultimately manage and optimize the development program and ultimately, in clinical practice. And as you know, basically, we have initiated a Phase III program in MS. And the whole principle underlying, I think, our Phase III program was to make sure that we get there quickly and that we get there with very high POS. And that is something that we covered extensively, I think, at the R&D update call, I think, earlier basically, in 2018. So with that, let me hand over to Luciano.

Yes. Just wanted to -- thank you, Rehan. I want to recapitulate to what you see in the kinome tree, the exquisite selectivity of this particular kinase inhibitor. Virtually at 1 micromolar or less, it's really hitting mostly exclusively the BTK and really no other kinase to a significant extent. Let me move now to Slide 6 very quickly. The selectivity of the molecule, the reversible nature of the inhibition and some of the preclinical data that Rehan has very -- start to summarize for you drove us to get involved into a very comprehensive clinical development program that, we've mentioned already, involved Phase IIb trial, randomized control trials in multiple sclerosis as well as trials in lupus and in rheumatoid arthritis with evobrutinib. Here, we want to just to give you an update. We were basing a lot of our planning that you're aware of based on the primary end point of our Phase IIb trial. It was based on 24 weeks data, mostly imaging data based on MRI, but also on some initial signals of efficacy on annualized relapse rate. Here, I wanted to give you an update now that we have data, obviously, 48 weeks blinded extension and also an additional 48 weeks of an open extension with very high participation in this extension. You can see on the left panel that we are much more convinced and even more committed to the efficacy of evobrutinib in this setting. We really see a monoclonal antibody like of efficacy with annualized response rates that are in the 0.11 recurrently both at earliest, by the time points, but also at the end of this extension. So it's very sustained effect and very similar to what has been observed with the most potent monoclonal antibody, the antiCD20. In the middle panel, you can see what you already have seen before that to the onset of a very, very robust effect on the T1 gadolinium lesions by MRI, first with very robust effect, but it's also extremely rapid. At the very first MRI, at 12 weeks, you can see this effect already maximized, and that was reported previously but I wanted to reemphasize, while the placebo, very important to have a placebo in this setting, really didn't show much changes, especially at that time point. So very clear. Then I want to recapitulate a little bit on the right some of the important point that this molecule has direct CNS in addition to peripheral effect. There is an impact on B cells, but also myeloid cells, so affecting both adaptive and innate immunity. And this has a -- play a role in the pathophysiology of MS. Most likely, we're looking mostly at the effect on B cell at this early stage, but we might have additional benefits coming after longer exposure. It crosses the blood-brain barrier to a certain extent and very importantly achieve brain BTK inhibition receptor occupancy, particularly in animal model of MS, but also in healthy mice. And therefore, we have demonstrated also some signals and further confirmation that this translate in an impact on CNS resident innate immunity cells as well as peripheral immune component trafficking into the CNS. Let's move to Slide 7 because I think this is probably one of the most important point. Many of us have been involved in several large Phase III program, and I feel it's very, very important to have a full characterization of the safety profile, especially of novel mechanism in a new disease like we are pioneering with this BTK inhibitor in MS. We have now a very robust evidence, as I mentioned, up to more than 2 years follow-up, but also evidence emerging from other trials for 1,200 patients exposed to pretty significant duration of exposure to multiple doses of evobrutinib. It's well tolerated, and we don't see any new safety signal in the 96 weeks extension follow-up. The long-term exposure to evobrutinib, in addition, really didn't result in any systemic side effects, including any signal of serious infections or lymphopenia, that is consistent with what we know actually about the mechanism of BTK inhibition and evobrutinib. The systemic side effects that you can see with some other oral treatment like GI disturbances, cardiovascular and others have not been observed so far with evobrutinib in this very large safety data set. LFT elevation occur in a minority of patients. But importantly, even in this very large cohort and follow-up, remain a lab finding reversible, but also largely restricted to the first 6 months post starting of treatment -- actually, in a window between 4 and 6 months. So this should be monitored very appropriately with just blood testing in this particular window. Finally, I think this comprehensive safety characterization is a very strong base for us to move forward in a Phase III trial with large confidence about the longer-term performance of this molecule in different settings, and this is derived, as I mentioned, from multiple Phase IIb trial. Let me move to Slide 8 and tell you based on this really robust efficacy data -- and I'm not referring only to the data on the imaging that was obviously very easily detected both even at the 12-week time point, but the continued and sustained effect on annualized relapse rate, that is the major end point of Phase III trial, our confidence in the precise characterization of the effect size of evobrutinib at the dose that we have selected for a Phase III trial into the projection of performance in a Phase III has increased quite significantly compared to when we had just the initial data on the primary end point of the trial. There was really a major factor in late December when we start having data from the extension that we start planning on the feasibility and the consideration to alter the Phase III design. The second part is that while Aubagio was considered a higher bar than the initially selected Avonex, most important, we now have emerging data from comparator study using Aubagio presented at the last ECTRIMS, in particular. They gave us even more precision about how to plan a study vis-à-vis Aubagio with the update and information on the confidence interval of our own end point related to evobrutinib. This consideration led us to make changes that were as minimal as possible in terms of the overall design of the trial. But to alter and change the active comparator from Avonex to Aubagio, that obviously being an oral treatment is also facilitating the execution of the trial. So we're going to go forward with the 2 new study versus Aubagio, fundamentally unchanged study design. But we can keep now the probability of success of this Phase III trial because we have assumption about efficacy and actually increased confidence about safety vis-à-vis the comparator Aubagio that we can count on. Finally, the overall cost of the trial has really not been changed dramatically. I want to also emphasize that because of the feasibility analysis we started in December, we now feel very confident that the completion of the trial also will now be changed compared to the original plan and be possibly in the fourth quarter of 2023 that we will get data in-house. We have a broad network of sites, more than 400, that already are enrolled and site activated. And these sites are basically largely more than 90% highly willing to continue the trial and shift to the new comparator. In addition, we have identified additional sites that are going to be added to this. So we start with a very, very good baseline in terms of getting the Phase III started. I want to now give the word again to Rehan for the summary.

Okay. Great. Thanks, Luciano. So just to finally summarize, I think we have the only BTK in MS with up to 2 years of very compelling efficacy and safety data obviously from a placebo randomized controlled trial. We've got optimal dose selection on the basis obviously of the clinical and MRI data that came out of that trial. So we're very confident I think in how we're now moving forward I think into Phase III. Our Phase III program is designed to ensure rapid and high POS entry of evobrutinib into clinical practice and of course addresses the vast majority of patients with active disease. So we anticipate obviously to -- what we target, a broad label. And I think it's also important to underscore that our MS franchise is incredibly strong. At this stage, we have a real gold standard therapy in terms of interferon with Rebif. We have introduced a novel high efficacy therapy, which is mechanistically unique, that is making good progress into clinical practice in Mavenclad. And we anticipate that both of these agents will continue to be agents of choice in their respective segments and ensure that we basically can follow on with a very, very strong competent introduction of evobrutinib once basically the study is complete and ultimately we secure registration. So what's coming next? So what's coming next is that the study design that Luciano has shared is going to be presented at the American Academy of Neurology by the Steering Committee. We're obviously going to start and really accelerate recruitment into these modified studies given the profound site engagement and all of the work that we've done up-to-date on the initial design. We're going to share the detailed, more detailed data I think from the randomized controlled trials, some of which Luciano shared with you here today, at an upcoming medical meeting. So you will see that at some point in later this year. And of course, we're also excited and waiting for the clinical data from the randomized controlled trials in both rheumatoid arthritis and in systemic lupus. And of course, we expect to be able to communicate I think on those potentially within the first half of this year.

Great. Thank you very much. I would like now to take your questions. Thank you.

[Operator Instructions] We can now take our first question from Matthew Weston of Crédit Suisse.

Three questions, if I could, please. Firstly, can we just dig a bit deeper into the reason for the change in the comparator arm? Was this in any way related to Sanofi announcing its trial design and you seeing centers more interested in an oral comparator? Or was this really driven very much by Merck's data relative to Aubagio and increasing confidence? I'd be very interested in that decision. Secondly, in the slides, you make it clear that you believe that evobrutinib is brain penetrant. One of your key competitors in MS with a BTKi believes that they are the only people to have demonstrated that in a human model rather than in a rodent model. So can you tell us whether or not you've also got data in humans around brain penetration? And what gives you confidence that you believe your molecule is brain penetrant? And then finally, a quick one. You set out your plans for relapsing remitting MS, any plans for PPMS or SPMS?

So Matthew, Luciano here. I'll start a little bit quickly on the first one. It's very easy. I think I mentioned very clearly that the availability of internal data on the real sustained efficacy related to annualized relapse rate was cut off in September, and we got the data in-house towards the end of last year. At that point, we started to be responsible in immediate feasibility analysis of how a change in the trial could maintain the time line and reasonable costs in getting us as rapidly as possible with a very strong design to regulatory agencies. So even just in terms of time line, this has absolutely nothing to do with the competitor decision to move forward in a similar fashion. I emphasize once again that, however, one major part of the feasibility was that about 400 sites that we have validated and activated were highly willing to switch to this new design. So major push for the design change is what I described, Matthew. The fact that it's true that we had a very robust effect on annualized relapse rate with one of the doses of the Phase IIb, the 75 BID. But on the other side, the level of confidence was a little bit limited by the fact that there was large confidence interval, and we were looking at just 1 or 2 early time points. By seeing with a lot more relapsed observation and event, this very dramatic and sustained efficacy throughout really have changed our level of confidence. And also, we could do the study now with the sample size that actually is absolutely similar to the original one or actually a little bit lower. So I think that was really the driver for that. The second part, I have been involved in discovery for a long, long time. And I think that the brain penetration is actually pretty well predicted. We can make a lot of argument about the predictability of some of this model, but the annual data are probably sometime more robust that they just have been able to demonstrate some of the molecule into CSF or elsewhere after a certain period of time or even a short time and whatever ratio you see. The tough part is that the ability of these molecules to really have a robust effect on CNS biology is clearly partially demonstrated in animal models of the disease. And they are not limited to the brain penetration, they are also due to the trafficking -- because of the irreversible nature of the binding to the BTK, the trafficking of immune cells into the brain. And they dramatically affect the inflammatory status in the CNS. Just to give you a piece of information, in animal model of MS, the BTK occupancy after more than a week of treatment in the CNS is 100% with evobrutinib. So let's not just focus on the brain penetration. That is very similar with different molecules that we have studied in our own lab. And the preclinical is pretty clearly predictable. I think regarding the strategy to go forward with RMS, I can start but I think Rehan needs to comment more. It's pretty obvious that the proof of concept of our Phase IIb trial that really drive the eagerness of developing drugs mitigating to this indication is really very robust and give us a very high probability of success in this particular setting. Whether and how and when we are going to decide to go into a proof of concept and a development program in other indications is something we continue considering. Rehan, do you want to add to the strategy?

Yes. No. I think just to really confirm, Luciano, what you said from that perspective, our major focus has always been to make sure that we deliver the medicine I think as well characterized as possible and as with high POS I think as possible and as rapidly as possible into clinical practice. So that means, of course, really focusing on those patients where we have robust evidence that we're really impacting I think the inflammation and ultimately, of course, impacting the correlated clinical parameters. So if you think about it, in the scheme of things, at the moment, it's really -- our program is covering 75% I think of MS patients and about 90% of patients basically with active MS. When you look at the data so far basically in progressive trials, be that primary progressive MS or SPMS, you'll see that really the impact that those agents are really making. And this is recognizing some jurisdictions I think in the respective labels is really basically in those patients where you truly basically have real activity. So I think what we are doing at the moment is, of course, we're being cautious I think in terms of not jumping into areas where, at this stage, there's very limited evidence and where we could pursue a big clinical program with potentially low POS, but at the same time, yes, actively basically engaging in discussion about how we might potentially go about this. But again, I think the real focus really of -- and the real value I think of the program is going to be in that 75% of MS patients and ultimately in the 90% of active MS patients that we currently have basically encompassed in the program.

We can now take our next question from Richard Vosser from JPMorgan.

A couple from me. So just firstly, just thinking about something you said around the fact that patients don't get to a disease control. So by the time you come to market, a good proportion of patients probably have tapped by a CD20 agent. So just thinking about the future, do you actually need to study these agents in CD20 failures at some point? Is that going to maybe affect uptake in the long term? Second question, just on a little bit more detail on the liver enzymes. Luciano, you highlighted that the majority of the liver enzymes are seen during the first 6 months. Perhaps you could characterize what you're seeing beyond 6 months and maybe beyond 48 weeks to 96 weeks and also, what you're seeing in the lupus RA program. And then final, just to -- it has to do with the change in trial design. Of course, you now have very similar trial design to your competitor, Sanofi, as Matthew said. How should we think about the recruitment there given both of you will be trying to recruit the same patients? Do you think that makes it more difficult than maybe giving investigators a choice to go up against something else like Gilenya or Tecfidera?

So why don't I start just in terms of the unmet need? So look, I think you're absolutely right, Richard. I think as we consider basically the evolution of the treatment landscape, we see increasing penetration of high efficacy agents. And a lot of that increasing penetration is going to be driven by the antiCD20s and expansion, to a certain extent, of the S1P class and, of course, we believe also increased utilization of Mavenclad, right? So in the future environment, around 60% plus of patients are going to be receiving one of these high efficacy therapies, and the antiCD20 class is going to be a big component of it. We believe that I think if we hit the profile that we're aiming for and if we really validate I think what we've seen in this robust randomized Phase II clinical trial in terms of that profound impact on relapses, profound, with daily oral dosing, that rapid onset of impact on the MR, then ultimately, we have a very good chance to actually displace infusions and injectable therapies and actually basically really become the new standard of care when it comes to basically trying to address MS by targeting obviously the B-cell pathway. So I think that's important. But of course, yes, we'll continue to robustly characterize obviously evobrutinib once we're in the marketplace and make sure that we generate data in and around I think its utilization in multiple different settings. But the primary focus would be ultimately the core program in -- to ultimately and to displace obviously some of the current high efficacy therapies that are there. Okay. Let me hand over to Luciano for the next.

Thanks, Richard. The question on LFT is pretty simple. Across all the different indications, we have seen really an onset of LFT elevation only in that particular window. That's particularly important because we have now a pretty robust data beyond that window, and we have not seen a new onset. We only see it obviously in the patient that are switched, for instance, from the Tecfidera active arm into evobrutinib, but that basically is in the same window that we are talking about. That's actually a new information that we feel is a lot more validated in our end than before. The second validation is obviously 1,200 patients might not be enough, but we continue seeing this as an important lab monitoring effect that we have to obviously explore in a Phase III trial. But we have not seen consequences yet in any way or form, so I think that's extremely reassuring so far. And potentially, this would be a way to screen out the few patients that could be at risk. So I think we are really quite a bit reassure on that. We are equally reassure, of course, on the fact especially on things like incidence of serious infections, GI and all the other possible systemic effects. And now we have not only a very robust safety database in different diseases, but we also have a longer duration of exposure. So that really -- we go into the Phase III trial with a lot more confidence not only because of the efficacy, but because of the -- clearly, that -- also because of the safety database. Going back to I think the last question was on the recruitment, I clearly mentioned that we will not even embark in this decision if we didn't feel that we could leverage our extraordinarily robust site activation and site relationship. So we start already with approximately 400 sites that are very enthusiastic about shifting to the new study, and we have 200 already identified that want to participate. So I don't want to give you the impression that this is starting from scratch. When you start a Phase III trial, the first several months are all about site activation and get the sites activated, not how many patients enroll, but the site activation. And we feel once we did the feasibility study, then we can leverage that very, very robustly to get a very rapid recruitment. Otherwise, I can tell you, for us to maintain the end of the study, prediction and plan compared to the original plan will never happen. So we're really counting on enthusiasm, but also on the willingness to participate from the sites.