Rezolute, Inc. (RZLT) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. I'm very happy to be here with the CEO of Rezolute, Nevan Elam. This is Kelly McCarthy from the Morgan Stanley Healthcare team and really excited to have you at our conference. I know you got a great schedule of meetings, and we're excited to talk a little bit more about the Rezolute story. So before we get into it, I'm going to read this quick disclaimer. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

So with that, Nevan, Rezolute is focused on treating hyperinsulinism. It's a rare disease in the congenital and tumor setting. Can you provide us with a brief background on the disease and how it's managed today?

Sure. First off, thanks, Kelly, for having me. It's good to be here, and thank you all for attending to hear our story and to share where we are in our stage of development. As you said, we are focused on treating hyperinsulinism. And specifically, we have an antibody that is designed to serve as a universal treatment for all forms of hyperinsulinism. When we think about hyperinsulinism, it's not just the overstimulation of the insulin receptor, but it is a dangerous hypoglycemia that's a byproduct of that condition. And one area starts at birth, there's congenital forms of hyperinsulinism. So these are children based on a set of known and still unknown genetic defects where they overproduce insulin and overstimulate the insulin receptor, causing the body to uptake glucose excessively, which then creates the dangerous hypoglycemia. From that to the other side, you can have something similar happen with tumors where a tumor can overproduce insulin or insulin-like substances, overstimulating insulin receptors and causing a similar phenomenon for patients that are suffering with certain cancers. Our antibody that we have is a therapy that is designed to modulate insulin binding and signal affinity. So we don't try to block insulin, but instead to modulate it in a dose-dependent fashion and target tissues, liver fat and muscle.

Okay. So the program you're developing is really to be a universal treatment for HI. So can you give us kind of an overview of kind of how it works in addressing multiple forms of HI and kind of how you're sizing up those 2 different markets in the congenital and tumor groups?

Yes. What we've seen in our clinical work, we're now in Phase III for both congenital HI as well as tumor HI. And in our earlier work as well as in real-world settings where we've treated patients under our expanded access program, we've seen our antibody have a pretty profound effect in correcting glucose values, restoring individuals back up to normalized glucose by modulating insulin by means signal activity. And that's exactly how it works in a dose-dependent fashion. And because it's working downstream, not at the pancreas or specifically, that's why it's a universal treatment. So all forms, if anything overstimulates the insulin receptor, then our antibody works to counteract it. In terms of those 2 indications as our core focus, there are approximately 3,500 individuals, we believe, who are living with congenital HI in the U.S. And we're still doing a lot of work to understand on the tumor side, the overall prevalence, because we're talking about more than 15 different tumors. Some are easier to quantify and understand like insulinomas as well as hepatocellular carcinoma, but there are a variety of tumors that produce insulin. And we estimate that the tumor market may be about twice as large as the congenital, but we're still learning a lot more.

Okay. So just getting into some of your clinical development plans for the drug. Last week, you actually had an important update on achieving alignment with the FDA on the upLIFT study, and that's going to be a streamlined Phase III in the tumor HI group, right? I know that was an update you were waiting for and quite excited about. Can you provide just some updates on how significant that is in terms of timelines and impact for the program?

We believe it's a pretty significant development. And really, we're impressed to see FDA aligned with us in our view of the path forward for this indication. And what I mean by that specifically is given that in the last 2 years, all across the country from the East Coast to the West and the South, we have treated patients who are severely compromised in the hospital. Nothing can be done. Their bodies are overproducing insulin are severely hypoglycemic and nothing literally can be done because they can't take their radioactive label therapies and are often left, unfortunately, to hospice. And what we've seen is a pretty substantial change after they're dosed on our therapy, where in these patients, after a few doses, they're often out of the hospital, quality of life dramatically changes. And that's been embolding, I think, for us as a company as well as for FDA to look at that in the last 2 years to say, well, do we really need a placebo-controlled study in this case for Phase III as the gold standard? No, we don't because we already see what's happening in the real world. And so I think in the new FDA's view and generally speaking, the idea of trying to move where appropriate faster, particularly in rare diseases, this is a prime example of that.

So when will you actually have data to share from that study? What's the timeline for that?

So the study itself went from a 48-patient placebo-controlled study to now about a 16-patient study. And what we want to show is a 50% reduction of glucose infusion rates, which is what is the standard that these patients are on, in at least half of the patients. So I think probably next year as we plan for success on the congenital HI program, which we'll have data in December on. I think we'll probably likely as we're filing the BLA and updating the world, we may very well have an update on that tumor program and how that Phase III has progressed.

Okay. So you just mentioned the data that's upcoming from your Phase III program, the sunRIZE study in congenital HI, which is your next big catalyst. You recently presented patient demographics and baseline characteristics from that study. Can you give us a little bit about what you presented?

Yes, I'd be happy to. And I think just describe a little bit more about the disease itself. It is a nightmare disease. Clearly, if you have a tumor and you're overproducing insulin, then nothing can be done. It's literally potentially the end of life. And for children that are born with this disease, as you can imagine, as a parent, 24 hours a day, you're obsessed with making sure your child has adequate calories, nutrition and the ability to stave off hypoglycemic events 24 hours a day. And so that's why it literally is a nightmare disease. And there's never been anything really developed to treat this disease. So I think that understanding that as a baseline for the disease itself is really important as we think about how our therapy will fit into the treatment paradigm.

Okay. So when we look toward December 2025, what do you plan to show? What do you view as a successful outcome there and what people can expect?

Yes. And even before I get to that, just to finish off on your question in terms of baseline characteristics with that nightmare disease, we are very careful to enroll patients in our Phase III study. And what we've seen, if you can imagine, is, on average, about 20% of the time the children that we enrolled in our Phase III are hypoglycemic, 20% of the time. That's a lot. 40% of the patients are on the standard of care that works in about 40% of the patients, which is diazoxide. And yet they still meet our entry criteria to enroll in the study. On average, about 15 events a week. So these children are really suffering. And so we hope to show and demonstrate with our therapy a significant change between being off therapy on "standard of care" and then being on erso our therapy. And specifically, we want to show a 35% difference between placebo in each of the treatment arms at 5 mg per kg and 10 mg per kg.

Okay. You mentioned diazoxide in the CHI patient population. There was recently a study published on the real-world effects of that drug. So what was significant about that paper? And sort of what is the current understanding of the standard of care for CHI?

So diazoxide is a vasodilator and it can work to help suppress insulin. And depending upon the genetics that a child may have, again, about 40% can be responsive to diazoxide. But even as we say 40% are responsive in our Phase III study, we have 40% of those children still with that level of severe hypoglycemia who are enrolling. So it's efficacy, one is a question. And then two, what we also know and now we can be a little more vocal about because it's all we've had largely to treat the children are the side effects and some of the problems associated with the drug, notably facial changes, syndromic like facial changes in the children that are on the therapy such that you can actually recognize those children that are taking diazoxide, which leads to social trauma and a lot of other issues potentially. So it is not an ideal drug. It's a black box label for -- black box warning for pulmonary hypertension on the label. And if there was a better safe alternative, I know for sure, starting with my own children, if I had young children, I would want them on that therapy.

Okay. You alluded to the expanded access program that you've continued to enroll in for congenital HI. What have you learned from that group that you've actually seen some data out of there?

Yes. We have learned as we have a few children that have been on our therapy now for going on 3 years. That's really nice to see our drug working in a young patient population over a course of time and really correcting hypoglycemic values. And we've also seen what treating patients across the country and in Europe on the tumor side, what's actually happened to transform quality of life from literally end of life to being out of the hospital and living a much more normalized life. And the testimonials from the families and the individuals who've gone through this with the emotional roller coaster of being closer to death and then resuming normal activities in life is powerful. It's actually very moving. And we hope to share more of those stories in the coming months.

Okay. So assuming success, you hit your benchmarks in December, what does the regulatory path do you think look like from there? I know this is a registrational study. What do you -- kind of what has your interaction with the FDA been around the path forward?

Well, we're fortunate this year to have received breakthrough therapy designation, both on the congenital side of the equation as well as the tumor. And we've used that to rigorously interact with the agency. And so what we would expect is to file our BLA mid-2026, which then would put us with a PDUFA date in the early 2027-time frame. And we would expect to do exactly that. I think the question will be how the tumor program, now that it's been significantly truncated, how that will slot into that timeline. So there's still may be favorable developments there, but I won't speculate today other than to say it will be a fast follower. The approval that we're looking for is back to the original equation is a treatment for all forms of hyperinsulinism. That's what this is. So I think that the tumor program can definitely be a fast follower.

So just to be balanced on my question, let's say, for any reason, there was an issue with the sunRIZE readout. Do we feel like that would directly read through to upLIFT? Or could there be concerns around the potential in HI? Or do you view those as kind of 2 separate paths? I know it's -- you mentioned that it's a fast follower, but...

Yes, they actually are 2 separate paths. They're 2 separate INDs, 2 different patient populations. The agency views it that way. We do look at the underlying disease. But I think that's why our announcement last week was a significant further derisking event for the company because each program stands on its own. There's supportive clinical evidence that comes out of the congenital side. But the tumor program, we've already seen what's happened dramatically with 10 patients, and we would expect to see that continue as we do the small Phase III open-label study. So they do stand separately.

Okay. And I know the receiving support from KOLs and from the advocacy community is very important in rare diseases and in ultra-rare diseases. What sort of feedback are you receiving from KOLs and from the patient advocacy community in CHI?

I think it's fair to say that there's now a lot of excitement because we're talking about decades where there hasn't been a therapy. And now there's the potential, finally for a therapy to be commercially available to patients and their families. So as we talk to physicians from all over the world, literally [indiscernible] who are treating these children and interacting with the families, as we see the families at the family conferences in different parts of the world, I think there's excitement. And that's really the word I would describe because hopefully, we can change the paradigm of how we treat these children.

And does that apply to the tumor HI population as well in terms of that engagement with -- I feel like this is a disease area where you're really defining and creating that market. So how are you thinking about approaching that patient set and actually finding those patients?

It's a great point, Kelly, because you're talking about, again, 15-plus different tumors, different patient populations. So a lot of it will be education. And even as we know from our expanded access program at the sites across the country, there's a lot of sharing amongst physicians about what their experience has been. And those referrals have been triggered other requests for our drug. So I think we'll be doing a lot of -- spending a lot of time with a lot of education with clinicians and awareness that if our therapy is successful in Phase III, that there's now a therapy to be able to treat hypoglycemia regardless of what tumor it is that's creating the issue of overstimulation of the receptor.

Okay. I want to talk a little bit about the commercial opportunity. I know you sized up the market a little bit for us. But when you think about the combined markets for congenital and tumor HI, how do you think about the commercial path in each? You're talking about 2 different call points, of course. How do you think about the U.S. opportunity versus ex-U.S.? Maybe you can talk a little bit about what you would do commercially.

From a commercial perspective, we believe that we are in a sweet spot in metabolic disease with pediatric rare disease pricing. We can bracket that. And with the patient population, it may be a price that may be a little lower in Europe, as we all know. But there are other regions of the world that we also are paying attention to where there's high prevalence like the Middle East, where we plan to definitely be active as well from a commercial perspective. So the drug itself, we would expect to have the pediatric indication approved and priced. And based off of that, the tumor HI indication would follow weight-based dosing. So with weight-based dosing, we would expect to be able to command a pretty robust price for that patient population. And again, this is really making such a substantial difference in these patients and families' lives that we don't expect much pushback from a payer reimbursement perspective. And even some of the work we've done has confirmed that. So overall, when you think about this patient population, just taking the U.S. itself, a core addressable market and which will grow, particularly on the tumor side, if we put the 2 together of at least 3,000 patients, this is a very attractive commercial opportunity. And then when you layer in geographies like Europe as well as the Middle East, it gets even more attractive. So we think we are definitely sitting in a sweet spot.

Does the weight-based dosing cause -- present any unique challenges to thinking about pricing or [indiscernible].

No, no challenges other than effectively, you -- depending upon the weight of the individual, they're going to use more drug. And so that's why it is a positive impact for us as a company from a commercial opportunity.

Okay. And then as you think about commercializing, would the plan be to just do that independently? Or is there a partnership potential for this landscape?

Given that we're dealing in the ultra-rare space, we really feel confident about our ability to penetrate the market and commercialize the drug ourselves in the U.S. We're excited to have brought on, most recently in the last few weeks, our Chief Commercial Officer. So he and our commercial team will be aggressively moving forward with all those preparations. And we will continue to evaluate the alternatives for the rest of the world. Suffice it to say, we're not going to do anything in the near term in terms of partnering because we don't need to as we think about the rest of the world. But we'll be thoughtful in how we actually think about different regions and how we commercialize, whether it's through distribution relationships, partnering and also potentially on our own. And so all of that will continue to be evaluated over the course of the next 12 to 18 months.

Okay. You mentioned your recent hire on the commercial front, which is great and certainly builds out that muscle for you. Can you talk a little bit just about how the Rezolute team has come together over the last few years? And you think you have the right pieces in place to be successful, both from an R&D and clinical execution perspective, but also for the long run, it seems you're building out that later-stage ability in our ability set?

I think we've been really fortunate to have a very talented team that's dedicated, where we have very little, if any, attrition. We all share the excitement and enthusiasm to be fortunate to work on such a devastating disease and to be able to potentially make a difference. And that's not often that you can do that as a small team. So whether it's our CMC and quality team, our clinical team, to your point, as well as the scientists in the company, I think there's a mission-driven and focused. And it helps when as a company, you get the chance for many of the individuals who work for the company get to interface with families and physicians and get to hear the stories and understand that we are part of something that truly will make a difference. So really excited about continuing to grow out the team and just thankful that we have such dedicated professionals.

Can you talk just on the history of the company, where erso came from, how it came to be in your hands and being developed at this late stage?

Yes. I started the company about a dozen years ago and having done a lot of work in metabolic disease throughout my career and came across XOMA, which was a development company at the time, very different company today. And they had this program as a lead program and XOMA has been developing antibodies for many, many years, just what they used to do. And just looking at the early clinical data and the mechanism of action and the potential for this universal treatment for hyperinsulinism was really intrigued. The more we did diligence and work on it to bring this out of XOMA and put it into our hands as our really sole core focus. And that's the history. It's been great.

And I know you did have a regulatory bump in the road along the way. And it feels like you've kind of cleared that. So do you want to just give a little bit of context for how that came to be and then how you guys have put that in the rearview?

Yes. Well, clinical development is a journey starting with, obviously scientific discovery. And one thing is clear is you're going to have all kinds of bumps in the road potentially, and you have to be prepared for that. We had a partial clinical hold in the U.S. that was associated with the finding in one particular species and specifically one type of rat. And so we worked with the agency over the course of a couple of years to realize that, that finding in one particular type of rat was inapplicable to humans and made it very clear. And so a year ago, the agency said, and particularly the pharm tox side of the division, we agree. We agree. Thank you for being patient with us. We told you we'd eventually get there, but we're aligned and please, let's go. Now let's get patients in the U.S. And hopefully, this will be a successful study, and you can get this into the hands of patients and their families. One of the things that you have to deal with, and we all had to do it in the company is to be patient because here, you're staring at a very frustrating, seemingly ridiculous issue in late-stage clinical development after Phase IIb, but to be patient and to work through the process. And so we've done that. And now, coming on the other side of that, we've been the beneficiary of rare disease causal mechanism. Your drug appears to work. How can we go faster? And by the way, from partial clinical hold to 2 breakthrough therapy designations. So a definitely interesting twist in turns.

Well, congrats on putting on the rearview, and it seems like a very clean story ahead with a very important catalysts coming. I guess as you just view the competitive landscape in HI, anything you would highlight in terms of either -- we've talked a little bit about the standard of care and the limitations there that you're trying to overcome. But anything in terms of the competitive set, it feels like you're really at the front of this wave and probably the most attractive potential therapy that's being developed here?

We really don't view as we look out at the landscape, we don't see competitors. We see other companies developing other therapies that we're supportive and cheering them on, whether it's a new and better somatostatin analog, which can help suppress insulin. If it's a new and better version of a glucagon that could be used in emergent and acute settings, we think that's great. We believe we're the only therapy that can be used across the board in all forms of hyperinsulinism with a durable effect that it could be and supported by chronic dosing. So we don't really view anyone out there who's working in the space as competitors, and we're really cheering everyone else on. It helps when we have a drug that is -- so far has demonstrated such profound results.

So if we were to have you back at the Morgan Stanley conference next year, this time, looking back at the prior year, what would you like to say you've accomplished as a company in the clinic from a regulatory perspective, what excites you about the next 12 months?

Well, the next 12 months are going to be a big set of 12 months for us, given that it will really start with our clinical readout for the congenital. So we really do hope in December of this year that we have a successful study that will definitely be exciting. That will enable us then to push forward filing our BLA mid next year. And then mid next year into roughly this time frame, we also would have an update on the tumor program. And hopefully, we can have an update that is demonstrative of, again, what we've already seen in the real world in 10 patients, which would be very exciting and with a little bit more clarity on what that regulatory path hopefully looks like on the heels of the congenital HI program. So a lot is going to happen, we think, over the next year and a lot that is hopefully going to be really great.

Agree. Yes. Very exciting time for the Rezolute team. And then maybe just for any investors or participants who aren't as familiar with the company. Anything that you want to leave people with? Anything you want them to know about the company and your mission here?

Well, I think we've largely covered it. We were a company that wasn't known a few years ago. We were quietly in the background, but I think as awareness of a lot of these stories and the impact we're having with families and the fact that we're just in late-stage development now. I think there's a lot of excitement and enthusiasm across the board and just happy that I'm part of it and as a team, we're part of it.

Well, thank you for joining me. I'm really glad to have you at the conference and hope it's a productive one and really excited to see what will come out of the Rezolute story and particularly the data in December. We're very much looking forward to that update. Thanks, Nevan. We wish you luck.

Appreciate it.

All right.