Sagimet Biosciences Inc. (SGMT) Earnings Call Transcript & Summary

Welcome to Oppenheimer's 36th Annual Life Science Conference. I'm Jay Olson, one of the biotech analysts here at Oppenheimer. And it's a pleasure to welcome you to our discussion with Sagimet Biosciences. And it's an honor to introduce Dave Happel, the CEO of Sagimet; Rob D’Urso, SVP of New Products; Eduardo, Chief Medical Officer; and Thierry, the Chief Financial Officer. Thanks so much guys for bringing your team here today and making time for us.

Thanks, Jay. Thanks for the invitation. Great to be here.

It's our pleasure, and we're super excited about Sagimet. You've got a lot of interesting things going on. So it's good timing for the discussion. For those who may not be so familiar with the Sagimet study, Dave, would you like to give us a quick overview?

Yes, sure. Thanks, Jay. So Sagimet is a clinical-stage biopharmaceutical company. And our approach really begins with understanding how overexpression or overactivity of fatty acid synthase or FASN plays such a critical role in the development of a number of underserved conditions and our primary focus in MASH, acne in certain solid tumors that are dependent upon FASN for progression of disease. To solve for this overactivity of FASN, we've developed a portfolio of FASN inhibitors led by our lead program, denifanstat, they really target an underlying cause that is common to all of these disease states. And that common thread is fat accumulation or de novo lipogenesis. And by doing so and by solving it by this manner, we have a really unique and highly differentiated molecule across the disease states that we're pursuing development. If we talk about just MASH for a minute, we have really significant body of work both preclinically and clinically that show largely the same thing, and that is denifanstat targets the 3 primary drivers of MASH, and that's that inflammation and fibrosis, and it does so independently. And it makes it rather unique in the fact that everything else that's really trying to tackle the disease is a fat burning mechanism of some variety, whether it's a fat oxidizer like an FGF or THR or a fat mobilizer like a GLP or the GLP analogs, all of those molecules really work on burning fat and hoping that, that fat burning translates into downstream benefit in inflammation and fibrosis. And we've seen that it can be successful to varying degrees. But our molecule really does target the inflammatory cells, the fibrotic cells within the liver as well as fat cells. And by doing so, it has translated into a really significant reduction in fibrosis, which, as Eduardo always reminds me is what drives prognosis. We've completed a Phase II study in which we showed excellent reductions in inflammation and fibrosis and particularly in the more severe patients, where as the liver becomes less fatty, having an antifibrotic mechanism becomes critical. And then most recently, we shared data at the European Liver Meeting last year. And then again, at the North American Liver Meeting in the fall that patients who were digitally diagnosed as F4s had a significant response of 13 patients in our Phase II study were digitally diagnosed to F4s, 11 of 13 had a 1- or 2-stage improvement in fibrosis. And all of this has led us to the conclusion that this molecule can work very effectively in F4s. And so last May, we announced that we were going to be going into cirrhotics into the F4 population with the combination of denifanstat plus resmetirom. And we have now subsequently completed a Phase I PK study DDI tolerability, safety study this -- in which we announced last fall before the holiday that showed that it was -- there was no safety signal, very well tolerated and supports moving into Phase II. So with that, we'll have a discussion with the FDA shortly, and we'll -- our plan is to kick off the Phase II study in the second half of this year. Turning quickly over to acne just for a second. We have -- our partner in China, Ascletis has run a couple of studies in moderate to severe acne patients, demonstrating absolutely, nearly identical results where we saw roughly 20% placebo-adjusted differential reductions in lesion count across the board, total lesions, noninflammatory, inflammatory lesions and also improvements in IGA. They submitted their data sets to the Chinese regulatory authority and that submission was accepted and they are anticipating an approval second half of this year made the beginning of next year, which will be an important milestone because this is the first new mechanism of action in the treatment of acne in roughly 40 years since isotretinoin was approved back in the early 1980s. So the scientific community, and I think the patient community are really excited with this potential addition to the landscape. With that, we have started our Phase I with our next-generation FASN inhibitor that walks and talks and functions nearly identically to deni. And we should see the results from that here in the next few months. And our goal and our communicated plan is to start the Phase II by the end of next -- this year. And then we should have results from that study in the second half of next year. So we're really excited by where everything is going. We've got a couple of programs that have great data and really anxious to see the results of all the work that the team has done.

Excellent. Thank you so much for providing that overview. That's a perfect background for our discussion. Maybe let's start by diving into MASH. You successfully completed your Phase IIb study with deni and MASH. And that study met both primary endpoints. Can you give us a recap of the findings from that study? And then you did talk about sort of the differentiating features for deni and MASH from a mechanistic perspective. But maybe from a clinical perspective and based on your findings in Phase IIb, what are some of the key clinical differentiations for deni and MASH?

Yes. So the big differentiation is that the drug tackles, as Dave said, all 3 drivers of the disease. Fat inflammation and fibrosis, tackles directly, and it's the only drug that does that. On fat, we block production of it inside hepatocytes. On inflammation, we block activation of inflammatory cells, the Kupffer cells in the liver. And then on fibrosis, we block activation of the stellate cells that deposit fibrosis. And so you get the downstream benefits of potent defatting coupled to the direct effect on the other 2 cells. So it's really a double hit on every single one of the 3 cell types that are the main ones involved in MASH. So you asked about the Phase IIb, the study was successful. I think that's the most important thing. We hit both primary endpoints statistically significantly. And more importantly, we hit the endpoints that FDA requires for approval of a drug, fibrosis improvement without worsening of fibrosis and MASH resolution without -- sorry, fibrosis improvement without worsening of MASH, and MASH resolution without worsening of fibrosis. And that is a reflection of the antifibrotic mechanism, as they've said fibrosis drives prognosis. And importantly, in the study, there were significant improvements that we observed in the most advanced patients there, patients that by human labeled as F3 fibrosis. So is the highest stage, if you will, before F4 cirrhosis. And also the patients that received deni were half as likely. In other words, placebo was twice as likely to progress to cirrhosis, progress to F4, which is one of the endpoints for approval, of course, in noncirrhotic patients but you can translate that to the cirrhotics to a certain extent and showing the potent -- again, the potent antifibrotic effects. Another important point was AI digital zpathology. AI pathology supports, corroborates and goes beyond the human. And our data were also statistically significant. And what we saw was that in a continuum and also in a categorical manner, an improvement in fibrosis. In other words, regression of stages but also fibrosis being reduced, or in some cases, disappearing. And parts of the liver that are -- the liver microscopic parts of the liver, they are associated with prognosis. We call them the portal and periportal areas. So again, a reflection of fibrosis being the key driver. And finally, in AI pathology, we identified 13 patients that actually buy digital pathology, were cirrhotic or F4 or -- they call qF4. And of those patients, 11 became no longer F4 at the end of the study. There was a regression of one or more stages. So that taken together, that is the reflection of the mechanism of action in the clinical trial setting.

Excellent. That's super helpful. And maybe just to touch upon the combination of -- and by the way, as of antifibrotic, especially in those patients with more advanced fibrosis. I guess thinking about the combination of deni with resmetirom for MASH, and Dave, you touched upon some of the early work that you've done there. Eduardo, can you kind of walk us through kind of the rationale behind that combination and the evidence that you've seen so far that really drives your enthusiasm for the combo?

Sure. And you are correct. We are very excited in going into this population that is of all patients with MASH, the ones that need the most potent possible therapy and as fast as possible, they cannot afford a long time waiting for something to happen. So why combination? Again, it goes to this requirement of the patients who really need to tackle the disease hard. So you have the potent antifibrotic effect of deni. And then by adding resmetirom, you are actually, one, magnifying the steatosis reduction effect. Resmetirom, that's one effect is to reduce steatosis. The 2 mechanisms of action are not overlapping. They complement each other. Deni blocks production of toxic fat, resmetirom oxydates "burns"" fats inside the hepatocytes. Also, the metabolic pathways are somewhat different, which also helps in the planning and running this development. And finally, both are small molecules and you can combine in the tablet. Now why -- what else can we say about data in addition to the antifibrotic mechanism, our data on preclinical models that we presented at EASL. A couple of years ago, showing in these models that the combination was synergistic, was better than the parts, let alone better than, of course, placebo or vehicle, as we call in the demise. So the other interesting thing is THR-ß risk resmetirom and THR-ß, they upregulate FASN. So the activity of FASN increases. So we are actually, in a sense, also helping resmetirom to do more. So it's really -- we believe a sweet spot of goldilocks combination. That's why we are excited to go into clinical trials. And we believe that we may show what we saw in the preclinical in the mice in people as well.

Okay. All right. That's great. As Stephen Harrison used to say, this could be the chocolate and peanut butter for...

My dear late friend, we were close.

So congrats on the completion of the Phase I PK study for the combo in healthy volunteers. Can you just remind us the highlights that you found in that study?

Sure. That is basically a PK study, as you said, was an open-label cohort and trial, 40 patients or about 40 patients. And the objectives were mainly to evaluate the combination, the pharmacokinetic profile of this combination, potential drug interactions, of course, in the safety and tolerability. The combination was well tolerated over the duration of study. We saw no safety signals. No serious adverse events. And there were no clinically significant lab abnormalities and no treatment discontinuations.

Okay. Excellent. I know a lot of investors are looking forward to the detailed results of that study coming up at a medical conference in the not too distant future, I suppose. Where would you like investors to focus on that data set and given the proven single-agent activity for both molecules and the preclinical synergies that you've found and previously demonstrated, what are the areas you'd like investors to focus on?

Sure. We, of course, can't preempt the conference. Our goal is to present at EASL, and organizers of both big meetings. They are very sensitive to disclosure of information prior to the conference, there are actually official embargoes. But we are excited, and we plan to share the data at EASL.

Okay. Fair enough. Understood. We will look forward to that. And then I guess, how are you thinking about the study design for the upcoming Phase II MASH study especially related to the comparison arms, the combination doses and the trial size?

Sure. Although we have not disclosed the specifics of the study at a high level, we, one, anticipate to have more than 1 dose of the combination. Basically, you need to narrow down what you're going to use in Phase III and FDA also asks that combinations are tested against the parts in addition to placebo. So we'll probably need to do that as well. But of course, the final design depends on our discussions and agreements with FDA. We are planning an assessment at 52 weeks and the study will continue to 96 weeks. I think it's important that even a very potent combination may require a little longer. We can improve what the patients have to fight the fibrosis, but biology is biology. So we have to be mindful of how things work. We are looking at noninvasive tests as a potential endpoint. And again, as I mentioned, we will discuss with the agency and the agreement will be the final protocol.

Okay. Excellent. I'm glad you mentioned the noninvasive tests. And especially with the high unmet medical need in the F4c population and complications like portal hypertension. Do you expect the regulatory bar to evolve over time?

I think the division is very active, if you will, following where things are going and trying to be as close to clinical practice coupled with, of course, the observations over decades and decades and decade of chronic liver disease. Most of the staff are hepatologists and hepatologists with a very, very solid pre-FDA experience. So we are discussing with peers, if you will. They've shown this in the F2/F3s recently with the acceptance of the letter of intent for the FibroScan. And we look forward to the evolution of the approval pathways, if you will. Now as I say all the time, we need to have the conversation with the agency.

Understood. And then maybe a big picture question. I have investors ask about the impact of GLP-1-based MASH treatments, investors are looking at FGF21 class on the horizon in MASH. So getting more competitive. Eventually, where do you see the deni plus resmetirom combination fitting into the treatment landscape?

Sure, frontline. Once approved, we expect, based on the potency of -- actually deni alone, we expect the fixed dose combination talent to be frontline therapy. Again, conversations with FDA results of the clinical trials. We are optimistic, but you have to prove in studies, of course. GLP-1s, we are not worried about them. We actually welcome GLP-1s. And the main reason being, you diagnose more patients with MASH. So in the end of the day, you are helping undiagnosed patients and preventing progression of their disease and actually being able to regress the disease. Our opinion leaders in our advisory board, they tell us that they expect about 50% plus of patients coming into clinical trials to be on a GLP. So the appropriate thing in clinical studies in our opinion is to allow patients with GLP to enroll as long as they are on a stable dose for a sufficient amount of time. If you don't do that, you're not going to enroll the studies. Now the other drugs. I think the data with FGFs are cannibalizing and we have to see the results of the studies. Of course, we are talking injections in pharmacological doses, which are thousands of times higher than the endogenous FGF21. One thing that I didn't mention is that deni upregulates FGF21 and FGF21 upregulates adiponectin. So a very important molecule in MASH. So it's one more thing that deni does that with the addition of the THR-ß, we believe -- that's why we believe frontline is the way to go.

And Jay, I would just add in terms of sort of competitive differentiation, as Eduardo pointed out, certainly, deni on its own. The fibrosis data stands on its own merit in the combination as the whole market is moving towards combination therapies to help patients achieve optimal outcome. It's also important to do that in a patient-friendly way, both by route of administration. And keep in mind, this FDC will be a single oral tablet once daily versus an injectable, which is generally highly attractive to patients, plus the safety and tolerability profile strongly leans towards this oral FDC that we're developing. There is no -- we haven't seen any GI, any dilly, any bone loss, any muscle wasting associated with any to date, and we don't expect to -- it's not what the mechanism suggests. So that also -- so not only from an efficacy perspective but also from a my safety tolerability makes it highly, highly attractive.

Thank you, Dave. I'm glad you mentioned the patient-centric nature of MASH. And I want to make sure we have time to talk about acne, but just maybe one couple of last quick questions. Do you envision a future where there could be a precision-based -- precision medicine-based approach to MASH supported by biomarkers. I think that would be a very patient and payer friendly.

Our goal is to pursue that. Every single patient with MASH is unique, that person is unique. We can say a complex disease such as MASH is the same across the board. So identifying patients that are more likely to respond to the drug is one of the things that we are pursuing. We're looking at reduction in toxic triglycerides, [ triacylglycerin ], for example. And we're also looking at other markers of metabolomics and proteomics that could support the predictive or personalized medicine approach, and this is part of the overall strategy in broad sense.

Okay. Great. That's super helpful. And maybe one last MASH question before we switch gears to acne. You recently announced a licensing agreement with TAPI for resmetirom API. Anything you'd like investors to know about that deal?

Yes, sure. I think the objective was to have a clear path to approval and to commercialization with the combination molecule that involves resmetirom and that's what we've done. We struck an agreement, a partnership with TAPI subsidiary, a Teva subsidiary of TAPI to manufacture multiple forms of resmetirom, which we have the option of choosing the most ideal one to combine with denI, as we move forward. And again, the goal was to have a clear path to development and commercialization, and we believe we've achieved that.

Okay. Great. Now shifting gears to acne. Your partner, as Ascletis recently had long-term data from the Chinese Phase III trial for deni in moderate to severe acne. Can you just remind us the highlights there. And then I guess, what are you expecting to see with longer-term treatment? I don't think the press release talked about efficacy longer term, would you expect to see additional safety signals with prolonged treatment with deni?

Yes. Jay, thanks a lot for taking the time to learn about acne for a little bit. I can just summarize very quickly, which is the data coming out of China is very exciting. So first off, our partner, Ascletis, took denifanstat, 15 milligrams into a Phase III study, which is very much aligned to what the FDA and the U.S. would expect an acne study for moderate to severe patients to look like 12 weeks efficacy and safety endpoints. In the Phase III program, the 12-week Phase III program, all the clinical endpoints were statistically met. And in addition to the efficacy endpoints, there were a very nice safety profile, and it was generally well tolerated. After that 12-week period, we went into -- or our partner went into an open-label extension, where patients were rolled into 50 milligrams denifanstat for either an additional 40 weeks or a total of 52 weeks. During that, as you said, the safety profile of the product remained positive. It was very well tolerated through that entire course. And in addition, the secondary endpoints, which looked at efficacy, showed that after a 12-week period, a patient continued to stay on medicine continue to see an improvement of efficacy. So very positive results as well. Those results were shown -- presented in a press release at a very high level, and they'll be presented in detail and upcoming medical conference this year, what our partners, Ascletis, does.

Okay. Excellent. Thank you for that, and we'll look forward to seeing those detailed results at the medical conference. Can you remind us the potential approval time line for deni in China? And any milestone payments that Sagimet will be eligible for upon approval in China?

Yes. Thanks a lot, Jay. So the NMPA accepted Ascletis NDA in December 2025. And although we cannot predict the timing of the NMPA response, it's not unusual for applications to be approved within 12 months. Under the license agreement with Ascletis, we are eligible to receive development and commercial milestone payments in aggregate of up to $122 million as well as tiered royalty, and it ranges from high single digits to mid-teens on the future sales of denifanstat in Greater China. So we haven't disclosed the individual milestones, but you should assume that the majority is based on revenue achievement and there is more milestone that would be due to us upon potential approval.

Okay. Great. And then also, I wanted to make sure we touched upon your next-gen program, 3567 currently in Phase I development. Can you just talk about the key differences between 3567 deni. And then also, how should we think about the efficacy safety profile for your next-gen based on deni's profile?

Yes. So the next-gen molecule, which we call TVB-3567 was developed as part of our medical chemistry program at Sagimet. We developed a library of FASN inhibitors. There's a significant amount of DMPK, toxicology and CMC work that led us to basically put denifanstat and 3567 as our lead molecules. Structurally, they are different, and they are governed by different patent families. So they do have different IP landscapes and different IP suites. But in form and function, we are looking that they will work similarly as inhibiting FASN in the body. As you mentioned, we are currently in a Phase I program with 3567. This Phase I program will look at and provide us PK and PD data that will give us a good read as to how those 2 molecules are working in the body, both from an absorption and mechanism. The unique part about this Phase I also is that we will have a 28-day acne cohort. So we'll have our standard single dose, multiple dose and then an acne cohort. That acne cohort will give us some very interesting biomarker data around CBAM where we'll see the change in CBAM and also the composition change in CBAM after 28 days. Why we're doing that is it will give us a nice read as to how those 2 molecules are performing in acne patients. It's not a go, no-go decision to move into the Phase II, but it will give us additional information and understanding of how 3567 behaves and works and how it relates to denifanstat.

Okay. Great. And I know we're a little bit over, but if I could just squeeze in 1 last question. I know Dave mentioned this at the beginning, it's been a long time since we've seen any significant innovation in the acne field. Can you just share with us any feedback you're getting from KOLs on deni's data in acne and where do you see 3567 fitting into the treatment paradigm for acne?

Yes. I mean, first off, the feedback that we've received from our KOLs and the general dermatology population around an oral FASN for moderate severe acne and the clinical data that we've presented from the Chinese studies has been very positive. I think the easiest way to think about the acne market for people that don't know acne very well is to think about what the atopic dermatitis and the psoriasis markets in dermatology looks like 10 years ago before the large molecules and complex molecules came in. Both diseases were managed through generics and branded generics, a combination of topicals and generics. That is what the acne market looks like today. The acne market, patients are treated with branded generics -- branded generics, top goals and orals. But the current available treatments lack either efficacy or safety challenges for their patients. And so dermatologists are looking for novel mechanisms of action that will provide effective and safe products for their moderate to severe acne patients. When you think about the acne population in the U.S., there's 50 million Americans with acne. There's 20% of them are moderate to severe, so 10 million and only 5 million of those people are seeking therapy today. And so our hypothesis and what dermatologists are providing us is that with a novel mechanism of action, with the safety and efficacy profile that denifanstat has presented we're going to have the ability to not only increase the value of the patients that are seeking dermatology, but also expand that patient population that are seeking dermatology treatments. And we've seen that in 2 markets already in dermatology with psoriasis and atopic derm. And so we think that, that will be replicated here in the acne population as well, and so do the U.S. KOLs.

Okay. Great. That's super helpful. And then one lightning round question, how should investors think about the valuation of Sagimet and the balance between MASH and acne and your allocation of resources?

Well, we're undervalued clearly. That's an immediate obvious answer. But I think that what investors should be looking forward to is having a molecule that works exceptionally well in 2 different disease states. And we have great data in MASH. We have great data any acne and everything points towards significant progress in both of those indications with this molecule, and we'll have -- we'll start the Phase II in MASH match by the end of this year. We'll start the Phase II in acne by the end of this year and we should have data and acne, proof-of-concept data in the second half of next year and Ascletis should get approval of their -- of an acne by the end of this year, beginning of next. So lots of stuff to look forward to, and we're really excited to get going.

All right. So we'll wrap things up there. Thank you all so much for joining us today. Really appreciate the time you shared with us here.

Thanks, Jay. Really appreciate it.

Our pleasure.