Sanofi (SAN) Earnings Call Transcript & Summary

Good morning and good afternoon to everyone on the call. I hope everyone is safe and remaining healthy. Thank you for joining us to review the Phase II results of our brain-penetrant BTK inhibitor '168. As usual, you can find the slides to this call on the Investors page of our website at sanofi.com. Moving to Slide 2. I would like to remind you that information presented in this call contain forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. I refer you to our Form 20-F document on file with the SEC and also our Document d'Enregistrement Universel for a description of these risk factors. With that, please advance to Slide 3. Our speakers today in the order of presenting are Bill Sibold, Executive Vice President, Specialty Care; Erik Wallström, Therapeutic Area Head, Neurology Development; Rita Balice-Gordon, Therapeutic Area Head, Neurologic and Rare Disease Research; and John Reed, Executive Vice President, Global Head of Research and Development. Bill will make some introductory remarks, after which, Erik will discuss the details of the Phase II results. Rita will then discuss the underlying mechanisms of progression in MS, and John will wrap up with our Phase III plans. We will close with a Q&A session. Joining for Q&A will be Tom Snow, Global Franchise Head, Neurology and Immunology. With that, I like to turn the call over to Bill.

Thank you, Felix, and good morning and afternoon to everyone on the call. This is an exciting day for Sanofi and, I believe, for the whole MS community. We just finished presenting the data on our brain-penetrant BTK inhibitor at our virtual scientific event that was an innovative step we took to share the results with the MS community in light of AAN being canceled. Now let me step back and provide a little background and context here. As you know, Sanofi has a proud tradition in MS that stretches back to the FDA approval of Aubagio in September 2012. Aubagio is really a tremendous drug for those who seek an oral option with a well-characterized safety profile. It's the only oral disease-modifying therapy proven to reduce the risk of disability worsening in 2 Phase III trials. Aubagio is also remarkably well tolerated with more than 15 years of long-term safety experience and no confirmed cases of PML. For all these reasons, we continue to see high levels of treatment satisfaction, continued market share growth, while other orals have been flat to declining and nearly EUR 2 billion in annual sales. Lemtrada has also played a unique role in our leadership in MS. Lemtrada provides long-term, durable efficacy in the absence of continuous dosing. Today, there are more than 17,000 patients globally who are receiving -- who after receiving Lemtrada, did not need further treatment. The safety profile of the drug means it is not suitable for all patients. But for those patients who need high efficacy, Lemtrada is an important treatment option. Today, Sanofi is the #2 company in the industry in terms of MS patient share, and we want to build on our long-term commitment to patients with new and better options, which brings me to our investigational brain-penetrant BTK inhibitor '168. Based on the Phase II results, which Erik will cover later, we believe we may have the best-in-disease agent across all treatment dimensions in MS and potentially the first truly efficacious drug in progressive forms of the disease. As you will hear more about later, '168 combines potent B-cell modulation in the periphery with the potential to normalize microglia activity within the brain. This is the reason we are moving as quickly as we can to accelerate the development of this molecule. I want to expand a little on my comment about addressing all treatment dimensions. On the left-hand side, you see the 5 main treatment dimensions in MS, which we have ranked by unmet need, so beginning with safety, moving through the treatment burden, relapse rate reduction, slowing disability, and finally, efficacy in progressive disease. Fortunately, the outlook for someone diagnosed with MS today is much better than it was 25 years ago when there were no DMTs available. In the past 2 decades, the pharma industry has been able to offer steady improvements against these 5 dimensions, beginning with platform injectables and moving through platform orals like Aubagio. We have also seen the market entry of high-efficacy monoclonal antibodies, including natalizumab, Lemtrada and most recently, ocrelizumab. Despite these advances, there are important remaining unmet needs, and options for patients with progressive disease are extremely limited. If our oral small molecule '168 meets our target profile, it has the potential to deliver against all 5 treatment dimensions, which would make this brain-penetrant BTK inhibitor not just best-in-class, but the best-in-disease molecule across the spectrum of MS, one which could potentially offer high efficacy in both relapsing and progressive forms of MS, a strong safety profile plus the ultimate convenience of a once-daily oral medication. I mentioned the mechanism of action of '168 earlier. And on this slide, you can see how we consider the MoA and target profile of '168, alongside that of the B-cell-targeting anti-CD20 antibodies like ocrelizumab. Essentially, the anti-CD20 antibodies work through B-cell depletion in the periphery. They've shown better efficacy compared with older classes of drugs, but they come with potential safety concerns as a result of long-term B-cell depletion, a consideration that is especially poignant now that the world is in the midst of a viral pandemic. Furthermore, while ocrelizumab is highly effective in relapsing-remitting MS, it has only a modest impact on primary progressive disease. By contrast, '168 is expected to deliver its effects both peripherally through modulation of B cells and in the CNS by crossing the blood-brain barrier and impacting the microglia. Importantly, by putting to sleep rather than killing these cells, this allows for the potential of more treatment flexibility, and it means we do not expect the long-term consequences of B-cell depletion. We also know from studies of rare individuals born without functional BTK genes that inhibition of this kinase does not pose a teratogenicity risk, an important consideration for many MS patients. These and other factors that my colleagues will expand upon lead us to predict that '168 has the potential to also deliver best-in-class safety. In terms of efficacy, there is broader actions on microglia and macrophages in addition to B cells. We expect '168 to impact both innate immunity and acquired immunity, which are the 2 main pillars of the immune system and which are both thought to play important roles in MS progression. All of this means we have reason to believe '168 may deliver superior relapse rate reduction as well as significant benefits on disability progression in relapsing disease and a significant treatment benefit in progressive disease. You'll hear more later about some of the exciting elements of the MoA of '168 within the brain from my colleague, Rita Balice-Gordon. Let's return to the theme of unmet treatment needs in MS, of which we believe the greatest are disability and progressive disease. It's a worrying fact that many patients do not receive disease-modifying treatment despite a diagnosis of MS. In fact, more than 1/3 of patients in the U.S. and more than 1/2 of patients in Europe are not currently receiving a disease-modifying therapy for their MS. That's over 0.5 million patients not being treated. And as the disease progresses, the percentages rise due to the lack of appropriate treatment options. There are many reasons that so many patients are not treated, but as noted earlier, no current treatment address all key treatment dimensions. An effective, safe and well-tolerated new therapy could bring fresh hope to patients and address the significant undertreatment that I've described. We may have just that new treatment in '168. On my final slide, I've shown sales projections for the MS category. The overall market is expected to reach around $24 billion by 2024 despite the entry of oral generics. Just under $10 billion or around 40% is expected to come from the anti-CD20 antibodies, such as ocrelizumab. Now clearly, the basis for these projections is that, in line with current trends, B-cell-targeted therapies will be increasingly adopted by the MS community. This would set up the market well for '168 with its potentially unmatched clinical profile based on B-cell modulation, combined with quieting the microglia in the brain and potentially strong safety profile. So what does this mean for the commercial potential of '168? If '168 meets its target profile in the Phase III program that John will describe, then we have every reason to believe it will capture a leading market position in the B-cell-targeting class and also capture a significant share of untreated patients, particularly those with progressive disease that have limited treatment options. In short, we believe we have a potential multi-blockbuster on our hands that will build on Sanofi's heritage and commitment to the MS patient community. With that, it's my pleasure to hand it over to Erik to take you through the Phase II results. Erik?

Thank you, Bill. It's certainly fair to say that we're very excited about the mechanism of action of the '168 compound. And I think it helps to think about the mode of action in terms of a 2x2 matrix. With that, I mean that there is activity both peripherally and centrally, but also that there is activity both on the adaptive and innate immunity. So if we dive a little bit deeper into the mechanism of action, we think that in the periphery, an important effect of BTK inhibitors may be to reduce cytokine production by B cells, reduce B-cell proliferation and inhibit the B cell help to T cells. And also in the periphery, they may affect macrophages in the periphery. It's a cell type perhaps a little bit less discussed in the periphery of MS patients, but there is an involved cell type. And then importantly, because BTK inhibitors, such as '168, do not kill B cells, that may be preferable from a safety perspective, given that this is a reversible mode of action. So when the compound washes out, BTK is resynthesized and the cell starts to function again. And this is, of course, in contrast to approaches such as CD20 antibodies, where you kill the B cells and you have a very prolonged depletion over several months even after discontinuing such treatment. But then if you switch to central nervous system, I think it gets even more interesting actually because there are some B cells also in the central nervous system, but not very many, but there could be an interesting effect of interfering with the function of these B cells. But perhaps more importantly, there's also a CNS-resident microglia cells, and they are in a pro-inflammatory state in the brain of -- and the spinal cord of patients with MS. And Rita Balice-Gordon, our research colleague, will expand on this in her talk and discuss how this could be one of the underlying mechanism for disability progression in MS. And then we go to the next slide. This is some background information from Phase I. And perhaps what is important to highlight here is that we do have human CSF data with the '168 compound. These are samples taken 2 hours after dosing in healthy subjects, where we can show that the level we can measure is clearly above what we would predict to be pharmacologically active. So we see the concentration on the y-axis with the dot there to CSF 2 hours. And you can see the cellular IC50 plotted as well in the figure. And furthermore, discussing the properties of this compound, it's important to note that not all of the BTK inhibitors are the same. They differ in their potency, they differ in their selectivity and they importantly differ in their level of brain penetration. And of course, in addition to brain penetration, in the lower right of this figure, you see the peripheral BTK occupancy and it's -- this figure is there to show you that as expected, this is very rapid onset of effect, and it's a durable effect of the '168 compound. But let's move to the Phase II results. That will be the next slide. First, just a slide to show you the design of the study. So this study, when we designed the study, we really wanted to use the knowledge of the compound class. And also, we wanted to minimize exposure to placebo. So we applied more than statistical methodology, specifically something called MCP-mod, Multiple Comparisons Procedure with Modeling. And this was to reduce patient exposure to placebo and also save time in development to get answers quickly. And there were actually 2 answers we wanted to have from this trial. The first is what the level of magnitude of effect of -- does this '168 compound have on MRI characteristics of disease, specifically new gadolinium lesions and T2 lesion when compared to placebo. But the magnitude of effect is important to understand, if it's a potent treatment or not. And the second question is what is the right dose to take forward to Phase III. So the study was designed to answer these 2 specific questions. And just a general note also about clinical outcomes in MS and predictivity of MRI data. So in general, in MS trials, Phase II trials are not designed to give us reliable values, the reliable magnitude of effect on annualized relapse rate and confirmed disability worsening. These are important end points for Phase III but they cannot be measured in Phase II trials either in 3 or 6 months reliably. But what can be measured reliably are the MRI lesions, and they are actually highly correlated with the outcomes in Phase III. That has been shown in several analysis, including meta-analysis of Phase II MS trials. So that's important to keep in mind, that perhaps put a little bit less weight on what you see in terms of clinical outcomes, if you see it at all in Phase II MS trials and really look at the magnitude of MRI effect because that is translatable to effects in Phase III. There's a strong correlation. And of course, modern MS clinicians, they use MRI lesions routinely to gauge the level of treatment in MS patients. The treatment decisions are based on MRI lesions in modern MS management. The next slide, please. So these are the top line results of the Phase II trial. And it was a 2-step approach to analyze the data in this trial. So the first step was to determine that there was a dose response in at least one of the predefined dose response models, and there indeed was a dose response with a statistical significance of -- p-value of 0.03 for the exponential model. And the next step and what you see on this slide is exploring the magnitude of effect of that response. And what you can see here is that there is an 85% reduction of the new gadolinium-enhancing lesion after 12 weeks of treatment and specifically at the 60-milligram dose level. And if you look in the right part of the slide, you see the number of new and enlarging T2 lesions also after 12 weeks of treatment. And you can see that there is an 89% reduction also at the 60-milligram dose level in this slide. So that's really the key results from the Phase II study in terms of the magnitude of effect. And the next slide, please. So this just give you a little bit more background. And maybe not surprisingly, the dose we are taking forward to Phase III is the 60-milligram dose, which had the best effect on both the gadolinium-enhancing lesion and the T2 lesions. But there is one detail that could be worth knowing. And you see Phase I data on the left part of this slide. And you can see that there is a bit higher exposure in subjects, in healthy subjects, in this case, that had fed conditions versus fasted conditions. So exposure a bit higher with fed conditions. And we actually looked at this also in Phase II. And you can see in Phase II a plot showing the exposure in Phase II patients on the x-axis versus the presence of new gadolinium-enhancing lesions on the y-axis. And what you can see here is that if you go to the right in the slide, you can see that with higher exposures, there are very few new lesions. And actually, if you would draw a line at 30 nanogram per hour and milliliter, you see very few new MRI lesions in this -- in patients with that level of exposure, which is not just the 60-milligram patients. There are also some 30-milligram patients, as you can see from this figure. And even if you go down to perhaps 10-nanogram per hour and milliliter, it would have a good lesion suppression, except an outlier here in the 30-milligram group. So that is what is behind our recommendation to actually take the 60-milligram dose to Phase III, but also giving that dose with food to make sure that we have a consistent exposure in patients in a range that is likely to result in a strong suppression of new lesions. So the next slide, please. So equally important to efficacy is, of course, safety. And I'm happy to report that the safety profile looks good in the data we have so far. And actually, 129 out of the 130 patients completed the Phase II trial as planned, and the patient that did not complete the trial actually withdrew consent. They would withdraw consent in not wanting to follow the standard contraception requirements in the trial. And in parentheses, I want to note here that contraception is standard in all early trials in clinical development for experimental therapeutics, such as '168. We didn't have it when we started this trial, but we actually have the reproductivity toxicology studies now, and they do not show teratogenicity for this compound, and we have an approximately hundredfold safety margin in the repro tox study. If we look further on this table, we can see that there was one patient with a serious adverse event in the 60-milligram group. That was MS relapse and the patient was hospitalized to rule out stroke, and the stroke was indeed ruled out. It was a normal MS relapse, and the patient did recover and remained on study treatment. That is the only SAE they had reported in this study. One interesting area based on the experience with the class in MS is looking at liver enzymes. So we looked specifically at liver enzymes. There were 2 patients of note here. One patient at the 30-milligram dose level had one liver enzyme value that was abnormal, just about 3x the upper limit of normal. But then it normalized with the next time the patient was sampled, and the patient stayed on study drug. There was one patient at the 60-milligram dose level as well who had a slight elevation of liver enzymes at baseline. It actually increased during the first 4 weeks when the patient had placebo to slightly above 3x upper limit of normal. And then when the patient went on active treatment with 60 milligram, the liver enzymes normalized over an approximately 8-week period. So clinically, we don't believe that we see any liver enzyme on patients of concern in the Phase II trial. But of course, we will continue to closely monitor liver enzymes in Phase III. And if we combine that with the preclinical data for this compound and also the experience with liver safety in oncology patients treated with BTK inhibitors, we do not believe that liver enzyme elevations are an obligatory class effect of BTK inhibitors. But of course, again, we need additional data to confirm it. So the next slide, please. So this slide attempts to do something that is very difficult, and that's sort of comparing across trials. And that will always be a bit of an apples-and-oranges comparisons because the trials are all done with slightly different methodologies, there are different populations and, of course, you cannot just compare and assume that, that will be a justified comparison in all cases. But still, this is something that we know that many people want to see, and that's why we're showing this slide. We can see that the 85% reduction of new gadolinium lesions and an 89% reduction of new and enlarging T2 lesions is indeed very competitive if we do this very rough comparison with other Phase II results for a number of other compounds in MS. But again, of course, we will need a Phase III end point with the Phase III outcomes with clinical end points and longer-term data to really confirm what level of effect this company has in relation to other MS treatments. And with that, I would like to hand over to my colleague, Rita Balice-Gordon, who will talk about mechanism underlying progression in MS. So please, Rita.

Thank you, Erik. Despite currently approved therapies, patients with MS continue to accumulate significant disability. As shown on the left, treated patients follow a similar trajectory of disability accumulation, here assessed by EDSS score, as do untreated natural history cohorts. On the right, regardless of treatment with platform injectables or treatments that are considered high efficacy in relapsing MS, around 20% to 30% of treated patients exhibit progression of their disease over several years. This raises the important question of what fuels MS disease progression and accumulation of disability. Can I have the next slide, please? Erik presented this cartoon earlier when he introduced the dual mechanism of action of brain-penetrant BTK inhibition with our compound, which affects adaptive and innate immune cell function in the periphery as well as addressing a missing piece in MS therapy: the ability to normalize innate immune cells of the CNS called microglia, shown here in orange, which respond to peripheral immune activation and myelin damage in the brain, becoming reactive and pro-inflammatory. Activated microglia that accumulate at the lesion rim exacerbate myelin damage leading to axon damage, synapse loss and neuron death, which fuel further microglial activation and continue the vicious cycle of CNS damage, which underlies disease progression and accumulated disability. BTK is a key regulator of microglial function. Inhibiting BTK may be able to stop this cycle of inflammation behind the blood-brain barrier, stop progressive CNS damage and accumulation of disability, returning the aberrantly activated microglia to a quiescent, homeostatic state, thereby attenuating MS progression and providing a potentially transformative therapy for patients. The next 3 slides provide some of the reasons to believe that a brain-penetrant BTK inhibitor may switch off microglial activation and reduce disability progression. Next slide, please. Genome-wide association studies, such as the one shown on the left, suggest the expression of MS risk genes is enriched in microglia. To better understand the role of microglia in MS progression, we examined the transcriptomic signature of cells isolated from patient brain lesions using single nuclear RNA sequencing from progressive MS patient autopsy samples. A representation of this analysis is shown in the middle plot, demonstrating clear differences among upregulated genes, shown in red, and downregulated genes, shown in blue, between age-matched healthy control and progressive MS patients. So to determine what cell types were contributing to the progressive MS transcriptomic signature, we further analyzed the single nuclear RNA seq data and found that the 50 most highly up-regulated genes in progressive MS are, in fact, most highly expressed in microglia. These analyses suggest that in progressive disease, microglia acquire a disease-associated phenotype that is distinct from microglia in normal brain. And interestingly, we found that BTK is upregulated in lesions from progressive patients. So we next asked, what is the spatial localization of BTK in and around lesions? And what cells express BTK in the brain? Can I have the next slide, please? Work by Daniel Reich and colleagues at the NIH showed that activated microglia are colocalized with demyelinated lesions and areas of axon loss as shown in the histology panels on the top right -- excuse me, on the top left. These microglia contain ingest myelin debris and iron, and the iron content allows microglia to be visualized using advanced MR imaging. In the bottom panels, you can see these iron-containing microglia as a dark rim around the lesion. Now using immunostaining of brain autopsy samples from progressive MS patient lesions, we found that the number of BTK-positive cells, shown in purple in the middle panel, are increased in the lesion rim where active demyelination is occurring. In another set of analyses, we further showed that these BTK-positive cells, labeled in red here, are microglia as identified by IBA1 staining shown here in green. In the right-hand panel, we found that BTK was most pronounced in lesions from progressive MS patients. These lines of evidence demonstrate that BTK is highly expressed by activated microglia in and around the lesion rim in progression (sic) [ progressive ] MS patients. We next asked what genes and pathways are regulated by BTK in microglia, and this data is shown on the next slide. So Sanofi scientists, as many academic labs, have extensively characterized the role of BTK in microglial biology using mouse model. In the lab, we can conduct cause-and-effect experiments to functionally probe the role of BTK, using the mouse data to generate hypotheses that can be interrogated, at least by correlation with patient tissue analyses. An example of this approach is shown on this slide. We first generated a transcriptomic signature from activated microglia before and after adding a BTK inhibitor. This approach also allowed us to identify a number of genes and pathways that are modulated by BTK, and some of these are shown in the table below, including genes in several neuroinflammation-relevant pathways. We then applied the BTK-dependent microglial signature for mouse to the transcriptomic data set from progressive MS patient lesions that I showed you on the previous slide in an unbiased way using the mouse data set as the training set for the human data. A set of BTK-dependent genes, upregulated genes in red and downregulated genes in blue, clearly segregate the progressive MS patient lesion signature from that in normal white matter. Now understanding this set of genes and pathways in the mouse microglia BTK-dependent signature that are similarly regulated in progressive MS patient microglia and other cells is an area of focus of our ongoing work. And taken together, this data suggest that a brain-penetrant BTK inhibitor potentially could normalize aberrant pro-inflammatory BTK-dependent signaling in microglia that may be a driver of disease progression in MS. So to summarize on the last slide of mine, microglia play a key role in the progression of MS, and I might add also in other neurodegenerative diseases as their unchecked pro-inflammatory phenotype contributes to ongoing CNS damage. BTK inhibition normalizes the pro-inflammatory microglial signature and restores microglia to a resting homeostatic phenotype, which may be neuroprotective and reduce disease progression and disability in MS. Thank you, and I'll turn it over to John Reed to present the Phase III program.

Thank you, Rita. I now have the pleasure of discussing how we plan to take forward our brain-penetrant BTK inhibitor based on the promising data that you and Erik have just so eloquently described. This slide summarizes the comprehensive Phase III program that we're initiating with '168 as well as the medical need. As you can see, more than 1.2 million MS patients are living in the United States and EU5 alone, which roughly 1/4 have progressive forms of the disease where, as we've heard today, the therapeutic options are few or even nonexistent. We will be addressing all major forms of the disease in our more than 4,000 patient program. First, in relapsing MS, we will have 2 900-patient head-to-head studies with Aubagio as the comparator. We chose Aubagio as it is a standard of care in the oral space with proven efficacy in worsening disability and a well-documented safety and tolerability profile. So we feel we've set ourselves a high bar, but we're very confident in '168. In primary progressive disease, we will have a 1,200 patient placebo-controlled study. Only one disease-modifying treatment is approved in this setting and it has limited efficacy. So we would hope to see competitive efficacy from '168 in this setting based on its unique dual mechanism of action. In non-relapsing secondary progressive disease, where there are no approved options today, we will run a similarly sized trial of approximately 1,300 patients, again using placebo as the control. And finally, 95% of the eligible patients in the Phase II study that we've described have rolled into an open line extension phase of the study, which will serve as a long-term study of the efficacy and safety profile of '168. This is the broadest clinical program we're aware of in the MS space today. In the next slide, you'll see that in parallel with our clinical program, we are looking hard at exploratory neuroimaging biomarkers to generate additional evidence supporting the CNS activity of '168. We have 2 elements in our strategy here. First, we are examining the utility of slowly enlarging lesions as a marker of chronic tissue loss, where no ongoing acute inflammation remains. Slowly enlarging lesions are chronic lesions that can be seen on conventional T2 scans. They have an inactive center surrounded by a rim of activated microglia or macrophages. I think Rita described the potential role of these activated microglia in disease progression very nicely for us. As they are relatively resistant to current treatments, slowly enlarging lesions could be used as a marker of the CNS activity of '168 in persistent chronic disease. Second, we will look at phase rim lesions as markers of disability accumulation. Phase rim lesions can be detected by susceptibility weighted imaging. This is a type of MRI sequence that is especially sensitive to blood and iron. These lesions typically have a weekly magnetic rim corresponding to the presence of iron-laden microglia. By imaging phase rim lesions, we could get an additional indicator of CNS activity of '168, given that disability accumulation is correlated with the number and volume of these lesions. This innovative neuroimaging work is ongoing already in our Phase II patient cohort. I do not have further details to share today. However, we plan to give an update at an upcoming conference. Now given the priority of this program, we're getting a lot of questions about whether it's impacted by the COVID-19 pandemic. I'm glad to say that, so far, we are on track. Our local clinical study teams are securing remote site selection visits and continue to prep for the site initiation visits with anticipation that the trials will start midyear. Despite the pandemic, our CMC team has generated the necessary drug product, and our drug supply chain team is poised to ship to sites. If all goes to plan, we'll be submitting '168 for regulatory approval in the 2024-2025 time frame, beginning with relapsing MS in the first half of 2024. If we meet these goals, this would represent a substantial advance over typical industry cycle times with our Phase I and II completed in just under 3 years, and the Phase III development and regulatory filings expected to take approximately 3.5 years. The pace of our development program is an indicator of the new mindset and agility at Sanofi R&D, whereby we will take swift and decisive actions to prioritize and scale up investment behind our most promising molecules. Patients can't wait and neither will we. So to wrap up, I hope you found the Phase II data as compelling as we do. We look forward to the results of our Phase III program, which aims to deliver: safety similar to placebo, low treatment burden based around a once-daily oral dosing with no monitoring, relapse reduction comparable to the anti-CD20 class and superior to other orals, benefits on disability progression through demonstrated CNS penetration and supported by novel neuroimaging approaches and efficacy across the full MS spectrum, including progressive disease. As Bill said in the beginning, if we meet this best-in-disease target profile for this molecule, we will have a major commercial success on our hands and a product that not only meets the needs of MS patients across the MS continuum, but it offers fresh hope to many thousands who have been diagnosed but currently receive no treatment. With that, I'd like to hand over to Felix to start the Q&A.

Thank you, John. We will now open the call to your questions. [Operator Instructions] Operator?

The first question from the phone is from the line of Peter Verdult from Citi.

It's Pete Verdult from Citi. Two questions. Just in terms of the dose range that you explored in Phase II, obviously, we saw nice effect, but only at the highest dose. So does that beg the question of whether you could have gone actually higher with your dose? That's question number one. Number two, John, thanks for the commentary regarding the clinical program. I mean, obviously, the situation right now is fluid. We're seeing COVID putting a rather large spanner in the works for the industry in terms of conducting clinical trials initiating, and you've got some big plans. So I think you've touched already on some of the measures you're taking, but the time lines are pretty aggressive. Wonder if you can go in a bit more detail how you're going to ensure trial integrity and making sure that the patients can be followed up properly on this expansive trial program.

Well, thanks for your call, Pete. I'm going to let my colleague, Erik, address the first of the questions about the dose. Erik, can you comment on that?

Yes, I'd be happy to comment. I think, as noted, we have a very competitive profile of the 60-milligram dose with very high efficacy and also very good safety profile. So -- and I would just remind people that this is the profile we see already at 12 weeks. So it's -- typically, in MS, we can see a little bit more with longer-term treatment. So there is not much more room to improve actually upon this 60-milligram dose. The additional point is that you saw the exposure response relationship on one slide. So really at the upper levels of exposure, we see very few new lesions. And if we give the 60-milligram dose, and especially then in fed state, we think that we will have very good control of the lesions and that there is little room to further improve.

Good. And then on the ability to conduct trials in the current COVID era. Indeed, there certainly are challenges. We've been, like many I'm sure, learning to negotiate our way through these. Fortunately, with an oral therapy like this, that removes one of the elements of complexity. We don't have to get people into infusion centers, et cetera. Two, we've been practicing direct-to-patient shipping of the investigational products in our current studies and have been using a variety of ways to remotely stay in touch with the patients. We're also developing smartphone apps that can be used as adjuncts. We expect to start the study in midyear, more or less as planned from the beginning. We recognize, though, because of COVID that the slope of the ramp-up curve will probably be shallower than we originally would've anticipated, but we do expect them to build momentum in the -- as the studies move out and the pandemic becomes less of an issue and to see an acceleration in that recruitment slope after the initial start. So that's what our estimates are now. Obviously, we'll keep the community appraised as we get underway and begin our program.

The next question from the phone is from the line of Matthew Weston from Crédit Suisse.

Two questions, please. The first on the microglia hypothesis. If it proves to be correct, what specific end points would you point us to in the Phase III trial where you would expect to see a clear differentiation in drug profile versus the existing therapies for MS on the market? And the second is a question about the ALTs observation. So evobrutinib obviously saw a more significant impact on ALTs in their Phase II study. They've highlighted that they feel there's a subset of patients which they can call out that see that side effect. Is that anything that resonates with you? Or from your perspective, the level is so low that you can't really comment.

Well, thank you for your question. Maybe I'll just start, and then I'll hand things over to Erik. The -- we talked about these new neuroimaging methods that will become part of the exploration for demonstrating a CNS effect behind the blood-brain barrier of '168. So I think those are going to be some of the main tools that we'll have available. And I'll have Erik comment more on that as well as the LFT issue, Erik?

Yes. Thank you, John. Yes. So in terms of Phase III end point, where we're hoping to get additional effectives on the disability progression end point. So that's normally measured with the EDSS, Expanded Disability Status Scale. That's the end point to look out for in Phase III. And then there are these exploratory MRI end points that John already discussed that you can look at in Phase II. And in terms of subgroups and liver enzyme elevations, I really can't comment on the evobrutinib data. But looking at our data so far, we don't really see -- we believe that we don't see a significant liver signal with this compound so far. But obviously, this is something that we will continue to monitor.

The next question from the phone is from the line of Richard Vosser from JPMorgan.

Just one on the dose response curve. There was no appreciable difference between the 30-milligram and the 50-milligram dose. So maybe you could comment on why you think you see that, obviously, receptor occupancy high. So just thinking about the 60 milligrams showing very different results. So just your thoughts there. And then secondly, just thinking about the upregulation of the BTK. How much of a benefit do you actually think you could see in relapsing-remitting MS? I note that the upregulation seems to be very limited versus healthy controls. So is this more of a benefit you could see in some of the later disease progressions or the more difficult phenotypes, like SPMS or PPMS? So just your thoughts there as well.

Great. Thanks for your question. I'm going to make a -- just a quick comment about the 30 versus 60 milligram, but then hand that over to Erik. And then on the issue around the relevance of BTK to the relapsing MS, I'm going to ask Rita to take that. Earlier today, I don't know if you had a chance to attend, but we did do a scientific online symposium, given that the American Academy Neurology conference, where the data would have been presented, has been canceled due to the pandemic. And the speakers there talked about the statistical modeling of the data, et cetera. And I think what you can see there, at least with the T2 lesions, is a very clear linear dose response. And maybe Erik can comment a bit more on that. And then as I said for the issue around the BTK relevance to the relapsing MS, I'd like Rita to cover that. So Erik, you first.

Yes. Thank you, John. I think you hit the nail on the head there when you described that. If you look at the data in totality, if you look at the new gadolinium-enhancing lesion, yes, it looks like a dramatic difference between 30 and 60 milligrams. But if you then look at the T2 lesions, the -- it gets a bit more clear that you need to have a very clear dose-response relationship, and that there is a partial efficacy of 30 milligram. I think it's getting even more clear when you look at the exposure-response analysis that actually quite a lot of patients on the 30 milligram and especially then with the higher exposure seem to have a very good control of the lesion. So I think it's a slightly -- again, slightly misleading if you only look at the new gadolinium lesions. You have to look at the T2 lesions as well. You have to look at the exposure-response relationship, and the totality of data is quite convincing.

Good. Thanks, Erik. And Rita, can you comment on the role of BTK in RMS?

Certainly, John. That's a great question. As you noted, the upregulation of BTK is quite prominent in progressive MS. It's also present in relapsing MS, and I would note that activated microglia play an important role in the inflammatory cascade in lesions in relapsing MS as well. But because of the nature of these lesions and the fact that they are at different stages in patients that are on different treatments, they're more of a mixed bag, which makes quantification of BTK expression somewhat more challenging, and this is an area that we continue to probe in our going work.

The next question from the phone is from the line of Graham Parry from Bank of America.

So firstly, just again focusing on the relapsing market. If you look at the MRI data, and again, obviously, comparing across trials here, it doesn't look as effective as the CD20 monoclonal bodies but perhaps a little bit better than the orals. And I think in your slide on positioning, you referred to it as having best relapse reduction of the orals. So can we just sort of clarify -- you think of this in terms of positioning in relapsing as being perhaps something which is a slightly better oral than what's already out there, but not a challenger to CD20 necessarily, and then more of a progressive MS being where you see clear differentiation for the asset. And then, secondly, a question on trial design. The trial assumes that lesion developments continues throughout the study, but you've obviously got a shorter placebo period to try and adjust to the fact that you're exposing patients to placebo for the limited amount of time that you can. But what testing is done to ensure that that's a valid assumption and that isn't throwing out some false positive results?

Good. Well, thanks for your questions, Graham. I'm going to have Bill Sibold take the first one regarding the positioning in the RMS versus the progressive space. Bill?

Great. Graham, thanks for the question. Look, I think if you -- what we've shown here in the presentation and as you've seen in the market over the years and having been in the market for almost 20 years now, there's still a tremendous amount of unmet need. Now specifically, we see that there's very little, if anything, for progressive disease. And I think the -- we have -- mechanistically, we have a belief that this is going to have an impact as well. I think if you look at the MRI data, we consider this is CD20-like, and this is after a very short trial. So we fully expect that, as all the presenters have said, that this is going to be a best-in-disease profile product that can compete really across the spectrum of MS. Now where is it going to? Where would we target? Well, we showed on my slide that about 40% of sales, we think, by 2024 are going to come out of this CD20 space. That's a big market in itself. We see that there's a lot of patients that are still on the sidelines because there isn't therapy for them, especially as in you get into the more advanced progressive disease. So there's an opportunity. And I'll just remind you that provide the perspective over -- around the world, injectables still have 40% patient share. 40% of patients are still on an old injectable today, and only 19% of patients are on high efficacy. So we see lots of potential across the spectrum of MS. Highest unmet need, we believe, remains in this progressive disease and also bringing some of the patients back in from -- that just simply don't and haven't had an opportunity for any other therapy. So hopefully, that answers your question for you, Graham.

Graham, and then on the issue of this modern trial design that minimizes the exposure to placebo for patients, I'm going to have Erik offer probably a more sophisticated response than what I'll provide. But I think one other way you could even perhaps think about this, although the statisticians may not like the way I describe this, is if you think about the 5-milligram dose, which is really subtherapeutic, it almost in a way serves as a placebo arm as well. Because if you look at the data, you see that the T1 and T2 lesions don't change much on 5 milligram, and yet those are patients who had that dose throughout the full duration of the study. So I think if you look at it that way, then you can very readily see that there's roughly a tenfold decrease, a 90% decrease roughly in these lesions. The T1 lesions going from around 1 to 0.1 and the T2s from around 2 to 0.2. So that would be my relatively unsophisticated, non-statistically correct way to think about it. But let me hand things over to Erik to talk more about it.

No. Thank you, John. I think it's an interesting way to look at it. Actually, I was planning to mention the same. I mean if you would actually use the 5-milligram data as sort of a reference instead of placebo, because we used the 4-week placebo as the reference when we calculated the 85% and the 89%. But if you were to use the 5-milligram data at 12 weeks instead of the placebo, you would have had an even stronger effect, actually. So I think that, that should be comforting in terms of robustness. And the reason why you think we can extrapolate on placebo and use it, the 4-week placebo as a sort of a surrogate for the 12-week placebo that we don't have is that we have a lot of Phase II MS data from various try-outs. And in terms of individuals, we know that patients vary. But in terms of groups, the placebo groups are quite consistent. And also the activity in this trial, both at baseline and on placebo, is very comparable with what we've seen now in many, many Phase II MS trials through the years. So very little concern in terms of being able to extrapolate both in terms of historical data showing placebo stability and exactly what John measured, that if you would use the low dose at week 12, you would actually get in a stronger result.

The next question from the phone comes from the line of Wimal Kapadia from Bernstein.

Wimal Kapadia from Bernstein. So you mentioned this during the presentation. But given the impact you are seeing on the microglia, how does that drive your thinking about the potential for the product in other CNS indications, such as Parkinson's and Alzheimer's where we know microglia has a role to play? And then my second question, if I can just ask, maybe it's a very simple question. But what makes this BTK a good brain penetrant versus others? What on a molecular structural or selectivity perspective is really driving the better outcomes versus evobrutinib? Because my understanding is that your asset targets over 10 kinases. Evobrutinib is around 2 or 3. So why is '168 more potent and a better brain penetrant?

Thanks for your question. I think I'm going to let Rita have a stab at these -- at both of these. And then on the second one relating the characteristics of the molecule itself, myself or Erik may supplement. But Rita, please, over to you.

So 2 great questions. The first one, very much on our minds as we explore the mechanism of, first, microglia in the broader category of neurodegenerative diseases, where, as you know, in the diseases that you mentioned, they play an important role in disease pathophysiology and, of course, the potential for BTK inhibitor. And this is an area of our ongoing research work and an area of discussion with our development colleagues about additional indications to pursue. Now with respect to the molecule itself, we know that '168 inhibits 7 kinases at 4 nanomolar or lower. 5 of those are members of the Tec family and the other 2 are members of the ErbB family. And I would mention these latter 2 play important roles in brain function, and we are interested in understanding what role they may play in myelination and MS disease progression. The selectivity of evobrutinib is described in the Haselmayer 2019 paper, of course. And I finally want to mention that while selectivity is important, it's only one of several parameters, including exposure in tissues and cells of interest. And I'll note as we presented here today, that the exposure of '168 is quite high in the brain. The potency of the molecule, '168, is quite potent compared to evo. And of course, safety, not to mention the ability to achieve the desired pharmacodynamic effect and the clinical impact in patients, all of these are essential features of a successful therapeutic. So Erik, John, I'll turn it back to you.

Yes. Thanks, Rita. I think you phrased it well in terms, of course, one needs to look at the totality of the characteristics of the compound when you're thinking about the therapeutic index. To some extent, the clinical data speak for themselves around this. One of the other things I would note is that '168 is a highly potent compound. And so we don't really have to push the dose, perhaps, in order to hit the target as much as some other compounds might, and then that tends to spill into sometimes off-target activities. But I think, overall, it's a well-crafted molecule, nicely balanced profile. And then, of course, with a covalent mechanism, pharmacology really matters a lot. It tends to be more of a Cmax-driven rather than AUC-driven pharmacology. And so again, it allows with the right pharmacology, the right potency, the right selectivity, you can thread the needle and get the exposure you need without the off-target effects. Erik, anything to add?

Only very shortly to say that we did show in the slide actual human CSF data. And I think that distinguishes this molecule actually from competitor molecules that have shown some data in animals, but not human.

Good point, Erik.

The next question from the phone is from the line of Luisa Hector from Berenberg.

It's Luisa Hector from Berenberg. I wanted to check on the Phase III. Just to confirm if the EU regulator is happy with the placebo-controlled studies in PPMS and also to check on the duration of treatments and end points in the relapsing and then [indiscernible] studies in particular and whether you actually have data in progressive. It looks like the Phase II is all relapsing. So just to confirm on that. And maybe if I could just ask on safety because you did question the sort of long-term safety of B-cell depletion when we look at the CD20s. I mean so far so good, it seems. But is there something different when we think about long-term B-cell depletion versus your activity, which is more of that B-cell suppression? Is it -- are they fundamentally different? Or is it just that you have that kind of faster on-off switch relative to the CD20s?

Okay, Luisa. Thank you. So yes, there were several questions there. One was on the primary progressive, whether that should be placebo controlled. The other was on -- I didn't quite get the question, but something about the duration of treatment and then the last one was on the safety regarding the effect on B cells of the CD20 class, the deplete versus this. Maybe I'll start with the safety and then hand some of the other questions over to colleagues. Indeed, the idea of the on/off switch, as I think you described it, Luisa, is precisely what we're talking about here. The reversibility, the relatively quickly of being able to restore B-cell function when it might be needed, such as in the middle of a COVID-19 pandemic when it would be good for your body to be able to make antibodies that neutralize a virus is, I think, example par excellence of why the reversibility, the quick reversibility is to be desired. In terms of the placebo control for PPMS, we think that's a reasonable place to start, given that the only other approved therapy only slightly moves the needle. We may, down the road, look at other studies that could do comparisons. But for starters, we think this is a good way to proceed. Let me hand that over to Erik maybe for other comments you would have on the design for the primary progressive as well as the duration of treatment.

Yes. Thank you. So these are event-driven trials, so that means that they will continue until we have enough disability progression events to make these trials informative. And in terms of the regulatory acceptance of placebo, yes, indeed, it is accepted by regulators to use placebo and exactly for the reasons that John outlined, that there's only one treatment for PPMS. There's no registered treatment for nonrelapsing SPMS, and the treatment for PPMS has -- that's relatively low efficacy. And also, notably, there are different labels across the world. So in many parts of the world, including Europe, it's only younger patients with inflammatory activity where the treatment is indicated, and there are many PPMS patients that don't meet these criteria. So they would not have a label treatment available in many parts of Europe and other parts of the world.

Yes. Thanks, Erik. I forgot to mention that the team did have the end of Phase II meeting with the FDA just yesterday.

That is correct. Yes, absolutely. And I think there was overall good outcome and certainly acceptance of the proposed trial designs.

Good. Hopefully, Luisa, that addressed your top -- your questions.

The next question from the phone is from Soni, Tarun from Guggenheim Partners.

This is Seamus Fernandez on behalf of myself, I guess. Wanted to ask just a couple of very quick questions. When I look at the data, I just wanted to get a better sense of the -- when I look at the confidence intervals and the standard error bars, which are super helpful, thanks for including those, can you just help us understand the tightness of the data for the 60-milligram dose versus the other doses? It certainly could just be a dose effect. Or is it something of a factor of the statistical model that gets utilized here? I'm just trying to better understand how tight that data set actually looks for the 60-milligram dose or if it was perhaps a difference in the baseline characteristics of the patient populations. And then the second question, in terms of other neurodegenerative diseases that would make sense as potentially impacted by microglia. I know you commented on this a little bit earlier. But are there any that really jump out specifically that you're most excited to explore? Are there any -- is there any evidence, available evidence, where the kinases that you discussed are uniquely involved in any particular disease states?

All right. Thanks for your questions, Seamus. Erik, do you want to take the first one on the tightness of the data in the 60-milligram dose, confidence intervals, standard deviations as well as there was a discussion around whether baseline characteristics of those patients in that group were different? We showed those data in the tables. And then I'll ask Rita to comment again around microglia and, specifically, BTK as a target in other types of neurodegenerative or inflammatory diseases. So Erik, you first.

Yes. Thank you. So actually, the -- when you look at the data as presented, we showed you both the raw data in terms of lesion count, but we also showed you the percentage reduction. And actually, when you have this 85% reduction with the new gadolinium lesion, that is an analysis that actually does take baseline characteristics into account. So when you do this analysis, you do compensate for baseline characteristics, and that's why we showed both the numbers, both the percentage reduction and the raw data to give a more comprehensive picture. I think it's important not just to look at that data in isolation and look at the confidence interval in that particular figure. When understanding the treatment effect, you also have to look at other parameters, such as the T2 lesions. You can see that the confidence interval is a bit different there with the same dose, but also -- and that's why we showed you that additional analysis. Also looking at the exposure-response relationship because that gives you another dimension, and it gives just sort of a visual view on how much variability you see in the lesion data. And I think when you look at the data together, again, it shows a quite compelling picture of efficacy with -- when you're in the higher end of the -- of an exposure into and particularly with the 60-milligram dose in trial state.

Good. So let's -- Rita, can you take up the issue again of BTK, microglia and other neuroinflammatory, neurodegenerative diseases?

Certainly. So as I mentioned in the earlier answer and I touched on in the presentation, microglia play important roles as both responders to inflammation and drivers of inflammation in the brain in the context of a number of neurodegenerative diseases, including Parkinson's, ALS, Alzheimer's and several others. So we are very focused on understanding the role of microglia as drivers of pathophysiology in these different diseases. And I want to point out that there are some commonalities that we and other labs working on this question have uncovered. And there are some differences in the extent of the microglial response, the way microglial response and in the microglial inflammatory signature in each of these diseases. So there are similarities and differences that the field as a whole is really focused on understanding. And BTK is one key regulator of microglial activation. It's interesting in the context of diseases that have an autoimmune or B-cell component, and it may turn out to be relevant in diseases that have a prominent microglial component. And we'll understand that better as we define the BTK-dependent signature, further define it in MS and explore it in diseases that have a prominent microglial component to neurodegeneration. I want to mention as an aside that the regulation of the microglial response, both acutely and with respect to long-term inflammation behind the BBB that drive neurodegeneration and accumulation of disability, we think this is a really important node in the treatment paradigm for neurologic disorders, and it's of great interest to Sanofi as we move our portfolio forward.

Thanks, Rita. Yes. And I think now that we have this transcriptomic signature of a -- what we would call the BTK signature, we certainly -- our team is looking whether that same signature is found in the transcriptome from material taken from patients with other disorders. So we have something to build on there in terms of seeing where else might there be a fit for a BTK inhibitor. Good. Okay. Further questions?

The next question from the phone is from the line of Peter Welford from Jefferies.

I've got 2 questions remaining. Firstly, just on the Phase II if I -- both on the Phase III trial design. I wonder if you could just clarify what the primary end points will be in both the RMS and the PPMS and also the nonrelapsing SPMS populations? And specifically, in the RMS population, are either the primary or the key secondary end points, is there a design to be a pooling across the 2 studies or both studies designed to be independent with regards to the statistics for each of the key end points? And then just secondly, are patients -- particularly in the PPMS, I'm thinking, and the RMS populations, are patients who have been on prior CD20s and/or drugs like Mylinax are allowed to be enrolled into these studies or must these patients come from some of the original injectable platform drugs or other orals?

No, thanks for your questions, Peter. I'll make a comment or 2, but I'm going to hand it over to Erik for the details. On the Phase III, the 2 parallel Phase IIIs for relapsing MS, those are powered to be independent readouts with fairly standard end points for relapsing. Erik, do you want to talk about the eligibility requirements as well as the end points for the progressive studies?

Yes, absolutely, absolutely. So for the progressive MS studies, it's confirmed disability progression. That is the primary end point for both these studies. It's 6-month confirm. And exactly, as John said, for the relapsing MS studies, the 2 relapsing MS studies, you have annualized relapse rate as the primary end point, and they're individually powered for the annualized relapse rate. And then you have a key secondary end point, which is the confirmed disability worsening, and that is pooled across both studies. So there are 2 identical studies pooling for the key secondary end point, disability progression. And when it comes to previous treatments, it's pretty much all MS treatment, except the very long-lasting or type -- life-long-lasting experimental treatment. Most standard treatments are allowed as previous treatments in the trials, but there are various washout times that are required before going into a trial. And actually for the oldest and most established platform injectables, so we don't have washout time. But then there are different washout times for -- depending on which previous therapy the patient had.

The last question from the phone is from the line of Simon Baker from Redburn.

Two, if I may. Just going back to the Phase II study. You said that the patient characteristics were typical of a relapsing population. I just wonder if you could give us a bit more detail in terms of age, time since diagnosis and EDSS scores. And then secondly, a large proportion of this population, assuming all goes well, will be on a once every 6-month injection. What do you see as the appetite for people to switch from twice yearly to daily dosing? What level of efficacy benefit you think you're going to need to make that a persuasive change for patients? And then just a very final yes/no question. Have you disclosed the structure of '168?

Thanks for your questions, Simon. On the Phase II -- so we had questions on the Phase II results and the patient characteristics. We showed a table with that. I'll make a couple of comments and hand over to Erik for that. And then on the IV infusion twice yearly versus a once-a-day oral, I think I'll let Bill comment on that from his perspective of bringing Aubagio on the market as one of the standard-of-care orals. So on the Phase II results, I think if you saw, this is a patient population that is really early in their journey with MS. The EDSS, the disability scores range from 0 to 5.5, so it's still an ambulatory population. The median ages were something around 37 years old, if I remember correctly. But overall, I would say, very typical, let's say, of an MS population in a relapsing situation. Erik, do you want to add anything else? Again, many details were provided in the slide. But Erik, what else would you add?

I think you have a good memory, John, because the age is absolutely 37 years of age at the mean age, and there's around 70% female, which would be expected; and the time since symptom onset, 7.8 years; EDSS score, median score, 2.5. One other important parameter is the number of patients with baseline gadolinium lesions. It's around 35%. So overall, a very, very typical Phase II MS patient population, yes.

Yes. Thanks, Erik. And then, Bill, do you want to take on the IV infusion versus the once-daily oral?

Yes. So thanks, Simon. Look, real simply, best profile wins. And I think as you looked at this presentation across the 5 dimensions, we think that we win across all of them. I think that a once-daily oral is something that patients are going to want in this disease. So best profile wins. I think we really can have the best profile in the disease.

Thank you. Felix, over to you.

Yes, great. Thank you. Thanks, everyone, on the call. And for those that could not get through with a question, please don't hesitate to contact our IR team. Otherwise, please join us for the Q1 earnings call tomorrow where you will also have the ability to speak to John Reed besides the other Executive Committee members and the CEO. And with that, I would say we conclude the call, unless, John, you have a final word or wrap-up comments to make.

No. Just thank everyone for your interest. We're clearly very excited about the results from this Phase II and committed to the Phase III program that you've seen. We do feel that '168 has potential to be a best-in-disease molecule across the spectrum of MS pathology. So we're going to move forward as fast as we can, pandemic notwithstanding, to bring this molecule forward for patients. So thank you for your interest, and we'll keep you informed along the way.

Thank you.