Santhera Pharmaceuticals Holding AG (SANN.SW) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Santhera Pharmaceutical Conference Call. I am Alice, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. This conference call may contain certain forward-looking statements based on current assumptions and forecasts made by Santhera Pharmaceuticals. Such statements involve certain risks, uncertainties and other factors, which could cause the actual results, financial condition, performance or achievements of Santhera Pharmaceuticals to be materially different from those expressed or implied by such statements. These factors include those discussed in the comprehensive risk factor disclosure on the company's website at www.santhera.com. Santhera disclaims any obligation to update any forward-looking statements. The conference may be downloaded on Santhera's website during the 2 weeks following the call. At this time, it's my pleasure to hand over to Mr. Dario Eklund, CEO. Please go ahead, sir.

Thank you very much, Alice. Good afternoon and good morning to our U.S. participants. Thanks for joining today's call following our announcement this morning on our DMD drug candidate Puldysa. As most of you have probably already reviewed the press release, I'll briefly take you through the key points. In May, we announced the full recruitment in the SIDEROS trial and proceeded with an interim analysis after a planned sample size and variability reassessment confirmed that the study had a high enough power to detect the treatment difference. Our confidence was further supported by the fact that at this point, a large number of study participants had already completed a substantial portion of the study. Yesterday, the Data and Safety Monitoring Board completed the interim analysis of the SIDEROS study and recommended that the trial be halted on the basis of futility, which means that the study was unlikely to show a treatment difference between Puldysa and placebo. Santhera has adopted the recommendation and is stopping the study. As we will not have positive data to enhance our European regulatory dossier or support the submission in the U.S., we have drawn the logical conclusion and decided to withdraw the European marketing authorization application and are ending the global development program for Puldysa. As you can imagine, this was not the outcome we expected. I would like to thank the patients and the families as well as the investigators and medical professionals who participated in the SIDEROS study and all Puldysa development activities. Without their contributions, we would not be able to advance DMD research. In connection with this decision, the company intends to initiate a restructuring plan for the business with a focus on retaining the key functions for bringing the DMD drug candidate vamorolone to patients and execute on its other pipeline programs. Now let me turn to the future. Our aspiration was to provide the Duchenne franchise to address the needs of patients across the disease -- across the entire disease spectrum. Now our focus going forward will be on a single but very promising DMD asset, vamorolone. Our excitement about this product candidate is well founded. We have good clinical data, and the pivotal study VISION-DMD is progressing towards a readout in the spring of next year. The potential in DMD alone is substantial. And in addition, we have the rights globally to partner in much larger indications beyond DMD. Alongside vamorolone, we will also continue to advance other pipeline drug candidates lonodelestat for cystic fibrosis and other lung diseases and the discovery stage gene therapy approach for congenital muscular dystrophy. With this, I'd like to close my comments, and thank you for your interest. I will now hand over the call to the operator for our Q&A. Thank you.

[Operator Instructions] The first question comes from the line of Bob Pooler with ValuationLAB.

Dario, sorry to hear you have to discontinue development of Puldysa in DMD following the SIDEROS interim analysis. A few questions from my side, first on Puldysa and then on vamorolone and then just on the financials. On Puldysa, do you have any idea why the SIDEROS trials unlikely to meet its primary endpoint? For instance, was the effect of Puldysa on top of DMD patients on steroids too small?

Bob, thanks for the question. It's a good question that we also asked ourselves last night when we got the data, the top line data from the DSMB. The answer to your question is not something we will be able to answer anytime soon. I mean we still need to do a lot more data mining to really understand whether there are subgroups who benefited from this, whether some effects of the drug were masked by the fact that these patients are glucocorticoid-using patients. Obviously, it was a big surprise to us given the data we had from the DELOS study, where, if you can recall, the blinded analysis that we did at the same time point of the study where you have basically combined the active and the control into one line, and you see the average decline. When we looked at the DELOS average decline and we looked at the SIDEROS average decline when the recruitment had been completed, the lines were colinear. They were declining at the exact same rate. And as we're successful with the DELOS study and saw a clear difference between the 2 groups, there was no reason to not assume that we would have a different outcome in the SIDEROS study. It's commonly accepted that the patients who are on glucocorticoid start declining about 3 years later than patients who are not on glucocorticoids. But once they start declining, which is defined as less than 80% of predicted FVC value, they typically decline at the same rate as patients who are not on glucocorticoids. So when we had finished the recruitment of the SIDEROS study, we had already more than twice the number of patients that we had in the DELOS study, the entire DELOS study. We had already had twice the number of patients complete the full 18 months of the SIDEROS study. And the study was very well powered. We had 99% power at that point. So we decided to do the interim analysis. We're quite confident that we were going to see at least the difference we saw in DELOS, if not bigger. But to our great surprise, we, last night, learned that, that was not the case. And that actually, there was not enough of a difference between the 2 groups to justify continuing the study. How that happened and why that happened is something that we will obviously dig into. But that analysis will take weeks or maybe months because there's a lot of data to be evaluated. But obviously, we owe the community an answer to that question.

Yes. Clear. Yes, let's switch to the future then on vamorolone, once you gain the full rights on vamorolone in September. Just a few questions on vamorolone. Is the pivotal VISION-DMD trial on track to report in Q2 2021?

Yes, it is. I mean we had our last patient first visit, I believe it was in the first days of September, if I recall, second week of September this year. So if you add another 6 months to that, we're looking at early March for last patient last visit, so the top line readout should be available in the second quarter.

Okay. Great. And then recently, you also provided the long-term 18 months data of vamorolone in patients and that was published. Could you just come back to what the key findings are? And do you expect a positive 2-year results of the ongoing trial early -- yes, next year?

Yes. So for those that haven't read the press release, I think it was on the 29th -- 22nd of September, sorry, we announced the 18-month results of the Phase IIa study of vamorolone. This is an open-label study. And also to remind everybody, the target product profile for vamorolone is essentially to have the efficacy of prednisone or glucocorticosteroids, but with a much more benign safety profile, so less side effects, less safety issues. Now in that 18-month data that was published not so long ago, the -- on all the measures, we saw improvement from baseline on the patients. But this is not completely unexpected. I mean these are boys aged 4 to 7, somewhat older, obviously, as the study progresses. And in many cases, these boys improved from baseline as they grow and become stronger at that age. So it's difficult to tease out whether it was an effect from the drug or whether it was just a natural effect from growth. However, we saw a clear difference in some other measures versus the synergy, natural history cohort that was matched to the patients. We saw that on the 4 stair climb, we saw an improvement also on the 10-minute walk test. Where we didn't see a difference, a statistical difference to the glucocorticoid-naive patients at 18 months was in that time to stand velocity test. And the study also wasn't really designed or powered to show a difference there. The number of patients in both groups were quite small. But we did see an improvement to baseline in these patients on the time to stand velocity. So I think the -- maybe in my opinion, the most stunning difference from this 18-month study was that there was absolutely no growth stunting compared to the glucocorticoid treatment group. So you saw all the efficacy benefits of glucocorticoids, but without the growth stunting, which is really important in this patient cohort. So we will see that this drug will probably be dose-dependent also. We saw in the 18-month study that the patients who received the 6 -- the higher dose, the 6 milligrams per kilo, were trending towards having more of the types of side effects that the glucocorticoids had. For instance, in the BMI index, we saw that there was an increase in the BMI index in the higher dose. So I think it will be really the key to success with this drug will be the titration, knowing how to up and down titrate for the optimal benefit to the patients where they get the efficacy without having the side effects of glucocorticoids. So in short, really, really encouraging data on all parameters from that study. And your second point was when we will hear about the 2-year follow-up, and that will be in early -- and I think the data is being analyzed now, so we're looking at probably publishing that in the early part of 2021.

Okay. Great. Just a follow-on on vamorolone. Now you have the full rights. When could you potentially monetize the rights for certain markets, for instance, for potential major indications?

Well, as you can imagine, that's a difficult question to answer. I mean some negotiations go by really quick, and they're very efficient, and some tend to drag out. There's also 2 types of nondilutive funding that we can extract from vamorolone. The first kind is partnering with noncore geographies for the DMD indication itself, so in the same indication that we pursue ourselves. I'm thinking of markets like China, Japan and Korea, in particular. Those types of negotiations in the DMD indication could probably close a little sooner than discussions around indications that are not -- non-DMD. So as you can imagine, with the target product profile of being a safer glucocorticoid, it's probably not going to be a first-line therapy for other indications, but certainly, a second-line therapy for patients who do not tolerate steroids, but need the benefit of those. And so I'm thinking of COPD, asthma or ulcerative colitis. But before we can start partnering or signing partnering deals in those types of indications, it requires a little bit more work in elucidating the benefits of the product and finding the right partners. So I can't commit to a time line to answer your question, but it's -- I don't think it's going to be -- you can't expect that in 2020. It's probably going to be a 2021 announcement.

Okay. And then just one final question on the financials. Well, the estimated cash reach following the discontinuation of the trial and also the announced restructuring, I know there's many moving parts, but do you have any estimate?

I'll pass that question to Andrew Smith, who's our CFO, sitting next to me.

Thanks, Bob. You're right. I think there are many, many moving parts to that. As we've previously said in other recent communications, we had cash through to early '21, which was based on positive achievement of certain milestones. Clearly, with this news today and the withdrawing from the CHMP process, that takes some of those milestones away and moves that timescale earlier. The exact timing of that depends upon the extent of -- and timing of the restructuring and the cessation of the various study-related activities, which we're collecting at the moment. But I think as a guide, say, towards the end of the year is where our cash reach is. And then we're obviously looking to bridge that gap to support to the vamorolone readout.

[Operator Instructions] The next question from the line of Barbora Blaha with Crédit Suisse.

I have also some questions on the finance. So after this news, do you plan to do just one capital raise, which would be next year? And would this -- I guess this would be before the vamorolone results. Is this a correct assumption? And then a second question, what implications does this decision to terminate this Puldysa program have on your funding from hybrid capital as this funding also depends on certain milestones? Can you be a bit more specific with this regard?

Yes. I mean, Barbora, thanks. Firstly, on the capital raise before vamorolone. I think, in question to Bob's question just now, I think that there is a need for additional financing before the vamorolone readout. The form that, that will take, we will pursue a number of options, equity raise being one of them. But we will look at what's open given our profile and structure. In terms of the milestones or finance, that's not available to us right now. We've not previously disclosed what the size and elements of those milestones are. There are a number of potential and moving parts to that. So suffice to say that, as I said earlier, our cash reach would be, as a guide, towards the end of the year right now as it stands, and we will look to both existing and new agreements as to what we can do to bridge the gap and provide updates when we have something new to announce.

[Operator Instructions] We have a follow-up question from Ms. Barbora Blaha with Crédit Suisse.

I have actually an additional question. And this is what will happen with your existing sales team? Because if I remember correctly, you kept around 35 people after the sale of LHON business. Yes, for the case if Puldysa would be approved, but now you terminated the program. So what happens with these people?

So Barbora, they're not salespeople essentially. They're field-based people of different types of skill sets. Some of them are medical. Some of them are patient advocacy. Some of them are sales, indeed. And some of them have functions which are global or headquarter functions, but they're based in the countries. So that's just to clarify the around 35 number that you mentioned. They're going to be part of our overall review. We haven't, at this point yet, made any communication as to where and how many people we will -- or will be affected by the restructuring that we're planning. The -- obviously, this took us by surprise last night. So this is going to be something that me and my management team are going to be looking very closely at over the next days and weeks. We have made a commitment to our organization this morning, at a town hall meeting, that we will have clarity on this by the end of October. And the factors that will play a role are obviously, on the one hand, what do we need to rightsize the company for vamorolone, what are the skill sets and the people that we want to have onboard for that at minimum. And then that's going to be contrasted against our financial capabilities. So the 2 of them are going to be playing hand in hand. But we'll have an answer to that by the end of the month.

Next question comes from the line of Alberto Romaneschi with Romaneschi & Partners (sic) [ Romaneschi & Partner ].

I apologize. I just joined. So I joined late. I couldn't dial in correctly. I have a question, and I'm sure it was addressed before. How does your financing look like until when you have secured financing?

Again, Alberto, apologies if you missed that, but -- the questions to Bob and Barbora, so will expand on it. We previously had financing through early '21 assuming positive milestones. Obviously, some of those milestones are not available to us. We view towards the end of the year, the cash availability, which is secured already, and we have that bank at the moment. The reach depends upon the extent and timing of restructuring, cessation of various study-related activities, which we're in the process of collating those amounts. Sometimes, we have -- as you can understand, that process is not being fully gone through at this current stage. So we'll do that in the coming days and weeks and update you as soon as we can. Alberto?

Yes. I have a question. You say year-end, you mean 2020 or 2021?

2020.

So you are talking about a couple of months. October, November, December, 3 months.

Yes. Correct.

The next question comes from the line of Ursula Moore from Newcastle University.

Just wanted to ask about the patients on the SIDEROS trial which is now terminated. You mentioned that you'll we doing some subgroup analysis to see whether there was any effect in some smaller subgroups. Do you see sort of this as an end to any future trials with the compound? Or if there was a significant effect in a certain subgroup, would you envisage starting another trial in this week?

I'll pass that question, Ursula, to Dr. Hasham, who's our Head of the Puldysa Global program.

Ursula, thank you for that question. It's a little early for us to say. We only got the results for the top line data yesterday. So obviously, we need to have a look and see what the clinical relevance of any subgroup data could be and then make a decision from there. But certainly, we are intending to still remain very engaged with the community. There's obviously a lot of data and learnings to go through. It's just a little early today to be able to give you an accurate picture.

That's great. Just nice to know that there is more to come.

Yes, there is, absolutely.

The next question comes from the line of Olav Zilian with Mirabaud.

It would actually be on lonodelestat in cystic fibrosis. Can you please give us an update where you stand as for your Phase I program?

Yes. Olav, the study has started recruiting again after the break due to COVID. And right now, we believe that the last patient last visit will probably be towards the end of November or early December. So we're expecting that trial to read out by the end of the year.

[Operator Instructions] There are no more questions at this time.

In that case, I'm thanking everybody for their interest today and for the many good questions. I hope you all dial in again next time we have an investor call. I am quite bullish about the future of the company despite the bad news we had on Puldysa. However, in this particular case, I think the decision to do an interim analysis was the right one even with the outcome that we have. We didn't put patients through a trial that provides no benefit to them. We didn't create false hopes in the patient groups. And we saved investors' money by not completing a trial that would have been futile anyway. The focus is now shifting to vamorolone, which ironically, a year ago, we didn't have as an asset. It's also a DMD asset with higher predicted peak sales than Puldysa would have had. It has also a, in my opinion, a less risky clinical and regulatory profile than Puldysa being for a very well understood patient population, whereas Puldysa was for a very difficult late-stage patient population where there were no therapeutic alternatives. With vamorolone, we're entering on an existing very well understood disease profile and have had some really good news flow just in the last month or 2. So I'm quite pleased with the progress we're making on vamorolone, and I ask everybody to stay tuned to that. Thank you very much, everybody, and speak to you later.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.