Sol-Gel Technologies Ltd. (SLGL) Earnings Call Transcript & Summary

Okay. Ready? Hey, everyone. I'm Gary Nachman. I'm the specialty pharma analyst at BMO, and we're very excited to have Sol-Gel management with us. We have Alon Seri-Levy, CEO; and Gilad Mamlok, CFO, live from Israel. We also have John Vieira, Head of Commercial; and [ Jerry McLoughlin ], who I'm just forgetting the title. Jerry? If someone wants to -- we'll let it go. So this is a really exciting year for you guys with the expected filings of your 2 key products, Epsolay and Twyneo. So great to have you here to give us the update on all the progress.

Alon, maybe to start, for those not as familiar with the story, just describe the microencapsulation in silica technology sort of at a high level, which has enabled you to successfully formulate both Epsolay and Twyneo.

Sure. Thank you, Gary, for hosting us. We use Sol-Gel microencapsulation processes that we invented and developed to entrap APIs in silica-based gels. We chose silica because it is FDA-approved. It has a safe excipient in topical and oral drugs. As our microencapsulation processes are being conducted on-site as opposed to using ready-made silica particles, we tune the release rates of the APIs to meet specific requirements.

Sorry, I was muted. That was a good high-level overview. So when you consider the unique platform, Alon, what are some of the areas where you hope to apply it? [indiscernible], obviously, we're going to spend most of the time talking about Epsolay and Twyneo. But what are some other applications for the technology, just so people get a better sense of the overall platform that you have?

[ When they ] use our platform, we never slow at least over time [ my tenant's ] efficacy whenever the API is irritant or whenever stability is required. As for the second part of your question, Gary, there are a few more projects we are considering implementing our technology for, but it is too early to disclose the APIs or the indications.

Okay. So let's go into Epsolay for rosacea, your lead product. So maybe you could review the positive Phase III results, what's going to be differentiated about this product. And you had some long-term safety data earlier this year, maybe just comment on that very briefly. And you were supposed to file by the end of this quarter. We're approaching the end of the quarter, so is everything on track for that?

Yes. So again, the pivotal studies, 43.5% and 50.1% of the patients treated with Epsolay reached clear or almost clear compared to 16.1% and 25.9% of the patients who applied the vehicle, and these were highly statistically significant differences. In addition, Epsolay demonstrated statistically significant higher success in IGA compared with the vehicle at every visit and as early as at week 2. And furthermore, at the end of a 52-week long-term safety study, 73.2% of the subject treated with Epsolay reached IGA of clear or almost clear. Only 4.8% had moderate rosacea and none had severe rosacea. So not only does Epsolay work fast, but improvement continued beyond the 12-week treatment of the pivotal trials, and we are on track submitting the NDA by the end of this month. So we have about 7 more days to go, and no delays due to COVID-19, thankfully. Exhibit measures for Epsolay were already produced at full commercial scale, and validation batches will be produced closer to launch.

Okay. So maybe, John, you want to chime in here, just how you see the market opportunity for the product? Where it's going to fit into the current treatment for rosacea? And then, ultimately, given the profile, do you think it's something that could be used front line for these patients?

Sure. Thanks for having us, Gary. The rosacea -- first of all, the rosacea market is large. It is an estimated -- about 16 million patients in the U.S. who struggle with rosacea. For papulopustular rosacea, which is a particular type of rosacea that we studied the drug for, it's about 6 million to 8 million. It's important to note that these patients, in many cases, are undiagnosed. So we estimate only about 10% of patients actually seek treatment for rosacea. So despite being an established disease state, so many patients don't get the therapy that they need. And in many cases, those that do, because it's a chronic lifelong condition, they've struggled to achieve satisfactory results with the currently available treatments. In this category, there hasn't been a lot of innovation in the last several years. So Epsolay, while based on benzoyl peroxide, which is an established, safe and effective product in acne, really represents a new class of treatment for rosacea. And as you saw with the results that Alon had just mentioned, we have very compelling results in efficacy, but also in tolerability, which can oftentimes limit treatment options for patients with a chronic condition like rosacea where the skin is very sensitive. So we're really excited. The feedback that we've received since we've had an opportunity to have that data since the middle of 2019, we shared that across the dermatology community with KOLs and with practitioners like NP, nurse practitioners, and physician assistants. And they really see the clinical results suggesting a first-line role for Epsolay, and we feel the same. So we're excited about prospects of the drug in rosacea.

Okay. Great. Are you still confident in potentially greater than $150 million peak sales? Maybe you could just talk about the other key brands in the category as a comp. And then specifically, its generic, Soolantra, is available. Well, actually, it is available. But if there are multiple generics available at some point, does that play into the market opportunity at all for you?

Yes. That's a great question. We feel very confident regarding our peak sales estimate of $100 million to $200 million. In fact, internally, we often call Epsolay the dark horse because we've got such positive feedback and the data is so compelling, particularly the speed of action, that we feel there's a tremendous amount of upside, in fact, for Epsolay. Just to remind you, Soolantra, which is the #1 branded [ product ] in the category, reached peak sales of almost $1 million in 2019, which is 4 years after their launch. So we feel very confident in the benchmarks that we've established for the product. Now we recognize that generic, Soolantra, will be available at some point, and we don't think this is going to dampen the enthusiasm for a new class of treatment. In truth, we actually think this provides -- certainly, Epsolay will provide even more options for physicians and patients. And in many cases, combination treatments are desired by dermatologists. So we think we see not only our opportunity to compete very successfully in the branded segment, but even with the generic, Soolantra, we think that we see great upside for our product, for physicians and patients.

Okay. Great. Alon, back to you. So same thing that you did with Epsolay, maybe you could do for Twyneo for acne, which is clearly the bigger market opportunity, according to most of us. So yes, just highlight the Phase III results, what's differentiated about the product, and are you on track for filing this in the second half?

So at the end of the Phase III pivotal studies for Twyneo, 38.5% and 25.4% of the patients treated with the drug reached clear or almost clear compared to 11.5% and 14.7% of the patients who applied the vehicle. As for differentiation, Twyneo has the potential to be the best FDA-approved in acne treatment containing a fixed-dose combination of benzoyl peroxide and tretinoin, 2 effective active ingredients with a complementary mechanism of action. Benzoyl peroxide and tretinoin are already widely used for treating acne. But as of today, not concomitantly because benzoyl peroxide decomposes tretinoin. We have managed to overcome this instability using our microencapsulation platform. As those APIs are already being used to treat acne, we were not required by the FDA to do any long-term safety study, which was a great relief for us. We intend to submit the NDA of Twyneo within the next few months. We just cannot prepare and submit 2 NDAs, one for Epsolay, one for Twyneo, in parallel.

Okay. And once you file both of the products, any expected delays as a result of COVID-19 just in the overall regulatory process? It seems like you've been having good discussions with FDA all along the way. So any reason to think that if this pandemic is a lot more protracted, and maybe we'll see some delays there, or you would expect everything to go on time?

As you mentioned, the dialogue so far with the FDA was helpful and productive. And as far as we can judge, we don't expect any delays due to COVID-19 or otherwise. Of course, this is something that we'll continue monitoring closely. But as for now, this is our current working assumption.

Okay. Good. John, back to you on the commercial opportunity for Twyneo. So same thing that you did for Epsolay, just where do you think it fits into the current treatment regimen for acne? Could this be used front line potentially? Maybe talk about the dynamics with Epiduo, Epiduo Forte and those generics and why you're confident you could launch a new brand into the space and get significant traction with it.

Yes. Sure. And I think as you pointed out, acne is a larger market than rosacea and as strong as we feel we're positioned in rosacea. We feel equally optimistic about our opportunities in acne. The market itself is very large, about 50 million U.S. patients who struggle with acne, over 5 million patients each year that seek medical advice on managing their acne, and the market itself is very large, about $3.5 billion for acne treatment. It's about $1 billion in the topical branded segment. And within that, about 3x the amount of combination treatment, which is increasingly the approach to drive better efficacy and better results for patients. So we're well positioned into the dynamics of the market. A lot of patients struggle with OTC products, which really don't [indiscernible] where they're looking to go and other prescription products that just start insufficiently effective or for which they have very poor tolerability. We've had a chance now with the data to talk to a lot of dermatologists across the U.S. and providers, and they've increasingly recognized, because acne is a multifactorial disease, a combination treatment is really the way that we're going to push the bar when it comes to the effectiveness of treatment. And it's often necessary for many acne patients, certainly, those with severe or moderate, but increasingly, those with mild who might have recurrence and are inadequately treating the disease. When we look at -- when we evaluated Twyneo, we did it in a more challenging patient groups, in fact. So when you see the great results that we saw in the clinical data, it's important to remember that this was largely in moderate and severe patients. And so we've had an opportunity to analyze the data and get feedback. And what most doctors tell us is that they see this product as a potential go to first-line option in a broad range of acne patients. Remember, that trend has been towards combination therapy. And I think, as Alon pointed out, the 2 combination products that they wanted to put together so often have been benzoyl peroxide-based product and a retinoid like tretinoin, which has seemed to be very effective but oftentimes not as well tolerated, and certainly products that can't be used by the patient together, which leads to very inconvenient and difficult to comply with the regimen. And so we think Twyneo really represents a great leap forward in terms of the type of combination that physicians have been looking for with clinical data that shows outstanding efficacy and tolerability. So a strong position, we think, coming into the market with Twyneo.