Teva Pharmaceutical Industries Limited ($TEVA)

Pleased to be introducing Teva Pharmaceuticals and Eric Hughes, EVP, Global R&D and Chief Medical Officer. So Eric, thanks for joining us.

Good to be here. Thank you for having us.

So I thought I'd focus the discussion initially just on some corp strategy matters and you did a recent royalty and Blackstone deals. And so how should investors think about sort of those deals as a template for the future. You also did your first BD deal as well. So how you're thinking about capital deployment but also giving up economics on certain drugs to expedite those through development, are these in part done, given you have margin targets and there's a desire to ensure that you deliver on those. So maybe we start there.

Well, thanks again for having me. And there's a fundamental way in which Teva is approaching our deals. So we have a relatively robust late-stage pipeline with a relatively high POS. So the way to create value is to go at pace. So these deals are really just the way in which we can, I'd like to say, future proof for some of our programs. Now we've done deals on 4 of the 5 programs we've got. What that does is give us the gun powder to go really quickly. So we've done a deal with Royalty Pharma [indiscernible] LAI. We did an [indiscernible] deal with Darty. We did a Blackstone deal with Duviqitan. Now we've done the royalty pharma deal with anti-IL-5. What that does is it keeps us unconstrained on speed. So the teams have really leaned into it. And you can see we've executed on these programs. There's another fundamental part about that is that acceleration to get the launch a couple of years forward to get launch going quickly. The value there is far greater than any cost that we're seeing in these deals. So that's 1 thing. And also, we're sharing the risk. So those deals they're sharing risk with us. So for us, it's a natural thing we'll lean into whether we do more in the future, it all depends. But it's all about unconstraining the speed in which we can develop the drugs.

To that end, right, you have the -- I'm going to box the name a [indiscernible], right? So now you've got a launch opportunity in 2017. You've got LanzanLAi, which effectively is launching in 2027. You've got Dare, which launches probably sometime in 2017 as well. I don't know if this is by design, but are you kind of like leveraging these deals to have a new indication or a new drug that launches every year through the end of the decade?

Yes. So I mean just to sum it up, that's with echopitane added to the list, that's 5 submissions in the next 5 years. So that's a fantastic runway on relatively derisked programs. So yes, the deals help just executing that with speed. And so we don't have to worry about any ups and downs in our budget. We're just moving quickly because that's going to generate the vast majority of the value on these programs. It's frustrating to see in my prior lives prioritizing programs. If you have to prioritize your programs, there's programs you shouldn't be doing. So we know that these programs all should be moving forward as quickly as possible.

Okay. There's a lot of focus on the upcoming IL-15 data that you're going to have for vitiligo, that's remind us that's a Phase I study, single arm, where you'll be looking at basically the clinical endpoints are bossy based on face and body. But -- maybe if you could just educate us a little bit in terms of what you can glean from these single-arm studies or these proof of concept in your mind that inform pivotal study as a next step?

Yes. Yes. So the anti IL-15 program for Vito -- there's a lot to unpack here. The first thing I'd say is it's a great opportunity for our molecule. When we compare our molecules to others out there in the competition, we believe we have the most potent. It has a half-life of 38 days. We were focused on every 3 months giving a dose, subcutaneous does every 3 months. So there's a large convenience factor for the potential in vitiligo. Now getting to vitiligo, I think is an underappreciated indication. This is more than 3 million people in the U.S. and right now. And in my experience in dermatology conditions, patients are motivated. And although maybe vitiligo is underappreciated now, it's just like psoriasis 15 years ago where people didn't think there was any need for treatment, and that's grown into a massive market. So I think there's a great opportunity here. Patients are motivated. And when it comes to the anti-IL-15 program, there's only been 1 molecule approved. It's a topical JAK that can only treat 10% of your body and vitiligo is a whole body disorder. So systemic therapy is what's needed. There's oral JAKs that are being developed right now. That's a daily pill you take, and there's the baggage of the JAKs with their profile. So we come in, I think, with a very a good option for patients where you have a good safety profile with we hope, good efficacy that's going to be stacked up against the JAKs, but then there's a convenience factor after that. So if you get a very well-tolerated, safe treatment with a subcutaneous shot every 3 months, you're now treating those patients who need systemic therapy conveniently. So the study is a proof of concept. It's weeks. In those 24 weeks, you get only 2 shots of our anti-IL-151 on day 0, 1 at 12 weeks. And we follow them for the normal endpoints, the facial base you mentioned. So facial VASI75 is the regulatory endpoint and the total VASI, and the patients we brought in this study are very similar the patients you see in a normal registrational program. So you have a certain level of facial vase at baseline and a certain amount of total body. And that's important because the topical that's out there was targeted really to a more mild population. These systemic therapies are now at the moderate to severe level.

Your comment about like comparing this to psoriasis and maybe 20 years ago, psoriasis, I'm curious how well in the medical literature is segmentation characterized for those with more moderate to severe disease or perhaps a facial component to disease. I imagine these are going to be the most highly motivated to seek out systemic treatment. So I wonder from that $3 million, is this 20, is this 50% that have this perhaps more severe disease phenotype that would be motivated to treat?

Yes. I mean I can't give you a number today, but. As we've seen, that will progress. The more disease awareness there is, the more that people learn that there's treatments, the numbers just keep growing. So they will start obviously with the people who are most disturbed by the facial things that you see in your hands and your arms are also disturbing the patients. But that number will continue to grow in my experience, where it will be probably a bigger market than we anticipate right now.

I think psoriasis is 30% on advanced therapy. So that could be potentially a proxy for 1 million patients.

Yes and that's how it starts. Yes. So the more severe, you can use that as a proxy, but then you'll see the more moderate people look for treatments.

So 24-week endpoint, that's about halfway through what will be a Phase III endpoint, which would be a full year. Can you talk a little bit about how this disease manifest over a 52-week period. Is it more of a slower onset. It takes time to accumulate to show clinical benefit in a clinical trial. So what I'm asking ultimately is what can investors -- how to think about 24-week data and stacking that up in terms of the clinical benefit. Other drugs see at 24 versus 52 week?

Yes. So traditionally, in this disease -- so to start off with actually -- that's 1 of the nice things about this indication. It's a very clear pathway to registration. It's been shown how we do this. We know what we have to do. So if you're in a good molecule, you can move quickly. So traditionally, you do about 24 weeks in your Phase II, so you can get your signal, get an idea where you're going. But to your point, it does continue to get better in general. When you look at the JAKs and you look at the topical JAKs and it gets back to the disease mechanism. So Vito is a destruction of the melanocytes that produce the color on your skin. And when you shut down the T cells that are causing the destruction, it takes time for those monocytes to then repopulate the skin. They usually grow out from the follicles and then repigment. So there's probably going to be a defined theoretical rate at which it gets better. So all the Phase 2 is a 24-week readout and you should see an effect by 24 weeks. It will continue to get better at 48 weeks as those Milano sites continue to repopulate the skin. So we expect that to happen as well.

Okay. So I imagine there's going to be a desire for investors to benchmark this to ustekinumab, which is the oral JAK that's out there. And so does an oral JAK work faster on this disease versus, say, how 15 might work? And so because that could be relevant to how you look at 24-rig data?

Yes. So that's a good point. There's a total difference in the activity of these different classes. So JAKs are more immediate, fairly broad suppression of the immune response. IL-15, the cytokine as a key cytokine in the way that vitiligo and slack disease behave. IL-15 is driving the expansion and the migration of these intraepithelial lymphocytes into the skin. So while JAK is a daily suppression in a broad sense of the inflammation, IL-15 could be considered potentially in the future as a disease modifier where you're blocking the cytokine that's driving those pathogenic cells into the skin and then preventing them from being resonant in the skin. So you're stopping the cells from even being there. So that could be more of a long-term effect potentially but it could be really modifying the disease pathology. So they're very different and IL-15 is a little bit more targeted in the way that it's going to be treating vitiligo.

Okay. So a couple of quarters ago, there was potential to file this, if everything went well, 2031 to 2034, now it's 2031. So I'm wondering is what's changed now being 2031. Is it that you feel more confident about the data and how fast you can recruit a study because people will be excited about what the drug offers? Or is there something different about how you're thinking about trial design that could be faster?

Yes. So I think that's all of the above. And I think the key thing is that we hit an inflection point where we have a very extensive Phase I program for this molecule that we've been running. We've been running proof-of-concept studies in celiac disease. And we're seeing the biomarkers we need to believe and we're confidently dosing the exposure. We have defined the PK/PD when you're looking at free IL-15, which we measure uniquely in this program as well as the NK cells. So we have a very good idea of the dose range that we need to interrogate. And like you had alluded to, vitiligo is a very clear pathway. And the end points that we see in the absence of any safety issues, we can move very quickly here, knowing where we need to go. So it's a totality of the data we're seeing and the confidence we have in the pathway forward and that's largely why we structured the Royalty Pharma deal on vitiligo because it's something you can easily calculate.

Okay. And then you also have Celiac as an indication to develop for this drug. And does the royalty deal contemplate financing for celiac? And the -- I think the trial that's ongoing is a gluten challenge type of study. So -- what can be gleaned from that? I know investors will look to with this mechanism, Amgen had a less potent drug that didn't work in the clinic. And how much confidence you can glean from this type of study -- and I believe that the measurement you look at is the villous atrophy efficacy measures -- is that a registrational endpoint?

Yes. So yes, there's a lot there. And you're right. We based the deal with a royalty firm on the vitiligo the long-term payout, it does include the total package of IL-15. But getting to the disease itself, celiac disease and vitiligo are very similar in the driving characteristics. So you can think of the skin is the outward facing epithelium and the gut is the inward facing, epithelium and it's these T cells that the L15 are expanding and driving to these surfaces. So there's a lot of -- in fact, many -- there are a certain number of patients who have both diseases at the same time. So there's a lot of evidence that our anti IL-15 is working in both the diseases. I mentioned that we're very potent, have a great half-life. But we've also done a lot of preclinical work, especially in celiac disease where we actually looked at nonhuman primates where 1% of those animals actually generate celiac disease. And we've done some great preclinical work with the molecule that shows that you can block the migration of those pathogenic cells into the epithelium, reverse antibodies and actually really protect their gut. And we're seeing -- we saw that in our first proof-of-concept study with our celiac program where looking at a biomarker called FABP, free acid binding protein, we protected the gut from actual insults with the molecule. And in fact, over time, if you overread the data a little bit, you can actually think that we are treating an underlying smoldering celiac that these patients had. So it was a really strong biomarker data in the first proof of concept. But the second one that will read out in the second half of this year is a placebo-controlled proof-of-concept in 50 patients. We're looking at biopsies of the baseline in 8 weeks after a 6-week challenge with 3 grams of gluten. So that will be a great proof of concept showing that we can achieve that regulatory end point to answer your question, both you want to show good histology changes, and you want to show patient-reported outcomes in a Phase III study. So those 2 things will have a very good sense going into Phase II and III with celiac after the study.

Okay. I'm realizing that my entire discussion guide is all about your branded efforts, but I wanted to step back and just ask how are you spending your time between the branded R&D effort versus the generic R&D effort? And as we think about Teva which has a lineage in generic pharmaceuticals. I'm just sort of wondering where the R&D effort really is being put? Is it more of a selective approach in this year, Revlimid coming out of the numbers you rebase your U.S. generics business, which is very small now as a percentage of your total business. But I just wonder, on the go-forward R&D operation and where you're spending your time, just curious if you can kind of frame that.

Yes. So the fun thing for me is I've got all of it under -- in my shop and R&D. So I've got a head of biosimilars. I've got a Head of Generics and I've got a Head of Innovative Medicines. And it's been a great experience over the last 3 years because one of the things I found I always kind of thought this was true, but I really have found that there's a lot of synergies that we get out of the knowledge base from our generic work from biosimilars that we apply every day to our innovative group. So I will say this -- I've been saying this for 3 years. We have one of the best device groups I've ever seen. I know I've been in a lot of big pharma companies. This group really knows how to make devices. We actually can make other people's devices better. We had extraordinary formulation capabilities. And you throw on top of this wonderful discovery we have in Sydney where they make excellent antibodies. They can protein engineer anything. So when I have a problem on formulations, frequently, I don't go to my innovative I go to my generics head. If I have a device problem, I talked to the generics guys. And the production and the biologic capabilities that we have from biosimilars and our knowledge base that can easily be applied to all these programs. So there's a lot of synergies for me.

If I could squeeze in one generic question then, right? Like when we think about the GLP-1 opportunity, right, there's seemingly some parallels to insulins in my mind, right? So basal insulins, price came down, no generic could ever be sold at scale at the pricing that evolve to. The concern with GLP-1s is that pricing is coming down and is expected to come down even more, such that when semorizepatide is available generically with the patents can you make money in that business and put all the money into making that at scale. So where do you guys stand? You've never went after insulins as it pertains to GLP-1, which is the hot topic within generics?

Yes. So I mean, I just Kind of speak off the culture a little bit about GLP-1s. We've actually gotten the first GLP-1 generics approved. I think that's a very strong business case for us to move forward, treating them as generics. I know we got a lot of questions 2 or 3 years ago about you should getting the GLP-1s, you should be innovative in that space. We consciously didn't do that, and that was actually an excellent decision because a lot of the investment we would have had to put into a GLP-1 program would be taking away from the opportunities we have in all this other play. So I think -- I'm happy to look back and say that was a great move. We played the way we should play in GPs and that's what we'll do.

Okay. Let's shift gears to your TL1A program and really good data, maintenance data in both you see and I don't think you have the maintenance data yet in Crohn's, but you have the UC data.

We have both.

Okay, maintenance in both. Now as we look ahead, there's a couple of dynamics playing out. We're seeing competitor combinations in the INI world and Merck has Phase III data for its TL1A, -- so where is your focus in terms of development and thinking ahead to like the next step because INI is a very dynamic marketplace. And so do you think single agent has a pretty viable opportunity in front of it? Or do you see kind of the space evolving more to combos and you want to like establish a solid monotherapy profile and then ultimately playing for combinations.

Yes. So I'll start off by saying I&I is a great space to be in. I mean it's got 1 of the largest growth potentials of all therapeutic areas, so it does neuroscience. So our focus at Teva in neuroscience and I&I is a great place to be. And we've built a lot of muscle now, not only in the development space, but in the commercial space as well. So getting on to what the opportunity here for [indiscernible] is I'll start off with the basics. The fundamentals are great on Duvaqitia. We think we have the most potent TL1A. We have the most selective TL1A. We have the lowest antidrug antibodies that have been reported out there right now. We had numerically the best induction data in both Crohn's and ulcerative colitis in the TL1A space. And now we just showed the maintenance data as our first milestone this year, again, showing numerically very high numbers, not only best-in-class, potentially best in the disease. So the opportunity for monotherapy for [indiscernible] is big. We're great to have the Phase III studies going with Sanofi. They're ahead of schedule on the enrollment at this point. We're going to continue to press making sure that we launch on time and within the pack, I think that ulcerative colitis will be in the magical 18-month window of launch. We will also probably be maybe second in the Crohn's disease space. So we're right in there. And I think at the end of the day, FSK is king. So I'll answer your question about combination therapies, but monotherapy has so much to be shown to show going into the launch of this new class of drug. It's a totally new biologic class because remember, people with Crohn's disease and ulcerative class frequently, about half of them fail their therapy after 1 year. And this is a chronic disease. There's over 4 million people with IBD and they're all cycling through therapy as they fail. 20% of the ulcerative colitis still get surgery, 70% of people with Crohn's disease are still getting surgery. So there is a lot we can do for these people right now with a new monotherapy class. So that's a focus. Having said that, looking towards the future, I'm a guy who always believes in combination therapies across multiple therapeutic areas. I think there's a lot of opportunity there. as we bring together different classes, TNA actually right now looks like a great class to combine with because the safety profile is strong at this point. And if that continues, combining in different ways is a great idea.

That's all envisioned within the Sanofi partnership. If you were to, say, advance a molecule with bispecific properties that targets both DNA and say, Integran or some other common mechanism. Is that all envisioned and that would roll up within the Sanofi partnership.

So we're free to do that, and they're actually doing that and we're actually doing it as well. So it's actually pathway we both can interrogate. And to be honest, our group in Sydney is very good at it. we're filing an IND for TSLP IL-13 at the end of this year. And that knowledge base and our ability to combine these different triggers, remember, we make all these biosimilars to we can bring many things together very rapidly in a very robust plan.

I just want to be clear here. So if Sanofi were the 1 to develop, right, would that be a risk to you now that they move forward with thereby specific? Or is that envisioned within the partnership?

And I don't want to get into the details of the partnership, but they're freedom to operate.

Okay. Maybe -- with respect to Phase II proof-of-concept studies, where are you guys at in terms of exploring other indications I know some competitors are? If you can just remind us where the...

It reminds me of IL-15, but I'll do TL1A first. So we've already have our plans together for the next 2 indications -- I mean it's so interesting, this class where it's an amplifier of many different -- we call it T2s, non-T2 or even fibrotic disease areas because this is also a unique class and the fact that it has a direct potential impact on fibrotic cells. So that's something we always kind of hoped in the inflammatories would do, but this 1 has a potential direct effect. So we bucket them in those big categories, and we're going to be choosing our indications in a way that follows the science has the biggest market potential, maybe build the label as broadly as possible and as quick as possible to develop.

Your alpha-synuclein, the oral agent. It's easier to say than emasolemen. So you got a Phase II futility analysis later this year. And so -- it's really tough to treat population. It's been a great art for drug development for others. And so I group -- group to pretty rapidly deteriorate. So if you can survive a [indiscernible] analysis, can you speak to that and how that derisks this maybe versus other disease categories where you survive a utility analysis?

Yes. So there's a number of -- good points you made there, and it starts with the disease area itself. So it is a very rapid disease. You can see these people decline very quickly. study. There's some differentiating factors. I think that you mentioned it being kind of a graveyard of a truck development. I think that we have to make better molecules. And I think [indiscernible] is the first molecule, which is a small molecule brain penetrant, and it gets to the very genesis of this alpha-synuclein protein aggregate. It blocks it at the very beginning. It's not an antibody that's trying to mop up the stuff that's been released and that is killing other brain cells. So it's great that we've seen some trends in efficacy with antibodies out there. But I'm hopeful that a small molecule gets to the very upstream genesis of the problem could have a significant impact. But again, this is a high unmet medical need, they progress very quickly. The futility analysis will tell us whether we're in the game. So I wouldn't be little it and -- but we're moving very quickly. We're making sure that this study is as robust as possible with a big sample size because if it hits, this would be the 1 my regulatory guy and I say all the time, if it works, we'll be the first one to ask for accelerated approval because these people need treatment desperately. 50% of them are wheelchair at 5 years, most of them have passed away by 10.

So the injectable options, which are RNA targeted and I believe there is some antibody approaches.

We are only targeting, there's antibodies and there's actually also in chelator, I think, out there.

I don't think the antibodies are using any sort of brain shuttling technology, the RNA targeted questionable as intrathecal injections, whether they're crossing -- getting into the brain, right? So the premise here that an oral agent is the best approach to crossing blood-brain barrier and achieving target knockdown, which you can't measure in a clinical setting.

Yes. So you're putting out all the challenges of this disease area right now and why a small molecule that's brain penetrated is really has the potential to have hopefully the greatest impact -- all the other ones have a challenge. Certainly, antibody penetration across the blood-brain barrier is a challenge. And that has a long way to go.

Okay. Well, looking forward to the update there. You also have Phase III data in asthma for Dare a program that doesn't get a lot of discussion.

Glad you brought it up.

It seems very derisked, right? You take a steroid and Saba and we've got validation for that approach from AstraZeneca Zero -- maybe talk a little bit about your Phase III design, how it's different and how you see your approach is ultimately differentiated versus Air Supra?

Yes. So I really like this program because it illustrates a lot of the great things that we can do at Teva. Teva makes a lot of inhalers. We're very good at developing them. They're a lot harder than you think. And this actually dare inhaler pinamizes what we do best. And we put 2 drugs in a dry powder inhaler advanced technology that makes a device that's very easy to use. You just click it open and you inhale whenever you want and close it out. This is in contrast to an MDI, a metered dose inhaler, which is the typical spray that you inhale, you have to inhale and coordinate at the same time. And sometimes you have to use a big space or if you're a little kid, you can't inhale right? So it really is a convenient device. It doesn't require a lot of cleaning and it's easy to use and it's particularly well suited for kids. So getting to the study, which is a great, big study that Teva is running that's got pediatric, adolescents and adults in it. So it's probably the biggest study that had all 3 patients population in it. It will get us a good label because remember, 25% of the entire population is pediatrics and you'll have a great device. So we'll let the market be developed by our competitors, but will come in, I think, with a better label and a better device.

Where are the guidelines now on ICS Saba?

So that's actually -- I'm glad you brought that up. This is the first time I've ever launched or developed a drug -- in the guidelines. So that's a great place to be.

So the science makes a lot of sense. The matter of getting -- but we're very excited by it. I think that for a long-acting injectable bookings a large part of Great. Well, we're at time. Thank you Eric, for.

Thank very much.