Teva Pharmaceutical Industries Limited (TEVA) Earnings Call Transcript & Summary

Hello, everyone, and thank you for joining us today for the IL-15 Celiac Disease Phase IIa Topline Results Conference Call. My name is Sami, and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Christopher Stevo, Head of IR, to begin. Please go ahead, Christopher.

Thanks, Sami. Good morning, and good afternoon, everyone. Thank you for joining us for the celiac disease results for TEV '408, our anti-IL-15. The materials are posted to our website this morning in the Investor Relations section, as always. Please see those. And before I turn the call over to Richard Francis, I'd like to remind everyone that we'll be making forward-looking statements on this call. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in our earnings press release and our most recent Forms 10-Q and 10-K filed with the SEC. Any statement that we make are only as of today, and we undertake no obligation to update these statements subsequently. Now it is my pleasure to give you Richard Francis.

Thank you, Chris. Good afternoon and good morning, everybody, and I do appreciate you joining the call. Today marks another major step forward for Teva as we continue to execute on the Pivot to Growth strategy, a strategy that was launched 3.5 years ago to transform Teva from a world-class pure-play generics company into a world-class biopharma company. Now as many of you will know in the conversations and interactions we've had, a major part of this was expanding our innovative portfolio. In fact, that was pillar 2 of the 4 pillars of the strategy. This was about stepping up innovation. And I think you'll see today that we continue to make great progress on stepping up innovation here at Teva. If we go on to the next slide. We set out this year to have 7 milestones. We had to update that, and it became 8 milestones as we have the transaction and eco pipeline came into our pipeline. But for a world-class biopharmaceutical company, I think this is a very impressive lineup that we have here. We have made significant progress on executing on these milestones. Already, we've had the duvakitug maintenance data. As I mentioned, we've had eco pipeline when the NDA was accepted. We've had the top line results of vitiligo. And as of today, you'll be hearing from Eric about the celiac disease IIa topline results. But I will remind you, there's still quite a lot more to come this year with [ DARI ], emrusolmin, olanzapine LAI anticipated approval in Q4, and finally, the anti-PD-1 IL-2. So what does this all mean for Teva? If you go on to the next slide. It means we have an opportunity to have 5 submissions in 5 years. And it's worth pointing out that these products and these programs and their indications have the potential to generate over $10 billion of sales for Teva going forward. Now for any company, that would be significant. But for a company of Teva's size, I think this really creates an opportunity to create a biopharma company that has a growth trajectory for many years to come, and create real shareholder value. I'd also like to point out that 2 of the assets in this -- on this chart, duvakitug, RTL1A and anti-IL-15, are products where we have multiple indications, so often referred to as a pipeline in a product. And we've clearly shown this is possible with the 2 new indications that were announced earlier this year for duvakitug. And now we have the second data for anti-IL-15 of [ CX2s ] backing up the data we gave you a quarter ago with vitiligo. So lots to be excited about, 5 submissions in 5 years of assets that all have the potential to achieve over $1 billion in peak sales and some considerably more. Creates a really exciting time for Teva to continue on this growth trajectory, both on top and bottom line. But I know you want to get into the data. So without further ado, I'm going to hand you over to Dr. Eric Hughes, Head of R&D and Head of -- our CMO. Over to you, Eric.

Thank you, Richard, and it's great to be here and have the chance to talk about some new data and our pipeline. I'm really excited to be here and talk about this next step in our IL-15 program. Just to start off first, celiac disease, it's a very important disease. 1% of the population in the U.S. and EU are affected, and that's up to 5.1 million people. But most importantly, 50% of these people, even if they can strictly adhere to a gluten-free diet, still have symptoms. And there's currently no therapies for these folks. So this is a very important disease. I think it's unmet medical need, and it's something that is highly overlooked, I think, and underserved at this point. We'll talk a lot about normal gut villi that you see here on the right of the slide, where you have a nice, normal villi where it is a high surface area to absorb nutrients. But in celiac disease, this architecture is highly blunted in the gut. And this is a basic pathophysiology of the disease. Now moving on to give you a little bit more flavor to understand the data we'll talk about today. As I mentioned, there's normal gut villi with these finger-like projections. And the basic pathology in the disease process is the exposure to gluten, which causes a stress response in the epithelium of the gut lining. This leads to a release of IL-15, a key cytokine in the pathogenesis of the disease. And that release drives the migration and proliferation of pathogenic into epithelial lymphocytes. These are the cells that rush into the gut lining and cause the inflammation and, ultimately, the destruction of the villi. And you can see on the right-hand side, again, a gut epithelium that's blunted with its villi, lower surface area, poor ability to absorb nutrients and infiltrated with many different lymphocytes. So that's the basic pathology. And I think it's a very important aspect to remember because one of the things I'll harp on today is that these anti-IL-15 therapies, including ours, are really driving at a disease modification. We are, by definition, changing the course of the disease with these treatments. Moving on to the first slide of our data. I just want to start from the beginning. This, again, as Richard mentioned, a homegrown antibody from the labs of Teva, just like our duvakitug program. It's the same scientists who do a great job at designing these antibodies. And just like duvakitug, we're focusing on the fundamentals of drug development throughout the process. And we start with our antibody. How does it compare to other antibodies we've created in our labs based on the IP of other competitors? And you can see here that we're more potent by 2 different assays, considerably, up to 50x more potent when you look at different assays. And on the bottom, in a transgenic IL-15 mouse, we can suppress IL-15 in a greater extent in a directional comparison to these other antibodies. So again, the fundamentals of the antibody is higher affinity, better suppression preclinically. Now Teva also did something completely unique in the field right now. Years ago, we took a population of Macaques, nonhuman primates. And about 1% of macaques actually spontaneously develop celiac disease. So that was a great opportunity in a nonhuman primate preclinical model to see what effect does anti-IL-15 therapies do. And you can see here quite clearly on the left, there's some histology of the gut on monkeys that were challenged with gluten and either treated with placebo or TEV '408. And you can see quite clearly that the normal architecture, that you see on the lower part, is dysregulated and disturbed on the top. And you can see in a quantitative fashion that that villous height to crypt depth, the actual measure of the blunting of the histology in the monkeys, really showed a strong effect. We also showed that the intraepithelial lymphocytes were, in a statistical fashion, also decreased. In the monkeys, you also actually saw a decrease in the serology of the anti-gluten antibodies and transcutaminated antibodies. So a really strong preclinical signal that, in fact, anti-IL-15 really is a disease-modifying antibody. Now moving on to now some human data. When we started our Phase I program, which is pretty extensive, you can see that we looked at a nice PK profile from low to high doses. We observed a half-life of approximately 38 days, which really extends the capability of the molecule to be in a more broad schedule, out to 3 months. And you can also see on the right-hand side, when you look at the 2 top doses, we suppressed the free IL-15 considerably, almost below -- well, essentially below the level of detection, out to 80 or 90 days. So again, the fundamentals of the antibody are strong: long half-life and clear target engagement up to 80 or 90 days in healthy volunteers. I'll also note something that the team did extraordinarily well, and that's the follow-up. We have a follow-up out to 2 years in our Phase I program. So again, the antibody itself is strong, the preclinical data has been unique and strong, and the Phase I data is probably the most extensive I've ever seen in a program at this stage. Now moving on to our first celiac study. Remember, we actually are going to be talking about data from our second celiac challenge study, but our first one showed some very encouraging data. It was a safety study in celiac patients. We also looked at a number of biomarkers. And I thought one of the most interesting biomarkers that we looked at, and we've talked about before, was this FADP, this fatty acid binding protein. And what you can see here quite clearly is that patients who received placebo and then were challenged with gluten showed a bump in the free acid binding protein. And the free acid binding protein is a marker of gut inflammation and health. So when you see a release of that, you show that there's -- you're inferring that there's inflammation going on. So those people who received placebo had a bump. But then the patients who received TEV '408, you can see that not only they didn't get a bump, but if you overread the data, you can actually see an improvement over time, and it goes below their baseline. And this is very encouraging. Obviously, we're protecting the gut according to this biomarker from the challenge of the gluten. But also the curious possibility here is that we're actually treating smoldering disease that was at the baseline of the patients [indiscernible]. So that was another bit of data that we are very excited about in our first celiac patient challenge study. What we learned from that study, we actually rejiggered and the team did a great job in executing this next study, this Phase IIa study challenging the celiac patients. Again, this was in 50 patients randomized 1:1 to placebo or active. Again, we gave a single dose on day 1 and, 2 weeks later, started a 6 weeks challenge. And I want to emphasize that. Remember, everything you see today is a single dose of TEV '408. That's all we gave in this study that was a challenge of 8 weeks. And we'll be following these folks out to week 80. But the important thing in this study that was differentiated from the first study is we did a 6-week challenge, and this study has biopsies in it. The first one is just a safety and biomarker study. This one has biopsies. And as I mentioned, it's 50 patients, 3 grams per day for 6 weeks. The primary endpoint is the villous height to crypt depth ratio, which is important when we think about Phase II and Phase III. We also look at intraepithelial lymphocytes and a number of other biomarkers. So now getting on to the actual data today. So we were super encouraged. The joke I wanted to make today, that the study was so well run that even the statisticians were happy. So everything went in the right direction on the study. Here I'm just going to be talking about the primary and key secondary endpoints. But when it comes to the primary endpoint, villous height to crypt depth, we had a very robust study design. We protected the gut. When you look at the placebo, dropped to 0.88 on the ratio, when compared to the TEV, you can see it only went down to 0.43. So the important point here is that the delta is 0.45. And that is numerically a very high reported result in one of these challenge studies. So that villous height to crypt depth actually showing a protection of the damage to the gut epithelium is key. I would then point you to the right-hand side where we're looking at the count of the intraepithelial lymphocytes, so the count of these pathogenic cells for every 100 enterocytes. And this is one of the basic ways of measuring celiac disease. And here again, you can see basically TEV '408 didn't move at all. The placebo went down by a remarkable -- I mean, the number of cells went up by a remarkable 27.6 with a delta of 27.23. So that's an extremely robust, again, statistically significant effect. I'd also mention that the primary endpoint was not only statistically significant, but the threshold of 0.4 was met, which is clinically meaningful. So these are, in such a relatively small study, remarkable results showing a very robust response. And then the last thing I'd just highlight on this slide too was we've seen the trends in the symptoms actually in the study. We looked at the celiac disease symptom diary, which is the standard PRO, and we see a clear trend towards protection from symptoms. So when it comes to actually thinking about what a patient will experience, that's important as well. So these are the key aspects of how we're going to move forward in Phase II and Phase III. So again, it was very well-tolerated treatment. Overall, you'll see in the future presentations of the data that it's a very favorable safety profile. So how does that compare to other proof-of-concept studies and gluten challenges out there? Right now we think that we're looking very favorable. Remember, we, with a single dose, saw a statistically and clinically meaningful change on the villous height to crypt depth with this challenge. You can see here other compounds in development, slightly smaller studies, without necessarily a statistical change on this endpoint. So we're very pleased with the results. Again, the power of a single dose over 3 months is another evidence that the compound, based on its fundamentals, its potency, its PK, its target engagement, is doing what we expect it to do. So when you think about celiac disease and what it represents, there's 1.6 million people already diagnosed out there. There's no options for therapy for these patients. And the peak sales and the possibilities here are high. There's no pharmacotherapy out there. I challenge people to say that gluten-free diet is good enough for these patients out there. 50% of these patients don't respond to a gluten-free diet anyways. And we saw clinically significant and clinically meaningful results today with a single dose. And this builds upon what we've already shown earlier this year. I was very pleased with the results in vitiligo. That again was a 2-dose study over 24 weeks. And I'd just remind you of the results we saw in 2 representative patients here who saw themselves or experienced much improved skin. That's a remarkable another clinical study that shows we have activity. And just to summarize about how many -- how much data we're accumulating at this point, we've had, as I mentioned before, a very robust Phase I study, including 115 patients that went out to 2 years. We had our first celiac challenge patient -- challenge study in Ib where we learned and saw encouraging biomarkers. Today we talked about very robust challenge data with biopsy endpoints that are key for our development into Phase II and then Phase III that we'll build upon. And then we also had the vitiligo data. So all of these have been accumulating our confidence in the target, our confidence in the safety. It's been very well tolerated to date and no concerning signals have been identified. We're moving forward as quickly as possible and very excited by the program. And that reminds me, where do we go from here? Right now, we are working very diligently on getting our vitiligo study initiated this year, our Phase II/III [ seamless ] design. We will also be next focusing on bringing this exciting data we had today to FDA and other regulatory authorities to design the next step for celiac disease. That's going to be our next focus. But in the future, we can imagine parallel work with other targets. There's a natural progression in thinking about alopecia areata, eosinophilic esophagitis and even potentially atopic dermatitis in the future, which we have preclinical data to support. So again, we've shown, again, another clinical efficacy point today that really builds this as a pipeline and a product, as a key cytokine in multiple different indications. And finally, I'll just wrap up by saying, again, this program, like duvakitug, is a homegrown antibody from the labs of Teva. We build upon fundamentals, developing very potent antibodies that have favorable PK that can be used and shown in strong preclinical data now in celiac and vitiligo, that we have a very safe and potentially highly effective molecule that's convenient for patients to take once every quarter. So we have Fast Track designation in celiac disease. We'll move into Phase II as quickly as possible when we take this data to FDA. We've already engaged with FDA on vitiligo and have a seamless design moving very quickly to start this year. In the future, we'll look at expanding indications, as I mentioned. But the data today highly support moving forward in celiac disease. So I appreciate your attention. I think now I can hand it over to Chris, and we'll probably take some questions.

Thanks, Eric. And before I hand it over to Sami to start the Q&A session, I just want to remind people to please keep their questions as brief as possible, one question and then one follow-up if need be. And if they have any further questions, you're more than welcome to get back into the call. And also, I want to remind people that Eli, Richard and Eric are all joining for the Q&A session now for your questions. And with that, Sami, please go ahead.

[Operator Instructions] Our first question comes from David Amsellem from Piper Sandler.

So 2 quick ones for me. So I wanted to better contextualize the change in villous height to crypt depth here. You had a 6-week gluten challenge. So I guess my question here is, can you talk about the magnitude of that gluten challenge in terms of how much gluten you're introducing and duration of gluten exposure and how that ties into worsening of villous height to crypt depth over time? And the reason I'm asking is because we did see data for other agents such as the [ Forte Biosciences ] agent. I believe that was a 2-week gluten challenge. And it looked like they had stabilization on villous height to crypt depth. So I'm just wondering here is how you would contextualize this slowing of, I guess, for lack of a better term, disease progression here. So that's number one. And then number two, also a question for Eric is, how should we think about the kind of symptomatic assessments that you may look at in future studies, be it Phase IIb or registration quality studies, and help us better understand what you're going to be looking for both in terms of GI symptoms and non-GI symptoms? It might be early to answer that, but I figure I'd ask anyway.

Great. Thank you, David, for the questions. And let me take them one by one here. So the villous height to crypt depth measurement and the amount of gluten challenge, both the dose and the duration. So this is a little bit of the art and the science of these gluten challenge studies. There's no one absolute answer. When it comes to Teva, we learned, we did a 14-day challenge, the first time with 3 grams, and we did a 6-week challenge the second time. The important thing here is you want to have a strong enough signal with the amount of gluten you use, but you have to do it in a way that people can finish the study. So if you've known anyone who has a gluten-intolerant or celiac disease, 3 grams is what we gave. That's essentially a slice of normal bread. And some people, that is almost impossible to tolerate, it's very challenging. So you have to be able to have a patient population that is sensitive but tolerable to that dose. And then you have to choose a duration dose that people can tolerate. From our learnings and our experience, the team did an excellent job at executing the study. Getting the people to the end of the 6 weeks and then getting the biopsy at that time is really kind of threading the needle here. So there's -- my answer is there's no one defined way in which you do this, but it's the way in which you execute. And the team's excellence and their ability to really learn and pivot and design and execute the study is really the key here. You can see from our data that the 3 grams for 6 weeks, and then making sure we finish the study well, gave a great signal-to-noise ratio. So we -- I think we -- the team hit it right on the head. But again, other people do it different ways. It's all about execution at this point. And my final thing on this is these are challenged studies. These are somewhat atypical in the dose that we give because we want to get a signal and show the potential of the compound. When you go into Phase II and III, if you do what we call a SIG study, which is a singulated inadvertent gluten exposure study, those are probably going to be lower doses. So there's more physiologic and inadvertent exposures in the real world. So this is a well-designed study showing the signal and the power of the compound. And that's why we chose 3 grams per day for 6 weeks. Now your other question, the symptoms. And I think the symptoms are super important because that's what the patient will experience. I think the FDA appreciates that symptoms are important in the patient experience and the fact that we should change and improve the gut histology of the patients. That's why both of those will be included in Phase II and Phase IIIs moving forward. We use the celiac disease symptom diary, which I believe is pretty much becoming the standard at this point for how we measure that. That's a measure that includes abdominal pain, diarrhea, nausea, bloating and fatigue. Fatigue is usually separated differently from the quantitative components of the measurement, but those are the symptoms that are most important for people with celiac disease. Certainly, the people I know, those are the critical ones. You can -- we'll talk about our symptoms in the future presentations, but we do see a very nice trend in how we protect people from those symptomatology that they experience.

Our next question comes from Louise Chen from Scotiabank.

This is Corey Rosenbaum on for Louise. Congrats on the data. Can you just discuss how the positive celiac disease and vitiligo data from earlier in the summer inform your confidence in TEV '408's potential across other IL-15-mediated diseases? And secondly, I know the study enrolled adults with celiac disease. How are you thinking about development in pediatric and adolescent populations and what would need to happen before expanding into those groups?

Corey, your first question is how does this add to our confidence in the program in, general was the first question?

In other potential indications.

Yes, I'm sorry. Yes. So yes, so IL-15, you can see is pretty much a key driver of a lot of these surface diseases. You'll see programs across the landscape now developing across the dermatology and GI space. I think there's a lot of pull-through from vitiligo, celiac disease to alopecia areata. I think most people would assume that there's going to be a strong pull-through to that. I believe, as I mentioned before, eosinophilic esophagitis will be important. It's encouraging to see other companies going to atopic dermatitis, and even lichen planus, which are other surface indications, topicological dermatologic indications that are important, obviously, atopic dermatitis is very big, and I've mentioned that before, lichen planus is an underappreciated disease that has no therapies as well. So there's the world of indications for anti-IL-15 therapy as the safety continues to be strong keeps opening up. So I think that this is another inflammatory program that has a long way to go in multiple different indications. Now a very important question about pediatrics. So that's a great question. Certainly, people with celiac disease started developing it frequently early in their life. In fact, it's frequently under-diagnosed early in life. For these programs at this point, we'll have to continue to develop the safety, prove the efficacy in the adult population. And most certainly, we'll be developing along the way pediatric programs as the FDA requires. So that would be probably a future indication that we certainly look forward to.

Our next question comes from Dennis Ding from Jefferies.

This is Anthea on for Dennis. Congrats on the great data. Could you talk a little bit more about the regulatory path for celiac and your initial thoughts around that, and how you're thinking about mucosal damage prevention versus mucosal healing? And then secondly, how are you thinking about developing this yourselves versus partnering out with -- to a pharma company to co-develop similar to [ TLNE ]?

Eric, maybe you want to take the first 2 and then...

Asking the same thing. So yes, I'll do the first 2 and I'll probably pass the partnering out to Richard. But Anthea, thanks for the question. So the regulatory path, I'm not going to give too much clear detail right now because we are going to be going to the FDA with this new data soon. And that will be a negotiation. I think that in general when it comes to celiac development, I've mentioned many times before that it's going to be a component of these biopsy readouts and the symptoms. I think that regulators see the value in both because you want to make sure that you're disease-modifying the basic pathology of the disease like I believe anti-IL-15 can do. But more importantly, you want to make sure the patients feel and experience a better quality of life. And I think that that's why I highlighted the symptoms today trending in the right direction, which is very encouraging. So those 2 things will be used. I think that when you think about different study designs in the future, I think that one of the things that's becoming more commonplace is this idea of low-level inadvertent planned exposures to low levels of gluten. And I think that's probably the best way to move forward. But that's something we need to still discuss with regulators at this point. And the question of prevention versus healing, that's a more broad question. I think that's something we also have to be discussing, about how far can we drive a label. I personally have an aspiration that this should be all comers, people who want to be able to have a normal diet. And so beyond just the people who don't respond to gluten-free diets, I think there's a great value in being able to travel and live your life the way you want it to be. So those are the discussions we have to have with regulators and make sure that how we design the Phase II and III studies achieve those goals. And let me pass off the last question about partnering to Richard.

Thanks for the question, and thanks, Eric. As you've seen over the last few years, Teva has developed an excellence in commercial execution across a number of therapy areas. And so based on that capability, based on understanding these disease areas through the work we're doing in clinical development, we have no plans to partner these products. As you saw by some of the partnering we did on financing with Royalty Pharma, we're in a position to develop these in multiple indications all the way through to launch.