Theratechnologies Inc. (TH) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for standing by. And welcome to the Theratechnologies conference call. [Operator Instructions] I'd like to remind everyone that this conference call is being recorded today, September 10, 2020 at 8:30 a.m. Eastern Time. I would now like to turn the conference over to Denis Boucher, Vice President, Communications and Corporate Affairs. Mr. Boucher, please go ahead.

Thank you, and welcome, Mr. Paul Lévesque, President and Chief Executive Officer of Theratechnologies; as well as Dr. Christian Marsolais, Senior Vice President and Chief Medical Officer; Dr. Steven Grinspoon and Dr. Rohit Loomba, will be the speakers on today's call. A Q&A period open exclusively to financial analysts will follow their presentation. Before Paul begins his remarks, I've been asked by Theratechnologies to read the following message regarding forward-looking statements. I would like to remind everyone that Theratechnologies' remarks today contain forward-looking statements about its current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or other future events or developments. In preparing these forward-looking statements, several assumptions were made by Theratechnologies, and there are risks that results actually obtained by the company will differ materially from those segments. As a consequence, the company cannot guarantee that any forward-looking statement will materialize and you are cautioned not to place undue reliance on that. Theratechnologies refers current and potential investors to the forward-looking information section of its press release issued this morning and to the Risk Factors section of its annual information form dated February 24, 2020, available at www.sedar.com and on EDGAR at www.sec.gov as an exhibit to its report on Form 40-F dated February 25, 2020 under Theratechnologies' public filings. Forward-looking statements represent Theratechnologies' expectations as of September 10, 2020. Except as may be required by securities laws, Theratechnologies does not undertake any obligation to update any forward-looking statement whether as a result of new information, future events or otherwise. I would now like to turn the conference over to Paul.

Good morning, and welcome. Thank you for being on the call today. Just over a year ago, on June 17, 2019, to be precise, we announced that we would be pursuing the development of tesamorelin for the treatment of NASH in people living with HIV. Our decision at the time was based on data from an investigator initiated study, showing the significant impact of tesamorelin on the reduction of liver fat and delayed progression of liver fibrosis in people living with HIV. These results were published in The Lancet HIV in October 2019. We also said at the time that we had not ruled out the opportunity to move forward with the development of tesamorelin for the treatment of NASH in the general population. Following this announcement, we entered into discussions with the FDA and the EMA regarding a proposed clinical program for the development of tesamorelin in HIV NASH. Through those discussions, we were told that regardless of the patient population, the clinical trial and the endpoints would need to be aligned on the agency's published guidelines. Based on the agency's guidance, we carefully looked at every option. One option was to stay the course and pursue a trial solely in the HIV population. The second option was to develop tesamorelin for NASH in the general population. Before reaching a final conclusion, we needed to assess our chance of success going forward with one or the other option. This is what we did, asking ourselves 3 fundamental questions. Do we have enough scientific evidence supporting the efficacy of tesamorelin in the non-HIV population? Would we have a formulation and mode of administration that could be competitive in the marketplace? And could we ensure an appropriate level of intellectual property or regulatory protection that would allow us to invest and build long-term plans? After careful consideration and consultations with our scientific advisers, we believe that tesamorelin can become a successful treatment for NASH in the general population. Therefore, I'm pleased to announce that we will be pursuing the development of tesamorelin for the treatment of NASH in the general population while also including a cohort of people living with HIV. [Audio Gap] data from the clinical trial led by Dr. Grinspoon showing positive and convincing results in the HIV population. In a moment, he and Dr. Loomba will discuss why we believe this data applies to the non-HIV population as well, making tesamorelin, a serious contender in the treatment of NASH in the general population. As you know, many products fail in Phase III because of unexpected safety issues. This is not as much of a concern given the 10-year history we have with tesamorelin and HIV patients. In addition, we believe that our investigational F8 formulation, combined with convenient multidose pen injector under development greatly strengthened our competitive position. We will be working with Haselmeier, a well-recognized and established leader in the development of pen injectors. We're also confident that tesamorelin could be among the first treatments to be commercialized in this therapeutic area. Finally, our IP and regulatory protection for tesamorelin are crucial elements of our carefully developed plan. I'm now very confident in our intellectual property position. The F8 is patent-protected in the U.S. until 2033 and until 2034 in major EU countries. Our patent protection could actually extend all the way to 2040. Indeed, we were thrilled to receive last week a notice of allowance from the United States patent and trademark office on a pending patent application, which relates to the treatment of hepatic disease using growth hormone releasing hormones. This patent application claims, among other things, a method for the treatment of NAFLD or NASH with tesamorelin. All this to say that we have a huge opportunity that we just cannot turn our back on. On this, I will ask Christian Marsolais to give you more details on the proposed design for our Phase III clinical trial. I will come back with some closing remarks after the interventions from Dr. Grinspoon and Dr. Loomba.

Thank you, Paul. As Paul mentioned, when we first approached the FDA and the EMA to discuss a potential clinical trial design, we intended to specifically evaluate the efficacy of tesamorelin for the treatment of NASH in people living with HIV. There is a high unmet medical need in this patient population, and we believe that we had the potential solution to address it. We, therefore, presented a proposal to the FDA and the EMA, which focused more on liver fat decrease and delayed progression of fibrosis or ballooning and inflammation. We also proposed to the agencies that the long-term clinical follow-up study to assess the impact on the treatment of clinical endpoints could be replaced by an in silico modelization. Both agencies commented that substantial data would be needed to establish a clear rationale as to why people living with HIV are at higher risk of NASH-related fibrosis and ultimately cirrhosis than the general population. They also concluded that no matter the patient population, our Phase III clinical trial would have to follow the established NASH guidance document and guidelines. As Paul said, this meant that a clinical program in NASH HIV would be the same as in the general population. Upon receiving feedback from the agencies, we convened a scientific committee composed of 6 international experts in the field of NASH in both the HIV and digital population. In addition to Dr. Grinspoon and Dr. Loomba, our Scientific Committee also include Dr. Jennifer Price from UCSF, Dr. Graeme Moyle from Chelsea and Westminster Hospital in London, Dr. Vlad Ratziu from Sorbonne University in Paris and Dr. Jürgen Rockstroh from the University of Bonn in Germany, all recognized opinion leaders in their respective field of research. Our scientific committee had access to all relevant data on tesamorelin, to the feedback received from the regulatory agencies to the information under new F8 and our proposed multidose pen injector. The experts unanimously concluded that tesamorelin should be developed for the treatment of NASH in the general population based on the strong scientific evidence. We also felt that a small group of people living with HIV should be included in our clinical trial to ensure that this population could have access to the treatment, if approved. Other than adding this small subgroup, our clinical trial design is simple and straightforward. Our intention is to initiate in the first half of 2021, a study including a total of 650 patients with a minimum of 600 patients from the general population and approximately 50 people living with HIV. All patients will need to have a histologic diagnosis of NASH with fibrosis score of 2 and 3 and with a NAS score of at least 4. The study will compare the F8 formulation to a placebo. Patients will be treated for a period of 18 months. Once patients have completed the 18 months of treatment, they will be enrolled in a follow-up study to assess the impact of the treatment on clinical outcomes. If the results of the Phase III study are positive, we will submit a sBLA in the United States and its submission for first approval in Europe, which should grant us 10 years of data exclusivity in this territory. Should tesamorelin be approved, the follow-up study will enroll a total of approximately 2,000 patients, which is the same as other investigational treatment for NASH. That Phase IV study would be completed post approval. Based on the safety and efficacy data collected over more than 10 years with tesamorelin and with the most recent data published by Dr. Grinspoon on the genotyping of the liver, we are very confident with the chances of success of tesamorelin for the treatment of NASH in the general population. I will now turn to Dr. Grinspoon, who will talk about his experience with tesamorelin. As some of you know, Dr. Grinspoon has been the scientific lead behind tesamorelin and has been collaborating with their technologies for more than 15 years. Following Dr. Grinspoon, Dr. Loomba will discuss the need for new treatment options in general NASH. And the reason why tesamorelin is a unique contender with great potential. Dr. Grinspoon?

Thank you, Christian, and thank you for having me on the call today. As you said, I've been involved in the development of tesamorelin since the Phase II trial 15 years ago, and this eventually led to the approval of the drug in HIV-associated lipodystrophy. At the time, I saw a significant promise in tesamorelin's unique mode of action, which acts to induce pulsatile release of growth hormone, mimicking the biological pathway of the endogenous release of growth hormone. In these earlier studies, we demonstrated that people living with HIV with increased visceral adiposity, experienced a significant decrease in growth hormone secretion. This same conclusion was also made in the general population. Decrease in growth hormone secretion was also observed in obese people with increased waist circumference. In another study conducted a few years ago, our team demonstrated a population with the BMI over 30 was associated with a significant decrease in growth hormone secretion. We also demonstrated that treatment with tesamorelin significantly decreased the accumulation of visceral adipose tissue in the same magnitude as what is seen or observed in the HIV population. These results importantly indicate that for both patient populations, decreases in growth hormone secretion are associated with altered fat accumulation. Finally, it is known that adult growth hormone deficiencies associated with the development of NAFLD/NASH and that the treatment of adult growth hormone deficiency with growth hormone is associated with NASH improvement. This is further evidence that normalization of growth hormone levels can play a significant role in the treatment of NASH. It is clear after 10 years on the market that tesamorelin serves as a safe and effective treatment for lipodystrophy. Given its efficacy in lipodystrophy, it seemed likely that tesamorelin would have a positive effect on NAFLD/NASH, but this needed to be proven. With the support of the National Institutes of Health and Theratechnologies, we were able to conduct a study in HIV patients with NAFLD/NASH, which was completed in 2019. The results were striking, to say the least. Tesamorelin showed a treatment effect on liver fat reduction of 37% versus placebo. In addition, more than 35% of the tesamorelin patients had normalized liver fat content at the end of the 12-month treatment period compared to 4% in the placebo group. Additionally, tesamorelin prevented the progression of fibrosis with fibrosis progression occurring in 37.5% of placebo-treated patients versus 10% in the tesamorelin group. Moreover, the change in fibrosis during the study was significantly correlated with the change in NAS score, signaling that tesamorelin could likely have a significant impact on NASH. More so after performing a transcriptomic analysis on liver biopsy tissue, tesamorelin proved to have a significant effect on liver health, which was very interesting. For the first time, we were able to show that tesamorelin, which acts to increase endogenous growth hormone secretion, increased hepatic expression of genes important for oxidated phosphorylation, a key pathway in fat metabolism. In addition, treatment with tesamorelin decreased the expression of genes involved in inflammation, tissue repair and cell division. These changes in hepatic gene expression correlated with an improved fibrosis-related gene score. The data also showed that treatment with tesamorelin led to reciprocal up- and down-regulation of the genes associated with favorable and poor hepatocellular carcinoma prognosis, respectively. Finally, tesamorelin was shown to upregulate key genes in the electron transport chain and oxidative pathways indicating beneficial mitochondrial effects. Mitochondria are the organelles responsible for the oxidated phosphorylation of fat and play a key role in fatty acid catabolism. This was a key finding because mitochondrial impairment promotes hepatic fat accumulation and generation of toxic lipid metabolites, increases oxidative stress, cell death inflammation in fibrosis, which are all key events in NAFLD/NASH progression. These beneficial changes related to the increased transcription of IGF-1, a marker of increased growth hormone signaling in the liver. These findings demonstrate that treatment with tesamorelin promotes positive changes in hepatic gene expression, which thereby reflect a return to liver health. These results are very significant and illustrate a clear scientific rationale for the development of tesamorelin for the treatment of NASH. The totality of data from years of research clearly indicate that tesamorelin has the potential to play a significant role in the treatment of NASH in people with or without HIV. The accumulation of liver fat in the context of increased BMI in visceral fat in both patient populations is related to a significant decrease in growth hormone secretion, making tesamorelin an ideal candidate to manage the root cause of NASH. Thank you again for your attention. I will now turn the call over to my colleague, Dr. Rohit Loomba. Thank you.

Good morning, everyone. Thank you, Steven, and thanks to Theratechnologies for inviting me here. Nonalcoholic fatty liver disease, or NAFLD, is the most prevalent cause of chronic liver disease worldwide. It is estimated that as many as 25% of adults globally are affected, and it is expected that it will be -- it will keep growing over the coming decades, encumbering the health care system, causing substantial economic burden and negatively impacting quality of life of many individuals. Approximately, 3% to 12% of the U.S. adult population, which represents 10 million to 40 million Americans may progress to nonalcoholic steatohepatitis or NASH, which can lead to cirrhosis and liver-related morbidity and mortality. Of these approximately 5 million individuals may have Stage 2 or Stage 3 fibrosis, a figure that is expected to grow to approximately 10 million by 2030. There's a definite consensus within the medical community that NASH and NASH-related fibrosis is a clear and present threat to well-being and survival of those who are suffering from it in the United States. Unfortunately, we still have only very limited options to treat patients with NASH. In fact, other than the lifestyle modification through diet and exercise, there are currently no FDA approved treatments for NASH and NASH related fibrosis. Although weight loss can be effective, it is difficult to achieve and even more difficult to sustain. Fortunately, we now have several investigational drugs at various stages of development for the treatment of NASH and one of them being tesamorelin. Based upon my long experience in the field of NAFLD and NASH, tesamorelin has the appropriate mechanism of action to address the NASH epidemic. NAFLD/NASH is a disease that is caused by accumulation of fat in the liver that can lead to then hepatocellular injury, hepatic inflammation and progressive liver fibrosis that can lead to cirrhosis and hepatocellular carcinoma. Many different therapeutic approaches are being tested to address the unmet medical need, patients suffering from NASH. However, in my opinion, treatments that target the root cause of disease have better chances of success. In the past few years, due to a large number of ongoing clinical trials in NASH, knowledge on this disease has significantly improved. We now know that decreased growth hormone secretion is associated with increased body mass index and more specifically, increased visceral adipose tissue, both of which are commonly seen in patients with nonalcoholic steatohepatitis. As alluded by Dr. Grinspoon, tesamorelin is a growth hormone releasing factor analog, which specifically addresses decreased growth hormone secretion. Results obtained so far with tesamorelin are particularly impressive, with a relative reduction of approximately 37% in liver fat and normalization of liver fat content in more than 35% of patients over 12 months of treatment. Data from recent studies conducted by us and others have demonstrated that a 30% reduction in MRI-PDFF to quantify liver fat is associated with higher odds of histologic response, which includes not only steatosis, lobular inflammation and ballooning, but also resolution of NASH. Given results obtained with tesamorelin thus far and its unique mechanism of action, I do strongly believe that this drug should be tested in a Phase III trial to examine efficacy in patients with NASH Stage 2 or 3 fibrosis. In addition to liver fat data, the most recent data on transcriptomic signature of the liver published by Dr. Grinspoon, are also very informative and further support the mechanism of action by which tesamorelin decreases liver fat, involves a number of distinct pathways that may play a role in progression of NASH and NASH-related fibrosis. Furthermore, tesamorelin has an excellent safety profile thus far, which is desirable due to long duration of therapy that is needed for reversal of NASH and NASH-related fibrosis. A key characteristic of tesamorelin is that unlike administration of exogenous growth hormone, it mimics the biologic release of growth hormone. Tesamorelin induces the pulsatile release of growth hormone and contrary to the administration of growth hormone has a very limited impact on glycemic control. I'm pleased to have been involved in the design of the Phase III protocol that will be submitted to regulatory agencies in the coming weeks. In my opinion, based on the study endpoints and the science and the data I've seen so far, I'm convinced that tesamorelin requires to be tested to examine its efficacy and reversal of NASH, and improvement in NASH-related fibrosis in patients with NAS Stage 2 or 3 fibrosis. On this, I will let Mr. Lévesque give his final remarks. Thank you.

Thank you, Dr. Loomba. Today marks the beginning of a tremendously promising program for Theratechnologies. We have a clear plan, and our objective is in sight. As we move forward with this unprecedented opportunity, we will also continue pursuing our oncology program for which there is also a significant potential. We have a strong team of talented and knowledgeable experts capable of advancing this innovative pipeline. Yet, as we build our future, we shall continue to deliver growth from our commercial assets. To this end, we have relevant messages to provide to health care practitioners and patients. We will carry on with our mission despite the environment created by COVID-19, which makes face to face interactions more difficult and challenging. As such, we are constantly evolving our go-to-market capabilities to grow our business and serve our patients. We currently expect the Phase III trial to cost $15 million to $17 million over the next 12 to 15 months versus $10 million to $12 million we had been expecting for a HIV NASH trial. We have the ability to finance this through a combination of our existing balance sheet cash, which was over $31 million as of May 31, 2020, and revenue from our commercial product portfolio. We also continuously evaluate other options to finance these costs, and we'll continue to do so in the future. In a few years from now, I believe Theratechnologies will be a very different company. Today's announcement marks one of the most important milestones in the history of this company and the start of a journey, which has the potential to provide significant value to all our stakeholders, including patients, physicians and shareholders. We will now take questions from analysts. Thank you.

[Operator Instructions] First question comes from Brian Abrahams with RBC Capital Markets.

Congrats on all the progress. I guess just a few on the new trial for me. Would this be one where you'd be seeking accelerated approval for label expansion in this indication? And would you expect that you need to follow these 650 patients for outcomes longer term? Or with that planned Phase IV 2,000 patient study that you mentioned provide for that?

Thank you, Brian, for the question. I'll ask Christian to actually give you more details.

Brian, thank you. The -- this is more or less what you're saying yet. And when we will submit the file to the FDA with the Phase III study completed, that will be for accelerated review. But as per the guidelines, we also have to show impact on clinical endpoints. Then the Phase III will be running treating patients for 18 months. At the end of that 18 months, patients will be enrolled in a kind of a long-term follow-up study. Once we obtain approval, we will, at the same time, discuss the long-term study and the total number of patients, maybe we'll have to go to a total of 2,000 patients, which would mean that post-approval, we would have to recruit an additional 1,300 or 1,400 patients to complete the long-term clinical endpoint study.

Got it. That makes sense. And can you talk a little bit about powering of the study? And what went into your powering assumptions in terms of potential effect size?

Yes, absolutely. Once again, we are looking at the minimum difference of 10%, and this will be based on the primary endpoints requested by the FDA, which are mainly to look at a decrease of at least 1 in the fibrosis score with no negative impact on the NAS score or an improvement in the NAS score or resolution of NASH without a worsening of fibrosis. And the delta that we're looking at will be 10%, which is the same as the one from most of the other Phase III trials that are ongoing that were completed so far.

Got it. Makes sense. And then just last one for me, if I could. Have you had any initial regulatory feedback as to whether there's adequate biopsy data in a sufficiently overlapping population, I guess, in terms of the required inflammation reductions or fibrosis improvements to support history biopsy driven study?

Yes. At the moment, based on our scientific rationale and based on what was explained this morning, one factor, which is extremely important is a decrease in liver fat, which we have reached a decrease of 37% and probably the most difficult patient population to treat. And we're quite confident that a decrease, and it's been shown also by Dr. Loomba, and I will ask him to comment on that. But once you reach a decrease in liver fat of 30%, there is a significant decrease in fibrosis and/or resolution of NASH. Therefore, we think that the data that we have so far are strong enough to submit this protocol to the regulatory agency. Dr. Loomba, would you like to comment on the decrease in liver fat and the impact on fibrosis?