Theratechnologies Inc. (TH) Earnings Call Transcript & Summary

Good morning, everyone. Our next presentation is Theratechnologies. The presentation will be given by Paul Lévesque, President and CEO, followed by a 5-minute Q&A session. [Operator Instructions] Paul, the floor is all yours.

Thank you very much, and welcome, everyone, for connecting today. And I hope that within the next 25 to 30 minutes, I'm going to have a chance to tell you who we are and what is happening at Theratechnologies because I certainly believe that we have exciting stuff going on. So before anything, I would like to ask you to always refer to the forward statements, it's important. Forward-looking information comes with a fair amount of assumptions. So refer to them before anything because, obviously, like any other businesses, there are risks to what we're doing. But all kinds of opportunities as well. So let's start with who we are. So the company was founded a while ago in 1993. Out of that was a product that was introduced on the market in 2010. It was a homegrown product, coming from the research of Theratechnologies. We have businesses in Europe. We have businesses in the U.S. So we have hubs over there. About 120 employees and growing because we're building capabilities as we move along. We are listed on NASDAQ and the TSX in Canada. The stock price in mid-April was almost USD 4. We have 95 million shares outstanding, market cap, as you see, $360 million. We have a good cash position, and we have a convertible that is coming up in mid-2023. That is a bit of some of the parts of the organization. What we are is very simple. We are a biopharmaceutical company focusing on the development and commercializations of innovative therapies. It's important to state that because you're going to see throughout the presentation that just like any other biotech, we have major development programs, but also the commercial organization that is generating revenues, and I'll get to that. At a glance here, you have a bit of our situation. We have a promising R&D pipeline with opportunities in oncology in NASH, and we're always working to develop new mode of administration or line extension for the 2 products that are already commercialized. That is Trogarzo and EGRIFTA. The Phase I program in oncology is something I will cover in a moment, same for the NASH program, and we've made a decision in 2020 to go after NASH in the general population. We have 2 commercialized assets in the HIV area that are very interesting drugs because, from my point of view, we fulfill unmet medical needs. The first 1 is EGRIFTA. We launched a new formulation last year. That is easier to take, small volume of injection. It's the only drug approved in the U.S. to treat lipodystrophy in HIV patients. And that's important because lipodystrophy was not quite appreciated the way it should many years ago. So I think the drug was a bit ahead of its time. And now people recognize that lipodystrophy is going to be precursor to NAFLD and, in many patients, to NASH. And that is bad and that it should be treated. So very unique product. And I think that the science now is very compelling, and that's why I see significant upside potential in the upcoming months and year. And Trogarzo is very interesting as well because it has an indication for multidrug-resistant patients suffering from HIV one. And the reason why this is timely is certainly something you can understand. The drug now is offered to a cohort of patients that have been treated for 35, 40 years. Resistance is developing, and we think that Trogarzo is fulfilling a very interesting niche for those patients. Now if we take a look at how all of this is developing in terms of time, the product that we have, the peptide drug conjugate that we have to treat patients in oncology is entering first-in-human Phase I. We received a fast track for that, and I will give you more details in a moment. We have a follow-up compound that is called TH1902 that is going through toxicity program at this time in manufacturing scale up. We have the NASH program that also received a Study May Proceed letter, and we have a meeting coming up with the agency just to finalize the protocol. It's around the corner, and we should be able to start dosing patients in the third quarter. And when it comes down to the line extension or the new mode of administration for our HIV products, we have an IV push, for which we have almost completed the trial, we're going to prepare a submission, and we should seek for an approval. We want to get going with an intramuscular mode of administration for Trogarzo. We intend to start a quick trial in the latter part of the year. And we want to take the SV formulation that we have for EGRIFTA and move that forward with what we call an F8 that is more concentrated, and we want that to be packaged in a pen because the volume of administration is going to be so small, 0.16, 1-6 ml, 0.16 ml, that we're going to be able to put that in the state of the art pen so that, again, it's going to be game changing, a game changer for patients having to use it for first lipodystrophy in HIV patients. And obviously, we want to use it for the NASH trial later on. So where are we at with this when it comes down to milestones and timetable? Well, for TH1902, as I said, we were granted fast track designation from FDA right after the submission of our preclinical work. It's very much rare that you get a Fast Track designation right after the preclinical work. But what we had was so compelling that we got this Fast Track designation. We have dosed our first patient in March ahead of our timeline, may I say. And that first patient was dosed the second time this week, and we're going to have the escalation trial that will be done as per the prescriptions from the FDA methodology. When it comes down to tessamorelin, as I said, we received a Study May Proceed letter. We will finalize the protocol with the agency. It's very, very important that we do that because the agency has. Acquired knowledge and tips along the way with other companies that have failed, other companies that have submitted protocol. We want to make sure that our protocol is really well done. And we've got this meeting coming up. We already have exchanged questions and answers with them. We'll sit down, finalize the protocol, and we are on target to start our NASH trial in the third quarter. And as I said, when it comes down to mode of administration, we are on track for having, certainly, the IV push in the front part of 2022. And in the latter part of 2022, hopefully, we'll have an intramuscular mode of administration also for Trogarzo. Now let's move on to more details associated to our oncology program because this is really, really something that is worth spending time on. So first of all, we acquired this technology from a group in Québec here called Katana. These guys extensively studied the cancer cells and identified a receptor, a novel receptor that is called sortilin. And this receptor is very, very unique because it seems like it is overexpressing itself, very significantly in solid tumor when the cancer is advanced or very, very hard to treat. The expression of the receptor is not a small one. The expression goes anywhere between 40% to 90% expression. So it plays definitely a role that is important in cancer cells in one way or another. We have studied the sortilin receptor, and what we did is that we have seen that this receptor plays a role in the trafficking and transport of large molecules across the plasma membrane. And what is good is that we've been able, through our research, to design a really good peptide that has a payload of 2 molecules of docetaxel, which is a very good compound when it comes down to cytotoxic medicines. And when the peptide connects to the receptor, it is internalized within the cells. And as such, what you have is a concentration of the cancer cytotoxic medicines within the cancer cells. And therefore, one of the benefits associated to that is that you have fewer side effects because you had less cytotoxic medicines floating around. You have a higher concentration within the cells. We're talking about 5 to 7 fold. And obviously, this will bring additional benefits. And it looks like our peptide gets to the cancer cells in a more effective way than other larger molecules, such as the larger molecules that can be used to achieve the same thing. So our fit-for-purpose peptide is really, really good to concentrate the cytotoxic medicines within the cells without providing the same amount of neutropenia, which is very often the show stopper in cancer therapy. So very, very promising. Now we have published a lot of data in different cancer types. But recently, we published additional data at AACR. And I think that they are really worth covering in a short period of time here. First of all, you see that when you compare the activity of docetaxel at a quarter of the dose versus our TH1902 at the equivalent dose you see that docetaxel doesn't have much activity in colorectal cancer, and we do at a quarter of the dose. But what is more interesting is that if you actually push up the dosage a little bit, you see that docetaxel still doesn't work much at a higher dose at the maximum tolerated dose. But our TH1902 does a stunning response, or produce a stunning response in a cancer that is not known to actually respond to to docetaxel. So there's really something going on here. And we know that, that 15-milligram per kilo of docetaxel, this is a maximum tolerated dose. But there's nothing that says that the equivalent dose of 1902, which is 35-milligram per kilogram is our maximum tolerated dose. It's actually our dose escalation trial that will actually show us if that is a maximum, we can go. So already here, you've got stunning results in terms of saying docetaxel is normally not a good drug for colorectal cancer, this was 1 of them that we have not tested our TH1902 on. When we tested it, great response. We also showed new preclinical data in endometrial cancer. And as you can see here, same thing. You don't have much of a response of docetaxel at the quarter of the dose. You do have 1 at the maximum tolerated dose, which often triggers side effects. But take a look at our response with TH1902 at the equivalent dose of docetaxel. You had a response, but that response is sustained for over 30 days. It's pretty, pretty mind-boggling to see that sort of response in some of cancer, solid tumor that are not that easy to treat either. So very, very stunning results in that sort of cancer types as well. So in a nutshell, these 2 additional studies that were presented at AACR, plus what we have made public before is all actually heading in the right direction. We have a chance here to have a compound that will actually have enhanced efficacy and less side effects, so that we could even challenge down the road, maybe the way that this medicine has been given in cycles every 3 weeks based on the fact that the patients will be able to tolerate these treatments better. What we know for now is what makes the difference is the sortilin receptor that has an affinity for, obviously, the peptide or the peptide has an affinity for the receptor because there's a good fit-for-purpose and the release of the payload is beautiful. So what we intend to do now is to do what the first-in-human Phase I trial is all about, so dose escalation. Once we have determined our maximum tolerated dose, we'll do a basket trial. And in the basket trial, we'll use a lot of solid tumors for which we know the sortilin is expressing itself at a significant rate. We have a Fast Track designation, which will allow us to obviously have ongoing interaction with the agency. The ongoing interaction with the agency may give us a chance to actually identify how we can accelerate the development of TH1902 and get it to the marketplace in some cancer types in an accelerated way. That's what Fast Track designation is all about. We're extremely proud of having this, and we're going to keep meeting our deadline so that we can advance this as fast as possible. I'm very glad to say that despite the pandemic in 2020, this program has not missed a single beat. In fact, we ended up dosing our first patient ahead of schedule. So stay tuned for this one, but this is really, really promising. Now let me move on to the other program that we have, for which we have great expectations. So we have EGRIFTA SV that is on the market, that is tesamorelin. As I said, it's been on the market for 10 years. This is a growth hormone releasing hormone. And we believe that this leads to a mode of action that is very, very much one that could tip over an indication for NASH. And here's why. What it does unlike the other growth hormone -- there are probably 20 growth hormone on the market and none of them can actually pretend to have the same mechanism of action because this drug does stimulate endogenous production of growth hormone. It's a growth hormone releasing hormone. What it does is that it gives a kick to the pituitary gland to resume doing endogenous production of GH in a normal fashion. What I mean by that is that it produces endogenous growth hormone in a pulsatile way. And that has a huge difference versus the usual growth hormone because you don't have the same potential decremental effects on glucose control and insulin resistance. So you see all of the benefits related to that, it reduces visual fat, decreases lipogenesis, decreases oxidative stress and inflammation, and it looks like it's restoring some of the functions that are respiratory functions of the cell. Now what is really important as well is not to lose all the benefits associated to the IGF-1. IGF-1 has been identified as having its own set of benefits. And again, unlike the vast majority or all the growth hormones that have been tested, we actually keep the function of IGF-1 intact, which brings another set of benefits on insulin resistance, oxidative stress and other benefits on keeping the integrity of the [indiscernible] cells. So this is a mode of action that we believe is unique, that is very compelling, and that's why we're excited about it. In our Phase II clinical trial, which was conducted in HIV patients, we actually produced pretty compelling data. First of all, in liver fat reduction. We achieved a delta versus placebo of 30% -- 37% difference between the 2 groups in liver fat reduction. That's pretty compelling because liver fat is an important marker. We actually showed that over 60% or 60% of the patients showed liver fat reduction that was over 30%. Literature shows that if you actually reduce liver fat by 30% or more, you're going to have an impact on the NASH score. So that's one of the strongest point in all the data that we have actually produced where you have a patient on a very important marker, which is liver fat reduction. In fact, 35% of the patients in the trial had liver fat normalization, and we actually delayed progression of fibrosis significant more than placebo. All of this to say that all of this data is directionally correct because this trial was not perfect in a sense that it was over 12 months. We know that tesamorelin probably needs 18 months to actually show its full potential. And we also know that if we want to show an impact on fibrosis, we'll probably need to zoom on the F2 and F3 patients, and that's what we're going to do in the trial. When this data was presented along with everything else that we have published either in HIV patient population or not, when this was presented to hepatologists that had not touched this medicine because they don't treat HIV patients, they thought it was very compelling data, and that we basically had a serious kick at the can at having a drug that is going to show good results in the NASH space by reducing or having a chance to reduce the NASH for and without worsening fibrosis. So that's what we intend to do. In fact, when you take a look at that space here, you realize that on liver fat reduction, we fare very, very well. And unlike all of these compounds that our new molecular entity, we have 10 years of state safety data behind us. So we are entering a Phase III clinical program with a drug that has 10 years of safety data and an already identified dose of 2-milligram every day, which is not the case for these compounds where most of the time, they have different arms to actually identify what's going to be their dose. So first-in-class mode of action because it's a different mode of action, it's somehow derisked, I believe, because the drug has been on the market for a significant period of time. And I think that this is going to be a key thing while entering that space. Now last but not least, I think that this is a hard condition to treat. What I foresee as someone that has done more than 35 years of commercial and development of medicines, I think that the NASH space, once we have many molecules approved, you're going to see combination therapy. And to tesamorelin with the profile that we have will be certainly a good medicine, not only for being used as a single agent, but if doctors start combining mode of actions, we have a very unique one that will be very appealing. I don't want to dwell on this slide, but the market is big and growing. By 2030, you see that in F2 and F3 patients in NASH, the forecast is that there's going to be more than 10.6 million. We all understand now that the consequences of NASH on the cardiovascular parameters is significant, and that's what our Phase III and mainly Phase IV program, once we are in the market, will determine. But the opportunity is massive, and we intend to get a chunk of it. Now where we are in the program is that we made public that we are going to have a program that will be for 18 months, the Phase III programs, we said that approximately 900 patients would be part of it. We also said that we would have a subset of patients that would be HIV patients. We're committed to this population. So we would like to have a small cohort within the entire trial that will be HIV patients, and we will carry on as per the agency's requirement with a Phase IV trial once we are in the market. So when all is said and done, we're going to have well over 2,000 patients that will actually be on this program. Now knowing now that we're very well supported by a very broad set of KOL, people that have seen the work in -- the drug in HIV and also hepatologists that just got the data presented to them, knowing that we're supported by a wide set of KOL. What is important is that we're competitive from an administration point of view and from an IP point of view. So as I said before, we intend to run the trial and launch tesamorelin at a very high concentration, low volume of injection and package this new formulation in a multi-dose pen. That will be a state of the art pen. In fact, this pen is already on the market for other drugs. So it's going to be approvable. And I think that knowing that the vast proportion, a significant proportion of patients are diabetic patients, this is the type of pen they already use. So we're going to be competitive in the marketplace. You don't want to be investing any money in a space like NASH because of the cost of development, if you're not on solid ground when it comes down to the IT regime. While take a look at this year, we have a patent that will come to an end for lipodystrophy, but we only have an F8 formulation that will be used once we get to market that has an IP protected, that is IP protected until 2033 and 2034. But more importantly, probably, we had a huge patent that, in fact, we have 2 huge patents that actually makes tesamorelin protected for the association of tesamorelin in the treatment of NAFLD and NASH. So we are on solid ground from that point of view, and this is probably good news. So let me just summarize the situation when it comes down to the commercial portfolio that we have. As I said, Trogarzo and EGRIFTA are on the market. I foresee a fair amount of growth year-on-year. We're launching in Europe now with Trogarzo, EGRIFTA with this indication of lipodystrophy and all the science supporting the consequences of lipodystrophy over the long run in HIV patients is important. The name of the game for us in 2020 has been to refine our go-to-market model, do more education, medical to medical activities. That's what we've been able to do in a virtual way. And I think that now that things are reopening in the U.S. and hopefully in Europe shortly, I think the table is set for significant growth with the 2 compounds that we have and the line extension or new mode of administration that we're working on. First, an IV push for Trogarzo then potentially an IM formulation and for EGRIFTA having a chance to actually go to a better formulation and a pen. So that the ease of administration on the daily basis can actually make a difference for patients. In summary, this is where we are. We recorded $66 million in sales in 2020. So we are generating revenue that goes into supporting some of the R&D activities that we have. We have a solid cash position at this time. We grew market capitalization significantly year-to-date this year. And we have a convertible that will come to be renewed or changed by midyear at 2023. So in a nutshell, this is the situation. I hope that you see that we are a biotech or a biopharmaceutical company that has a very exciting commercial arm, but probably even more exciting drug development programs with 2 things that are really, really outstanding and somehow derisk because of the safety data that we have with tesamorelin. And because of the docetaxel data that have been available for years as well. So I'm going to stop here and take some of your questions.

[Technical Difficulty]

I'm sorry, Sid, I mean, for some reason, the line was not optimal. I didn't hear your question.

Any kind of guidance from [Technical Difficulty] regarding the NASH program?

I'm not sure I fully understood. Let me try to take a crack at it. So we received for the NASH program a Study May Proceed letter, but the agency wanted us to have an end of Phase II meeting, which is scheduled, which is upcoming. And they've already sent us questions. We've already responded. We're going to be sitting down with them, and we're going to review the questions. If we agree with their recommendation for the protocol, we will actually in -- just resubmit an amended protocol, and that's going to be the end of it. For now, there's nothing outstanding. But what is important is that we sit down with them so that we can pick up all the experience that the FDA has accumulated, all the tips that it can give us. So that, for instance, we have the best way to read the biopsies baseline and after 18 months. This is a very complex space, and we need to obviously have a perfect Phase III protocol, if we want to succeed. And we know we can succeed. We need to prove it, and to prove it, we need the best protocol possible, and that's why we're looking forward to getting that meeting with the FDA. I hope I answered your question.

Yes. The next question is on the same topic. Any update on the NASH program with the European Regulatory Agency?

Well, as I said, the meeting is just around the corner. It's coming up. And for NASH, we're going to be doing it in a few -- in a few weeks, in a few months, and we will actually just resubmit the protocol. We are on target to actually dose the first patient in the third quarter.

Okay. How should investors think about the peptide drug conjugate versus an antibody drug conjugate? Is there an advantage to a PDC?

GC versus agency.

Well, the mode of action is not dramatically different between PDCs and ADCs as are large molecules. Their payload is not always consistent. And what we've seen with our compound makes us believe that our peptide has an easier way to reach out to the tumor. Tumors can be very big in volume, and you have to reach out. You have to get to all the cells. And I think our peptide for now is showing exclusive results, and we believe that it has maybe more of an affinity to get to the cells, get into the cells. So quite frankly, for us, there was absolutely no benefit in designing a larger molecule like an ADC. And time will tell. But for now, I think that we may have something that gets to the cancer cells in a more efficient manner than ADCs.

That's all the time we have for the questions. Thank you so much, Paul. The presentation is now over. A replay of the presentation will be available for 24 hours after the conference. To access this replay, please visit the main agenda page.

Thank you.