Theravance Biopharma, Inc. (TBPH) Earnings Call Transcript & Summary

Welcome everyone to the 39th Annual JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by Matt Bannon and Tessa Romero from the team. Our next presenting company is Theravance. Speaking on behalf of the company, we have CEO, Rick Winningham. Rick, before I turn it over to you, I just wanted to remind everybody that if you have a question, please use the Ask a Question feature in the portal. And I'm happy to ask the question on your behalf. With that, I'll turn it over to you, Rick. Rick?

Good morning from the Bay Area. Thank you, Anupam, for inviting us to present and also I'd like to thank JPMorgan. If you've not been paying attention to Theravance Biopharma prior to this, 2021 is the year to pay attention. On the next slide, I've just got the forward-looking statements. I will be making some forward-looking statements, so I'll direct you to our SEC filings on our SEC website. First, I'll start on the third slide with our science. As I said, 2021 is the year to focus on Theravance Biopharma, and that focus begins with our approach to designing organ-selective medicines. The goal of our design is to maximize therapeutic index, to maximize the potential of the medicine, to deliver efficacy not possible without organ-selective design. And on the next slide, I highlight the steps of our organ-selective design process. It starts with the understanding of the disease. We want to modulate the disease, where it exists in the body to achieve an improvement in efficacy and to achieve that improvement in efficacy by getting the drug where it needs to be, the organ affected with the disease while keeping the drug away from the rest of the body, thereby limiting side effects and limiting toxicity. Our focus is on improving the therapeutic index of a given medicine to treat the disease better than was possible prior to the organ-selective approach. I'll focus on the next slide on 3 transformational pillars of value in 2021. The first, YUPELRI, a product design based on organ-selective principles that's currently in the market and being commercialized by both Theravance and Viatris. After YUPELRI, I'll focus on 3 programs emerging from our clinical pipeline and with critical clinical trial results this year: the Phase III data for ampreloxetine in symptomatic nOH; in our izencitinib program, an organ-selective medicine targeted at the gut, key results in that Phase IIb study in ulcerative colitis and Phase II results from our study in Crohn's; and third, TD-0903, an organ-selective JAK inhibitor focused on the lung. We expect data from our Phase II study in hyperinflammation in the lung caused by COVID-19 in the second quarter of the year. And I'll close the presentation with the third area for transformational impact: our changing financial profile. On the next slide, you'll see just the pipeline. And because of time limitations today, I'll only cover a few of our programs. But one can see that we've got a number of programs in development that have emerged from our internal research engine, and these programs are in all phases of development covering multiple organ systems. And first, on Slide 7 is the bridge to YUPELRI. Slide 8, YUPELRI is the only FDA-approved once-daily, nebulized long-acting muscarinic antagonist for the treatment of COPD. Why is nebulization important? Well, because almost 1 in 10 patients with COPD use nebulization treatment for maintenance therapy because these patients can't use either a dry powder inhaler or an MDI to deliver medicines into their lungs. We discovered YUPELRI using organ-selective principles, actually, more specifically lung-selective principles. And we developed YUPELRI with Viatris in partnership with their financial support. And through that partnership, we're now commercializing YUPELRI with Viatris whereby we leave -- we received 35% of the profits, and Viatris received 65%. We launched the product in early 2019. Quite simply, Viatris covers the outpatient market and we cover the hospitals. Well, how are we doing? Well, as you can see from these 2 slides, on the left-hand panel, you see the hospital and on the right-hand panel, you see the community. And a hospital is a small gear that drives a large gear of the community. Since the launch of the product, we've continued to gain share in both the hospital and the community and gained share in spite of a global respiratory pandemic that's faced us this past year. Many patients whose COPD has progressed go through the hospital as a site of care, and the hospital becomes a key point in which to switch patients from the inhaler that they had been using to YUPELRI and then follow the patient into the community post discharge. These steady complementary share gains, you can see the collaboration with -- between Viatris and the Theravance Biopharma sales teams working to synergize to find the very best patients for YUPELRI. Remember, the -- on the next slide, the Viatris/Theravance commercial partnership is a 65-35 profit split. But as an illustration, we've broken out 35% of the YUPELRI sales. And while we saw an effect in the pandemic on the second quarter, we've seen steady growth coming out of the second quarter and the post pandemic. And we expect strong sales growth because of the unique attributes of this product and the unique position that it occupies in the market. Now I'll move to the development pipeline. And the development pipeline on Slide 11, again, I'll highlight 3 programs: ampreloxetine, izencitinib and TD-0903. Ampreloxetine is a once-daily norepinephrine reuptake inhibitor in Phase III for a rare disease: symptomatic neurogenic orthostatic hypotension. And I'll just call this nOH for simplicity in the rest of the presentation. This is a devastating condition in some Parkinson's patients and nearly all multiple systems atrophy patients. Let's quickly look at the market size and the market need and how ampreloxetine could help these patients. On Slide 13, you see an outline of this. Parkinson's and MSA patients with this terrible condition are often confined to a wheelchair because of a risk of fall. An nOH patient may attempt to go from a sitting to standing position and become so dizzy that they fall, injuring themselves and potentially, caregivers. Avoiding these falls and the extreme dizziness is really the objective of therapy. Their blood pressure doesn't adjust as yours or mine might as they rise out of the chair. Their blood pressure, in fact, drops, leading to a loss of perfusion of blood in the brain causing the dizziness, and treating these patients is a challenge. Northera product currently in the market was approved under an accelerated approval mechanism and is selling almost $400 million a year in the U.S. Due to its short half-life and its mechanism of action, the nOH patient must take Northera multiple times a day, and the drug carries a side effect of supine hypertension. In other words, treating the low blood pressure in these patients actually causes an overshoot -- increases the blood pressure that overshoots normal and causing abnormally high blood pressure in some patients treated with Northera. We -- we're -- our objective is to bring a better therapy to these patients. The ampreloxetine mechanism should not carry this incremental risk because it blocks the reuptake of the drug, leaving -- by leveraging really the natural norepinephrine in the bloodstream, blocking, again, blocking its reuptake. And the half-life of ampreloxetine permits once-daily dosing. We're very excited about the opportunity with ampreloxetine. Let me show you the profile over time from data in our small Phase II trial. On the next slide, Slide 14, highlights this Phase II data. While small, the Phase II data described above did give us confidence to proceed into Phase III. Built to Y-axis is an accepted measure of dizziness in the field, OHSA #1. OHSA #1 is the primary end point in our Phase III. Although initially this study was designed to give patients only a single dose, but patients responded with a desire to continue to take the medicine. And we extended the study first to 4 weeks and then out to 24 weeks. As you could see, after therapy is initiated, OHSA #1 begins to drop through week 4. This is an important time point to remember. We extended our study out to 24 weeks because we wanted to understand the duration of effect. As you can see, the effect extended out to 24 weeks when we stopped giving the patients ampreloxetine. We did this to see what would happen. Without ampreloxetine, would the dizziness return to baseline in these patients, and the dizziness did return to baseline after week 24. We're excited again about the opportunity with ampreloxetine and hence, our innovative Phase III design highlighted on the next slide, in which we work with FDA to design an efficient program. With SEQUOIA on Slide 15, the Phase III study, the 4-week study, sought to replicate the first 4 weeks of our Phase II study, again with the primary end point being OHSA #1. We plan to have data in the third quarter of this year. Patients finishing SEQUOIA will roll over into REDWOOD. After a total of 20 weeks on therapy, patients will go through a randomized withdrawal, with half of the patients remaining on drug and the other half switched to placebo. Again, very excited about the potential of this medicine to meet an important patient need. It's a rare disease. This medicine can be commercialized by Theravance Biopharma in a very targeted way. It can deliver on what patients need, and it can deliver on what health systems need. Turning to the next slide, we'll focus on izencitinib. Izencitinib, formerly known as TD-1473 was designed as an organ-selective medicine. Because of the nature of the disease, a gut-selective potent inhibitor of the JAK enzyme pan-JAK inhibitor with activity against JAK1, JAK2, JAK3 and Tyk2. Well, how do we know izencitinib is gut-selective? Turning to the next slide, Slide 17, you'll see the PK profiles of izencitinib on the left panel compared to tofacitinib, a commercially available JAK inhibitor by Pfizer. You'll see that the systemic levels of tofacitinib are far above the levels seen with izencitinib. In fact, if you compare the dotted line with the 3 solid lines, again, each of the solid lines representing plasma concentrations of a dose of izen greater than tenfold lower than the systemic exposure of tofa. Now turn your attention to the right panel. The right panel shows concentrations in the colonic tissue of each dose of izen. Even though there's almost no drug in the bloodstream, the concentration of the drug in patients' colonic tissue is at or above the IC50, the concentration level necessary for efficacy based on a Pfizer peer-reviewed journal article. Izencitinib is where it needs to be to stop the inflammation in the colon. It's in the colon. Izencitinib is not in the plasma. It's not in the other compartments of the body where it would serve no purpose in treating inflammatory bowel disease. Now based on this data, I'll turn to the next slide and summarize our ongoing study -- ongoing studies. But our ongoing studies were -- came from data that we saw in the Phase Ib study, assuming -- where we observed numerical improvements in clinical outcomes, such as reduced rectal bleeding and higher rates of mucosal healing. I direct you to a peer-reviewed journal article in the Journal of Crohn's and Colitis Foundation that really describes the gut-selective nature of izencitinib. Based on this data, 2 decisions were made: one, to proceed with the development in inflammatory bowel disease; and two, to partner with a global leader in immunology, Janssen Biotech, to leverage their global platform in which they paid us $100 million upfront and $900 million in milestones as well as the profit share in the U.S. once commercialized and double-digit royalties outside the U.S. The Phase IIb portion of the IIb/3 RHEA ulcerative colitis study will read out the third quarter of 2021. The Phase II DIONE study in Crohn's disease will also read out in the third quarter. Izencitinib, a gut-selective pan-JAK inhibitor, targeting improvement of efficacy in IBD with a better safety profile designed into the molecule to focus the effect directly into the colonic tissue. Izencitinib is not delivered to the colonic tissue via the bloodstream. It's different than every other JAK inhibitor and every biologic used to treat IBD. That's gut selectivity. And let's turn to the design of lung-selective medicines now and highlight an ongoing program, TD-0903, a lung-selective JAK inhibitor to address severe hyperinflammation of the lung, both in acute hyperinflammatory states as well as hopefully, chronic disease. The pandemic provided a unique situation that permitted us to accelerate the development of 903 by about 18 months. And turning to Slide 20, we wanted to achieve targeted control of inflammation, control of the inflammation via the very potent JAK inhibitor and putting it directly into the lung, control not possible through systemic medicines because of dose-limiting toxicity. As you could see on the right-hand panel, 903 achieves much higher concentrations in the lung than plasma. And the long half-life in the lung permits QD dosing. We've progressed through Phase I and part 1 of the Phase II program. Highlighted on Slide 21, we're now in part 2 of the Phase II program, where we got 200 patients randomized between a 3-milligram dose plus standard of care of 0903 versus placebo plus standard of care. The timing of dosing of the inhaled JAK inhibitor is coordinated to begin when oxygenation drops early in the inflammatory stage of COVID. The lessons learned on the chemokines and cytokines in this study will inform overall our work in the inhaled JAK program. 903 is a lung-selective JAK inhibitor. Again, excited about the data reporting out in the second quarter of this year, treating the hyperinflammatory condition of COVID. And now I'll get to our changing financial profile, which is really comprised of YUPELRI growth and profitability, the progression of the development program as well as the continued growth of TRELEGY, which you see on the next slide or Slide 24, where TRELEGY marketed by GSK, we receive a royalty between effectively around 5.5% to 8.5%. TRELEGY has been quite successful marketed by GSK, marketed initially for COPD, but in the third quarter of last year, began to be marketed as -- after its approval for asthma in the asthma indication in the United States. This has been a great launch by GSK in COPD, and we expect a strong launch to continue in asthma. Part of the change, these royalties serving part of the changing financial profile of Theravance Biopharma. Now to close out, I want to highlight on Slide 25 why you should pay more attention to Theravance Biopharma in 2021. In the presentation today, I've highlighted 2 commercial products, which are strengthening our financial profile, YUPELRI and TRELEGY, both unique products in the respiratory segment, capable of maintaining and growing share in 2021 and beyond. YUPELRI, discovered and developed by Theravance using organ-selective principles and now marketed by both Viatris and Theravance. Our lung-selective JAK inhibitor, TD-0903, will have data from part 2 -- from the part 2 portion of our Phase II study that's ongoing. Again, this is studying patients who have hyperinflammation of the lung caused by COVID. And in the third quarter, critical quarter for the company, 3 important data releases: ampreloxetine in Phase III, the SEQUOIA study; izencitinib in Phase IIb for ulcerative colitis; and then izencitinib in the Phase II study for Crohn's disease, a very busy third quarter for the company. So Theravance Biopharma, if you look where our objective is to create transformational value for our stakeholders, really based on our innovative research platform, yielding organ-selective, molecularly designed medicines. We rely on our proven development and commercial expertise as well as strategic partnerships and a strong capital position to create value-driving catalysts that we're going to see in 2021. So with that, I thank you for the -- your attention. And now I'd like to bring in Andrew and Brett to answer questions as well as Anupam.

Thank you so much. Thanks for the presentation, Rick. And just a reminder to everybody on the webcast, if you would like me to ask the question on your behalf, please send it through the portal, and I'd be happy to do that. So Rick, maybe we'll start out with ampreloxetine here. You've got the SEQUOIA results that you mentioned. You talked about the unmet need. You talked about the clinical trial design. So walk us through what a win scenario is. And if that win scenario is achieved, would you move forward with a regulatory filing just based on SEQUOIA results and not have to wait for REDWOOD?

Yes. I think that's a -- it's a good question. Obviously, what we're looking for is a better improvement in OHSA #1 than what's been seen by Northera. We think that based on what we saw in the limited study in Phase II that, that's possible. And the SEQUOIA study is a relatively large study in this rare disease. And the improvement in OHSA #1 should prove quite meaningful. I'll turn it over to Brett to talk through our plans from approaching the regulators. Brett?

Thanks, Rick. And Anupam, Rick is absolutely right. Even showing benefits at 4 weeks will set us apart from what droxidopa was able to show. Their own package insert confirms that they were not able to detect clinical benefits beyond 2 weeks. So showing at least what droxidopa showed at 4 weeks would set us apart. Our expectation based on Phase II data is we'll see even greater effects. Now to your question about the Phase III studies, the FDA asked for both sets of data to be conducted, so the 4-week study as well as the REDWOOD study, which is our randomized withdrawal. But I think, as Rick rightly said, if we see compelling data, and particularly because SEQUOIA reads out before REDWOOD, it's certainly our intention to engage the FDA to share that information from the 4-week study. We've been really pleased with the collaborative approach that the FDA has taken in this program to date. And I think, certainly, if we see evidence of compelling clinical benefit, we'll want to share that with the FDA even before the REDWOOD study has read out, knowing that, that study is ongoing and could provide data even during the course of the subsequent review. So we'll certainly engage the regulators. Clearly, it depends on the data, but we won't wait on that second data set if the first one is compelling.

We've got a question in the e-mail portal here about can you give us an update on the TRELEGY/Innoviva sort of negotiations?

Sure. Right now, we're -- I'm assuming that's what's being referred to is we're currently in an arbitration process with Innoviva. Innoviva is the manager of the LLC that the TRELEGY royalties flow through then to end up at Theravance Biopharma. 85% of those royalties end up at Theravance Biopharma, and 15% of them end up at Innoviva. I can't go into a lot of detail because of the dispute that we have with Innoviva is covered by confidentiality provisions of the LLC agreement. But I can direct everyone to the LLC agreement, which is a public document. And we'll go through the arbitration in the first quarter and then likely have results from the arbitrator in the early second quarter of this year.

I got another e-mail question here. What are the annual sales of Northera? Would you expect a similar launch trajectory?

Sure. The annual sales of Northera are slightly over $400 million. I think this highlights, to a great degree, the unmet medical need of patients with symptomatic neurogenic orthostatic hypotension. Lundbeck has done a good job in developing the market and achieving a $400 million-plus run rate for the product. And we think a product with a better overall profile, one that can have, as Brett said, our plan is to have a greater effect on OHSA #1 or dizziness than Northera and to have because of the mechanism, a safer product, we think that we can increase the number of patients being treated with symptomatic nOH. And therefore, the $400 million as a proxy, we hope to do better than that with a better product.

Got it. Maybe I'll ask a question on izencitinib, did I say that right?

Perfect.

I've messed up a couple of the new ones. Just some pretty big readouts here coming up in Phase II for UC and Crohn's disease. Maybe for each of them kind of what are the competitive benchmarks we should be thinking about? And what would get you excited relative to those benchmarks?

Sure. Brett, do you want to take that, and then I'll close off with a couple of comments?

Yes, of course. So the benchmarks are in ulcerative colitis to be at least as good, if not better, than tofacitinib. Tofacitinib is a systemically active JAK inhibitor that has shown benefits in ulcerative colitis. The 10-milligram dose is shown in both Phase II and Phase III studies, its efficacy in ulcerative colitis. Unfortunately, that dose has had some post-marketing pressures applied to it because of concerns around systemic risk, including the risk of deep vein thrombosis and pulmonary embolism. So systemic JAK inhibitors like tofacitinib have been under some pressure to reduce their doses because of this limited therapeutic index. It's our expectation with our organ-selective approach that we'll be able to apply optimal therapeutic benefit, pushing up the efficacy as well as reducing any risk of systemic risk. So at least as good as tofacitinib in ulcerative colitis. And then in the Crohn's study, our frame of reference is against STELARA. STELARA is an anti-CD23 antibody produced, manufactured and promoted by Janssen. And because of our collaboration with Janssen, we've been able to draw on their experience and their expertise with STELARA in the design and powering of our own study. So the expectation here is to show something that's at least as good as STELARA, if not better.

I think Matt from the team, he's got a couple of questions on YUPELRI?

Yes. You guys provide some nice quantitative metrics on the YUPELRI launch. Just wondering if you can give more sort of a qualitative analysis, what you're kind of hearing from the front lines from medical liaisons and whatnot?

Sure. I'll start, and then I'll kick it over to Andrew for some additional thoughts. I think what's driving the share, whether it be in the hospital or in the community, is YUPELRI is a product that delivers on its promise. This is a product that enables patients to breathe better over a 24-hour period with COPD. It's a product for that one -- those 1 in 10 patients that use a nebulizer, and this product can deliver on that promise. Andrew?

Yes. Yes, indeed. The slide number that you're referring to, Matthew, with the numbers, so to speak, is number 10 and then obviously, the market share that Rick nicely covered on Slide 9. Back when we had our Q3 call, we, for the first time, were able to delineate the implied 35% share that Theravance has for net revenues. That was $13 million for Q3, which implied a run rate of about $150 million if you gross up the number. We look forward to providing greater granularity going forward and would welcome the team from JPMorgan and everyone listening to participate in our year-end 2020 call, where we will provide guidance on the business going forward. I will say qualitatively as well that YUPELRI is now profitable from a brand basis. And as Rick mentioned, the changing financial profile of Theravance Biopharma relies heavily on increased internal cash flow generation from both YUPELRI and TRELEGY. So that's -- those are 2 key dynamics that are cash flow generators in the business going forward as well as 2020 for investors should be viewed as effectively a peak year of investment in our portfolio. We have a significant Phase III investments around ampreloxetine and the Phase II program for izencitinib. So going forward, again, we'll be providing specific guidance in February. But that 2021 and beyond, we believe we'll be getting closer and closer to the hallowed ground of cash flow positivity on a corporate basis.

I didn't see it in the slides, but I did see TD-8236 in the pipeline chart, but not specific slides on kind of what's next for that program given the data that we saw towards the end of last year.

Sure. The 8236, that's the -- that is a molecule, again, lung-selective design product delivered through a dry powder inhaler, and the data that you're referring to are 2 different pieces of data. One of them is our Phase Ic data in moderate to severe asthmatic patients and then the lung allergen challenge data, the Phase II lung allergen challenge data. We saw quite a bit of biology in both of those studies, although disappointingly, 8236 did not protect against the lung allergen challenge. We continue to look at that data as we work to put together really an understanding of JAK inhibition in the lung with both 903 and 8236. Brett?

Thanks, Rick. And just to add to that, Anupam, we've been looking at the underlying biology, as Rick rightly said. So in both Phase I and Phase II, we've seen reproducibly a reduction in the nitric oxide that these patients put out with asthma. We know that nitric oxide is elevated when you have active inflammation. And we know that our product, 8236, reduces that back down to normal level. So it's clearly engaging on parts of the inflammation. As Rick rightly said, it unfortunately didn't ablate that late asthmatic response. And we're working through the sort of residual elements of the data which are coming through. We're looking at gene signature data, we're looking at cytokine data to understand where this may have escaped the pathway. One of the other elements that will be useful to us is 0903. This is the other inhaled JAK inhibitor that we're currently working on. We're actually testing this at the moment in hospitalized patients who have COVID-19. And although it's a different disease state, the insult on the lung also produces multiple cytokines. And understanding how those are blocked in this disease state will give us a broader understanding of the way which JAK inhibition works in the lung.

And I guess maybe final question here before wrapping up. What would give you confidence in sort of that program, 0903, in COVID? And where do these agents ultimately fit provided they produced some good data given what we've seen with therapeutic progress, vaccine progress?

Sure. Brett, you want to start and then I'll finish?

Sure. So I may answer the second part of your question first, and then I'll come back to what it is we're looking at. But just to describe, Anupam, that 0903 was an asset that we were progressing at the beginning of last year towards treating patients post lung transplant. Our objective there was to reduce the inflammation that occurs after lung transplant and leads ultimately to the rejection of a large number of the organs that are transplanted. So the damping of inflammation was one thing that we were committed to anyway. When COVID came along, we realized that this would provide an opportunity to look at acute lung injury. Now we're testing COVID-19, but actually the way that this mechanism works could just as easily be applied to other acute lung injury insults like SARS or MERS, parainfluenza, influenza, in fact, other forms of acute respiratory distress syndrome. So although we're looking at COVID right now, I wouldn't view it as an all-out investment just in COVID. We're really using COVID as an exemplar to trigger acute inflammation. And so we'll be able to extract data from this study not only to inform its value in COVID-19, but in other disease states where the ultimate cascade, the cytokine storm, is a fairly common denominator in all of these. As to the study itself, what are we looking at? Well, we're looking at the same end points that a number of these programs have been looking at. If you look at dexamethasone, remdesivir, izencitinib, they're all focused on ultimately, a 28-day end point. And at 28 days, the key question is, are the patients alive? And if they are, are they in hospital and on oxygen? Or are they at home and breathing normally? And that's a key end point that all of the programs are looking at. And indeed, that's the primary end point in our own study. We will be looking at other much more mechanistic end points like the amount of oxygen in the blood and so on. But there's a secondary to really the key clinical pragmatic question right now. Let me pass on to Rick who had other broad comments.

Yes. It's important, I think, to understand the context of both 8236 and 903. This is -- these are the really first JAK inhibitors that have been delivered into the lung. And we're pioneering sort of an understanding of how to deliver JAK inhibitors in the lung and the inflammation that the JAK inhibitors can control. This is why the understanding of the hyperinflammatory state caused by COVID-19 in the lung is so important because the cytokines that are being driven here, the chemokines that are being driven show up in a host of inflammatory states that are caused, as Brett said, by a whole host of different factors. And really putting the 903 learnings together with the 8236 learnings, particularly the 8236 learnings around gene expression and the gene signature data that we're working on, will give us a better understanding of how to progress broadly in inhaled JAK inhibition in multiple different diseases of the lung.

Got it. Okay. With that, I want to thank Rick and Andrew and Brett so much for a really productive session here. And I hope you guys have a great rest of the day and great rest of the conference.

Thank you, Anupam. Thank you very much.

Thank you.

Thanks, everyone.