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

Ladies and gentlemen, good afternoon. I'd like to welcome everyone to the Theravance Biopharma conference call. [Operator Instructions] Also, today's conference is being recorded. And now I'd like to turn the call over to Gail Cohen, Vice President, Corporate Communications. Please go ahead.

Good afternoon, and thank you for joining. As always, I remind you that this call will contain forward-looking statements that involve risks and uncertainties, including statements about our development pipeline, expected benefits of our products, anticipated timing of clinical trials, regulatory filings and expected financial results. Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in our filings with the SEC. Joining us are Rick Winningham, Chief Executive Officer; and Rick Graham, Senior Vice President, Development. Following our prepared remarks, we will open the call for questions and Andrew Hindman, Chief Financial Officer will join. Now I will hand the call to Rick Winningham.

Thanks, Gail. Today, we announced top line results from our Phase IIb dose-finding induction study of izencitinib in patients with ulcerative colitis. The study did not meet its primary endpoint change in total Mayo score at week 8 compared to placebo. Given the totality and consistency of a broad range of clinical histologic and biomarker data that we saw in the Ib program with only 4 weeks of treatment, albeit in a small number of patients, we had high expectations for the Phase IIb study. While we did see the same magnitude of change in rectal bleeding as early as week 2, we did not see a similar difference in rates of endoscopic healing between Izencitinib and placebo. We have been planning for success with the Phase IIb/III protocol in place and had hoped for a different outcome, most importantly for patients suffering from ulcerative colitis who desperately need novel treatment alternatives that use different approaches than currently approved therapies. Rick Graham, our Head of Development, will walk you through the top line results from the study. Rick?

Thanks, Rick. Starting on Slide 3, I'd like to remind everyone that the Phase IIb induction study is part of a seamless Phase IIb/III design. Patients that achieved clinical response during the dose-finding Phase IIb part of the study are transitioned into a Phase III maintenance study. Today, we will share top line results from the 8-week Phase IIb induction portion of the study. We'll focus on the primary endpoint, which was a change in total Mayo score at week 8, but will also share data on the key secondary endpoint of clinical remission by the adapted Mayo score as well as some of the exploratory end points. Skipping ahead to Slide 5. There was no statistically significant difference for the change in total Mayo score between any of the 3 doses of izencitinib and placebo. The table at the top of the slide shows the placebo-adjusted difference in total Mayo score at week 8, along with a 95% confidence interval in P value. The figure at the bottom of the slide shows the least square mean value by group, along with the 95% confidence interval. The graphic on the top right of the slide shows that the observed changes in total Mayo score were dose-dependent, but were not large enough to achieve statistical significance. Moving to Slide 6 and beginning with the figure on the left. You can see that there was no improvement in clinical remission by the adapted Mayo score. The next figure to the right shows a small dose-dependent improvement in clinical response, which was largely driven by an improvement in rectal bleeding. While there were slight imbalances in the baseline endoscopy scores, namely a higher proportion of baseline endoscopy score of 3 in the 200-milligram relative to the placebo group. The last 2 figures on the right indicate that there was no improvement in endoscopic remission or healing at any of the 3 doses of izencitinib. As shown on Slide 7, we did observe an improvement in rectal bleeding that was consistent with the results of our 4-week Phase Ib study published in the Journal of Crohn's and Colitis. The y-axis shows the proportion of patients with a greater than or equal to 1 point reduction in rectal bleeding from baseline. The changes in rectal bleeding in the Phase IIb induction study were observed as early as 2 weeks post initiation of treatment. Moving to Slide 8, and again, consistent with the results of our Phase Ib study, we saw a dose-dependent reduction in C-reactive protein, which was apparent by week 2 and persisted over the course of the 8-week treatment duration. Slide 9 provides a summary of the safety results. Izencitinib was well tolerated at all dose levels when administered once daily for 8 weeks. There were 13 serious adverse events that were well balanced amongst the groups. There were no deaths reported during the course of the study. Most of the treatment-emergent adverse events were mild or moderate, with exacerbation of ulcerative colitis as the most commonly reported event in the izencitinib groups. Overall, the rates of UC exacerbation were consistent with results from other studies. There was no safety signal observed in the study, including for adverse events of special interest. With regard to laboratory values, electrocardiogram parameters or vital signs, there were no remarkable changes. This assessment included liver and kidney function tests, creatinine phospokinase, lipid parameters and blood cell counts. Moving to Slide 10. To summarize, there was no statistically significant difference at any dose in the change in total Mayo score at week 8. There was no improvement in clinical remission by adapted Mayo score and no improvement in endoscopic healing. There were dose-dependent improvements observed and clinical response in C-reactive protein. However, the magnitude of these changes was relatively small. Izencitinib was well tolerated with no safety signal observed. The plasma exposure of izencitinib was low and consistent with our past studies in patients with ulcerative colitis and healthy volunteers. I'll now hand it back to Rick Winningham.

Thanks, Rick. Systemically active JAK inhibitors have been shown to be effective in treating inflammatory diseases, but continue to be challenged by dose-limiting side effects to prevent such therapies from being used at the optimal doses. Izencitinib was designed as an oral gut selective pan-JAK inhibitor with a strategic intent of solving the challenge of systemic JAK inhibition by restricting pan-JAK activity to the intestinal wall. Moving to Slide 11. In terms of what our current plan is for izencitinib, we'll be taking time to analyze the data to understand why izencitinib fell short of expectations in the 8-week Phase IIb dose-finding induction study on the primary endpoint of total Mayo score and didn't impact endoscopic healing at 8 weeks of treatment. Forthcoming ulcerative colitis data will include results from the previously blinded extended induction portion of the study and data from patients who rolled over into the maintenance study. These additional data points may help us understand the role of duration in clinical outcome. Enrollment is near complete for the Phase II Crohn's disease study, and we're on track to deliver the top line results on the week 12 endpoints of the study in late Q4 2021 or early Q1 2022. We will be keeping a close eye on expenses. And based on the ulcerative colitis results, the company will seek to minimize future expenses associated with the izencitinib program. Before closing, I want to acknowledge how grateful we are to the patients, their families, our research partners, the clinical investigators, our strategic partner, Janssen, and our team at Theravance Biopharma for their important contributions to this study. We look forward to further understanding of the data from this study, and I'll now hand the call back to the operator for questions.

[Operator Instructions] Our first question comes from Marc Frahm of Cowen and Company.

Obviously, we're displaying with the data results as well. quickly, is there a rationale for why maybe rectal bleeding, given the consistency of the data on that endpoint, might be more sensitive to local therapy than maybe other aspects of disease? And is this maybe a sign that you really need systemic inhibition for all to get the full power of a JAK inhibitor?

Well, I'm not sure about the need yet for systemic exposure, we today haven't proved that the doses that we studied in the 8-week Phase IIb study were enough to accomplish our objective. The rectal bleeding has been, as we said, relatively consistent between -- in terms of improvement, both in the Ib and the IIb, but I'll let Rick comment as well.

Yes. Thanks, Marc. I mean what we know from talking to KOLs as well as other studies with active drugs, the rectal bleeding is the most sensitive measure. So not surprising that we saw that consistently between the 2 studies. Unfortunately, we just didn't get over the hump here with longer treatment to have an impact on endoscopy.

Okay. And then with the extended induction period are all patients kept on the same drug? Or are people shifting around doses depending upon how they've been performing?

Rick?

Yes. So Marc, one thing -- thanks for the question. Before I answer, I just want to point out that during the conduct of the study, the team was firewall from knowing the proportion of patients that transitioned from the 8-week extended -- the 8-week induction into the extended induction to avoid the potential for bias. And the team currently remains blinded to the results of that study. But to answer your question, patients who ended up having a response at week 16, but not week 8, continue on their same dose if they were on active drug. If patients were on placebo and they had a response at week 16, they go into the 80-milligram dose group.

Okay. And then. Maybe for the other Rick, just following up on your comments about thinking about spend kind of in light of this data. I guess if you can provide any kind of granularity to kind of the guidepost of what may or may not be possible over the next kind of 3 to 6 months?

Yes, sure. I mean we -- obviously, we were anticipating a positive outcome to the study. So we had a number of plans in place to set up transition to a Phase III. We won't be implementing that. I'll let Andrew give more specific guidance.

Yes, Marc, as we had spoken about as recently as our Q2 call and certainly on the roadshow for our June offering, we were planning for success on izencitinib to rapidly initiate the Phase III program in the remainder of 2021. So we'll provide greater detail and granularity on the Q3 call in November. And at this point, what we can say is that we will be minimizing future expenses associated with izencitinib. We do have a number of elements in the program ongoing. So the impact to our guidance for 2021 is likely to be negligible or not that great. It's really about the direction of the company for 2022 and beyond, which is where we'll obviously be doing a lot of work internally to give guidance to The Street and all of our constituencies going forward. But don't have that nailed down today.

Our expectation continues to be reading out the ampreloxetine study before the end of the third quarter and will likely provide, as Andrew said, a greater level of granularity after that.

Our next question comes from Douglas Tsao of H.C. Wainwright.

So just as a starting point, I'm just curious when you look at -- obviously, the clinical results were varied relative to the Ib data. I'm just curious when you look at some of the secondary endpoints and sort of histological and lab readings, was there anything consistency between the 2 studies? Or was this result very divergent?

Rick?

Yes, sure. Thanks for the question. So in fact, there was a lot of consistency between our Phase Ib results and the Phase IIb induction top line data that we reported today. So specifically, we did see the changes in CRP that were consistent between the 2 studies. With regard to rectal bleeding, we saw that as early as 2 weeks in both experiments as well. And even with regard to endoscopy, we saw the similar magnitude and treatment effect. The big difference there though was in our Phase Ib study, there was no change in endoscopy. So in other words, the endoscopy score was 0 for the placebo group. So that was the difference. With regard to other biomarkers and measures, we have not looked at histology yet from the Phase IIb we haven't looked at some of the JAK pathway biomarkers from this study because we just reported top line results today.

Okay. And I guess as a follow-up in a big picture. I mean, I know obviously, we also saw sort of disappointing results with 8236. I'm just curious, is there sort of a need to sort of rethink or sort of any takeaways or sort of ways that The Street should -- investors, we can sort of think through sort of the utility of the sort of gut-selective approach? And are there sort of maybe perhaps indications that are better suited for this? And do you think their kind of -- I know it's early, but sort of initial takeaways on what sort of better avenues or more promising targets.

Yes, I think that's a good question. I think what we know now is that 8 weeks of induction therapy at the doses that we tested here for the gut, don't push us over the edge with regard to endoscopic healing. And as Rick sort of outlined, we expected 4 weeks of additional treatment to have some greater effect. I think the intestinal track or the gut is very different than the lung. So I think we'll probably keep our narrower observations to the individual organ and the exposure that we're able to achieve. I think, as Rick said, we've got quite a bit more data coming here that we'll need to analyze on the izencitinib program to understand what happened really to concentrations over time in the gut wall and in fact, to see whether there's a potential for duration to make any difference whatsoever. Rick?

Yes, really nothing to add to that response.

Our next question comes from Anupam Rama of JPMorgan.

I was wondering if there was any thought to -- did you pick the right high dose? Because I remember in the Phase Ib study, you went all the way up to 270 mg, I believe. And I'm just wondering if maybe perhaps given the results we saw today, that may be less on potency and efficacy on the table. If you had any thoughts about that? And then number two, given sort of your current cash position, have you considered monetizing the TRELEGY royalty and/or YUPELRI JV, given the last couple of sort of pipeline setbacks.

Andrew, you want to take the cash first and then Rick will talk about dose.

Sure. Well, we ended Q2 at $265 million on the balance sheet. That takes us well into 2023 even without a Janssen opt-in on izencitinib. And, Anupam, your question is very well taken. We're looking at flexing all aspects of our capital structure in order to make sure that we can keep the company fully funded and prioritize capital allocation to the programs with the highest risk-adjusted probability of success. And we will continue to do that. And especially in the light of the recent data here on izencitinib, we'll be conducting a full portfolio review to make sure that we can invest with the best path forward.

Rick, on dose?

Yes. Sure. Anupam, thanks for the question. So yes, a very fair question with regard to dose. I mean, remember for a gut selective JAK here and knowing the safety liabilities with the JAK inhibitors in general, for us, it was really important to try to thread that needle with regard to maximizing efficacy but minimizing systemic exposure. And clearly, based on these results, we fell short on efficacy. Safety looked very good, but we fell short on efficacy. So yes, a fair question. I mean 200-milligram just may not be enough to do it. And like Rick said, we're also going to be looking at the duration because we have the additional 8 weeks that we can look at an extended induction, and we'll have some data from patients that entered the maintenance study as well.

Our next question comes from Liisa Bayko of Evercore ISI.