Ascendis Pharma A/S (NASDAQ:ASND) Q3 2023 Earnings Call Transcript November 7, 2023
Ascendis Pharma A/S misses on earnings expectations. Reported EPS is $-2.88 EPS, expectations were $-2.63.
Operator: Hello, and welcome to Ascendis Pharma Third Quarter 2023 Earnings Conference Call and Webcast. Following the prepared remarks, there will be a question-and-answer period, instructions will be given at that time. I would now like to hand the conference over to Tim Lee, Investor Relations of Ascendis Pharma A/S. Sir, you may begin.
Timothy Lee: Thank you, operator, and thank you, everyone, for joining our third quarter 2023 financial results conference call. I’m Tim Lee, Senior Director, Investor Relations of Ascendis Pharma. Joining me on the call today is Jan Mikkelsen, President and Chief Executive Officer; Scott Smith, Executive Vice President and Chief Financial Officer; and Dr. Stina Singel, Executive Vice President and Head of Clinical Development Oncology. Before we begin, I would like to remind you that this conference call will contain forward-looking statements that are intended to be covered under the safe harbor provided by the Private Securities Litigation Reform Act. Examples of such statements may include, but are not limited to, our U.S. commercialization and continued development of SKYTROFA for the U.S. and European market, as well as our expectations for 2023 SKYTROFA revenue, the expected timing of the approval and launch of TransCon PTH in the U.S. and the EU.
Our pipeline candidates and our expectations with respect to their continued progress and potential commercialization our strategic plans, our goals regarding our clinical pipeline, including the timing of clinical results, our ongoing and planned regulatory filings and our expectations regarding the timing and the results of regulatory decisions, our expansion into new therapeutic areas, our progress toward Vision 3×3 and our ability to become cash flow positive and create a sustainable, profitable and leading global pharma company. These statements are based on information that is available to us today. Actual results and events can differ materially from those in our forward-looking statements, and you should not place undue reliance on these statements.
We assume no obligation to update these statements as circumstances change that has changed except as required by law. For additional information concerning the factors that can cause actual results to differ materially, please see our forward-looking statements section in today’s press release and the risk factors section of our most recent annual report on Form 20-F filed February 16, 2023. TransCon Human Growth Hormone or TransCon hGH is approved in the U.S. by FDA and the EU has received MAA authorization from the European Commission for the treatment of pediatric growth hormone deficiency. Otherwise, please note that our product candidates are investigational and not approved for commercial use. As investigational products, the safety and effectiveness of the product candidates have not been reviewed or approved by any regulatory agency.
None of the statements during the conference call regarding our product candidates shall be viewed as promotional. On the call today, we will discuss our third quarter 2023 financial results and will provide further business updates. Following some prepared remarks, we will then open up the call for questions. And with that, let me hand it over to Jan.
Jan Mikkelsen: Thanks, Tim. Good afternoon, everyone. Our dedication to the values of patients, science and passion remains the foundation for us to create long-term value for all stakeholders. In the U.S., we achieved market value leadership for SKYTROFA within two-years by sticking to our belief that a premium product deserves a premium price. Following the same strategy in German, we launched SKYTROFA in September and also expect to also launch TransCon PTH in January 2024 if approved by the European Commission in November. In select other European countries, we will use the same direct sales model to launch our portfolio as we have in the U.S. and Germany. We call this EU Direct. In other markets, we will commercialize our portfolio to sales and distribution partners who are local experts in rare diseases.
We refer to this as international indirect markets. In Japan, we intend to partner our endocrinology rare disease products. We believe we have the organization and the manufacturing capacity to support expected launches of three independent endocrinology rare disease products by 2025. Driving further growth, we aim to continue to work to create highly differentiated TransCon product candidates, expanding into additional endocrinology rare disease indication. Last quarter, we announced the expansion of our TransCon platform, a new type of carrier platform specifically designed to support new product opportunities in diseases with large patient population. I look forward to sharing more information with you about this in the near future. Let me provide more details on each of our programs.
For TransCon commercialized at SKYTROFA. We reported strong revenue growth, finished the third quarter with €47 million, including initial revenue from Germany. We now expect full-year 2023 SKYTROFA revenue to be between €170 million and €175 million. To drive differentiation and market leadership, we continue to build out the times and data behind SKYTROFA. We recently announced results from our long-term Extension trial showing that the majority of patients treated with TransCon growth mix or exceeded average parental height at the time of their treatment completeness or last visit. The data also demonstrated the long-term safety of SKYTROFA in patients treated up to six years. In adult growth hormone deficiency, we expect to share top-line results during the fourth quarter from our global Phase III foresight trial.
Today, we estimate less than 4% of adult patients suspected of having growth hormone deficiency are treated with growth hormone, making this an opportunity to both expand SKYTROFA labeled and expands the overall growth hormone market. In addition, we plan to launch SKYTROFA in certain markets in our international indirect region with initial revenue contribution expected to begin in 2024. Turning to TransCon PTA. In the European Union, EMEA, CHMP adopted a positive opinion in September. Recommending approval of TransCon PTAs and replacement therapy for adults with chronic hypoparathyroidism. We expect the European Commission final decision on our marketing authorization application this month. If approved, we plan to launch TransCon PTH in Germany in January 2024.
In Germany alone, while the annual cost for currently approved PTH treatment is around per patient, our target population is 22,000 chronic hypoparath patients out of the overall patient population of around 17,000 patients. Our status team in Germany that launched it is ready to launch TransCon PTA if approved. And EU approval we will also provide the basis for marketing authorization and initiation of commercial activities for TransCon PTAs in addition, markets in our international market segment where we expect through launch starting in 2024. And further launches in Europe direct in 2025, following standard price and reimbursement pathways. By following our algorithm for product innovation, we will have taken transport PTAs from idea to expected regulatory approval all in about seven years.
In the U.S., all documents have been finalized and we expect to resubmit the NDA for TransCon PTA for the hypoparathyroidism within a week. We expect to know where the FDA has accepted our risk submitted NDA with 30 days from the risk submission date. If accepted, we expect the FDA to notify us at the time where the resubmission is class I or class II and provide a new PDUFA date. Besides this information, we will not comment further on the resubmission. As this guide over, we continue to build of the science and data behind TransCon PTH. In September, we announced a post hoc analysis of Phase II and Phase III data, demonstrating substantial increase in estimated DFR in adults with hypothyroidism treated with TransCon PTH. These data suggest that treatment with TransCon PTH can reverse impaired kidney function in patients with hypoparathyroidism.
Turning to TransCon CNP, this is our third endocrine rare disease product candidate. Following our end of Phase II meeting with U.S. at EU regulatory agencies, we have lined on the pathway to potential regulatory approvals in the U.S. and EU. We expect topline results from our Phase III approach trial with completed enrollment in Q3 in the second half of 2024. We continue to have strong patient retention in our trials. And during the fourth quarter, we will provide an update and share with you one year follow-up data with the open label extension part portion of accomplished. We believe the strong retention in our clinical trial is a result of additional benefit of TransCon CNP in addition to height improvements. As we have further evaluated the science behind achondroplasia and our own data, we now believe that achondroplasia is a disease of both skeletal growth and muscle function and that the continuous exposure to the CNP enabled by TransCon CNP may be able to address both elements.
At our upcoming update, we will disclose this additional potential benefit of TransCon CNP in addition to height. If we are right that is correct that achondroplasia is emphasis for both skeletal growth and muscle function. This means that TransCon CNP could potentially offer value for adults living with achondroplasia, who experience muscle fatigue on all of medical and quality of life impacts. That may be potentially addressable with constant exposure to CNP. We are in a constructive dialogue with later on how best to evaluate the pretended impact on TransCon CNP on comorbidity, quality of life and other important aspects of achondroplasia, in addition to height to support an indication for treatment of achondroplasia. While our key focus in the treatment of achondroplasia is to address the co morbidities that are associated with this disease.
We believe an even more effective way to address height if needed or desired could be CNP in combination with Protego. We believe that this combination therapy may provide greater analyte hypervelocity and CMP alone. And at the same time address the comorbidity of achondroplasia. Our previously presented preclinical data demonstrate the attitude effect of combining TransCon CNP and growth hormone in animal models. Consistent with stimulation of different growth promoting signal pathway in the growth rate. Supporting this idea, a group out of Osaka University in Japan presented a post during last month ASBMR, showing that a last group of 41 achondroplasia treated with [indiscernible] demonstrated first year annualized high velocity of around 7.4 centimeters with sustained growth benefit to five-years of treatment.
To export this concept, we plan to submit an IND amendment or similar to initiate a combination trial of TransCon CFP and SKYTROFA by the end of this year. Moving to oncology, for TransCon IL-2 beta/gamma, we recently reported new data from the IL-Believe trial of TransCon IL-2 beta/gamma as monotherapy and in combination with chemo at ESMO. These data confirm that TransCon IL-2 beta/gamma dosed every three weeks demonstrated clinical activity as monotherapy or combination therapy of course late line heavily preceded patient in multiple tumor types. Further strengthening our confidence in its best in class potential. In two out of three small lung cancer patient treated with combination therapy in the trial and confirm partial response and unconfirmed complete response in the first tumor assessment of an ongoing patient were observed.
We believe these data are intriguing despite the very small sample size considering the treatment history of the responders and the substantial on with medical needs. Enrollment is ongoing in the indication specific cohort of IL-Believe. Where we are now enrolling 20 to 40 patients in each indication, and we expect interim results in the second half of 2024. In summary, with growing revenue, by showing up our pipeline, we continue to progress to our goal of becoming profitable. With our Vision 3×3 on track to be achieved in 2025, we are preparing for our next vision for growth to 2030. In our next vision, which I look forward to sharing with you at the beginning of 2024, we will work to lever our fully integrated capability to become the leading endocrinology rare disease company.
Taking product from contact out to patients on a global scale with a highly productive organization. In other areas where we believe TransCon can deliver best in class product candidate as we have been oncology ophthalmology. We plan to pursue partnership or business model to take out our product candidate to late date development to commercialization. Such future partnership in oncology and ophthalmology along with the maturation of our endocrinology program should result in lower expenses in the coming years. By staying focused on achieving valued market leadership globally for our endocrinology rare disease portfolio. We believe Ascendis will deliver sustainable value over the long-term for patients, shareholders and society. I will now turn the call over to Scott for a financial review before we open for questions.
Scott Smith: Thank you, Jan. As Jan noted, we believe we are making significant progress towards our goal of becoming cash flow positive with SKYTROFA revenue growing is in each quarter combined with diligent expense control. I will touch on some key points surrounding our financial results. But for further details please refer to our Form 6-K filed today. Total revenue for the third quarter of 2023 was €48 million. SKYTROFA revenue for the third quarter was €47 million compared to €35.9 million reported in the second quarter and €12.3 million reported in the same period last year. The sequential growth in Skytrophy revenue was primarily driven by increased demand in the U.S. with minimal foreign currency impact of around €100 million.
Exiting the third quarter, we estimate we have low double-digit penetration into the U.S. pediatric GHD patient population, and we see a large opportunity in front of us to grow our patient share in pediatric GHD, which we estimate to be only half of the addressable U.S. growth hormone market. Turning to expenses, R&D costs in the third quarter totaled €111.4 million, up 6% sequentially from the second quarter of 2023, primarily driven by higher endocrine rare disease related costs, including clinical expansion and PPQ manufacturing costs related to TransCon CNP partially offset by lower oncology related costs. SG&A expenses declined 9% sequentially to million compared to the second quarter of 2023 primarily related to lower commercial and G&A external costs.
Total operating expenses were €175 million for the third quarter less sequentially from the second quarter of 2023. Overall, our operating loss declined sequentially by 5% to €134 million for the third quarter from €141 million in the second quarter of 2023. We ended the third quarter with cash, cash equivalents and marketable securities totaling €455 million, including proceeds from the previously announced $150 million royalty funding agreement. Looking ahead with continued momentum for SKYTROFA in the U.S., we are increasing full-year 2023 SKYTROFA revenue expectations to €170 million to €175 million. Let me now also provide a review of selected key program milestones. For TransCon Growth Hormone, we expect to report top line data from the global Phase III Foresight trial in adult GHD in December.
Potentially opening an opportunity to both expand SKYTROFA’s label as well as expand the overall growth hormone set. For TransCon PTH, as Jen noted, we are on track to resubmit our NDA for TransCon PTH for adults with hypoparathyroidism before mid November. We expect a European Commission decision on TransCon PTH this month. If approved, we plan TransCon PTH as our second product launch in Germany starting in January 2024. For TransCon CNP, we expect to submit and IND amendment or similar for a new clinical trial evaluating TransCon CNP in combination with TransCon Growth Hormone in children with achondroplasia. We plan to share follow-up data from the open label extension of our Phase II ACcomplisH trial later this quarter. And as a reminder, we expect to report top-line results from ApproaCH, our Phase III trial of TransCon CNP, in the second half of 2024.
Within our oncology therapeutic area, enrollment continues in the Phase II portion of our IL-Believe trial of TransCon IL-2 beta/gamma in indication specific cohorts. We expect initial data from indication specific cohorts in the second half of 2024. With that, operator, we are now ready to take questions.
Operator: [Operator Instructions] Our first question comes from Jessica Fye with JPMorgan.
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Q&A Session
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Unidentified Analyst: This is Nick on for Jess. Can you talk to us a bit more around your strategy with the oncology and ophthalmology programs and kind of what that means in terms of OpEx over the near-term and maybe more so over long-term and how like to change?
Jan Mikkelsen: The question related to what do we do as a company with a very, very strong platform technology that basic have application in yearly every therapeutic area. We at Ascendis will be focused on rare disease endocrinology, this is where we will be integrated from idea state up to the patient where we are building up all the efforts. We also know that the TransCon technology would provide paradigm shift product, best-in-class product outside our own focus area. And we also feel that we need really to be part of that value creation also to the benefit of the patients. We will have different business models that will fit exactly to each single therapeutics. Some areas we will basic out licensing on an early stage, where the feeling is that it is the optimal thing, it could be potentially large patient indications where we basically never can succeed with running all the big clinical trial.
It can be areas like ophthalmology where we maturate the two states and then we change to give it out either to a spin out or an out licensing or a combination of both where we feel that an independent management team really with the focus on, for example, ophthalmology really, really can mature. It is not the same thing Ascendis not really continually be involved. We will still provide service to this entity, we will be part of the upside both related to royalties, milestone payment and equity. In other areas like oncology where we feel that we really can make issue is different from the patient. We made an investment in it and we will continue to make an investment into it until we see that we can get the full value on this and when I see how we progressive with this oncology effort, I’m really, really proud about it.
Unidentified Analyst: And maybe can you help set the stage for the update from the Phase II accomplish trial and what you hope to see when you have all the patients on 800 micrograms for the full-year?
Jan Mikkelsen: Yes. What we hope to do that we will provide you with the element that we really believe it is essential for the patients. We will provide you with the sustainability of how we keep the positive benefit on growth but we’ve also come in and trying to give you the explanation both from a scientific base but also true data how we feel that we are providing a benefit to the treatment besides just providing the analyzed height velocity. We are 100% in the belief that the key element for us is to address the co-morbidities associated with this disease and that is our focus on that. And this is why we believe that annualized high velocity is an element, if it is desired and if the patient really want to have it, that can always go into perhaps the most powerful combination of treatment is CMP to move the brake growth hormone to speed up the accelerator and you basically will have what we call the wanted, desire, analyze, high velocity compared to the patient’s needs and desire.
Operator: The next question comes from Paul Choi with Goldman Sachs.
Paul Choi: My first question is just with regard to TransCon PTH positioning in the major European markets, specifically, Germany and just how you think position will be particularly given surgical complication rates there and then just the pace of reimbursement access? And then I had a follow-up question.
