Ipsen SA

PAR:IPN

Earnings Call Transcript 2018-Q1

[Operator]

Welcome to the Ipsen Q1 Sales Results. Your host today is David Meek. Please go ahead, sir.

[David D. Meek, CEO & Director]

Thank you very much. Good morning. Good afternoon, and thank you for joining us on the Ipsen First Quarter 2018 Sales Conference Call. Aymeric and I are very pleased to share with you the outstanding sales results for Q1.The momentum in the business is strong, and Ipsen is set up for another excellent year. And before we get started, here is our routine safe harbor statement.Group sales grew plus 23.1% at constant exchange rates in the first quarter of 2018. The Specialty Care sales growth was 27.4%, driven by continued Somatuline growth and the contribution from the launches of Cabometyx and Onivyde.Our Consumer Healthcare business back to growth strategy is confirmed at plus 6.4% growth adjusted for the new Etiasa set-up, which was -- with the set-up, we have a 0.8% growth as reported.We're on track with our 2018 financial objectives to grow sales greater than 16% and exceed a core operating margin of greater than 28% of net sales.And with these excellent results, we're well on track to deliver our 2018 financial objectives.The next slide, on Cabometyx. Turning now to our pipeline. We're continuing to make strong progress advancing our key programs.For Cabometyx, we submitted the regulatory filing to the EMA for second-line HCC based on the positive results of the Phase III CELESTIAL trial and expect to receive a decision by the end of 2018 or early 2019.We also received a positive CHMP opinion for first-line renal cell cancer and expect a decision from the EMA in the current quarter.With these milestones, we're quickly expanding the market potential for Cabometyx and strengthening our competitive positioning in several specialty oncology markets. And more broadly, we are focused on accelerating other key pipeline programs and externally sourcing new assets to build an innovative and sustainable pipeline.Successful business development continues to be a priority for the company and is also one of my main objectives.Now for an update on our 2 oncology launches. Starting with Cabometyx. The launch is progressing well, and we achieved quarter-over-quarter growth of 37%, positively impacted by inventory buildup in newly reimbursed market territories.We currently have reimbursement established in 18 countries, and we'll continue to launch in additional territories in 2018, including Canada, Australia and other European countries.We are seeing increase in second-line patient share in all countries as well as increasing awareness and value recognition. We continue to believe Cabometyx offers an innovative and valuable treatment options in the RCC treatment paradigm and that it will have a place in the evolving competitive environment in both first and second-line RCC treatment.Turning to Onivyde, we achieved sales growth of 28% quarter-over-quarter, reflecting the progressive sales ramp in the U.S. and growing sales to our European partner. There is growing awareness and support among oncologists and key opinion leaders in the major U.S. treatment centers, which is translating into a higher number of prescribing accounts as well as key institutions on formularies.We are also steadily increasing the number of treatment cycles in both the second and third line.The U.S. Oncology commercial team is in -- fully in place, and they're energized. And we're as optimistic as ever about the potential of Onivyde. And now let me turn the call over to Aymeric to provide an overview of the first quarter sales. Aymeric?

[Aymeric Le Chatelier, Executive VP & CFO]

Thank you, David. So I'm very pleased to present you more in detail our excellent first quarter sales performance.As you've seen, we achieved a good sales growth of 23.1% at constant exchange rate, which was really driven by our Specialty Care business with a growth of 27.4%. This growth reflects the outstanding performance of Somatuline of 25%, including 40% growth in North America, driven by continued volume and market share uptake and also the increasing contribution of Cabometyx and Onivyde.Note that Onivyde sales are only consolidated since Q2 of last year or 2017. But also, it was -- noticing that Decapeptyl had a strong quarter growth with some nonrecurring performance from certain country, but also a strong volume growth in lots of European G5 country and also in China.Dysport also continued to perform very well globally, both in therapeutic and aesthetic, despite the exceptional high level of shipment that we get from Galderma in the first quarter of 2017, which is impacting the deadline.Our Consumer Healthcare business, as David said, has a steady growth at 6.4% if you adjust for the new Etiasa contractual set-up of 0.8% and adjusting for this new set-up.Just a few words on that new set-up, due to a moderated change in the distribution structure, starting in the third quarter of 2017, the accounting for the product shift from the sales line to the other revenue and cost of goods line. This is strictly an accounting technicality with no impact on the commercial performance of post-Etiasa in China and our Consumer Healthcare business.Regarding Smecta, Q1 sales were negatively impacted by inventory movement, but the local sales performance of Smecta is growing nicely in the 3 main country, France, Russia and China.Last but not least, just mentioning that first quarter was significantly impacted by a notable impact of foreign exchange. We had a negative minus 6.6% impact due to the appreciation of the euro against most of the foreign currency, and especially the U.S. dollar. This is fully in line with our expectation, and we are confirming based on the current exchange rate, the 4% negative impact that we expect on sales and the limited impact on the core operating margin for 2018.Now it's time to open the call for questions. David and I are ready to answer in more detail any question on our first quarter performance update.Operator, can you please take the first question?

[Operator]

[Operator Instructions] And the first question of today comes from the line of Sarita Kapila from JPMorgan.

[Sarita Kapila]

I was wondering, could you give us a little bit more detail on the amounts of stocking in Cabometyx and ahead of the launches and rollouts? And maybe give us a bit of an idea into the growth rates within Germany and the UK? And secondly, the question is on Somatuline. Could you give us the breakdown between the U.S. and ex U.S. sales and more idea about the growth rates in these regions?

[David D. Meek, CEO & Director]

Aymeric, do you want to handle that, please?

[Aymeric Le Chatelier, Executive VP & CFO]

Yes. So your first question on Cabometyx. What we say is that clearly, the product has been performing very well in Q1, but as you know, we line up 18 country in the launch mode. So some of the performance really impacted by the inventory that we have to put in all the key country. We are not able to provide the breakdown of how much of that is really related to inventory, how much is really the performance. As you know, there is many country now in the launch mode, and it's very difficult to track. Clearly, your question, also, about the UK is performing very well. We are also very happy with the performance in France. And Germany continue to gain market share in second line and also in third line. Regarding Onivyde, we are not providing the splits between U.S. and ex U.S, especially with regard to our partner Shire. But clearly, the U.S. business continue to grow nicely quarter-over-quarter as expected, and we're going to ramp up during the year 2018. And Shire is also in the full launch mode in many more country. And as you know, we are booking also some limited sales due to the wholesale pricing agreement that we have with Shire in order to supply the products for the European launch.

[Operator]

Ladies and gentlemen, the next question comes from the line of Emily Field from Barclays.

[Emily Field, Research Analyst]

Yes. So just on Somatuline, Mylan confirmed at their recent Investor Day that they are pretty far advanced in a generic long-acting Sandostatin. And I was just wondering if you could give an update on how you see the landscape in terms of generics in development? And what you think the impact would be on Somatuline, particularly with newly diagnosed patients?

[David D. Meek, CEO & Director]

Sure. It's David. I'll answer that question, and thanks a lot for the question, Emily. We don't see any near-term 2018 generic drugs for Sandostatin, including for Mylan. I think what they shared is they have a program in development. No time lines were given, but we do not see that as a near-term generic threat for Somatuline. What we do know is the manufacturing process is extremely complex. It requires a stand-alone facility. And we also know NET is a very slow-progressing disease. And Sandostatin and Somatuline are not interchangeable. And so generic would have to build its patient pool on newly diagnosed patients. And it would have to compete with a product that has differentiated benefits. It's one of the reasons Somatuline market share is growing month-over-month, not just in the U.S., but in the major markets too. So we don't see any near-term threats with this -- with the generic Sandostatin LAR at this point. Does that answer your question?

[Emily Field, Research Analyst]

Yes.

[Operator]

The next question of today comes from the line of Matthew Weston from Crédit Suisse.

[Matthew Weston, Managing Director and Co]

Two questions, if I can, please. One coming back to the Onivyde performance. I can understand that you don't want to give the U.S. ex U.S. split. But can you, at least, give us an understanding as to whether or not the contribution from ex U.S. was exceptionally large as Shire rolls out and requires stocking? Or should we assume that the ex U.S. contribution is at a sustainable level and this is a reasonable base for future quarterly growth? And then secondly, a question on Somatuline. We have now seen Novartis launched Lutathera albeit only across a modest number of accounts. I know it's very early, but I wondered if you could give us your experience in terms of whether or not there is any impact on how long patients are staying on Somatuline? Or whether or not you're seeing patients who are relapsing stay on Somatuline and add Lutathera or whether that's an opportunity to where they switch to Sandostatin LAR?

[David D. Meek, CEO & Director]

Great. Thanks a lot for the couple of questions. I'll pass the Onivyde question to Aymeric, and he can begin with that and jump in and then I'll tackle the Lutathera question. Aymeric?

[Aymeric Le Chatelier, Executive VP & CFO]

Yes, David. So on the Onivyde, so I confirm that the growth, quarter-over-quarter from Q4 to Q1, has been impacting by larger amount of sales to Shire, and this is why we were making these comments. But yes, we are expecting the contribution from Shire to remain at least at that level. And we expect Shire to be successful in its launch in Europe, which will even further support the growth of the product and then our sales at wholesale price to Shire. Just as I remember, we are not making a lot of profit, as you know, as there is a back-to-back arrangement with PharmaEngine in terms of royalty that we pay back to PharmaEngine. So this is mainly impacting our sales, I mean the ex U.S. from Shire, but not our profitability.

[David D. Meek, CEO & Director]

Yes. And I would add that what we're seeing in the U.S. was continuously increasing demand in the U.S. month-over-month, which we're quite pleased with. We continue to add new accounts every month. We're adding about 100 new Onivyde order in hospitals and clinics. So we're seeing nice weekly demand increase as well. And also our source of business is primarily in second line and third line metastatic pancreatic cancer. So we're seeing nice trends in the U.S. with the launch of Onivyde. Now let me tackle Lutathera question. And I'd say, first of all, it's a little too early. Lutathera was approved at the end of February in the U.S. though they're very new into the launch period. But some of your questions about how long patients are on therapy for NET was, patients were on therapy for NET a long time, for many years actually. And Lutathera is for patients that have progressed -- their NET has progressed based on clinical symptoms. So this could be up for a couple of years, the patient could be offered Lutathera. What's also important to remember, I'm actually going to have a conference call on this in a couple of weeks, deep dive just on the SSA market and Lutathera and the impact there. So please, you'll be invited to that. But what we do know is SSAs will remain back home therapy, so even if the patient does progress while on an SSA, such a Somatuline, if a patient was, if Lutathera was added to that patient, the SSA may or may not come off and -- but once the Lutathera cycles are complete, the patient will go back on an SSA. And so this actually extends the tale of the patient staying on somatostatin analog, such as Somatuline. And where Somatuline is really driving our market share is the clinical profile, the progression-free survival data that we have in the label. We're the only SSA with PFS data, symptom control data and a better device. And that's why we don't want to share. You asked about patients switching, could they switch from Somatuline to Sandostatin LAR. That could happen, but it also happens the other way. Actually, a pretty good source of our business is patients switching from Sandostatin LAR to Somatuline. So they don't just have new patient starts. And if a patient does go on Lutathera, while they're on SSA, physicians are telling us they probably will not switch the SSA. They would just add Lutathera and then probably just go back on the same SSA the patient was on. But if they did switch them, there'll be switches from Sandostatin LAR and there'd be switches from Somatuline as well. Does that help?

[Matthew Weston, Managing Director and Co]

That does.

[Operator]

The next question of today comes from Jean-Jacques Le Fur.

[Jean-Jacques Le Fur]

Just coming back on the Lutathera product. If I look at the label in the U.S, Lutathera is frontline therapy, I would say. There is no indication of usage after failure of any SSA. So just to understand what you just told, David, about this -- the story here. So how do you view in the future the fact that Lutathera may be prescribed in a first-line therapy? And second question is on Onivyde. How do you view the transfer of Onivyde from the Servier in the future? Shire would be a good candidate to promote the product in the -- in Europe, sorry. So how do you view that with Servier, which is less an oncology company for such a product in Europe?

[David D. Meek, CEO & Director]

Okay, great. So for Lutathera, the -- I think we need a little bit of guidelines as well. Somatostatin analogs will remain frontline therapy. A patient is -- a newly diagnosed patient for NET will not be on Lutathera. It'll be a patient that progresses on either one of a somatostatin analogs with their NET, so that we know. So that's a very small patient population that does progress. And I think that's what you see in the clinical guidelines as well. So that's why we have the guidelines. And if you look at the guidelines that are in the U.S, not just the NCCN guidelines, they will state this, but also in the local guidelines as well, and also what physicians tell us. To answer your question, so if they wanted to do the true frontline patient -- they wanted to do a study there, they'll have to do that study. What we do know about that study, that study will take years. It takes years to diagnose such a slow-growing disease, looking for PFS outcomes as a minimum in this patient population. And as you know, NET is slow-growing. It takes years to diagnose and then it takes years for disease progress. And that's one of the benefits of Somatuline. With the SSAs, we can almost treat this as a chronic disease. And with the therapy, good choice for patients to be progressed on an SSA. And then we're pleased because, as you know, we have our own Peptide Receptor Radionuclide Therapy program in early development ourselves. So moving on to Onivyde and -- so we're pleased that Servier is going to be acquiring the ex U.S., ex Taiwan rights for Onivyde, where Servier has committed to publicly as oncology is one of their key growth engines. It's where they spend over half of their R&D. Right now, they want to be a significant oncology player, and Onivyde would be a great opportunity for them in Western European markets to increase their presence for oncology. So I like the, I would call it, a renewed focus. Shire has been very clear that oncology is not a platform for them. And that's one of the reasons they divested the assets, all of the oncology assets. So I'm pleased with this. And we can -- we lead the clinical development, manufacturing, supply chain, et cetera. So there is no change in the clinical development programs. It's just that Servier will receive the seat of Shire at the table. So all in all, we think it's better. And we know the Servier people very well. We will get along very well. Their new CSO was our CSO a couple of years ago. So a good relationship with Servier too.

[Operator]

[Operator Instructions] The next question of today comes from the line of Thibault Boutherin from Morgan Stanley.

[Thibault Boutherin, Research Associate]

[Foreign Language] Just a couple of questions. The first one on Dysport. Can you comment on the underlying trends in the aesthetics market and the performance of Galderma. So are you just growing with the market share? Or is there any market share gain? And what are the expectations going forward? And then a similar question on Decapeptyl. Just to know if you could detail the positive 1 of the 2 experience this quarter because we saw some very strong growth given the pricing pressure. So how do you see the growth trajectory going forward for Decapeptyl?

[David D. Meek, CEO & Director]

Very good questions. Thank you very much. I'll have Aymeric. And I'll also add on to Aymeric's comments. Aymeric?

[Aymeric Le Chatelier, Executive VP & CFO]

So the first question was on Dysport. So as we said -- I mean, we're very happy with the performance in aesthetic as well as in therapeutic. So I think in aesthetic, Galderma continues to have a very strong performance to gain market share in the U.S. market, where they are really investing. And so clearly, we're very happy. We just mentioned, if you remember, that Q1 2017 was benefiting a very large shipment. So this one -- Q1 2017 was the probably higher, but the underlying performance of Galderma is really very strong. Regarding Decapeptyl, we are entering into certain countries where we had some seizing of shipments ship from one month to another month, which may have an impact of EUR 1 million or EUR 2 million. If you take that in the quarterly performance, this is why you see a 9% growth, which clearly is higher than our expectation. I think that when we did our Investor Day, we said that this is going to be a low single-digit growth for that product. We are very pleased with the performance. Volume growth, new indications, and clearly, there is a potential. But you should not expect the products to be in the -- close to double-digits. When -- at the same time, seeing Dysport is benefiting of a toxin market. We continue to grow at double-digit.

[Operator]

There are no further question at this stage. Please continue.

[David D. Meek, CEO & Director]

Well, I'd say, if there is no further questions, I do want to thank everyone for joining the call and listening to Aymeric and I share our outstanding results for the first quarter of 2018, answer your questions. And we look forward to keeping in touch with you throughout the year, and we're also pleased to confirm our guidance for 2018. Thank you very much, everyone, and have a wonderful day. Bye.

[Operator]

Thank you, ladies and gentlemen. Now that does conclude our conference for today. Thank you all for participating. You may now all disconnect.