Ipsen SA

PAR:IPN

Earnings Call Transcript 2018-Q3

[Operator]

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Ipsen Q3 2018 Sales Conference Call. [Operator Instructions] I must advise you this conference is being recorded today on Thursday, the 25th of October 2018.I would now like to hand the conference over to your speaker today, David Meek. Please go ahead.

[David D. Meek, CEO & Director]

Welcome to the Ipsen Third Quarter 2018 Sales Conference Call, and thank you for joining us today. We're excited to share with you our excellent results for the third quarter and the first 9 months of the year. The momentum of the Ipsen business remains strong, and we continue to execute against our 2018 objectives. And we are positioned to deliver another outstanding year of growth and transformation.But before we begin, here is our safe harbor statement that outlines the routine risk and uncertainties contained within this presentation.Starting with the financial highlights. In the third quarter, we achieved group sales growth of over 20%, driven by Specialty Care sales growth of 24.2% and continued Consumer Healthcare sales growth of 5%. For the first 9 months of the year, we achieved group sales growth of over 21%, driven by Specialty Care sales growth of 25.8%, and Consumer Healthcare sales growth was maintained at 2.9%; thanks to the double-digit growth of Smecta. We will provide more details about the Specialty Care products in the following slides.With these excellent results, we are well on track to deliver our financial objectives for the year, and we are confident in confirming our 2018 guidance of sales growth greater than 19%, and core operating income margin of around 29% of net sales.Our oncology business now represents over 2/3 of total sales and 30.9% growth year-to-date. Oncology is the largest contributor to the excellent performance of our Specialty Care franchise.Somatuline continues to lead the oncology portfolio, with 26% year over -- year-to-date and strong momentum growth globally. North America with 39% growth year-to-date is being driven by volume increases and both new patient as well as total patient market share gains. And Europe, despite being a more mature market, is still experiencing double-digit growth. We are very pleased with the performance of Somatuline in the first 9 months of the year and expect the favorable trends to continue in the coming quarters.Next, the launch of Cabometyx in second line renal cell cancer is progressing well. It is now positioned as a TKI of the choice and gaining market share. For first line renal cell cancer, we have secured reimbursement in 6 countries, including Germany and the U.K. And we will continue to launch gradually in additional countries, in both first and second line RCC over the coming months.The RCC competitive environment is evolving rapidly, especially with immuno-oncology combinations emerging in the first line setting. Due to its unique mechanism of action, we continue to believe Cabometyx has a solid place in the treatment paradigm, including as monotherapy in both the first and second line, as well as in combo with IO in the first line setting.We continue to closely monitor this exciting space, and most importantly, we are encouraged that patients are being presented with more treatment options.Moving on to Onivyde. We are steadily growing market share in second line metastatic pancreatic cancer and increasing the duration of treatment. We continue to see growing level of awareness and support among oncologists and key opinion leaders in leading U.S. treatment centers.Turning to our pipeline highlights. We recently received the positive CHMP opinion for Cabometyx for second line liver cancer, which sets the clock for regulatory decision by the EMA in the current quarter. We also received the first European approval for our new Somatuline delivery system and expect regulatory decision in the U.S. also in the fourth quarter of this year.As for our key oncology Phase III and Phase II pipeline programs, we have an ongoing Phase III trial for Cabometyx in combination with Opdivo for first line RCC. And for Onivyde, we have 2 Phase II trials ongoing for first line metastatic pancreatic cancer and second line small cell lung cancer. We expect top line results for both Onivyde trials in the second half of next year and remain excited about advancing our oncology pipeline.Turning to neuroscience and starting with our key product Dysport, growth of 15.4% year-to-date was driven by strong performance in both the therapeutics and the aesthetics market. For therapeutics, there are strong momentum in the U.S. from the new indications and our commercial partnership. We also see good performance in the rest of the world, including the resupply in Brazil.In the aesthetics market, Galderma continues to be an excellent commercial partner, and we are also seeing strong growth from our own territories, like Russia and the Middle East.As for the neuroscience pipeline, we are advancing 2 Phase II trials for hallux valgus, more commonly known as bunions, and vulvodynia, both of which have a significant unmet need and no approved therapeutic options.In our earlier stage pipeline, we are accelerating our fast-acting and long-acting next-generation of first-in-class recombinant toxins, which are currently in Phase I and preclinical development.To close, we've executed well against our 2018 objectives in the first 9 months. For the remainder of the year, we're focused on key priorities to deliver our financial targets as well as our threefold growth strategy. On the top line, we aim to support growth and market share gains worldwide for our differentiated established Specialty Care products like Somatuline and Dysport. For oncology launches, we intend to maximize the market penetration of Cabometyx and Onivyde through strong clinical data and unique mechanisms of action. And for Consumer Healthcare, we will continue our sales growth momentum achieved year-to-date.On the bottom line, we will realize synergies from Cabometyx through leveraging our European oncology infrastructure and with Onivyde through our U.S. oncology commercial team.And finally, on our pipeline, we will continue to execute on our external innovation strategy. We will advance and accelerate key internal pipeline programs. And as you all know, a top priority for us is to identify, execute and integrate successful business development transactions to build our pipeline and ensure continued growth momentum for years to come. By delivering on these key priorities, we will continue to deliver superior value to our patients and shareholders.And with that, for the operator, together, with Aymeric Le Chatelier, our CFO, we're ready to open the call for questions.

[Operator]

[Operator Instructions] And our first question comes from the line of Matthew Weston from Crédit Suisse.

[Matthew Weston, Managing Director and Co]

Two questions, if I can. The first on Onivyde. Could you possibly give us a split between U.S. and ex-U.S. partner revenue for the product so we can look at underlying trends in 3Q? And then, secondly, David, a more general one. There's a lot of discussion this morning about what President Trump may say at the HHS this afternoon U.S. time, with a lot of speculation that it may be around some pilot programs to reform pricing in Medicare Part B. I see looking at the CMS website. It looks like about 50% of Sandostatin LAR sales are in Medicare Part B based on the last data available in 2016. Can you confirm what proportion of Somatuline U.S. sales are in Medicare Part B? And any comments that you'd like to add? I think, anybody would be very interested.

[David D. Meek, CEO & Director]

Sure. Thanks a lot for the question, Matthew. So let me answer the question you directed at me, then I'll turn it over to Aymeric to answer your first question. I mean, as you know, we're all -- for any administration that opens up access to new products for patients and innovation of patients. So working with pharma, we're very much part of this understanding and the agenda to understand the potential impact of any U.S. healthcare blueprint. And we believe our focus and innovation in demonstrating product value and real work data positions us well. For the question, more than half of our business is in commercial for Somatuline in the U.S. The Medicare business is pretty much exclusively in Medicare Part B, as in Bravo. And then we also -- so that's where -- there were changes earlier this year to the Medicare Part B program, as you know. Some impact there, but we'd no exposure in the Medicare Part D. So we're anxious to see what is rolled out later on today by President Trump, and we'll take it from there. To answer your question on -- but we have to see. I think the announcement is at 2:00 Eastern Time when President Trump announces. But I would say, as of now, with the Medicare Part D, no impact. Medicare Part B is less than half today where we are.

[Aymeric Le Chatelier, Executive VP & CFO]

So regarding the question of -- I mean, we do not provide the split for confidential reason with our partner for ex-U.S. sales. But what I can tell you that the majority of the sales are really related to our U.S. business, and we are selling just at a supply price with very limited market to our ex-U.S. partner. Regarding the trend, I mean, the business continue to clearly grow at a steady rate in the U.S. The ex-U.S. business could be impacted by some stocking and seasonality. So it's not really very relevant. That was the reason of our comments in our communication today.

[Operator]

And our next question comes from the line of Luisa Hector from Exane.

[Luisa Caroline Hector, Pharma Research Analyst]

I wondered if you could update us on your acquisitions for the year. You're still looking to add product, potentially pipeline product. So where are you with that? And any comments around how competitive that process is? Whether it's taking you longer for competitive reasons? And then, secondly, on Cabometyx. Just a bit more color around how you're seeing the use today? Are you seeing some first line use already? And if so, what type of patients PD-L negative for example? And again, in the second line for Cabometyx, are you being used in IO failures at this stage? Or is it maybe too early to say whether that's happening? But I'm just wondering ultimately whether you might need to run another trial given the pace of change within the renal segment whether you might need a bit more data along the way.

[David D. Meek, CEO & Director]

Great. Okay. I'll tackle those questions, and Aymeric will jump in as needed. So first of all, regarding business development. Business development is top priority for the company and myself, and we are assessing numerous opportunities as we speak. And we're looking at all stages of clinical development, but we'd really like to find mid-stage assets with proof of concept. The criteria, the therapeutic areas are oncology, neurosciences and rare diseases. We're looking for best-in-class, first-in-class assets, worldwide rights that are strategically aligned in one of those therapeutic areas. We like to be able to integrate the new assets as quickly as possible in the company and leverage our global footprint to experience synergies. So those are the criteria that we use. But I can reassure you that we're very active in the business development space right now with our BD team that has been expanded over the past year. They're on the ground in the Boston area, in the U.S., in Paris, the U.K. and also in Asia. We have current firepower of at least EUR 1 billion, which is 2x debt to EBITDA. And we've got solid cash flow regeneration. And if necessary, we can stretch an amount over time as our business grows. And I'd say we're in a good competitive position for some of these opportunities. Some of this has to do with the Ipsen size. You asked about the competition. We're usually not in direct competition for the same asset as the major pharma companies. For example, an asset with peak year sales potential, say EUR 300 million to EUR 500 million, this would be significant for Ipsen, but it may not move a needle for the larger companies. And -- so the sweet spot for Ipsen is a little different than some of the competitors that are also looking for assets. Also our speed and agility and the capabilities we have to transact quickly make us an attractive partner, and we hear this from partners. And for example, we were just with the team that did the MD Anderson transaction early this year. I was with him in the U.S., and they couldn't be more pleased with our team's performance, the ability to transact on this option deal, an asset that we expect to go into Phase I in the next few months in solid tumors. So we're certainly very motivated, and we're active. And we're being disciplined at the same time for a transaction. That is priority #1 for the organization.Moving on to the RCC space and especially some of the news that came out ESMO over the weekend, and our team was very present, as you can imagine at the ESMO. We had a significant presence with a lot of new data discussed. Regarding cabozantinib and the source of business, the vast majority of our business today is in the second line setting. And it's in the second line setting because that's where we have reimbursement and that's where we have the approval. Very little business is in the first line setting today. And that is because we just received the approval we now have in the second quarter. We have reimbursement in 6 markets. Germany and the U.K. are 2 of those 6 markets. So we're seeing some pick up in the front line setting as monotherapy. You asked about IO. There currently is not an IO product approved in Europe at this point in time. Nivo/ipi is not yet registered in Europe. They're still going through the CHMP appeal process at this time. So our business in the second line setting is typically for Sutent, for example, which is currently -- which -- well, currently and not too much longer a standard of care in the front line setting. So a majority of our business is in the second line setting. We do have some business in the third line setting and a little bit in the front line setting. Now I'll answer the question because I'm sure it's going to come up. What is going to happen over time based on the data readouts that were at ESMO? And they were very exciting. So in the next couple of years, we could have 4 IO combos registered in the front line setting. Again, this is great for patients because the response rate, the survival rates continue to improve. And this is actually what we predicted to happen over time. And that's why we've got the front line trial going with cabozantinib and nivolumab in the front line setting. So we predicted this. The key opinion leaders predicted this over time that more and more treatment in the front line setting would be IO plus something else. And so when we talk about our peak sales of EUR 300 million in RCC, we've always forecasted the vast majority of that to be in the second line setting. Because another key theme that was happening at ESMO was the term sequencing. And that was actually titled in many of the slides at ESMO. So there will definitely be many IO choices in the front line setting, but we know that the vast majority patients will continue onto the second line setting. And if a patient has been on any IO combo in the front line setting, the second line will not be an IO. So the window of opportunity for cabozantinib in the second line setting is about to open in a major way, beginning with the first IO combination. And I think our market share will rapidly increase in the second line setting over time. And that's how we have our peak forecast for cabozantinib in the RCC space. So does that answer your question about maybe both those, especially for the...

[Luisa Caroline Hector, Pharma Research Analyst]

Yes.

[David D. Meek, CEO & Director]

Yes, thank you very much.

[Operator]

Our next question comes from the line of Emily Field from Barclays.

[Emily Field, Research Analyst]

Sort of on the same theme with Cabometyx. I was just wondering if you have any timing update for the Opdivo combo trial. And whether there'd be a potential for an interim look? And then, also given that the keynote for [ DUEXIS ] trial let out significantly ahead of schedule. Does that change your calculus on how the competitive landscape in first line will evolve? And whether you think it's going to be timing is what's going to make the difference in terms of obtaining market share? And then, just on Somatuline. I was just wondering what sort of uptick you expect from the new delivery system, and if you'll be changing pricing at all, particularly in the U.S., assuming it is approved?

[David D. Meek, CEO & Director]

Great. Okay, Emily, thank you. Regarding the RCC setting, in the front line setting with IO, we actually expected ipi/nivo to be approved already. We thought that would have received a positive opinion over the summer and a subsequent EC approval. So that's actually given us a little bit more space to grow our market share in the front line setting is we're out right now. Having the reimbursement conversations in market like Germany, U.K., actually getting a little bit of a front line RCC use. So we saw while it may have been little bit early, but it's expected, this is about the time line that we expected with some of the other data readouts. But we clearly expected the IO to move -- or IO meaning ipi/nivo to be registered now and to be out there. And knowing that more and more patients IO as you probably saw the ESMO draft guidelines that already have ipi/nivo as standard of care for intermediate and high-risk patients in RCC, we clearly expect those patients to move to IO therapy. So yes, that's what I would say. I'd say it's pretty much what we thought would happen with these data then there just could be more and more competition in the IO setting in the front line. But again, with sequencing, the more IO is used in the front line, it will not be used in the second line. And today, as you know, nivo has market -- is a market share leader in the second line setting, that will go away, and our market share will move up in the second line setting. CheckMate 9ER data readout, we still expect second half of next year for this data to read out. So the other point I'd say in the time line just so we're all pretty much aligned on this, so we do expect CheckMate 9ER. So -- I'm sorry. Yes, that data will be out we think second half of '19. But we expect ipi/nivo to come in soon with this. It'll be the first IO combo in the first line setting. And then, the new trials I just read out, they'll go ahead and submit their dossiers to the respective health authorities sometime in 2019. I would expect, a year for approval, then about another year for reimbursement. The time lines that we're forecasting. But ipi/nivo we do expect as the first entry -- the first approved entry into the space. Next, Somatuline, yes, the question about Somatuline with the price. What do we expect to do with price? We're looking at that right now, and we're having payer conversations. And we think that this will add, definitely, value to not just the patients because of the improved device and the delivery system, but also it would be a significant enhancement for those injectors. So whether it's a physician or whether it's a nurse, this new and improved device it will not need to be reconstituted like the competition. So it's pretty much grab with the self-injector or with the auto-injector, it should be a pretty quick and seamless injection. So we're looking at the value proposition right now for the U.S. market. And we expect probably launch in the second quarter in the U.S. after approval late this year.

[Operator]

And your next question comes from the line of Eric Le Berrigaud from Bryan Garnier.

[Eric Le Berrigaud, Managing Partner Equity & Research]

Three questions. First, are you aware once patients progress on Somatuline of any additions of Lutathera or are you seeing switches from Lutathera plus Sandostatin after the washout period? Second question again, on cabo. Can you give us any idea about how the drug is used in terms of duration of treatment? Is there any difference versus what we've seen in clinical trials? And thirdly, should we be aware of any price increase for any drug during the quarter?

[David D. Meek, CEO & Director]

Okay. Thanks, Eric. Let me answer the Lutathera question first and the impact on the somatostatin analog market. We're not seeing any fundamental difference at this point in time where our team is seeing the usage of Lutathera is at the far end of the treatment continuum for NET patients. So these are patients that have continued to progress on an SSA. And we're seeing a mixed bag of some patients may go off the SSA for the holiday period of Lutathera and then come back on. And there is about equal amount of those patients that receive Lutathera, but they stay on the SSA. And then so we're actually getting some longer SSA. The tail is getting little bit longer for some SSA patients and some will go off for a few months and then come back on. But this is also pretty much in line with the label that many of these patients prior to a Lutathera, they would have moved on to a cytotoxic agent, like an Afinitor or Sutent, either with or without the somatostatin analog. So for the underlying backbone therapy of an SSA, we're not seeing any difference at this point in time in the U.S. market with Lutathera. For cabozantinib, the duration isn't any different than the label. At this time, we're not seeing any difference. It's about the same as of what the label and that's what our model suggests as well. That's cabozantinib. And then price for this quarter. No, there is no price impact in Q4 for -- Q3 or Q4 for that matter.

[Operator]

And our next question comes from the line of Sarita Kapila from JPMorgan.

[Sarita Kapila, Analyst]

Two questions, please. Could you give us some more color on what drove the decline in other Consumer Healthcare? And how should we think of development going forward to these products? And secondly, could you give us more of an idea as to the proportion of Onivyde sales that are second line versus third line? And how has it changed since the beginning of 2018?

[David D. Meek, CEO & Director]

Great. Okay. Thank you. So it was a little bit hard to hear your question, Sarita. But I'll do your -- I think, I captured on the Consumer Healthcare business. A big driver of our Consumer Healthcare business was Smecta in the second line setting, is what drove a lot of this performance and is the primary driver of double-digit growth of Smecta is with the big driver of our Consumer Healthcare businesses. And again, when you remove the [ ETS of ] accounting, we've seen third quarter growth of 5% with our CHC business. So the objective is that this business would have growth, and we're finishing up a second year of continued growth for the CHC business. Primary driver of the biggest asset being Smecta and the biggest growth driver of that business. For Onivyde for second line versus third line, we don't exactly give the exact numbers over time, but what we -- our strategic intent when we bought the asset was the second line setting was a smaller piece of the business and there was a lot of use in the third and fourth line setting. And what we've seen is a shift towards more of the second line setting. And that's why we get a little bit longer duration of therapy in the second line setting. So we're still shifting more and more that source of business from third line setting to a second line setting with Onivyde. And that's where the label is that we have. And that's our strategic intent that business in the second line setting until we expand the label with new trials.

[Operator]

[Operator Instructions] And our next question comes from the line of Lucy Codrington from Jefferies.

[Lucy-Emma Mary Sarah Codrington-Bartlett]

Just a couple from me. Firstly, just wondering if there is any stocking impact in the Somatuline numbers for this quarter? And then secondly, if you could expand on the commentary around Onivyde seasonality impact that would be really helpful.

[Aymeric Le Chatelier, Executive VP & CFO]

Okay. So to answer those, there is no stocking impact in the performance of Somatuline in the third quarter. We still have a slightly lower quarter-to-quarter growth due to the seasonality, especially ex-U.S. for Somatuline. And clearly, this is underlying volume and market share gain performance. Regarding Onivyde, just to be clear, we continue to see a steady growth in the launch of the product in the U.S. quarter-over-quarter. And then, the performance is impacted more by some seasonality, a very little bit less efficient during the summer that has been on the drug. And then, we have some inventory, especially with our ex-U.S. sales as this is not really directly linked to the demand as we are shipping to our ex-US partner, [ Servier ].

[Operator]

And our next question comes from the line of Patrick Fuchs from AGI.

[Patrick Fuchs]

I have a question regarding the first IO TKI data that we saw on ESMO. And from this data, it becomes kind of clear that one driving factor is the efficacy in favorable -- in patients with favorable risk looking at the intermediate and poor performance of the drugs regarding PFS and also maybe OS. I mean, the efficacy seems not terribly different from Cabometyx versus Sutent from CABOSUN. Would you please comment on that or is that you premature or just to -- and we know we get other data at year-end from the trial you mentioned, but just your view on the subgroup interpretation here.

[David D. Meek, CEO & Director]

Yes, great question. As you can imagine, our clinical development teams, they're sifting through the data right now and interpreting the data. And seeing how -- seeing what the implications are for Cabometyx as well as future development plans with our partner with Exelixis. I think a couple of good things that came out is the improved response rates that we're seeing overall with the IO combo, which gives us greater confidence with the program of nivo plus Cabometyx. We now Cabometyx is a TKI choice. I think that was clearly laid out in the draft ESMO guidelines that talked about other products other than IO that Cabometyx could be the top choice of the other products and this is based on the CABOSUN data in the front line setting. So that was a nice reinforcement and validation of our CABOSUN trial. And then, importantly, for CheckMate 9ER, having the best TKI, and we think that's pretty clear based on the data that's available today with cabozantinib having the best TKI combined with nivolumab, we're very excited about this as a potential opportunity in the front line setting. So for us when we with cabozantinib over time if we have nivo plus cabo in the front line setting for the patients, we capture the front line setting that's fantastic. For the patients that move to any other IO therapy or any other therapy, it's pretty clear that the TKI of choice and actually the standard of care in the second line setting will be cabozantinib. And again, that window of opportunity opens up for us. So we're looking at the subgroups now. And as you know, while the data is not coming out, so we're still -- we're waiting for the publications or data sets for the trials that were released and those that are about to be released.

[Operator]

Ladies and gentlemen, there are no further questions at this time. So David, I hand the call back to you for closing comments.

[David D. Meek, CEO & Director]

Well, thank you, everybody, for attending our third quarter sales call. We greatly appreciate it. We look forward to sharing full year results for you early in 2019. Thank you, and have a great day.

[Operator]

Thank you. That does conclude our call for today. Thank you for participating. You may all disconnect.