All right, I think we'll get started here with our first fireside discussion this morning. My name is Derek Archila. I'm one of the senior biotech analysts here at Wells. With us this morning, we have the Ascendis Pharma team. We have Jan Mikkelsen, President and CEO, also Scott Smith, the Chief Financial Officer, and I think Tim is going to give us some disclosures here, first off. So we'll start there, and then we'll get into the discussion.
Great. Thanks, Derek. We may make forward-looking comments during this presentation. Actual results may differ materially from those expressed or implied, and you should not place undue reliance on these statements. For information concerning the risk factors that can cause actual results to differ materially, please see the Risk Factors section of our most recent annual report on Form 20-F. Before I turn it back over to Derek, I wanted to make a comment regarding our U.S. regulatory status of TransCon PTH. Jan provided a status update on our second quarter conference call earlier this week on Tuesday. We are not in a position to make further comments on that topic. With that, Derek, back to you.
All right. Thank you very much. Well, gentlemen, thanks again for joining us. And, yeah, maybe just kind of give us a kind of high level of kind of the state of affairs with, you know, current business in terms of SKYTROFA, you know, what you're executing on in the pipeline. And obviously, as, you know, Tim mentioned, maybe we won't talk too much to the PTH, you know, regulatory front, but maybe just kind of remind us, you know, in terms of like, where you are on that. I know you just had your earnings call, but maybe you can just share that.
Yeah. Thanks a lot.
Yeah.
First of all, thanks for our invite here. Let me start and go a little bit back. In... At JPMorgan in 2019, we lay out our vision from 2020 to 2025. One of the key cornerstone in our vision was to develop Ascendis Pharma to a leading sustainable biopharma company. The cornerstone of the vision was to get approval of three independent rare disease product opportunities. The first one was TransCon Growth Hormone, and I'm quite sure Derek will ask me a lot of question about how it's SKYTROFA is progressing. Now, where we both have going to have it in the market here in the U.S., and we're going to launch in Germany here in the next weeks. And our TransCon PTH, we expect the first approval here in 2023.
And as we outlined in our Q2 release, we now have a clear pathway for really the best-in-class nature of our TransCon CNP, really to address the element of achondroplasia. We have a clear pathway also to get that into the approvals and in the market by 2025. So the key cornerstone that we laid out in January 2019, we really have kept on addressing, building up each single milestone, so we really are succeeding with this vision. We have also applied the TransCon technology to areas outside rare disease endocrinology. We have done that in a more optimistic manner, where we believe we can develop paradigm shift compound, really, to address unmet medical needs in both oncology and ophthalmology.
We also know that this area is not really the place where we'd be, like, we'd be in rare disease, where we're building on the economy of scale, our synergies, our way where we can operate from idea states out to the patients. So when Derek asked me to give where we are in Ascendis today, we are in a situation, we fulfilling our vision about being a leading sustainable biopharma company, and we are adding one thing, which is a strong focus for the time being, how we basically are developing Ascendis to be a profitable entity. We're doing that by really moving in and developing commercial infrastructure on a global basis to ensure that we can be there. So every place where there is patient, Ascendis Pharma will also be there.
Excellent. Maybe just starting with TransCon PTH and, you know, kind of looking at the European market, you know, potential approval towards the end of this year and your readiness for launch and ultimately how you kind of think that will roll out, you know, across Europe, you know, over the next maybe, you know, 12, 24 months?
Yeah. When we talk about Europe, we already have initiated in Germany an EAP program. It's a little bit different compared to the U.S. EAP program because both naive patient and short-acting PTH experience patient are electable in this program. It gives us a strong foundation to get started in Germany, where we're ready to launch as the first country. This is typical what we see. The patient population with hypoparathyroidism in Germany is at least 15,000, that is already diagnosed with the disease. So just in Germany is a large patient population. In our Q2 call, we also released data that is part of our AMNOG discussion in Germany, where we are building up the health economic part of justification of our price structure in the European market.
This is where the data that you saw being released related to the positive impact on kidney insufficiency. We basically showed data where you have a cutoff for renal impairment at about 60 estimated filtration rate. And when we look at the patient group that were in our phase III trial, that was under that, meaning that basically have the diagnosis of kidney insufficiency. 50% of them, after one year treatment, basically moved up to what we call having normal kidney function. We think that is such an important part as an additional benefit that you can see of a TransCon PTH treatment. Summing up, we're ready to move into Germany as soon as we get the European labels. We are ready in other European countries, too, where we are also preparing for the labels.
We are also ready from the internal operation side, meaning this country that is not the U.S., not in Europe, E.U., where we are also building the capabilities to really penetrate, ensuring that as many as possible patients can see the benefit of TransCon PTH.
Got it. Maybe just two questions from that. Like, one, how fast can you switch the patients from the EAP to commercial drug? And then also just in your comments about the improvement in eGFR, I mean, how has that, like, informed maybe, you know, updated thoughts on, on pricing in Europe?
Yeah, two elements. For example, it's a country-by-country specific way we can get them switched. In Germany, there will... Our EAP program was not called EAP, but a different name, but it basically is the same content. They basically are switched immediately over as the EAP will stop at the time we get approval. The element of your question related to the kidney improvement, we believe that is part of and take a holistic view of the treatment benefit of TransCon PTH. We have disclosed before how we see the normalization of a lot of important elements like serum calcium, serum phosphate, 24-hour urinary calcium, together with impact on bone, where we see normalization of bone density, normalization of bone markers. And now we also see what we call, in addition to the benefit we see on patient-reported outcome, the PRO system well-being of the patient.
We also see how well I can not only stabilize the disease related to kidney impairment, but basically improve the kidney function. I think this is really an integrated benefit, which we basically think we can provide with TransCon PTH in this era of hypoparathyroidism.
Got it. And then maybe again, just elaborate or, you know, clarify the differences between the EAP and the U.S. and the similar system in Europe. And I guess, do you think that at least when you get approved in the U.S., will be again, kind of a similar switch, you know, as fast as you just kind of noted, maybe potentially in Germany?
The EAP program in the U.S. is focused on PTH-experienced patients, and the PTH-experienced patient is a small percentage of the patient with hypoparathyroidism and around the level of 4%. So it's only addressing a small part of it. So when I see the EAP program, it basically is to help this patient, really help this patient to ensure, because we know the shortage of Natpara, how it was taken off the market, is to help this patient population. And it has nothing to do what we expect to see of long penetration in the U.S. This is not why we have established the EAP program.
Got it. And then maybe just shifting gears to SKYTROFA. You did this deal in terms of, like, a royalty deal. Obviously, you know, extending the cash runway and things like that. What do you... In terms of, like, the deal structure, again, how has that informed or maybe changed your view on overall kind of like peak sales for SKYTROFA in the U.S?
I think Scott will explain about why we did the deal and exactly the background for the deal, and also going much more in detail of the actual transaction. For us, when we launched SKYTROFA, we had two main elements in our commercial strategy. We wanted to be the leader in value, but we wanted to be the leader in value in a growing growth hormone market. And when I go back to Q2, we saw for the first quarter we were leader in value. But we also saw that we achieved that with a penetration less than 10% of the pediatric growth hormone deficiency market, which is about 50% of the entire growth hormone market.
So if you do this simple calculation, that if we penetrated the same price structure we have in the rest of the market, we basically have grown the entire growth hormone market from $1.5 billion to $3 billion. Is that really acceptable? Yes, it's acceptable, because we want really to be responsible also in our pricing. But we are providing an improved treatment outcome, a benefit to the patient, a benefit to the society. So we really believe that we can justify this increase in market, of the growth hormone market. Scott, would you explain about the, our SKYTROFA?
So, Derek, you're referring to the recent $150 million royalty funding agreement that we did with Royalty Pharma. We have been talking to Royalty Pharma and other parties over the years about ways to potentially provide funds for Ascendis, on the one hand. On the other hand, Ascendis historically had been funded with equity, and you saw last year we did a convertible, so a little bit less dilutive, and we're totally committed to not raising equity again. We're all shareholders at Ascendis, so I could say the last thing we wanna do is dilute ourselves further. I think we had a good series of events that led to working with Royalty Pharma to have a transaction that lowered our cost of capital, gave us what we thought were very good terms, which include no payments until Q2 of 2025.
Very low internal rate of return and a capped royalty that, you know, we believe will revert to Ascendis after about 1.65 times being paid. So the terms were pretty good, allowed us to reduce our overall cost of capital and give us some flexibility to do other things, invest, drive sales, repurchase shares, whatever we want to do.
Got it. And then maybe just talking more, again, on the financial side for a second, about profitability, like a profitable quarter sometime next year. I guess, what are the kind of levers, and how do you guys think about that in terms of, you know, SKYTROFA growth next year, kind of OpEx spend, but also any contribution from PTH in Europe and the U.S.? Scott.
So the great thing about SKYTROFA is it's become, I think, pretty predictable. And also you've seen, perhaps Jan can talk about too, with the approval of some other products, we're actually seeing an acceleration of SKYTROFA uptake. So that product itself is becoming pretty predictable, and we raised our guidance to EUR 165 million-EUR 170 million for this year. And you can just do the math, exiting Q4, what would be our run rate going into 2024, and expect that we'll continue to grow from there. I think as Jan talked about, we have another product launching early next year in TransCon PTH, and then also this month we're launching SKYTROFA in our first country in Europe. So the top line's looking pretty, pretty good.
On the cost side, we also announced on the Q2 call that we established high volume manufacturing at Lonza for TransCon Growth Hormone. That should give us an opportunity to really reduce COGS overall, but we also made quite a bit of investment in that upscaling, you could say. Now we have a chance to supply the global market without risk of running out of shortage. In other parts of the business, you've seen R&D decline, and that should continue to be the case going forward, particularly in the endocrine rare disease area, where TransCon Growth Hormone has been the most expensive product you can imagine to develop, more than CNP and PTH combined. So, you know, we see, we see declining R&D, and, you know, as Jan mentioned, early next...
Or, sorry, late next year, we look forward to our first profitable quarter.
Perfect. And then, yeah, going back to, you know, SKYTROFA, how do you think about kind of the, you know, evolution of that landscape with now a couple long-acting, you know, products on the market? And, you know, ultimately is again, is it kind of tide lifts all boats or, you know, again, how the competitive dynamics will work out there?
Yeah. Let me somewhat define it in two stages, because we're going to the second stage in the end of this year. Stage one is where I'm now focused on pediatric growth hormone deficiency, which are where the two product now got approved. We have been the only long-acting product inside the U.S. market. We have been a product where we basic have shown our improvement compared to daily growth hormone. We have mainly been getting switched patient, meaning there have been a step through daily growth hormone. So people have realized that when you look on the prescribed dose of daily growth hormone today in the U.S. market, which are 0.32 to 0.34 mg/kg/week of daily growth hormone, that when we take SKYTROFA at the prescribed dose, they really see a clear improvement in the outcome.
So when we now see two other products being launched inside the U.S. market, the two other products will not really be equivalent to what you say that is in the U.S. market today of 0.32-0.34 mg/kg/week. The somatrogon non-inferiority trial against a much lower dose, 4.24 mg/kg/week. And somatrogon there could show, in one case, the same or inferior absolute growth velocity. So when these two products will be launched in the U.S. market, you're basically lowering the bar that we need to achieve, because they are providing not the same outcome that you are used to see in the U.S. of a daily growth hormone, because they basically have been matched up to a much lower daily growth hormone.
That's about 30% to 40% less than you typically use in the U.S. market today. So we actually only see that the market conditions are improving for us, because we basically are having now a bar to overcome that is much less than we see with the daily growth hormone today. Going to the second stage, we are investing in SKYTROFA as a brand. We are investing in label expansion. One of the key label expansions we will have is in Q4 this year, where we basically will be in a position that we will have our adult growth hormone deficiency. The two other products that are long acting also have shown phase III data. One of them didn't hit statistical significance compared to placebo, and the other one basically only got half the effect compared to daily.
So if we, which we expect to have, to show at least the same effect as daily growth hormone, potentially we will have an improvement in the outcome as we had in the pediatric growth hormone deficiency segment. We don't know that, but we believe that we can show the competitiveness of the best-in-class nature of SKYTROFA, really also in the adult growth hormone deficiency segment. And why we thrilled by that? Because this segment is a highly under-penetrated segment, meaning is that to our best estimate, we believe that less than 5% to 6% of the patients that have this diagnosis is really being treated today. Give us a huge opportunity to further increase the growth hormone market. So we look really, really thrilled for that. We investing further in SKYTROFA. We're also combining it with our CNP in achondroplasia.
If patients really want to have enormous amount of linear growth, we believe that is the best combination. We're still developing CNP as a treatment of achondroplasia. Focus on trying to show, proving that we can address the comorbidities, which we believe is why you should really treat achondroplasia. Linear growth is an inherent part, also to provide benefit to the patient, but there's no direct correlation between increased linear growth and changes of comorbidities. That is what we want to change. We believe achondroplasia is not only a growth disorder, but also is a part of a phenotype of muscle weakness, where we believe TransCon CNP really address that as also the only compound.
I guess two questions in terms of, SKYTROFA . So how much in, in this long-acting market, like, how much share do you think will convert to long-acting, you know, kind of over time, maybe at peak? And then, maybe you can just comment on, you know, you're going to be launching in Europe, how you guys are thinking about the opportunity there for SKYTROFA .
Yeah. Let me start first in the U.S. market. We have run, I do not know how many penetration models and modelings and modelings and modelings. And one of the elements we ran was we will be the only one, or there will be two or three, product. The key element for us that we never saw any big element of change of our market share, dependent on the amount of product opportunities that will be in the long-acting space. The key element will be what is really the total conversion of short-acting to long-acting.
Yeah.
So what we believe now with the three product, basically 90% to 95% of the market will be converted over to long-acting, and we will still be the leading product in value. Going back to Europe, we believe we will see the same thing that we observed in U.S., in the European market. There's no difference. It will be the same mechanism of being a highly educated decision society, to understand the best-in-class nature will always be the winning product. The question is, how long time it takes? It will take some years, but it always are the fundamentals of this kind of business.
Got it. So you think... I'm sorry, maybe I missed it, but, like, time to that conversion of that 90%, how long would that typically take, you think, or-
I think in U.S.-
-like this?
It would take three, four, five years, you will see this conversion happen.
Interesting. Okay. Got it. So yeah, maybe just shifting gears to, you started talking about TransCon CNP. We'll have some, you know, updated data towards the end of the year. Maybe you can just kind of highlight where you are with that program, and again, just kind of the excitement as, you know, this you know, kind of evolving competitive dynamic and, you know, competitive landscape, you know, continues to, you know, produce more data. Like, where do you think, you know, TransCon CNP kind of fits and, and how competitive their data is?
Yeah. First of all, we made a phase II trial as the only trial that have a duration for one year, placebo-controlled. Because my basic idea, we want to de-risk product opportunity and the phase II level. I have seen a tendency to many company starting run phase II, a single arm, short trials, and then get all the surprises in phase III. I believe in a solid product development, where you de-risk every product opportunity at the phase II stage. Optimize the phase III to be optimal position in, to the commercial launch of the product. So when we went out and showed our phase II data, they had a duration of one year. Why do we have a duration of one year? One year is the time it need to really to observe an optimal statistic significant linear growth.
Because everyone know, if they have children, that how children are basic are growing in an asymmetric manner. I can illustrate it with achondroplasia. Achondroplasia children typical growth between in the age 3, 4, 5, 6, 7, 8, 10, about 4.0 to 4.3 cm per year. So if you start with a population of children that basic are coming into the trial, measured on the last six months with an analyzed height velocity on 3.5, you basically know that in the next six months, that basic will be in a position to grow about 4.5 to 5 cm without any treatment, because this is just how the biology functions of linear growth.
So that was why we ran it for one year, to be sure that we basically have data that is extremely solid over one year, because we know that our registration trial, our phase III trial, will have a duration of one year. We made it placebo-controlled. Why did we make it placebo-controlled? Because we wanted to be sure that we not only could evaluate the safety, but also the benefit related to achondroplasia-specific comorbidity in a placebo-controlled manner. And we did that for one year in a dose exploration. We came out with this data, and I believe it's first time there has been a well-controlled phase II trial. We went to regulatory agencies and explained this is how we want to run our phase III trial, which are basic, mimic the phase II trial. A phase III trial that have analyzed height velocity as the primary endpoint.
Secondary endpoint will be reflected how we can address comorbidities in achondroplasia. We still continue discussion regulatory agencies to quantify exactly how we can get that optimally done to also be optimal position for labeling discussion. Everyone agreed to the dose of 100 microgram per kilo per week. And what perhaps was more important, that we enrolled the patient, all the patients in less than four and a half months. So basically, the trial are fully enrolled now. We're ready in next year, 2024. I expect to be in the beginning of the second half next year, we will have the phase III results. So we are ready to have it sent in and be ready for the market in 2025. The key element for us to focus on the treatment, and this is why we basically are expanding our clinical trial.
We also are initiating a second trial in newborns, which was just got filed, the IND for that. We are initiating a combination trial with SKYTROFA. If you want to focus on just achieve increased linear growth, just combine it with SKYTROFA. I can guarantee you, you can get the linear growth that you really want to have. This is how we want to be building up a treatment which optimal is for the patient. And sometimes, if you have a strong focus of patient that basically have not been exposed to CNP as newborns, therefore have a lack of linear growth, you can always increase that with extra SKYTROFA. But if you are on CNP for treatment of newborns, you basically should have an opportunity to have nearly normalized annualized height velocity your entire life.
What are the key, like, comorbidities that you would hope to address with TransCon CNP? And I guess, what gets you confident that, you know, you'll see a benefit there?
We mainly got the benefit of that when we started to look in our phase II data. Because what we saw, we saw an improvement in a lot of different parameter, and this is why we started to analyze more and more our data. We went into the element and trying to understand the science behind it, and it was where we actually came to this conclusion that the phenotype of achondroplasia is not only driven by the skeletal dysfunction, but also on a muscular weakness element. And we actually find a lot of old literature that basically are supporting that. And when we saw the mode of action, for example, we couldn't really someday understand just up from the skeletal dysfunction, why patient came to us to explain, now we can balance better, they can better coordinate.
And then we understood there must be a muscle component of that. And that is the element we can basically build in, in different way, basic in our clinical phase III program. How to measure that, that is exactly how we're defining that in the discussion with regulatory agencies.
Got it. And maybe with the remaining time here, just kind of like a more like broader question around, you know, the TransCon technology, and obviously, you talked about GLP-1, you have TransCon oncology. So I guess how do you kind of push those programs forward to, you know, more proof of concept data? And I guess, what's the end game? Is this something that you guys, you know, you want to kind of monetize in some way, or is it something you kind of develop yourself? Maybe you can just kind of talk about the overall strategy, you know, with those programs, but even beyond with, you know, the overall platform.
Okay. The background is that the TransCon technology is consisting on the element of a TransCon linker. We have a lot of different linker family, a lot of different generation.
Mm-hmm.
It's the fundament of the TransCon technology. Then we have different carrier system, and you have been heard a lot about the carrier system we call the soluble polymer. This is the carrier system we use in growth hormone, PTH, CNP, IL-2. Then you heard about our hydrogel system, which are hydrogel particle we used in our TLR 7/8. We also use it ophthalmology. What we now have invented and expanded the TransCon technology with is a new carrier platform. We call it novel carrier, and basically, it's an element of where we use the same TransCon linker, achieve the same benefit of the TransCon technology that you have seen in all the other program. But in addition of that, we have designed it to facilitate what we call high volume manufacturability.
At the same time, we have designed it to really be impacting the costs in the manufacturing cost on a very, very, very low level. This is what we call the new novel carrier system. We know that this new technology platform can have a major impact on a lot of different targets, both in metabolic diseases but also cardiovascular, where we believe that really is a technology platform that can work on the same principle. If you use an already established compound like semaglutide, you basically are making a new composition of matter patent, but you also have to know the high risk related to target engagement because you release a completely new unmodified semaglutide, so the mode of action will be the same.
So when you came out with the data that we presented in a deck you can find on our website, we went to different animal models, and we wanted to show for the GLP-1 class, how potentially you can make it to a once monthly treatment regimen. You can also make it to a once weekly, where you basically could expect to get higher efficacy on a... Because of a much, much more stable concentration on a continued basis, 7 days a week, 24 hours on the, the GLP-1 molecule. And this is how we can position in different manner. We really think that this is how we want to work at Ascendis, expand our technology platform, be everywhere where we can be in, and help really develop new best-in-class product opportunities.
So we really highly engaged in the GLP-1 area, where we believe we can really make a major improvement from nearly every of the GLP-1 molecules.
I mean, again, is this something that you wanna—these big indications, do you develop them yourself? Is that something you look to partner or, I guess again, how do you, how do you best move that program forward?
We have the capabilities to always develop ourselves. We have freedom to operate for semaglutide.
Mm-hmm.
We have freedom for the technology platform, but as every opportunity, we always open for discussing partnership if we can get the right condition for such a partnership.
Does that go for TransCon oncology as well, in terms of just... Is that-
Yes.
-Yeah.
Yes.
Gotcha. All right. Well, I think we'll leave it there, gentlemen. Thanks so much for coming.
Thank you so much.
Thanks for having us here.