Good morning, everyone. My name's Sean Laaman. I'm the Head of Mid-Cap Biotech Equity Research here at Morgan Stanley, and welcome to our Global Healthcare Conference. Before we begin, just to make you aware of some important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you do have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have the pleasure of welcoming from Disc Medicine, their CEO, John Quisel. Thank you for your time today, John. A pleasure to host you.
Great to be here. Thank you.
Thank you. Maybe just some macro considerations to start with, and we're doing this for all our covered companies. How is the rise of China origin innovation, if at all, changing your competitive positioning and your R&D and business development playbook, if at all?
It's a great question. I think we are fortunately unaffected so far. We don't see anyone else developing GlyT1 inhibitors for our lead indication in porphyria, and similarly, that's true in the second indication in myelofibrosis anemia. We haven't really identified any competition from that sphere at this point. As you know, our pipeline programs are all transitioning towards phase III, and the lead program has phase III readout and hopefully a commercial transition shortly. So I think we've managed to kind of get beyond that competitive wave, at least at Disc.
Okay, what about AI and its adoption? Are you adopting AI within your business, and what sort of impact do you think it can have?
Yeah, we are working on that. It's still early days. I think it runs from the menial to the really. Well, even the menial is quite important, actually. As you know, in a rare disease setting, one of the most important factors in driving towards peak revenue is literally if you have a good therapy, being able to identify where the patients and their treating physicians are located, and I think that's an area where there's a lot of interesting new tools being developed.
Sure. Thank you. Last question before we dig into the meat of Disc, but maybe it is quite high on your agenda. Which policy variable, is it FDA, Medicare negotiations, MFN tariffs, global pricing, which policy variable do you think will have the most impact?
We do think a lot about MFN pricing. It impacts the perceived value of overseas markets, which itself impacts ideas about whether you might partner or develop on your own an asset, such as bitopertin, right? We are clearly committed to building in the U.S. market on our own. But strategy's still evolving in terms of overseas markets, and MFN has an impact on that.
Sure. Thank you. Right. Now to get into Disc specifically, thank you for doing that, but bitopertin in EPP and looking. I have got a couple of questions here on the APOLLO readout and the regulatory path. I guess sort of following the June Type A meeting, can you share any more detail about the feedback you received during that meeting in terms of what the FDA is looking for?
Yeah. I think broadly speaking, we and they are both focused on the APOLLO phase III trial. I think broad alignment around the endpoints. That is really about all there is to it. I think we are just in a position now where we need to deliver what is hopefully fantastic data from the phase III trial.
Thank you. On the powering, we understand that APOLLO is designed to detect roughly an 11-hour time in sunlight difference. Can you walk us through how you arrived at that powering assumption? What gives you confidence that the placebo-adjusted delta holds up in a larger, more geographically diverse study?
Yeah. The objective of the drug is to reduce the protoporphyrin IX and give these patients the freedom to spend time in light if they choose to do that. That endpoint is designed to detect the time that they choose to spend. I am using the word choose to emphasize that it is a voluntary endpoint, right? What we saw in phase II is that by and large, over time, patients who are on the active arm tend to choose to spend more time in light. We see that trending upwards. The placebo control trial in the U.S., the AURORA trial, was four months.
In the last month of that, you see an upward trend. When you look at the six-month open label trial in Australia, you see that continues. When we look now at snapshots of data from the long-term extension trial, to be honest, the data quality starts to erode a little bit on these diaries.
Sure.
But nonetheless, what you see is patients just spending vastly more time in light. So it appears it's kind of what you would expect. The drug gives people the biochemical ability to spend time in light within a matter of weeks. But then for patients who've spent their entire life avoiding sunlight, and often designed their entire lifestyle around that, having that newfound freedom takes a while to adjust to. So back to which month do we. So we're using the last month, this month six.
Sure
because we think it's a good place where you get beyond the placebo effects, but also you give patients time to adjust their behavior to detect a difference of a drug therapy. But what we chose to use for our projected effect size, we didn't use the last month of the phase II trial. What we did is we basically took months two, three, and four.
Where you're still just starting to separate from the placebo group, and used that as our projected effect size. So essentially, as long as the patients behave like any of months two through four, or at least an average of months two through four from phase II. Then our powering calculation should be robust to that. If they're doing what we expect, was actually spending more time and separating further from placebo when you get out to month six, then we should be in an advantageous situation.
Sure. Thank you, John. On seasonality, the U.S. patients exit at all times of the year. But the majority of ex-U.S. patients are expected to complete in spring and summer. And you've noted roughly half the geographies that weren't in AURORA now synced up. Given more patients completing the higher daylight months, how are you thinking about the seasonality impact?
Yeah. We think it's well represented in the phase II data. So that placebo-controlled trial conducted in the U.S., 75 patients running from Seattle, Boston, down to Miami and Texas. So I think representing a lot of different seasons, a lot of different geographies, a lot of different light intensities. So all of that, I think, is already represented
Right
in the phase II data that we used. We also know that the seasons didn't have a dramatic effect. We can detect a difference with the drug, both in the winter and in the summer. I think our intuition is that, and the data bears this out, is that the delta is larger in the summer.
I think what we see here in the way the enrollment played out is that the U.S. patients are a pretty broad smear across the seasons. And like you mentioned, through the accident of very rapid enrollment, the European patients ended up concentrated as completers across the summer. And I think we don't know for sure, but our guess is that should be favorable to detecting a drug effect.
Sure. Thank you, John. On the clinical meaningfulness language that we observed in the CRL, can you share about what this means for the APOLLO readout? Would it be achieving that sig on the time in sunlight endpoint?
Yeah. The key here is that exactly. The co-primary endpoints are PP9, which would be shocking if we missed that, and then the sunlight endpoint, which is where we really powered the study. In doing so, of course, overpower the PP9. Hitting those two co-primary endpoints, p-value less than 0.05, that's the key.
Sure. I guess given the pro work, essentially, every patient felt better. How much does the patient experience in real-world advocacy that builds up after the CRL reinforce the case regardless of how the primary endpoint reads?
Well, right. With the CRL, I think that really activated the patient groups' deep frustration around that result. You see a lot of media reports now with patients coming forward and telling their story about the disease. I think they're trying to make sure that the seriousness of what they're living with is made more public perhaps than it has been before. Many of them are even choosing to talk about their experiences on bitopertin, and those have been remarkably positive stories. I guess what we take in from all of that is that there is a meaningful impact here with the drug. The challenge we have really is just detecting it with our endpoints. That's converting that patient experience into clinical output. I would argue that's a vastly better place to be than if you don't really know
Sure
What your drug's really doing. I feel like we have very good insight into what it's doing for many of these patients, and it gives us a lot of confidence that the math we've put into designing the phase III trial will work out correctly.
Sure. Thank you. Thinking about the HELIOS-B study, the extension study, how much is there a way to think about that in terms of de-risking some of the data that we might observe from APOLLO?
Well, it's certainly helpful to see, for example, the protoporphyrin IX suppression continues essentially uninterrupted for apparently years on end. That, as I mentioned before, people tend to increase the time they spend in light the more time they're on therapy, which I think is evidence of perhaps people adjusting their lifestyles in a way that is very meaningful. So those things are all very encouraging. Simply the rate at which people choose to go into that long-term extension. We've talked about in phase II, we had about 86 out of 100 patients choose to roll over onto the long-term extension. We've talked about the enthusiasm there was and the rapid enrollment in the phase III trial, such that now we know the last patient last visit is in this month.
At this point, we start to have insight into the rate at which patients have chosen to roll into the long-term extension out of phase III. It's literally only two patients have chosen not to.
Sure.
Which out of 180-plus eligible patients, I think shows an astonishing level of enthusiasm and interest in receiving this therapy.
Okay. Thank you, John. I've got a couple of questions here on the commercial opportunity for bitopertin and the competition. Assuming approval, how do you think about sizing the U.S. EPP opportunity and the number of patients you'd realistically target at launch? Is it patients on SCENESSE or treatment-naive patients?
Well, the patients on SCENESSE is, in our view, a pretty small number. It's not easy to estimate, but I would say on a year-to-year basis, it's probably no more than we have already in our clinical trial.
Right
Neighborhood. That is a group that we'll want to offer bitopertin to in a launch situation. But I think what's more interesting is the patients that we see at centers of excellence. I think we've reported something like 600 patients at the top 10, 15 centers, and that's been validated by our field force. So validated on the ground, not purely based on claims data. So that's an excellent place to think about launch potential. That doesn't get you, of course, to the kind of peak sales that we're hoping to achieve here, but it certainly gives you a place to start from. Then we're continuing to engage with accounts using the claims data as our guide, right? Going to the physicians who are reported to have a decent number of patients and working down that list.
We see a decent correlation between the two.
It's not perfect.
Sure
The claims data is never exact to the current real-world situation, but I think directionally it looks like it's going in a good direction.
Sure. Thank you. What does the cost structure of the launch look like? Should we expect a ramp ahead of the approval?
Should we expect, I'm sorry, what?
Sorry, the cost structure of the launch as you're thinking about-
Oh, yes.
the commercial infrastructure, et cetera.
Oh, yes.
Okay.
Our cash runway is into 2029. We assume no revenues in that model, but we have fully loaded in commercial expenses, and some of those commercial expenses are going on right now as we speak-
Around disease education, physician engagement. Then as we get across the data, assuming everything looks good, then those activities will continue to ramp as we head towards launch.
Wonderful. How do you think about scaling that if the PV and MF opportunities, how do you think about scaling that infrastructure?
Well, I think some of the home office infrastructure scales very well. I'd say the field force infrastructure will probably be different. As originally planned, 24 reps to focus on the porphyria population. I think when we get to myelofibrosis and polycythemia vera, those two indications are directly overlapping in terms of-
Sure
Physicians. That's one sales force to address those two patient groups, but that's probably a different sales force specialized in the heme/onc space versus the porphyria space.
Sure. Thank you. Just on the competitive dynamic, just in emerging competition in EPP space, how do you frame that for investors?
Yeah. We all know about SCENESSE, the surgically implanted drug.
The only approved product today. There's dersimelagon, which works by a similar mechanism, essentially an oral version of SCENESSE. Failed in initial phase III, had a successful second phase III. Product was acquired by a company this summer called LEO Pharma.
We're probably on roughly the same timeframe of-
Sure
Getting to launch sometime in the first half of next year. We think we're unique in the sense that we reduce protoporphyrin IX, we think it gets to the root cause of the disease. Then behind us, there's one additional product that's targeting, I guess, has a novel theory of targeting the plasma compartment of protoporphyrin IX versus the whole blood, which is what we go after.
Sure. Okay, thank you, John. Maybe moving on to DISC-0974 in MF anemia, can you remind us what the most recent cut of data that you've shown to date has shown?
Yeah. It's been a remarkable developing data set. We designed the phase III trial with three, four cohorts initially to just look across the whole survey of anemic myelofibrosis patients.
Newly diagnosed patient who's never received any therapy, just simply had an anemia, which turned out to be myelofibrosis, all the way through to patients who are getting as many as 6 units of blood on a 12-week basis, so very intensely transfused patients. What we see across that spectrum is generally the same overall response rate of around, if you look at what's called the major response, which is what the FDA is going to key in on, it's around 50% to 60%. Then if you look at what's called the minor response rate, which is probably what the clinicians look at, you're up to 70%, 80%. So remarkable response rate, but even more remarkable is the way that this fairly heterogeneous disease population, we get roughly the same degree of response across all of them.
That kind of common response is probably driven by just like a common mechanism, which is we're stimulating hemoglobin formation, and that fundamentally gets to whether you're a responder for hemoglobin or a responder for transfusion.
Okay. On competition with that one, momelotinib establishes an anemia-sparing and mutant CALR targeting antibodies emerging. How do you see DISC-0974 fitting?
Yeah. Well, what we've learned about momelotinib, to your point, it's anemia-sparing, but we saw at least as a trial experience, we created a special cohort to allow some of these new JAK inhibitors to come in, and we saw quite a few momelotinib patients. In fact, many of them, you couldn't get into our trial unless you were anemic already. So patients who were receiving momelotinib remained anemic and responded very well to our therapy. So I think momelotinib I view as just part of the background therapy forest, right? There's JAKAFI, there's momelotinib, there's pacritinib. There may be some new agents coming even, the navitoclax, who knows what. Our expectation is our mechanism by mobilizing iron is just kind of orthogonal to all of those and should prove to be effective on top of really any background therapy.
I don't view that really as a competitive dynamic there.
Sure. Thank you. What signpost, whether it's the data or what signpost can we expect from DISC-0974 over the next six to 12, 18 months, and just your general alignment with the FDA on clinical endpoints?
Right. Well, that's the big signpost.
Yeah.
We have seen enough from an efficacy, safety point of view. We believe this drug should progress to phase III. We will share one more data cut from that later in this year, and that will be the same data cut that we use as the basis for our end-of-phase II meeting with the FDA. Before the end of the year, we hope to provide the public community with insight into that last data cut, which probably will be about the same as data we have seen before. But also now, a kind of what we hope will be an aligned phase III trial design with the U.S. regulators. Of course, we will talk to European regulators as well.
Sure. On other indications for DISC-0974, the RALLY IBD trial-
Yeah
started early this year, and how do you compare the opportunities in MF and IBD?
Well, yes. RALLY IBD, we remain excited about this kind of broad anemia of inflammation concept.
That'll be the trial probing that specific question in the setting of IBD patients. There are a lot more IBD patients in this country than MF patients. Even if you take the anemic subset of IBD patients, it's measured in hundreds of thousands. By target population, it's a large indication. To that point, while we're using DISC-0974 as our signal-seeking study agent, we may well choose to use our second-generation product with a longer serum half-life, which may be better for those patients who see their doctors less frequently. That may be where we actually continue that development once we find a validated signal in the anemia of inflammation population.
Sure. Thank you, John. Maybe moving on to DISC-3405. You presented the RESTORE-PV data at SOHO last week. Can you give us a recap of the data and how you believe the antibody performed?
Yeah. Really exciting data set. We were overwhelmed by the enthusiasm for our phase II program. We were able to move our first data release up into SOHO rather than a conference later in the year. Although we probably still will have yet an additional data cut before the end of the year. We took our first cohort, right? There's two cohorts here.
The first one, cohort A- which involves a little bit of dose escalation, and then a settling in at a Q2 weeks, 300 mg dose level. Cohort B is a steady 300 mg Q4 weeks dose level. Very similar dose ranges. The data were great. Really pleased with what we saw. The measures of efficacy, where you're looking at reduction in phlebotomy, a stable hematocrit at around 45%. Those look really good, and pretty much right on with, as we know, it's a competitive field with other agents in the field. On efficacy, I think we're meeting the standard. I think one of the places we're hoping to distinguish in the long run is by having a product that's more tolerable to patients. We're keeping an eye on some safety and tolerability aspects, like whether patients become anemic on therapy, whether patients have injection site reactions.
And so far, early days still, but both the rates of those events appear to be quite low. Possibly, we will see, but maybe allowing us to, in the long run, claim to have one of the better product profiles in the space.
So it seems in the data so far, you are seeing what you need to see on phlebotomy and hematocrit control. When do you get to a level of confidence to bring it forward into phase III?
Oh, I think if we replicate that same data in cohort B, we will be able to choose a dose and progress. So that is kind of slated for next year as our end-of-phase-II meeting on that program, as well as the presumed phase III trial start. Which time-wise puts us right in the mix with the other TMPRSS6 targeted agents.
Okay. Yeah. So maybe give us your view on the comparative dynamic when we think about what we have observed so far from SYLVANT and also the recent launch of rusfertide. So, what should we really be looking at? Phlebotomy, hematocrit, injection site reactions.
Right.
Yeah.
Yeah, well, like I said, I think you see all of these agents collecting around the same degree of phlebotomy-free rate, which has emerged, I guess, as kind of the-
Yeah
It is the endpoint that rusfertide used-
Yep
To support approval as the primary. You see rusfertide, you see divarasib, you see our program, you see Ono, sapablursen, all performing in the same range. Everyone has different mass of data, right?
Obviously, rusfertide has the largest, most rigorous data set. Then those of us in phase II have smaller data sets. Assuming that all proves out, on that front, everyone will be pretty similar. Then the differentiation probably comes from tolerability, safety, convenience, ease of use, all of that.
Sure. Thank you. Still on DISC-3405, we've got the phase I-B data coming up in sickle cell disease.
Oh, yes.
What should investors expect there?
Yeah. By the end of the year, I think we will have a little bit of data from that trial. It's a novel approach to sickle cell. We're taking it slowly because safety is paramount in that population. I think we'll have, think of it as single-digit patient information, so essentially almost case reports. We're able to look in a very detailed way at the way the mechanism works. The goal would be to see restriction of iron manifested in reduced concentration of hemoglobin inside the red cells. Then if things are going great, that could convert into a reduction in evidence of cellular damage, sickling, which can all be measured through a variety of different biomarkers. The big question in the end is can you reduce important clinical adverse events like vaso-occlusive crises, retinal damage, kidney damage?
That is something we are not going to see for quite a while in this study. But really just trying to look at the physiological and scientific underpinnings that predict whether those clinical endpoints might be worth pursuing in a larger trial.
Sure. I have got this financial question. Here is one of my last questions that you have kind of already answered, but seeing I get so much inbound on it, I will ask it again. Before I do that, a lot of the inbound I get is on bitopertin. I do not get so much on PV and so much on MF, but just your view on how you think investors may be underappreciating those assets relative to bitopertin, and how would you sequence them in terms of value?
Yeah. Well, interestingly, bitopertin is, of course, a totally novel financial proposition, right? It is the first potentially disease-modifying therapy into this rare disease where there is not a lot of experience. So we are building that story with various pieces of evidence and the value proposition around that. The other two indications, there are tremendous numbers of peer case studies that provide value indexes. There have been numerous companies with phase III myelofibrosis programs, and I would argue our program may have the broadest applicability of any of these molecules across these patients. So I think you can look at other There has been a whole series of phase III myelofibrosis programs that have been acquired at value points, and quick AI search would give you a sense of what the value ought to be for that product. The same could be said now for polycythemia vera.
Now we have several different peer companies, some of whom are essentially single-asset TMPRSS6 agent valuation, and that gives a very good kind of basis for thinking of a value for our TMPRSS6 program. I would say if you put those things together with our cash which as of last quarter is sitting above $700 million, it would tell you that if you wanted. This is not how the market's viewing it, but I would argue you could almost see the entire value of the company embedded in its pipeline plus cash.
Sure. Last question, but you have kind of answered it, or you have answered already. Just to double down, the $718 million on cash on balance sheet end of Q2. There is a lot going on at the company and just sort of, you are confident that we are going to get to your long-term trajectory. We are not going to see a blowout on costs either way.
Oh, no. I mean, our costs, our guidance is cash into 2029.
It is quite conservative in the sense that it does not include any potential revenue from bitopertin. So you can kind of straight line the projected burn if you want to, and I would imagine that that will be the trajectory.
Awesome. Is there anything that I didn't ask that I should have today?
No. I don't think so. I think we're just super excited to be coming into the end of the year. First evidence that our TMPRSS6 program is looking good, looking like it's on a path to phase III. We'll have our APOLLO trial data in Q4, which will answer the question about where bitopertin's headed. Then we'll have, hopefully, the end of phase II readout from myelofibrosis, which will show the path for that to phase III. I think incredible transitional moment here for the company at the end of this year.
For sure. Agree. Pretty exciting. Thanks for your time today, John.
Yeah. Thank you.
We will call it closed. But thank everyone for listening.
Much appreciated.
Yeah.
Thank you.