Keith Leonard – Co-Founder, President and CEO
Kythera Biopharmaceuticals, Inc. (KYTH) Cowen Health Care Conference Call March 5, 2013 11:20 AM ET
Good morning. I’m Keith Leonard, Co-Founder, President and CEO of Kythera Biopharmaceuticals. I had heard that the current conference was less formal so, I get to it in the interim, I introduced myself.
As I mentioned, I’m the – one of the Co-Founders, we’ve been at – worked at Kythera for a little over 7.5 years. We became a public company in the third quarter of last year so it’s been quite an exciting journey. And I’m very happy to tell you about it today. I will be making some forward-looking statements in today’s presentation so I would ask you to refer to our SEC filings for a more specific detail.
This is a patient from our European Phase 3 studies. She was treated with ATX-101, and we injected into her submental fat or fat under the chin and this was the result. That is 12 weeks after her last treatment. And to look at them side by side, this is a very significant change in the before and after picture. And it is the kind of result that we’re after – we think can drive large demand for the product and more importantly drive great consumer satisfaction.
So ATX-101 is the product that we’ve injected here in this Phase 3 study, it’s a novel injectable drug for the reduction of submental fat or what most people think about as double chin. I’ll show you clinical results out of our European Phase 3 studies, we believe that she result in a filing for MAA by our partner Bear, sometime this year. We’re fully enrolled and progressing in our U.S. Phase 3 studies, I’ll show you the structure of that trial and how that outcomes will be measured.
The reason we’re excited is because this is a very large market opportunity. We think it’s north of $500 million I think U.S. sales opportunity, in the U.S. alone. We think that’s attractable opportunity that we can get to as a standalone company, we rely on our partner Bear outside the U.S.
Importantly, we’re going to be focusing as on the existing facial injectable market, that’s a well developed market and I’ll talk to you a little bit about. And we think we have the right team in place to drive not only regulatory success but also commercial success.
So the market that I mentioned, this is an overview of the market in 2011, it was a little over $2 billion, projected to grow to just under $5 billion by 2018. This is the facial aesthetics market. So it’s a large market, it’s growing, it’s highly concentrated so about 40% of that business is in the U.S. alone. And this is a very friendly cash paying market, these consumers often pay with credit card.
The consumers create the demand but important it’s a physician mediated or physician is the gate-keeper of that – the real decision maker. And importantly these are non-surgical interventions which if you look at the statistics driving the growth in this area, the non-surgical interventions are definitely the rapidly growing area within aesthetics.
Now this market has been developed by others. We would be a new entrant into the facial injectable market. If you would think about the existing products that define that market today, there are great products by great companies, those would be – if you think about it in categories, the toxins relax superficial wrinkles, primarily in the forehead or around the eyes. And there were four main of those procedures done in 2011, so this is a high demand area.
The other category of facial injectables are the fillers, primarily hyaluronic acid base fillers. There were 1.7 million of those procedures performed in 2011, predominantly to add volume to the middle part of the trades or to alleviate structural wrinkles. Now if you want to think about what that looks like in a patient, I showed you before and after here is the before and after that we got operated net, this is a patient that’s been treated with both toxins and fillers, and while their differences are settled, the outcome is remarkable and it’s something that people and patients will pay a lot for.
The characteristics of the market are that it’s concentrated primarily in dermatologists and plastic surgeons, so office visits are short 15-20 minutes. The results are both predictable and significant and they drive high patient satisfaction and all with little or no patient downtime.
Those are the characteristics of the market that we enter – significant to diet or exercise can come with age and there are limited treatment options currently, only surgery or like of suction and no drugs approved in this area.
So, quick overview of the product itself, what is ATX-101, it’s a proprietary synthetic formulation of sodium deoxycholate, which is well characterized endogenous compound that is used to metabolize fat in your body. When we injected subcutaneously into target fat, it reduces or resolves that fat locally while leaving the surrounding tissue essentially intact.
We have IT protection in place for method, manufacturing and compound in the U.S. at least for between 2025 and 2030 depending on the type of fat and the location. We’ve made substantial progress in the clinic. I’ll highlight that here in a moment but I’ll show you the European Phase 3 results and talk a little bit about the structure of the U.S. trials and then the commercial promise.
Just a brief word about how it works. ATX-101 when injected into the target tissue, essentially directly disrupts the cell membrane. The triglycerides that are released and the salt debris are cleaned out over a period of about 28 days, we know we also stimulate fiber glass in the area which it seemed to produce an additional lay-down of college and I’m going to try to use this little pointer here, okay.
What you see in effect is the fact goes down over time and the college comes up and that’s notable in that there is a retraction of the skin after the evacuation of the fact. That’s interesting to know it’s more important to see in a before and after picture which I’ll show you in a minute.
This is a summary of our global development program, we’ve conducted six phase 1 studies, three phase 2s including two being in the United State. We’ve got two parallel pivotal studies in Europe and we have the two ongoing in U.S. and Canada.
I’ll also mention that just this weekend, at the American Academy of Dermatology, we presented an interim analysis done on what we call study 26, it’s for this phase 3b study at the bottom, where we – it’s an open label study but we saw results that mimicked and substantiated what we saw in the U.S. in the European studies earlier, those are available in press release forum and also through the AAD website, I’ll come back to that again in a minute.
When you think about the clinical trials, the most important thing to understand is how we measure. So we measure patient’s response in three different ways, as a physicians scale, it’s a 5-point scale, we eliminate the extreme category, we enroll patients that are moderate to severe. There is a patient scale which is administered simultaneously, that’s also 5-point scale. And these form the two five very ways that we measure to drive effectiveness. We also look at objective measures, in the U.S. it’s an MRI and in Europe that is a fat caliber but those are supportive data only.
The European Phase 3 trial is a very busy slide, I’ll just highlight this. We tested two doses versus placebo, two parallel studies as I mentioned 723 patients. We treated up to four times at 28-day intervals. And then we measured the effect 12 weeks after the last treatment. The results that we were looking for were in the primary measures, changes in this clinician reported submental fat scale and also subject self rating scale. Importantly we included the United States patient reported outcomes, in this trial, secondary measure so that we can get a look at how the U.S. endpoint would perform.
This is a summary of this statistical performance of the product in both doses versus placebo and what you can see is in the primary and secondary, with a number of different ways to measure where there is proportion of patients with the one-point change or mean change, of the variables we saw, very nice statistical outcome. Question is, what did that look like in magnitude.
And here is the data from Study 16, this shows you the journey through time of a large number of patients averaged into a mean change from baseline in the physician score. So, here the patients were treated at baseline, week-4, week-8 and week-12 and then we go into an observation period only.
And what you see is on this objective scale, there is a placebo response but a nice breakaway from the placebo by the two actives and nice dose response and importantly out here at 12 weeks both the last treatment, nice statistical significance offset of placebo. So, this is what you would think about, it’s the course of an average chin across this time period.
Study 17 looks similar, good statistics, slightly less robust response on the drug and slightly higher placebo response. But nevertheless nice confirming study, absolutely identical in construction to Study 16.
If you think about what this means to patients, we asked a very simple question at the end of the trial, how satisfied were you with the treatment you received in the study. And more than 90% of patients in the high dose group, is 2mgs per centimeter squared indicated satisfaction with treatment, that’s extremely important because we have to go into this area that is with patients demanding high satisfaction.
If you think about what satisfaction might look like specifically, you can look at the patient reported impact scale, this is an impact scale underlying the U.S. patient reported outcomes. And here we measure a number of things that patients articulated to us as important during the development of the scale. So that we know now on a placebo control basis, statistically significant and by dose we can make patients happier, less bothered and less self-conscious, less embarrassed, feel less overweight. This is all driven out of the self perception based on their chin.
So, this is extremely interesting data and we think it – it’s underlying why patients adopt a set, it’s not only a physical outcome they’re trying to achieve but they’re trying to change how they feel about themselves based on self perception of that physical outcome.
Lot of data, very important but let me show you some real life before and after photo secrecy what it looks like on a person. This woman is 42 years old, which is about the average age for an existing toxin and fillers patient. She’s had a one-grade change in the physician score and a two-point change in their subject self rating scale that’s the European scale, this is the European data. Her BMI actually increased over that time period so she gained a little bit weight. And these are very nice – this is a very nice aesthetic outcome which she was very pleased with.
And another patient slightly younger, 36 a very lean woman, BMI of 21, 20.5, one-grade change, three-grade improvement in her subject self rating scale. And if you think back to that toxin and fillers patients where I showed you that, the changes, the specific physical changes are subtle but they drive a very dramatic change in the periods and they drive it $2 billion market. And you look here at the chin, before and after, this is a really nice result.
A slightly younger patient, 33, she’s had a two-point change in the physician scale and a four-point change in her seven-point subject self rating scale. This is a dramatic change. The thing I would plan about this patient, at age 33, she is probably too young to be getting toxins and fillers. So, what that means to us is this is an example of market expansion potential of this drug to drive new patients into this existing practice. Also, she is also lean with BMI of 21. So, this is probably familial predisposition to carry fat at that part of her body and we can intervene here and make a nice significant change.
The AEs that we saw in the European Phase 3 trials, the things to know about them. Primarily, mild to moderate transit and associated with the injection site. Here we’ve listed them by order of incidents. And what you see is the top group, the most prominent, pain and burning that’s fairly frequent at about 80% to 90%, that peaks at about 15 minutes, largely gone by two hours that gives you some relevance around what I mean here.
Swelling is idiosyncratic not all patients get it but it occurs at about two thirds of the patients, numbness or some interruption of the sensory nerve function for a certain amount of time, erythema and in duration.
Then less frequent and related to being injected as opposed to drug, there is breathing that can last four or five days as it’s typically getting injected with the needle. And then far less frequently provided stress amnesia, nodules or what we think about as focal indurations these do not appear to be nodules in the sense of Granulomatous which is something else that happens in the filler space.
Switching to the U.S. Phase 3 studies, U.S. Phase 3 studies, as I mentioned are fully enrolled, they are two parallel studies with over 1,000 patients. Now, here this trial structure is largely the same as Europe with a few exceptions. Here we’re only testing a single dose versus placebo, we’re allowing up to six treatments rather than allowing up to our – more complicated and little bit more rigorous.
Here we’re doing a responder analysis, a composite responder analysis. So, for any individual patient to be dropped into their responder category, they must simultaneously achieve, in the case of a one-grade change on their own self rating and the physician must have graded them as a one grade change. This eliminates noise in the scale, it also reduces the overall response rates. And we measure that at two different thresholds, a one-grade change and a two-grade change. And this trial is structured with these co-primaries. So we must win on both measures.
We also measure this patient impact scale, which I showed you and we will be doing MRIs, we are doing MRIs in a subset of about 400 patients so we can directly and objectively visualize fat reduction.
This complex composite responder analysis is something we agreed upon directly with FDA. It’s not unusual in aesthetics. And it induces some additional rigor in terms of interpreting the endpoints but the endpoints at the same is that we – the measures of the same that we used in the European study. So what that allows us to do is to take the European data, impose the land of the U.S. outcomes and see what we get in all, I just mentioned that the European study is, it only goes up to four treatments, I mean, one of the reasons we allowed six in the U.S. is because we wanted to drive actually a little higher.
When you see on the one grade, it’s 49 versus 15 with grade P-value, and on the two grade, 7.5 versus 4 over the grade P value. When we look at the same data from our Study 26 which is our open label study, I don’t have a placebo compared to it, but I can look at response rates. This data came out in November. And here we see, with six treatments now, we can get to 71 and 14 respectively on the two scale, I don’t have the P-values, of course to give you on those.
We performed analyses to make sure that our trial sizing was correct and we had power to meet these endpoints in the U.S. studies and based on that we made no changes to the U.S. trial site.
Moving on to the commercial promise, how did ATX-101 fit into the characteristics that I mentioned, simplified this in resisting facial injectable market. So, first of all we’re targeting dermatologists and plastic surgeons. We will have short visits, 15 to 20 minutes. Slightly different, we’re going to require between 4 to 6 treatments to achieve durable results, where the current treatments require only a single fashion and then you have temporary results, in the case of toxins, three to four months, in the case of fillers, between six and nine months.
Also, difference, when we talk about durable outcome, we’re running a five-year non-treatment follow-up study. And in that study to date, more than 90% of patients have maintained the response that they received in the initial study out two years beyond last treatment. So, that’s important for us to put metrics around durability. And it’s also something we note both the physician and the patient will care a lot about.
How we think about this market evolving over time in terms of targeting? Clearly we must win in this existing market with existing facial injectable patients. We know a lot about them, we know where they go to get their treatments. This is a well developed market.
Expanding out from there, we think that most proximate target would be women who are probably in that office but are naïve to facial injectables, that 33-year old was an example of potential target there. Beyond that men naïve to aesthetic treatments probably all together, that maybe a referral challenge because you have to get them into that office. And then lastly we expect that this product based under its characteristics is something that we can develop in other indications at the small localized fat deposits with high aesthetic value.
If you want to put numbers on this, this is how we modeled this. We think there are 1.9 million patients currently at least in 2011, by that I mean, currently this is old data, receiving injectable treatments. We know by going in and looking at those patients, a certain percentage of them, 79% have treatable submental fat, and then a certain percentage of those based on market research would be likely to try ATX-101. So this is highly enriched population. They are already in this target physician’s office they are already paying for injectables on prosthetic outcomes. So we – clearly this is the place to win first.
So, there is a group of about 900,000 patients as of 2011, here for the early harvest. This group is growing at about 12% a year that is courtesy of the toxin and filler companies who are filling this pool rather aggressively. Beyond that we see ability for market expansion, that’s not only for us but also importantly for the physician practice. This we think about as women, this is the 33-year old who are not yet receiving toxin and fillers or men, this is a patient in one of our – I think is in our Phase 2b study. You can see his before and after in our S1.
And if you look at some metrics here, there is a huge number of course starting with the general population. But when you go through similar cuts, you get to about 9.9 million or 10 million possible target patients that can be driven into this pool. These are clearly going to be more difficult to reach, clearly you have a lower penetration rates into that kind of pool but nevertheless it offers substantial market expansion possibility overtime.
We get asked frequently about pricing, what would we think about pricing this at – and we’re not yet to the point of thinking about literal price in terms of whiles, we think about it in value to the patient.
So, if we look at what patients are paying for today, we know that the injectables which are repeated are between $400 and $600 per session. But we also know that 89% of those patients are getting both toxins and fillers. So, when you do the math off of industry available metrics, you find that the typical expenditure for injectables is between $2,000 and $3,400.
On the right hand side, you have surgical procedures which are not repeated, which are substantially more expensive. When we think about the value propositions of the patients, we’re thinking about exploring more deeply, is this zone here. And the question we’re asking ourselves is it durable solution to your chin. A surgical like solution but deliver it to an injectable. Is that a good trade-off for about one-years worth of your two injectables.
So, that’s the area we’re exploring. It’s the math that has to be applied to that of course, how much did the physician keep, they typically keep 50% of the total procedure and the drug company gives the other 50%. But also we see a shift happening right now in the market, this is some numbers off of the AS, APS website. 92% of consumers survey preferred gradual results lasting two years over immediate results lasting 12 months. So, there is some perhaps early signs of this repeat injectable pool is getting some kind of fatigue either injection fatigue or expenditure fatigue. And there is an emerging trend towards wanting more durable outcomes that happens to be great news for us. We didn’t produce that data but it maps nicely on to our product offering.
Now how do we intend to do this, I mentioned Kythera, we’re un-partnered in the U.S. we intend to stay un-partnered. We believe that we can successfully commercialize in the U.S. and Canada against this pretty focused group of docs, these are well established practice, they’re not hard to find.
It’s a typical sales model, limited marketing really focused primarily on the existing patients later DTC to drive patients into the office if you’re going for market expansion and supported by a modest medical affairs type effort.
Outside the U.S. this is too difficult for us to get to by ourselves, so a little more than two years ago, we partnered with Bear, which has a fairly large footprint in healthcare in general at $18.6 million last year and in dermatology they had a skin care unit that has over €1 billion in sales last year.
Importantly their call points include more than 50,000 dermatologists in 80 countries. So this was a strategic expansion for them beyond medical dermatology into aesthetics and of course it was a nice fit for us as well.
Our team in order to get a fair initiative to our partner, it’s an embarrassment of wealth for me. We’re located about six miles from Amgen, I was there for 13 years. I left there running Amgen’s European operations and I was lucky enough to get to work with a lot of talented people, many of them now currently work for Kythera.
Amgen is a great home, if you want to be a biotech company working in aesthetics, that’s a great solid grounding spot for the biotech side, less obvious for the aesthetics side. We’ve been lucky enough also to attract significant number of employees out of Allergan and Kyros, clinical, regulatory and most recently in commercial. (Inaudible) also just joined our team almost a year was with Allergan for 26 years and left there as a Vice President for Global Strategic Marketing in Aesthetics. So, she’s got a lot of direct experience in the brand – market leading toxin and market-leading filler.
As far as our financial position, I’m going to apologize ahead of time that these are staying low – and in the IPO so you can do some math around that.
I’ll just highlight some Bear deal, we received an initial upfront payment of $43 million from Bear, we received a payment last year in May of $32 million, and then we’re eligible for additional $297 million regulatory and commercial milestones. And then we have escalating royalties available to us in mid to high teens based on net sales.
So, where this leads us for the coming year? Last year was tremendously successful year, we initiated our U.S. trials, we announced the data from European studies. We completed enrollment in our trials, we got IPO done and then we got those interim results from the study 26.
2013 is a little up on the slide but extremely importantly. MEA filing is expected by Bear this year, and we expect to announce our top-line U.S. and Canadian results in the middle part of this year.
So, that is a summary of the company and our current position and our milestones looking forward into 2013. I know there is a breakup session after this. So I’d love to have any of you, come who, if I pinch your interest and you have additional questions, please don’t hesitate to come by. Thank you very much.
[No Q&A session for this event]
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