Nxera Pharma Co., Ltd. (4565) Earnings Call Transcript

Good afternoon, everyone. Welcome to the JPMorgan Healthcare Conference. I'm Seiji Wakao, Japan Pharma Analyst at JPMorgan. And it's my pleasure to introduce Chris Cargill, President and CEO of Nxera Pharma, and welcome him to the conference. Chris, please go ahead.

Excellent. Well, good afternoon. It's great to be back at the JPMorgan Healthcare Conference. Thank you to our bankers at JPMorgan, and thank you all for being here. If you're new to Nxera Pharma, we are not a traditional or average Japanese pharma company. From our research labs in Cambridge, we pioneered structure-based drug discovery against GPCRs with the NxWave platform. And today, we leverage our proprietary data assets, coupled with advances in structural biology and AI. And the results, we've delivered 30 drug candidates over the past 12 years. Now in Japan, where we are headquartered, we've built a lean development and commercial business modeled on the U.S. go-to-market model, where our bilingual teams guide approval and launch to deliver specialty and rare disease-focused medicines to patients with unmet needs in Japan. I'm pleased to say that both sides of the business are advancing to plan. The next wave drug discovery platforms productivity is unprecedented. We've now got 15 clinical programs that are being advanced by our partners across multiple therapeutic areas. On the commercial side in Japan, we've got 2 marketed medicines, PIVLAZ and QUVIVIQ. They continue to grow and make a real difference for patients. And just last week, we're actually very excited to announce the addition of a new medicine in our Japan portfolio, Vamorolone, an FDA and EMA-approved medicine for patients living with Duchenne muscular dystrophy, which we will now look to move rapidly through the regulatory process in Japan. So the growth trajectory for 2026 and beyond is actually very promising. So now for the detail, and I'll start with the commercial business here in Japan highlighted. So the business is performing very well, ahead of plan. PIVLAZ is now 3.5 years post launch and has established itself as the standard of care in Japan for the treatment of aneurysmal subarachnoid hemorrhage. With over 70% market share in the category, QUVIVIQ, which is our dual orexin receptor antagonist is 12 months post launch and has been steadily increasing sales for the treatment of insomnia with the great support of our commercialization partner, Shionogi. Now the 2-week prescription limit that applies to new medicines in Japan was recently lifted on this product, and we've already seen a material uptick in scripts -- in monthly scripts of that product through December. Now as I mentioned at the top, we secured an exclusive license from Santhera Pharmaceuticals in Switzerland to develop and commercialize Vamorolone in Japan. It's a next-generation corticosteroid treatment for Duchenne muscular dystrophy. So Vamorolone is approved and marketed as AGAMREE in the U.S. and selected EU countries, the U.K. and also China. Now corticosteroid therapy is currently the only established treatment for DMD in Japan. However, existing medicines come with a lot of serious side effects that limit dosing, which is where we expect Vamorolone to significantly improve the standard of care. So Vamorolone addresses the need for a much more tolerable steroid. Recent top line data from their long-term GUARDIAN study demonstrated that the long-term efficacy of Vamorolone compared to existing corticosteroids, markedly improved safety alongside a reduction in key steroid-related adverse events related to growth, bone health, eye health, et cetera. So we expect that this may allow us to dose earlier aged patients and at a higher dose and to maintain that treatment for much longer than with existing corticosteroids. And as you can see on the chart here, the consensus forecast for the product as it is being marketed in the U.S. and core EU markets indicates there's clearly a demand and high unmet medical need for this product. And the product plugs in very nicely to our Japanese commercial infrastructure. We have existing overlap presence of approximately 70% across university hospitals and specialty care centers. So this is going to enable us to launch rapidly and deliver this treatment to patients once the product is approved in Japan. And we see this really as just the beginning for us in Japan. We will add more rare neuromuscular and adjacent rare disease products to the franchise, which aligns with our mission to contribute to improving Japan's drug lag and drug loss problem and to bring innovative medicines to patients in Japan with a U.S.-style speed to market. So turning now to our innovation research labs in the U.K. and the productivity and progress of the NxWave drug discovery platform. This is how it looks like here. Here's a snapshot. There's a lot of programs ongoing through Phase I, Phase II with partners, and we've also got a lot going on in discovery. So we recently refocused this portfolio with [indiscernible] impact. So we announced [indiscernible] programs targeting high potential targets. We're looking at chronic weight management, obesity-related comorbidities and other endocrine disorders. We expect our GPCR know-how and flexible chemistry will truly deliver best-in-class medicines to support the combination treatment approaches that are likely to be required. And that's exactly what the NxWave platform is primed to deliver on. So on this slide, you'll see some Phase II-ready clinical assets and also the current Phase II clinical assets. So NXE'149 and NXE'744 in the middle of the page here, these are Phase II-ready novel clinical candidates in the neuropsychiatry and immunology and inflammation areas. These programs have now completed their early clinical packages, and they are available for partnering with a leading biotech or pharma company. No further investment is required from us for these programs. NXE'732, which is a combination immunotherapy for advanced solid tumors. It's moving forward as planned. It's currently undergoing a Phase IIa expansion study and execution and financial contributions are provided by our partner, CRUK. So now for the detail. So as I mentioned, NXE'149, it's a neuropsychiatry product. It's a first-in-class GPR52 agonist, offers a novel mechanism that addresses, hopefully, the positive, negative and cognitive domains of schizophrenia. So NXE'149 has successfully completed Phase I studies. We saw predictable PK and CSF sampling confirmed high levels of central penetration. Pharmacodynamic measures showed evidence of engaged brain circuitry relevant to the treatment of schizophrenia and further demonstrated increased alertness, which was reflected in the better cognitive performance following 10 days of treatment with NXE'149. So as I mentioned, the product is Phase II ready, and we are actually going to be launching a competitive partnering process for this program following the conference. We want to put this program in the hands of a leading biotech or pharma partner with a strong neuropsychiatry franchise. Turning now to NXE'744. Now this is a gut-restricted selective EP4 agonist designed to promote mucosal healing in patients with IBD. So currently approved IBD agents are immunomodulatory in nature. So we see a good synergy in combining an anti-inflammatory approach with a barrier repair approach. SAD/MAD studies have completed. There was no concerning adverse events to date and importantly, no systemic exposure was observed with the program. Previous attempts by other companies and others to agonize the EP4 receptor had resulted in early signals of clinical efficacy, but they were limited by systemic safety issues. With NXE'744, we've got a gut-restricted profile, which was confirmed with high gut tissue concentrations measured following oral dosing. We've also completed an ulcerative colitis patient cohort, which has completed dosing and the PK data readout is imminent. We've done an indomethacin challenge cohort that is also completed with final data due to be read out by March 2026. The interim analysis is currently ongoing. This candidate is Phase II ready. And similar to our candidate in schizophrenia, we're going to launch a competitive partnering process to place this candidate in the hands of a leading biotech or pharma company with a strong I&I franchise. NXE'732, this is our potent selective EP4 antagonist aimed at reversing immune suppression in solid tumors. So in the Phase I study, we were very encouraged to see 2 partial responses, one in microsatellite stable colorectal cancer and PD-L1 resistant renal cell carcinoma, and we saw meaningful tumor shrinkage of approximately 30%, it's an attractive mechanism. We recently saw a competitor, Ono Pharmaceuticals, demonstrate mechanistic proof-of-concept in gastric cancer with the same mechanism. Our data with NXE'732 also showed very strong safety and target engagement with no dose-limiting toxicities, which we think supports its potential best-in-class profile. And as I mentioned earlier, it's in a Phase IIa expansion study across 4 tumor types in combination with atezolizumab, and it's being led by Cancer Research U.K. as our operational partner. As I communicated at the top, the NxWave platform is actually now primed to deliver the kind of next-generation of small molecules for obesity, metabolic and endocrine disorders. We launched this broad pipeline, primarily targeted to treat long-term weight maintenance and associated obesity-related comorbidities with convenient oral small molecules that can be manufactured and delivered at scale. So we've got active discovery programs to several receptors, including GLP-1, GIP, amylin plus multiple others. And we're very focused on delivering safe, tolerable molecules that will expand access for very diverse patient populations. So we look forward to delivering more news on development candidates over the next 12 to 18 months. So now moving on to the assets that are in our clinical portfolio that are with partners. So we have a long-standing partner, Neurocrine Biosciences. And they're advancing the world's most comprehensive portfolio of muscarinic agonists to treat neuropsychiatric disorders. Now all the molecules that you see here on the slide were licensed from Nxera, demonstrating the power of our research labs, the NxWave platform and, of course, our GPCR drug discovery capabilities. Now Neurocrine's muscarinic portfolio has 5 clinical stage programs spanning, selective and preferring M1, dual M1/M4 and M4 orthosteric agonists. So they're designed to broadly address the cognitive and psychotic symptoms across a wide range of neuropsychiatric disorders. Now the most advanced candidate is called Direclidine, compound code is NBI-568. This is a selective muscarinic M4 agonist. It's in Phase III registrational studies for schizophrenia. and in a Phase II study for bipolar mania. The top line data on Phase III, we believe, is on track for the end of 2027. So that will be a pivotal moment for our company. If there is success there, that will be one of the first -- will be the first molecule to have come out of our labs and gone through approval and hopefully a launch. So we're looking very much forward to the end of 2027 there. That's a big focus for us as a company. NBI-570 is a dual M1/M4 agonist, which has also recently initiated a Phase II trial in schizophrenia in the fourth quarter of last year. And there are additional Phase I studies of early-stage programs ongoing, underscoring both Neurocrine's momentum and commitment to this important therapeutic area. Another partner that we have is Centessa. So Centessa are advancing a portfolio of potential best-in-class orexin 2 receptor agonists, and these were discovered using our NxWave platform. The most advanced asset, ORX-750, is in development for the treatment of narcolepsy type 1, 2 and idiopathic hypersomnias. The initial Phase IIa interim data, which was released last year, marked the first robust demonstration of this oral orexin 2 agonist addressing wakefulness needs of patients across all 3 indications. So we expect to see them initiate a registrational program shortly in Q1 2026. So that's also something that we're very much looking forward to. So now to the big picture for our company. Our long-term goal really is to build a very high-growth highly profitable Japanese biopharma company. We are aiming for JPY 50 billion of annual revenues and operating profit margins above 30% by the end of 2030. And we think that, that would help us very much stand out from the pack when we talk about midsized pharma companies that are listed in Japan. So to deliver this, the pipeline is focused in areas where the science is the strongest and the biology is most validated and where there is clear unmet medical need. Wave 1 should deliver launches before the end of 2030. The Japanese commercial business will deliver the bulk of the stable and growing revenues from its rare and specialty-focused portfolio of medicines. And U.K. research will deliver the balance via milestones, royalties, and those will come from existing or new partners. Wave 2 really represents upside. These are products that can potentially launch in the 2030 to 2035 window. And if successful, would deliver a very significant step change in the directory and trajectory of the business. So looking ahead to 2026, we actually expect a number of potential catalysts. They'll be both internal and partner-led, particularly watch for the clinical progress of Centessa and Neurocrine. You can see there's a large weighting of milestones in the first quarter and the first half there. We also have discovery collaborations, which I didn't touch upon that are ongoing. They've been ongoing for a number of years, and we expect milestones from AbbVie and Lilly across those [both] collaborations. And of course, as I mentioned earlier, there is 2 Phase II-ready programs that we are very much expecting to have competitive partnering processes for. And those, whilst not baked into our catalysts for the year, are transactions that we are very much seeking to transact upon ideally before the end of the first half, but hopefully by the end of the year. And so for us, as a company, internally, we'll be focused on execution as we build towards that 2030 vision. We really want to lead the next era of medicine in Japan. And the best way to do that is to build a very high-growth, high-profit enterprise, one that can consistently reinvest in the best innovations for patients. That was everything for me today. So thank you very much for your time. The management team and I are available for questions. Thank you.

Thank you, Chris. I will start Q&A session. And from here, Nomura-san, CFO; and Patrik Foerch, Chief Science Officer, will also be joining us. Thank you. So I want to start with my question. Firstly, regarding the partnering. So for 2026 partnering, how confident are you in the partnering prospect for GPR52 in schizophrenia or the EP4 agonist in IBD?

Yes. Thank you. As I mentioned, we're very confident. And the reason I can say that we are confident is our track record in this area is very strong. So actually, all of those molecules that you've seen in the presentation that are with Neurocrine were originally with Allergan. We've got a number of other molecules in our portfolio that are now moving through the clinic that were originally with other pharmaceutical companies. So we've got a strong track record in basically getting molecules back, adding to them if they need to be added to and then repartnering them out. So in this situation, we did get the molecule 452 back from Boehringer Ingelheim, and that was announced just before Christmas last year. So that one is one that is genuinely Phase II ready and we don't believe that the reason that it came back to us was not for any adverse events or anything seen in the clinical data. It was purely a strategic decision. Pharmaceutical companies, large pharmaceutical companies do this all the time. The assets come back to us, and we package them up and then we re out-license them again. So that's what's happening with 52. With the EP4 agonist, we just back ourselves in to absolutely license that product out. I might just let Patrik talk a little bit perhaps about our strength and conviction in the data behind why we think we can confidently out-license these programs.

Certainly, around EP4, we have a very strong data package from our Phase I data. Our hypothesis that we get a gut-restricted compound is absolutely confirmed. We have gut restriction. We know that this is not only the case in healthy volunteers, we also see a very similar pattern in a disease population that confirms our hypothesis together with the modality that we are tackling both the inflammation as well as gut repair that resonates very well with the key players in the field. We had [indiscernible] team. We had already a few discussions with potential partners, and that resonates very well. On the barrier function, we also are looking at a challenge model where we are at a stage of interim analysis, which looks very, very promising that we can really confirm that we have a clear target engagement and see a clear effect for our EP4 program, addressing the liabilities whatever have seen for a systemically exposed EP4 agonist program. So very confident around the EP4. Around GPR52, we all know this is a very novel modality, 2 key regions in the brain, which are addressed. And where we see great potential is that we're addressing both the positive as well as the negative symptoms in schizophrenia, really setting us into a very different path compared to how other people are trying to address the unmet need in schizophrenia.

Okay. So I'd like to know more on GPR52. So I'd like to know the reason why Boehringer Ingelheim did not exercise this option. And could you elaborate on the Phase I data? Maybe data is favorable, but paying [indiscernible] at this point.

Yes, no worries. As I sort of alluded to in my first response, we don't know exactly why the decision was made, candidly, because they didn't provide one. However, we have seen the data. So we don't think that the decision is related to anything with the program. We think it is more a, let's call it, a very senior level strategic decision to not participate in this disease area. So I think it's what you would classically call a cessation of activities due to strategic reasons, not because of anything that they have seen in the clinical data. But I mean, Patrik, you can confirm, of course, -- it's what we can say.

It's -- we don't know the real reason, but certainly looking at the data from what we've seen together with the BI team, we are all very confident that the novel biology translates. It's safe, it's well tolerated. We have clear PK. We have clear engagement of the brain region circuitry that we would expect. We have multiple readouts that are confirming that from our perspective, this is not really just the non-exercise option, I don't think is driven by the data that we generated. It's probably -- I don't know whether it is related to some of the previous schizophrenia experience. We can't tell. Certainly, from our perspective, it doesn't seem to be data-driven.

Okay. What is the uniqueness for these drugs? I think mechanism is differentiated.

Absolutely. It's a novel mechanism. It's got great potential to address multiple components of schizophrenia, and that's why we are so excited. And that's why we invested quite heavily into our Phase I studies to really prove the mechanism. That's why we are very confident that we can partner this with the right partner. Again, we are not equipped to run a Phase II study, but the whole program is absolutely Phase II ready.

Yes. I think I would just add something, Patrik. We know there's a number of neuropsychiatry players that have had a go at this target and not been successful in getting candidates into the clinic. We have been. With our platform and our insights, not only have we got one into the clinic, we've gone through 1a/1b and we've got a Phase II-ready asset that any neuropsych player that wants to have another go at this target can pick up and move straight into a Phase II study.

So if you have a question, please raise your hand, wait for microphone. Okay. So I'd like to move on the next question about BioMarin for DME treatment. What is your development and submission plan for BioMarin? Are you considering another -- and also are you considering another in-licensing opportunity? Or do you plan to pause in-licensing for a while?

Thank you. That's a good question. Yes, this is a really interesting one. So Japanese PMDA and all regulators in Japan in general are very focused on solving the very widely publicized drug lag, drug loss issue. And they've sought to do that by also offering incentives for things like pediatric drug development or orphan drug development. The reason I say that is this product ticks all of those boxes, right? It's a pediatric -- effectively starts as a pediatric medicine. We're very confident it will receive orphan drug designation. The drug is approved in all the key markets around the world, but it has never been developed for Japan. So it's there to solve the drug lag, drug loss issue. So with all of that information, we will be approaching the PMDA for a formal consultation as soon as possible now that we've executed the in-license. And the goal is we're actually going to try and be quite candid with them and see if we can persuade them to skip the Phase III clinical development locally, if possible. Now we've seen that done before in ultra-rare diseases in Japan. We haven't seen it done in these sorts of diseases, but we think that there's a lot of long-term safety data associated with this product. We think we have a credible argument to make. Now if we're unsuccessful, then the base case scenario is a small bridging study and a Phase III will be required and the launch time line in the base case would be 2029. But anything that we can do to accelerate that is something that we'd be really focused on.

Okay. Base case 2029?

Base case is 2029 for launch if we have to do bridging and a Phase III study. And just the associated time lines for talking to the [indiscernible] and getting pricing, if skipped 2027, which is obviously a win for everybody. It's a win for those problems that I mentioned that everyone is trying to solve, and it's a win for patients.

Okay. Understood. Next question about restructuring. So could you tell me the background behind the restructuring announced last year? Has it already been completed?

Yes. The restructuring has been completed. The restructuring is largely as a result of some of the things we've discussed today. We have completed early clinical work on the GPR52 program on the EP4 agonist program. And those programs are now earmarked to be partnered. We do not have any other programs that are ready to move into Phase I for the time being. So the restructure was really focused around -- we had some resource that was not really required in that area given the fact that there's no active programs to work on. So that was largely part of the decision there. It was around the streamlining of the portfolio basically. And with that comes an associated cost reduction, of course, which is also helpful because we are working very hard to reset the cost base. For a number of years, we've seen a lot of inflation through not only the costs of conducting external research, but also just having a presence in the United Kingdom and other markets. Now that is starting to calm down, but we have to be cognizant of how much money we spend. So an added sort of focus of the restructure was really around a bit of a reset of the cost base to put ourselves in a stronger position to achieve profitability as early as possible.