UCB SA (UCB) Earnings Call Transcript

Good morning, good afternoon from my side. Welcome to our call introducing gene therapy. I'm happy to hand you over to Dhaval Patel, our Chief Scientific Officer, who will give you a brief presentation and who then, in the Q&A session, will be joined by his team, namely Martin Citron, Head of Neurology Therapeutic area; and Roger Palframan, Head of External Innovation & U.S. Discovery Science. This presentation and following Q&A session is covered by this disclaimer and safe harbor statement. We kindly ask you to read this carefully perhaps not now, but it's also available on our website, and be informed about this. I'm now happy to give over -- to hand over to our Chief Scientific Officer, Dhaval Patel. Thank you very much.

Hey, everybody. Thanks for taking the time to join. It's my pleasure to speak to you today about UCB's entry into gene therapy. As you all know, we have a strong legacy in the chemical industry starting many years ago, and then entry into biologics with the acquisition of Celltech in 2004 and in peptides with the acquisition of Ra Pharma earlier this year. We're today announcing our entry into gene therapy with partly Element Genomics in 2018 but today Handl Therapeutics acquisition and also a partnership with Lacerta. We believe that this really is an important component of the armamentarium we have to treat diseases. The main reason to do this is that it will contribute strongly to fulfilling our patient value ambition. We really do want to innovate by bringing differentiated solutions with unique outcomes for patients. And their goal is not just to achieve symptomatic treatment but is to cure their disease. And today, gene therapy offers one of the best possibilities to do that. And this is the reason for our entry. We've chosen AAV as the platform, and we've also chosen to start in central nervous system diseases, which is an area of strength for us. We want to be able to address the root cause of the disease and also be able to deliver medicines to the CNS better. This is an evolving technology. Much work still needs to be done, but we believe it's at a mature enough stage for us as a company to enter. Again, we'll start in CNS with -- and the diseases that are in scope are neurodegeneration, movement disorders and epilepsy. As we become more experts, we will expand into additional indications and populations. Our aim and hope is that we'll build a platform that represents 25% or so of our pipeline in the next 10 years. We've been doing this slowly and methodically and thoughtfully for the last 3 years. It really started with the acquisition of Element Genomics in 2018, which is a company that's a spin-off from Duke University in Durham, North Carolina, and really has developed many tools for functional genomics. And these tools are essential for us not only for our regular drug discovery activities but for gene therapy. Today, we've announced the acquisition of Handl Therapeutics, and I'll talk more about this in a minute. We have also built several activities and capabilities internally. I will not talk about those today but just to say that Handl and Lacerta are adding on to the activities we already have and the capabilities that we are building. So a little bit more about Handl. It was founded last year, headquartered in Leuven in Belgium. Right now, it already has more than 12 employees since this slide was made, with very strong gene therapy expertise and capabilities. And its focus is on gene therapy for complex neurodegenerative diseases. They've really been able to form a large international network of experts and really leaders in the fields in which they're working. And this includes KU -- the Catholic University of Leuven, the Centre for Applied Medical Research, or CIMA; and the University of Navarra in Spain; University of Chile; and also Kings College London in the U.K. They've been able to amass a really strong group of people with global capabilities and expertise as well as a proprietary AAV gene therapy capsid platform. Lacerta was founded in 2017 out of the University of Florida. And you may or may not know that the University of Florida is one of the leading institutions in AAV research and clinical translation. This particular spin-off is really interested in developing AAV-based therapies for CNS diseases. They have a number of capabilities, intellectual property and know-how for CNS diseases, and we have agreed to partner with them on one program with access to their platforms and proprietary capsids that we believe are essential for the type of diseases we want to treat. This particular slide may be a bit too detailed or may not be detailed enough. I'll just briefly go through it from -- on a high level, and we can come back to it if anyone has any questions around it. For us, we see gene therapy with several different components the biggest ones of which are the therapeutic gene itself that we want to deliver. Handl and Lacerta both help us with that with their academic partnerships as well as the partnerships we already have within UCB. The promotor drives the expression of that gene in whatever tissue or cell type that's desired. This is a special expertise that Element Genomics has and has already been instrumental in helping us define proprietary promotors and how to express the gene where we want, how we want and when we want. Next is the capsid, which is the protein shell that encompasses this genetic material and that delivers this to the cell type of interest. Capsid technologies are also proprietary, and we have gotten one specific technology with Handl that we believe is critical for our CNS ambitions and, of course, I already mentioned from Lacerta. Manufacturing is another critical component, and we are today working externally with Novasep and are building internal expertise. The gene therapy and AAV is a platform in itself and can do many different things. Today, most people focus on replacing the disease-causing or mutated gene product with a healthy copy of the gene. This is the low-hanging fruit and for specific genetic defects. AAV can also be used to silence genes, to shut off the proteins that are causing disease. We will get that with Lacerta. In addition, we believe gene therapy will be able to deliver a therapeutic protein to the brain. This is one of the most critical components for externally administered genes or -- sorry, therapeutics, which include small molecules and biologics. The hard part is getting them into the brain. AAV could allow us to do that. So I'll stop here with this particular slide and say that gene therapy is one of the final blocks that we have for our platforms to make therapeutic entities, and we believe that this is essential for going for patient value, which is for a cure. I will now stop here and invite questions. And I'll also invite, as needed, Martin Citron, who's the Head of our Neurology Therapeutic Area; and Roger Palframan, who is the Head of External Innovation and U.S. research, to join as needed. Antje?

Thank you very much, Dhaval. And I'm happy to start with the first question. [Operator Instructions] The first questions deal around the AAV platform. And I'm combining, if it's okay, a question from Peter Verdult, Citi and Jean-Jacques Le Fur, Bryan Garnier. So Peter is asking, "Can you talk about the viral vector technologies out there and why you went for AAV over lentiviral vector technology? What are the pros and cons of both?" And Jean-Jacques wants to know, "Why did you choose specifically AAV platform," sorry, "since it is known to have pre-existing antibodies in some people and after first injection for some of the patients?"

I'll let Roger start with that. Roger, can you answer about why we went for AAV?

Thanks. Oh, yes. So AAV enables us to deliver, first of all, to the type of cell type that we want to deliver to, and it delivers -- enables us to deliver the type of payload that we want to deliver, as Dhaval had mentioned. It also, compared to other viral vector technologies, has a more mature and better understood manufacturing process, which is something perhaps we can cover later. In comparison specifically to a -- to lentivirus, that's -- lentivirus is mostly used for cell therapy, for transfecting cells prior to cell therapy, although there are some people using it for direct injection. But because it integrates and whereas AAV doesn't integrate, we believe that the AAV offers us the right combination of properties to do what we want to do for our particular applications.

Yes. And also, to add to that, lentiviruses depend on a replicating cell to integrate, and the transduction efficiency is rather low compared to AAV. So we think we need to have many more cells transduced, and that's essential. Martin, do you want to take the next component?

So why for CNS specifically? The answer is that for CNS, we're looking at terminally differentiated cells, and there AAV is the ideal choice. Dhaval pointed out that we are not looking at replicating cells here. And therefore, AAV is the vector of choice. We wouldn't want to go with a lentivirus into terminally differentiated cells.

The question continues. It's exactly this. So perhaps you could elaborate a little bit more. But Jean-Jacques is continuing, "Since blood-brain barrier is very strong with low level of AAV vector able to cross, did Handl or Lacerta develop a specific mode of administration other than IV?"

Yes. That is correct. That is correct. Both our partners are looking at an administration other than IV, either intracerebral or intrathecal or intraparenchymal, to administer the AAV into the correct brain region and get the right amount of coverage.

If I may continue with a question from Peter Welford, Jefferies. "Has UCB a technology to enable readministration of a viral vector?"

I think that's a very good question. Roger, you've been thinking about this?

Yes. So we do think that the AAV technology will evolve in a number of ways, and we're in a current way at the moment. And obviously, one of those potential limitations is the -- are the immune response to the AAV. UCB is very well placed to advance AAV technology into the second and third ways which we will enable readministration, and that can enable either -- that can be either through modification of the capsid itself, modification of the payload and also, given our immunology expertise, modification of the host immune response. And we will be exploring all 3 of those different areas.

Excellent question. And this is really an important area because, as pointed out, it's estimated that 20% to 30% of patients have preexisting AAV immunity or antibodies that would prevent an appropriate infection if you delivered systemically. And the brain route of administration would likely go around that, but having a second administration is also critical.

The next question is coming from Trung Huynh, Crédit Suisse. He would like to have any color about the cost of these deals. If you could round this up with some color and general sense of additional R&D expenses for this short and midterm and if this does any -- have any impact on our margins.

Yes. Maybe this is something I can -- I should address. First of all, the -- we have been looking at getting into gene therapy now for 3 years, and I've sort of laid out some of that path. And we've seen all of the deals and the high valuations that occur. And as a company, I think we have decided that we want to appropriately spend our money and not just do a buy for -- and have a big splash with a lot of resource. So what we've done is had an internal build and be very thoughtful and careful about how we do the external build. With that stated, Handl has been a sort of build-to-buy. And we have worked together with the founders in deciding how to set up the company to get the right intellectual property, the capabilities, the people, et cetera. So it has not cost us very much. And I think that this is a really great thing for UCB. In addition, I would say the Lacerta deal is a standard numbers that you would see for any licensing deal of that origin -- or of that type at the stage that it is, which is preclinical. So overall, as we have been building it and building it into our 10-year plans for that amount of time, we plan for it in all of the numbers that you see externally with our R&D spend, with the margins, et cetera. So it should have no impact on that because it's been planned. Antje, would you add to that?

Yes. And thank you for confirming this. Indeed, as it has been planned, it's already included in our outlook and in our margin target. If I may continue with Lacerta. Also the question's still from Trung from Crédit Suisse on Lacerta. "What is the importance that you are placing in leaving Lacerta control of the initial clinical development aspects of the program?" He is asking because UCB has lots of experience and expertise developing CNS therapies and potentially perhaps could have accelerated some programs quicker than Lacerta could.

Yes. So perhaps that's a misunderstanding or a misstatement on our part. We will be responsible for the clinical development. We're asking Lacerta to get to the candidate stage and the early preclinical activities that are readily outsourced as far as any clinical development that will be run by UCB.

We have Christian both from Trung and Peter Verdult. Peter Verdult is from Citi. So interesting alliance here. They both would like to know, when do you expect the first projects to enter the clinic? Which indications? And if all goes well, what's your best estimate for getting to market with a gene therapy asset? As Peter and Trung very well know, UCB be is usually completing to the next milestone, so we will not discuss when we can go to the market. But perhaps you can talk about when you think these things can enter the clinic and which indications are we pursuing.

Yes. Maybe Martin, you can address that one.

Yes. So we are looking for, in the best case, a first clinical entry in 2023 into clinical trials with one of the neurodegeneration indications.

Yes. So I believe we can probably get there. We have a number of programs that we are doing, what you see externally and now -- and also internally. I expect that we will have candidates in the next 1 to 2 years and hopefully several of them. And at least one should make it in by '23, I would say, yes.

Jean-Jacques Le Fur from Bryan Garnier would like to know, "What portion of CNS diseases mentioned in the presentation, meaning epilepsy, movement disorders and neurodegeneration, are related to gene defects and could -- which could be potentially cured with gene therapy?"

So if I can take that. I would say it's a subset of these disorders, it's not the majority. But you have to look at really 2 categories. One is the rare diseases that you're already thinking of where you have a single gene defect, for example hereditary childhood epilepsy that could potentially be cured with a gene therapy. And then there's a sort of broader set of diseases where a gene therapy may come in for an actual sporadic indication. And an example of this that is currently discussed in the field are, for example, vectorized antibodies for certain neurodegenerative indications, but there are also some genes for rare indication that could potentially, if successful in the rare indication and spill over into the broader sporadic population. So it's very difficult to say a priority, what the percentage of patients is that we could touch. It's not the majority, but it's also not a tiny minority, I would say.

Yes. And just to add on that, look, the first therapies we're seeing in this space are to genetic defects that are rare and orphan. I think that's the low-hanging fruit. And of course, we will do that in the indications and places that we have expertise. You can imagine epilepsy is one of them. Then the ambition really is to go into polygenic diseases that have larger populations. We believe we will have the capabilities to do that.

I would go back to a question coming from Laura, from Laura Sutcliffe from UBS. "What is your rationale behind working with novel capsids as opposed to some of the more conventional and/or readily available AAVs? Given that novel capsids steepen the curve on manufacturing challenges, what advantages do you hope to gain or problems you hope to better to solve using these innovative delivery vehicles?"

Roger, I think for that question, maybe you take that one.

And so the proprietary novel capsids have been chosen for -- specifically for optimal AAV brain distribution for the indications that we mentioned, and they do address the known challenges for AAV to obtain what is very important, which is the sufficient brain area coverage. And to address the point on manufacturing, we are investing internally and with external partners on the bioprocessing for research and clinical stage. And so we will be addressing that as we move forward.