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Edited Transcript of ALDR earnings conference call or presentation 2-May-19 9:00pm GMT

Q1 2019 Alder Biopharmaceuticals Inc Earnings Call

Bothell May 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Alder Biopharmaceuticals Inc earnings conference call or presentation Thursday, May 2, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Carlos Campoy

Alder BioPharmaceuticals, Inc. - CFO

* Paul D. Streck

Alder BioPharmaceuticals, Inc. - Chief Medical Officer

* Robert W. Azelby

Alder BioPharmaceuticals, Inc. - President, CEO & Director

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Conference Call Participants

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* Alexandre N. Bouilloux

Mizuho Securities USA LLC, Research Division - Research Analyst

* Benjamin Jay Burnett

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* Daniel G. Wolle

JP Morgan Chase & Co, Research Division - Analyst

* Danielle Catherine Brill

Piper Jaffray Companies, Research Division - VP & Senior Research Analyst

* James William Birchenough

Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst

* Jeff Hung

Morgan Stanley, Research Division - Equity Analyst

* Matthew W. Luchini

BMO Capital Markets Equity Research - Analyst

* Owen J. Drinkwater

RBC Capital Markets, LLC, Research Division - Associate

* Sumant Satchidanand Kulkarni

Canaccord Genuity Limited, Research Division - Analyst

* Vamil Kishore Divan

Crédit Suisse AG, Research Division - Senior Analyst

* Michael Horowicz

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Presentation

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Operator [1]

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Good afternoon, and welcome to the Alder Biopharmaceuticals First Quarter 2019 Financial Results Conference Call. (Operator Instructions) Please be advised that this call is being recorded at the company's request.

At this time, I'd like to turn the call over to Michael Horowicz of Stern Investor Relations. Please proceed.

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Michael Horowicz, [2]

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Thank you, operator. Good afternoon, and thank you for joining us. Just after market close today, we filed our Form 10-Q for the first quarter of 2019 with the Securities and Exchange Commission and issued our financial results and corporate highlights press release, both of which are available in the Investors section of our website at www.alderbio.com.

You may listen to a live webcast and listen to a replay of today's call on the Investors section of the website. Today's speakers are Bob Azelby, Chief Executive Officer; Dr. Paul Streck, Chief Medical Officer; and Carlos Campoy, Chief Financial Officer. Nadia Dac, who just joined as Alder's Chief Commercial Officer; and Erin Lavelle, Chief Operating Officer, will be available for the Q&A portion of today's call.

Before we begin, I'd like to caution you that during today's conference call, we'll be making forward-looking statements regarding future events or the future performance of the company, including statements about possible future developments regarding clinical, regulatory, commercial, financial and strategic matters. Actual events or results, of course, could differ materially. We refer you to the documents that Alder files from time to time with the SEC, and in particular, the company's Form 10-Q for the quarter ended March 31, 2019, which was filed with the SEC today, May 2, 2019. These documents, which are available on the SEC's website, contain and identify, under the heading Risk Factors, important factors that could cause actual results to differ materially from those contained in any forward-looking statements.

With that, let me pass the call over to Bob.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [3]

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Thank you, Michael, and welcome, everyone. As many of you know, the mission of our team here at Alder is to forever change the migraine treatment landscape. And we are driven by the opportunity to develop and commercialize treatments that allow patients debilitated by migraine to get back to daily living.

We were pleased that on April 22, 2019, the FDA accepted our BLA filing for our lead investigational product candidate, eptinezumab, our monoclonal antibody inhibiting calcitonin gene-related peptide, or CGRP, for the prevention of migraine.

We subsequently were advised by the FDA in our day-74 letter that it has set the PDUFA target action date of February 21, 2020.

We are continuing to scale the organization, and we expect to be ready to competitively launch epti in Q1 2020 following approval. We have continued to build out our team with several key hires, adding significant commercial expertise. Notably, Nadia Dac recently joined Alder as Chief Commercial Officer, bringing over 25 years of U.S. and global commercial experience, having launched multiple neurology products in competitive markets while in leadership roles at Biogen, Novartis and AbbVie. Additionally, we have added seasoned marketing, market access and commercial operations team members at various levels throughout the organization.

We are successfully scaling our medical, manufacturing and G&A infrastructure as well. We further enhanced our medical presence, such as increased opinion leader engagements and our greater presence at next week's AAN meeting. And we continue to produce commercial product to meet forecasted demand at launch. As we stated on our Q4 call, we have a supply agreement with Sandoz that provides for the manufacture of guaranteed quantities of eptinezumab drug substance for a 5-year term running through 2023. This puts Alder in a position to meet forecasted commercial demand not only in the U.S., but also globally beyond 2023.

Turning to the product itself, we believe in eptinezumab's unique clinical profile and its potential to meet the needs of many of the approximately 13 million migraine patients who are candidates for prevention therapy.

As we have mentioned in the past, migraine is far more than just a headache. It's a debilitating neurological disease with far-reaching effects. Those with migraine often experience sensitivity to light, sensitivity to sound, suffer from gastrointestinal issues, sleep disorders and may have impaired cognitive abilities, which may lead to anxiety and, in many cases, depression. Essentially, they are living with the reality of migraine every day, not just the day of a migraine attack.

Just to further expand on this market, research done by migraine.com indicates that a 1/3 of migraine patients surveyed said they have lost a job due to their migraine. And about 2/3 state this disease has negatively impacted professional advancement as well as their personal relationships. However, this population is determined. Many of them have tried and will continue to try multiple therapies and drug classes as they search for relief. It's no wonder that our market research shows they are looking for therapies with robust and sustained efficacy that take effect rapidly.

In our market research, nearly 90% of patients surveyed would choose a product based on its effectiveness, and 80% of them would choose a product based on speed of prevention effect. Our market research also supports our belief that many patients would prioritize relief of the disabling symptoms over convenience of administration. In fact, over half of the patients we surveyed, when given the choice, would choose an infusion product with epti's clinical profile.

If approved, we believe that eptinezumab's rapid onset of preventive effect; high 50%, 75% and 100% responder rates; and a safety profile similar to placebo, as demonstrated in our clinical trials; combined with a 30-minute quarterly IV dosing, will be attractive to these efficacy-seeking patients and the physicians who treat them.

From a broader market perspective, we are encouraged by the uptake of the anti-CGRP since last May, with over 300,000 new-to-brand Rxs having been written. Alder is targeting roughly 3,000 proceduralists who are high-volume clinicians, each seeing an average of 150 to 200 migraine patients monthly, aligning well with epti's profile, because they perform in-office procedures, including IV therapies, 94% of them have access to IV capabilities, 63% have IV capabilities in their office and 45% stated they would expand or add IV capabilities once epti becomes available.

We've been interacting with physicians within this group to solicit their feedback on epti. Their feedback suggests that while they view the new anti-CGRP subcutaneous products as being fairly comparable to each other in terms of their performance, they are looking forward to epti's uniquely differentiated clinical profile and IV mode of administration.

During the quarter, we completed a 250-physician quantitative demand study, which once again estimated epti's share of the anti-CGRP market to be in the range of 20% to 30%. This most recent market research study is consistent with the ones we have highlighted in the past. We have also had significant engagements with commercial payers over the past few months. These payers also view epti as being differentiated due to its 100% bioavailability immediately after a 30-minute infusion, high response rate and a rapid onset of prevention as well as epti's potential for enhanced compliance due to its in-office quarterly IV administration. We feel confident that at the time of launch, payers will make epti widely available for their plan participants.

During our Q4 2018 financial results call, I spoke about how Alder is focused on becoming a fully integrated biopharmaceutical company and our excitement about ALD1910, our preclinical asset which has the potential to address another subset of migraine patients who may not respond to anti-CGRP therapy. Paul Streck, our Chief Medical Officer, will provide details on that program in a moment.

Additionally, through our life cycle management prioritization program last fall, we believe that there is a significant opportunity for eptinezumab, leveraging its 100% bioavailability and rapid onset of prevention, as an acute treatment for migraine. We reached this conclusion following a clinical trial feasibility study and a rigorous commercial assessment combined with expert clinical consultations.

As Paul will discuss, we plan to initiate a Phase III clinical trial of epti in the second half of 2019 to investigate this opportunity. If approved for prevention of migraine and if successful in treating an active migraine in clinical testing, eptinezumab would be in a unique position as the only anti-CGRP monoclonal antibody indicated for the treatment and prevention of migraine.

In summary, we're excited about the broad potential for eptinezumab and are working hard to ensure its clinical and commercial success, while also attempting to enhance the portfolio by developing additional indications and new therapies that could potentially help migraine patients in the future.

With that, I will turn the call over to Paul.

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Paul D. Streck, Alder BioPharmaceuticals, Inc. - Chief Medical Officer [4]

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Thanks, Bob. First, I wanted to share my increasing enthusiasm since coming to Alder in January. I've been able to see the positive responses from key opinion leaders and the busiest headache-focused practices regarding our eptinezumab program. And it's clear, we have a unique opportunity to improve treatment outcomes in patients suffering with a debilitating condition. I've also gotten to know the Alder team, and I'm extremely pleased to see the commitment, technical expertise and enthusiasm. We believe we've submitted a high-quality BLA and have successfully shifted from a single clinical focus to effectively executing on multiple key clinical development and commercialization initiatives.

Given eptinezumab's magnitude and speed of response, I'm excited about the potential opportunities to explore additional indications in order to impact a larger number of migraine patients.

Before I discuss eptinezumab in greater detail, I'd like to walk -- update you too on ALD1910.

ALD1910, as you may know, is our highly -- high-specificity, high-affinity neutralizing monoclonal antibody with reactivity to PACAP-38, or pituitary adenylate cyclase-activating peptide. PACAP-38 has emerged as an important signaling pathway in the pathophysiology of migraine and is believed to be distinct from CGRP. As such, we believe PACAP-38 represents an attractive novel target for preventing and treating migraine. Evidence indicates that PACAP-38 and its 3 known receptors, PAC1, VPAC1 and VPAC2, are expressed in the regions of the brain known to be associated with migraine symptomatology. We are very encouraged by our preclinical work to date, which indicates that ALD1910 prevents the signaling of PACAP-38 to all 3 of these receptors.

Our acute toxicology studies have not indicated any adverse treatment-related effects by ALD1910 in 2 species. Similarly, 28-day multi-dose studies have completed their main treatment phases with no treatment-related effects observed. The preclinical program is on track for completion this summer, and we expect to initiate a first-in-human clinical study of ALD1910 by the end of 2019.

Now I want to return to eptinezumab, currently under review with the FDA, and our plans to seek to expand our proposed prevention label into the acute setting. When we think of treating and preventing migraines, there are 3 reasons that bring patients to their physicians for a therapy.

First, for a new patient appointment. A majority of chronic patients and about 1/3 of the episodic patients who are coming to a clinician for evaluation will have a migraine on the day of their visit.

Second, they come for a planned follow-up appointment. There is a large number of patients returning to their physician as planned, and their therapy may require adjustments, has become ineffective or has worn off. And finally, patients come for an urgent intervention. Many episodic and chronic migraine patients will present to their physician or to the ER in crisis.

Considering these scenarios, there may be a therapeutic rationale to prescribe epti in each of them, and that's why we're excited to potentially provide physicians with the tool that manages a highly debilitating disease in the immediate term along with the previously demonstrated preventive efficacy over the following 12 weeks.

As Bob mentioned, in the second half of 2019, we expect to initiate enrollment in a Phase III study to investigate epti's utility in the acute setting. Our depth of knowledge with the pathophysiology of migraine and our experience with eptinezumab give us confidence in this study. We conducted post-hoc analysis of time to migraine resolution in 3 of our previous eptinezumab clinical trials in patients who entered those trials with an active migraine. We observed 2-hour resolution rates in these patients, which demonstrated a clear trend from which we've been able to design a well-powered Phase III trial to detect a meaningful difference versus placebo.

For this trial, we're planning to examine a 100-milligram eptinezumab dose level versus placebo, with the co-primary endpoints of patients achieving pain freedom and the absence of most bothersome symptom at 2 hours post-treatment

We've submitted our protocol to the FDA and are actively preparing to initiate pre-study activities. We continue to see significant opportunity for eptinezumab in the preventative setting. We believe it also has the opportunity to bring improved clinical outcomes to a broader population of patients, assuming successful clinical results in acute migraine.

I'd now like to turn the call back to Bob to discuss the commercial opportunity for epti in the acute setting.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [5]

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Thanks, Paul. Our commercial assessment identified 3 incremental opportunities for eptinezumab, if we are successful in securing a product label stating epti is indicated for the treatment and prevention of migraine. The first and largest incremental commercial opportunity is in the prevention marketplace. Our market research with physicians demonstrated that having a treat-and-prevent label would provide significant uplift in terms of market share. The increase would come from physicians who're prescribing epti to more patients as well as an overall increase in the number of physicians that would now be willing to use epti because of the acute indication.

Keep in mind, in our PROMISE 1 study in episodic migraine, these patients averaged 9 migraines a month, so that means approximately 30% of these patients saw their clinician during a migraine attack. In our PROMISE 2 study in chronic migraine, these patients averaged 16 migraines a month, indicating that greater than 50% of these patients saw their clinician during a migraine attack. The feedback from our market research demonstrated that a product that has both a treatment and prevention label will be attractive to both the physicians that treat the migraine as well as their patients.

The second incremental opportunity for eptinezumab with both a treatment-and-prevention label would be in the emergency room setting. A large number of episodic and chronic migraine patients end up in the ER when they are in crisis, meaning their current therapies do not work and the patient has run out of treatment options. The goal of the ER physician is to triage these patients and try to relieve their symptoms quickly. However, it is common for these same patients to return to the ER days later when their symptoms come back. We believe the ability to treat and prevent migraines in this setting could be an attractive option for ER physicians, institutions and to the patient by minimizing the repeat visit.

The third commercial opportunity for epti with both a treatment and prevention label would be in those patients who are suffering from debilitating migraine, but average fewer than 4 migraines a month, the threshold for reimbursement of prophylactic therapy. These patients, 80% of whom are women in the prime of their careers and family obligations, can be sidelined for multiple days a month, battling through their migraines, limiting their career opportunities, negatively impacting their personal relationships and creating challenges for their family members. Our market research indicates there are a large number of patients willing to pay out of pocket for a therapy that treats and prevents migraine and allows them to be more effective in their personal lives and their careers.

As you can see, we are excited about the potential to bring epti to the market for the prevention of migraine and continue to support the need -- needed commercialization efforts. We are further encouraged by the life cycle opportunities for epti as we look to expand the proposed epti indication and to change the treatment paradigm. Our objective is a label that has both a treatment and prevention indication in order to positively impact more patients, battling through this serious neurological disease.

With that, Carlos Campoy, our Chief Financial Officer, will take you through our financial results. Carlos?

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Carlos Campoy, Alder BioPharmaceuticals, Inc. - CFO [6]

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Thank you, Bob, and hello, everyone. During the first quarter of 2019, our epti program drove a significant portion of our R&D and G&A expenses in support of our commercial readiness activities.

As of March 31, 2019, we reported $499 million in cash and cash equivalents, investments and restricted cash compared to $412 million as of December 31, 2018. This includes net proceeds of $159 million from an equity financing in March. Please note that we will provide brief first quarter results on this call and refer you to our period-over-period operating results detailed in this afternoon's press release and Form 10-Q filed with the SEC.

In the first quarter, R&D expenses totaled $70 million. G&A expenses were $45 million, which include a $26 million loss contingency provision related to a dispute over a contract we terminated for breach by the other party. Our net loss was $119 million or $1.63 per share. These results generally reflect our planned expenditures to advance the epti program and to position the company for commercialization.

With respect to our financial outlook, following our reported Q1 results, we continue to expect that our full year 2019 net cash used in operating activities and purchases of property and equipment will be in the range of $285 million to $315 million. Much of the spend is focused on ensuring that we are prepared for the potential launch of epti in the first quarter of 2020, including advancing its supply chain, building commercial inventory, continuing to build out our commercial footprint and the other prelaunch market-readiness activities.

We estimate our available cash, cash equivalents, investments and restricted cash as of March 31, 2019, will be sufficient to meet projected operating requirements through the anticipated launch of eptinezumab and into late 2020.

With that, I will turn the call back to Bob.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [7]

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Thank you, Carlos. In summary, we are really pleased with our execution in recent months and are confident in the capabilities we are putting in place to take advantage of our near-term opportunity by successfully launching epti early next year. We have made the decision to continue to invest in epti's life cycle management, creating a mid-term opportunity to leverage epti's unique clinical profile to continue to differentiate it in the marketplace as well as expand the number of patients that may benefit from epti.

Finally, we understand that as good as epti's clinical profile looks, there is still a need to bring additional novel therapies to the market and that's why we are pursuing alternative pathways and the development of ALD1910, creating a longer-term opportunity for Alder. I look forward to sharing our continued progress, as we advance towards epti's potential commercial launch in the first quarter of 2020.

With that, we'd like to open the call to your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question is from Brian Abrahams from RBC Capital Markets.

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Owen J. Drinkwater, RBC Capital Markets, LLC, Research Division - Associate [2]

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This is Owen on for Brian. Congrats on the recent BLA acceptance. I have 2 questions, if I may. First, regarding the new acute study. You talked a little bit about the possibilities in the ER setting. Do you think a positive result in that study is required for any sort of ER use? Or might you expect any potential off-label use, given the profile, even if acute wasn't part of the label? And then just switching gears to discounting regarding some of the details in the space over the last week with some of your competitors noting potential rebates in the 40%-plus range. Is this in line with your expectations for the market? And would you expect any differences in discounting given the different profile of your product?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [3]

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Sure. So starting with the acute study and the impact in the emergency room. Obviously, we wouldn't be able to promote anything in the emergency room without an acute indication. However, I do think it would be important for -- to secure an acute indication to get uptake in the ER because those clinicians are looking to problem solve and triage that patient quickly and provide relief. And so we think the acute indication would be an important element for significant ER use.

As it relates to your second question on discounting and the 40% range that you spoke to, we're not terribly surprised by it because there's 3 players, they're working through the pharmacy benefit, and that's what PBMs do, right? When you have products that are similar to one another and they think they're a commodity, then at the end of the day, they start working down the discount. That's why we're really pleased that we are in the medical benefit. And as you know, those 2 are distinct processes used by managed care plans. So we'll be dealing with the Medical Director and that we won't have to go back every year to renegotiate contracts because it's basically mitigated by ASP. You can't take crazy price increases due to average selling price. And so I don't think it was a terrible surprise, and we feel great that we're in the medical benefit.

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Operator [4]

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Our next question is from Jessica Fye from JPMorgan.

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Daniel G. Wolle, JP Morgan Chase & Co, Research Division - Analyst [5]

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This is Daniel for Jessica. Some physician feedback has suggested they view eptinezumab as a potential option for patients who are not doing well on injectable CGRPs. Do you expect to position the product for this type of use when you launch or just focus on capturing patients new to the CGRP? And second, what should we expect out of the presentation at AAN?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [6]

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Sure. So the first question, I'll take, and then the second question, I'll turn over to Paul. So as it relates to -- when we launch this product in the marketplace, we do not believe that we're going to be second line to any other monoclonal antibody out there. We think we'll have to jump through the hurdles of failing 2 prior therapies, similar to what the subcus do today. But our target market is going to be for those patients that are debilitated, that are struggling to get their life back, struggling to go to work. And the fact that we can provide robust efficacy, deep responses, 50%, 75% and 100%, and then offer that prevention starting within 24 hours, we think that will be highly attractive to not only the physicians, but the patients as well.

Now with that being said, do we think that patients who have tried a subcu CGRP and have had an inadequate response? We've been told by opinion leaders that they think that they would go to eptinezumab because they like the fact that they would get 100% bioavailability. So they get the full effect of the product right at the end of the 30-minute infusion. And if eptinezumab doesn't work for the patient, then they would rule them out as a CGRP candidate. So again, going back, our target market is going to be that highly impacted patient, but we do see us getting inadequate responses from the other products. Second question, I'll turn it over to Paul for AAN and the data we'll be sharing.

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Paul D. Streck, Alder BioPharmaceuticals, Inc. - Chief Medical Officer [7]

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Yes. Thanks, Bob. Certainly excited going into AAN this year. I think if we look at the themes of the presentations that we are putting forth, they would include consistency of effect that we see across trials; certainly, the longer-term efficacy and durability of response of eptinezumab; impact on quality of life; and certainly, how early response impacts this; and finally, the impact of epti on most bothersome symptoms, which I think is really along the lines of this not just being a headache. So those are -- will be presented in 3 oral presentations and 6 poster presentations, and would refer you back to our press release from last week outlining these.

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Operator [8]

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Our next question is from Difei Yang from Mizuho.

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Alexandre N. Bouilloux, Mizuho Securities USA LLC, Research Division - Research Analyst [9]

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This is Alex on for Difei. I was wondering if you could comment on the impact that CGRPs have had on the overall migraine market since launch. Are market share gains of CGRPs at the expense of other classes of migraine drugs? And are you seeing overall migraine market growth? And how do these dynamics play into your prelaunch activities?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [10]

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Yes. So thanks for the question. So first of all, I think a great example would be, the 300,000 new-to-brand prescriptions in less than 12 months is really a large number. And as a benchmark, Botox has been out since roughly 2010, and we see them treating about 250,000 patients a year or so. So you can see that the impact of the CGRP have been outstanding. In fact, I was at one of the largest practices a few weeks ago, and basically, they have 600 patients on Botox and they have over 2,000 patients on anti-CGRPs. And when we look at the data, we do see some declines in some of the other preventive medicines. The orals and the CGRPs are picking up and Botox seems to be holding pretty steady, but it's still early and there's a lot of noise in the marketplace with the free product. But overall, we think the uptake has exceeded most people's expectations.

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Operator [11]

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Our next question is from Paul Matteis from Stifel.

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Benjamin Jay Burnett, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [12]

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This is Ben Burnett on for Paul Matteis. I wanted to ask for just a little bit more color on the acute treatment and the regulatory path forward for that program. Do you expect at this point to need to run multiple pivotal studies? And then also just wanted to clarify, just approximately how big do you expect this acute study -- this first acute study to be?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [13]

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So basically, we -- and I'll turn it over to Paul for more detail. But we just submitted the clinical trial design to the FDA, and so we're not going to provide the numbers on the size of the trial at this time. We're still working through those logistics and details. And Paul, as it relates to securing an indication, do you anticipate that this one Phase III should be able to secure an indication?

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Paul D. Streck, Alder BioPharmaceuticals, Inc. - Chief Medical Officer [14]

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No. Obviously, I -- Bob, I think our preventative studies are still under review by the FDA. We do feel like the data that we put forth from an efficacy and a safety perspective is compelling. Nevertheless, our sense is that from the acute trial, based on the work that's been completed, that 1 trial would be adequate to secure a -- at least a review by the agency and subsequently as -- an approval, provided the strength of data is there.

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Benjamin Jay Burnett, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [15]

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Okay. Great. Perfect. And I just want to ask one more question. Just the -- so I noticed the impact of initiating acute studies, your cash burn, it looks like you've kept that -- your guidance the same for 2019. Should we assume that most of the costs associated with this acute study hits in 2020 or is that kind of already built into your assumptions?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [16]

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So basically, the acute study has been built into our assumptions for 2019. And as you know, we haven't provided guidance for 2020 as of yet.

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Operator [17]

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Our next question is from Charles Duncan from Cantor Fitzgerald.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [18]

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Congratulations on the progress in the quarter with the filing. I had a couple of questions. One is, I think that you mentioned 3,000-or-so proceduralists that would be targeted initially with -- upon epti approval. And I'm just wondering if you have any updated thoughts regarding the number of sales folks that you would use to initially launch the drug.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [19]

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Yes. So thanks, Chaz. We've been really pleased about when we look at the concentration curves of the -- of where the anti-CGRPs are being written, and that our target audience of these 3,000 proceduralists appear to be writing about 75% of all the prescriptions that are taking place right now. And so our target that we've been talking about, 3,000, has been very, very consistent. And we stand by -- we believe that our field footprint would be between 75 and 100 representatives, we'll be able to have a very, very successful launch.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [20]

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Okay. That's helpful. And then the next question I had was regarding the pipeline. I like that you're considering the acute use of eptinezumab, and frankly, it makes a lot of sense to me in the emergency room setting. But I think you've laid out 2 other commercial opportunities, and one is kind of a normal doctor appointment, the other is for patients with less than 4 migraines. And it's perhaps jumping the gun a little bit, but I'm wondering if -- what your thoughts are in terms of pricing, and really how the model looks relative to the planned use in chronic migraine. Is there a difference or do you think that you accommodate that?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [21]

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Sure. So I think the first point I want to -- we want to make sure that we're really clear on today, that we have no delusions that we will compete in the standard acute market with generic triptans. That is not the market. Where we see the largest commercial opportunity here is in the prevention marketplace, and it goes back to the fact that when clinicians are treating episodic migraine patients or chronic migraine patients, many of them arrive with a migraine that particular day. And when we went out and did a large study when we're doing our commercial assessment, the uptake and market share to have both a treat and prevent label was very, very large. And what I would suggest to you is that's where the real upside from a commercial perspective is.

And in terms of pricing, the fact that we'd be using 100 milligrams in both the prevention space, and if you had a treat-and-prevent label, it would be the same type of patient, we don't see pricing differentials by indication. So as we work through our pricing work and our health and economic data, we'll come out with a price. But I wouldn't assume that -- I would assume the 100-milligram dose is going to be the same in either setting. And then as it relates to the less than -- patients who are suffering between 1 and 3 migraines, again, we see that also in the prevention marketplace because these are patients that are getting migraines on a regular basis, they may not just hit the threshold of the payer, which is 4 or more a month. But 1, 2 or 3 migraines a month can be terribly debilitating. And so the same type of effect, where if they have it, we can treat it, and then we can prevent the futures coming over the next quarter.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [22]

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That's helpful added color, Bob. I appreciate that. Last question is on 1910. You probably haven't had a lot of questions about that relative -- or recently, but I'm just kind of wondering when we could see increased visibility. You spoke about that a little bit. And I'm wondering if I missed this or if you kind of set some goal dates in terms of Phase II studies, et cetera.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [23]

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Yes. So I think, right now, the team, as Paul articulated, is actively pushing to get our first in-human by the end of 2019. And then if you run the time line, we got to see that data, how it works. That will actually help us assess what our Phase II type of program would look like. And so I think it gets more visibility in the latter part of next year.

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Operator [24]

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Our next question is from Jim Birchenough from Wells Fargo.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [25]

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Congrats on all the progress. A few questions. I guess, first, when you think about the patients that come in through the ER, my sense is, typically, they've failed to respond to the...

(technical difficulty)

your acute migraine study, will you enroll patients specifically that have failed triptans, maybe that as a starting point?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [26]

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So Jim, you broke up a little bit on your question. Can I have you repeat that? We lost you there for about 2 or 3 seconds.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [27]

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Yes. So just thinking about the ER population that presents with migraine, my sense is a lot of them have -- are presenting because they're not responding to their triptan. And so in your treatment study, will you study specifically patients who have failed prior triptan use? And I asked the question also because some of the newer triptans that are more expensive have step edits that require a certain number of prior triptans, and so will you try and encompass that population?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [28]

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So, Paul, do you want to take that?

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Paul D. Streck, Alder BioPharmaceuticals, Inc. - Chief Medical Officer [29]

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Yes, absolutely. I think the main thing that we're focused on in this trial is making sure that a patient did not receive any sort of acute therapy in the period immediately entering our trial to prevent any sort of confusion in terms of was it eptinezumab versus that treatment that caused the acute relief. So -- but in terms of restricting them from a -- the perspective of failing anything in the past, no.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [30]

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And maybe related to that, just when you think about the benefit that you saw in your chronic migraine and frequent episodic migraine studies, migraine relief within 2 hours, trying to benchmark that against what we've seen with triptans. Is it a different point of intervention in chronic and frequent episodic migraine studies than what you see in a typical treatment study? And would you expect to see a more rapid effect if you're enrolling more life-for-like patients that we've seen in the triptan studies?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [31]

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So Paul, why don't you take the efficacy side of things and what we expect to see, and I'll come back to the commercial opportunity.

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Paul D. Streck, Alder BioPharmaceuticals, Inc. - Chief Medical Officer [32]

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Sure. Sure. So as we look at the market of individuals who are in the acute setting, I mean, I think the main thing is that we want to get those individuals when their -- as their migraines are initiating, get them into the center and treat them accordingly. And then look at them with the 2 required endpoints that the agency puts forth, pain-free within 2 hours and getting rid of the most bothersome symptom. Does that cover where you were going with that one?

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [33]

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Yes. I guess I was looking more for differences. You've shown in your Phase III studies of chronic migraine suffers that had a migraine at the time that they were initially treated, some benefit within that 2-hour time frame. But I'm just wondering beyond that, if the patients you saw in your Phase III were further out from the initiation of their migraine than what we see in typical treatment studies, i.e., could you see an even more rapid effect when you study a treatment-specific patient population?

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Paul D. Streck, Alder BioPharmaceuticals, Inc. - Chief Medical Officer [34]

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We don't know that. We don't have that information.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [35]

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Yes. So Jim, I think when we thought about this opportunity and what I would keep on -- I know people are excited about the emergency room, but from a commercial perspective, the real opportunity is in the episodic and the chronic migraine settings. So we want to be able to have a label that talks about treating and preventing patients specifically in that setting. And the reason why we're excited about it is, however you think the CGRP market will be big, whether it'd be $3 billion, $5 billion, $7 billion, one share point in a given year, why -- would give you a great ROI on the amount of money we're spending on this particular clinical trial. And so the commercial assessment there and then the feedback from clinicians as well as patients on the ability to actually walk into an office, and many of the patients are suffering a migraine, and get a therapy that potentially could treat it and then prevent it is really the -- a real key clinical differentiator.

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James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [36]

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That's helpful, Bob. And maybe one final question. We have been getting questions ourselves on the potential impact of the Amgen-Sandoz litigation. If you see any risk to the supply being disrupted by that litigation? Why should investors not worry? And what are your contingencies if there's any disruption because of that litigation?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [37]

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Yes. So obviously, we have no part in the Amgen-Novartis litigation. I would say that our relationship goes back to 2015 with Sandoz, and we're working with them on a day-to-day basis. As you can imagine, we're making commercial product as we speak. We're gearing up for a potential FDA audit, right? So all the day-to-day activities are underway. And then, I would just -- if you're staying close to the Amgen-Novartis situation, they started discussing this issue back in the fall time frame, September-ish. We signed this document and it became effective, our amendment, in January of 2019. And it moves forward for the next 5 years through 2023 for guaranteed supply. And so we feel, in our engagement with Sandoz, we have great confidence that this is not going to be an issue for us.

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Operator [38]

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Our next question is from Carter Gould from UBS.

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Unidentified Analyst, [39]

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This is [Andrew] in for Carter. I have a few here. So first, from the recent script data and commentary by your peers in CGRP space, they point to a pretty competitive environment right now in patient gains and shares, and you guys benefit from having this play out to an extent before epti comes online. But I guess, on a higher level, how do you see eptinezumab while they're maneuvering thorough these dynamics, where your peers have been refining their infrastructures, from their sales force on the ground, dialogue with payers and DTC campaigns and so forth? I guess, put another way, how should we be thinking about eptinezumab's first weeks of launch? That's my first one.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [40]

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Okay. So let me take that. So when we've engaged with payers, right -- we've had ad boards, we've gone out and done site visits. Because this is in the medical benefit, basically, what they say is, "Hey, you're going to have to be prior auth like the other products, but we're going to pay for you early and then we'll make a determination 6 months down the line whether or not you stay on formulary." But they also told us because of the clinical profile of eptinezumab and the fact that it's IV, that there's high, high likelihood that we're going to be on. In fact, they say, "Boy, it's really exciting that you're the first IV and not the fourth subcu." And then, as it relates to how we're going to compete in that marketplace, well, number one, we're hiring great staff here, right? So we're building a great team. And the fact that this is a specialty marketplace, and we think these 3,000 doctors control a very large portion of the business and they're proceduralists. And eptinezumab, not only from a differentiation perspective, in terms of depth of response and speed of prevention, will be a really good characteristic that they tell us. But the fact is, it also fits in with their business model, right? So we don't think we're going to need armies of salespeople. We're going to focus on these 3,000 who have large concentrations of patients. And we think we're going to do quite well.

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Unidentified Analyst, [41]

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Great. So I wanted to touch on your PACAP program real quick. Given your comments on CGRP not being appropriate for all patients or where some patients are not responding, do you to expect your future studies will be CGRP-failed patients or naive patients? I guess I'm trying to get a sense of how this program will evolve clinically, and commercially thereafter.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [42]

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Yes, great question. I think that's still a little early for us. We're working through all those particular elements, right? So obviously, it would be great if we can identify a biomarker which identified which was a CGRP patient and which was a PACAP-38 patient, because we know that the pathophysiology of these migraines are different. And so what I would say is, we'll continue to do more homework on that and figure out how to design our Phase II, and whether that would be do you have people failed on a CGRP or do you just do a similar type of program that we ran with eptinezumab, and so that's still work in progress.

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Unidentified Analyst, [43]

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Do you see a value in pursuing subcu or keeping with the IV as a more appropriate area for all the -- for either the PACAP program or the eptinezumab program?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [44]

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Yes. So on the PACAP-38 program, both of those options are still on the table for us in terms of whether that's subcu or IV. As it relates to our eptinezumab program, I think what you're seeing right now is, we're really glad we're IV. We're clinically differentiated, and we're in the medical benefit, not the pharmacy benefit. And so we've done our ranking of life cycle opportunities, and we bet on the acute indication and going forward with that. And I would say, subcu is still on the board, but down lower. We don't see that adding a tremendous amount of value for us in terms of return on investment.

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Unidentified Analyst, [45]

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Got you. And I guess the one last one. On your IP, given you're licensing with Teva, I was wondering if there were any IP overlaps with those being litigated between Teva and Lilly right now.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [46]

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Sure. So our IP runs through 2032, and we solved our issue with Teva in January 2018. And so we feel great about our IP situation.

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Unidentified Analyst, [47]

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And no overlap with the Lilly issue right now?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [48]

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Yes. Actually, we feel good about our PACAP-38 IP estate, but obviously, we'll work through that over time. People are working through these products early, but we feel good about our IP estate.

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Operator [49]

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Our next question is from Danielle Brill from Piper Jaffray.

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Danielle Catherine Brill, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [50]

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I have a few. First, I'm just curious for the acute migraine trial. Why did you decide to go with the 100-milligram dose? And then I missed what you said on the call about your market research about what percent of patients see their doctor during an acute attack.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [51]

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Sure. So Paul, do you want to articulate why we want the 100-milligram dose?

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Paul D. Streck, Alder BioPharmaceuticals, Inc. - Chief Medical Officer [52]

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Yes, absolutely. So when we look at eptinezumab from both the PK and the clinical perspective, we see the response is primarily a function of the bioavailability, tissue penetration and receptor binding. The 100 milligram clearly hits the threshold. And when we look at 300, it really did not offer any benefit, thus our rationale for going forward with only the 100 in our clinical trial program.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [53]

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And then, Danielle, secondly, on the data that I was talking about, episodic migraine and chronic migraine was from PROMISE 1, just as a surrogate that people in the PROMISE 1 study averaged 9 migraines a month. So that would be roughly 30% of the days in a month that if they go to see their doctors, there is a 30% chance that they're having a migraine at the time of seeing their clinicians. And then when you are in the chronic migraine space, the low end is 15 days, right? And it ramps all the way up to 30, as it relates to migraine/headache days. There's greater than a 50% chance that patients will see their doctor on the day that they're having a migraine. In fact, in PROMISE 2, our patients average 16 migraines a month.

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Danielle Catherine Brill, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [54]

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Okay. Got it. And then -- so one more. We conducted a recent migraine survey and saw a significant spike in our physician awareness for epti. So I'm just curious if internally you had any new outreach activities or physician detailing during the quarter that might explain the trend.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [55]

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Yes. So I think at the end of the day, data keeps getting released on eptinezumab and people are excited about it. We do have an MSL team out in the field that's doing scientific exchange, and so we're doing all the things -- we're doing all the basic blocking and tackling that a company would do as we start to march towards commercialization.

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Operator [56]

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Our next question is from Jeff Hung from Morgan Stanley.

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Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [57]

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You mentioned the opportunity in patients with fewer than 4 migraines a month. Would these patients continue to pay out of pocket or do you have any reason to believe that payers might be willing to provide some coverage to these patients?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [58]

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Yes, you know what I think, Jeff, it's still early on that particular analysis. The market research we've done, that roughly added 35 million Americans that suffer migraines. 13 million are eligible for prevention. And then there's about another 13 million that suffer between 1 and 3 million -- I'm sorry, between 1 and 3 migraines a month. So that population is quite large. And many of them are in the prime of their careers. And so paying out of pocket to get a couple of days back, 2, 3, 4 days a month is attractive to them, but we'll continue to do more work. But I do want to come back and say, the biggest and largest commercial opportunity is the differentiation in the prevention marketplace. This other piece between 1 and 3 we think is an exciting opportunity, but we still need to do more work on it.

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Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [59]

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Great. And then does your expense guidance include the loss contingency provision that was in SG&A in 1Q? And just wanted to get a sense for how we should think about the trend in expenses for the rest of the year.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [60]

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Carlos, do you want to take that?

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Carlos Campoy, Alder BioPharmaceuticals, Inc. - CFO [61]

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Yes. Jeff, yes, it does include that loss contingency provision. And you will see quarterly fluctuations from quarter-to-quarter, but we remain confident that the full year guidance remains in place at $285 million to $315 million.

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Operator [62]

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Our next question is from Geoff Porges from SVB Leerink.

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Unidentified Analyst, [63]

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This is [Andrew] on the call for Geoff. So maybe a question regarding the launch strategies. So how do you -- I mean, do you believe -- how many reps in the MSL and payer specialists do you expect to hire? And do you expect to build your patient hub internally or through a CSO?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [64]

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So on the field force perspective, what we've articulated was we'll hire between 75 and 100 sales representatives. We expect to have them on board by the fourth quarter, fully trained and ready to go by January 2nd or January 3rd, whatever the first working day is in 2020. And so we're active on that side. Obviously, we're building hub services to make sure that it's easy access to access eptinezumab, whether it be with co-pay cards, insurance verification, et cetera, but we haven't articulated whether or not we're building that internally or that we're outsourcing that. So more to come on that.

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Operator [65]

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Our next question is from Vamil Divan from Crédit Suisse.

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Vamil Kishore Divan, Crédit Suisse AG, Research Division - Senior Analyst [66]

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I think given all the commentary you made around the 3,000 interventionalists, your 75 to 100 reps, I'm assuming nothing has changed around your confidence in commercializing this on your own in the U.S., but maybe we can just confirm that's still definitively the plan. And then also just related to that, ex U.S., so maybe if you can talk a little bit on the updated thoughts you have in terms of commercialization or partnerships or where things stand there.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [67]

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Sure. So 100% confident in the ability for Alder to launch eptinezumab in the United States. Obviously, we have our new leader, Nadia Dac, and so with her experience -- and also I'm very proud of the next level of folks that we're bringing in. We're attracting great talent. And there's no reason why we're not going to go out and have success in this marketplace by doing it on our own. As it relates to ex U.S. as I stated in the past, we'd be open for a partnership to help take eptinezumab to the rest of the world because we're really focused on the U.S. It has to make sense for patients, meaning that the partner would have to have good relationships with neurologists, be well respected. And then the deal would have to make sense for our shareholders. And so we're active in those discussions. But as you know, they can take a fair bit of time and we won't provide more detail than that at this time.

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Operator [68]

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Our next question is from Serge Belanger from Needham.

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Unidentified Analyst, [69]

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This is [Chan] on for Serge. I just had one last question. So I know there is a lot of oral products that are for treatments that are coming down the pipeline. So how do you plan to fit in? Or do you expect to compete with orals?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [70]

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Yes, so great question. So I just want to reiterate that there's 2 marketplaces as we see it. There's an acute marketplace, where generic oral triptans play a large market for people that are suffering migraines on a regular basis. We're not playing in that marketplace, we're playing in the prevention marketplace. And the fact of the matter that, if you need prevention therapy, you also need acute therapy, right? And so the fact that we have the opportunity potentially to get a treat-and-prevent label, that's the marketplace we're going to spend all of our time competing in. So we're not going to be competing against the orals, as you highlight there in terms of generic triptans.

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Operator [71]

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Our next question is from Sumant Kulkarni from Canaccord.

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Sumant Satchidanand Kulkarni, Canaccord Genuity Limited, Research Division - Analyst [72]

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I have two. So first on the acute treatment side, is it fair to think of your acute treatment study as more of a strategy to counter detail your IV versus subcutaneous products in terms of speed of action and prevention without running a head-to-head? I'm actually asking that for 2 reasons. First, because for an IV product, clearly, the larger market is prevention versus acute treatment. Then second, we're aware of at least 3 companies that are at various stages of development for inhalable quick-acting products that could act within 15 minutes or so. Of course, it remains to be seen if those can be approved.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [73]

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So to answer your question, first of all, we think we're going to be uniquely differentiated without the acute label. The fact that we have excellent depth of response and the fact that you get that prevention starting within 24 hours, we feel really, really good. And that's our A game where we stand today. Although do we think that adding an acute label on to that would continue to further differentiate eptinezumab? Clearly. We also hear from patients and from physicians that a product that would treat and prevent would be very attractive to both of those audiences.

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Sumant Satchidanand Kulkarni, Canaccord Genuity Limited, Research Division - Analyst [74]

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And then I have a big-picture question about the migraine market, in general. Given that there are already 3 monoclonals out there for prevention, at what point do you think we could see prescriptions for the acute treatment market starting to shrink? Because if you look at triptan prescriptions, they're still growing on a year-over-year monthly prescription basis. I'm asking this because when you're out there on the market, there could be at least a year or so or more of the other 3 being out there in terms of prevention.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [75]

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Yes. So I'm just going to go back and give you the stats. 13 million people in United States are eligible for prevention therapy. Before the anti-CGRPs came onto the market, roughly 3.5 million were being treated. That's a treatment penetration rate of roughly 27%. And greater than half of the patients will be off those products within the first month. The opportunity here is enormous, right, in terms of patients that would benefit. So I think all this whole entire market is going to grow, and I don't anticipate that anybody's going to be boxed out because someone else has captured the patients. I think we're a long, long way from that.

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Operator [76]

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Our next question is from Matthew Luchini from BMO.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [77]

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You there, Matthew? Okay, operator. We can go to next question. Matthew can requeue, if that's appropriate.

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Operator [78]

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And our next question is from Matthew Luchini from BMO Capital.

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Matthew W. Luchini, BMO Capital Markets Equity Research - Analyst [79]

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Hello?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [80]

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Hey, Matthew, can you hear us?

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Matthew W. Luchini, BMO Capital Markets Equity Research - Analyst [81]

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Can you hear me?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [82]

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Yes.

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Matthew W. Luchini, BMO Capital Markets Equity Research - Analyst [83]

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All right. Okay. Very good. Sounds like we had some technical difficulty there. So just one for me. Thinking about the acute indication and recognizing that not all physicians are going to have an infusion site -- infusion capability in office, and patients, for whatever reason, may not want to go to the ER or may be unable to. Could you just give us some sense as to the ways that you may be able to help a patient that's experiencing a migraine, locate a physician that has capabilities, and more importantly, availability for immediate treatment, given the sort of time-sensitive nature of the setting?

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [84]

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Yes. So again, the marketplace that we're going to be playing in is in the chronic and the episodic, right? So those patients, many of them are already in the marketplace seeing their clinicians. We're going to continue to focus on those 3,000 clinicians. And I stated, out of those 3,000, about 2/3 have IV capabilities in their practice, and the other ones all have access to IV. And so what I'd be telling you, IV access is ubiquitous, right? There's enormous amounts of it, and so we don't see that as a problem. But as we work through our hub services, we'll be thinking about what other services we could help patients, if they would call in, to get them into the right spot, to get them treated them in the most appropriate way. So that would be part of our commercialization process as well.

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Operator [85]

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Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Bob Azelby for closing remarks.

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Robert W. Azelby, Alder BioPharmaceuticals, Inc. - President, CEO & Director [86]

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Thank you, everybody. I look forward -- I know I'm going to be speaking to some of you in the next few hours and over the next couple of days, I look forward to it. And thanks for your time today. Thank you, operator.

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Operator [87]

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Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.