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Edited Transcript of IDIA.S earnings conference call or presentation 23-Jul-19 12:00pm GMT

Half Year 2019 Idorsia Ltd Earnings Call

Jul 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Idorsia Ltd earnings conference call or presentation Tuesday, July 23, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* André C. Muller

Idorsia Ltd - Executive VP & CFO

* Andrew C. Weiss

Idorsia Ltd - Senior VP and Head of IR & Corporate Communications

* Guy Braunstein

Idorsia Ltd - Executive VP & Head of Global Clinical Development

* Jean-Paul Clozel

Idorsia Ltd - CEO & Director

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Conference Call Participants

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* Barbora Blaha

Crédit Suisse AG, Research Division - Research Analyst

* Edward D. Marks

H.C. Wainwright & Co, LLC, Research Division - Research Analyst

* Philippa Gardner

Jefferies LLC, Research Division - Equity Analyst

* Richard J. Parkes

Deutsche Bank AG, Research Division - Director

* Stefan Schneider

Bank Vontobel AG, Research Division - Head of Life Sciences Team & Pharmaceutical Analyst

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Presentation

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Operator [1]

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Dear ladies and gentlemen, welcome to the Idorsia Conference Call regarding the Presentation of the Half Year Financial Results 2019. At our customer's request, this conference will be recorded. (Operator Instructions)

May I now hand you over to Andrew Weiss, who will lead you through this conference. Please go ahead.

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Andrew C. Weiss, Idorsia Ltd - Senior VP and Head of IR & Corporate Communications [2]

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Thank you, Angela. Good morning, good afternoon, everyone, and welcome to our call today. We're here gathered to discuss the first half results published this morning at 7 a.m. Central European standard time.

With me on the call are our CEO, Jean-Paul Clozel; our CFO, André Muller; and Guy Braunstein, Head of Global Clinical Development. He is here to discuss with us the data presented at San Antonio on daridorexant, our dual orexin receptor antagonist.

Next slide, please. Before we jump in, I need to remind everyone that we will be making forward-looking statements, and that there are risks and opportunities there in investing in our shares.

With that, I hand over to Jean-Paul for his introductory remarks.

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Jean-Paul Clozel, Idorsia Ltd - CEO & Director [3]

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Thank you, Andrew. Good morning or good afternoon to everyone. It's a pleasure to present to you the progress we are making at Idorsia. The first half of 2019 has been about running our studies and getting ready for the wave of results and news flow approaching soon. As you might imagine, it's a very exciting time.

Since the studies are progressing well, we also started the preparation activity for the potential filing of our late-stage assets. And looking a little further into the future, Simon Jose, our Chief Commercial Officer, has started hiring his core commercial team, enabling the development of a commercial business plan, something that we look forward to sharing with you as each of the programs read out. But of course, we first need to deliver the results from our ongoing studies.

Next slide. The pipeline has made good progress in the first half of 2019. We initiated our multiple dose efficacy and safety studies with Cenerimod for lupus and a new compound has started clinical trials in the field of immunology with potential activity in cancer immunotherapy. This is, again, a very exciting development from our drug discovery group.

These are great steps forward for our long-term future, but it's the late-stage assets which all eyes are on. If you are interested, you can still find the webcast describing our Phase III program on our website. One of the most notable milestones recently was a presentation of the Phase II results with our dual orexin receptor antagonist, ACT-541468, newly named with the INN daridorexant.

After a long period of silence, the field of insomnia starts to wake up. The FDA has just put a black box warning on the Z-drugs and several scientific bodies are warning the public of the risk of addiction with these drugs. This is extremely sensitive in the frame of the opioid crisis.

Since more detailed clinical results are now publicly available and Guy did the design of the Phase III, I have invited Guy to give you the details and an opportunity for Q&A.

But before, I will hand over to André for a brief overview of our financial situation in order to give as much time as possible to Guy and to your questions. André?

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André C. Muller, Idorsia Ltd - Executive VP & CFO [4]

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Thank you, Jean-Paul. This was quick. I will be quick as well. So we can start with the next slide and see the operating results, which is Slide #6. From left to right, you have the non-GAAP operating results, starting with revenues. You see here we've CHF 13 million. There's no change. This is relating to deferred contract executed in 2018 with aprocitentan with J&J for CHF 10.6 million and research collaboration with Roche for CHF 2.5 million.

Research at CHF 56 million is more or less stable compared to H1 '18 CHF 54 million. Development at CHF 151 million is increasing significantly compared to H1 2018, which was CHF 73 million. So it's more than doubled. The reason for it is that the clinical development with CHF 108 million has significant variable costs that were incurred in H1 2019, CHF 84 million, compared to CHF 32 million in H1 2018.

And you have pharmaceutical development costs of CHF 43 million. Here again, the fixed cost base is relatively limited around CHF 13 million and the variable one with drug substance and drug products of CHF 13 million has also significantly increased. As Jean-Paul said, we're advancing our late-stage assets. And in order to do so, we incur some significant pharmaceutical and clinical development.

G&A -- now it's SG&A, with CHF 28 million. This is more or less stable compared to last year 2018 -- H1 2018, which was CHF 25 million. Main increase was relating to the commercial operating expenses with, as Jean-Paul said, our Chief Commercial Officer, Simon Jose, shaping our strategy for our late-stage assets.

So with this, we have CHF 221 million non-GAAP operating results. You have to add CHF 10 million in D&A and CHF 8 million in stock-based compensation to end up with CHF 239 million U.S. GAAP operating results.

Next slide, please. Not much to say going from operating results to net results. The only point here that I would like to recall is that if you're looking at the financial result, which is almost 0 for non-GAAP despite negative interest rate environment, you see plus 8 for U.S. GAAP at the unrealized gain on the Santhera shares that we own in connection with the sub-license that we granted to Santhera on a compound called vamorolone that we -- where we have also an option to in-license it from private-owned company -- U.S. private-owned company called ReveraGen. So CHF 8 million is the mark-to-market, and it can go up and down depending on the stock price of Santhera quarter after quarter.

For the rest, as you see, almost no income tax, no noncontrolling interest. So we end up with CHF 222 million non-GAAP net results and CHF 232 million U.S. GAAP net loss.

Next slide will show you how we came down with the liquidity. We started the year with CHF 1.2 billion, going down steadily, CHF 108 million on each quarter, Q1, Q2, ending up at CHF 1 billion by the end of June 2019.

You see the breakdown on the slide between cash and cash equivalents and some deposits. We try to offset the negative interest rate environment in Swiss francs. And keep in mind that this CHF 1 billion is mainly held in Swiss francs because we want to avoid any currency risk on our liquidity with CHF 827 million out of this CHF 1 billion. And we have USD 168 million held in U.S. dollars also to cover our cash needs in U.S. dollars in the foreseeable future.

I have no specific slide on the financial debt because there was no change. We still have the convertible loan with J&J CHF 376 million in the balance sheet, but nominal value of CHF 445 million. And convertible bonds that we issued last year in July for CHF 199 million in the balance sheet, but nominal value of CHF 200 million.

Next slide, please. Here you see, in connection with the previous slide on liquidity, the cash flow quarter-after-quarter, Q1, Q2. Here you see CHF 108 million that we spent in Q1 as well as in Q2 and -- meaning CHF 216 million for H1 2019, mainly with the funds from operation CHF 235 million, which are very close to the CHF 234 million non-GAAP OpEx that we were just discussing a few slides ago.

And you see also in green, the contract revenue, CHF 5 million. This is an upfront that we got in Q2 2018. Please refer to Note 4 of the financial statements in other. That's an optional license and/or research collaboration for our T-type calcium channel blocker that we want to investigate in epilepsy.

The undisclosed potential partner will be able to opt-in after the FDA feedback based on the IND that we plan to submit in Q4 2019. We should know by the end of this year or very early next year whether this partner will opt-in. Opt-in would consist in CHF 50 million or CHF 57 million upfront -- opt-in milestone including CHF 5 million upfront. And as you will see in the Note 4, we would then also get regulatory milestones, phase milestone and share the royalties.

Finishing with the next slide, the financial guidance. We maintain the guidance with CHF 530 million non-GAAP operating expenses for the full year, which would mean CHF 570 million for the U.S. GAAP. You may be slightly surprised, if you compare the CHF 234 million that we spend in H1. But again, as you know, we are advancing our -- we are going with full recruitment in our Phase III assets. This should drive additional expenses in the second half of 2018.

With this, I hand over to Guy, who will comment on our dual orexin receptor antagonist as Andrew said previously.

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Guy Braunstein, Idorsia Ltd - Executive VP & Head of Global Clinical Development [5]

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Thank you very much, Andre. If you're on Slide 11, you can move right to Slide 12, which introduce you to the name daridorexant, as mentioned by Jean-Paul. And you see how you can spell this name on that slide. I'm going to summarize for you the data that we presented at the SLEEP congress a month ago.

Next slide, Slide 13. Just as a reminder of the definition of chronic insomnia disorder. It's a combination of night and day symptoms. As per DSM-5, patients have difficulty falling asleep, staying asleep. They also wake up too early. And as a consequence, their daytime functioning is impaired. The definition includes the night and the day symptoms. And this has to come with a frequency at least 3 nights a week and for chronic period of at least 3 months.

We have tools in clinical development that we use to measure the different aspects of the disease, primarily, objectively, with polysomnography, where we can measure the latency to persistent sleep, which is the time from the start of the recording of the PSG to the first moment the patients are sleeping continuously, by that I mean for at least 10 minutes. Then we can also measure, what we call, WASO, the wake after sleep onset, which is the time spent awake after the sleep has actually started until the light is on at the end of the recording. And of course, we can also measure the total sleep time based on PSG.

These are important measures, especially for the U.S. registration of products. However, there is also great interest in patient reported outcome, instruments measuring sleep parameters using diary card, where patients are recording their time to falling asleep, their time to wake during the night as well as total sleep time; and also the daytime functioning of the patients, which can use different instruments, one being called IDSIQ, which has been developed by Actelion and Idorsia. So this is a schematic representation of insomnia.

On the next slide, I will just remind what we have discussed before about daridorexant. Of course, there is, as mentioned by Jean-Paul, still a need for safe and effective treatment for chronic insomnia and daridorexant is a targeted molecule. It's an orexin receptor antagonist. And as we know, there is accumulating evidence of the role of the orexin system in the regulation of insomnia, sleep wave and role in insomnia disorder.

Daridorexant is potent and selective dual orexin receptor antagonist and this was selected based on the properties of the product with the idea of initiating sleep onset, maintaining sleep without impairing the next day functioning. And a lot of that is driven by the pharmacokinetic profile of the product, which is shown on the graphical representation with time on horizontal axis and plasma concentration vertically.

And we see on day 1 of the treatment administration of 25 milligram, the peak occurring very early and then a sharp decrease over time. And when we look at the pharmacokinetic (inaudible) vector, we see a profile which is very similar, showing that there is no accumulation. So this profile which we have discussed before is ideal to product designed for treatment of insomnia patients.

This product has gone through Phase I studies and -- through Phase II studies. The Phase II studies were reported at the Sleep Congress in June, and I'm going now to summarize the results for you. But before that, I would like us to show you the design of the Phase II studies.

Next slide, Slide 15. We conducted 2 studies in parallel, 1 in adult patients and 1 in the elderly patients. The first one in adults was a parallel group design study, duration of 4 weeks, allowing to look at the effect after a single dose as well as durability of the effect over a treatment period of 4 weeks.

At the end of this 4-week treatment, there was a short washout period, allowing to assess whether there would be withdrawal symptoms. In that study, 4 dose levels were assessed: 5 milligram, 10 milligrams, 25 milligrams and 50 milligrams. There was also a placebo group as well as negative control arm, zolpidem. And we measure primarily objective and subjective sleep parameters as I mentioned on the slide before.

The elderly study was a different design. It was a cross-over design. And we just focused on day 1 and 2, 2 nights of treatment. And we know that the dose response can be established as soon as the dose is taken, so a single night or 2 nights of the patient to show the efficacy. We didn't need to confirm the durability of the effect in elderly having shown that in the adult population. We also tested 4 dose levels identical to the adult study, 5 milligrams, 10 milligrams, 25 milligrams and 50 milligrams. There was also a placebo group and we didn't have in this study a negative control group. And at the end, objective and subjective sleep parameters were recorded.

On the next slide, we see the schematic of the adult study, starting with the screening day -- screening phase of 14 to 28 days. And during that screening phase, we had a running period where 2 nights were recorded with PSG serving as the base line. And during these 2 nights, the patients were taking placebo.

This screening period was followed by a double-blind treatment period, where zolpidem placebo, daridorexant 5 milligrams, 10 milligrams, 25 milligrams or 50 milligrams were administered for 28 days. During the first 2 nights of administration of double-blind treatment, PSG were recorded. We did the same at day 14 and 15 as well as day 28 and 29. And as shown on the PSG measurement line, there was also a single-blind placebo run-out phase to look at potential withdrawal effect of exacerbation of insomnia in (inaudible). And all around the period, from screening to double-blind treatment, sleep diary card were filled in every day by patients to collect subjective assessment.

And the next slide shows -- Slide 17 shows the patient disposition and the flow of patients. We had to screen about 1,000 patients and these patients entered into the study based on their self assessment, self-reported history of insomnia, claiming that they are dissatisfied with sleep with difficulties during the day as well according to the DSM-5 criteria.

And they also claim that they have more than 3 nights per week for more than 3 months difficulties to fall asleep, longer awakening during the night and the total sleep time less than 6.5 hours and insomnia severity index of more than 15. This insomnia severity index is on the scale from 1 to -- 0 to 28 and 15 is the limit of the moderate severity of insomnia. 15 to 21 is moderate and 21 to 28 is the severe insomnia patients.

So we screened all these patients and then they were given the sleep diary to confirm with self assessment on a daily basis that actually they had insomnia. And from the 1,000 patients, 60% could be -- could satisfy the criteria and therefore enrolling to the PSG running phase. And here, again, we had very strict criteria to randomize the patient. The patient had to have objective measures, confirmatory measure of chronic insomnia with latency to persist from sleep to at least 20 minutes, WASO of at least 30 minutes and total sleep time of less than 7 hours.

So in the end, from 1,000 patients that were screened, 360 could be randomized because they had confirmation of insomnia based on the sleep diary as well as the polysomnography.

The next slide shows the baseline characteristics and demographics of the patient. There is no surprise here in terms of the demographics, more female than male as expected. The mean age in this adult population was 45 years. The body mass index was 25 actually, between 19 and 32, and the majority of the patients were Caucasian. The study was conducted in 38 sites in 6 countries that are listed here in sleep hospitals and centers.

On the right-hand side of the slide, maybe more interesting to see the baseline characteristics with WASO at 97.5 minutes, which is more than 1 hour, 1 hour and 38 minutes. The same for latency to persistent sleep, about 1 hour and 12 minutes. And total sleep time, which is just a little bit above 5 hours. And similar numbers were recorded subjectively by patients with WASO of 1 hour and 20 minutes, time to fall asleep of 1 hour and total sleep time of less than -- about 5 hours and 20 minutes.

So we see here that these are relatively severe insomnia patients overall and insomnia severity index is at 21, which is right in the middle of moderate and severe, so probably half of the patients had moderate and half of the patients had severe insomnia.

Now it's interesting to look at the study results. And the first one I would like to show is the WASO, which was the primary endpoint. And as you understand, the study was dose response study, so the results will be shown as dose response.

Next slide, Slide 19. So we see here on this busy slide on the horizontal axis the different treatment groups: placebo, 5 milligrams, 10 milligrams, 25 milligrams and 50 milligrams. And there was a [capsule of zolpidem] on the right. And on the vertical axis, we see the change from baseline in WASO in minutes. And we have 2 lines: the blue line, which showed the results from day 1 and 2; and the red line, which was the results on 28 and -- day 28 and day 29.

So what we see here is that there is dose response from placebo to 5 milligrams, 10 milligrams, 25 milligrams and 50 milligrams. And this dose response is highly significant with p-value of less than 0.001. Similarly, at day 28 and 29, there was also a dose response that was also significant and we see nice decrease from placebo to 50 milligrams.

What is interesting to note is that the placebo effect was actually more marked at day 28, 29, which explains probably why the dose response is very steep on day 28 and 29. However, the treatment effect is maintained. And it's also interesting to contrast the results with zolpidem and you can just look at how daridorexant compares with zolpidem on this slide.

The similar interesting endpoint is the latency to persistent sleep, again, measured with polysomnography and this is shown on the next slide, Slide 20, where we see the blue line, we're using the similar format, the blue line day 1 and 2 with, again, a significant dose response. And the red line, day 28 and 29, also significant with decrease of the latency to persistent sleep as the dose is increasing.

As we discussed before, objective parameters are interesting, but it's also interesting to look at how patients perceive the change and this is shown on the next slide, where we have using exactly same format on the left of the slide, the subjective WASO; and on the right of the slide, the subjective time to falling asleep.

As we see, there is also dose response for the fourth parameter, the significance is not always achieved. As we know, the viability is bigger than subjective assessment, and we decided for the study that we had, there was no real hope that all these dose response (inaudible) significant. But what is interesting is to see that there is in general a nice (inaudible) between the different parameters, objective and subjective.

Maybe the next one is even more interesting, Slide 21, showing sort of summary measures of how patients are sleeping.

And Slide 22, next slide, and we see the total sleep time. So of course, total sleep time to increase, and that's why the lines are now increasing, ascending. We see, again, with the same format on the left, total sleep time recorded objectively by polysomnography. And on the right, the total sleep time recorded subjectively by the sleep diary by the patients. And we see, again, very nice dose responses on daridorexant from placebo to 50 milligrams for all these parameters at day 1 and 2 as well as day 28 and 29.

I cannot just show the efficacy results without briefly talking about the safety. And the safety results are shown on the next slide. It's unusually -- not very busy. As you see, there are many 0s and very few numbers on that slide. We had, of course, adverse events during the treatment phase and you see that there are a number of patients with adverse events, the majority were medically insignificant. We have just shown here the adverse events leading to treatment discontinuation. There were a few of them, and you can read the numbers.

What is maybe more interesting and is written on the text on the right-hand side of the slide that there was no evidence of rebound insomnia and withdrawal symptoms during the short withdrawal period at the end of the treatment period.

Also interesting is to look at how patients feel sleepy on the next morning, and this was looked at using the Karolinska sleepiness scale as a morning assessment. This is a scale that goes from 1, very alert, to extremely sleepy, 9. And the results are shown on Slide 24, next slide.

You see the different doses on the horizontal axis and mean value for the Karolinska sleepiness scale on the vertical axis. The black line shows the baseline data, and it's about between 5 and 6, which is normal, 5 being the point of being neither sleepy nor alert. And what we see on day 1 and 2 is that there was not much change between the black line and the blue line was on placebo at 5 milligrams, 10 milligrams, 25 milligrams and 50 milligrams and the same for zolpidem.

You see the similar line for day 15 and 16 with not much of an effect and, again, day 28 and 29. The change, virtually -- there is one. It's more in the right direction, going below and being low -- being more alert. So there's certainly no signal here of being sleepy in the morning after having taken any of these treatments. So these are the results of the adult study that were shown at the San Antonio Congress.

Now moving on to the elderly study, Slide 25, is summarizing the design. As I mentioned, it's a cross-over study, so we have here Latin square design with 5 frequencies corresponding to 5 treatments and 5 periods.

There was also a screening trial at the beginning with 2 placebo nights initially to serve as a baseline. And then for each treatment period, we had 2 consecutive polysomnography nights at each dose including placebo. So very classical course of the study. We had shown previously, years ago, with [another drug] that this was sufficient to show dose response and we see the results in a minute confirming these.

The next slide show the patient disposition. Again, to be able to randomize 58 patients, we had to screen 149 subjects. And again, the entrance to the trial based on the self-reported insomnia according to DSM-5. They completed the sleep diary and they had to pass the criteria of at least 30 minutes time to fall asleep, 30 minutes WASO and less than 6.5 hours of total sleep time. And if they do so, 100 of them, then they could go to polysomnography to objectively confirm the insomnia.

And this was confirmed in 58 patients, which represents 39% of the initially intended population. So again, we have to screen many more patients to be sure that we had patients that had objective and subjective confirmation of insomnia.

The next slide shows the demographic and baseline characteristics using a similar format as for the adult population. We see, again, that there is domination by female population. The mean age this time is 69 as expected for the elderly population, which has to go from 65 to 85. And we see, again, that the subjects are mainly white subjects.

Turning on to the right side of the slide. We see the WASO, which is quite prolonged, nearly 2 hours of awakening during the night; and LPS, latency to persist on sleep, of more than 1 hour, 1 hour and 15 minutes; and total sleep time, which is just less than 5 hours. And we see, again, on the bottom of the table the insomnia severity index scale of 20.5, which is similar to what we have observed in the elderly population. So we have here, again, moderate to severe insomnia population.

Now turning to the study results. And starting with primary endpoints, which is Wake after sleep onset.

Next slide, Slide 28. We see very obvious dose response with p-value that is highly significant. And we see from placebo, 5 milligrams, 10 milligrams, 25 milligrams and 50 milligrams on the horizontal axis, sharp decrease of wake after sleep onset on the vertical axis. The placebo effect was less than half in this population compared to the adult population and the treatment effect was absolutely obvious at all dose levels.

In that study, we also show that at San Antonio, the result of WASO by quarter of the night using the polysomnography. So polysomnography is a recording for 8 hours in everybody and we can just look at the first 2 hours and then the following 2 hours, the third quarter of 2 hours and the last one of 2 hours.

And I showed on the next slide, Slide 29, the result of the WASO quarter-by-quarter with the symbols of placebo, the first one, and then the open square, daridorexant 5 milligram; the triangle is 10 milligrams; the open diamond is 25 milligrams of daridorexant; and the star is 50 milligrams of daridorexant; and we see the four panels of subsequent quarter during the night.

And what we see is that not only that with the dose response at this quarter, but it's becoming more and more pronounced as the night is evolving. And this clearly shows the effect of daridorexant is maintained during the entire night period.

The next slide, Slide 30, using the same format as for WASO, is showing latency to persistent sleep, again, the polysomnography. We see, again, a very significant dose response when moving from placebo to 5 milligrams, 10 milligrams, 25 milligrams and 50 milligrams and the p-value gives you the significance of this dose response. The placebo effect was more marked on WASO, but the dose response was still (inaudible) enough.

During the night of treatment, the patients also filled just for 2 night their sleep diary and the results were also presented. So I'm showing you, on Slide 31, the results of WASO and latency to sleep onset. And again, using the same approach, on the horizontal axis the dose of daridorexant and the time on vertical axis, we see a decrease in subjective WASO on the left and a decrease in the subjective time to falling asleep on the right.

This is actually maybe better summarized on the next slide, which show the total sleep time subjectively and objectively.

Next slide, Slide 33. So we see here placebo, 5 milligrams, 10 milligrams, 25 milligrams and 50 milligrams of daridorexant on the horizontal axis and the time on the vertical, increased total sleep time from -- and again, we have a very, very nice dose response. And this is shown for the total sleep time as well as for the subjective total sleep time recorded by the sleep diary.

Again, maybe the safety results as shown on the next slide. We see that Slide 33. There are very, very few events. Some qualifications on the right side, you can read that, which will be very little reason to worry on the safety of daridorexant in this population.

The next slide, Slide 34, shows using the same approach in elderly population, the Karolinska sleepiness score assessed in the morning, and we see the baseline score that is around 5 as expected. And then there is no increase after the treatment the next morning if the score is down, which is showing [it being smaller.]

The conclusion that we can draw from the Phase II, next slide, Slide 35, is that in both the adult and elderly patients with chronic insomnia, daridorexant dose-dependently improved sleep onset, sleep maintenance and total sleep time. Daridorexant was well tolerated and there was no detectable residual next-morning effect at any dose using the Karolinska sleepiness score. Based on these results, we selected 3 dose levels: 10 milligrams, 25 milligrams and 50 milligrams of daridorexant to go through the Phase III program.

And just in the manner of conclusion, I will show you briefly what the Phase III program is now, the Slide 36. So we have shown here 2 studies ongoing with 900 patients each, combining in total 1,800 patients; and in both studies, including [the adult and] elderly population.

Objective and subjective sleep assessments will be measured. But in addition to what we have done in Phase II we are also going to include the developed IDSIQ questionnaire which is a patient reported outcome instrument that is affecting the impact on patient functioning during the day. This was not feasible during the Phase II but we could include this instrument in the Phase III program.

The study will deliver a long-term efficacy on safety because these 2 studies are followed by randomized blind studies that will provide up to 12 months treatments. And this will also allow us to look at the hangover effect and the withdrawal symptoms and rebounds in between.

And as mentioned on the Phase III program which is shown graphically on the bottom of the slide is completed by a clinical pharmacology program, which is running as we speak, including, for example, a driving performance study; the interaction with drug and alcohol; as well as a study on the abuse potential. So this should be done with this insomnia [of CMS further into] the order.

So we are on track to report 3 months' efficacy and safety results the first half of 2020, and long-term efficacy and safety results later in the same year, next year.

With that said, I will hand it back to André Weiss.

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Andrew C. Weiss, Idorsia Ltd - Senior VP and Head of IR & Corporate Communications [6]

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Thank you, Guy, for all your elaboration. Next slide, please. So we've come to the end of our prepared remarks. We now have roughly around 20 minutes' time to address questions. Operator, please open the line.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we've received the first question, and it is from Richard Parkes of Deutsche Bank.

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Richard J. Parkes, Deutsche Bank AG, Research Division - Director [2]

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(technical difficulty)

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Andrew C. Weiss, Idorsia Ltd - Senior VP and Head of IR & Corporate Communications [3]

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Let's go to the next question, please.

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Operator [4]

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Yes, the next question is from Stefan Schneider of Vontobel.

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Stefan Schneider, Bank Vontobel AG, Research Division - Head of Life Sciences Team & Pharmaceutical Analyst [5]

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I just wanted to have a comment from you if you may in respect of comparing your data versus suvorexant and lemborexant, and they also showed some data with the past months in respect to efficacy, which is sleep onset and sleep maintenance, but also on safety, like somnolence and next-day hangover effects and so forth. But you can put that in perspective, as it's your data.

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Andrew C. Weiss, Idorsia Ltd - Senior VP and Head of IR & Corporate Communications [6]

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Guy, please?

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Guy Braunstein, Idorsia Ltd - Executive VP & Head of Global Clinical Development [7]

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Yes. This is difficult question because we don't have head to head with suvorexan. So we have just to probably refer to the pharmacokinetics of our product, which has an onset of [just a consultation] and the duration half-life which is ideal for an insomnia product. And we know from the suvorexant story that there was enough of a congregation of the effect the next day to decrease the dose to a level where the efficacy may be debatable. And this is something that we think we're going to avoid.

But of course, I can't tell what -- how it compares, because I don't have a head-to-head comparison and I don't think it's my task really to speculate on the competition.

But the data are available for both product. You mentioned, the data are available publicly and you can also take our data and make your own opinion. We think we have a product that's differentiated based on the pharmacokinetic and pharmacodynamic profile that we have. And I do not want to speculate more about direct comparison without having a head-to-head.

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Operator [8]

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The next question is from Philippa Gardner of Jefferies.

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Philippa Gardner, Jefferies LLC, Research Division - Equity Analyst [9]

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I had a question on Slide 24 regarding the Karolinska sleepiness scale. And I was just wondering when we look at the zolpidem data that seems to be very, very similar to what we're seeing with daridorexant. And I was just wondering, were you surprised by this? And were you also expecting perhaps a better improvement in terms of how sleepy people feel the next day with daridorexant?

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Guy Braunstein, Idorsia Ltd - Executive VP & Head of Global Clinical Development [10]

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Right. Actually, no. We don't expect a big difference because we know that zolpidem is good at inducing sleep. It's not very good at maintaining it, which means probably that on the next morning, there is not much of an effect if already in the middle of the night, there is not much remaining.

Where we expect a big difference, but that was not collected in Phase II, is how the patient can function the next day, and that's why we are going to collect data in our Phase III program. We expect a very good effect on the next day -- on the daytime performance, not the next day, but the daytime performance of the subject is to have a very good night.

And -- but we know that [result to] them they fall asleep quickly but they also wake up early. So there is no surprise to us that they wind up sleepy in the morning. What I would like to know is whether they can function properly during the day, and this is not data that is available.

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Operator [11]

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The next question is from Ram Selvaraju of H.C. Wainwright.

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Edward D. Marks, H.C. Wainwright & Co, LLC, Research Division - Research Analyst [12]

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This is Edward Marks on for Ram. I just have 2 really quick ones. Just wondering with the recent approval of Galafold, if that provides any additional favorable context just from a regulatory perspective regarding lucerastat? And then if you can just talk about clazosentan REACT trial, and just provide a recruitment update on that please?

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Andrew C. Weiss, Idorsia Ltd - Senior VP and Head of IR & Corporate Communications [13]

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Galafold, do you want to take that? The way that Galafold got approved gives us an indication as to how the regulatory pathways for new drugs in Fabry can be.

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Jean-Paul Clozel, Idorsia Ltd - CEO & Director [14]

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I think it was a big surprise for us to see Galafold approved because the FDA told us that they need clinical endpoints. And I think that frankly we need a clinical endpoint, we need to show benefits. And as a CEO, I do not want to really launch a drug without knowing the clinical benefit. And this is really what we're trying to do.

For the first time, we're trying to get to see if the patients really feel a change and feel better and there's less pain. Because 70% of people with -- patients with Fabry have this neuropathic pain, sometimes less serious, sometimes more serious.

So our trial is a trial based not only on how the drug works on all the systemic effect of the Fabry disease but also how people feel and do they have less pain. So I think that we are a very pioneer in this respect, and I really hope we can show a benefit to the patient.

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Andrew C. Weiss, Idorsia Ltd - Senior VP and Head of IR & Corporate Communications [15]

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And the second question was on clazosentan and an update on the recruitment.

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Guy Braunstein, Idorsia Ltd - Executive VP & Head of Global Clinical Development [16]

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Yes. It's moving well. As you know, we have a program in the rest of the world as well as in Japan. And both programs are actually running well. So we have no issue and nothing to report at the moment.

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Andrew C. Weiss, Idorsia Ltd - Senior VP and Head of IR & Corporate Communications [17]

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The time lines that you can see in clinicaltrials.gov basically indicate that the Japanese trials should be ready sometime during the summer of next year, while the global or the Western European -- the western trials, so Europe and U.S., should be available in 2021.

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Operator [18]

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We have now question from Barbora Blaha of Crédit Suisse.

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Barbora Blaha, Crédit Suisse AG, Research Division - Research Analyst [19]

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I have actually 2 questions. The first one is, how long do the patients typically stay on drugs, so in insomnia? And do you think, will these periods decrease with SORA because it is less addictive?

And then the second question is, Minerva recently presented Phase II data of its SORA, selective orexin antagonist, which could suggest that DORAs has more an effect on WASO and SORAs on more on latency to persistent sleep. Could you comment on this? And then do see a higher need for a new therapy to treat WASO or to treat LPS?

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Guy Braunstein, Idorsia Ltd - Executive VP & Head of Global Clinical Development [20]

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Thanks for these difficult questions. The duration of treatment, with current medications, the main one is zolpidem, the limitation is 1 month. And this is because of the way that it is shifted with longer treatments with (inaudible) or with benzodiazepine in general. That's the opposite what we want to do with our products.

We think that insomnia -- actually by definition, we talk about clinical insomnia, of course, not acute insomnia. By definition it is chronic, and the definition means at least 3 months. Therefore, a treatment that is given for 1 month doesn't really have a place in that indication because the patients are not cured after a month of treatment. In -- with daridorexant, what we are planning to do is long-term treatment. We don't expect to have dependence occurring. We don't have -- we haven't seen so far any similar possibility, of course more data will come on the Phase III. We haven't seen any withdrawal symptoms after termination of the treatment after a month.

And our clinical program is going to address short-term and long-term efficacy in the blind attrition, [should be the] first study has a 3-month duration and then there will be an extension, which is blinded as well, where we measure efficacy and safety during long-term. So everything is in place to show that the duration of treatment can be long. And we'll have data (inaudible) follow-up. The second question?

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Unidentified Company Representative [21]

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(inaudible) the Minerva.

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Guy Braunstein, Idorsia Ltd - Executive VP & Head of Global Clinical Development [22]

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I will just comment on Minerva. Your question is interesting (inaudible) antagonist versus dual, where one is useful for sleep induction and the other one for WASO. If you look at the dose response that we have with our products you see that -- actually, I don't know whether what you said is speculation or real, everything is possible, but what you see with our product is that the load is sufficient to induce sleep. I don't know how much [blockage] we had at that dose for 1 versus 2.

But if we can go back to the slide, maybe -- can we go back to Slide 30? And then we see a very (inaudible) you see that the maximum effect on sleep latency, so inducing sleep is actually achieved at the 10 milligram dose and if you contrast that with slide 29 where you see that there is an effect -- or no, 28 sorry, Slide 28, you see a very different profile, where 10 milligrams (inaudible) WASO but if you increase the dose, you get a much larger effect.

So I don't know if this is a potential story of [orexine one] versus dual, it's our belief that we need to block the 2 receptors to have a good effect and we have seen that with these products on the different parameters.

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Jean-Paul Clozel, Idorsia Ltd - CEO & Director [23]

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And just to complete because this was another question, what does the need for the clinical need is it WASO or LPS, and maybe you can...

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Guy Braunstein, Idorsia Ltd - Executive VP & Head of Global Clinical Development [24]

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No. No, go on.

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Jean-Paul Clozel, Idorsia Ltd - CEO & Director [25]

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I think really with all the market analysis that we are starting to do, we really see the big need is the sleep maintenance. Certainly because zolpidem doesn't do anything on sleep maintenance and therefore this is a very big medical need.

I think also what I would add personally is really -- I think the danger of having too fast acting drugs. In fact, in cardiovascular you do not want to have [antipathy] which works too quickly because then you have the risk of hypertension. It's the same with a sleeping pill in that we do not want an elderly person to fall asleep when he is still in his armchair, he is not in his bed.

And we do not want to have and we did not look for having drugs which would work in chronic insomnia. I think this is a very specific for chronic insomnia. We do not want to have drugs which work too quickly because they are difficult to manage and then they will have some restrictions by regulatory authorities, which -- who might ask, for example, to have the drug taken when the patient is already in bed.

So I think that with -- frankly, with daridorexant -- sorry I still have a hard times to say it -- with daridorexant we have the ideal pharmacokinetics: not too fast, but long enough. And I think that frankly I have not seen another drug with such a profile.

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Operator [26]

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The next question is from Richard Parkes of Deutsche Bank.

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Richard J. Parkes, Deutsche Bank AG, Research Division - Director [27]

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So yes, I've got a couple of questions. So the first one you partly answered it with the discussion around the chronic versus acute insomnia, and I noticed that there are additional trials ongoing looking at abuse potential, driving performance and respiratory function. So could you just update us on your views on the -- or your hope for labeling including expectations for scheduling or what would be your best case for a label relative to what's out there already?

And then second question on daridorexant as well, I think you mentioned in the last call, plans to partner in Japan. I just wondered if you can update us on how those discussions are going.

And then, third question. I know Simon is obviously working hard on the commercialization strategy that you will reveal next year, but I just wondered if you could give us some insight into how your thoughts on that are evolving during the process, if possible.

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Guy Braunstein, Idorsia Ltd - Executive VP & Head of Global Clinical Development [28]

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Yes. I can take the first question, maybe. Of course, we have to do all the studies and they are all ongoing. It's very, very difficult to speculate on the labeling. We do as good as we can. We have large studies. We have these programs discussed regularly with regulators. We got a lot of input from them. So everything is there to show the profile of the product. How this profile is going to translate in delivery, this will be speculation in the future which I cannot do at this stage.

To be very clear, we're assessing the product, the abuse potential, the driving performance, the impact in COPD patients, in obviously sleep apnea patients, and many other things are being looked at as well. So everything is there. [Having the conversation today] I think would be speculating too much and we'll come back later when we have results of these studies.

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Jean-Paul Clozel, Idorsia Ltd - CEO & Director [29]

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But coming back to the regulatory, I think that you might have noticed the black box for the Z-drug and that really I think that what is happening today is that the regulatory authorities still take -- are really more and more conscious of the problem with that drug. And they're really looking for alternative to cease that drug and of course we need to show that we do not have the same type of issues with that drug. This is what we're trying to do. And let's wait for the results which are going to come very soon.

For the Japan, I think that I can say that things are moving. And we will keep you updated when we will be in a more definitive stage, but it's clear that I would say that many companies are interested in such a drug.

In terms of commercial strategy you mean, I think, that what we're doing now is really basically analyzing in really depth, and that Simon is building a team around him with especially building a team around clearly how to profile, how to brand the drug but also how to have commercial success because we clearly -- we know that this is something which we have to solve, much before the launch. We have recruited very good specialists in that. So I think that we are now gathering the data and in the coming months as soon as we get the results, we are going to define the strategy and we will keep you updated.

But I think we really want to base this commercial strategy around data because we want to be able to promote these advantages and differentiation. And without having the data I think it will be very dangerous to completely define the strategy. And let's wait and this is also coming soon.

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Operator [30]

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At the moment, there are no further questions. (Operator Instructions) As we haven't received any further questions, I would hand back to you.

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Andrew C. Weiss, Idorsia Ltd - Senior VP and Head of IR & Corporate Communications [31]

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Thank you very much. So as you can see a lot of things are moving ahead these days. So keep -- we'll keep you posted as to how our advances are. We are getting ready this wave of news flow and results coming first half of next year. So please stay posted. Operator, please close down the lines.

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Operator [32]

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Ladies and gentlemen, thank you for your attendance, this call has been concluded. You may disconnect.