Ascendis Pharma A/S Q2 FY2020 Earnings Call

Thank you all for being here. Welcome to the Ascendis Pharma Earnings Conference Call for the second quarter of 2020. I will now turn the call over to Scott Smith, Senior Vice President and Chief Financial Officer of Ascendis Pharma. Please proceed.

Thank you, Operator. Thank you, everyone, for joining our Second Quarter 2020 Financial Results Conference Call today. I'm Scott Smith, Chief Financial Officer of Ascendis. Joining me on today's call are Jan Mikkelsen, President and Chief Executive Officer; Dr. Dana Pizzuti, Head of Development Operations; and Dr. Juha Punnonen, Head of Oncology. Before we begin, I would like to remind you that this conference call will contain forward-looking statements that are intended to be covered under the safe harbor provided by the Private Securities Litigation Reform Act. Examples of such statements may include, but are not limited to, our progress on our pipeline candidates and our expectations with respect to their continued progress, statements regarding our strategic plans, our goals regarding our clinical pipeline, statements regarding the market potential of our pipeline candidates and statements regarding the planned regulatory filings. These statements are based on information that is available to us today. Actual results or events could differ materially from those in the forward-looking statements, and we may not achieve our goals, carry out our plans or intentions or meet the expectations or projections disclosed in our forward-looking statements, and you should not place undue reliance on these statements. Our forward-looking statements do not reflect the potential impact of any licensing agreements, acquisitions, mergers, dispositions, joint ventures, or investments that we may enter into or terminate. We assume no obligation to update these statements as circumstances change, except as required by law. For additional information concerning the factors that could cause actual results to differ materially, please see the forward-looking statements section in today's press release and the Risk Factors section of our most recent annual report on Form 20-F. Please note that our TransCon product candidates are investigational product candidates and not approved for commercial use. As investigational products, the safety and effectiveness of the TransCon product candidates have not been reviewed or approved by any regulatory agency. None of the statements made on the conference call regarding our TransCon product candidates shall be viewed as promotional. On today's call, we will discuss our second quarter 2020 financial results and provide a business update. Following some prepared remarks, we will then open up the call to questions. I will now turn the call over to Jan Mikkelsen, our President and Chief Executive Officer. Jan?

Thanks, Scott, and good afternoon, everyone. This second quarter, we achieved several key milestones for Ascendis. As we continue to advance towards our Vision 3x3 to build a fully integrated biopharma company. We submitted our first BLA to the FDA for TransCon Growth Hormone for the treatment of pediatric growth hormone deficiency in June. The BLA submission was completely in line with our stated 2020 corporate goals. And it moves Ascendis another step closer to becoming a fully integrated global biopharma company. To see our first TransCon technology product, TransCon Growth Hormone, progress from the idea stage through three Phase III clinical programs, covering over 400 subjects and into a regulatory filing, which also includes our auto-injector, makes me proud of what we have achieved. But we are not stopping here. What makes Ascendis unique is that we are a global company with a broad, diversified pipeline where all product candidates are created with the TransCon technology platform. With the TransCon technology, we are able to leverage the validated biology of assisting drugs and create highly differentiated product candidates by identifying significant unmet medical needs with well-defined clinical strategies, starting with signs underlying the disease. By applying our TransCon technology to an existing clinically validated parent drug or pathway, we can create new product candidates that solve unmet medical needs. Starting with known biology, we are able to simply create highly differentiated products with large commercial potential and an expected high success rate. To achieve our goal of sustainable long-term growth, we will continue our algorithm of building multiple high-value product opportunities in endocrinology rare disease, oncology, and a third therapeutic area. The BLA filing for TransCon Growth Hormone in the U.S. is just one more milestone for Ascendis towards achieving our Vision 3x3 strategy to be a leading biopharma company. We also continue to execute across other areas of the company. Let me update you on some of this recent development. For TransCon Growth Hormone, after the BLA filing for the treatment of pediatric growth hormone deficiency, Ascendis received a positive opinion from the Pediatric Committee of the European Medicine Agency (PEDCO). On this agreement with the proposed Pediatric Investigation Plan (PIP), covering children from six months to less than 18 years of age. We are pleased by the PEDCO decision because we believe it reflects the unique product features of TransCon Growth Hormone, which enables the long action release of unmodified somatropin. By releasing unmodified growth hormone, the same molecule as daily growth hormone all in daily growth hormone. The TransCon technology is designed to level both the direct and indirect effect of growth hormone in the same balanced way as daily growth hormone has for decades. To our knowledge, the approval of our PIP is the first time PEDCO has concluded that a development program for a long-acting growth hormone treatment supports the clinical development in children. With the approval of the PIP, we are on track for filing the MAA (Marketing Authorization Application) in Europe this quarter, instead of the planned Q4 2020 filing. To establish global clinical reach for TransCon Growth Hormone, we continue to advance on several fronts. In Greater China, VISEN Pharmaceuticals, our strategic investment, continues to enroll subjects in a Phase III trial for TransCon Growth Hormone in pediatric growth hormone deficiency. In Japan, we remain on track to initiate the Phase III trial for TransCon Growth Hormone in pediatric growth hormone deficiency in the fourth quarter. For indication label expansion, we continue to execute on our global Phase III trial evaluating TransCon Growth Hormone in adults with growth hormone deficiency. Why is this trial so exciting? Daily growth hormone treatment for children and adults with growth hormone deficiency supports overall endocrine health, including improved body composition, mental health, cardiovascular health, and bone health, in contrast to pediatric growth hormone deficiency, where we measure height as the primary endpoint. In adult growth hormone deficiency, we typically measure the impact on altered body composition, such as change in truncal fat mass or lean body mass. To achieve this optimized clinical effect on truncal fat mass, it's essential that growth hormone has its direct effect on the target tissue because the decrease in truncal fat mass by growth hormone is partly facilitated by the direct activation of the growth hormone receptor on truncal fat cells. Our adult growth hormone deficiency trial, the foresiGHt Trial, is a global Phase III trial designed to compare the safety and efficacy of once-weekly TransCon Growth Hormone with placebo and a daily growth hormone product. The foresiGHt Trial will be conducted in around 120 sites in North America, Europe, and Asia, including China and Japan. Around 240 adult subjects with growth hormone deficiency who are treatment-naive or have not received growth hormone therapy for at least 12 months prior to screening will be enrolled in the trial. Subjects will be randomized 1:1:1 across three arms with an expected 80 subjects in each arm: once-weekly TransCon Growth Hormone, placebo administered once per week, and a daily growth hormone product. The once-weekly TransCon Growth Hormone and placebo arms will be double-blinded, and the daily growth hormone arm will be open label. The treatment period will be 38 weeks with 12 weeks for dose titration and 26 weeks for maintenance. The primary endpoint is the change from baseline in truncal fat percentage at week 38. Secondary efficacy endpoints include a change from baseline in truncal fat mass and change from baseline in total lean body mass. All exploratory endpoints will be assessed along with the patient-reported outcome measures, safety, PK, and PD. The primary regulatory objective is to evaluate the efficacy of once-weekly TransCon Growth Hormone versus placebo. From a commercial perspective, it is important to show at least comparable efficacy, safety, and tolerability to daily growth hormone. Adult growth hormone deficiency is the least penetrated market segment for growth hormone, with well-documented adherence challenges and health challenges. We believe TransCon Growth Hormone may provide an alternative to daily growth hormone that addresses overall endocrine health and may provide a convenient alternative, which also leads to better outcomes for adult patients and expansion of the growth hormone market. Moving to TransCon PTH. The data we have reported from the 4-week fixed-dose, double-blinded period of PaTH Forward in April 2020 combined with the additional data we reported this afternoon demonstrate, for the first time, that we believe has the potential to transform the lives of people living with hypoparathyroidism with a hormone replacement therapy. Earlier this year, in April, we reported top-line data from the 4-week fixed-dose, double-blinded portion of our Phase II PaTH Forward trial, which demonstrated that TransCon PTH has the potential to replace the standard of care, activated vitamin D and calcium supplements. The data reported to date support our view that TransCon PTH could replace the standard of care. In just four weeks, 80% of patients on TransCon PTH removed standard of care compared to 50% on placebo, even if subjects were kept to a fixed dose of TransCon PTH. In our open-label extension trial, subjects are allowed to optimize up and down the TransCon PTH dose. So we expect that additional subjects might be able to remove standard of care. We have been pleased to see all 58 subjects in the open-label extension trial are continuing in the trial at the six-month point. These subjects have continued regardless of baseline pill burden, severity of disease, and whether they had a response or not in the four-week portion. We believe this excellent retention may indicate a positive effect of PTH itself, independent of historic pill burden and other biochemical parameters that we have reported out. What we have not known is whether PTH therapy may improve quality of life for the patients. Today, we released new data, which we believe is another element in demonstrating that TransCon PTH is better than standard healthcare for treating hypoparathyroidism patients and supports TransCon PTH as a hormone replacement therapy. It is the first time, to our knowledge, that a treatment for hypoparathyroidism has demonstrated a statistically significant improvement in quality of life compared to placebo in a double-blinded controlled trial using the SF-36 Health Survey, a commonly used and validated non-disease-specific PRO instrument for overall assessment of health and well-being. The survey consists of 36 questions, and the results are summarized in a Physical Component Summary (PCS) and Mental Component Summary (MCS). At baseline, in the Phase II PaTH Forward trial, subjects in both arms of the trial had lower than average SF-36 scores, suggesting that there is a reduced health-related quality of life in this patient population. This is in alignment with several other targets. Already in the 4-weeks double-blinded controlled part of a Phase II trial, significant and clinically meaningful improvements in PCS and MCS were observed. For the PCS score, using a normative scoring system with a score of 50 as the norm for the general population and an ANCOVA model, TransCon PTH subjects demonstrated a mean difference of 5.2 points compared to placebo with a p-value of 0.013. The minimal important difference for PCS is 2 points. For the MCS component summary score, TransCon PTH subjects demonstrated a difference in mean of 9.8 points compared to placebo with a p-value of 0.0003. The minimal important difference for MCS is 3 points. Our four-week data suggests that sustained normal PTH levels offer something more rather than just normalization of serum calcium. Both PTH-treated and placebo subjects achieve high rates of normal calcium (92% and 80%, respectively). Yet, there was a meaningful difference in quality of life scores. Based on clinical experience, clinicians and patients with hypoparathyroidism have not discussed that physiological PTH levels contribute to optimal function of the central nervous system. Our four-week data suggests that sustained normal PTH levels, rather than just normal serum calcium, are indeed associated with health benefits. While these data are considered exploratory, they are the first evidence we have ever seen from a randomized double-blinded controlled trial indicating that a treatment for hypoparathyroidism compared to placebo may have significantly improved physical function as well-being towards a normal level. In previously published randomized control trials of PTH products where SF-36 was compared to placebo, no significant treatment differences were detected versus placebo. One possible explanation for this finding is the lack of sustained PTH levels. We continue working on validating our own disease-specific PRO instrument to evaluate additional patient benefits of TransCon PTH that may strengthen our overall value proposition. We plan to discuss our four-week double-blind data and six-month open-label extension data for our own disease-specific PRO instrument and SF-36 with the FDA in the coming months. We remain on track to report six-month data from the open-label extension portion of the PaTH Forward trial this quarter and some regulatory filings to initiate a global Phase III trial of TransCon PTH in North America and Europe in the fourth quarter. We have initiated our global end of Phase II meetings with regulatory authorities and are pleased with the feedback so far. From the results that we are seeing in our Phase II PaTH Forward trial, we believe that TransCon PTH potentially represents a new treatment paradigm for hypoparathyroidism as replacement therapy, a therapy that might be able to replace conventional care, normalize biochemical parameters, improve long-term risk factors, and enhance the quality of life for patients. We look forward to sharing the six-month open-label extension data with you later this quarter. A quick update on the rest of the pipeline. For TransCon CMP, we continue to work towards escalating dose cohorts in the ongoing ACcomplisH Trial. Our global Phase II trial is evaluating the safety and efficacy of TransCon CMP at escalating doses in children with achondroplasia from 2 to 10 years of age. We received Orphan Designation from the European Commission for TransCon CMP for achondroplasia, giving us Orphan Designation in both Europe and the U.S. As part of an integrated global clinical program, clinical development in China is being done by VISEN Pharmaceuticals. There, an independent Phase II ACcomplisH China trial is expected to be initiated in the fourth quarter. Moving to oncology, quick clinical data for TransCon IL-2 beta/gamma, a product candidate designed to provide sustained systemic relief of the receptor-biased IL-2, IL-2 beta/gamma specific, were presented at the American Association of Cancer Research Meeting in June. These data show the potential of TransCon IL-2 beta/gamma to be a best-in-class IL-2 molecule, demonstrating that a single dose in nonhuman primates provided a potent expansion and activation of cytotoxic lymphocytes with low activation of Treg cells and eosinophils. In addition, a long half-life of around 32 hours was observed in nonhuman primates, which is expected to support potential dosing every three weeks in patients. We are on track to submit the first IND filing or similar for TransCon TLR 7/8 Agonist in the fourth quarter 2020, followed by a planned IND filing or similar for TransCon IL-2 beta/gamma in 2021. Based on the promising preclinical results we have seen in our TransCon IL-2 beta/gamma and TransCon TLR 7/8 Agonist product candidates, we believe our TransCon technologies, which enable both systemic and long-acting inter-tumor administration, have the potential to improve treatment outcomes for patients with cancer. As you can see, our clinical pipeline progress has kept Ascendis very busy during the first half of 2020. During the current quarter, we continued to grow our headcount in both R&D and the commercial organization as we're preparing for a potential launch of our first project and expand our pipeline and global key initiatives. Now let me turn the call over to Scott for a financial review before we open for questions.

Thank you, Jan. Turning to our financial results for the quarter ended June 30, 2020. We reported a net loss of €94.9 million or €1.97 per basic and diluted share compared to a net loss of €58.9 million or €1.25 per basic and diluted share during the same period in 2019. Now I will run through some of the key components of these results. Research and development costs for the second quarter were €63.6 million compared to €43.8 million during the same period in 2019. The increase in R&D costs reflects continued advancement of our pipeline, with the primary drivers including for TransCon Growth Hormone. Costs were higher compared to the same period of the prior year due to increased costs related to the manufacturing of commercial product supply, as well as increased clinical trial activities, including start-up costs for the global Phase III adult GHD trial, the foresiGHt Trial, and the Phase III pediatric GHD trial in Japan. For both TransCon PTH and TransCon CMP, costs were higher primarily due to increased clinical trial and manufacturing costs. We also saw higher external costs related to the continued build-out of our oncology therapeutic area and across all programs, and an overall increase in personnel-related costs. Selling, general and administrative expenses for the second quarter were €20.8 million compared to €11 million during the same period in 2019. These higher costs primarily reflect an increase in personnel and related costs, as well as expenses associated with the continued build-out of our commercial capabilities. Other income and expenses included an unrealized noncash loss of €9.9 million compared to an unrealized noncash loss of €8.2 million during the same period in 2019 due to foreign currency exchange rate fluctuations. We ended the second quarter with cash, cash equivalents and marketable securities totaling €471.6 million. In July, subsequent to the quarter end, we completed a follow-on financing with net proceeds of USD 654.7 million or approximately €580.7 million. Including net proceeds from the July offering, pro forma cash, cash equivalents and marketable securities as of quarter end would have been approximately €1 billion. We also remain on track to achieve the following milestones for the remainder of 2020: for TransCon Growth Hormone, these include submitting the MAA filing in Europe during the current quarter; executing the foresiGHT trial, a global Phase III study for adult GHD; and initiating a Phase III clinical trial for pediatric GHD in Japan in the fourth quarter. For TransCon PTH, these include reporting six-month open-label extension data in the Phase II PaTH Forward trial in the third quarter and initiating the global Phase III clinical program for adult hypoparathyroidism in the fourth quarter. For TransCon CMP, this includes initiation of ACcomplisH China, a Phase II clinical trial for achondroplasia through our strategic investment in VISEN Pharmaceuticals in the fourth quarter. Lastly, in our oncology therapeutic area, we continue to invest in CMC and preclinical activities related to TransCon TLR 7/8 Agonist and TransCon IL-2 beta/gamma, and we plan to submit our first IND or similar filing in the fourth quarter for our TransCon TLR 7/8 Agonist. We continue to execute on our goal of building a leading biopharma company with a diverse pipeline of potential high-value product candidates in multiple therapeutic areas. Combining our TransCon technology with clinically validated parent drugs in areas of well-known biology has allowed us to deliver unique product candidates and clinical results with an expected high probability of success. We saw that first with TransCon Growth Hormone where, for the first time, we are aware of a long-acting growth hormone demonstrated in a randomized controlled clinical trial, similar or superior efficacy and safety across a broad spectrum of parameters compared to a daily growth hormone. Today, you see similar results from the four-week randomized double-blinded fixed-dose portion of PaTH Forward with TransCon PTH, which demonstrated, for the first time to our knowledge, that a treatment for hypoparathyroidism had a statistically significant improvement compared to placebo for the SF-36, a commonly used and validated non-disease-specific PRO instrument for overall assessment of health and well-being. We look forward to sharing similar firsts with you in our TransCon CNP, TransCon TLR 7/8 Agonist, and TransCon IL-2 beta/gamma programs in the coming years. With our recent follow-on financing, we remain well capitalized to execute on our Vision 3X3. Operator, we are now ready to take questions.

Our first question comes from Michelle Gilson with Canaccord Genuity.

Congratulations on the data. I know it's not apples-to-apples because of the duration of treatment and the baseline. But perhaps you can expand a little bit on some of your comments about this being the first trial to show a difference in quality of life for SF-36 results in a randomized placebo-controlled study. And maybe specifically, you can help us understand if there's a comparison to be made with the results from the REPLACE study, which showed that net par treatment did not result in a statistically significant improvement in either of those domains compared to placebo?

Thanks, Michelle. Why we are really so excited about the data is because we had been missing something. When we started our TransCon PTH product, we had a long discussion about how to really describe the severity of the disease. People tried some way to describe it from the pill burden. When we looked at the patient demographic that we enrolled in our Phase II trial, some of the patients were definitely placed in the group of mild, taking low amounts of activated vitamin D and calcium supplements. Then we have the more moderate and severe patients, but what we saw is that all 58 patients now are past this six-month point. We know the burden of daily administration, but still patients are staying and not dropping out. Typically, in many trials, we expect in the open-label extension to see many dropouts. Asking why all patients are staying indicates that there must be something else which we cannot just quantify with biochemical analysis. This is why we are developing the disease-specific PRO patient-reported outcome for hypoparathyroidism because we want to really capture that and get it validated. The SF-36 is a non-disease-specific validation that describes the benefits you can really achieve in the well-being of a person. What we saw here is that SF-36 came out so clearly in just the first four weeks. We believe this is because we are providing the physiological PTH level 24/7, meaning a stable release without large fluctuations. This is believed to be the reason others have not been able to show a significant change in SF-36 during double-blinded periods. Importantly, for me and Ascendis, is we see the benefit that patients get. They are adapting more to a normal life because they receive the right hormone replacement therapy.

Great. And just as a follow-up, are you planning to report the PRO with your six-month data later this quarter? And just moving forward, when we do get those data without a placebo arm in the open-label extension study, how should we think about interpreting the PRO or SF-36 results?

I think we both have the SF-36 results. But then, Dana, you can comment about our...

Right. Yes, as far as our own PRO instrument, the HPES, we've already submitted to the FDA, the documentation to get that validated by them. It's really not so much to look at the individual groups and how patients fit, but more about the instrument itself, how it behaves, and how predictive it is. There are two major aspects of that, which are the symptom side of it and then the impact side. So we're pretty excited that it seems to function well. But the thing is that it's not validated yet. The reason we came forward with SF-36 was because it's a validated instrument, again, not specific for hypoparathyroidism, but well-established in terms of measuring patient well-being, as Jan mentioned. We will be able to correlate both of those scales as we go forward. The issue we have interpreting the six-month data is that there's no control arm beyond the first four weeks. We can follow and see how patients do. Based on what we've seen so far, we expect nothing less than a maintenance or improvement in the four-week results we gained from either the SF-36 or the HPES data as well. We will closely analyze the six-month data in all of the 58 subjects that are still in the trial.

We have never had any doubt there was a reduced health-related quality of life in patients with hypoparathyroidism. There are multiple applications showing that. The interesting part from a high-level scientific perspective is that it looks like this level can be independent of calcium levels. We think that what we're seeing indicates a potential direct CNS effect that may be providing this benefit related to health-related quality of life. This is something we will like to sustain further with both our PRO and also continue measuring SF-36. We are really interested in these results as it shows how much benefit we can provide with an endocrine product that significantly enhances health-related quality of life.

Our next question comes from the line of Joseph Schwartz with SVB Leerink.

Hi. I'm Joori dialing for Joe. So the first one has to do with the questions on the data. We were just wondering if you talked to the FDA about the SF-36 data, and do you have a sense about how the FDA feels about the study design and primary endpoint for Phase III?

I think we just got that data now. This is why we released it here together with our Q2 earnings. Definitely, Dana and her team will be discussing it with the FDA. You can comment on that, Dana.

Yes. I mean, we actually are preparing to communicate not only these data but also the six-month data once we compile that. So in addition to validating our new instrument, the HPES, we'll talk further about the SF-36 and the long-term efficacy and safety of the product after the six-month period.

In conclusion, we have not shown regulatory agencies this data yet. We are going to do it together with our six-month data coming later this quarter.

Okay, that's helpful. Could you elaborate a bit more on your HPES PRO? What differences might exist between HPES PRO and SF? What are you hoping to achieve with your PRO that the standard endpoint of SF-36 cannot provide?

The major difference is that this has been developed and validated specifically in hypoparathyroidism patients, right? The SF-36 has been around for quite a while. It's been used in multiple therapeutic areas to look at how patients react or respond to therapies. What we were able to do, we examine the prominent symptoms more related to hypoparathyroidism such as cognitive issues, like memory and concentration troubles that patients experience. We ask targeted questions about that. On the impact side, we inquire how physical activity, working ability, mood, and social relationships change. So those are the differing parameters we assess on the impact side. Again, the significant difference is that it’s patient-specific and validated for hypoparathyroidism.

Our next question comes from the line of Josh Schimmer with Evercore ISI.

I have three of them. First, on the foresiGHT trial, can you describe the dose and titration schedules for the weekly and daily treatment arms? For the growth hormone market, you indicated that the adult growth hormone market is under-penetrated. Can you talk a little more about the unmet need, the symptomatology, and the benefits they could derive from a convenient growth hormone option? And then when do you think we're going to get a clear sense of the TransCon CMP candidate profile in terms of its differentiated effect on growth specifically in patients?

Let me start with your last question. Yes, it's a good question. When we are getting the efficacy on the right cohort, we are dose escalating now, and what we already know from our knowledge about the product profile is that we think it’s highly differentiated because it provides continuous exposure of the CMP molecule without the high peak typically associated with side effects like vasodilation. Regarding when we will see the impact of this differentiated product in the clinical trial, it will depend on our ability to identify the right dose during the ongoing dose escalation. I hope that in the next 6 to 9 months, we will have better insights, but I cannot guarantee that as I do not know which cohort we will finally validate with efficacy data. Related to adult growth hormone deficiency, this patient population is quite different from pediatric patients, with most adult patients coming from backgrounds where they experienced different types of trauma or cancer treatments. The penetration rate has been discussed as only 15% to 20% treated of the total patient population. This suggests we can assist a significant number of patients with adult growth hormone deficiency by providing a once-weekly dosing option that alleviates the burden of daily injections. In our foresiGHT trial, we have a 1:1:1 randomization because we believe it is essential to demonstrate both better safety and greater efficacy than placebo, but also ensure we achieve at least comparable efficacy and safety to daily growth hormones. The titration depends on how well the body adapts to the growth hormone therapy.

Our next question comes from the line of Jessica Fye with JPMorgan.

In the PTH data today, I'm curious if the four-week SF-36 results or the HPES results track with the biomarker and supplement withdrawal components of the primary and key secondary efficacy endpoints in PaTH Forward. Essentially, were the responders on the primary and secondary more likely to benefit on SF-36 or HPES than the non-responders? It sounds like you're saying that some patients benefited on quality of life, even if they didn't meet the responder criteria for some reason. If so, I was hoping you could elaborate on which part of the responder criteria seemed less important for quality of life. You alluded to calcium in response to an earlier question. Was that serum calcium or urinary calcium?

I think we still have much to learn about how TransCon PTH has so many positive effects during normal replacement therapy. What we have not found any clear correlation between serum calcium and any of the parameters related to quality of life. This lack of correlation is very interesting to analyze more closely. We have not completed a deep dive into the PF-36 where we can further subgroup the questions into different domains. We're not at the level of detail yet in our analysis to show any correlation or lack thereof. However, it certainly is a fascinating topic we plan to follow up on. Importantly, our SF-36 is aligned with some of the positive trends we’re observing in our disease-specific PRO. So, I think the data shows a great alignment.

Okay. Following up on that. Do you see any possibility of changing the planned Phase III endpoint to SF-36 or HPES?

I believe when we look at our primary endpoint, we will consider including parameters such as SF-36 or possibly our patient-specific PRO as key secondary endpoints. So definitely, there is a chance, but we don't plan to change our primary endpoint at this time.

Okay, great. Lastly, is it possible to refine when, in the third quarter, we can expect the six-month PaTH Forward update?

There aren't many months left in the third quarter. So I think there’s only one month left now, basically September. Therefore, I would expect it within the next 4 to 6 weeks.

Our next question comes from the line of James Birchenough with Wells Fargo.

Congrats on another strong update. I have a couple of questions. First, perhaps on the mental component of the SF-36, it seems like there's a substantial decline in the placebo group from baseline to week four. Is that an expected natural history? Is the drug result specifically superior to the baseline of the placebo? I'm trying to understand if the decline in the placebo contributed to the results.

I haven’t received any feedback indicating that the decline in the placebo group should affect treatment outcomes. What you'll see in the interpretation is that everyone is normalized to 50 on the score. The transformation involves how the different domains summarize and normalize.

Got it. Okay. Yes, it just looked like the baseline was around 47 for placebo and then dropped down to maybe 42, and that was part of the delta with the treatment effect at week four. So I was just trying to understand that a bit better.

Exactly. But I think this is how you interpret the different domains in a summary scheme where you normalize it to a baseline score.

Got it. Okay. And then in terms of going beyond the six-month data this quarter, interactions with regulators. When should we hear back on the results of those interactions? Is breakthrough designation part of the discussion?

Currently, we are only discussing with regulatory agencies our first four-week data. We have not included our SF-36 data in this discussion. We have discussed how to look at our four-week data, which confirms our understanding of replacement therapy. We expect regulatory feedback from the U.S. in early September and different European agencies afterward. Out of the feedback we anticipate from the U.S., there seems to be understanding that this is a replacement therapy. Essential data should develop as we can discuss and send in our six-month data as well as the additional feedback we get from SF-36 and our disease-specific PRO once we complete the six-month data.

Finally, could you provide some context regarding the adult growth hormone deficiency? What would be the burden of abnormal body composition in adult patients with growth hormone deficiency? What constitutes a clinically relevant change in that metric? Additionally, what are the metabolic consequences of those parameter changes?

Yes, in pediatric growth hormone deficiency, we measure height. However, we don’t see the same parameters in adults who are not growing. In this patient population, body composition is critical. Traditionally, we measure a decrease in truncal fat because growth hormone aids in breaking down truncal fat. Additionally, it has major implications on patient-reported outcomes, cardiovascular parameters, and exercise capacity. When we look at positive longitudinal effects, we measure growth hormone treatments primarily through height in pediatric patients while for adults, we emphasize decreased truncal fat, typically as a percentage or absolute amount, along with increased lean body mass. The overarching positive effects on endocrine health through growth hormone treatment correspondingly relate to decreased truncal fat.

Our next question comes from the line of Taz Ahmad with Bank of America.

Okay. A few questions for me; regarding the SF-36 results for the three doses you studied, the 15, the 18, the 21, can you provide a sense of how the response has changed from low to high doses? Specifically, did the highest dose show the best results? I have a couple of follow-ups.

I have not seen a detailed breakdown of the three different patient groups. The primary analysis was focused on the PTH arm versus the placebo arm, which has not brought any significant differences to my attention. Hence, I believe we might observe similar positive effects on all three dosing groups.

Turning to GHD for a second; you have a Phase III trial ongoing in China and a Phase III trial starting in Japan soon. Can you provide more color on the timeline for when these studies should read out? Additionally, given traditional insights into rare disease launches in Japan regarding price points, could you talk about your market assessments in China?

TransCon Growth Hormone is being evaluated by our strategic investment, VISEN Pharmaceutical, in Greater China. They are currently enrolling patients and expect to be fully enrolled by the end of the first quarter next year. Therefore, you can assume that data clarity will be roughly 12 months from enrollment, so you will see endpoints. For the Japanese trial, it is a smaller study involving fewer patients. The growth hormone market in Greater China and Japan is appealing as it is among the largest. The growth hormone market in China is dominated by local players, with one company managing most of the market share. The unique aspect is that 75% of patients rely on direct payment from caregivers, which differs from hospital-dominated markets. Our best estimates indicate the established Chinese market is around USD 600 million to USD 700 million and growing substantially each year. The size of the Japanese market is comparable and has been well established for years. When considering TransCon Growth Hormone, we aspire to be the leading brand globally. That is one of the reasons we brought in a person like Jesper Høiland with extensive global commercial expertise to help implement our rare disease endocrinology products on a global basis. Some countries will see us launch directly as in the U.S. and select European areas. In other regions, we will utilize strategic alliances with local knowledge to establish our presence, similar to our relationship with VISEN Pharmaceuticals in Greater China. You will observe this innovative thinking in additional regions as well.

Our next question comes from the line of Alethia Young with Cantor Fitzgerald.

Can you talk about why you decided to focus first on TLR 7/8 versus IL-2? Is there anything you've seen pre-clinically or commercially influencing your decision? Secondly, regarding the CMP trial, has its progress been potentially impacted by COVID, or is it simply a matter of dose escalation? Lastly, have you received any feedback from the FDA regarding the growth hormone submission since you filed in late June?

Let's start with your questions from the backlog. Both projects were competing for development timelines. We believe both are transformative, high-value opportunities, but one – our TransCon TLR 7/8 can provide long-term inter-tumor exposure of the agent to enhance tumors from uni-reactive to reactive states. This is a significant paradigm shift. Whereas the IL-2 is expected to be another best-in-class product opportunity. Since both are invaluable, we need to prioritize clinical operations and trial initiation metrics. TransCon TLR 7/8 will commence clinical trials by the end of 2020, and we expect the bios IL-2 to follow within six months. There's no setback to the potential of either pathway; we remain highly enthusiastic about both opportunities, which contribute to our innovative oncology pipeline.

Our next question comes from the line of Trevor Allred with Oppenheimer.

A couple for me. Following your recent capital raise, are you considering any M&A activity? If so, which therapeutic category do you think you might focus on? Also, are you hearing anything regarding the enrollment pace that VISEN is experiencing in China? How do you expect that trend to translate to your other trials?

While reviewing our portfolio, we specifically looked at our oncology pipeline, focusing on unique product opportunities for growth. We believe we built Ascendis Pharma based on intensive work on TransCon technologies. We aim to discover around differentiable product opportunities focused on high unmet medical needs with great success rates. We continue to believe that we have a unique competitive edge with our TransCon technology and will prioritize it going forward. Seeing low-hanging fruit helps us refine potential of insights and competencies we possess around the technologies. I do not expect us to engage in M&A activities as we remain committed to advancing our technology on its introduced course. Regarding our strategic investment in VISEN Pharmaceuticals, they are well-staffed with talent and pursuing the same high standards we apply. Therefore, we expect they will yield comparable results with our products as we have done.

Are there any impacts you've observed regarding enrollment due to COVID related issues with VISEN? Do you anticipate incorporating those learnings into your own trial initiations later this year?

I believe that looking at Greater China, they maintained a relatively lower incidence of COVID-19 related restrictions compared to other regions. We have not reported any restrictions on patient enrollment for the trials.

Thank you. There are no further questions in the queue. Ladies and gentlemen, this concludes today's conference call. We thank you for participating. You may now disconnect. Everyone, have a great day.