Good afternoon, this is the Chorus Call Conference Operator. Welcome, and thank you for joining the Recordati Acquisition of Global Rights of Enjaymo conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, then they signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Miss Eugenia Litz, Vice President of Investor Relations of Recordati. Please go ahead, madam.
Thank you, and good afternoon, everyone. I'm very pleased to introduce Rob Koremans, our CEO, and Scott Pescatore, Executive Vice President of Rare Diseases. Together, they will provide an update on our agreement to acquire the global rights to Enjaymo. Also joining for the Q&A session will be Luigi La Corte, our CFO. As always, the presentation is available in the investor section of our website. It is now my pleasure to pass the call over to Rob. Please go ahead.
Thank you, Eugenia, and good morning, good afternoon, and thank you for joining us. We are extremely pleased to update you today on our agreement with Sanofi to acquire the global rights to Enjaymo. The transaction reaffirms our commitment to addressing serious unmet needs in rare diseases, and is a perfect strategic fit with an attractive product and a great financial profile. Enjaymo provides patients with cold agglutinin disease, a novel treatment option, as the only approved targeted product launched in 2020 in the U.S., Europe, and Japan. It has a broad geographic footprint and fast uptake, with last twelve-month sales of approximately EUR 100 million euro. Enjaymo complements our current rare disease portfolio in an area of high unmet medical need and is synergistic with Sylvant, with hematologists as the key target physicians.
We aim to retain all Sanofi employees in scope to continue enhancing the global support for Enjaymo. On the financial side, we expect a 2025 revenue of greater than EUR 150 million, and peak sales in the range of EUR 250 million-EUR 300 million. After successful closing of the deal, we anticipate an immediate positive EBITDA contribution, with margins expected to be accretive to our current rare disease business from 2025 onwards. Lastly, I would really like to highlight the de-risk deal structure, with commercial milestones subject to achievements of net sales at or above the top, the top end of our peak year sales expectations. Now, I would like to turn the call over to Scott to provide more details on Enjaymo and on the CAD market. Scott?
Thanks, Rob. It's my great pleasure to provide some more insights into Enjaymo and the CAD market. Starting with the market, CAD is a rare B-cell lymphoproliferative disorder, and is caused by autoantibodies from B-cells binding to erythrocytes, leading to their aggregation and destruction through the classical complement system. This condition is seriously debilitating for patients, causing severe fatigue, risk of thrombosis, and cold-induced circulatory symptoms, all of which significantly impact their quality of life. In the U.S., Japan, and Europe, there are approximately 11-12 thousand patients, and the median onset of age is about 66 years. And unfortunately, there are very limited current treatment options available. The dynamics of the CAD market highlight the significant unmet medical need and emphasize the importance of Enjaymo as a treatment option for patients. Now, turning a bit to Enjaymo, and as you recall, it's the only approved product for CAD.
It's administered as an IV. Enjaymo is indicated for patients who do not respond to first-line treatment or who are experiencing severe anemia. Enjaymo is a biologic with IV exclusivity in the U.S. and Japan until 2036, and in Europe until 2037. We anticipate limited competition in the midterm. As for the mechanism of action, the classical complement pathway activation in CAD results in red blood cell destruction. Enjaymo intervenes by binding to C1, which is a part of this pathway. Enjaymo was approved based on very compelling results from the phase 3 CADENZA trial, where 73% of patients met all three key indicators: significant hemoglobin increase, transfusion dependence, and no need for additional treatment. Finally, on the right side of the slide, you'll find some additional financial highlights that Rob just covered.
With that, I'd like to turn the call back over to Rob for the financial summary of the transaction. Rob?
Thanks, Scott. Yeah, as already indicated, we anticipate 2025 revenue to exceed EUR 150 million, with peak sales between EUR 250 million and EUR 300 million. EBITDA margin should positively impact our rare disease business starting in 2025, and we expect non-recurring costs of around EUR 10 million. Depending on the closing date, we expect minimal financial contributions in 2024. The agreement includes an upfront payment of $825 million and potential additional commercial milestones up to $250 million, if net sales meets or exceeds the highest expectations for peak year sales. We are financing the transaction with existing cash and committed debt facilities.
This will result in a leverage between 2.4 and 2.5 times EBITDA pro forma by year-end, and decreasing to below 2 times in 2025, if there is no additional BD. Our dividend and capital allocation policy remain unchanged. The transaction is expected to close by the end of 2024, and is subject to regulatory clearances, of course. Before concluding, I would like to sincerely thank Gabriele Finzi, our Executive VP of BD, his team, and many others throughout the organization who've worked diligently on this transaction. I would also like to thank Sanofi for the very constructive discussions and the results we achieved together. Now, together with Scott and Luigi, we are ready and happy to open the call for questions.
Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touchtone telephone. To remove yourself from the question queue, please press Star and Two. Please pick up the receiver when asking questions. Anyone who has a question may press Star and One at this time. The first question is from Brian Balchin with Jefferies. Please go ahead.
Hey, guys. Brian here. J ust on the peak sales guide of up to $300 million, I believe that's only for CAD, isn't it? I t'd be great to get your thoughts on potential label expansion, for instance, to warm autoimmune hemolytic anemia, wAIHA. I think that's, I'm not actually exactly sure. T hen just on the manufacturing, would it be correct to assume similar to what you currently have with GSK on an Avodart Combodart, and that you book transfer price to COGS? Cheers.
Hi, Brian. Thanks. Yeah, the peak sales do relate to the labeled indication. I don't want to speculate before the deal is closed onto anything potentially beyond that, right? A s said, we expect this closing by the end of this year, but it's obviously subject to the authority's approval of this. I don't think we should do anything that speculates on what is there beyond what we have communicated at the moment. As to production, I think Luigi can probably give a good answer to that. Luigi, if you want?
Hey.
Luigi, you're on mute. Yep, we can hear you now. Working in that sense. No, so what we have here is we have a relatively, we have cost of goods that are, I don't wanna definitely disclose, but the end up in this is fantastic margin, and very, very favorable in terms of EBITDA contribution for our business. And the production is, at the moment, with Biogen and Vetter. And combination of that is actually very favorable for us, and we'll continue with that supply chain. I t's different from the GSK deal, where really they make all of the finished products and get a fairly high margin. W e have a much more attractive margin construct here with Enjaymo.
Sorry, can you hear me now, Rob?
Yeah, Luigi, we can.
Sorry, not sure why the line got cut off. Probably you've already answered, but, my short answer would have been, we do not share the economics through the supply price as we did on the GSK deal. This is upfront and milestones only.
Got it. Super. Thank you, guys.
The next question is from Isacco Brambilla with Mediobanca. Please go ahead.
Hi. Good afternoon, everybody, and thanks for the presentation, and congratulations for the deal, which looks a compelling one, both financially and strategically. A couple of questions on my side. The first one is on the performance recorded so far by Enjaymo, based on data reported by Sanofi. In the first half of 2024 , revenues in Europe are already almost doubling the results posted in 2023 in the full year. Could you elaborate a bit more on the timing of launches in Europe so far for Enjaymo, and just tell us if there is any relevant market still missing?
Also fair to see growth in Europe as the main driver of the acceleration from last 12 months sales to your indication for 2025. Second question is on net financial position. Are you going to include the earn-out in your net financial position, and the clarification on your pro forma leverage for 2024? Is it including last 12-month EBITDA by Enjaymo?
Luigi, you want to take the second question first?
Yeah. Hopefully you can still hear me, yes? . Y es we always set to the pro forma for trading, last twelve months, as if we've done the benefit of the economics from the a twelve-month basis. It's quite customary to do that. I n terms of, do we already recognize now the liability? No. I mean, under accounting standards, we would wait for. This is subject to regulatory approval. O nce we have the regulatory approval and the deal closes, we would be recognizing the liability for the payment at that stage.
Thanks, Luigi. This is Scott. Perhaps I can circle back to your first question. B asically, I can tell you, we don't have all the details, and we don't provide the split by country or by region in terms of the sales. W hat we know so far for 2024 is that sales are progressing quite positively. They've done more than EUR 100 million for the last 12 months. T hat, moving into next year, with regards to the regional rollout, it really comes down to increased diagnosis, increased penetration, and as we all know, when we have finally an approved product and an indication, the increased disease awareness that allows us to treat more patients. Wi ll be focusing on those three areas as we continue to integrate the product and drive the sales into next year.
Okay, thanks, both.
The next question is from Niccolò Storer with Kepler. Please go ahead.
Good afternoon, gents, and thanks for taking my few questions. The first one is on peak sales. I see that in the presentation, you write about patent expiry, et cetera, but considering the fast uptake, when do you think you will reach EUR 250 million-EUR 300 million, or at least get close to those numbers? The second one is on further geographical expansion. Do you think that you might have the possibility to bring this Enjaymo or also beyond the three markets in which it is today?
the last one may be a clarification on milestones to be paid. How does it work, the mechanism? Because it's not clear to me. Are you paying some money if you get to the peak sales, and additional money if you're getting to more than peak sales? I s the timing related to this payment linked to when actually you're reaching peak sales, or is maybe more linked to the time when patent are expiring? Can you clarify a bit more? Thank you.
Hi, Niccolò. A t this point, as we haven't closed the deal and still really subject to the approval and from the regulatory authorities, I really am very uncomfortable to give any detail on this product that we don't own. It's currently by Sanofi. We know that we give peak sales of 250-300 million EUR. I don't want to get into details as to when we expect it and what the plans are for geographic expansion at this point in time. The moment this is closed, we are more than happy to give more details on our plans with this product going forward. At this moment, it would just not be the right thing to do. As to the commercial milestones, they are due.
We will pay commercial milestones when certain net revenues are achieved, which is typically what you do with commercial milestones. B eyond that, there is no, like, there's no meaningful royalty. W e have this. We have a down payment and the commercial milestones, and that's basically very straightforward and lean and simple deal structure.
Maybe, Rob, I'll just add on that, because I think it was maybe part of the question that I had, earlier. A s we said, the thresholds for these are at or above, the peak sales guidance that we've provided. W hen we get to it we'll discuss with auditors under IFRS 3, to what extent, any or part of those milestones need to be recognized at that time, as liability. A gain given where the thresholds are, we, we'll have to have that, discussion.
Thank you. Maybe a quick follow-up for Luigi. How much new debt are you taking on to finance this deal? Which is the mix between new and available finances?
Most is new, Niccolò. We always like to keep a balance of cash on hand. I t's a cash-generating business, as . We were at back below one point eight times leverage at the end of Q2. Q3 is usually a quarter where we generate cash, and we reduce that further ahead of the interim dividend. Y ou assume most of it will be new facilities. You may recall, we said when we did the GSK deal, we took down one facility, which also had a further piece that we could draw down as needed. I t'd be a mixture of those, but you should assume mostly a new debt, and mostly at rates which are consistent with our current financing arrangements. I t's nice to see interest rates coming down around the world.
Thank you.
The next question is from Giorgio Tavolini with Intermonte. Please go ahead.
Hi, good morning, gentlemen, and thank you for taking my three questions, please. I may have missed this detail. I don't know if you are in the position to disclose it. What is the duration of the Enjaymo licensing agreement with Sanofi, and yeah, if it extends beyond the expiration of the patent? The second one is regarding the synergies with the Sylvant in oncology, as you mentioned in the press release. W hat is the expected magnitude, or, I mean, if you can provide more color on the commercial synergies, for the network, I don't know. The third one is on the non-recurring costs of approximately EUR 10 million. I was wondering if they are related to the R&D activity. Thank you.
Maybe I can take the last one first, if that's okay. T he non-recurring costs are as customary, there's a number of. In the case of an acquisition, as is this deal, there's a number of, transaction-related costs which IFRS 3 does not allow to add to the intangible, so those will go through the P&L. The cash component of this, as you said, as we said is we estimate below EUR 10 million. It's mostly it'll be customary insurances that we'll take out. There'll be some transition costs. O bviously small advisory costs that we've incurred.
Some of these ten have been incurred already in Q2, sorry, Q3, and to the tune of EUR 3 million or just or thereabout. T he balance most likely by the end of the year. We'll obviously have to go through a purchase price allocation, and we'll have similar to when we did the Auza deal, some non-cash adjustments that we'll have to do to the reported financials particularly around the initial inventory that we purchased. T hen we'll provide more details on those when the deal closes. Hopefully, that addresses that one question.
Thank you.
Giorgio, maybe the other part to address is we have acquired the global rights, the ownership of Enjaymo, so there's no license, and there is no end to it. This is our product. It needs to be approved by the authorities, and after the authorities have approved it, this is gonna be in our hands. The IP position is quite strong. I t's until 2036 in the U.S. and Japan, and in 2037, at the end of 2037, actually, in Europe. And this is a monoclonal antibody, so expensive and difficult to produce. W ith our peak sales expectations, this typically is not an attractive target for any generic to try and copy. W e're well beyond that at the moment. W ith the IP exclusivity, we have a really good and fantastic protection. I'll pass to Scott for the synergies with Sylvant.
Thanks, Rob. Thanks, Giorgio, for the question. I think with regards to the synergies with Sylvant, maybe I'd take a step back, and I look at really what the synergies are with our existing organization. As we've had Sylvant available in both the US and Europe for quite some time now, so we have a very strong relationship with hematologists in those markets, and we're excited to bring Enjaymo on board to further those relationships with this new opportunity. It's a little early right now to talk about structure, but the. One of our key priorities for the early days of the deal is to retain and integrate as many of the Sanofi colleagues as possible, and to really anticipate harnessing their background and know-how to continue to optimally serve the patients with CAD in those markets.
Thank you very much.
The next question is from Charles Pitman-King with Barclays. Please go ahead.
Hey, guys. Thank you very much for taking my questions, and congrats on the deal. Maybe just speaking a little bit more about your IP protection, obviously this has got a great run rate on it. I understand you're not gonna give us more details on the milestones until the deal's closed. M aybe if you could just speak a little bit more about your commentary around the you don't see competition for the midterm, just what assets. I know that some assets have been terminated from development, and it looks like you're gonna be alone for a while. H ow are you thinking about that competition over the longer term, and what are your plans to mitigate that?
T hen, just in terms of the fact that this is taking you up to two and a half times leverage for next year, but you're looking to delever, what potential further M&A could we expect to see next year, given you seem to be pushing with the standard one deal a year strategy, which, yeah, it looks great? J ust further detail on that would be great. Thank you.
Thanks, Charles. A number of questions. First, thanks for the congratulations on the deal. We're also super happy with it, and more details on the IP, there really isn't, right? T he patents look strong, very, very healthy, and both in the U.S. and Japan, last till 2036, in Europe to 2037, and this being a monoclonal antibody gives additional protection, right? T hen as rare disease products and patients and the entire market, generics work a bit different anyway, but you're looking fairly far into the future. W e feel very secure with the patent protection and the IP on this, as we speak.
To answer your question on further deals, we've always stressed that and traditionally, Recordati has been not only good at doing deals, but doing deals that bring fantastic return on capital employed. We're good at integrating, and I'm very optimistic that once this is approved by the authorities, we'll do a good business on this as well and serving patients in need. We continue to be active in both rare disease and on our traditional SPC business, to look at the right deal for us to continue our growth path, right? I mmediately after this, we're not gonna do something immediately sizable.
I really wanna focus of making sure that we land and integrate and continue to serve patients with CAD as good as, and to our best ability, and as good as we can. Wi ll continue to be active in this field. Gabriele and his team have a weekend of rest, and then the journey continues. The competitive landscape, I'll pass first to Scott to give a little bit more of a background to that, if that's okay.
Hi, Charles. Sorry, did you wanna say something before I-
I was just clarifying that I'm talking about the competition from other assets as opposed to the IP of your act, your asset, but you're about to speak, so that's great. Thank you.
Yeah, no, no problem. J ust to reiterate, as I said before Enjaymo is really the only approved product for CAD at the moment. There are a number of off-label treatments that are currently available that people are using to treat CAD, but again, this is the only on-label treatment for CAD. With regards to future competition, I mean, we know that there are a couple that are being developed now that have CAD as part of the development portfolio. There's the ANX1502, the Annexon compound, which is also a C1 inhibitor. That's in phase two, but from our understanding, that they're considering to go after other indications with that molecule.
Then there's a follow-up compound from Sanofi, the relipaviroc C1 inhibitor, and they made a statement not too long ago that they will cease development for the CAD indication for that molecule. W hile there are some things in development, we have to obviously keep an eye on for the time being, we're the only approved treatment, and we'll continue in that direction.
And maybe to add to that, also in a very effective treatment, right? T here's an incredible good response rate for CAD. And what we've seen is that whereas many have tried to develop in this indication, everyone basically had to stop, and this is really the only product, and Enjaymo is the only product that made it to market and has been successfully developed with incredible good efficacy and safety profile. W e're very confident on the ability of Enjaymo to continue to help patients address this serious situation and disease, and confident about the possibility to achieve our targets there.
That's great. Thank you very much.
The next question is from Neil Alexander with Deutsche Bank. Please go ahead.
Hi, how's it going? It's Neil from Deutsche Bank. Thanks for taking my question. F irst one, just on M&A, just to push a little bit. I know typically you'll switch your focus between the segments, so potentially, is it fair to say that the next deal you would go for could be an SPC, or do you feel you perhaps keep pursuing something in rare diseases? That's the first question. T hen the second is on just the rare disease margins. Now, obviously, we've seen a decline in recent quarters in that margin, but I'm just wondering if, with this deal, how the rare disease margin will play out now. Do you feel it will somewhat stabilize? It'd be helpful just to get your view on the outlook for the rare disease margin there. Thank you.
I think this deal. T hanks, Neil, for the question, but this deal has a margin that is above the average of our rare disease, so we'll improve the margins once it gets approved. I think one of the reasons why you've seen some pressure on the still very, very attractive margins for our rare disease is because there were also royalties, which in this deal we do not have. W e're very, very optimistic about the opportunity to really also help and push the already high margins for rare disease up a bit further when this product is available to us and further progresses. On the nature of the next M&A, it's always very difficult to predict what will happen when. Like I said before, both businesses are equally important to us.
The rare disease space offers beautiful opportunities, but so does SPC, and we'll look at what we'll keep the discipline, and we know after doing this, but also before this, we were in no pressure to do a deal. This is just what we think a really good opportunity to and strategic, fantastic fit, so we're very happy with the agreement with Sanofi, and we'll continue to pursue anything that makes sense for us and helps us to further strengthen our company and serve patients.
Great. Thank you very much.
The next question is from Alastair Campbell with Royal Bank of Canada. Please go ahead.
Hi, everyone. Hope you can hear me. Not really a lot left to ask, but just a couple ones, please. In terms of retaining Sanofi employees, I wonder if you can give us an indication of broadly how many people you think that might be, or at least which specific geographies you think might be strengthened through that, and then obviously, you're saying the synergy here in terms of adding it into an existing hematology franchise, but with Sanofi employees coming on board and this product coming on board, do you think this will increase your appetite to look for other hematology assets going forward from here? Thank you. Thanks, Alastair, for the question. Y our first question around the Sanofi employees and yeah, like I mentioned, absolutely, we're looking forward to welcoming them on board.
They're primarily coming, mostly from the US, but we also have many colleagues that are joining us in the Japanese market and a couple that are coming in Europe, specifically in Germany. L ike I said, it's early days now, but we're looking forward to our first interaction with them and beginning the transition to welcome them to Recordati. T hen with regards to your second question, yes, absolutely. I mean, oncology, since we acquired the EUSA portfolio a couple of years ago, it's been a key strategic growth driver for us. You've seen the phenomenal results that we've had with Qarziba and with Sylvant over the past couple of years. We anticipate obviously similar success within Enjaymo and whatever else we can do in that space it's up to Rob and Gabriele and the team to continue to drive new products in hematology and oncology in the future.
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Now, I understand there's no more further questions. Well, this is all very new and thank you for joining, wishing you a wonderful Friday, and if there are questions further, we're very happy to engage with you. You can always reach out to Eugenia and her team, and as always, we'll be happy to try and answer what we can at this point in time. It's gonna be easier for us to answer questions, specifically on the future and the outlook on Enjaymo, once the authorities have approved, and we're hopeful that they will do this by the end of this year, but that's always their choice, so thank you for joining and looking forward to engage with you in the future.