Hello all, and a warm welcome to the PharmaMar first half 2022 results presentation. My name is Lydia, and I'll be your operator today. If you'd like to ask a question at the end of the prepared remarks, please press Star followed by the number one on your telephone keypad. It's my pleasure to now hand you over to our host, José Luis Moreno, Director, Capital Markets and Investor Relations. Please go ahead when you're ready.
Thank you, Lydia, and good morning to everyone. I'd like to welcome all of you to our first half 2022 results conference call. On the call with me today are Mr. Luis Mora, Managing Director of PharmaMar, María Luisa de Francia, our Chief Financial Officer, and Pascal Besman, our Chief Operating Officer of PharmaMar in the U.S. Following our prepared remarks today, we will open the line for questions. Also, the presentation we're using today for our call is available on our website together with the press release of the results we released yesterday. As you have seen in our results, the first half shows the continuous growth of our recent recurrent business as we've seen in previous years. This growth is mainly coming from our oncology business, which is our core business.
It is important to highlight also the fact that we're generating cash, EUR 35 million in operating cash flow, which enhances our solid cash position of over EUR 250 million. With this solid balance sheet, we can finance our strategic plan internally, which, as we said, has three main parts which are, you know, what we're currently working on. First, you know, further developments with lurbinectedin, which includes the LAGOON trial that's currently recruiting. Also, we plan another trial, phase III trial, to start this year in mesothelioma. The second part is further developments with the rest of our molecules, basically lurbinectedin and other molecules that we expect to get in.
The third part is the corporate development, which is basically, you know, most of our efforts are to in-license a drug that we could include in our sales force. Let me turn over to María Luisa now, so we can start with financials. María Luisa?
Thank you, José Luis. Good morning, and thank you all for joining this first half results call. The cumulative financial data for the first half of the year saw a 5% increase in recurrent revenues compared to the first half of the previous year, as we can see in this slide number 6. With regard to sales in oncology segment, which as a whole remain unchanged compared to June 2021, three things should be mentioned. First, net sales of Yondelis declined slightly, about 2%, although gross sales grew by nearly 6%. Second, early access sales of Yondelis in Europe declined as a result of a new law in France regulating the prices of drugs offered under the temporary authorization for use system, now called Autorisation d'Accès Compassionnel. This new law entails significant discounts for those drugs.
In the first half of the year, these discounts for Zepzelca amounted to approximately 30% of the total revenues received in these six months. Third, these declines were offset by increased sales of Yondelis raw material to our partners in the new licensed territories other than U.S. and Japan. As for the other part of recurring revenue, royalties, the first half of 2022 saw an increase of 24% to EUR 21.5 million. EUR 1.6 million are from our royalties from Yondelis, and EUR 19.9 million are royalties received from Jazz Pharmaceuticals for Zepzelca. As you know, royalties for each quarter are calculated according to PharmaMar internal estimates. We had to lower first quarter estimates after knowing the actual figures. Therefore, the second quarter estimates represent a growth of about 8% in relation with first quarter.
On the expenses side, the main thing to note is the 39% increase in R&D expenses, up to EUR 40.3 million, as a result of our efforts focused on the advances of our trials in phase three, which Luis Mora will now explain in more detail. Other operating expenses have also increased, reflecting mainly the coming back to normal commercial activities after finishing lockdown. Therefore, EBITDA for the first half was 21% lower than in the same period last year, mainly due to these higher R&D expenses. The same can be said of the net results, which amounted to EUR 34.9 million compared to EUR 43 million at June 2021.
However, operating cash flow generated EUR 35.2 million in the first half of the year, even taking into account the EUR 14 million mentioned that we have spent on R&D in this period. This positive cash flow generation has been helped by the milestone payment received from Jazz for the fulfillment of our commercial milestone for an amount of EUR 22.4 million accrued, received in the first quarter 2021. We will now make a brief mention of PharmaMar cash and debt as of June 2022. Group net cash, current and non-current, amounted to EUR 210.5 million, being net total debt, EUR 41 million. Total cash is EUR 251 million.
To conclude, I would like to highlight the consistency of the financial statements with previous quarter, the generation of operating cash flows, even with growing R&D expenditure, with the consequent maintenance of cash levels and the reduction of debt. Now I pass to Luis Mora.
Oh, thank you, María Luisa. I want to analyze the pipeline in PharmaMar and where this increased expenditure in R&D is made in all the areas, even in oncology, virology and RNA interference. In fact, in oncology, I want to highlight the pivotal trials on lurbinectedin, the phase two trial immunotherapy in different tumor types in this basket trial and in other tumors like soft tissue sarcoma, prostate cancer and solid tumors. Regarding Zepzelca, more in-depth, I want to update some regulatory and clinical aspects. Regarding the regulatory, the dossiers for approval marketing authorization was filed in different countries. PharmaMar filed in U.K. and Switzerland, and our partner in South America, Adium Pharma S.A., filed the dossier in Brazil, Mexico, Argentina, Colombia.
We expected the resolution of this process between December 2022 and first quarter 2023. We hope if the drug finally is approved, to launch the product early next year in different countries. In other countries like Canada, Singapore, Emirates or Saudi Qatar, where the drug was approved, are in market access process. It's difficult now in the market access to get some data, but we expect that next year to generate sales in these different countries and obviously PharmaMar will receive the royalties. Regarding the early access program, María Luisa explained the situation in France. In France, the volume of patients treated is increased. That is very good for us and demonstrate the huge medical need, and the Zepzelca is well received by the physicians.
In China, we announced recently our partner, Luye Pharma Group, was approved in the early access program, in particular area southwest in China for early access. Other countries like Austria or Turkey are ongoing in the same early access program. We have treated in last two years around 2,800 patients in compassionate use. Regarding clinical aspects, LAGOON trial is recruiting after several months of logistic problems. Now it's recruiting, is approved in several countries and is open in several hospitals in USA and Europe. IMforte trial that aligns maintenance therapy in small cell lung cancer is conducted by our partner, Jazz Pharmaceuticals, in agreement with Roche, is well underway and is ongoing. Finally, the other pivotal trial in mesothelioma will remain Yondelis in combination with vincristine plus immunotherapy.
We are ongoing negotiation with the big pharma who will support this trial with the immunotherapy, and we remain to expect the trial will start before the end of the year. The other two new drugs will finalize all the preclinical tests, all the dossier are already submitted, and we expected to start the clinical trials before the end of the year. Regarding RNAi in dry eye disease associated with the Sjögren's syndrome, the pivotal trial for activity is ongoing, well underway. We expected to finalize the recruitment in first quarter of next year. The other pivotal trial for safety is trials are needed for the potential submission in the future is ongoing too. Finally, regarding in virology area, NEPTUNO trial for SARS-CoV-2 are ongoing, is slower than our expectations.
As we announced at the end of June, we have more than 210 patients included. It is ongoing and recruiting. We plan interesting trial, phase II trial for immunosuppressed patients. We expect it to start at the end of the year.
Are a very huge medical need. We presented recently in one congress a retrospective trial in patients treated in compassionate use and demonstrate encouraging results in for these patients. Now I pass Pascal Besman.
Thank you, Luis. I'm going to highlight for you a few recent and upcoming publications and presentations that I think deserve some attention. Starting with this e-publication that came out this month, I believe, in the European Journal of Cancer by the Erasmus MC in Rotterdam. Interesting because this is the first real-world data of lurbinectedin, and it comes from the Named Patient Programs in both small cell and mesothelioma, about 50/50 in those patients. In these patients, we could see that about in the small cell cohort, 70+% were resistant refractory. When we compare that, or when the authors, more to the point, compare that to topotecan, we see a 16% response rate, bearing in mind these are all third line and beyond, compared to topo of 17% in only the sensitive patients.
Really a stark difference in these very difficult to treat patients. More to the point in why perhaps it's worth reading this publication in addition is that there's a lot of work being done here to show the evidence, further evidence of the synergy in combination with IO through monocyte. A recommended good summer read on the beach for you. Following that up, in about 10 days, we're gonna see the World Conference on Lung Cancer in Vienna, which a few of us will be attending from PharmaMar and have a number of KOL meetings with. This will be actually the second real-world data that we will see on lurbinectedin. This is one of the authors of this is interestingly the chairman of the NCCN guidelines.
The interesting thing is actually to just have a look at the abstract compared to the real-world data. Because the abstract has a cutoff of October 2021, and this is April 2022 is what we'll see at the conference. You'll get to see a time continuum. Why I think that is important is because to remind you, when lurbinectedin was first launched in the United States, there were a bolus of third and fourth line patients, and by the time we got round to 2022, those will have been able to be worked off. You'll be able to see the movement in the average number of cycles over that period of time. Recommend that one. Moving on to our ISTs, I wanted to highlight three of them that are of interest and worthy of following.
There's a combination with radiation, which is interesting because there's been quite a bit of talk and even some data generated with Yondelis in combination with radiation. This is the first trial as an IST being done in combination for lurbinectedin, and there's a trial in progress poster at World Lung from Emory on that one. Secondly, Luis referred to this earlier, the French ATU, as it used to be called, now called something different that I don't remember, is amalgamating their data of the 2,000+ patients that they have had into a publication as an IST called Pharmaclean, which we hope to have that published around year-end of this year.
All of this is gonna be a really robust real-world data package between the studies I mentioned earlier and this, which no doubt will help us in future regulatory discussions. The last IST I wanted to mention of interest is this NCI Mayo study of durvalumab plus or minus lurbinectedin or topotecan in relapsed small cell, which is enrolling. Lastly, I wanted to update you briefly on our business development activities, which continue. We are involved in multiple transactions with multiple companies over multiple assets and continue to work hard to bring those to closure. If and when we do, we'll be happy to report that. With that, I'll turn the microphone back to José Luis. Thank you.
Thank you, Pascal. With this, we'll finish our prepared remarks for today. Lydia, if you'd like to open the line for questions, please.
Thank you. If you'd like to ask a question, please press star followed by the number one on your telephone keypad now. To withdraw your question, it's star followed by two. When preparing to speak, please ensure your device is unmuted locally. Our first question today comes from Joseph Hedden of RX Securities. Your line is open.
Good afternoon. Thanks very much for taking my questions. Just the first one on the phase III trial of tivanisiran. Noticed there that the number of centers has been increased. Could you just give us an idea of how many patients have been treated and what the timeline to date for that is?
We don't update, Joe, on timing and updates during a trial. The number of centers has been increased because there was a little bit of a COVID impact, and so we're trying to boost that with a few more centers being recruited. We, as a policy, don't give updates on recruitment during trials.
Okay. Thanks, Pascal. Then a very similar question on LAGOON. I won't ask about specific numbers. But are the logistical issues that you mentioned there, are they also COVID? Are you looking at opening additional centers to keep the study on track, or are we expecting at this point it should be delayed a bit?
No, the logistics problem are solved. The logistic problem was basically the control arm drugs available in the market and the packaging for the clinical trials. You know, is a different packaging than the commercial drugs for the control arm, and was a special shortage in the market for this type of packaging. Remember, it is conducted by the CRO, not PharmaMar. This was solved, and now the trial is approved in several countries, and we have opened several hospitals in USA and Europe, and this will increase across the year.
Okay, thanks very much.
Okay.
Our next question comes from Christian Glennie of Stifel. Your line is open.
Thanks. Hi, guys. Thanks for taking the questions. First one on, I just want to clarify what you were saying on the royalties for Zepzelca® in the U.S.. It seemed to be implying that you've basically recalculated the Q1 numbers. I just wonder if you could provide the actual royalties that you're now booking in Q1 and Q2 for Zepzelca® in the U.S. , please.
Yeah. Okay, okay. Our estimation regarding first quarter Zepzelca® royalties was bigger than the final that we know, the actual numbers. We have to correct it. About EUR 500,000. We have corrected in the second quarter and the estimation made for this second quarter is 8% higher than the first quarter.
Sorry. Just to clarify, you're saying you reported in Q1 EUR 10.2 million at that point in time.
Yeah.
Of-
We have to decrease that figure exactly around.
By EUR half a million.
Exactly.
Your 19.9.
Uh-huh.
Give you-
Exactly.
10.2 in the second quarter, effectively, is your estimate.
Eh.
Okay.
When it's about 8%, but probably instead of EUR 506,000, more or less.
8% more.
Yeah, yeah. 8% more.
Okay, okay. I mean, I know we'll get Jazz numbers next week, I think. Just, I mean, do you have any comment in terms of what, you know, what might be going on, you know, in terms of Zepzelca? You know, it's sort of flattening to slightly declining quarter-on-quarter. Would you have any comments to make there? The implication, at least from these numbers, are, you know, $65 million Q4 last year, $59 million was their report for Q1 this year. Then, you know, this will probably come out at sort of high fifties, you know, mid-to-high fifties. Slight flat down again.
Yeah, Christian Glennie, I think, you know, I'll let Jazz Pharmaceuticals speak for themselves next week, and then you can connect the dots and decide what trends are happening or what not. I'll just repeat a comment that we've said before, which was, lurbinectedin came out of approval very, very strongly during COVID, for various good reasons. Jazz Pharmaceuticals did a very good job of collecting the leading KOL marketplace. Getting the rest of the market, the larger community is more blocking and tackling in onesies and twosies and will require an effort, but I'll let you ask them the question as to how they will do that, and hopefully that will fulfill you.
Yeah. No, thanks, José. That's useful. And then on the new discounts being offered in France for the early access program there, I mean, unless I've got the numbers right, it implies quite a significant discount. They're now forcing you to put through at about over 75%. Is that about right? Is that new, the new sort of base level for pricing, or could there be further discounting to come?
In fact, now is two. The two disappear. Remember before was a two cohort, a two nominated. This disappeared and now it's two modalities or accès compassionnel or accès précoce. The accès précoce is activated two years prior any submission to EMA, and before you have accès compassionnel. This accès compassionnel, according to the new law, have different level of discounts, depend of the level of sales and number of patients treated. Our actual sales in the first half of the year, the discount is about 30%-32%. This could be increased in the future, depend of the level of sales according to the law. Now it's not easy to plan what is the maximum level discount we can achieve depend of the level of use of the drug in this accès compassionnel.
Taking into account the LAGOON trial, we incorporated different centers in France, then some patients intended to move to the accès compassionnel can move to the clinical trial. In any case, I cannot answer exactly this question because it depends on the level of sales we can achieve.
Okay, thank you.
Sure.
Finally, if I may, on the NEPTUNO, the COVID trial, just to clarify and confirm timelines here. I think you said had you recruited 210 patients into the trial so far and a reminder of what
Yeah.
The total number we're expecting and the potential timings to data then.
We announced at the end of June we already enrolled 210 patients in the NEPTUNO which announced this figure. Now it's difficult to have any data because depend of the evolution of the pandemic and the number of hospitalized patients according to the protocol. We amended the protocol two months ago, was approved by the different authorities in different countries. In order to be more flexible in the enrollment according to the evolution of the pandemic and the new variant of the virus. COVID will help to increase the enrollment in this trial.
Okay, thanks. Thanks, guys. Thank you.
Okay.
Thank you, Christian.
As a reminder, if you would like to ask a question, it's star followed by the number one on your telephone keypad. Our next question comes from Álvaro Lenze of Alantra. Please go ahead.
Hi, thanks for taking my questions. Just if you could provide us some update on Yondelis, because I think that the performance has been is still resisting quite well. When could we expect potential competition in prices or volumes? If you could provide some update on the timing for the Sylentis clinical trials. Maybe I missed that on the presentation, but if you could please repeat.
Okay.
I missed that. Thanks.
Thank you for these questions. Regarding Yondelis, we are very excited about the volumes of Yondelis sales. In fact, the big effort of our team and the sales force team and one important publication was presented last year in ESMO and finally was published in Lancet, the PanDox trial, an IST trial, the combination Yondelis plus doxorubicin in first-line leiomyosarcoma. This helped a lot to maintain, even increase the volume of sales. On the other hand, this is public information, the pressure of different countries, South European countries in different discounts. This conduced to reduce the sales about 2% in the first half. We expect that across the year, maintain this level of volumes of sales until end of the year.
Yondelis, we maintain our, even increase slightly our market share in second-line soft tissue sarcoma, about 31%. We are the leader of the market now. It is in a standard of care. It is important and remarkable, the success of the new launch, the Yondelis in different countries around the world for the new partners. This is in the figures, the important increase. There are raw material sales in these partners in different areas around the world. Regarding Sylentis, I explained before, we expect this efficacy trial, phase II trial, finalized recruitment in the first quarter of next year. We are still preparing all the documentation to start very soon after this trial, the second pivotal trial for efficacy.
I want to remark for, this type of disease, is necessary 2 pivotal trials for efficacy and 1 pivotal trial for safety. The first pivotal trial, efficacy and safety are well underway at the moment.
Thank you.
Thank you, Álvaro.
Thank you.
We have no further questions on the conference line, so we'll now move over to questions from the webcast.
Thank you, Lydia. We have some questions from the webcast. Now I'll translate some of them. The first one, we have a question about if we plan to repurchase shares as we've done before or repurchase shares instead of our dividend policy. We did a repurchase plan in 2020. We've already implemented. In the short term, we do not plan to repurchase nor sell. Our cash, as we've mentioned in previous meetings now is for our investment in R&D. We committed to our plans that we've mentioned, and we do not plan to do another program in the short term.
Moreover, even in the dividend policy, we've always said our dividend policy depends very much on the R&D, which is our priority. We'll decide on the dividend amount on a yearly basis or the board will recommend the dividend to the annual shareholders meeting depending on the investment in R&D. The next question about some of our molecules. Let me translate. One in regard for Yondelis. How do we think to plan after the study of doxorubicin with trabectedin, if we plan to ask for a commercialization license. Another one in regard to plitidepsin. They ask if the new changes of our criteria have helped to make it easy recruitment. How we are going to manage all these new trial, as we just mentioned, about immunosuppressed patients.
Finally, the same shareholder asked about lurbinectedin if there is any advance in conversations in Japan.
Yeah, thank you, José Luis. Well, I explained before the combination study of doxorubicin plus trabectedin was a very good study. In fact, it's the best results in the history in this subtype of sarcoma. Regarding the submission of a new dossier for commercialization is not needed. Yondelis have approved, as far as you know, in soft tissue sarcoma, and the new potential submission don't automatically impact in the patent protection or in exclusivity data. But our sales force show these results to all the physicians. And this is one of the main important fact to increase the volume of sales of Yondelis. Regarding plitidepsin, I explained we submit an amendment of the protocol in order to have more flexibility to enter the patients for this trial.
Regarding the immunosuppressed patients, we treated more than 63 patients in immunosuppressed. The results are very good. We plan and already designed to start this new trial in immunosuppressed. Regarding the new partners for different areas, where Zepzelca is licensed in many countries, is only waiting for Russia and Japan. For Russia, obviously, now it's very difficult to close any deal. Regarding Japan, we have several opportunities. When we will arrive at some agreement, we will announce. In Japan, we performed the phase 1 trial for Zepzelca in single agent. We arrived at a similar dose than Europeans or Americans, then this is very good. For the future partner, in order to be clear, they can use the future data of Zepzelca for potential development in Japan.
Thank you. Well, we have another question. Says, "Good morning. I'd like to know what the exact number of patients treated with Zepzelca in the U.S. and in the second quarter in 2022. And what is your expectations for the second part of the year?
This is a question for Jazz.
Let us remind you that Jazz will hold its conference call on the third of August next week. We have another question about if you can provide an indication about R&D cost for 2022 and 2023.
Well, no. The first half of the year you see is an increase. We have several pivotal trials ongoing, the other pivotal trials planning. We will announce the investments in R&D. What is important to remark is with our actual cash, we have sufficient resources to finance the future developments for these drugs.
Yes. I have another question in regard to our strategy. This is a question we had before, and it's in regard about our plans to list in the U.S., as we've mentioned in other quarters. We have you know now basically concentrated on this strategy that I've explained. We have so many things going on now, and that's what we focus now to get all these things moving. So at the moment in the short term, we're not considering listing the company in the U.S., although you know because we focus basically on our plans. Let's see if we have any more questions. We're receiving questions. Let me remind you, we're receiving questions that they're not related to the results or the strategy. So those you know we can answer offline.
Let me see if there are any more questions. In regards to results today, this is all the questions we have. Lydia, that will be it for today. Let me just, you know, have a, you know, closing remark. You know, thank you, Lydia, for your help, and thank you very much to all of you that have connected today. Let me just finish by saying that we're very happy with these good financial results, which of course allow us to concentrate in all our development plans in order to follow a pathway to continue growing. We would like to thank all participants for joining the conference call.
For those of you who like to meet with the management, we'll be participating in the forthcoming Wells Fargo Healthcare Conference in Boston in September. Also in September, we'll be at the Morgan Stanley Healthcare Conference in New York. Our team will also be present at the World Conference on Lung Cancer in August in Vienna and also in ESMO in September. We hope to see you there, and I wish you all good summer. Thank you.
This concludes today's call. Thank you for joining. You may now disconnect your lines.