Hello everyone, and welcome to the PharmaMar third quarter 2022 results presentation. If you would like to register a question for today's call, please press star followed by one on your telephone keypad. I would now like to hand you over to your host, José Luis Moreno, the Director of Capital Markets and Investor Relations at Pharma Mar. Please go ahead.
Thank you, Daisy, and good morning to everyone. I'd like to welcome to all of you to our nine-month results conference call. On the call with me today are Mr. Luis Mora, Managing Director of Pharma Mar, María Luisa de Francia Caballero, Chief Financial Officer, and Pascal Besman, Chief Operating Officer of PharmaMar in U.S. Following our prepared remarks today, we'll open the line for questions as we always do. I'd like to remind you that today's conference call might include forward-looking statements regarding future events or the future financial and operating performance of the company. Such forward-looking statements are only predictions based on our current expectations, and actual results might vary from those projected. We disclaim any obligation to update any information provided herein.
We refer you to our safe harbor statement on our corporate presentation, which is available on our website together with the press release of the results we released yesterday. As I said, we released our nine months results yesterday, and as you have seen, our recurring revenues, which are sales plus royalties, continue growing. Also about recurring business, it is important to highlight the fact that royalties grew up 30% during the first nine months of the year. Strategically speaking, it is important to increase our efforts in R&D because, you know, it's investing in the future growth of our company. We will carry on investing not only in our late-stage programs, but also in our early-stage developments.
The first-year results showed a 23% increase in our R&D investment, and that is particularly because of the four Phase IIIs that we have ongoing in different therapies and indications in oncology, RNAi, interferons and virology, and also because of our investment in some of our early-stage projects, which we expect will show some advances in the following months. Despite this increase in R&D, we have generated EUR 40 million of operating cash flow, and we have reduced our debt level to the lowest in the last 20 years. Let me turn over now to María Luisa, so she can give you more details about financial results. María Luisa?
Thank you, José Luis. Good morning, and thank you all for joining this conference call regarding the financial results for the first nine months of 2022. The cumulative financial data for these nine months showed an increase of 3% in terms of recurring revenues compared to the same period of last year. In relation to the sales in the oncology segment, three things should be mentioned. First, net sales of Yondelis still slightly increased 0.7% to EUR 52.2 million. In terms of gross sales, this increase almost reaches 6%. Second, early access revenues from Zepzelca in Europe amounted to EUR 13.8 million compared to EUR 23.3 million as of September 2021.
This decline comes from a new regulation in France related to prices of drugs offered under the Autorisation d'Accès Compassionnel system, which entails significant discounts for those drugs. During these last nine months, these discounts amounted to approximately 40% of the total revenues received in the period. Lastly, net sales of raw materials to our partners, including Zepzelca and Yondelis, increased 32% to EUR 17.8 million as of September 2022 from EUR 13.5 million registered at September 2021, compensating partially for the decrease in the amounts received from Zepzelca in early access. As part of the recurring revenues, royalties as of September 2022 were up to EUR 35.4 million, which means an increase of 30%.
Royalties from Yondelis amounted to EUR 2.5 million, and the royalties from Zepzelca received from Jazz amounted to EUR 32.9 million. Please note that Jazz sales for the third quarter are not yet published, so that the royalties for that period are calculated according to PharmaMar internal estimates. On the expenses side, we need to highlight the 23% increase in R&D expenses up to EUR 57.1 million as a result of our effort focused on the advances of our trials in phase three, which Luis Mora will explain in more detail. Other operating expenses have also increased, reflecting mainly the coming back to normal commercial activities after finishing lockdowns, and to a lesser extent, the impact of rising inflation.
Therefore, EBITDA as of September 2022 amounted to EUR 44.5 million versus EUR 65 million in the same period of 2021, which means 19% decrease resulting from the EUR 10.8 million an increase in our R&D expenses. The same can be said for the net results for the period from continuing operations, which amounted to EUR 48 million compared to EUR 57.2 million at September 2021. However, operating cash flow amounted to EUR 14.4 million for the first nine months, even taking into account the EUR 57.1 million of R&D expenses in this period. We'll now make a brief mention of PharmaMar cash and debt as of September.
Group net cash, current and noncurrent, amounted to EUR 201 million, net of total debt, which amounted to EUR 39.8 million at the end of September 2022. In this context, as a part of the company strategy to focus on our core business of developing and marketing drugs, the board of directors decide, after considering different alternatives, to discontinue diagnostic segment activity carried out through GENOMICA . Net losses for the period from discontinued operation was EUR 4.6 million, compared with EUR 2.5 million in the same period of the previous year. To conclude, I would like to highlight the consistency of the financial statements with previous quarters, the generation of operating cash flows, even with growing R&D expenditure, with the consequent maintenance of cash levels and reduction of debt.
Now I pass the microphone to Luis Mora.
Hello, good morning. Thank you, María Luisa. I want to make some remarks on some details about the state of the other products in the pipeline and different developments. Yondelis, María Luisa explained before, the gross sales increased 6%. This is good indicator and we win the market share in soft tissue sarcoma in second line, and we can say today Yondelis is a standard of care for the patients. The net sales increased 1%. This difference is because some countries in Europe increased official discounts, and this is the impact in the difference between gross sales and net sales. Regarding the rest of the world, for our partners, is reflected in the raw material we sell increased dramatically.
The performance in different countries around the world very well, and Yondelis, like European Union, is considered now around the world a standard of care in second line in soft tissue Sarcoma. Sarcoma, the genetic competition is not impact in first nine months this year, but we expected some impact in this quarter, fourth quarter 2022, and in the following years. Regarding lurbinectedin and the pivotal trial we will use to confirm the conditional approval in USA, and we will use for submission in Europe is LAGOON. LAGOON is on track, according our estimation, is recruiting. We will update in several days the ClinicalTrials.gov because it's not updated today. I want to remark both trials, LAGOON and IMforte trial, the Roche trial, are ongoing. Both trials will serve to confirm the clinical benefit of Lurbinectedin.
The other trial was PLANET, is mesothelioma. We expected to start in first quarter 2023. We are very close, and we expected the signature with one partner to conduct this trial very soon. This trial, we will combine Lurbinectedin plus immunotherapy against the standard of care in second/third line Mesothelioma. Other indications for Lurbinectedin, we are prepared, and we will inform, I expect it, in the next conference call at the end of the year. Regarding the regulatory aspects for Lurbinectedin, the dossier for approval was submitted in U.K., in Switzerland, and in several countries in the rest of the world. The regulatory process is ongoing, and we expected in first quarter next year to announce several approvals around the world.
The use compassionnel in France, María Luisa explained, with the law change in France, and now depends on the level of sales of this use compassionnel some level of discounts applicable. If we consider the gross amount, the Zepzelca increased the use in France. This is important because is a good indicator to demonstrate the huge medical need for this patient and the drug is well perceived for the physicians. Regarding our partner in U.S., Jazz Pharmaceuticals, we are so happy with this partner. You can see the level of royalties increased. You compare with the same time last year, 30%, and this is very important for us and for the drug and for the patients.
Zepzelca is considered a standard of care second line in small cell lung cancer now in USA. Ecubectedin, the other drug, is the pipeline, is in phase II, conducted in several tumors. The trial is ongoing. It's ongoing too with ecubectedin three phase Is. One in combination with immunotherapy, the other phase II with irinotecan, and the other trial in combination with radiotherapy. Two new compounds are presented to the regulatory authorities in order to start the clinical trials before the end of the year. It is under analysis for the regulatory authorities, and we expected the green light in November in order to start the first patient in December. These two new compounds come from our R&D platform and, in principle, we will conduct in solid tumors.
In biology area, Neptuno trial, pivotal trial is ongoing. The recruitment is not at the level we expected because of the dependence of the pandemic and the hospitalization level of the patients. I want to announce we are very, very close for the futility analysis pre-specified in the protocol. It was pre-specified in the protocol, several number of events in order to conduct this futility analysis. This analysis will be conducted by the independent data monitoring committee. The other important trial for biology area is the Nereida trial. This trial will be conducted in immunosuppressed patients. The dossier to start this trial is already submitted in several countries, and we expect the green light to start this pivotal trial. Phase II trial, sorry.
Finally, for the Sylentis ongoing two phase III trials, one for safety and the other one for activity. The trial is ongoing. We expect that in first quarter next year to finalize the recruitment. When we will finalize the efficacy phase III trial, we will start the second efficacy trial that's needed for a potential submission for approval. The phase I trial in macular degeneration was finished. They achieved the recommended dose and they now are preparing the phase II trial. Okay, thank you very much. I pass to Pascal Besman.
Thank you, Luis. Hello, everyone. Few comments here. Jazz continues to build on their successful launch of Zepzelca in the United States, and our royalties reflect that. We are also optimistic on further market share gain in the future. We with Jazz continue to generate new data, and in Q3 we saw a presentation at World Conference on Lung Cancer in Vienna of Zepzelca versus a synthetic control arm, as well as real-world data in over 700 patients characterizing Zepzelca use post-approval in the United States. It's interesting to compare the submitted abstract to the final poster as it shows a difference in timing of six months as the progression of the launch went from October 2021 to March 2022, and it shows a change in use.
Whereas the October 2021 cutoff saw over half the patients in third line or later, with the data six months later, that was down to 38%. At ESMO, we have data showing real-world experience of 396 second line patients post-launch, as well as a presentation from Canada of a 300 patient study versus a synthetic control arm. Finally, at the IASLC North America meeting in Chicago last month, there was a nice trial in progress poster of Jazz's basket trial and more real-world evidence. Net net zepzelca continues to build on its body of evidence as a treatment of choice in relapsed small cell. However, our goal is not just to see zepzelca become a treatment of choice in this setting. We hope to see zepzelca change the paradigm of treatment.
In this vein, we are excited to see the Roche-Jazz IMforte trial continue to accrue patients. We note that a recent publication remark from a prior lurbinectedin trial of ours regarding patients who had received prior IO that, quote, "There was a numerically longer median progression-free survival in the lurbinectedin plus doxorubicin group versus the control group, totaling 6.9 months versus 4.2 months. Improved results in patients previously exposed to PD-1 or PD-L1 inhibitors versus those who were not exposed were also seen in the phase II lurbinectedin single-agent trial." unquote. This is the third piece of evidence showing synergy or additive benefit from lurbinectedin and IO.
First, we had the patients in the monotherapy trial who got lurbinectedin after IO. We have the too small study presented at SITC 2021, with 26 relapsed small cell patients in combination with atezolizumab, and now this. Getting the drug in physician's hand so as to expand the knowledge and experience base and help patients with access is also a goal. In this quarter, we saw two new ISTs with lurbi. One in combination with trilaciclib in relapsed small cell from UNC, Dr. Jared Weiss, and a French study in the maintenance setting of small cell lung cancer in combination with durvalumab. In addition, OncLive has recently posted two new interviews with European thought leaders, Dr. Sanjay Popat from the Royal Marsden in the UK and Dr. Nicolas Girard from Institut Curie in Paris.
Lastly, on our in-licensing efforts, we continue to be in ongoing discussions and negotiations for a number of late-stage assets for European commercial rights. While the environment continues to be highly competitive, we have noticed of late that the public equity market conditions are driving more companies to reconsider their EU plan amid cost controls with the non-viability of equity financing. We will keep working and hope to be able to report something concrete in due course. With that, I'll hand the microphone back to José Luis.
Thank you, Pascal. With this we'll conclude our remarks today. Daisy will open the line for questions, please.
Thank you. If anyone would like to register a question, please press star followed by one on your telephone keypad. When preparing to ask your question, please ensure you are unmuted locally. If you would like to withdraw your question, please press star followed by two. That's star followed by one on your telephone keypad to register a question. Our first question today is from Ami Fadia from Needham & Company. Ami, your line is open. Please go ahead.
Good morning. Thanks for taking my question. Can you give us some color around the end market performance of Zepzelca? The royalties certainly showed a pretty nice increase, but if you could give me some color around that or how you estimate your royalty for the quarter, that would be helpful.
Yes. Thank you very much for the question, but this is, sales are just sales. If you want to ask just in the next conference call, they will organize in early November. Thank you.
Okay. Can you give us an update on the LAGOON study with regards to patient enrollment and how the study is progressing?
We don't update the number of patients included, et cetera, et cetera. I can explain to you according to our forecast is on track. It is open in several countries, USA and Europe, and all the opening new countries and new hospitals are ongoing. We plan to include more than 100 hospitals in America and Europe, and the recruitment is on track.
Got it.
Thank you. Our next question is from Álvaro Lenze, Lenze from Alantra Equities. Álvaro, line is open. Please go ahead.
Hi. Thanks for taking my question. Going back again to the increase in royalties. I understand that you cannot comment much on the dynamics at the end market. But since this is your estimate, could you give us an indication of whether this is what you expect for just to have grown in the U.S. mainly? Or does this reflect an increased penetration in other geographies with other partners? Just to get a sense of where that growth is coming from. My second question would be regarding the competition from generics and Yondelis. If you have any early indications of what the pricing pressure could be and what's the ballpark in terms of the new pricing?
I don't know if you already are negotiating the new prices or you have any insight on what the competitors are looking for. My third question would be, once again, coming to the capital allocation. You continue to have a very high level of cash, and valuations across, at least in public equities in the pharma industry, have gone down significantly. I don't know if you're seeing any more affordable investment opportunities or whether we are getting closer to seeing any relevant M&A to accelerate growth or improve the diversification of the pipeline. Thanks.
Okay. Thank you for your question. Regarding the first question, we can't speak about the sales outside our territory because we want to remember we're licensing out our compound to the different partners around the world, and we can only speak about the royalties we collected. Okay? These companies, Janssen Pharmaceuticals, for example, have a conference call results quarterly basis. You can follow the performance of the drug in this territory. Regarding the Yondelis, the impact of the price is managed by several countries by law. In several countries, no impact. In several countries, huge impact. It's not the equal impact in all the countries around the European Union. Okay?
Today is only one generic approved, okay, in Europe, and we will see, because it's not only the impact, this is public information and the normal work when one generic enters in the market. It's not only the price, but it's the policy of the discounts around the different hospitals in order to keep the volume to sell these hospitals. In some countries it's about 30%, in some countries it's 15%, depend of the country. Okay? Regarding the last question is the cash allocation, et cetera, and the M&A. We explained all of this from last year. Our team are working so hard in order to include in our commercial pipeline some licensing in products. Our team screen very well the market.
We analyze more than 120 potential assets, et cetera. Now, several options are considered by the company in internal analysis, and we will see. This is one of the objectives for the company in order to incorporate these assets in our sales force to sell more products than Yondelis. This could be one of the special allocation, but the most important one is we can support all the R&D investments in order to arrive to the market, not only with the Zepzelca in several indications, but the other drugs incorporate in the pipeline. Thank you.
Thank you.
Thank you, Álvaro.
Thank you. As a reminder, if anyone would like to ask a question on the telephone line, please press star followed by one now. We have a question from Joaquin Garcia from JB Capital. Joaquin, please go ahead. Your line is open.
Yes. Hello. Thank you for taking my question. It's just regarding the royalties for zepzelca. During the first quarter you restated your expected royalties. Did you do the same thing for the first half of the year? If so, what was the actual royalties for PharmaMar for the first half of the year? Was it the $19.9 that you released during your presentation of the half year or did it change? Thank you.
Yeah. In the first quarter, as you know, we have every quarter to make our own estimation. In the first quarter, we overestimated royalties and therefore we had to make an adjustment in the second quarter. In the second quarter, we underestimated royalties and we have to make an adjustment in the third quarter. In any case, the amount is not significant, EUR 200,000 up or down, so it's not significant. We obviously have to adjust in the following quarter.
Thank you. Royalties for the first half will be close to EUR 20.1 or so, more or less, instead of the EUR 19.9?
Yeah. Yeah, yeah. Exactly. Approximately.
Thank you.
Thank you, Joaquín.
Thank you. We have our next question from Joseph Hedden from Rx Securities. Joseph, please go ahead. Your line is open.
Hi there. Thanks for taking my questions. Apologies if anything, any of this has been asked before because I was late joining the line. It's just an update on the status of the pipeline programs. Is there any news on when the phase III trial in mesothelioma might start? Then just an update, you know, on your expected timelines for Jazz's IMforte trial. I thought there might be an interim analysis there that's been discussed before. Is there any more you can say about when that should be expected and potential importance of that?
Okay. Thank you for your questions. Regarding the mesothelioma trial, I explained before. Finally, we are so close to finalize the agreement with the potential partner for this trial. The trial we expected to start in the third quarter next year. All the protocol is ready, the CRO, et cetera, and this is our expectations. Regarding the IMforte trial is a Roche-Janssen trial, is not PharmaMar trial. Address the question to Janssen or Roche in order to get the right answer for this.
Okay. Perhaps a couple more on the pipeline. I noticed that there's a phase I trial of lurbinectedin ongoing in combination with bosentan, which is a pulmonary arterial hypertension drug. I just was wondering what the rationale behind that study was?
Yes. Ecubectedin, the combination with IO, the rationale for the mechanistic reason. Ecubectedin mechanism of action acts to inhibit the active transcription and some effect to the macrophages. This is important because this activates the immune system in the patients. In parallel, the IO, as you know, is through the immune system. This combination is very interesting. For that, we conducted the phase 1. I want to remark the other family products, what I call the inactive. We achieved the full dose for lurbinectedin and IO. Is what we expected in this combination, Ecubectedin plus IO. This is the good signal, our mechanism of action synergy and non-overlapping toxicities. For that reasons, we start this combination.
Thank you.
Okay. Sorry. Is the same rationale about Lurbinectedin? Sorry, I confused your question. Is the trial about lurbinectedin plus? Joe?
I've just reopened Joe's line.
Luis, I think he was asking about Lurbinectedin, that trial. The FDA required trial.
Yeah, the PAH.
Is that right, Joe?
Bosentan. Yeah, that's right.
We didn't hear you well, sorry.
Yeah, that was the trial, asking the FDA, basically.
He's not the one.
Yeah, just the rationale behind that trial.
The rationale is the FDA asked us to do it.
Okay. That's.
Drug interactions.
And then.
Drug interactions.
Yes.
Potentially.
Sure, sure. You know, I know that Jazz is doing a basket trial of its own in the EMERGE-201 trial. Being as that you've, you guys have run a successful one before, I was just wondering what your thoughts were on the kind of design of that trial, patient population expectations.
Yeah. Does your question is about the Jazz trial?
Yeah. Just your opinion of that basket trial from the perspective of, you know, you guys have conducted one before that's turned positive data and just wondered what your thoughts were on how they set theirs up.
Well, I cannot speak about the Jazz trial, but Pascal, if you want to answer, it's an opinion.
Oh, I'm always happy to give an opinion, Luis, as you know. In this case, not really. I mean, some of these. Yeah, exactly. Some of these overlap with things that we've done, and it may be that they saw something different in the data than we did. Others are new indications. You know, Jazz is looking to expand lurbinectedin, not only into earlier lines of small cell, but other indications. This is, I think, the normal development plan to investigate the drug in multiple other indications.
Lastly, and apologies again if this has been asked before, but the ongoing first phase III efficacy trial of tivanisiran. What are the current timelines running to? Is that on track to complete recruitment this year and report results in the first half of next year?
In regards to tivanisiran, the first phase III, it was planned before, you know, towards the end of this year, early next year. I think it'll be the complete of recruitment will be earlier, early next year. There's another phase III trial going on, in safety. That is recruiting faster. I mean, just to remind you, this one, the activity one is in relation with patients with Sjögren's syndrome that have a dry eye, and the safety is general dry eye, so that one is going faster. I guess, you know, we'll have the first one by, you know, early next year and the other one we'll see also next year.
Okay, great. Thanks very much.
Thank you, Joe.
Thank you. There are no further questions on the conference line, so I give the floor to José Luis Moreno to take questions via the webcast.
Yeah, we had.
Questions on the webcast about two issues that already been mentioned, but you know, we are happy to answer that again. One is in relation to the futility analysis of the Neptuno trial. There's another question about the trial you mentioned, Nereida.
Well, the futility analysis, thank you, Pepe, for the Neptuno trial. I explained before, we are very close to achieve the number of events that specify in order to the IDMC will conduct this, futility analysis. Regarding Nereida, all the documentation are already submitted to the regulatory agencies in several countries in Europe and the ethical committees. We expected to start the first patient in this trial very soon, depend of the regulatory timeline.
Thank you, Luis. That's all. With this, we finish the question time. Before we leave and, you know, I'd like to thank Tracy for your help and thank you very much to all of you for joining us today. As a summary of third quarter results, you know, are very much in line with our strategy of investing in the future growth of the company. We're also, you know, generating cash, which together with our solid balance sheet and the cash and its low level of debt will allow to strengthen our strategy going forward. We, you know, we're very happy with these results. I'd like to thank all participants for joining in our conference today and thank you very much.
Thank you.
Thank you everyone for joining today's call. This concludes today's call. Please disconnect your lines and have a lovely day.