Welcome to PharmaMar's first half 2023 results presentation. After the presentation, we will do the Q&A session. If you would like to ask a question, please press star followed by five on your telephone keypad. If you change your mind, please press star followed by five again. Now I will give the floor to José Luis Moreno, Head of Capital Markets. Now your line is open.
Thank you, Lara, and, good morning to everyone. I would like to welcome-
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Ladies and gentlemen, we are experiencing some issues. Please hold the line.
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Hello, I think we're back online? Okay, apologies about this trouble with our lines. As I was saying, and before I give the floor to María Luisa Francia, let me just do a quick introduction. As I was saying, that one of our main headlines for this year in regard to financials is the increase in our investment in R&D. In oncology, you know, we're making these significant strides in advancing our development, particularly with LAGOON, the confirmatory phase III trial of lurbinectedin in small cell lung cancer. The recruitment of patients for this trial is progressing successfully, and we're also making substantial progress with the preparatory activities for initiating two additional phase III trials with lurbinectedin, one in leiomyosarcoma and one in mesothelioma. Moreover, we are unwavering in our commitment to invest in the development of our early-stage trials.
Our dedication extends to phase I clinical trials with ecubectedin, with PM534, and the PM54 for the treatment of solid tumors. These efforts showcase our belief in the potential of all these molecules, we're wholly devoted to our ongoing R&D investment to foster continued growth in the years to come. I mean, regarding our revenues, the arrivals of generics of Yondelis, trabectedin in the European market, as anticipated, has had an impact on our P&L. However, we had proactively factored this into our strategic plan, and we're well prepared and with sufficient cash and financing to navigate this situation smoothly. We remain confident in our investment plan, additionally, we're getting closer to the date when we'll have valuable data for the ongoing phase III trials with Zepzelca, which is an exciting prospect for the future.
Now, as said, I'll pass the floor to María Luisa, who will provide you with more comprehensive insights into the financial results.
Thank you, José Luis. Good morning, thank you all for joining this conference call on first half 2023 financial results. I will start by reviewing the evolution of revenues in the first half of the year. Total group revenues amounted to EUR 80.2 million, 21% lower than in the same period of the previous year. In relation to recurring revenues, sales plus royalties received from our partners, there are three things to note. First, the decline in Yondelis sales as a result of the arrival of trabectedin generic products on the market. These were 60% lower in the first half 2023 than in the same period of 2022. Generic trabectedin hit the market in October 2022. Second thing is a nearly 90% increase in sales of lurbinectedin under the authorization Accès compassionnel program in France.
This increase is due to the positive recalculation made in the 2022 rebates, once we received from the French health authorities, the settlement in relation to such rebates. No further adjustments are expected for the rest of the year. The amount recorded at June 2023 was EUR 21 million, compared to EUR 11.2 million at June 2022. Finally, royalties received from Jazz Pharmaceuticals are 6% higher than in the previous year, confirming the good performance of our partners. As I always mention, last quarter, second quarter, is an estimate made by PharmaMar. On the expenditure side, the most noteworthy is the increase in R&D expenditure, which is up 16% to EUR 46.6 million.
This increase is mainly due to the phase III trials currently underway, plus preparatory work for those trials that will start soon, as Luis Mora will explain later. Other operating expenses, commercial, general, administrative, and corporation, on the whole, remain at the same level as in the previous period, slightly higher, due principally to the annual contribution to the PharmaMar Foundation. All of the above, increased R&D expenditure, lower Yondelis sales, and the recalculation of lurbinectedin in rebates, together with the profit tax, which included the amount received for the monetization of R&D deductions, leads to our results for the period of EUR 6.4 million. I will finish highlighting the net cash position as of June 2023. That amounts to EUR 162.5 million, after deducting the EUR 39.8 million of total financial debt.
As José Luis Moreno mentioned before, we have a solid balance sheet to continue with our business plan. Now, I pass the microphone to Luis Mora.
Thank you, María Luisa. Hello, good morning. Regarding Yondelis, in Europe, sales continue as expected, with the pressure on price derived from the entry of generics in the last quarter of 2022. The different sales in values is much rather than the difference in volume, so in the first half, we are maintaining a good market share with Yondelis in soft tissue sarcoma. In the USA, it should be noted that Yondelis plus doxorubicin has been included in the NCCN guidelines for leiomyosarcoma in first-line treatment. In the rest of the world, Yondelis is commercialized by our partners, continue as expected. Regarding Zepzelca, in USA, continues to grow, and therefore in royalties, being today is a second-line treatment standard.
In Switzerland, where we have already announced its approval, we expected to finish the market access processes in September and for Zepzelca to be included in the reimbursement list. Regarding the different regulatory processes underway in other countries with Zepzelca, we recently announced that our partner, Luye Pharma Group, submitted the registration dossier, and we await the decision of the authorities to start the marketing in 2024. The large number of mesothelioma cancer patients in China should be highlighted, around 120,000 new cases per year, which gives an idea of Zepzelca potential in that country. With Zepzelca, we have an extensive clinical program, as José Luis mentioned before, highlighting the LAGOON trial. It is a pivotal trial that will serve as a confirmatory trial for USA and as a registrational trial in Europe.
Recruitment is progressing as planned, with more than 120 hospitals recruited, both in America and Europe. We have two other pivotal trials planned. We are currently in the protocol advice process with the EMA and the FDA. On second-line mesothelioma, combining with Zepzelca plus IO, and the other in the first-line leiomyosarcoma, combining Zepzelca plus low-dose doxorubicin. Regarding the situation of Zepzelca in Japan, we are in contact with some companies for a potential future license. As we have already commented in the other meetings, we have an early access program in some European countries with more than 3,000 patients treated, which gives an idea, the good reception of Zepzelca by the doctors and the need for new treatments for this disease.
Regarding other products, ecubectedin, PM14, continues in phase II, as well as the combination with irinotecan and with IO. The last two compounds that we include in our pipeline, PM534 and PM54, are in phase I in solid tumors. Sylentis, a group company dedicated to development of products based in RNA interference technology, has already completed the recruitment on phase III of safety, and we expect the results at the end of this year. The other phase III of activity is underway, and we expect to have the results in the first half of 2024. If these trials were positive, we will launch another phase III, since in ophthalmology, two phases of activity are needed. If the first phase III of activity were positive, we will start a licensing process. Now, I pass Pascal?
Thank you, Luis. Good morning, good afternoon to all. I'll go over some Q2 first year highlights and a few things that are coming in the near future. In three areas: clinical trials, business development, and KOL engagement. Firstly, on clinical trials, we have an expanded cohort of a combination trial of Lurbinectedin and Irinotecan in relapsed small cell lung cancer, which has now reached the target full enrollment of 100 this week. We expect to therefore have top line data around year-end, although to remind everyone, it is event-driven. In addition to this, we have an IST in relapsed small cell lung cancer with the combination of Lurbinectedin and Pembrolizumab, which has been chosen for a mini oral presentation at ESMO. This will provide further evidence of the synergistic benefit seen in small cell with immune checkpoint inhibitors and Lurbinectedin.
Regarding business development, we are continuing with our quest. Prices do remain high, and there is lots of competition. However, in the area that we are most interested in, I would mention that in the last two years, other than a couple of M&A transactions that we saw, we have been aware or involved in almost every other asset. We will continue to maintain our efforts and hopefully bring them to closure. My third point regarding key opinion leader engagement continues in 2023, and so far, we've engaged with over 75 of these oncologists, especially at both sponsored events and other medical meetings. To give you a little bit of color of the sponsored events where we have been active, there have been those in Las Palmas, in the Canary Islands, the Santa Monica Targeted Therapies meeting, which we co-sponsored with Jazz.
There is a lung cancer meeting in Rome we sponsored, the Swiss Oncology Meeting Group, OncoViews, small cell lung cancer event, and a meeting in Lille, France, called IMIG, regarding mesothelioma. In addition, we have been active at the ELCC meeting in Copenhagen, the Memorial Sloan Kettering small cell event in April in New York City, of course, ASCO. In Q3, we will have the event called, World Lung or IASLC, which is in Singapore, where we already have a number of meetings set up, some of those being first, some subsequent. We look forward to that, and later this year, ESMO in our hometown of Madrid. Hopefully that gives you a roundup of what I said, and I'll hand the microphone back to José Luis.
Okay, thank you, Pascal. With this, we conclude our speech today, and, we open the line to questions. Lara, please.
Ladies and gentlemen, we will now begin the Q&A session. If you would like to... I would like to remind you that if you want to ask a question, please press star followed by five over your telephone keypad. If you change your mind, please press star five again, and please make sure that your device is muted locally before proceeding with your question. The first question comes from Ami Faria from Afaria. Now your line is open.
Hi, good morning. Thanks for taking my question. Can you talk a little bit about some of the pushes and pulls in the revenue report? I understand that there was an adjust out of France for last year's revenues. If you could give us a sense of the underlying demand volume in other countries.
Sorry, sorry. Regarding the first question, that is the recalculation of the rebates , for the year 2022, regarding the authorization of Accès Compassionnel in France, we overestimated rebates that we calculate on 2022. After receiving from the French health authorities, the settlement of the rebates corresponding to that exercise, to that fiscal year, we have to recalculate the rebates we did in 2022, and we have corrected it this year, in 2023. This is the reason of the adjustment.
Regarding the demand for the other countries in the early access programs, not in all the countries in Europe is permitted, this type of reimbursement for early access.
In some countries, like Austria, this program is ongoing and is only in, in Austria and France. The other countries will receive a lot of orders, a lot from the physicians.
... I, from Peva, from Italy, Spain. Now from the Zepzelca is approved in Switzerland, and we expect that in September to include it in reimbursement list. The other potential program could be open for foreign medicine import if it's huge medical need. We expect that from September, some increasing in this modality of reimbursement for compassionate use.
Mm-hmm. In your prepared remarks, you had sort of indicated that, now you estimate that at EUR 21 million, it was EUR 11 million, seems like about EUR 10 million sort of benefit in the quarter for this adjustment. If you remove the adjustment, the underlying revenue is about EUR 5.4 million. Is that the correct way to think about it? That might be the run rate. Then as you kind of laid out, there might be growth post-September as uptake in Switzerland.
Yes, yes. Exactly.
Okay, great. Maybe I have, maybe twp other questions. The API revenues in the quarter were particularly high. Any, any color you can provide around the trends there? Maybe the third question is around the U.S. royalties. I understand that that's sort of more of an estimate. It seems to be sequentially flat with first quarter. Perhaps you could sort of talk to some of the trends there and if there's something more kind of one-time to consider there, how, you know, what conclusions should we make for the growth for the remainder of the year? Thank you.
Regarding API sales, is not linear in the year, depend of the partners, the level of stocks, etc., etc. From July to December, we have a lot of orders from our partners, and you will see in the end of the year, if you compare with the first part of the year, important increase in this setting. Okay? Regarding the royalties, well, I think the amount we accounted for this quarter is very accurate, but in any case, it's an estimation, we need to expect the just final figures, but we don't expect a big adjustment in this case.
Got it.
Okay.
Thank you. I'll go back in the queue.
Thank you, Ami.
The next question comes from Álvaro Liniers , from Alantra Equities. Your line is open.
Hi, thanks for taking my question. I wanted to know, with the revision that you have done to the French compassionate use sales, whether this new discount level, so to speak, is to remain stable, and if, in that case, what is the normal run rate of sales that we could expect from Zepzelca in Europe until the product is approved on a quarter elevation?
I say it's not a fixed figure on fixed percentage, depend on the level of sales and the number of patients are you treated. If you can see the law in France, was released in July 21. It's public information. Okay. Depend on the level of sales, you have applied 1 percentile or other, and it's increasing. It's a progressive one. Okay. It's difficult to answer exactly your question because depend of the level of sales in the future. What we don't expect it, is more adjustment in the future, okay.
This 2022 was exceptional year for the first full year application of the law. The French authorities finally sent us the amount. For that, the accounting point of view, we revert what was doing in 2022. We don't expect that more adjustments. Okay?
Okay. Thank you very much.
Thank you, Álvaro
The next question comes from Joseph Hedden, from Rx Securities. Now your line is open.
Good afternoon. Thanks for taking my question. I've got a couple. Firstly, we're seeing some shortages of chemotherapy drugs in the U.S. at the moment. Some of those are platinum drugs. I was just wondering if Jazz has communicated to you or what your thoughts are on potential impact on the first-line trial of Zepzelca, any possible timeline slippage? We know that that's going to be fully enrolled this year, otherwise. Secondly, just on the BV front, you mentioned about the opportunities that are around Europe, and you've seen kind of most of those.
Is it now just a case of waiting for or trying to get more reasonable-looking term sheets, or, or are there other factors that you think those products are maybe not slightly the best fit, or, or is it all financial at this point? Thanks.
Okay, regarding the first question, this platinum shortage is American source is for USA. The government, the American authorities announced that the provisional authorizations to import platinum from India. We don't receive any communication, the impact of this platinum shortage in the clinical trial. Okay? All remain as before this temporary shortage, platinum American sources. Regarding the licensing in process, as Pascal mentioned before, with the activities, we are actively searching the market. We're having conversations with several companies, we analyze carefully the drugs. Obviously, this is an agreement, is a process. In this process, we are the buyers. We conduct extensive due diligence and is ongoing some processes in this setting. The last question, sorry, is regarding.
I think, you, you've mentioned the import from India. You mean China?
It's India. It's India.
China.
Oh, both.
Yeah.
Sorry. It's only remain this shortage in USA, not impacting Europe in our LAGOON trial, even in USA. Okay?
Okay. Thank you.
The next question comes from Ami Faria from Faria. Now your line is open.
Thank you for the follow-up. I, I had two questions. Firstly, you know, you got into a year-end sort of data readout. You know, it is an event-driven trial. Can you maybe talk to what specific data points give you, you know, confidence that you will indeed have the data readout by the end of the year? And perhaps, at this point, should we anticipate that it would be in the form of a press release? Then I have 1 more question on spending.
Ami, I don't think we, we got the question clearly. You, you're referring to what data? Ami?
Yes, sorry. I'm referring to your second-line complementary trial, and maybe if you can just give us color on the anticipated timeline, and perhaps what your expectation is around how you would communicate the data.
Yeah. The LAGOON trial, we, we don't expect it, the readout, because the trial is ongoing. The only trial, important trial, we've analyzed the recruitment, as Pascal mentioned before, is the combination, is a phase II trial in combination with irinotecan. The trial was complete, the recruitment, two weeks ago. We follow the patients. The primary endpoint in this trial was a response rate, and the secondary endpoint, PFS and survival, is not a randomized trial. It's a single-arm trial. The read, the readout that we're gonna probably is in the first quarter next year, but now we are in the following the patients. Okay?
Oh, understood. That's helpful.
Okay.
Just with regards to, your, costs, there was a slight uptick in SG&A spending, in the quarter. If, if I think about sequentially or even year, year-over-year, is, is that a good run rate to think about for the remainder of the year? Then same for, R&D spending.
Yeah. Again, Ami, we don't have a very good line. When that spending, is that SG&A or R&D you're referring to? Apologies about that. We don't have very good lines.
Sorry about that. My question is regarding both SG&A and R&D. If you could just give us some color on how we should anticipate the trends to be in the second half of the year, that would be helpful.
Well, you know, many, this expenditure is linked with the level of patients recruited in the different clinical trials. I mentioned before, the two important pivotal trials, we are in protocol advice with the EMA and the FDA. Probably these two trials will have started at the end of the year, if all goes well. This is very difficult today to answer this question, but we expect that if you compare with the first quarters, take into account the trial with Sylentis was finalized for safety, and the trial for activity is very close to finalize the potential recruitment. We expect it to reduce this level of expenditure in the third quarter, and probably we will increase again in the fourth quarter. Okay? This linked with the pivotal trials, mainly.
Regarding this, thank you.
... Regarding G&A, the level is going to be flat according months, continuing the trend. No? Thank you.
Okay. We have some written questions as well, that we've received. First one is in regard to the strategy of lurbinectedin in Japan. We've been asked if we will wait for U.S. full approval or it will move before.
Well, in Japan, I mentioned before, is we are in a, we want to license the drug for the Japanese market. It's not a spare. We doesn't want to expect it for full approval in USA, we need to move before. In Japan, we conducted the phase I single agent. Probably the PMDA will need a small trial in the Japanese patients, but this is independent in the licensing process, it's not needed to waiting until full approval in this region.
Okay. Another question. They ask: Could you please explain the strategy with tivanisiran for 2024, including if there is a possible contract with an external company to market this drug?
Yeah. The, the first phase III for safety is completed. We expected the, the result at the end of this year. The second d pivotal trial, we expected the, the data in the 1st quarter next year. In 2024, we have news for these two pivotal trial. If the activity trial is positive, we will start the second pivotal trial for activity. If the first activity trial is positive, we will start the licensing process. This is the plan.
All right, we have two more questions. This one, it says, could you explain if you're going to use the EUR 200 million cash for something different than R&D?
It's important in the biotech sector, in biotech companies, to have a cash in order to be sure our large clinical plan will be funded. In the PharmaMar strategy, we are explaining, we plan to have some third-party products for our sales for in Europe. We will use, and actually, we use this cash for the two strategy projects, R&D and licensing.
Yeah, let me add to that, that we've just approved yesterday a share repurchase plan for an additional EUR 15 million. That will start from the 1st of August. As the final question we had in written: Could you please explain what countries are you going to sell lurbinectedin during 2023?
Part of the USA. As I mentioned before, we expected to launch the Zepzelca in Switzerland under reimbursement. Today, the drug is available, but only for the private sector, and to include it in the reimbursement list, we expect it in September. Apart of that, is the drug was launched with price in other three countries, but it's not in the royalties in the accounts, it's in the raw material or vials because it's included the revenues in these amounts. The other countries where we announced the drug is approved are in the market access process, which we don't expect it in 2023 in these other countries.
I see these are all our questions for today. Let me just to wrap up to say that this year's financial highlight is the increased investment in R&D, and we're making significant progress with the LAGOON phase III trial. In addition to that trial, we're preparing, as we said, two more phase III trials with lurbinectedin. Also, despite of the impact of revenues of generics of Yondelis in the European market, we have very solid balance sheet, and we're confident in our investment plan. Of course, we're very excited about looking forward to data from our ongoing phase III trials with Zepzelca.
With this, finally, you know, for those of you who like to meet with our management team, we'll be participating in the upcoming healthcare conference hosted by Morgan Stanley in New York, commencing on the week of the 11th of September. Additionally, part of our management team, as Pascal mentioned, will be attending the World Lung Conference in Singapore the same week, as well as ESMO in October here, here in Madrid. We hope to see you there. Well, we would like to wish you all a great summer. Once again, thank you for joining the call today, and thank you, Lara, for your help.