H2 18/19

Jun 4, 2019

Annual report

Good evening, everyone. I'm Helen from MedinCell. This conference call is dedicated to the results for the financial year that ended on March 31, 2019. Before we start, on our investor website, you can find the press release that was published as soon as the market closed today. Our annual financial report will be available soon. Over the next few days, you will also find a recording and the transcript of today's conferences, one in French and one in English. There will be two parts to our meeting today. In the first half, the executive management team will present the highlights of the year. Then the second half will be dedicated to answering your questions. You can post your questions from now in the chat section on the right-hand side of your screen. As our meeting is limited to 45 minutes, questions will be prioritized depending on how many likes they receive. Otherwise, questions will be answered in the order they're received. As our audience will have a varying knowledge of our activity, we will try to make it understandable for everybody. One last thing. I'd like to remind you that our general meeting will now be held on September 5 in Montpellier. I will now hand over to Christophe Douat, our CEO, who is speaking from the U.S., alongside Nicolas Heuzé, our Director of Corporate Development and Corporate Finance, and Joël Richard, our Director of Technical and Pharmaceutical Operations, and dialing in from our headquarters in Jacou will be Jaime Arango, our Chief Financial Officer. Over to you, Christophe. Thank you, Helen. Good evening, everyone. Before getting started, I would like to thank everyone for connecting today. Our first audio conference in December was a great success, with more than 100 participants who had some very important questions. It's a pleasure for us to have you all here today, including the new and prospective shareholders who are joining us for the first time. As always, we want our relationship with you, the MedinCell shareholders, to be based on trust, directness, and transparency. This is the mindset with which we've approached today's event and with which we will answer your questions. We always begin our shareholder meetings by restating our vision and our values. Our vision is twofold. Firstly, MedinCell is a humanist pharma that aims to achieve financial success through the wide-scale adoption of its treatment throughout the world. Secondly, it is also a company in which employees are actively incentivized as shareholders. All 130 employees are aligned with your interests since they are active shareholders in the company and equally motivated to succeed. MedinCell has strong values, including the power of the group, adaptability, and innovation. Other values that are of major importance to shareholder relations include transparency, directness, trust, and of course, having fun. So here are the main highlights for the financial year that ended on March 31, 2019. I would like to start by saying that our portfolio development went as planned, and we achieved all the anticipated product milestones for this period. Our programs are moving forward, notably the most advanced ones in preclinical and clinical. I will talk more about this later. Our programs in formulation research are also moving forward. Let's go deeper into our portfolio. Our partner, Teva, is incorporating our technology into several long-acting treatments for disorders of central nervous system. The most advanced program, mdc-IRM, has been in clinical phase III in the U.S. since June 2018. There is no significant update from Teva, and we expect there are no significant changes, and Teva is running the program as designed. You will see on clinicaltrials.gov that the primary completion date remains the same. As we hear more, we will share it with you. This phase III study is a key milestone for MedinCell because it is the last step before applying for marketing approval. It is also a major step in terms of the validation of both our technology and our know-how. A second product developed with Teva, called mdc-TJK, entered the preclinical phase last year. Like all the programs in our portfolio, these two products developed with Teva use already marketed molecules with less risky development profiles as compared to the development of new molecules. For example, mdc-IRM was exempted from phase II clinical trials. As a reminder, with this deal, Teva compensates MedinCell with milestone payments and royalties on future sales. Now to our programs targeting pain management. This also moved forward this year. The potential impact of these programs is very important, both for patients and for society. The patient receives personal pain relief, while our opioid-free products could offer some solution to the deadly opioid crisis in North America. The most advanced of these programs, mdc-CWM, is intended for the treatment of post-op orthopedic pain and inflammation. It involves injecting a depot directly into the joint at the time of knee surgery to reduce pain and inflammation. We are developing this product in partnership with AIC, a company created by Canadian orthopedic surgeons. AIC finances the development while profit will be shared 50/50 with MedinCell. This program has been in clinical phase II since May 2018. Last April, AIC decided to cap the recruitment for the study at 20 patients out of 50 allowed by the FDA. It should be sufficient for the study. These 20 patients are already enrolled, and interim results will be available this summer once they have all completed their 3 months follow-up visit. Our partner will then meet with the FDA to validate the next clinical development phase. As the study is still active and the results are not yet available, we have no more elements to report at this stage. We will communicate as planned this summer as soon as the results are available. A second program intended for opioid-free post-op pain management entered the preclinical development phase following in vivo validation in March. We are developing this program, mdc-CMV, with the input of Professor Xavier Capdevila, president of the French Society of Anesthesia. This is an important product for MedinCell for two reasons. Firstly, because it is our most advanced internal program to date. The internal feature means that we fully own the rights. Secondly, this program could be the first product combining short-term surgical anesthesia and longer-term 3-day analgesia after a single injection. The potential benefits of these products include significant reduction in the risk of chronic postoperative pain, reduction or elimination of opioid use, and reduced hospitalization time. We plan to start clinical trials in 2020. Finally, our third product for chronic pain management, mdc-NVA, is in the formulation research phase. Other highlights in the past year regarding our portfolio includes the progress of our mdc-WWM program, which aims to develop an affordable 6-month injectable contraceptive. The Bill and Melinda Gates Foundation supports this program, and they recently contributed another $1.5 million for the second part of their grant following our promising in vivo results. A few words now about our other programs in the formulation research phase, the first step in the development of a product. During the second half of the year, we decided to stop our program, mdc-ELK, which was in formulation research phase. Keep in mind that our strategy is to be proactive in stopping any project as soon as possible if the risk of failure becomes too high. Our goal is to ensure the highest likelihood of success for products entering preclinical. We aim to start a preclinical phase for this anti-rejection drug in 2020. During the past year, we also started a new program in neurology, mdc-DOM, with an undisclosed API. These were the highlights of our program portfolio. To summarize, we currently have two products in the clinical phase, two in preclinical, and five in formulation research. A total of nine programs. Five with partners, four internal. On the financial side, we have successfully completed several major fundraising projects in the past year, and these have allowed us to benefit from unprecedented financial resources. Our CFO, Jaime Arango, will provide more details in a few minutes. Before handing over to Jaime, I'd like to give you a short overview of the upcoming year, one that should be very exciting for MedinCell. Firstly, we are expecting some important results from our ongoing studies in the U.S. These include results from phase II mdc-CWM, which will be available by the end of the summer, as well as phase III mdc-IRM, our most advanced program. Secondly, at least one program will move to preclinical and one to clinical in 2020. Thirdly, we anticipate the addition of new programs in the formulation phase. This could be internal programs or programs launched with the support of new partners. MedinCell's recent IPO, along with having our technology now in phase III studies, has increased both our visibility and credibility. This brings more development opportunities with new potential partners. Finally, MedinCell's knowhow and technology allow us to consider applications in the field of animal health, which offers strong commercial and financial potential. MedinCell has taken the initiative to move in this direction without impacting its core activities in human health or its financial resources. As you can see, many positive things should be coming, and it is great for us all to be part of this exciting journey. Jaime, your turn. Thank you, Christophe. Hello, everyone. I am delighted to be here with you today. I am going to present to you the financial highlights of our fiscal year ending on March 31, 2019. As Christophe just said, this year we have successfully completed several major fundraising projects that allowed us to reinforce our cash visibility. At the end of March, we had a strong cash balance, EUR 21.3 million in cash and cash equivalent, EUR 0.7 million in current non-risky financial assets, and in addition, there are also EUR 3.9 million in non-current financial assets. This position is also reinforced with a potential EUR 12.5 million available from the loan from the European Investment Bank. That gives us a total potential of EUR 38.5 million. To achieve this, we completed the following financing activities during the year. First, we issued a new set of EUR 3.2 million convertible bonds, which were subscribed by major French institutions. As a reminder, we had previously issued EUR 4 million of these bonds. Second, we signed a loan of EUR 20 million with the European Investment Bank in March 2018. We received an initial drawdown of EUR 7.5 million back in June, and MedinCell can now ask for the payment of the second tranche of EUR 7.5 million since some milestones have already been met. Third, we successfully completed the IPO in October 2018 with EUR 31.4 million in gross proceeds. The IPO was backed by the company's financial investors, CM-CIC Innovation, 72 Partners, BNP Paribas Développement. In the IPO, we also had Teva participating and international funds, some specialized in life science and others in socially responsible investments. The net proceeds of the IPO were EUR 28.6 million with cost of EUR 2.8 million. The proceeds were also reduced by EUR 6 million, corresponding to Teva's repayment debt as announced at that time. Regarding our income statement, our revenue reached EUR 4 million this year versus EUR 8.3 million the year before. This revenue is composed of services of formulation research that we rendered to our partners and the research tax credit that we can benefit in France. Service revenue was of EUR 1.4 million or minus 56%. The variance in revenue compared to the previous year reflects, paradoxically, the progress made by products conducted with Teva. As our partner takes over the preclinical and clinical development activities, once we complete the formulation phase for them, the services that we render and our level of payments are therefore reduced. Revenue earned from our collaboration with the Bill & Melinda Gates Foundation partially offset this service revenue decline. In addition, this year there were no revenues related to milestones for partnership programs. Milestones for mdc-IRM and mdc-TJK were received during the previous exercise. Our revenue will therefore vary significantly from one year to another due to the product development cycle and depending on the contractual conditions of our partnerships. Looking ahead, the first revenues coming from the product sales should be the royalties generated by the initial commercialization of products using our technology. The research tax credit increased significantly by +40% to EUR 2.6 million, thanks to the investments we did in R&D. Now let us have a look at our operating expenses, which reached EUR 19.6 million this year, an increase of 29% driven by R&D. These R&D expenses reached EUR 11.9 million, an increase of 35%, which reflects perfectly the company's strategy of moving forward the products in its portfolio. This increase allowed us to expand in two main areas. First, we were able to strengthen especially the one that evaluates and validates the compatibility of molecules with our technology and help create the products that we plan to develop with the aim to increase the chances of success of each program very early in the process. Second, we were also able to engage materials and also services, such as CRO contracts, which are strictly necessary to move forward the products in our pipeline. Regarding business development and marketing expenses, they increased by 42% to reach EUR 2.7 million. We strengthened the strategic marketing and market access teams. The role is to identify possible controlled release treatments that we could develop and assess both the medical need and their commercial potential. In addition, G&A expenses reached EUR 4.9 million, an increase of 15% to support the company's operations. This increase was driven by the financing operations undertaken this past year. Also, part of the increase was dedicated to training the teams, an important part of MedinCell's development strategy. Our financial expenses were EUR 4.2 million. The company's IPO generated exceptional financial expenses of EUR 2.2 million, which include the fair value of the convertible bonds and the partial repayment of the Teva debt due to Teva's participation in the IPO. The remaining financial expenses of EUR 2 million correspond to the charges related to the existing debt. Our gross debt decreased to EUR 27 million against the EUR 31 million the year before. Following our financing operations, the net debt is now EUR 1.1 million compared to EUR 17.5 million. Very important, 71% of the current debt is repayable after April 1st, 2023. We anticipate that by that time, we should be receiving royalty revenue deriving from sales of the first products using our technology. Overall, MedinCell enjoys a robust financial situation at this time. Christophe, back to you. Thank you, Jaime. It's time now to answer the questions from all the participants, and I will start with the first one. David, do we have any questions? No, as I sent you a message a few seconds ago telling you that we do not receive any question in English. As I said, we have a lot of question in French. They will be translated in this transcript of this meeting. Everybody will access the questions that we had in the previous session. Thanks a lot, David. Before leaving, I will hand over to Anh Nguyen, our Chairman and co-founder of the company. Anh has taken the initiative to create an independent shareholders club with a particular purpose that he wants to present us today. Anh? Good morning. We created MedinCell with a vision for a humanist pharma based on a strong company model, where all the employees are shareholders. We have ensured that each employee, in addition to his compensation, can easily become a shareholder with the right associated. MedinCell is also based on strong company values, such as the power of a group, transparency, and directness, from which results trust. Our vision and values are the foundation of our success. As the company is growing and we are constantly welcoming new shareholders, it is our duty to maintain and preserve them, but also to ensure cohesion between all shareholders. I have taken the initiative to create this club for shareholders independent from the company. This club will make recommendations so that the company stays focused on its mission, preserve its value, and continuously improve its interaction with shareholders. Our objective is to take advantage of this summer to build this club and meet for the first time on the same day as our general assembly on September 5th. Thank you. Thank you, Anne. Once again, I would like to thank all the participants for joining us today. Have a good evening or afternoon for those of you who are also in the U.S., and we look forward to talking to you again soon. Bye-bye.