Investor update

Apr 23, 2020

Hello. I am Chris Douat, the CEO of MedinCell. Welcome to this video conference, which is targeting shareholders, but also open to the public. I would like to welcome, in particular, all our new shareholders which have joined us recently. First, I hope that all of you and your families are well in this COVID-19 epidemic. I am right now in our facility in Jacou by Montpellier, south of France. Our facility was a former Renault garage, which was modified to get our open space and labs. This is where our 140 employees, 25 nationalities, work every day and develop all the products we work on. We have a spectacular density of PhDs, masters, engineers, pharmacists, doctors. I am here today with Jaime Arango, our CFO, and Jaime is obviously in another room, due to the confinement which we have implemented with the crisis. We usually hold these calls twice a year, but we decided to organize this one, first, to let you know how we are going through the crisis. Second, to give you an update on the portfolio. Third, to, of course, talk about our COVID-19 initiative. Some of you may be new shareholders, so I will go back a bit into details on what we do and how it works. We have communicated a PR this morning summarizing the main points. This is the first time we do a video, instead of just trade calls, so you can see the nice haircut I did myself because of the crisis confinement. You will be able to see Jaime too in a minute. I will go through the most important points. You will be able to give your questions through the chat on your screen. You can already write questions now. You can also like the questions that others have asked, and we will answer, by priority, the ones with the most likes. We will, of course, moderate the questions to avoid an inappropriate use of the system. This video conference is planned to last 45 minutes, and we will try to answer as many questions as we can. First, I would like to remind you about MedinCell and its vision. Great companies always have two things: a vision and values. At MedinCell, our founding vision is twofold. First, it is a vision of a humanist pharma, a company which will deploy its technology in every indication where we can make a difference, but also for all the populations in the world. Second, it is also a humanist company since all our employees are shareholders, which unleashes energy, autonomy, and initiative. As we do it usually, I will start giving you an update on products. As you will see, we have very good news, given the COVID-19 context. First, I will just tell you or remind you of what BEPO is about. So what we do at MedinCell is what is called long-acting injectables. We inject a liquid which will form a depot under the skin, and this depot will degrade. As it degrades, it will diffuse a drug for an intended period of time, sometimes weeks, sometimes months. The main value of a long-acting injectable is bringing additional compliance to patients. In some cases, it is also used in local treatment to administer the drug where it is needed. Third, since we transform the peaks and trough of pill administration in a smoother release of drug, we can sometimes improve efficacy and reduce side effects. When we started MedinCell, we chose BEPO because it had known components which are already approved in pharmaceuticals. It is also a very robust technology that can allow us to do top-notch drug releases. It has the capabilities to be deployed massively at low cost. Our current portfolio comprises three clinical stage products and eight in pre-IND candidates. All use APIs, drugs that have already been approved, which means that the chances of success of our products is much higher than when you develop a new drug. Second, because those drugs are known, their efficacy, their toxicity are known, we can benefit from accelerated regulatory pathways, and this pathway is called 505(b)(2) in the U.S. What we call a candidate product is a formulation which we have validated in vitro and in vivo in terms of duration, dose stability, and it is a product that can enter regulatory development. We have three products in two clinical trials. Two of them are done and developed and financed by our partner, Teva. The great news is that, despite the COVID-19 context, Teva has not communicated any change in development. I remind you that the current expectation on our phase III program in schizophrenia is to get interim data in the second half of 2020. Approval from the FDA could be obtained based on this interim data. Schizophrenia is a disease that hits 1% of the population with really significant consequences. It is said that 20% of hospital beds in the U.S. are correlated directly or indirectly to schizophrenia. At a time where hospital capacity, of course, is questioned, having a product where we can provide a better treatment, have better compliance, of course, can have a big impact on the health systems. Despite the COVID-19 context, let's not forget about all the pathologies out there where patients need care, and in particular, hospital care. This phase III should be the last phase before commercialization. The second product Teva is developing with BEPO is another antipsychotic, which is now in phase I. The third program in clinical is a product to deal with pain and inflammation, post-op pain and inflammation, to reduce the impact of orthopedic surgeries. We developed this program with our Canadian partner, AIC. The first indication is total knee surgery. When I tell you that total knee surgery is the surgery where patients use the most opioids of any surgery, and that 15% of them become addict, you can understand that a product which will impact potentially pain and therefore opioid consumption, will have an impact. The opioid crisis was the priority of FDA until a few months ago. The great news is that the phase II trial is now completed, and our partner expects favorable results that will allow him to launch a phase III before year-end, so without going through a phase 2B. This strategy will be validated with the FDA this summer. For strategic and competition reasons, the results from the trial will be kept confidential for now. The other eight programs are either at formulation stage or preclinical. The last important facts of the last few weeks are the validation of the candidate formulation for our 6-month contraceptive with the Bill and Melinda Gates Foundation. We have received $3.5 million two years ago to finance the formulation stage, and the Gates Foundation committed to another $19 million last December. We are also working on another program with another foundation, Unitaid, and it is about developing an anti-malaria treatment to break the transmission vector of malaria. Unitaid gave us a grant of $6.4 million just less than a month ago. Coincidentally, it is very interesting to notice that the API we use on this program is ivermectin, the same API we will discuss a bit later on our initiative on COVID. I should remind you that this product is not a product against COVID, it is against anti-malaria. The two of them, despite using the same API, will be different, will have different clinical trials, and different goals. Last, we started a few weeks ago, the activities to develop the anti-HIV product with the support of the Gates Foundation again. This is quite interesting because what we will do here is attempt to develop a product in prophylaxis, so prevention of patients, with the same strategy as we intend to use on COVID. It has been shown that when patients or people take a low dose of antiretroviral on a regular basis, they are protected against infection against HIV. Let's talk now about what we call at MedinCell, the third path, and what we intend to do on COVID-19. Before I talk about it, I would like to precise that contrary to what has been written in a publication in Thailand, this program is a MedinCell program. It is not done today in collaboration with the Gates Foundation or Unitaid. Today, most companies and efforts towards COVID-19 look at either treatment or vaccines. Historically, vaccine development has taken many years, sometimes over 10 years, and sometimes without success. There is still no vaccine on HIV. Plus, this is made difficult because viruses can have mutants. There is a third way, and the third way is prevention. It is about administering patients a drug which will protect them against infection. Now, you understand that if when you have such a drug, and if the patient stops taking it, then it takes the risk of becoming infected. So having a long-acting injectable which will deliver the drug for months would be a great tool in prevention. It would bring a tool to protect populations that are at risk, healthcare workers, older people, maybe population at large, especially in the developing world. A tool that would allow, before vaccines come, to reduce the impact of confinement, social and economical impact. So a great potential for this third path. As you have seen, the API, the first API we are working on is ivermectin. Ivermectin is a known safe API. It was discovered about 40 years ago in Japan. The two people that successfully developed it to fight against river blindness in Africa received the Nobel Prize in Physiology or Medicine in 2015. Some early studies are showing that it may be effective against COVID to treat hospitalized patients which already have COVID. There are many other clinical trials coming. The last one that came out just came out last week. Things are moving extremely fast right now. This last study from scientists from the University of Utah and the Brigham and Women's Hospital of Harvard, is giving interesting hints about the potential of a single treatment of ivermectin in reducing mortality of people with COVID. Since we knew this molecule extremely well, it is very compatible with the BEPO. We can do formulation that lasts for months. We decided a few weeks ago to start this initiative. We decided recently to make it public because many questions were asked to MedinCell as ivermectin became a potential API for COVID-19. Just two weeks ago, the Monash University in Australia showed that it can kill COVID-19 cells in less than 48 hours in lab experiments. What we intend to do is not treatment of patients, it is prevention. Using the treatment, a long-acting injectable to protect populations. It could have eventually a major impact in treating the pandemic and the next waves of COVID-19. I cannot today give you an agenda on the timing of future development. Our objective, of course, is to go as fast as we can. There's a lot at stake here. We have relationship with many companies and foundations which may become extremely useful and joining the effort at some point. I'd like to remind you that we are already in a capacity to produce at GMP quality levels, massive amounts of polymers, thanks to our joint venture in the field. In case of success, the impact of such a product could be huge for world populations, and it is our responsibility at MedinCell to do every single thing we can to participate to the world effort against the virus and succeed. Let's talk about how MedinCell is going through the crisis, through this unprecedented crisis. MedinCell's management has gone through crisis before, in 2001, 2008, others. We know that when you go through a storm, you have to take the sails down and wait until the storm goes. We don't know how long it will last or how strong it will be. Early in the crisis, we have taken measures for the safety of our employees by stopping traveling and putting most people in a home office. We even have taken the initiative to deliver their desk chairs home so that they could work in appropriate conditions. The lab keeps working, of course, with all precautions necessary to move our strategic programs forward. I will now let Jaime maybe show us his haircut and tell us about finance. Thank you, Christophe. You took my idea of the razor. Thank you very much for this and thank you everyone for joining us in this video conference. As Christophe mentioned, we have managed to adapt ourselves very rapidly. We have very early on revised our spending line by line in order to ensure the continuity of all our strategic activities and put on hold those that we could. We have also put in place the partial activity scheme, over here in France for a part of our teams. This allows the company to preserve a good financial visibility that we estimate today that can go over a year, regardless of the scenario that we look at. One of those scenarios, including a return to normal activity. But with the uncertainty surrounding different factors like how the current crisis will evolve, how the financial markets' appetite will be in the coming months, or the impact of the crisis on our partners, we are working very actively on additional tools like the government guaranteed loans. We are also getting the access to the last tranche of the EUR 5 million we could get with the agreement we have with the European Investment Bank. We have therefore protected the company and preserved our strategic programs, but we remain very vigilant. Let me remind you that our fiscal year closes on March 31, and our financial results will be presented in June. For that purpose, we will organize a new shareholding meeting then. I propose that we go now to the Q&A section. Christophe? Thanks a lot, Jaime. Indeed, we will now go through the question and answers. The first question I have is the following: how will you manage the potential toxicity of ivermectin? I will make three points. First, ivermectin is a well-known drug which has been used to treat over 30 million people over the years. It is even on the list of essential medicines from the WHO. There is a lot of information of its low toxicity at current dosage, and even some analysis of potential toxicity above current dosage. We chose ivermectin with Unitaid in our efforts to break the malaria vector because of this low toxicity profile. It is in the lowest category of toxicity at FDA. Of course, some of the studies that you see, especially this Australian study, are using high concentrations, because it is an in vitro experiment. It is quite hard to, or impossible to extrapolate to acute treatment doses. The current trials that we see are using usual approved doses and seem to have an impact, like in the Utah Harvard study. However, we are not working on treatment here. Pills can do the job. We will be, and we are working on prophylaxis prevention, and we expect doses to be much lower. One of our early objective is to define, of course, the right dose. Next question. I understand that you are not able to communicate a schedule for the specific injectable ivermectin program. This is true. But maybe you want to share information with similar programs as to how fast they have been brought to market in the past. It is difficult because there is no similar program. Our ivermectin program should go way faster than everything we have done in the past. First, because we have already promising formulations in the lab, which need to be fine-tuned, but we know the API well. Second, we expect to have, in the next few months, trials data, trial starts, and data that will show efficacy for prevention. If we do, of course, we can piggyback on those data for the long-acting injectable. Third, given the situation, all the regulatory systems have put in place accelerated programs. What I can tell you is we have adapted our processes at MedinCell to optimize a parameter which is often under optimized in the pharma industry. Time. Time is of the essence here, and so we have to really change the way we work and include time early on in our design. What is your deal with Teva? When will the first product be on market? Our deal with Teva is a classic milestones and royalty deal. It was about developing three antipsychotics. One is at the end of phase III. The second is in phase I. The third one is in preclinical. Teva has responsibility for developing the product post formulation and commercialization. I will let Jaime describe the financial metrics. Yes. As Christophe mentioned, this is a classical biotech pharma deal in the sense that we are receiving milestones and royalties. In the development of these products, MedinCell will receive up to $122 million in milestones in development and also commercialization for each product. That would be up to $366 million for the three products. In addition to that, MedinCell will receive high single-digit royalties from the first sales of the products. Thank you, Jaime. About the timing to go to market, we do not communicate on this, but we know that when a product is at the end of phase III, then the next steps is to get approval and then commercialize. Next question. Can you give more detail about your pain program in clinical phase II, when it will be on market? This one is about releasing an anti-inflammatory drug in the place of surgery to reduce pain and inflammation. Some of the endpoints on the current phase II are pain and opioid consumption. The results are expected. Phase II is just being completed, or just completed, and our partner expect very favorable results that should allow him to go straight into phase III by the end of the year, and expects to talk to FDA in the meantime. Next question, in the press, there are articles linking nicotine, COVID-19, and ivermectin. What do you think about this? Do you think that the doses of ivermectin required to treat COVID could be toxic to humans? I will talk about the first question first. Yes. Actually, the papers coming out on nicotine are quite interesting and go in the same direction as our program. There is more and more data which is showing that the percentage of smokers in COVID patients that are hospitalized is way lower than in the normal population, and that nicotine could have a protective impact. There is a paper that just came out 2 days ago from some French scientists. One of them, at Institut Pasteur, was the discoverer of the nicotinic receptor, and he has shown in the past that ivermectin had an impact on this nicotinic receptor. We are learning two extremely interesting things here. First, that prevention may be possible if actually nicotine protects people. But nicotine is not seen as the best alternative by many people, especially because of its addiction power. Second, ivermectin may have the same impact because of its impact on the nicotinic receptor. The next question was about toxicity of ivermectin. I think I did answer this. The last one is, can we have more detail about the press release on the mdc-WWM program with the Gates Foundation? This program we started about 2 years ago. It is about developing a 6-month bioresorbable self-injectable subcu contraceptive, which would be not only a great product for humanitarian purposes, but also a best-in-class product for the developed world. The first tranche of the project was about finding a lead formulation to go to preclinical. We just reached this stage, and that is the press release which we did yesterday. The first financing from the Gates Foundation for that first step was $3.5 million. In December, the foundation gave us another grant of up to $19.5 million over 3 years. EUR 19 million, sorry, over 3 years to go to clinicals. In the agreement with the foundation, the foundation has all rights for humanitarian purposes, and MedinCell has kept all rights for commercial rights worldwide, especially in the U.S., where it is a $5 billion market, contraception, with about a third of it on long-acting devices or products. I think this was the last question. As a conclusion, I would like to first thank you for attending this call. As you can see, all our programs are moving according to plan. Of course, we are monitoring the situation of the COVID-19 context carefully, especially on the U.S. side, where all hospitals are focusing on COVID. I would like to thank, in particular, the 140 employees of MedinCell, which have done their utmost to go through the crisis, sometimes in difficult family conditions, and sometimes far from their families, and which have allowed us to keep all our strategic activities going forward. I would like to thank our current shareholders, which have sent us a lot of support and messages, and the new ones which are joining us. We will do all our efforts and put all our energy trying to move our COVID initiative, the third path, forward. I would like to also wish you a safe next few months and tell our new shareholders, in particular, that I hope they will see how a formidable company MedinCell is. Thank you.