Earnings Call: H1 2021

Aug 26, 2021

Good afternoon, ladies and gentlemen, and welcome to the Marlin Corporate Update Call, which follows the release of Marlin's interim financial statements for the 6 month period to 30th June 2021 this morning. At this time, all participants are in listen only mode. After the presentation, we will conduct a question and answer session As a reminder, today's conference call is being recorded. I will now hand over to Jessica Bergin, Director of Investor Relations. Good afternoon, ladies and gentlemen, and welcome to today's call. I'm joined on the call today by Dara Lyons, our Chief Executive Officer. And Dara will be walking through our 2021 interim results presentation, which is available within the Investors section of our website, mallonplc.com. On today's call, Dara will provide some of the highlights on our progress in 20 21 to date, what that means for our intrinsic equity value per share, and he will look ahead to the milestones we are targeting for the remainder of this year into 2022. There will be an opportunity for questions at the end of the call. And finally, may I please draw your attention to the disclaimer contained within the Thank you. And I'll now hand over to Dara. Good afternoon, ladies and gentlemen. As you're aware, we issued our interim financial statements for the first half of twenty twenty one this morning, and that document includes the detailed management summary of all of the updates from our investee companies and Malin in the year to date. Respecting your time and in an effort to make this call as efficient and useful for all of you as possible, I'm going to keep the prepared remarks pretty concise and then open up the call to questions. We're very pleased with the progress made by Malm and our investee companies during 2021 to date. Several important clinical and operational milestones were achieved by our companies over the past year or so. And this positive momentum has capitalized transactional opportunities for our companies, some of which we have seen executed during 2021 to date. The highlights of 2021 to date are included on Slide 3 of the presentation. They include the sale of Qimab to Sanofi that closed in April, yielding Malen a $113,000,000 share of the upfront consideration with the potential for it to $33,000,000 of additional milestone related payments in the future. We were also pleased with the successful Nasdaq IPO executed by Immunacor back in February, in which the company raised $312,000,000 This gives them extended capital runway to get through several important clinical milestones that I'll refer to later in the call as well as possible product approval and launch of tibentoplus, which we expect in Q1 2022 following the acceptance of a product approval application by U. S. And EU regulators in recent days. We announced the sale of Alton to Etipharm in June. Malum will receive €68,000,000 upon the close of that sale, that's a near 100% return on our investment in Alton. The sale, which is subject to competition authority approvals, remains on track to complete within the next few months. Biomet's successor company, Mycovia, delivered a very positive Phase III data for its antifungal drug, which has a canazole that we believe will support a product approval in RBC by early 2022. And finally, POSEIDO's progress in advancing its universal donor or allogeneic version of the CAR T technology into the clinic, with first patients expected to be dosed in the coming months, as well as the company's very encouraging early data update on its PSMA targeting solid tumor CAR T program. And they recently announced there will be a further update on that program next week. Turning down to the financial highlights on Slide 4. The sale of Kymab and the imminent disposal of Alton has significantly strengthened our balance sheet and we held cash of €58,000,000 at 30 June. Malen's share of the upfront consideration paid by Sanofi for Kymab is $113,000,000 of which $105,000,000 or €88,000,000 was received upon the close of the sale in April, with the remainder due to be received within the next 18 months. We used €45,000,000 of the cash proceeds received to repay our outstanding EIB debt in full. And we also used almost €10,000,000 to buy back over 1,500,000 Malen shares at a weighted average price of €6.34 per share, thereby taking advantage of the significant discount our shares trade as relative to our estimated intrinsic value per share. The close of the Altam sale in the coming months will further strengthen our balance sheet with Malin's share of the sale proceeds equating to approximately €68,000,000 We have previously announced our expectation to execute a significant return of capital to shareholders following the close of the Galton sale, And we will provide an update on this once the Galton sale goes through. Our cash operating costs for the first half of the year were 1 point €4,000,000 which is in line with previous guidance. The positive performance of our investee companies as well as their transactional activity has resulted in an increase in our estimate of the intrinsic value per share since year end, which can be viewed on Slide 56 of the presentation. The intrinsic value per share is calculated by taking the aggregate of the total fair value estimates of our investee companies plus or minus our cash or net debt and dividing that by our expanding number of ordinary shares. The intrinsic value per share at 30 June was €9.2 $4 per share, an increase of 9% since 31 December 2020, driven by the divestment proceeds of Klimab and Alton and the higher fair value estimate of Immunacor following Nasdaq IPO back in February. As of close of markets yesterday, our intrinsic value per share had decreased to €8.83 per share, primarily driven by the softer market value of Immunacor since June. Immunicore's only update to the market in this period was to confirm the acceptance ahead of forecast for both its EU and U. S. Product approval applications for tibentoplus. So we believe that the lower market value is driven by market dynamics only. In fact, the declining share price is directly correlated with softness seen in the broader U. S. Biotech sector in that July August period. ImmunoCAR has significant milestones in the month ahead, which we hope will greatly enhance its market value. There are plenty of potential value inflection points that we're looking forward to over the remainder of the year and into 2022 across our investee companies. Some of these are highlighted on Slide 7 of the presentation. For ImmunoCore, the recently announced acceptance of the U. S. And European approval applications for Dementifos by the FDA and European Medicines Agency puts the company on course to have this drug commercially launched in both Europe and the U. S. By early 2022. We also expect to see some initial data from the Genentech partnered MAGE A 4 program before the end of 2021. Proof of concept data on the proprietary program targeting PRAME that we believe represents the Unicorn's largest commercial opportunity should be available by mid-twenty 22. On Poseida, we expect that they will start dosing patients with its allogeneic or universal donor version of the BCMA targeting CAR T therapy over the next few months. That could facilitate a data update on this program as well as their autologous version of the BCMA program before the end of 2021. The company will also present a data update next week as I referred to on its prostate cancer program, another potentially groundbreaking clinical program in targeting solid tumors with CAR T. As I mentioned, the company previously gave a very encouraging but early update on that program. We also expect Poseida to file an IND for its next universal donor product candidate, which targets the antigen buc1c, again, a solid tumor target and that's expected before the end of this year. So after a relatively quiet period of news for thrombocyda since its IPO, as it progressed those programs through, we're expecting a lot of clinical updates and progress from Poseida over the next 6 to 9 months. For ViaMed, we expect its successor company, Mycovia, to gain a commercial approval by the end of this year or very early 2022 for atezocanazole, which will result in the initiation of milestone and royalty payments to Vionet shareholders, including Malin in during 2022 and beyond. For Alton, we expect to complete the sale to Etti Farm over the coming months and further bolster our cash reserves by the €68,000,000 share of the sales proceeds. For Zenixim, we're targeting normalized revenue growth trajectory for that business following the surge in sales last year driven by the pandemic, alongside the execution of some business initiatives to further differentiate the technology and hopefully increase market penetration. So the potential of these various milestones to create further value from where we are today is illustrated on Slide 8 of the presentation. We've made good progress in seeing value growth within our assets over the few years, and we've been able to exploit opportunities to realize value of what I believe was optimal value inflection points in the case of Alton, Kymab and 3d4 Medical. However, there is further significant value creation possible from our remaining assets over the next 12 months or so. And that assertion is based on the current estimates of the value of our companies and considering the very significant milestones that these companies have in the months ahead, most of which I've highlighted on the previous slide. So in conclusion, we're well placed as we look forward to the remainder of the year and into 20 22. With the close of the Alton transaction, we will have an even stronger debt free balance sheet, which we expect will enable the initiation of capital returns to our shareholders before the end of this year. We look forward to a busy period of clinical milestones in our companies, as you've heard. Further successful milestone achievements can catalyze further transactional and realization activity for Malon and our investee companies. We remain focused on working with our companies to fully develop the value potential of these businesses and to exit our positions at the best value inflection points and at the optimal time. Our primary focus remains on maximizing the returns we can make for our shareholders, and this guides all of our strategies and actions. I'll now hand over the call to the operator, who will open it up for Q and A. Thank you, Our first question today comes from Alan Smiley of Davy. Alan, please go ahead. Hi, Dara. Hi, Jessica. It's Alan at Davy. So I have a few questions just to kick off. Hi, Dara. So just firstly on the portfolio. On Poseida, you flagged a number of upcoming milestones in the coming months. And this may be a hard question to answer. Could you help us frame how to think of those potential milestones in terms of materiality, if successful? That will be helpful. Secondly, on Immunacor, what impact do you think getting product approval on a lead product could have on the rest of the pipeline? That would be interesting. And then on balance specifically, to the extent, Dara, you want to answer this. Once Alton is approved, like how should we think about timeframes of initiating capital returns? And to the extent you want to comment on the quantum and or format of those returns as well, that would be interesting. Thanks. Okay. Yes. Thanks, Alan. So on Poseida, I think in a word that the potential of those milestones is very, very significant because they're essentially all groundbreaking, hopefully, technology advancements. Allogeneic is obviously an off the shelf product. We've seen good efficacy from CAR T in high unmet needs of various forms of cancer. Today, it's mainly hematological cancers. But I think that the move to an off the shelf product with matching or even slightly inferior efficacy obviously makes the administration of that therapy and opening it up to a wider patient group much more possible. So we've seen some other companies with very early data in the allogeneic setting the likes of Allogene. They're multi billion dollar companies and they've shown pretty modest data to date. So I think the significant on the allogeneic technology is very significant. And we've spoken about that for quite a while as being something we were really looking forward to. The other major advancement that we've sort of seen developed, TOSAYADA, based on early data, is the potential of CAR T therapy and solid tumors, where, as you know, there's pretty limited efficacy seen using CAR T therapy and solid tumors to date. The early data on this PSMA program, which is targeting a very difficult to treat group of patients, many of which are on 4th, 5th line of therapy. The early data there at very, very low dose levels is extremely encouraging. And we're excited to see what further data the company will publicly release next week at the CAR TCR Summit. So I think both have huge significance. And either one would capitalize, I think, a huge, hopefully, growth in value of Poseida because I think the current market cap of Poseida is very modest when you consider the amount of cash even they have on the balance sheet, the fact that they have both the cell therapy and the gene therapy platform. So I think the significant the potential there with plenty of clinical news flow to come over the next year is very significant. On ImmunoCore, I suppose there's nothing majorly new on ImmunoCore from a clinical point of view over the past while. We highlighted before the fact that I spoke with the validation that the approval of Tepentifrost gives the entire platform, which is essentially a new form of or new modality, is significant. Obviously, the progression of that from Phase 3 data into their applications for approval being accepted is a welcome progression, but it doesn't surprise us because we've obviously already seen the Phase III data, which is being public. I think then getting into AG4 and PRAME, which are applicable to much larger groups of patients and much more prevalent tumor types is a very significant potential value inflection point for that company as well. We'll see mid stage, I think, before the end of this year. And then your final question in terms of return, I suppose we're waiting on the competition approvals to go through in the future restrictions. They're progressing very well. So we're on track to get that closed over the next couple of months, as I said. And then we'll be able to inform the markets of the process to return capital beyond that. So that's really all. I spoke with no definitive time frame. It's out of our hands in some ways as it always is in these sort of situations as to how quickly Alton will close. But we will be in a position to return capital quickly after that deal goes through. Great, Darren. Thank you. That's very clear. Thanks. Our next question comes from Alastair Campbell of Liberum. Just got three questions for me, actually, if that's okay. The first one is, look, I know you've been spending a lot of your time working with Al Tan. I'll have to say it's great to see that come to fruition with the Efipharm deal. So I guess the first question is, I'm wondering, is that pretty much now delivered? As far as you're concerned. What's the next top priority on your personal to do list in the company? Second question is on the ZenEx. I suppose just looking through the press release, clearly, it's been a very strong first half of the year. One slight disappointment I could point to is just we've seen a slight dip in the IPEV valuation on ZenEx, but looks at things. Can you give us a sense of what's been going on there in terms of revenue and what you think the normalized revenue growth trajectory should look like? And then my final question is on otsazaconazole. Obviously, we're hoping that will get approved fairly soon. And I just wonder if you can give us an update what you know about Mycovia, their commercialization strategy. And just remind us, if you can, your economics on that product as it rolls out. Thanks. Thanks, Alastair. Yes, so I guess in terms of the priority, really, it's for my priority over the next few months. It's really, I suppose, in terms of helping the remainder of the portfolio progress, executing upon that commitment that we made a couple of years ago in terms of returning capital and then looking to see some further realization events from the portfolio so that we can sort of continue down that track. So I think step 1 is obviously seeing Allison Close, making that return and then hopefully seeing some further progress from the rest of the portfolio to exit some further positions at optimal value inflection points, which I think is possible over the next 12 months or so. In terms of Zenix, I suppose Zenix had a fantastic year in 2020. We've stated before, it more than tripled its revenue levels in 2020. There's clearly not the same manic focus on disinfection in 2021. I still think the business will more than double its pre pandemic revenue levels in 2021. And looking beyond that, there's, I think, very good growth opportunities within that business that we're working on. A couple of interesting business initiatives there at the moment. One is the potential of further differentiating the robot versus competitors and clearly market out as the leading technology in this space. And then another is focused on is more business focused, possibly making the robot more accessible and improving margins. So there's a few balls in the air there in addition to letting sort of the base business settle at what I think is going to be a much higher basis level compared to pre pandemic. In terms of the valuation, the valuation on Zenix is pretty subjective because it's where they haven't had their requirement to raise money in quite a while. So it's just really the adjustment down to the valuation technique that we use and looking at the forecast of this year versus last year is really the small impact on valuation. But I think with some further progress in the business, I think we'll have a more validated view of the value of that business over the next 6 to 12 months. On chezakanazole, MYCOVIA, I suppose, we're obviously somewhat distant from Icovery in terms of what their commercialization plans are. They are building up their sales force. But personally, I think transaction through their license to U. S. Or sell the company probably more likely. That's just a view from looking in from the outside and because they are a separate entity to us. In terms of our economic standards, various milestones which we have set out insofar as possible before that we can achieve based on commercial successes and approvals across all jurisdictions, so in U. S, Europe and Asia, where development efforts are all ongoing. And then upon approval, we will get an approval milestone and sales royalties will start flowing from the U. S. Market in 2022. So we'd expect somewhere in the region of €10,000,000 to €15,000,000 of inflows from VioNet during 2022, potentially even better depending on how quickly the product is launched and obviously dependent on sales. Great. Thanks, that's very helpful. Just one last one for me. Just obviously, I saw the corporate level cash burn rate in H1 was about €1,400,000 Just is that the sort of run rate we should still be thinking about as you roll forward in here as well? Yes. Yes. Okay, cool. Brilliant. Thanks. Thank you. We have no further questions in the queue. So I'll hand back to Dara for closing remarks. Okay. Thank you for all dialing in, and we'll be in touch based on progress and over the coming months. Thanks. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your line.