Welcome to Ascelia Pharma Q4 2023 Report Presentation. For the first part of the conference call, participants will be in listen-only mode. During the questions-and-answers session, participants are able to ask questions by dialing pound five on their telephone keypad. Now I will hand the conference over to CEO Magnus Corfitzen, CSO Andreas Norlin, Deputy CEO, Finance, Investor Relations, and Commercial Julie Waras Brogren. Please go ahead.
Thank you, and welcome everyone to the webcast for Ascelia Pharma's Q4 Report and Full-Year Report for 2023. The headline for the quarter is that we have strengthened our financial position ahead of the headline results of our phase III study SPARKLE, which is on track for being announced in May this year. We will be making certain forward-looking statements on this call, so please pay attention to this. Our quarterly call is structured so that we start with Ascelia Pharma highlights and recent key events. This is followed by a portfolio update before moving to financials. After the presentation, we will open up to questions. Ascelia Pharma is dedicated to improving the life of people living with cancer by offering better treatment options. In particular, we focus on rare cancer conditions.
Our business model is to identify, develop, and commercialize novel drugs that address unmet medical needs within orphan oncology. We have two drugs in clinical development. Orviglance completed patient enrollment in the pivotal phase III clinical study in 2023, and headline results are expected by May. Orviglance has orphan drug designation from the FDA and is targeting an addressable market opportunity of $800 million. Oncoral is ready to start phase II in the treatment of gastric cancer based on encouraging results in phase I and a high level of unmet medical need. Our company is based in Malmö in Sweden, and we're listed on Nasdaq Stockholm. Q4 was a busy quarter with some important events. In October, we announced the acceptance of an Orviglance review article in Investigative Radiology, one of the highest-impact radiology medical journals, and it has since become available online.
At the extraordinary shareholder meeting in November, our shareholders approved an employee option program. In the beginning of December, we announced that the image reading had started as planned and reconfirmed that we were on track for headline results by May this year. After the quarter, our nomination committee has been appointed, and just last Sunday we announced a financing of up to SEK 35 million, which extends our financial runway to second quarter of 2025 if fully utilized. Now we will start the portfolio section of our presentation, and we'll start with Orviglance. We are very excited about Orviglance, and here is why. Orviglance is addressing a well-defined unmet medical need for a subgroup of people living with cancer. This is an $800 million global addressable market opportunity, and Orviglance is a first-in-class product to target this.
We have strong data from eight clinical studies, and manufacturing has been upscaled to commercial scale. For the pivotal phase III study, we have completed patient enrollment, and we have the data and images in the database, and headline results are expected by May. This is obviously a major milestone. Positive data will enable us to file for approval and bring Orviglance to patients in need. With these highlights, we'd like to move to the scientific part of the Orviglance presentation, and I'd like to do a handover to Andreas to continue here.
Thank you, Magnus. Orviglance is a first-in-class liver MRI contrast agent, which addresses a very specific unmet medical need where there are no good alternatives available today. Contrast-enhanced MRI is the gold standard procedure for examination of patients with suspected or known liver metastasis, and the contrast agents available today are all based on the heavy metal gadolinium. In patients with severe kidney impairment, use of gadolinium-based contrast agents has been associated with an increased risk of a very severe side effect called Nephrogenic Systemic Fibrosis. Both the European and U.S. regulatory authorities have, for that reason, issued warnings for the use of gadolinium-based contrast agents in this group of patients. The consequence is that patients with impaired kidney function typically will get an unenhanced MRI, which will result in liver images of suboptimal quality and a risk of that their cancer is not managed in the best possible way.
We envision that Orviglance, which is based on manganese, will address this unmet medical need in the future and become an efficacious non-gadolinium contrast agent for cancer patients with impaired kidney function. Eight phase I and II studies have been completed, showing a consistent positive efficacy and safety profile of the drug. The pivotal phase III study SPARKLE is the last study in the clinical development program. We have completed patient enrollment to this study and are well on our way to report headline efficacy results by May this year. Common adverse events in the SPARKLE study is already concluded to be in line with previous studies with Orviglance. With a positive readout of SPARKLE in May, we will have completed the extensive clinical development program with nine studies and a total of 286 subjects to be included in the regulatory submission.
Efficacy of Orviglance in the SPARKLE study is evaluated by measuring improvement of lesion visualization in MR images with Orviglance compared to images without any contrast enhancement. The evaluation is carried out by three independent blinded radiologists or readers who score lesion visualization by how well defined the lesion border delineation is and how big the contrast between lesion and normal liver tissue is. Improved lesion visualization, that is, superior efficacy of Orviglance, will be concluded in the study if two out of the three readers score both border delineation and lesion contrast for Orviglance MRI higher than unenhanced MRI with statistical significance. To the right, you can see an example of how a lesion is better visualized with Orviglance than without enhancement. We have demonstrated that Orviglance is superior to unenhanced imaging in a reread of one of the phase II studies, P004A.
In this reread, which included 20 patients only, the evaluation of efficacy using the same method as in SPARKLE demonstrated that lesion visualization with Orviglance was improved compared to images without contrast with a compelling level of statistical significance. This result is encouraging for the evaluation of SPARKLE. The SPARKLE study includes 85 patients, and also when accounting for differences between the phase III and the phase II studies, there is good reason to be optimistic that the SPARKLE study can confirm that Orviglance significantly improves visualization of liver lesions. We are well on our way to headline results in May 2024. We have completed the enrollment of patients, and we know that the common adverse effects are in line with what we have seen before. Unfortunately, we, in August, reported that we had to restart the image evaluation and efficacy analysis.
This was due to that we found out that two of the three readers were inconsistent and had high variability in their assessments. This was detected in accordance with the protocol and clinical guidelines when we compared the scoring of images that were scored at two different time points. It is expected that the results should be similar between the two reads, but this was not the case in this case. For that reason, we decided to make a new evaluation. We have trained new readers extensively, and we have updated the methods for monitoring, and we have in December started the reading again, and the monitoring is continuing, and the readers are proceeding according to plan so that we expect to have the headline results in May this year. With that, I will hand over to Julie.
Thank you, Andreas. The addressable market for Orviglance has a global value of $800 million annually. The U.S. represents almost half of this. Our launch strategy and plan is in place for a focused launch to reach radiologists who will decide on the use of Orviglance for our target patient population. These are cancer patients who need imaging of the liver and who also have severely impaired kidney function. As part of our commercialization strategy, we are exploring potential partnering opportunities. In the scenario of a U.S. or global partner, we would be able to leverage their established capabilities. As mentioned, the U.S. is the largest commercial opportunity for Orviglance.
In the U.S. alone, our real-world data, i.e., data from realized procedures in our target patient population, show that every year 100,000 abdominal imaging procedures are performed in 50,000 patients that fall under the Black Box Warning for gadolinium contrast agents. This is about 4% of people with cancer undergoing abdominal imaging. The well-defined patient population with a clear unmet need also drives an attractive pricing opportunity. We have extensive input from market access and pricing experts with whom we have tested different pricing levels and collected insights on the evidence needed to support access and reimbursement. We have investigated pricing and access benchmarks of other innovative diagnostic drugs in the U.S. 90% of healthcare professionals are concerned with issues related to gadolinium contrast agents, including Nephrogenic Systemic Fibrosis. In fact, 16% of providers have experienced gadolinium-induced NSF.
These insights come from market research with 270 U.S. healthcare professionals and answers from radiologists, nephrologists, and oncologists. Insights confirm the concerns with gadolinium and the need for Orviglance. Beyond the risk of NSF in kidney-impaired patients, gadolinium is well known to be retained in the brain and other tissue in all patients, and scrutiny over the possible safety effects is a key concern of regulatory and medical bodies. It is also well known that gadolinium is excreted via the kidneys in urine. Because it is difficult to remove in our sewage system, it is discharged into the environment and into our drinking water.
There's an urgency from regulators and medical bodies to find a viable alternative to the growing use of gadolinium, an alternative that is neither associated with the short- and long-term safety concerns of gadolinium for patients nor the unknown effects of gadolinium in our environment and drinking water. In short, the momentum for an alternative to gadolinium is getting better and better, and the industry is responding. Recent developments from the large gadolinium manufacturers are focused on smaller doses of gadolinium, and there's even an early-stage injectable manganese-based contrast agent, which is not liver-specific like Orviglance. We are excited that we have a head start and that Orviglance is expected to be a first-in-class to lead a future with less gadolinium and improved outcomes for our target patients. With this, I will hand over to Andreas to talk about Oncoral.
Thank you, Julie. Yeah, so we will now move on to Oncoral, our other asset in our development portfolio. Oncoral is a daily tablet formulation of irinotecan, a well-established intravenous chemotherapy. A daily tablet formulation enables a frequent, low-dose dosing regimen that could offer potential advantages on both efficacy and safety compared to the infrequent high-dose intravenous administration used today. We have completed a phase I study, which demonstrated a promising safety profile and desired uptake of the drug after oral dosing, and we are now planning for taking Oncoral into clinical phase II. The objectives are to generate clinical proof of efficacy data in metastatic gastric cancer in combination with LONSURF. Animal data has demonstrated a synergistic effect of irinotecan when combined with LONSURF, which makes this combination interesting. The planned phase II study is designed to study Oncoral + LONSURF against LONSURF alone.
The study will randomize approximately 100 patients and involves a clinical collaboration with Taiho Oncology, who will provide clinical advice and LONSURF for the study. A start date has not yet been communicated as we are prioritizing the successful completion of the Orviglance development. Irinotecan is a well-established chemotherapy with recognized anti-tumor effect in solid tumors. Our strategy is to start Oncoral development in gastric cancer, which is today a $3 billion market. For these patients, there is a high unmet medical need for improving outcomes, and there is an opportunity for an orphan indication. We also see opportunities for developing Oncoral in other solid tumor indications, where a daily dosing tablet formulation can demonstrate an attractive efficacy and safety profile. Irinotecan, as an IV formulation, is already approved in colorectal and pancreatic cancer.
In addition, Irinotecan is clinically demonstrated and recognized in guidelines for many cancer types, and we are assessing these opportunities as part of our ongoing strategic plans for Oncoral. Back to Julie again.
Thank you, Andreas. I will now move to the update on our financials and priorities. On the 4th of February, we communicated that we've entered into an attractive financing agreement with Formue Nord Fokus, securing up to SEK 35 million in financing. The transaction ensures financial and strategic flexibility, with the full financing extending the cash runway into the second quarter of 2025. We are also pleased that this is a solution with limited dilution for our current shareholders. The terms of the agreement are attractive for Ascelia Pharma. It consists of a first tranche of SEK 20 million, of which SEK 15 million is convertibles and SEK 5 million is a loan. The conversion price is set at SEK 10.53 per share, which is a 25% premium to the share price prior to signing.
A second tranche loan of up to SEK 15 million is available, provided that the total financing does not exceed 10% of the company's market capitalization at the time of the second tranche. Ascelia Pharma has the option to repay the financing at any time and with no additional cost. In Q4 2023, our operating result was a loss of SEK 11 million. This is a significantly lower loss compared to Q4 2023, and it was driven by the completion of SPARKLE patient recruitment, the effect of cost-cutting initiatives, including our organizational reduction, and the focus on the SPARKLE image reevaluation with other activities on hold. Our expectation is to maintain a lower cost level in 2024. At the end of December 2023, we had SEK 22 million in the bank.
With this cash and the full SEK 35 million financing, we have a runway into Q2 2025, covering both the ongoing reevaluation of SPARKLE images and the completion of time-critical activities for the new drug application for the FDA. To wrap up, we have substantial value creation opportunities ahead for Ascelia Pharma and for both of our orphan oncology assets in clinical development. With Orviglance, we are developing and launching a first-in-class diagnostic drug addressing an $800 million market for patients with a high unmet need. We have consistent positive efficacy and safety data from eight phase I and phase II studies. In 2024, our focus is to deliver headline results by May and to progress the FDA new drug application as well as launch readiness and partnering discussions. With Oncoral, we have a phase II-ready oral daily irinotecan.
Our phase II study is planned to target gastric cancer, but Oncoral has potential efficacy and safety benefits also in other solid tumors. In 2024, our focus is to prepare for the initiation of phase II when financing allows. Thank you.
This completes our quarterly update, and we'd be happy to take any questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Ludvig Svensson from Carnegie. Please go ahead.
Yeah, hello, Ascelia team . Thank you for taking my question. You said that you're opening up for a partnership in the U.S. Has this affected how you currently work with the pre-launch activities in the U.S.? Thank you.
Thank you, Ludvig. All our preparations in setting the strategy and developing a launch plan and collecting data and market research are value-adding regardless of whether Ascelia would launch or whether we would work with a partner. Up until now, there's no difference. Of course, in the future, working with a partner would reduce the funding requirements for Ascelia at some point in time.
Okay, great. Thank you. And what would an ideal partner be for you in the U.S.? And could you mention if you're maybe in a discussion right now?
An ideal partner is a partner where there's a strategic fit to their strategy and where there are synergies with the commercialization of Orviglance. Synergies can either be that it's a field force, as we call the sales team, visiting hospitals. It could also be someone who works with specialty pharma drugs with high value, where the medical and market access and pricing piece is important. There are different types of synergies that could be a match or a combination. Finding a partner or discussions with partners is an ongoing process. We haven't communicated specific details about this process.
Great. Thank you. And lastly, when should you file your NDA for market approval in the U.S. if you present the data on May?
We have not communicated any guidance on this yet, and we will come back with that in due time.
Okay. Thank you very much.
Thank you.
The next question comes from Johan Unnérus from Redeye. Please go ahead.
Thank you for taking our questions. Sorry, I came in a bit late, so I might repeat some earlier questions. First, are you still on track, and how much of a margin for delay do you have to reach the readout by the end of May?
Yeah, thank you for the question. We are on track with the reading according to the schedules. So we are still anticipating to have the results by May this year.
Great. And also the OpEx in Q4 came in a bit lower compared with what we expected. Should we expect this to fade a bit further still?
As we've communicated, yes, the Q4 costs were lower, and that's, of course, driven by, as we mentioned, the organizational reduction and the completion of the activities around patient recruitment, which, of course, have been a significant investment. So we expect that a lower cost level will continue in 2024. So that's the current expectation depending on future investments, but the current expectation is a relatively low cost level in 2024.
Is Q4 a relevant benchmark, or should the run rate be slightly below Q4?
We haven't communicated the details, but you can calculate with the runway. So we had SEK 22 million in cash end of 2023, up to SEK 35 million on top of that with a runway into Q2 2025.
Yes. Yes. So slightly further reduction by the sounds of it.
Yeah.
And your earlier answer regarding discussion, you phrased this as an ongoing process. We take that as a confirmation that you are having a conversation at some level right now.
I mean, Johan, you can read it any way you want. I think it's natural. I mean, we've said it's part of our strategy. So it's natural to assume that there would be dialogue ongoing, like most biotech companies would have a dialogue ongoing at some point, right? So I think we cannot be more specific than that. But it is, as we have communicated, we are looking to find partners at some point, the right partner who can create a lot of value for the asset and for Ascelia.
Thank you. And also, finish off with you have clearly gone through the process to reduce the rereading risk methods and so on. Is there anything that you can add to that?
Yeah. I mean, what we have done is that we have a more extensive training of the readers so that they are really up to the task. We have improved our way of monitoring the reading process to make sure that we capture any signs of suboptimal performance, if you like, before it's too late. So we are confident that with these additions or improvements that we have, we have reduced the risk of something similar happening again significantly.
Thank you. Thank you.
There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
Thank you, everybody, for joining our Q4 update here. We are, as mentioned, on track for results from SPARKLE by May this year, and very excited to move forward here with all the opportunities for value creation that we have ahead of us. Thank you and have a good day.