Welcome to BioArctic Q1 report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. I will hand the conference over to CEO Gunilla Osswald and CFO Jan Mattsson. Please go ahead.
Good morning and welcome to BioArctic presentation for the 1st quarter of 2023. I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share today's presentation with our CFO, Jan Mattsson, and our Chief Medical Officer, Tomas Odergren. We will give an update on BioArctic and on lecanemab and focus on the great start of this year with the approval in the US by the accelerated pathway and the submission of applications for full market approval of lecanemab in 3 continents. These submissions are based on the groundbreaking results for lecanemab in the Clarity AD phase 3 study in early Alzheimer's disease. I think it's really exciting that lecanemab or Leqembi, as it's named in the US, now is available for patients in the US. We'll talk more about that here today. Next slide, please. This is our disclaimer. Next slide, please.
BioArctic aim is through world-leading innovative research, create drugs that improve the lives of patients with neurodegenerative diseases. We focus on research and development of innovative treatments for brain diseases with high unmet medical needs like Alzheimer's disease and Parkinson's disease. As you know, these diseases affect large patient groups and their relatives and comes with large costs for society. There is a high medical need for disease-modifying treatments which is affecting the underlying disease and slowing down the disease progression. We are also building a commercial organization and preparing for commercialization of lecanemab in the Nordics together with our partner, Eisai. We have an attractive and well-balanced project portfolio with projects spanning from discovery to phase 3, and now also in the regulatory process in three continents and on the market in the US.
We have partner projects that generate revenues by milestones and royalties, where our strategic partner carry the cost for clinical trials. We also have earlier fully owned projects with substantial marketing and out-licensing potential. BioArctic is well-financed, we have a strong cash position with about SEK 1.1 billion on the bank, which is approximately $110 million. We have valuable collaboration agreements with companies like Eisai. During the first quarter of this year, we got regulatory milestones of EUR 35 million. BioArctic is listed at Nasdaq Stockholm Large Cap, our market cap is about SEK 21 billion. BioArctic is an innovative and dynamic and very exciting company with a huge potential. Next slide, please. BioArctic has a rich and balanced project portfolio that focus on brain disorders.
Alzheimer's disease is our largest area. For lecanemab, which is our most advanced program, which now is on the market in the U.S. based on the Accelerated Approval, and in regulatory phase in the U.S., Europe, Japan, and China for a full approval. That is driven in a great way by our partner, Eisai. We have 1 more large phase 3 program ongoing with lecanemab in even earlier phases of Alzheimer's disease. Even if this first step with the first disease modification treatment are successful, there is still a large medical need for more treatment option and for combination of therapies. It's very important that we and others continue to do research for Alzheimer's disease.
We have four early Alzheimer's disease modifying programs, including two, where we have combined the antibodies with our brain transporter technology in order to get more of the antibody into the brain and hopefully then have even better effect. Two of our projects in Alzheimer's disease are targeting truncated forms of Aβ such as pyroglutamate Aβ, and that is including BAN1503 and AD-BT2803, which is then combined with our brain transporter technology. Based on lecanemab's positive phase 3 results, I think that the probability of success has increased for our other programs with similar approach that are targeting misfolded aggregated forms of proteins that we call oligomers or protofibrils. That is soluble aggregated forms of the proteins, and they are toxic. In Parkinson's disease, the protein is called alpha-synuclein, and in ALS, the protein is TDP-43.
The ALS projects that are targeting TDP-43 are progressing really well and quickly, thanks to our technology platform and our vast experience from Alzheimer's disease and Parkinson's disease projects. We're also working on another rare disease, Gaucher disease with GD-BT6822, which is an enzyme replacement therapy with the aim of also being able to target the CNS effects of Gaucher disease, which is a major unmet medical need today. Our Brain Transporter technology platform, which you know, I think is a very exciting part, is progressing really well. We have now transferred the platform into preclinical development. It's now included in projects in all our disease areas. In the future, we could also foresee the Brain Transporter technology could be applied to other companies, antibodies or proteins on non-exclusive license basis.
Lecanemab is of course very important for BioArctic, but I want to point out that BioArctic is even more than lecanemab, and our portfolio is progressing really well. Next slide, please. We have a long-standing and successful partnership with Eisai in Alzheimer's disease all the way back since 2005, and we have two license deals and have had several research collaborations, and we have a research collaboration still ongoing with Eisai. During the first quarter of this year, we got EUR 35 million in regulatory milestones from Eisai, and that was based on the U.S. approval, the submissions in Europe and Japan. We have another EUR 101 million remaining for milestones if it continues to progress well, and they are linked to regulatory approvals in Japan and Europe and some sales and marketing milestones.
BioArctic is entitled to royalties of high single-digit % for the first 10 years following launch and mid-single digit % for the following 5 years on a country-by-country basis. After the 15-year period, Eisai has an option to extend the agreement period with continued royalties. I think that lecanemab is of substantial value or blockbuster potential, which means that we could, if everything continues to go well, foresee more than $1 billion per year in revenues without any cost for the clinical programs in Alzheimer's disease. BioArctic has also retained rights to other indications outside of Alzheimer's disease. We have the right to market in the Nordics, which we are very much looking forward to be doing together with Eisai. Next slide, please. Leqembi is the name for lecanemab when it's launched in the U.S.
Leqembi has the potential to become the first anti-Aβ amyloid antibody to receive full approval on a global basis. Lecanemab is now in regulatory review process for a full approval in 3 continents. The FDA has approved lecanemab by the accelerated pathway in the U.S., we got that feedback from the FDA on the 6th of January this year. That approval was based on the phase 2B biomarker data showing that lecanemab clears amyloid plaques from the brain. In the full approval applications that are submitted, they are based on phase 3 efficacy data. Eisai has submitted the application for the traditional pathway, they did that on the same day as the Accelerated Approval was received, which I think is very impressive.
We are looking forward to an advisory committee meeting on the 9th of June and the response from the FDA by the 6th of July at the latest. Reimbursement is of course also important, and the Veterans Health Administration has decided to provide coverage for veterans with Alzheimer's disease. A full approval based on the phase 3 efficacy data will be important in order to get broader reimbursement in the U.S. by CMS and a broader access for the patients. If Leqembi is granted a full approval on the 6th of July, then it is expected that CMS will broaden their coverage under the existing national coverage determination. Eisai is also exploring less frequent dosing for maintenance dosing and subcutaneous administration, and they plan to file those submissions in the 1st quarter of next year.
In Japan, where lecanemab has undergone a pre-review process of data during 2022, Eisai has then submitted a full marketing authorization application on January 16 to the Japanese authorities. The application has also been granted priority review by PMDA, and Eisai expects a re-response late later this year, in second half of this year. In Europe, Eisai has submitted a marketing authorization application to the European Medicines Agency on January 9, and that was based on both the phase 2B and the phase 3 data. The application was accepted on January 26, and it will follow a standard review process, and the response is expected on the first quarter of next year. In China, Eisai initiated the application process in December last year, and priority review designation was provided in February.
Response in China is expected by the first quarter of next year. I want to compliment our partner, Eisai, for their dedication and hard work with the clinical studies and regulatory submissions in such a timely way. I think this is very important since every day matters for the patients. Next slide, please. One of the 3 most important Alzheimer's congresses every year is called ADPD, and this year it was held in Gothenburg. The Swedish Queen Silvia inaugurated the meeting with a warm and crucial message of the importance of the effects for these patients. I think it was a very positive atmosphere at the congress with a lot of hope for the patients and a lot of talking about the new era for Alzheimer's disease. It was very nice to see the great progress, both with new treatment opportunities like lecanemab and on blood-based biomarkers.
Lecanemab was mentioned in numerous presentations, and lecanemab was the focus in four different presentations on health-related outcomes, safety, and the unique binding profile of the antibody. Our CMO, Tomas Odengren, will now talk about some of these presentations at ADPD and the clinical program of lecanemab. Next slide, please, and hand over to Thomas.
Thank you, Gunilla. Dr. Sharon Cohen from the Toronto Memory Program in Canada presented on the Clarity AD quality of life results. The analysis showed statistically significant benefits of lecanemab treatment across scales assessing quality of life, both for the subject affected by Alzheimer's disease as well as the care partner of the subject. As seen on the graph at the top right of the slide, the subject experienced 56% less decline in the quality of life over the 18-month treatment period compared to subjects in the placebo group on the disease-specific quality of life scale. A similar result with 49% less decline in quality of life was seen on another instrument, which is used across many different disease areas, the EQ-5D-5L. Alzheimer's disease is a condition that profoundly affects the life of the family members.
The experienced burden of caring for the subject with Alzheimer's disease by the partner or family member providing the care was assessed in Clarity AD with the Zarit Burden Interview. Across the 22 domains assessed, every one detected a point estimate in favor of the lecanemab treatment group. In aggregate, a clear increase in the burden for the care partner is seen over the 18-month study period, as seen in the black curve in the lower graph on the right-hand side. This was reduced by 38% with lecanemab treatment. The results on all instruments of quality of life were consistent across the randomization strata in Clarity AD, such as the disease stage and APOE genotype. Next slide, please. This slide goes into more details of the domains assessed with the QoL-AD instrument.
A point estimate to the right of the vertical line identifies a domain detecting a numerical benefit of lecanemab treatment as perceived by the subjects. As you see in the graph, such a benefit was seen in all but two of the 13 domains. The clinical significance of lecanemab treatment is readily apparent by the observations on such domains as ability to do chores and things on the top of the graph, as well as the ability to manage money, family, friends, and life as a whole further down. Next slide, please. Three further oral presentations were given on the lecanemab program at the ADPD conference. The first was given by the co-founder of BioArctic, Professor Lars Lannfelt, who reviewed a unique binding profile of lecanemab consequent to it being selected based on a preference for binding to soluble aggregated amyloid species.
It was noted by Professor Lannfelt that there may be an association between this binding pro-profile and the relatively lower incidence of amyloid-related imaging abnormalities, ARIAs, in the lecanemab phase 3 trial compared to several other anti-amyloid treatment candidates. This higher risk with these other candidates is apparent despite them having been initiated with several months of a titration regimen, whereas lecanemab treatment can be initiated at a full dose from the start. The two other presentations by respectively Dr. Sabbagh and Dr. Honig from the USA detailed the lecanemab safety profile in the Clarity AD study focused on two aspects of the ARIA data in the study. In the analysis of the possible impact on ARIA of the use of antiplatelets or anticoagulants, it was seen that the incidence of ARIA occurred at a similar frequency in the lecanemab-treated participants, irrespective of antiplatelet or anticoagulant use.
The analysis of isolated observations of hemorrhage associated with ARIA-H, the frequency, temporal pattern, and association with APOE genotype of isolated ARIA-H in the lecanemab group was similar to that in the placebo group in the Clarity AD study. Next slide, please. The treatment paradigm underpinning the lecanemab program is the need to continue treatment to ensure that the soluble aggregated amyloid species that drive neurodegeneration are continuously cleared from the brain. The recent publication by Monfared and co-authors in Neurology and Therapy have now applied the Clarity AD data to a previously published model of the impact of long-term treatment maintained for as long as the subjects remain at the stage of early AD.
The data show that lecanemab treatment applied in this manner slows the rate of disease progression and delay the progression to moderate Alzheimer's dementia with several years, thereby reduce the need for institutional care. Next slide, please. Seen in this slide, Eisai is diligently continuing the important clinical development program for lecanemab. The phase 3 globally conducted AHEAD study together with the ACTC academic consortium for subjects with pre-symptomatic Alzheimer's disease is progressing well to meet the target of 1,400 enrolled subjects with intermediate or elevated levels of brain amyloid. The study is applying blood biomarkers for pre-screening to enhance trial efficiency and reduce unnecessary PET scans. Lecanemab is also being assessed as background treatment in conjunction with anti-tau therapies in the DIAN-TU Tau NexGen study for subjects with dominantly inherited Alzheimer's disease.
To provide a more convenient treatment option than biweekly IV infusions, Eisai is exploring less frequent maintenance dosing. Eisai has also developed a subcutaneous formulation of lecanemab, which is presently being assessed in subjects treated in the open label extension phase of the Clarity AD. The subcutaneous formulation is also being progressed with the aim of providing the option for self-administration through an auto-injector. With that, I hand it back to Gunilla for the next slide.
Thank you so much, Tomas. Reflecting on the population of patients with early Alzheimer's disease, I think this is enormous. Eisai has estimated the global prevalence for future early Alzheimer's disease subjects to include about 240 million people by 2032, of which about 75 million people are in the Americas, EMEA, and Japan. Of course, will not all patients be treated with disease-modifying therapies. The patients need to come to healthcare and to be diagnosed with mild cognitive impairment or mild Alzheimer's disease with confirmed amyloid beta pathology. They have to fulfill other requirements, such as, for example, not having pacemaker and so forth, in order to be eligible for disease-modifying treatment. Even if a proportion of all patients with early Alzheimer's disease will be treated, it's still a huge opportunity.
More and more patients could potentially be treated if we work and handle some of the challenges. Eisai has estimated that approximately 3 million patients will be treated with disease-modifying treatments by 2032. I think that's a lot of patients that we hopefully will be able to help. There are several opportunities that could be worked on to increase access. Some of them are listed here to the right. It's important to increase patient awareness, especially on mild cognitive impairment and earlier signs of the disease, since there are no such treatments available today, and working on less stigma for Alzheimer's disease patients. Education of primary care on diagnosis and biomarkers and treatment options is of course also important. Access to specialist care is a very important area to try to facilitate.
I think, for example, memory clinics and so forth has an important role in order to making sure that the right patients get the right treatment. In the beginning, the confirmation of pathology has to be done by lumbar puncture CSF or PET scans. In the future, hopefully, more and more blood-based biomarkers can be used. Following treatment with MRI is important for safety aspects and access to infusions and so forth. There's a lot of things to work on to facilitate access. When we get more improved diagnostics with blood-based biomarkers, that will definitely help. It's great that the blood-based biomarkers are progressing so well in parallel with the treatment options like lecanemab.
Another really important opportunity to increase access is the subcutaneous formulation, and that will make the administration more convenient in getting the treatment earlier and, or easier and at home. We and our partners are working on all these aspects for the benefit of the patients, and we of course would like as many relevant patients as possible that could benefit from lecanemab to be able to get access if it's wanted by the patients. Next slide, please. By that, we come to the financial summary, and I hand over to our CFO, Jan Mattsson.
Thank you, Gunilla. Net revenues in the quarter amounted to SEK 393 million compared to SEK 4 million in Q1 of previous year. The reason for this increase is related to the 3 regulatory milestone payments totaling EUR 35 million that we received from Eisai and that we recognized in the first quarter. Total costs in the quarter were higher than in last year and amounted to SEK 96 million compared to SEK 48 million in previous year. The main reason for the cost increase is related to one-time effects that are linked to our milestone, milestones from Eisai. This led to a milestone payment to LifeArc and to variable remuneration to the BioArctic employees.
Operating results was SEK 301 million in the quarter compared to -SEK 44 same quarter of last year. Our operating expenses are expected to be in the range of SEK 330-380 million for the full financial year 2023, compared to SEK 246 in 2022. The reason for the cost increase is the build up of the commercial organization prior to the launch of lecanemab in the Nordics, and to costs for the expanded in-house project portfolio. Next slide, please. Cash balance amounted to SEK 1.1 billion at the end of March, and the reason for this increase has to do with the received milestones. Operating cash flow amounted to SEK 299 million during Q1, compared to -SEK 40 in Q1 2022.
Net results for the quarter was SEK 294 million, compared to SEK -44 million in Q1 of previous year. In summary, BioArctic continues to have a strong financial position, which is even stronger than a quarter ago. With that, next slide, please, and back to Gunilla.
Thank you so much, Jan. Now we come to the upcoming news flow and some closing remarks. Next slide, please. The upcoming news flow, if we look at this, we can also note that we had a very intensive and great first quarter. Looking forward, in the coming period that we are in now, the second quarter of this year, we will look forward to the US Advisory Committee meeting on the ninth of June. Then we have the regulatory processes with and reimbursement in the US in the coming months. The regulatory process in Japan for the second half of this year with a response, China and Europe within the coming year. Of course, we'll come back with more information when that is relevant.
We also look forward to further Alzheimer congresses, and the next one to look forward to is AAIC in July in Amsterdam. We will also provide more information from our other projects when that is relevant. Early next year, first quarter of next year, our partner, Eisai, is also preparing to file a maintenance dosing with less frequent dosing and subcutaneous formulation if all those results is positive. That's also something to look forward to. I think we can conclude that we have had a great start this year and that we have a very exciting year ahead of us. Next slide, please. I would like to end today's presentation by thanking our CFO, Jan Mattsson, for his valuable time as a CFO. He will now move into a new role as VP Finance at BioArctic.
I would also like to welcome Anders Martin-Löf, who is our new CFO, from 1st of May. Next slide, please. By that, I say thank you so much for your attention, and we're happy to take some questions.
Operator, we're happy to take some questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Joseph Hedden from Rx Securities. Please go ahead.
Good morning. Thanks for taking my questions. Congratulations again on all of the events achieved over the quarter. A couple of questions. Firstly, Lecanemab, having been approved earlier in the year, was launched pretty quickly by Eisai in the U.S. Although we know that largely it would only be available to private payers for the majority of the quarter until the VHA decision. Can you confirm if, you know, Eisai has made any sales and, you know, are you due any royalties for sales made in Q1? If not, when do you expect to record first royalties? That's the first question. Second question, I noticed that the VHA's criteria for prescribing lecanemab to people under coverage excludes the use of the drug in APOE4 homozygotes. That's not in line with the Accelerated Approval label.
What are your thoughts on that? Is that a potential risk for other insurers to follow suit, in your view? Thanks very much.
I think the first question will be for Jan.
We have not yet any information about the Lecanemab sales in the US. We have consequently not received any royalty for Lecanemab. We are in discussions with Eisai about royalty and sales reporting. We will get back to that next quarter for more information.
Okay.
Thanks on that one.
For the second question, if I start, then we can see if Tomas wants to build. With regard to the Accelerated Approval, we should recognize that there were very few homozygotes in the top dose of the phase 2B trial. That might be one of the reasons for why they were a bit reluctant for the first approval, that they would like to see more data from the Veterans Health Administration. We don't really know exactly why they have limited it. The most important, as we have said all the time, would be a full traditional approval, which is based on all the efficacy data from the large phase 3 trial.
And you're right, it's not excluded in the label, but they did this as a first step. They pioneered by taking this decision and grant coverage in the U.S. before CMS. Maybe they wanted to be a little bit more careful when they started. I don't know, Thomas, if you want to build any further.
No. I mean, I would just want to add that in the appropriate use guidelines that have been published in the U.S., there's no such restriction in respect to carrier shape of APOE. We await now the e-evaluation by the FDA and other regulatory authorities about the Clarity AD data, which provide a much better data set in terms of determining benefit risk in APOE for homozygotes.
Mm-hmm.
Okay, thanks very much. Thank you.
Thank you, Joseph.
The next question comes from Patrik Ling from DNB. Please go ahead.
Thank you. Just a few questions. Just to follow up on the first one regarding royalties. What's your agreement with Eisai when it comes to when you will receive royalties? Is it the same quarter as sales is generated, or is it the quarter after?
Jan, you.
That is the quarter after the sales have taken place. We will get a report from, There will be one quarter or a little more than one quarter delay before we get the payment.
Okay. When will it be booked, you know, from a accounting perspective?
That depends on when we get the information. We are not yet through this with Eisai. We have to come back.
So, so-
with that next quarter.
Okay. Potentially next quarter, we could get the royalties both for the second quarter, if you have any, and for the first quarter? Should we only expect?
We don't know that yet.
... first quarter? Oh, okay. Okay. I had a follow-up question on one of the comments that you gave, Gunilla, regarding the royalty agreement. Can you just clarify what happens after 15 years if they decide not to extend the royalty agreement? Eisai, that is.
It comes back to BioArctic.
Okay. They cannot, continue to sell it, so you will receive the product back?
Correct.
Okay, great. Thank you. I had a question on the AHEAD 3-45 trial. If you know anything about recruitment there, when it's expected that the trial is fully recruited, or how far they have got into this 1,400 patients as of now?
I think it's fair to say that the study started in the U.S. and it has been expanded broader and broader around the world. It's also now ongoing in Japan and Australia, Singapore, and some different places in Europe. We're hoping it will come to Sweden soon. The recruitment is going quite well. It's we have not yet gotten all the patients included, so there is still some time to get all the patients included. I don't know, Tomas, if you want to say anything more? No. I think one real important thing was also last year when they also now started to have blood biomarkers as a screening tool to come into the trial. That has really simplified and facilitated the recruitment part.
Since you screen many patients and some of them get the very positive news that they do not have amyloid. For those who have amyloid, the next part is to find out how much they have. If they have intermediate or clearly elevated levels, that decides if they go into A3 or A45.
Okay, great. My last question, I think that this might be for Jan as well. I mean, you talked about your operating expenses now in the first quarter, you said that there were some costs associated with the milestones. Maybe you can elaborate a little bit on that.
Yeah. We had an agreement with LifeArc in the UK, we paid a milestone payment to them, which was linked to the milestone that we received from Eisai, the EUR 25 million milestone payment. We had some payments to our staff under a remunerating program for the staff. As BioArctic receives milestone payments, also the employees will get a share of it.
Is that something that we should expect, I mean, assuming that you get the full approval, for example, now in Q3. If you get the milestone associated with that, which I would expect you to get, should we expect additional costs associated with that as well?
No.
I think it's very important to clarify, Patrik, that the remaining milestones that we have are linked to Japan and Europe. As you saw, I mean, the regulatory milestones is one for the U.S., one for Japan, and one for Europe, and we have already got the one for the U.S. The next one to look forward to will be Japan and then Europe, if it continues to go well.
Okay.
I think it's important that we clarify.
Okay. That's great. Great. Good. Thank you.
Tomas is just pointing that the staff will get some remunerations when we get milestones.
Okay. Okay, great. Good. Thank you, guys. That's all for me.
Thank you, Patrik.
The next question comes from Fredrik Thor from Redeye. Please go ahead.
Hello, and thank you. I was wondering a bit about the ADPD presentation about the relationship between anticoagulation on anticoagulants and ARIA frequency. Could you elaborate a bit on that and what does this mean for the previous hypothesis that maybe the risk could be higher in this patient group?
What these analysis show is that in terms of the risk level of having such an event, there is no implication of being on antiplatelets or anticoagulants. However, if you get a major hemorrhage, there is a greater impact of that if you are on such treatment, potentially. What these data do not tell us is that there is no risk consideration in terms of initiating lecanemab treatment for subjects who have antiplatelets or anticoagulants. I think it's very important that if the re-regulatory decision is to provide full approval, that prescribers are given the insight in terms of having a conversation with subjects who are on such treatments so that they are aware that the consequence, if there is an ARIA event associated with bleeding, may be worse if you have that type of concomitant treatment.
As of yet, we have a limited data set based on controlled clinical studies. It's important to build on that evidence once lecanemab is more broadly available to further assess the potential risk if you have those type of concomitant treatments.
Okay. Thank you. Also wondering a bit about the market potential in China. Could you maybe develop a bit on that market? What type of approach Eisai could take and maybe how ready, yeah, the market is for lecanemab?
Yeah. No, I think that China is very difficult to estimate in any way. I think that we are happy to see that ASI and the Chinese authorities are really working on lecanemab for the patients. I don't think that we can say anything about how big the an uptake could be in China. We know that the population is very, very large, but it's very difficult to judge China.
Okay. Thank you.
I see that as a very positive upside, but, it's difficult to foresee.
Got it. A final question, for markets, beyond these four, what's the status here, the rest of world beyond the five markets?
Yeah. Excellent question. Thank you, Fredrik. We will provide more information about other parts in the world when that becomes relevant. The focus so far has been those four major markets that we talked about right now. Of course, there are other important markets that Eisai is working on, and we'll provide more information when that is relevant.
Okay. Yeah. That's all for me. Thank you.
Thank you.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad.
If there are no more questions, then I think I just want to conclude that we have had a great start this year and that we have a very exciting year ahead of us. I thank you so much for your attention and for the great questions. Bye.