Earnings Call: Q2 2021

Jul 9, 2021

Welcome to the BioArctic Q2 report 2021. Today, I am pleased to present CEO Gunilla Osswald and CFO Jan Mattsson. For the first half of this call, all participants will be in listen-only mode, and afterwards there'll be a question and answer session. Speakers, please begin. Thank you so much. Most welcome to BioArctic's second quarter report for 2021. I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share the presentation here today with our CFO, Jan Mattsson. I think it's exciting times for the Alzheimer's community now, both regarding diagnostics with progress of blood biomarkers and also with new therapies. We are most likely on our way towards a paradigm shift for the treatment of Alzheimer's disease. Our most advanced program, lecanemab, previously called BAN2401, was granted Breakthrough Therapy designation by the FDA in late June. I will describe more about that in the presentation here today. Next slide, please. BioArctic is listed on Nasdaq Stockholm Mid Cap, and this is our disclaimer. Next slide, please. BioArctic is a unique Swedish biopharma company with the aim of improving lives for patients with CNS disorders. When I say that it's unique, I mean that based on 4 different areas. The first one is that we focus on research and development of innovative treatments for CNS diseases, where there is a high unmet medical need, like Alzheimer's disease and Parkinson's disease. These diseases affect large patient groups, it also affects their relatives, and it has large costs for the society. Today, there are only symptomatic treatments available, at BioArctic, we work with disease-modifying treatments affecting the underlying disease in order to slow down the disease progression. The second aspect is that we have a great organization with very experienced and engaged coworkers, we have important fruitful collaborations with universities and with our strategic partners, Eisai in Alzheimer's disease and AbbVie in Parkinson's disease. The third aspect is that we have an attractive and well-balanced project portfolio. We have projects spanning from early discovery all the way to phase III, and we have partner projects that are generating revenues by milestones when our strategic partners carry the cost for the clinical trial. We also have earlier fully owned projects with substantial marketing and out-licensing potential. The fourth aspect is that BioArctic is well-financed, and we have a strong cash position with close to SEK 1 billion in the bank, which is approximately $110 million. We have valuable collaboration agreements with big pharma like Eisai and AbbVie at a value of up to SEK 8.9 billion plus royalties if we come all the way to the market. I think BioArctic is a dynamic and very exciting company with huge potential. Next slide, please. During this quarter, a lot of things have happened, and there are great news during this quarter for lecanemab BAN2401. The FDA granted Breakthrough Therapy designation for lecanemab for treatment of Alzheimer's disease. This FDA program is intended to facilitate and accelerate the development and the review of drugs for serious and life-threatening conditions. The benefits of having a Breakthrough Therapy designation includes possibilities for more intensive guidance from the FDA in order to ensure an efficient development program, as well as eligibility for a rolling regulatory review and potentially also a priority review. The FDA's decision to grant lecanemab Breakthrough Therapy designation was based on the positive clinical results of the phase IIb trial, which were recently published. We think that this is a significant positive development as it signifies key validation of lecanemab's therapeutic potential by the FDA. In order to be qualified for Breakthrough Therapy designation, it requires a drug having preliminary clinical evidence that show a clear advantage over available therapy. Of course, we see this as very positive news for lecanemab and for BioArctic. Other things that have happened during the quarter is that we have got a manuscript published in Molecular and Cellular Neuroscience with the title "Elevated Soluble amyloid-beta Propeptides in Down syndrome and Alzheimer's disease." Furthermore, we also had a new patent granted in Japan for new antibodies targeting truncated forms of amyloid beta. This patent was also granted in Europe earlier this year. Patents are important for a company like BioArctic, and we now have 14 patent families and more than 230 granted patents and more than 60 pending patents. Next slide, please. As I said, there has been a lot of progress in the Alzheimer field this year. With regard to diagnostics, we see that the blood biomarkers are progressing quickly, and they will be important in order to facilitate the diagnosis of Alzheimer's patients, and especially important when the new disease-modifying treatments are available. With regard to therapies, FDA has shown its willingness to help the Alzheimer's population, where there is such a large unmet medical need. The first disease-modifying product was approved in the U.S. by the FDA. That was Biogen's ADUHELM, which is an antibody against amyloid beta. In early June, they obtained an accelerated approval with further requirements by the FDA in the U.S. The decision was based on a very complex data set from 2 early terminated phase III trials. The decision was quite unusual since it was based on biomarkers that are reasonably likely to predict the clinical effect, and it was not based, as it's usually done, by proven clinical effect. They also got a requirement to show clinical effect in a new study in order to get a full approval. Lecanemab, BAN2401, and Lilly's donanemab were both granted Breakthrough Therapy designation by the FDA in late June. This was based on encouraging clinical results from the phase II studies. We think that the probability for success has increased for lecanemab, and it's very encouraging to note that the data from lecanemab phase IIb looks very competitive versus other late-stage programs. Lecanemab has shown a profound clearance of amyloid from the brain and the rapid clinical effect that increased over time and with a better tolerability profile. We are now very much looking forward to the results from the confirmatory phase III study in early Alzheimer's disease. This study is called Clarity AD. Our partner Eisai is targeting the readout of the primary endpoint in late September 2022. Lecanemab has the opportunity to be the first program to provide confirmed clinical benefit results and to get the full approval. I think it's a very exciting time, but it does not mean that we have solved Alzheimer's disease. I see this as a first step with the first disease modifiers, but there is still a large unmet medical need for even better treatments and combination of therapies. Therefore, it's very important that we and others continue to do innovative research and get new products on the market as well further on. I think there will be room for many different treatments for this large growing patient population. Next slide, please. BioArctic has an attractive and well-balanced portfolio, and Alzheimer's disease is our largest area. As I just said, even if we now see encouraging progress for the first disease modifiers, there is still a large medical need for even better treatments and also for combination therapies in the future. We have six early disease modifying programs, and we are also very pleased with the progress of our BrainTransporter technology, where we are now combining this technology with two of our early discovery projects in Alzheimer's disease. Our portfolio is balanced in three different ways. The first one is that we have several projects in different areas, all focused in CNS, including our BrainTransporter technology. The second one is that we span from very early discovery all the way to late phase III. The third one is that we have a combination of fully financed partner projects and innovative, fully owned projects with great potential. Our strategic partners finance the expensive clinical development programs, whereas we finance the less expensive preclinical phases and increase the value before future partnering. Next slide, please. We have two longstanding successful partnerships. Eisai in Alzheimer's disease since 2005, and Eisai are very committed to dementia and to lecanemab. We have so far received EUR 66 million, and we have ongoing research collaboration with Eisai, which was recently prolonged. The total aggregated value of agreements is up to EUR 222 million. There is a lot still left in the program if it continues to progress well. If we come all the way to the market, we will get royalties. If you consider these royalties, they could be of substantial value. They could be like blockbuster revenues for BioArctic, which means more than $1 billion per year without BioArctic having any cost for the clinical program. We also have the right to other indications and to commercialization of lecanemab in the Nordic region for Alzheimer's disease. We are very much looking forward to this. I think BioArctic has a great business model. In Parkinson's disease, we have a very successful collaboration with AbbVie since 2016, and we have so far received $130 million out of the total aggregated value of up to $755 million. There is still a substantial amount to receive plus royalties if we come all the way to the market. AbbVie has mentioned that they will start with Parkinson's disease for the most advanced program, ABBV-0805, but they're also looking into several other different indications like multiple system atrophy and Lewy body dementia. This could, of course, also lead to substantial revenues for BioArctic. I think that we have 2 great partners and 2 successful collaborations. Next slide, please. Eisai are a strongly committed partner to lecanemab, and they have an impressively broad program with 3 clinical studies underway. Clarity AD is the confirmatory phase III trial, which is ongoing on a global level for early Alzheimer's disease patients. The study is progressing very well, and patient enrollment was completed earlier this year. There is now 1,795 early Alzheimer's disease patients who now will be treated for 18 months until the primary endpoint readout, which Eisai targets to have available late September 2022. For those patients who were part of phase IIb, there is an open label extension study ongoing, and there are new data coming along continuously. These data are being reported at the Alzheimer congresses. Everything we have seen so far has further strengthened the positive phase IIb results. The next congress to look forward to is, of course, AAIC in the end of July. The new phase III program is called AHEAD 3-45 and is comprising of 2 sister trials, A3 and A45. It's driven by Eisai together with Alzheimer's Clinical Trials Consortium, and it will include approximately 1,400 subjects on a global level. The subjects in this study are of preclinical asymptomatic stage, and they have intermediate or elevated amyloid levels in the brain. The program is aimed to evaluate the therapeutic effect of lecanemab on the progression of the disease to see if we can slow down and make sure that the patients do not get symptoms, or at least delay time to symptoms. We are looking forward to the progress of this impressively broad program that Eisai is driving in Alzheimer's disease. Next slide, please. Our broad early-stage portfolio continues to progress well and according to plan, which I think is an impressive achievement when you consider the COVID-19 pandemic situation. Of course, we work a bit differently. So far we have managed to progress our projects in our early portfolio without any notable disturbances. I'm really grateful to our grateful workers for this. Next slide, please. By that, I hand over to our CFO, Jan Mattsson, for the financial summary. Thank you, Gunilla. For those of you who don't know BioArctic so well yet, I'd like to point out that we currently don't have any steady revenues. We have a business model that is focused on partnership agreements, which means that our financials are very much linked to milestone payments and that income is related to research projects with our partners. With that, let's start looking at net revenues and operating results. My comments relate to the quarter's number. Net revenue were SEK 7 million for the quarter compared to SEK 7 million in the same period as last year. The major part of the revenues this quarter derive from the research collaboration agreement with Eisai. Looking at OpEx, the costs are in line with that of last year, SEK 42 million this quarter and SEK 43 million last year. Operating results amounted to minus SEK 34 million in the quarter compared to minus SEK 38 million last year. We have moved down our expected cost range for 2021 from SEK 180 million-SEK 220 million, and we are now in the range of SEK 170 million-SEK 200 million. Next slide, please. Looking at our cash and net result. The cash balance continues to be in good health and amounted to SEK 930 million at the end of this quarter. Our cash flow from operating activities was minus SEK 29 million compared to minus SEK 20 million in Q2 last year, and the net result for the period was minus SEK 34 million this quarter compared to minus SEK 38 million the same quarter in last year. In summary, we continue to be in good financial shape. With that, back to Gunilla. Thank you. I will finish with some upcoming news and some closing remarks. Next slide, please. We are now on slide 14. In Alzheimer's disease, our partner, Eisai, are progressing the broad clinical program for lecanemab that I just described. Data with lecanemab will continuously be presented at different international congresses. The next one we are looking forward to is AAIC in late July. This will be a hybrid meeting. It will be partially virtual and partially on site in Denver in the U.S. After that, the next important Alzheimer's meeting is CTAD in November. In Parkinson's disease, we are looking forward to agreed completion of phase I and initiation of phase II, which currently is being planned. Data with ABBV-0805 will be presented at international congresses, and we are looking forward to the Movement Disorders Congress in September. Next slide, please. I'll just close by saying that BioArctic is built on great science. We have great projects, great partners, and great people working for BioArctic. Everything we do is with patients in mind. Our aim is to help patients with brain disorders, and I really think that we are on our way to help the Alzheimer's patients. Next slide, please. By that, I thank you for your attention, and we are happy to take some questions. Thank you. Ladies and gentlemen, if you wish to ask a question, please dial 01 on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. If you find it answered before it's announced, you can dial 02 to cancel. Once again, that's 01 to ask a question or 02 if you need to cancel. We currently have one person in the queue. That's the line of Samir Devani of Rx Securities. Please go ahead. Your line is open. Morning, everyone. Thanks for taking my questions. I've just got a couple, actually. Obviously, there's been great progress over lecanemab in the period. Actually my question is just on the AbbVie collaboration. I think it's been nearly a year now since the phase I trial was stopped. When do you think we might hear on the phase II strategy for that for 0805? The second question is just confirmation, really, just on the cash runway. If you could just confirm, I think you previously mentioned through 2023, and whether that's still the case. Thanks very much. Thank you, Samir. Great questions. Of course, we are very pleased to see the progress with lecanemab, as you said. With regard to our collaboration with AbbVie, the phase I is still ongoing. We are looking forward to it being completed in not too long time. AbbVie are preparing for the phase II program. There were some really important learnings at the ADPD congress earlier this year, and we are looking forward to when we will be able to talk more about this. I really look forward also to the Movement Disorders Congress in September. We will come back to you when we have something more to report here. With regard to our cash runway, maybe Jan, you want to comment? Yes. We strive to have a runway of 3 years of fixing our cash position, and currently we have a cost base of around SEK 200 million, so that includes 3 years from now with the cash position that we do have. That's great. Thanks very much. Thank you, Samir. Thank you. We've had one further question come through. That's from the line of Gagana Almqvist of Eurodia. Please go ahead. Your line is open. Hello. I have a question about the recruitment of patients for the Clarity AD study. Have you noticed any impact of the approved ADUHELM on patient drop-offs? Great question, Gagana. Thank you. We have had a great recruitment into the Clarity AD study. I think this is based on the encouraging results from phase II-B that patients want to be part of this. There's always a worry when the first treatment is available on the market that there will be patients who would like to have that instead of the risk of getting placebo. Everyone who is in the trial will also be rolling over into an open-label extension study where they know they will have lecanemab. We have had very few dropouts. We're pleased to see that. There's always a risk, but we have seen very little effect so far. It's also very important to realize that this is a global study. It's the U.S. where now ADUHELM is available. It's also in Canada, Europe, Japan, South Korea, Australia, Singapore. It has many other places in the world where there is no other disease-modifying treatment available. I think that's also a very important aspect. Thank you. I'm just thinking about the next milestone payment by AbbVie. When are we going to know more about the progress or the initiation of the new phase? You mentioned that there's no concrete date or deadline. No, unfortunately, I cannot comment on any specifics. Okay. The reduced OpEx, which projects are on the back burner due to the reduced cost? Is there any projects who are being reduced investment? What we can say is that we have some projects where we have some more efficiency in how we have been able to omit some activities and so forth. It's due to more efficiency. Okay. There's no reduced investment in the pipeline? Well, there is a little less need since we have been able to do a bit more efficient program. Okay. It's all good news. That's good. That's all for me. Thank you. Thank you so much, Gagana. Thank you. Once again, if there are any further questions, please dial 01 on your telephone keypad now. There are no further questions at this time, I'll hand back to our speakers for the closing comments. By that, I say thank you very much for your attention and great questions. I wish you all a wonderful summer. Thank you so much. Bye.