Welcome to Cinclus Pharma Q2 Report 2024. 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 hash five on their telephone keypad. Now, I will hand the conference over to CEO, Christer Ahlberg. Please go ahead.
Thank you very much. Warm welcome to Cinclus Pharma's Q2 report. With me here today, I also have our CFO, Maria Engström. Let's start with the first slide, where we will have a short introduction. There might be some new investors in Cinclus Pharma. Therefore, I would like to introduce you to the company. We are a Swedish pharma company focusing on gastric acid-related diseases. We have a lead candidate called linaprazan glurate, which represent a new mode of action, a new class called P-CABs. We have developed the next generation of the P-CABs with a unique prodrug that gives us the opportunity to secure acid control over 24 hours, which is needed for the most severe patient population in eGERD, which is the indication.
And also in this target population of the severe eGERD patient, that is where the biggest unmet medical need exists currently. And there we will have a unique possibility to heal these patients, thanks to this new prodrug development. And which we also have already delivered very good, strong, solid phase I studies and phase II study, and now we are going to entering into the phase III program. And this, and the first study of the phase III is now funded via the IPO that we did earlier this summer. We also have a very strong investor base now.
Of course, we have many shareholders, and the corners in the IPO, we had investors, institutions with good track record in the sector, such as Linc, AP4, Trill Impact, Eir Ventures, and Iris Invest, and Recipharm Venture Fund . So good knowledge within biotech. Also worth mentioning here is that we have also an interesting peer in U.S., which will be our main competitor in the future, and that is a company called Phathom Pharmaceuticals. And of course, that's good. I mean, and they have just had an approval of their P-CAB in U.S., and it looks very promising, the first quarters of sales, and also with good feedback from the investors, and increasing in their stock values and market cap now coming above more than $1 billion.
Going further then, I have already mentioned this is a very big market if you look into the GERD overall also. But if you also go into the erosive part of the GERD, where the patients get erosions in the esophagus, that represent approximately one-third of the entire GERD population. But as I said, our target population is the severe GERD patient who suffer from the most severe erosions, grades called C and D. And that group is approximately. Globally, we foresee approximately nineteen million patients, whereof ten millions of these are in USA and Europe. And then we're talking about ten million patients in the Western part of the world.
Of course, that gives us, despite we are focusing on a niche population, a blockbuster potential. Especially if you look at the price level, as we now can benchmark with vonoprazan, which is the Phathom Pharmaceuticals drug in U.S. They have a price level per tablet of a little bit more than $20 per tablet. And that gives you a healing session cost for approximately $1,200. And in what we can foresee is that we have approximately one to two healing sessions needed per patient suffering from severe eGERD per year, and that, by itself, gives a very interesting market potential. Looking into Europe, the price levels are indeed lower, but definitely a very interesting market potential.
In Europe, you also have the possibility to be first in class, so that's also interesting to see, to follow. But as you can see, price level in Europe, we estimate approximately three EUR per tablet, going further. Okay, let's go down to the next slide, regarding our positioning and what we are aiming for. I have already mentioned that we have developed a unique prodrug, which represent the next generation of the P-CAB, and that gives us the opportunity to more or less shut down the acid production, and having pH 4 levels more close to 100% of the 24 hours.
That's really needed for a patient with severe eGERD, who has more or less an open wall between the stomach and the esophagus, where acid content flooding up in the esophagus and cause the erosions. You need actually to stop that, and you need to stop it for 24 hours to have a chance to heal them, and so they're also not relapsing as well. That is unique compared to the other P-CABs, the first generation P-CABs, who has approximately 60%-85% of acid control over the 24 hours. Then also compared to the first PPIs, that is current standard of care, like Losec and Nexium, which you might be familiar with, who has acid control between 40%-70%.
We have a very fast onset. You have full effect with our drug within 90 minutes, I would say. And that is definitely much better than what we have seen in the market. But this acid control, which is so important for our target population, we have already seen that will deliver healing, especially of the severe patient groups, where we have a very good effect difference compared to the current standard of care, with more than 50% unit difference. And that should be compared with vonoprazan, our main competitors in the future, have effect difference with the same compared with the same comparator between 10%-20%. And we also have...
We are aiming to decrease the healing time by 50% compared to standard, current standard. We will heal the patients in four weeks. That's ambition. Of course, we have the ambition to deliver superiority in the phase III program when it comes to healing of this target population, the C and Ds, both in four weeks, but also in eight weeks. We will also have an ambition to deliver superiority when it comes to symptom relief, where we also are focusing on the night-time symptom, which is the most complicated symptom, side effects they have, these patients. If we deliver that, which we think definitely is possible, we have already seen that we are significant better in healing for the severe patient in the phase II.
If we deliver and repeat that result, we will definitely have a possibility to claim that also in the label, which also will be unique. The competitors do have a non-inferiority label today in the U.S., and so this is a very good opportunity for us. The other thing, the other perspective, which I think is important also when we look into our target population, is that we are in contrast to what we have seen when we have seen launches in this area before. We saw it when AstraZeneca launched Nexium, and we saw it when Takeda launched vonoprazan in Japan. We can also see it now when Phathom is launching vonoprazan in the U.S.
They have a very, very broad ambition, where they're focusing on patients with lighter disease and also only symptomatic disease. That could be, of course, if you are first in class, a good opportunity, but also it takes a lot of resources, and it's definitely a big pharma strategy. We will, on the other hand, have a 180-degree different strategy, where we are focusing on the severe patients. That will also—I mean, we will also then, therefore, only focus on the specialist, the gastroenterologist, who's treating these patients. That is a very cost-effective way of launching. It also gives you an effective positioning in the market, which is definitely needed.
Also that meets the requirements, both from payers, but also from the patients who are suffering from the most severe who is not treated with the current standard of care. Also there, you have the biggest unmet medical needs. I think this looks very interesting and very cost-effective, and definitely a possibility for us to differentiate versus potential competitors in the future. If you summarize this, our focus is to have eGERD as an indication with all grades approved in the label, but the superiority ambition will be within the severe patient population that we have in healing, where we're aiming for superiority, and we are aiming to heal them in half the time compared to standard of care today.
And also, we are aiming for superiority when it comes to symptom relief, both faster and better symptom relief. And then we have another indication, which we are in parallel looking into, and that is a treatment of Helicobacter pylori, eradication of that. And we're going to do that only with one antibiotic, thanks to our acid control, that actually have the potential to deliver good acid control that's needed for amoxicillin to work, and actually eradicate the bacterias. And that also the benefit with that treatment, with that dual treatment, compare with current standard of care, where they're using two antibiotics, where one of them, clarithromycin, do suffer from quite high level of antibiotic resistance, approximately 30% in Europe and U.S.
If we can deliver as good a result as the triple therapy, definitely this has a chance to become the next, the future first-line treatment for HP eradication. Since you are reducing the risk of antibiotic resistance with only treating with a narrow spectrum antibiotic like amoxicillin. So this is also very interesting opportunities for the future. We will talk more about this in the future and let you know more around our plans for this indication. Timelines. When it comes to our initiation of the phase III, we are now, as you have seen, we have ordered a CRO called PSI, a Swiss company. They will take care. They will manage the eGERD phase III program.
We are now preparing everything for having the first patient in during 2025. We estimate readout of the healing during the year after, so in 2026. That is, of course, very interesting milestone for us, which then will lead us to initiate also the second phase 3 program, but also to finance that based on that milestone. As you can see in this, we also have a plan for H. pylori development, which definitely we will come back to more into details later. News flow is also interesting. Of course, now we are looking to start up the phase 3 program, first phase 3 study, as fast as possible, and that will create definitely news.
But also medical and publications and congresses and abstract publication as well will deliver news as well. In parallel, we are also working with different business development activities, which we also estimate to deliver during the next coming years here. So I think and I'm quite confident that we will deliver very interesting news during the next coming quarters here. Next slide, the summary of key events during the second quarter. I mentioned most of them already, but I can just give you them now here in the right order here.
I mean, as you already know, we successfully managed to do the IPO in June, and we raised approximately 750 million SEK, and currently, we have a market cap of 1.5 billion SEK, approximately. I think it's worth mentioning, this is the first IPO in biotech in Stockholm main market since two thousand and eighteen. So we are very proud of this, and this gives us definitely very good fundamentals for taking the next step and further develop this, coming closer to the market and a registration of the substance.
When it comes to operations, we also have finalized two phase 1 studies, which was definitely needed to bridge the old formulation we used in the phase 2 and the new formulation, which will be used in the phase 3, but also will be the formulation that will be commercialized later on. We will definitely also have publications on this and presentations of this, and we will come back about the results and the presentation, which we'll be holding in UEGW in Vienna later this fall. We also have finalized some preclinical studies, and as you can see here, and both of them with good results. We also, as I also have mentioned before, we have a patent expiration.
The original patent expires after extension, approximately 2035 in Europe and US. So therefore, we also have worked quite heavily on develop some kind of minefield around the substance. And the first one is, of course, the data exclusivity, which you will get in some markets where from the product approval. In Europe, you get ten years data exclusivity. In US, you get five years, but we also have a grant from FDA. So if we do the H. pylori indication first, we will get an extension of another five years. So it's a possibility with ten years data exclusivity also in US. On top of that, we are developing more patents. We have an approval of a polymorphic patent in US, expiring 2042.
We will have more polymorphic patents coming up there, and we also have formulation patents and which give us a patent until 2040. And these patents, of course, we are adding up in more markets, and what we can see here is that we now have also new national approvals in Hong Kong and Mexico, and we will have more coming up. Of course, we're also looking into other patents and filing of other patents, so we have a very, very strong minefield in this area later on. After the period, as I mentioned, we have signed with a CRO company called PSI, who will manage the eGERD program and starting up that work.
This process has started during the summer. We are now doing the site selections and preparing to start up the study and the first patient recruitment next year. We also have during the summer now produced the study medications for the new formulation and so we can make sure that we have these both the comparators and the placebos, and also the active substance in stock in time. Everything is ongoing, and here we are working together with a company called Lonza, which is a well-reputed CDMO.
Okay, I think that was the last slide regarding the quarter, but also worth mentioning, we also are working now and adding up people, so to make sure that we have the right team for the start and initiation of the phase III program. Currently, we're approximately 26 coworkers, whereof fifty-fifty when it comes to employees and consultants. And I think we have a very strong team with both know-how, generally, of product development, but also specifically within this area of PPIs and specifically within PPI development as well. With that said, I hand over now to Maria regarding the financials.
Thank you, Christer. So, I will now go through the financial overview, and we will start with the income statement. So, net sales was zero compared to last year, both for the individual quarter and the first half of the year. The corresponding figure for the previous period was a milestone payment from the outlicensing to Sinorda Biomedicine in China. The operating expenses, both G&A and R&D, was they were lower than the comparison period for the first half of the year.
The G&A expenses were a little bit higher for the individual quarter, but we have realized a one-off IPO preparation expenses in 2024 for SEK 6.9 million for the first half, and also in the period in 2023, the comparison period, we had IPO preparation expenses of SEK 9.3 million, and that was basically IPO readiness and some legal expenses. The R&D expenses were lower than the comparison period, and that was they ended up at SEK 51.3 million for the first half and SEK 20.8 million for the individual quarter. We had no studies running in 2024. They were in the late stage, no patient recruitments.
The studies, the clinical studies were basically finalized in the first quarter of this year, and the comparison figure, of course, include cost for the phase II study, which was running back then. The EBIT then show an improvement of 25.5 million SEK in the first half of the year, and in the individual quarter, 12.7 million SEK. The financial net was also lower than the comparison period, and that was due to an offset by positive, unrealized currency effects. We have realized interest expenses from the shareholder loan that was fully converted in the IPO, but for the first half of the year, we had interest expenses for that.
The tax is due to an internal IP move from our Swiss affiliate to our parent company in Sweden. Net profit then increased with SEK 31.8 million for the first half of the year and SEK 19.5 million for the individual quarter. So and next slide, then I will go through the financial position and the cash flow, and the cash position. The cash flow for the first half of the year was SEK 595.5 million, and that was, of course, a result from the new share issue in June. The cash position at end of June was SEK 684.7 million.
The new share issue, as Christer already mentioned, brought in a gross 715 million SEK and approximately 60 million in cost, ending up net at 655 million SEK. Equity also increased with 750 million, compared with December last year, and that was due to the new share issue, mainly, but also the offset issue of the shareholder loan. Next slide shows our 15 largest shareholders at the end of June, and as Christer already mentioned, we had all our current or some of our current shareholders, even before the IPO, constitute cornerstone investors, Trill Impact, AP4, Linc, Iris Invest, Eir Ventures, and Recipharm .
We also still have our six founders represented in this list, and that was, is Peter Unge, Kjell Andersson, Mikael Dahlström Estate, Nylöf Holding, that is Urban Paulsson and Lennart Hansson, and MWP Management Consulting. So before IPO, we had 23 million shares, and after 46 million shares. Then I hand over back to you, Christer. Christer, I think you're on.
Yes. So just to summarize, sorry. We actually do have a very interesting substance with a very good potential to become best in class with a unique acid control here. And definitely this next generation P-CAB, which we represent uniquely with this product, they have also the possibility to meet the unmet medical needs still in the market within severe GERD. We have definitely a clear phase III roadmap now and a roadmap how to get it approved. And therefore, we are very glad now that we can initiate finally the first phase III study, which we will have interesting readouts from in just near time, I would say, when it comes to development in 2026 .
We have the superior acid control profile, and we have actually, actually, we have not talked so much about it, before, but definitely the fastest onset as well, and time to steady state. Definitely also important to get healing of the severe patients. Very interesting results already in the phase II, with very strong efficacy data on our target population, which we will now want to repeat in the phase III. So all in all, this is definitely a blockbuster potential, despite we are focusing on a very niche population in this area, and going one hundred and eighty degrees compared to what we see now with Phathom in the U.S. But still, there will be room for more than one player.
I mean, when we had PPIs in the market, we were six different PPIs, and now we're talking about approximately less than that in the Western world. And then summarize it also, it looks also that we have a very strong IP protection, including the data exclusivity. So all in all, this looks very promising, and we are now looking forward to start up the development into phase III here. So with that, I stop the presentation and open up for questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. The next question comes from Alexander Krämer from ABGSC. Please go ahead.
Yes. Good afternoon, thanks for taking my questions. I have a couple of them. To start with the first one, could you provide more color on which phase III preparation milestones you are planning to reach still this year, and narrow it down? And could you also narrow it down a little bit when we can expect the first patient included in the study next year? And then I have two follow-up questions.
Yeah, you're asking, I mean, when we're going to have the first. I mean, the first, what kind of preparation we do this year is very much site selection, contract signing with all sites. And then, of course, all the production and everything regarding study medications, ethical committee discussions. But also, we also just need to update the IND in U.S. with the final study protocol. And also in Europe, we need to have the CTA approval as well. So these are some of the working elements that we will do this year. And then the first patient recruitment or that is will be during next year. We have not communicated exactly when that will be.
We have so, but definitely, and then we foresee that we have approximately a little bit longer than a year to have a readout of the healing in the first study. And we have already communicated Q2, Q3 with that readout, the high-level readout. So then you can start to calculate backwards, but that is what we have communicated, and that is what we continue to do.
Mm-hmm. Okay. Thank you.
But the readout.
My second follow-up questions are-
Maybe I said wrong when it comes to-
Mm-hmm
... readout. I meant readout 2026, Q2, Q3. So, maybe I said next year, but I meant 2026. Sorry, I was wrong.
Mm-hmm. Okay. Good, and then two follow-up questions related to financial aspects. The first one being, when do you expect the R&D-related costs for the phase III to ramp up? And, do you already have an estimate, what cost, what costs do you expect in 2025 related to R&D and the phase III? That's the first question. And the second question is, related to the potential and expected, China approval later this year. Could you give us some indication on the financial impact or benefit from a potential China approval that your partners will achieve?
Yes. The first question is, of course, I mean, we will ramp up the cost levels now, absolutely, when it comes to R&D. We will start to have a cost for the phase III, already in this quarter. And then it will, of course, increase more, when we're starting to recruit patients. That is, when the real increase will in this be initiated. So during next year, you will see a higher level of that. When it comes to China, we are estimating to have an approval in China in the end of this year, by the end of this year. And, there will with that be with a milestone payment.
With that, it's not, as I also have indicated, when it comes to China, a milestone. They are not that big, but of course, it will be a milestone, and the big payments will be then on royalty payments and also sales milestone payments later on when they reach certain thresholds. When it comes to sales in China, which if you have an approval in China now, by the end of this year, the first year from approval in China normally is a reimbursement year. So it takes approximately a year to get a reimbursement in China. So we should not expect huge sales during the first year.
The sales will be started really in 2026, I would say, if you have the approval in the end of this year.
Mm-hmm. Thank you very much.
The next question comes from Arvid Nikander from Carnegie. Please go ahead.
Good afternoon, and thanks for taking my questions, a couple, if I may. So first off, can you provide any more granularity on where you're at when it comes to CMC scale-up and drug production? And secondly, it seems like scripts for Voquezna is trending strongly, which I guess is a good validation for the PCAB drug class. But it would just be interesting to hear your thoughts at the price you're targeting, which represents a slight markup compared to Voquezna. What would be the most robust economic argument for why payers should replace Voquezna on formularies? Thank you.
Okay, good. Thank you, Arvid. The first question when it comes to CMC, we are, as I mentioned, we work together with Lonza when it comes now to the both with API production, but also when it comes to drug product, and when it comes to the study medication, we are, as we speak, having ongoing production now, and finalization of that. So that is definitely ready to go by the end of this year, including both the active substance and the comparator and the placebo that's needed in some of the cases. And so that will be ready to go and produced by a site in the U.S. from them.
Or in parallel to that, we are also working with second sources when it comes to both APIs and the drug product. So we will have them ready, especially the drug product, with the second source in from approval of the product as well. And that we have ongoing discussion just currently. So we will come back to that.
When it comes to Voquezna in U.S., indeed, that's very, very good that they have a good sales progress, and it looks now that also the U.S. market start to realize the benefits with P-CABs overall, as we already have seen recognition, especially in Japan, where they have become the market leader and passed Nexium since some years and become the most sold drug there in Japan some years ago, so it seems that the history is repeating itself, and that's, of course, very, very good for us, and when it comes to pricing and reimbursement in U.S., they have a second-line approval in many of the insurers within many of the formularies after the first-line PPI.
That could, of course, be an OTC PPI treatment, but also a pre-prescribed. That is a very, very, very good place to be at. Even though they start to become the market leader, we can learn from the Japanese market. They were launched there two thousand and fifteen, and still they are up approximately 30% in volumes, even though they are market leader. Still, 70% is on PPI. This takes time. Even though they start up now and have a market share, it will take some time to get an interesting market share.
And secondly, what you can see also in their clinical studies is that the disease by itself is very dynamic and is never cured, so to say. It's a chronic disease, and you will always come back and you will have relapse. And so patients will come back also with vonoprazan treatment. You can see in their studies that they have relapse approximately of 30% within six months and most likely more within 12 months. So they will come back. And if you have the best acid control, which we, as we can see now, have in the market, eventually these patients want to test the best product, because this is... The disease is caused by acid.
To treat that disease, if you can deliver the best acid control, then definitely, especially the specialists, would like to test that for the difficult to treat patients. Then it comes back to your question then. I mean, could you get a premium on that? Yeah, most likely. In our conservative calculations, though, we have benchmarked it in parity with vonoprazan. So that is what we have done our calculation on now. But of course, a partner that we will work with in US or if will aim for having a premium price. But I think still it's good to have a conservative aspect on this, and until we have the final phase III, we will put it in parity with vonoprazan. It's definitely a matter of also how-
Great. Thank you so much.
Your target population. It's definitely also a matter of how you define your target population and how you differentiate and position you towards vonoprazan in the end here. Okay?
Right. Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Bruno Bulic, from Bryan Garnier. Please go ahead.
Hi, thanks for taking my questions. I have two. The first one about China. Did you receive some feedback from Sinorda about the regulatory process in China? What is the current status, basically? And the second question about the phase III in the U.S., when can we expect the clinical sites in the U.S. to start screening patients into that phase III? Is it also for 2025? Thank you for your confirmation. Thank you.
Yes. First question, China and Sinorda. The feedback we have from the Chinese authorities is feedback in the end of this year. So that is what I already communicated. So that is the feedback we have, that we will that we are aiming for that date in the end of this year. And when it comes to U.S. sites, there is, I mean, the approval time in U.S. for starting up the study is a little bit shorter in U.S. compared to Europe. So it might be that we start up a little bit earlier in the U.S. On the other hand, it takes a little bit longer time to negotiate the contracts in U.S. So let's see.
We will not have any first patient in before the end of this year. All patients will be recruited during next year, also in U.S.
Good. Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay, then I stop there. Actually, thank you for your time and your interest in Cinclus Pharma, and I really hope and looking forward to meet you again and talk about our achievements in the future here. So thanks a lot, and let's stay in touch. Thank you. Bye-bye.