Welcome to Cinclus Pharma Q4 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 pound key five on their telephone keypad. Now, I will hand the conference over to CEO Christer Ahlberg. Please go ahead.
Thank you very much. Welcome to this webcast, and I will start to present here, and then also after my presentation, our CFO, Maria Engström, I will hand over to her later on. Let's look into the first slide. I would like to give you a short update on the market and the market perspectives. I would say that the trend is clear. What we can see, where PCABs are launched, they are taking over the market. Where they are being introduced, you can see worldwide that they are following the model as we have seen in Japan and South Korea. They are rapidly replacing the PPIs, and actually the pace is increasing. What we also notice in the market is that Takeda and the Korean-Chinese manufacturers, they are licensing, registering, and launching their products in many markets, in the rest of the world specifically.
We can give you some examples here. We have seen now in Mexico, we see already after the third, I mean, after a couple of years, we can see that they are taking a very strong position in the market with very good price levels, and they have increased in the market shares. We can also see in a market like India that also we see that the Physicians Association now have a broad consensus on the recommendation of the PCABs. I mean, we can already now see 11 brands, different brands of vonoprazan in the market. We also have seen a very positive opinion from the American Gastro Association about the PCABs, I mean, opinion of good efficacy, good safety. It is also a very good sign at this early stage.
We can also see that Takeda is focusing now, refocusing on vonoprazan and has strategic activities in both South Korea and Brazil. Overall, our sources say that we have approximately 19 markets where you have seen at least one launch with PCABs, and another 14 markets where you have confirmed submission and export licenses. It is interesting to follow. Of course, on top of that, we have the U.S. launch of vonoprazan, which is also interesting to see how they are taking step by step when it comes to the launch. Going further then, I mean, what we are trying to do and achieve here is that we are developing the next generation of the PCABs. As you can see on this slide, you can see the differences.
First, on the first line, where you have the PPIs, where you have both lansoprazole, omeprazole, Losec, and then later on the last generation of PPIs with Nexium. Vonoprazan belongs to the first generation of PCABs. They have had, they have delivered a faster onset, a better acid control compared to the PPIs. Thanks to that, they are now taking over in the markets where they have launched. This is interesting to see, as I mentioned. Our prodrug that we have developed is unique, and that gives us a unique possibility to more or less close down the acid production. We can deliver more or less a full acid control up to 96%. That gives us a perfect product to meet the unmet medical need still in the market, to help also the patient with severe eGERD.
We can see already in our Phase II trials that we have very, very good effect on these patients. We are also looking to heal them, but also we are looking into the symptom relief. This is an important step to develop the next generation of the PCABs, especially now when we can see that PCABs are taking over after PPIs. It is also important to learn from the history, actually. We could see exactly the same pattern during the launches of the different PPIs, where what you saw there is when Nexium, which was the next generation of PPIs, took over after Losec or Prilosec. They did that thanks to a superior profile, including a superior acid control. You can see how fast it went. I mean, they started, Losec had approximately sales about $6 billion.
Over the coming years, from when Nexium was launched, thanks to the incremental acid control, they took over the market and actually came up to the same level as Losec actually did in just some years before. It is an interesting story and also interesting to learn from that history, actually. Our ambition is to launch the next generation of PCAB with better incremental acid control compared to what Nexium had versus Losec. This is just a reminder of how to learn about the history. Going further then, what activities and key events have we done during the last quarter of 2024? I think we have delivered two good regulatory milestones, really, when we have agreed with the U.S. and European authorities about the pediatric plans. Both plans, they are aligned. That is also important.
The plans are similar and aligned, and we have agreement with both authorities here, which is important milestones. The biggest and most important milestones that so far, I would say, in the company's history is actually that we now also have an approved product in a big market. We actually, just before Christmas, had the approval of linaprazan glurate in China, and our partner in China, Sinorda, actually achieved a really, really important milestone here. I also would like to give you some information about their Phase III trial. Going to the next slide, we can give you a little bit of information about that. Next slide. This Phase III trial was done, it was done in China with 380 patients, where you can see 70% or 18% belong to the C and D grading, the most severe patients.
In contrast to our plans, we are actually more or less going to have the double amount of severe patients, C and D, more than 30%. That is, of course, important for differentiation later on when we want to, since we are going to meet and work towards that target population. After the introduction and after randomization, they were randomized three to one, three to linaprazan glurate. There you also can see it was they used 50 mg once daily here, and compared to lansoprazole 30 mg once daily. Just worth notice here is that our ambition in our Phase III trial is to push the doses so we can actually meet also and also heal the most severe patients. We are also going to test the double dose, 100 mg in our trials.
That, of course, will give us an even better acid control with that levels. They had endoscopy after four weeks and after eight weeks, and the primary endpoint was healing after eight weeks. It was, as we have seen in all Asian studies, a non-inferiority analysis study. The ambition was to deliver non-inferiority. That is what has been common in Asia with all of these studies done on PCABs previously and also with PPIs. Of course, they wanted to show secondary endpoint safety and tolerability. Next slide, what we see out of the 380 included patients, we have 346 left to do the per protocol analysis. That is what we are going to show you on the healing of the endpoint.
Next slide, where you can see then we have a healing rate in linaprazan glurate, 50 mg after eight weeks of 94% compared to lansoprazole of 90%. This is very much in line with all Asian studies, very high healing rates, and also it gives you, I mean, that has been the tradition that there are very high healing rates in Asia. This is how it looks, obviously, and it's very comparable with other studies in this sector. All in all, it's a product now that is showing very good efficacy and also good safety, and it's an approved product now in China. We are, of course, looking forward to the launch. They are working now on price and reimbursement aspects, and that will take some time in China. We are expecting to have, I mean, the first real sales after reimbursement in 2026 then.
Okay, let's go further then to our own Phase III trial that we are now preparing for the U.S. and Europe. What we have seen here is now that we are prepared 96 sites in eight different countries. We divide them in Europe and in the U.S. We're talking about approximately 500 patients. The ambition, and we are aiming here for superiority in healing, in symptom control, and we want to do it in half the time compared to PPIs. This is, of course, the reason why we are doing this, why we have this superior healing ambition is, of course, due to that we want to repeat the history where we can, as a next generation PCAB, take over after the first generation, the same as Nexium did when they launched 12 years after Losec was introduced to the PPI market.
I stop there, and then we hand over then to Maria on talking about the financials.
Thank you, Christer. Let's go into the quarterly overview of the financials in 2023 and 2024, and I will comment on the fourth quarter of 2024, the actuals there. Cash ended up at SEK 567 million in cash flow of negative SEK 77 million. The reason is the increased negative cash flow is the Phase III study preparations ongoing. The deviation in cash flow versus EBIT, as you see further down, was mainly due to prepayments to our Phase III CRO in the end of the year. Revenues concerned the marketing authorization approval and a tech transfer milestone in China, and the milestones in the beginning of 2023 concerned the Phase III meeting endpoints and NDA submission in China.
The OpEx increased due to the increase in R&D costs, as I said, due to the Phase III study preparation ongoing. For the R&D, we are back on the same level as Q3 2023 when we had several studies ongoing and in final stage. The R&D percentage of total OpEx ended up at 88%, which is much higher than the average in 2023 and 2024, which was 76%. The EBITDA net profit is then a result of the increasing R&D cost. The number of coworkers increased mainly due to an increase in number of employees in the fourth quarter, and the increase was mainly within the medical department, but also within finance and admin replacing consultants. Let's go to the next slide where we see financial overview year over year for the fourth quarter and the full year.
The revenues, which I commented on before, decreased with SEK 1.4 million for the full year and increased with SEK 4.6 million for the quarter. The G&A decreased with SEK 2.7 million for the full year and increased slightly in the quarter with SEK 1.1 million. Both 2023 and 2024 include one-time cost for the IPO preparations. Although this slight increase in the fourth quarter, we expect G&A to be on a quite lower level going forward in comparison. The R&D decreased with SEK 30 million full year and increased with SEK 20 million in the quarter. As said, the full year Phase III preparation is ongoing, but for the full year, it only affects part of the year, mainly Q4. The full year 2023 contained study costs all over the year, as I mentioned earlier.
The financial net increased with SEK 16 million full year and increased with SEK 6.8 million for the quarter. During the second half of the year, we received interest from Cash & Bank, which was partly offset on a full year basis by interest paid on the shareholder loan, which was offset in an offset issue in connection with the IPO back in June. The tax, small number here, but increased with SEK 0.2 million for the full year and decreased with SEK 0.3 million in the quarter. We paid tax due to the group internal move of the IP back in 2022 from Switzerland to Sweden. The cash flow from operating activities was SEK 31 million better full year, but worse SEK 16 million for the quarter. The better cash flow for the full year is also a consequence of the Phase III preparation, basically only affecting the second half of the year.
Cash flow from financing activities increased with SEK 532 million full year and was, of course, due to the new share issue back in June on SEK 750 million gross. The total cash flow increased with SEK 563 million full year, ending up at SEK 477 million positive for the full year, and cash at the end of the period increased with SEK 479 million, ending up at SEK 567 million. For the balance sheet, no surprises. I already commented on that, but what we can say is that we have no, or basically no non-current liabilities. We paid off the tax liability, the second tranche of that in December, and we will pay it off in full during this year. Next slide showing our largest shareholder by the end of the year, and there are basically no changes. We have still our IPO cornerstone investors on this list and our founders.
In the end of last year, we issued C shares and bought them back. So they are in the list here, 854,000 shares. That's it.
Yes, that's the last slide, and we open up for questions, and we're happy to answer them.
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 Alexander Krämer from ABGSC . Please go ahead.
Yes, good morning. Thanks for taking my questions. Today you wrote in your report, I mean, there is quite some delay in the startup of the Phase III compared to what was communicated with the IPO last year. Could you elaborate a little bit more on the reasons for these delays?
Also now today in the presentation, I mean, you showed that most patients are planned to be recruited in Eastern Europe. Do you believe that you will be able to start up in Eastern Europe before starting up in the U.S.? That's my first question, and then I have a couple of others.
It depends on how you define a delay, of course. In the prospectus, it's clearly stated that we're going to recruit first patients in 2025, which we are. I have indicated also that we are recruiting patients during Q2. What we mentioned in the report is that we have had a very successful Type C or Type C meeting with FDA, an advice meeting. What we agreed on was that the last reports, final reports that we needed to submit, and these reports will be ready by second quarter.
Thereafter, we are free to go and start up the study and initiate patients. From our end, we still will deliver the top line results during 2026, and that's not a major difference. Compared to what you said about Eastern Europe, Eastern Europe also follows the European regulation when it comes to approval of studies. They will have the approval to start up the studies at the same time as Europe. The fastest startup also is in the U.S., though, because they have a shorter approval time from the authorities. I mean, all sites will be more or less ready to go at the same time, and that will be during the third quarter. I think that is also an important message.
The most important is not when you start the first patient, it's actually when you have the majority of sites ready to go and initiate patient recruitments. I think that is an important message also. I mean, now we will have all sites standing beside each other ready to start recruit from day one, and that is very important.
Okay, I see. I have two additional questions. One on your financial runway, does this have any implications for your financial runway looking towards 2026 and 2027?
No, I mean, still is that our ambition is to have the readouts from the 2026 and that we have run rate over that readout. That is the ambition and that's what we are working for.
All right, thanks. Today you also showed the data on the Chinese Phase III results.
Did you receive any feedback from your Asian partners in Sinorda or maybe also through Shanghai Pharma? How these results could, or what are the implications of these results for the reimbursement and pricing negotiations in China?
No, we have not seen anything like that, but we should say that these results are very, very in line with the other PCABs. From that point of view, it's okay. I mean, as you have seen, all PCAB studies in Asia have been so far non-inferiority. That is not the difference. It should not have any, I mean, it's according to plan.
All right. That's it from my side. Thank you very much. Very interesting.
The next question comes from Oscar Haffen Lamm from Bryan Garnier. Please go ahead. Hi, team. Oscar here from BG.
My question would be, obviously, we got the representation of C and D patients in the Chinese trial was much lower than what you are expecting in the U.S. trial. Maybe could you first remind us what percentage of C and D patients you are aiming at for the U.S. trial? What would have been the expected healing in Asian patients for a higher C and D patient for PPIs, roughly at the same levels that you are expecting at the Phase III in the U.S.?
We are going to have more than 30% C and D patients. Of course, we will aim to have more in D patients. I mean, of course, it will be more C patients than D, but we are aiming to get more than 2% that you have in this study, but in total, more than 30%.
It is almost the double compared to what they had. Also, when it comes to, of course, it is difficult to speculate in results. If you look into, I think, and especially when it comes to Asian studies, there is a, I do not know the reasons, but more or less, during all decades, we have seen these kind of studies in Asia. We have seen that the healing rates are very high in Asia in comparison to what you see in Western studies. Also, the differences between the comparator and PCABs are higher in Western compared to what you see in Asia. The reason for that, you can always speculate about, but I do not want to do that.
What you can say, though, if you look into our trial, and also if you compare the doses that they have used now in the Chinese study, we will have a totally different formulation, which we have now seen that we have a very good uptake, and also we have a very good acid control with. We would push the doses, as we have said, so we can actually make sure that we also deliver very good results in the C and D patients, and also make a difference compared to the PPIs, which definitely will be a possibility when you push the severe patient, the number of severe patients.
Also, if you remember, I mean, our Phase II results, we were close to 90% with the formulation that had less acid control compared to what we are going to deliver today, or in the Phase III. There we had a delta of more than 50% versus lansoprazole. If you look at, I mean, normally what you say here in this trial, you had 90% healing of lansoprazole, 94% on linaprazan glurate. If you look into what NICE, the U.K. authorities say, when it comes to their systematic reviews, lansoprazole has an average of eight weeks of these patients between 60%-70% should be in that area. That is a big difference, of course, compared to 90%. I'm not saying that these results are wrong or anything like that, but if you take the average from a central review by NICE, you have lower healing rates.
That is a fact, and that has always been the case with the Asian studies. They have a tendency to have higher healing rates, but we are going to work with Western studies here, and the differences will be definitely bigger than we see here.
Okay, yeah, thanks. Makes sense. Maybe one last question on my side. Also on the U.S. trial, what are your expectations in terms of recruitment pace, and when do you expect to recruit the last patient for the first Phase III trial?
Y eah, as I said, I mean, we will have, I mean, what we, I mean, we are going to have now the first patient in Q3 directly after we have finalized the last reports to the authority in FDA. Our recruitment time is approximately, I mean, we are estimating less than a year. So yeah.
During 2026, we will definitely have.
All right, thank you. That is all on my side.
The top line results of healing.
Yeah.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. Any other questions? There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.
Okay, we have some questions also via the web here. As we have said regarding the Phase III trial, as we say here, I mean, we are expecting the first patient in the third quarter this year. The major milestones and triggers for the future are, of course, very much regarding the trial and the results.
Of course, there are other potential triggers also when it comes to business development and other solutions that can actually improve and potentially accelerate things here. Of course, we are working on different angles here from different perspectives to build a solid development program here that both can deliver in time and hopefully faster, and also giving interesting trigger points when it comes to the share price. We also should remember when it comes to share prices, we are not an isolated company, of course. We are looking into this globally. That is the reason also I wanted to mention that. I mean, looking into the PCAB market now, we saw it when the PPIs were launched and the H2 blockers, and they took over after the H2 blockers and became the most sold drugs in the world. That took some years, but when it happened, it happened.
I mean, it was more or less 100% switch from PPIs to, no, from H2 blockers to PPIs. Now what you see in the markets where you have launched PCABs is that we have the same pattern. We also need to say it's not that they are selling these PCABs to price levels as the same as PPIs. We're talking about at least 10 times higher pricing compared to PPIs in these markets, as earlier mentioned, in South America and Asia. We're talking about price levels that is more than $1 per tablet compared to PPIs who has less than $0.20 per tablet and less than that. In South America and Asia, we have price levels that are at least as high as we're expecting in Europe. Europe and South America and Asia, we are in the same neighborhood of pricing.
That means that this market will be very big in the future when this has been launched. Of course, on top of that, we have the U.S. market, which has another 10 times higher price levels compared to the rest of the world. That is, of course, interesting to follow now, also following triggers when it comes to Phathom as well then. The reason why they have had problems in the market is, of course, now lastly is due to their patent situation. We do not have the same issue at all. We have patent with our product beyond 2040 in the U.S. and in many of the most important markets. We are not facing the same problem. Of course, we are dependent on, not dependent, but we are affected of their share price drop due to their patent situation.
We do not have the same problem. The interesting thing here is also, since we are now positioned and differentiate our product to become a superiority product versus PPIs with the best acid control in the class, we have always been taking that into account when we have developed this product that we might launch this product either close to generic position of other PCABs or in a generic market. The same way as Nexium did when it was in comparison to Losec and omeprazole. They were exactly in the same position. They launched this when Losec went generic. Despite that, they could reach that sales level, as I just showed you before, $6 billion. It is possible, and it has happened before. It happens all the time when it comes to launches of drugs.
You're always meeting, you need to take into account generic alternatives here. That is what we have planned for, and that's what we're trying to do in our Phase III program. That's the reason why we're aiming for full acid control and superiority ambitions in the trials. I think that's important, and I think the trigger we're facing here in the future is, of course, also based on other launches of PCABs in the future and follow that closely in the market. Okay. When it comes to the IP and Phathom, of course, I should not talk about that, but I mean, there is a citizen petition ongoing in the U.S., and they are expecting to have response on that summertime this year. Let's see after that what happens there. We are talking about two years extension additional for them from 2030 to 2032.
That's what we're talking about here. What do we more have? Yeah, I think that we have some questions about shareholding. It's difficult for me to comment on. It's very much on each of the shareholders to decide. Of course, I mean, everyone sees here is that we have a very low price on the share price now. I mean, obviously, if the PCABs now start to take over the market from PPIs, this is a very good opportunity from a price point of view here now. I should not comment so much about that. We are working to deliver the triggers. We are working on to deliver what we have said in the prospectus and what we are, and we are aiming to become a superior product and to be launched during 2029.
This is the objective we have and definitely possible to do. I mean, we have a product that is shown now to be approvable. First country is China, and it shows that we have very good efficacy and good safety. Definitely, that should give us a possibility and reduce the development risk. Now we are working on how to differentiate this towards all the other products in the market. We have good opportunity to do that since we have this unique product that can actually give us the possibility to more or less optimize the dosing to push off the acid production more or less then. This is important, and this is what we are working on with high level of focus. Okay. Any other questions or comments?
I stop there and thank you all for your participation here and also for your support in the future. Let's stay in touch. Thank you and have a nice day.