Welcome to Cinclus Pharma Q3 Report 2025. For the first part of the conference call, the participants will be in listen-only mode. During the Q&A 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, and hi everyone, and welcome to Cinclus Pharma's third quarter earnings call. Here with me today, I also have our CFO, Maria Engström, and our R&D Director, Margit Mahlapuu . We will present the latest development from the Q3 2025 and the upcoming news flow. After this presentation, we will be happy to answer any questions you may have. Before we begin, just some—I would like to share a quick reminder with our listeners that during today's call, you may—I mean, we may make forward-looking statements that involve known and unknown risks, uncertainties, and other important factors beyond the company's control that could cause the company's actual results and performance or achievements to be materially different from the expected results, performance, or achievements expressed or implied by such forward-looking statements.
Please note that these forward-looking statements made during this call speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances other than the extent required by law. With that said, let's go then into the business. You, all of the listeners here, not maybe not all, but many of you, you know about our substance, linaprazan glurate, which is our next-generation PCAB. We definitely have designed it to deliver a unique 24-hour acid control, and we also have the fastest onsets of action observed to the date in the class overall. This is definitely a possibility to position the product to become best in class. We have finalized our phase II with very strong results, demonstrating high healing rates, especially in the severe erosive GERD patients.
We have also initiated the phase III program, which is definitely a very, very big milestone for us as a company and an important step towards approval later on. The first patient has been enrolled. You will learn more about that today. I would say that the study, the phase III study, remains significantly and clinically de-risked. We also have very much supported by clear regulatory strategy and extensive preclinical and clinical validations. The program overall looks very de-risked. Our commercial focus, though, remains on patients with the severe erosive GERD, where you find the most highest unmet medical need, and where also linaprazan glurate's superior acid control can actually deliver the greatest benefit. I think that's important, and that is something that we will develop more into the future as well.
With this unique profile, unique pharmacogenetic pharmacodynamic profile, provides a strong differentiation versus both PPIs on the market currently, but also against all other PCABs on the market and in the market in the future. Also, this unique profile supports a specialty commercial model, which also is important for the future commercialization. It is interesting to follow, actually, that we see an increase in global momentum when it comes to PCABs overall, globally where it has been launched. Now we actually see that PCABs are available in over 30 countries. They are also taking over from PPIs in the market where they have been launched and integrated into treatment guidelines for erosive GERD. It looks very promising for the class overall. Going to the next slide, where we're looking into the correlation between healing and pH level.
As you can see on this slide, there is a clear linear relationship between the 24-hour gastric acid control above pH 4 and healing of erosive GERD. The more intragastric pH stays above 4, the higher the healing rates observed at 4 weeks and 8 weeks. This relationship is consistent across multiple studies and thousands, thousands of patients where you look at PPIs, first-generation PCABs like vonoprazan or new compounds like tegoprazan. You can see the relationship everywhere. You can say that overall, you can see that PPIs, the current standard of care, reach approximately 60-70% of acid control. The first generation of PCABs, something between 60%-85%. We, as a unique next-generation product, we come close to 100% or 96% in our studies. It is a really unique possibility here. This correlation reinforces that acid control is the key biomarker for clinical healing.
It is exactly where linaprazan glurate differentiates with our—I mean, with our superior 24-hour control and the fastest onset of action. If you just look into the next slide, this slide is built on the previous one and illustrates how the correlation between pH above 4 and healing is fully aligned with the data from other studies, and especially from the linaprazan U.S. phase III trial. As shown here from that study, lansoprazole 30 mg maintains pH about 66% of the time and results in approximately 70% healing rate after 8 weeks for these severe patients. In comparison, in the same study, linaprazan 20 mg achieved 85% pH above pH 4, corresponding to approximately 90% of healing rates after 8 weeks. It is spot on the line, which we just mentioned.
What you also can see then, if you look into our study where we have shown 96% pH above 4, and if you plot it into the same line here, you see that it will translate into nearly complete healing for the most severe erosive GERD patients. This is very strong data. The reinforced acid control is the single most important determinant of healing. The linaprazan glurate superior pharmacodynamic profile provides a clear competitive advantage over both PPIs and other PCABs. Taken this together, this supports our phase III dose selection and underpins our confidence in achieving best-in-class outcomes in the ongoing HEEALING 1 study. Also, I want to mention a little bit about the market overall, which I started the presentation with.
I mean, looking into the PCABs, the global PCAB market continues to expand rapidly, driven by strong demand for fast and durable acid control. That shows also the unmet medical need. In the U.S., for instance, Phathom's linaprazan launch is progressing well. The company projects approximately $170 million-$175 million in sales this year. They already nearly have 800,000 prescriptions filled to date. Actually, they expect profitability during next year, 2026. We also foresee and expect an NDA of tegoprazan submitted in this quarter by the company called Sebela. That further expands in the U.S. category of visibility, obviously. As I said initially, PCABs are available in more than 25-30 markets worldwide, reflecting a broad clinical and commercial adaptation. In Japan, the first adapter market, PCABs account for approximately 44% of the entire acid blocker segment.
As you know, I mean, at the peak, they were close to $1 billion in sales only in Japan. In South Korea, four PCABs already approved, and they represent approximately 23% of all acid blocker prescriptions, and they have a double-digit annual growth. It definitely continued to displace PPIs. In other markets such as India, we're seeing rapid uptake. More than 20 brands launched, 13 licensing deals signed, and treatment guidelines updated to recommend first-line use for PCABs. In Mexico and Latin America, PCABs have reached position number three in market within just two years, already outpricing traditional PPIs. Everywhere where PCABs are launched, it looks very promising. Combined, this trend highlights a clear global shift towards PCABs, reinforcing the strong commercial potential for linaprazan glurate as the next-generation best-in-class therapy. Let's go in then to the events during the quarter.
During the third quarter, as we already have mentioned here, we received positive feedback from regulatory authorities allowing us to initiate the phase III HEEALING 1 study. We're going to evaluate, as you know, then erosive GERD patients, all grades, focusing on the primary endpoint where we would like to deliver superiority for the severe erosive GERD patients in four weeks. We have now initiated the phase III trial, which will enroll approximately 500 patients in up to 100 clinical sites in seven European countries. We have dosed the first patients, and you will soon learn more about that. That actually happened during October. That is, of course, an important milestone for us as a company and also for the substance, of course.
We have also presented an abstract at the biggest European congress in Berlin, highlighting the positive data from optimized tablet formulation developed for the phase III and also for the commercialization later on. In addition, an important step forward, an NDA, we received positive feedback from the FDA following the CMC meeting, confirming alignment on our manufacturing and quality strategy in preparation for an NDA submission. With that said, I will hand over now to Margit to present regarding the updates on the ongoing phase III HEEALING 1 study. Please go ahead, Margit.
Thank you. I will give a brief summary of the status of our phase III study, HEEALING 1. As Christer already mentioned, the first patient in this trial was screened in mid-September and dosed in early October.
In total, we are aiming to enroll about 500 patients in up to 100 clinical sites across seven European countries. Our primary endpoint is superiority in relation to comparator Lansoprazole in healing of severe patients, which means LA-grade C/D patients, after four weeks of treatment. We will also monitor a number of key secondary endpoints where the focus is then on healing and symptom relief, both at four and eight weeks of treatment, and both in patients with severe eGERD, which is then C/D-grade patients, but also in all patients, which would mean then LA-grade A to D patients. Overall, the patient recruitment has started really well and is fully aligned with our projections. You see on your right side of the slide, the line diagram where the planned recruitment is shown in green, and the actual recruitment rate is shown in yellow color.
You see that the actual and planned screening of patients are fully aligned. As of mid-November, we have recruited approximately 10% of patients, which is according to our plan. As expected in the beginning of the trial, the recruitment is always a little bit slower as the sites are being activated. As the trial proceeds, the recruitment also accelerates. Top-line results from HEEALING 1 are anticipated in the second half of 2026. After the top-line results have been obtained, we will start the second healing study and also a maintenance study, which will proceed both in Europe and in the U.S. On this slide, you see the seven countries who are participating in the HEEALING 1 trial. The countries are listed on your left side. On the right side of the slide, you see where the clinical sites are localized.
Here, every red flag indicates the city where we have clinical sites. In many cities, of course, we have many sites. The number of flags does not correspond to the number of active sites. We have also decided to add some additional sites who have expressed interest to join the trial. We expect the regulatory approval for these sites in early spring 2026. Now I leave over for financials.
Thank you, Margit. We go to the Q3 financial highlights. We ended the third quarter with the cash position of SEK 540 million, providing us with a solid runway into the phase III program. Cash flow for the quarter was SEK -49 million, mainly reflecting increased R&D spending as the HEEALING 1 phase III study is now underway.
R&D expenses totaled approximately SEK 46 million, including the first patient in milestone payment of SEK 3.5 million. The R&D represented 86% of total operating expenses compared to an average of 83% over the past eight quarters, underscoring our continued investment focus on clinical execution. We also saw an increase in the number of coworkers, primarily due to the addition of specialized consultants supporting the phase III program and ongoing regulatory activities. Overall, our operating loss for the quarter was approximately SEK 44 million, in line with expectations and consistent with the company's planned growth phase. Moving on to the year-over-year financial comparison, net sales totaled SEK 9.7 million in the third quarter. This primarily reflects the periodization of the upfront payment from Zentiva related to the outlicensing agreement for Europe. The recognition follows the cost allocation across the ongoing phase III program.
Operating expenses increased by SEK 14.7 million year-over-year, mainly due to the initiation of the phase III study, where the SEK 3.5 million milestone for the first patient was included. EBIT was SEK -44 million compared with SEK -39 million in the same quarter last year, driven by the higher R&D spend according with the start or associated with the start of the pivotal study. Financial net improved by SEK 0.7 million, primarily due to interest income on cash holdings and favorable foreign exchange effects. Net profit for the quarter was SEK -40.7 million compared to SEK -36.5 million last year, also here reflecting the higher operating cost tied to phase III execution.
Going to the balance sheet, the cash, as I said earlier, ended or the cash in the end of the period was SEK 540 million compared with SEK 644 million at the same time last year. This follows, of course, our increased R&D activity with the phase III study. Non-current asset increased by SEK 9.6 million, mainly relating to leasing of new office spaces. Other current assets rose by SEK 24.7 million, driven by prepayments to the CRO, the phase III CRO, and some CMC activities. Non-current liabilities increased by SEK 55.9 million. This was linked to the Zentiva contract liability representing deferred revenue beyond one year. Current liabilities increased by SEK 50.6 million, reflecting the short-term portion of the same Zentiva contract. Overall, our financial position remains strong with sufficient resources to support the ongoing phase III trial and advance our preparations toward commercial readiness.
We go to the shareholder slide. This slide shows the structure at the end of September 2025. The 15 largest shareholders together hold approximately 56% of the company's shares, demonstrating a stable and long-term oriented ownership base. Our Cornerstone IPO investor remains significant shareholders, including Trill Impact, the Fourth AP Fund, [Link], Irrus Investment, and Eir Venture. These investors have continued to provide strong institutional support since the IPO, reflecting confidence in Cinclus Pharma's long-term value creation potential. Our founding shareholders, Peter Unger, Kjell Andersson, Mikael Dahlström, Nylöf Holding, and Lennart Hansson Collective, hold about 14% of the company, maintaining close alignment with the company's mission and strategy. The Cornerstone investors account for roughly 24% of the shares, which together with the founders represent nearly 40% combined ownership.
This consistent and engaged shareholder base provides both stability and strategic continuity as we advance linaprazan glurate through late-stage development and prepare for commercialization. Over to you, Christer.
Okay, thank you. Just to summarize then the financial statements, what we could see when it comes to the run rate, we are financed into 2027 over the readout of the HEEALING 1 study, the first phase III trial, which is estimated to be top-line results in the second half of 2026. That looks promising. All the other milestones reflect, I would say, steady execution across clinical, regulatory, and CMC fronts, as well as financially. This is definitely a strong foundation as we advance linaprazan glurate through the first phase III trial here now.
Before we just leave this meeting for questions, I just would like to highlight our upcoming KOL event, December 11th, titled Healing the Unhealed: Redefining Acid Control in Erosive GERD. The session will feature Professor Prateek Sharma, a world-renowned gastroenterologist, educator, and researcher who has authored more than 550 publications and contributed extensively to advancing the diagnosis and management of erosive GERD diseases. Professor Sharma will discuss the current burden and clinical impact of GERD and erosive GERD and the strengths and limitations of PPIs, the emerging role of PCABs in improving acid control and healing erosive disease, and illustrative patient cases that underscore real-world challenges and unmet needs. We look forward to an informative session. With that said, I will now open for questions, Q&A session.
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 Joseph Hedden from Rx Securities. Please go ahead.
Good morning. Thanks for taking my questions. You mentioned that PCABs are taking a growing share of the market, and I'm just wondering if that has any implications on future trial designs. You have a superiority study in HEEALING 1 versus lansoprazole. Do you anticipate that there will be the need to change that should you proceed to the HEEALING 1 study and use vonoprazan as a comparator, or do you think that trial design still holds up? Thanks.
Okay, good question. What we can say is that, of course, I mean, there are both from a commercial point of view, but also from a regulatory point of view, we will not change the comparator in this.
We will use the same comparator as the other PCABs have used, lansoprazole. We will have an indirect comparison. The reason why we stay with PPIs is mostly from a regulatory point of view because we need to have the registered products in the market when we set up the studies. We cannot, from a regulatory point of view, compare with a drug that is not approved, for instance, in Europe. We need to stick with this. Of course, as I tried also to describe here earlier, the key aspect here is definitely the acid control. Since the biomarker with acid control in relation to healing is such strong and linear, the most important is, of course, to deliver the best acid control in class. That will, of course, end up with.
That is the argument actually why we also will have a very good and also the rationale behind why we will have a very good healing as well as symptom control for these severe patients. I also, of course, we are looking into factors in the trial to become superior, of course, in healing, but also in symptom relief. That will be definitely a differentiation factor that is not delivered by the other PCABs. We will also include this when we have the data. The hope is to include this in the label, and the ambition is to include it in the label. That by itself will differentiate also versus the other that do have non-inferior labels.
Okay, thank you.
Perhaps if I could just ask one on the market dynamics or what's already happening in the period while you're still running the phase III with tegoprazan potentially launching in the meantime, how do you see, particularly in the U.S., things changing in terms of uptake of relative drugs?
I mean, that's irrelevant. Firstly, we can say, before going into the U.S., we can say in Europe, we might be the first PCAB on the market. It looks possible, but let's see. That is the first step. In the U.S., it looks like we can be the number three. Therefore, we always have planned to have a product that is designed to deliver the best acid control, which is the biomarker, which is proved to have a reason to be in the market.
We definitely will focus all on patients where the severe patient that we still have an unmet medical need. That will be the case also in the future. You see, tegoprazan, the best PCAB, what it seems to be when it comes to acid control is vonoprazan, except for ours, linaprazan glurate. In tegoprazan, it looks like they have a little bit less acid control compared to vonoprazan. In that case, they will not add any additional tov vonoprazan. Of course, when we get in, our ambition is to become best in class. There will always be patients that have not either not are not healed by the first generation PCABs. Also, we know the market is very dynamic. You know that also in vonoprazan studies, 25% of the patients relapsing within six months. It's higher figures what we understand in tegoprazan.
The patient will come back to the physicians again after relapsing. In that position, you have definitely a switch possibility. Since there are so many patients, just talking about the severe patient, we're talking about in the U.S., four or five million patients. Definitely, there will be a space for a superior acid control product, even though it will not be first. The market will be there. Definitely, it still will be a very big dynamic market when we enter.
Okay, thanks very much.
Thank you.
The next question comes from Georg Tigalonov- Bjerke from ABG. Please go ahead.
Yeah, hi, this is George. Thank you for taking my questions. I have two. Besides for modeling a financial runway into 2027, could you provide any additional guidance on how OpEx will increase as the HEEALING 1 trial ramps up?
I'm particularly interested in the phasing between Q4 and Q1. Secondly, your key peer, Phathom's share price has really rallied lately. While the Cinclus share is relatively flat since June, you are obviously at different stages, but still, it would be interesting if you're able to share any thoughts or comments about that. Thank you.
Yes, of course. I mean, normally, as you have seen, as we have guided already, I mean, we are financed with current cash into 2027. As you see, the burn rate now we have in Q3 was a little bit less than SEK 50 million. What you could see, and that, I mean, of course, that will differ a little bit from quarter to quarter depending on the payment schedules for the CRO. I would say that that is approximately SEK 50 million what you would expect.
If you look into it, it will differ a little bit quarter to quarter. That is the first answer. The second answer on Phathom's stock price, I mean, of course, is very problematic for me to answer. What you could say is that it's interesting to see. I mean, thanks to their advancement and actually improvement in the launch now, the market is obviously looking into that. That's the reason why you're increasing. Of course, the gap between their market cap and our market cap has increased. I mean, we have now delivered from what we have said that we should deliver. I mean, now we have the Zentiva deal in hand, and the collaboration looks very promising.
They, I mean, after a huge due diligence, actually choose our substance, which is definitely a validation. We have now executed the start of the clinical study, the phase III. That also looks going according to plan, which also is good. We foresee readout of that trial in the second half of next year. There are so many different signs together with the improvement and the increasing awareness and prescriptions of PCABs overall in the world. I mean, I would say, I mean, time will come also for us, but it's definitely very problematic for us to say. Obviously, we are delivering what we are supposed to do. Eventually, I suppose that we will also gain from that also when it comes to market cap.
Great. 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 Oscar Haffen Lamm from Stifel. Please go ahead.
Hi, team. Thank you for taking my question. Just a quick one on my side. You mentioned about possible additional sites to be activated. How many are we talking about? Will these also be in Eastern Europe?
Yes. We are looking into the there are always when you do clinical studies, always you need to have you need to be planning for the next steps behind the corner. That is what we do. We make sure that we deliver the results in the second half of 2026. This is just a mitigation. We are talking about 10 sites, Margit, 10-15 sites approximately additional. Margit, can you help me here?
Yes.
Also, for regulatory reasons, we primarily want to open new sites in the countries which are already included in the trial just because the regulatory process will be faster.
Yes, to mention, we're still very confident with current sites. We will deliver the second half of 2026, the top line. This is just more an insurance that we always are prepared if something happens in the future. It is nothing more than that.
Yes.
Okay, got it. Thank you.
There are no more questions at this time. I hand the conference back to the speakers for any written questions and closing comments.
Okay. Let's see. We have some questions from the written questions. We have something from China. What happens in China? Do you have any response from Chinese patients yet? No.
We are waiting for the price and reimbursement process in China, which should come during this year. Normally, it takes up to a year. Normally, it takes a year to get price and reimbursement in China. This is the case also here. We expect to have the launch during next year in China. These are the plans for China. Yeah. Then the indication, if there are any indication that we should get superiority in phase III, I think it's important to remember here, our primary endpoint is superiority versus PPI in the first phase III trial. We have power to start a very high power. The chances to reach that, they are very, very high and good. Therefore, definitely, and that is not only based on indications.
We are also basing that, of course, on the phase II trial results that we have really good healing data already there. We're delivering the post-hoc analysis as superiority versus PPI. Now we're going to repeat that. It is also based on the biomarker, which I mentioned regarding the acid control. It is also based on clinical data from other phase III trials like vonoprazan trials. These together, we have put together the chances to reach this and made a very conservative diagnosis for this. It looks very, very promising. We are confident that we can reach superiority in the phase III trial. Yes. Just clarification of the KOL event. That's an online event, absolutely. We will send out the press release with the contacts and the links for that event in the next coming weeks. You will have it also.
It is an online event open for everyone. Okay. I think we stop there for now. If there are no other questions, I thank you for your interest in Cinclus Pharma and wish you a good day. Thank you very much. Bye-bye.