One, I'm Oscar Haffen Lamm. I'm a Biotech Equity Research Analyst at Stifel. It's my pleasure to host a fireside chat today with Christer Ahlberg, CEO of Cinclus Pharma, and Jesper Wiklund, Head of Corporate Strategy Development at Cinclus Pharma. Thank you so much, both of you, for joining us today. Just to warm us up, and maybe for investors new to the story, if you could just start with an overview of the company, your background as a team has helped with the development of the company and the asset you're developing, which is linaprazan glurate.
Yeah, I can start. I mean, the foundation of the company is very much from AstraZeneca, and both myself and all the employees, and also the founders, as well as the substance, do have a background from AstraZeneca. We have had the possibility to bring that out from them and developed it further into with non-clinical Phase I and Phase II. Now we are in Phase III for this next generation of PCAB.
Great. So your asset, linaprazan glurate, is a next generation PCAB. Could you just elaborate on what distinguishes it from a first generation PCAB, and what unmet medical need you're trying to solve within the GERD market?
Yeah, so a recurring theme you'll hear throughout this chat here, it's all about acid control, right? Really, if you look over a 24-hour period, the secret to treatment in this disease is, over that 24-hour period, how much are you controlling the acid? We started from the very beginning with a view of getting as close to 100% acid control as possible. That's the entire purpose of our program, of the company, of the treatment, is that we want to bring to the patients that need it a complete acid control. If you look then into the environment where we will be launching, which will be an environment where there will be the first-generation PCABs, certainly there are going to be a number of patients that are perfectly happy on those, but there will also be a lot of patients that are not.
Our aim is to meet that unmet medical need and to have a medication available for those patients that really need full acid control.
Good. I mean, GERD is, as you know, a highly genericized market. There are a couple of questions that we get from time to time is, how can a new entrant penetrate this market with premium pricing? Based on your experience, are there parallels to be drawn from previous drug launches like Losec and Nexium that also entered a highly genericized market and actually ended up working out pretty well from a commercial perspective?
Yeah, I mean, of course, you can always compare with the history. I mean, I was part of many in our company were part of the launch of Nexium, and that was 12 years after the launch of Prilosec. It took us three years, actually, to take over the market on a premium price versus Prilosec. That, of course, is another time. Now we are in a different situation. We are not saying here that we will take over the entire PPI and PCAB market. We will focus on a niche population of the most severe patients that are not helped by the current standard of care and also not helped by the first generation of PCABs, because we will have a unique acid control that actually will help these patients. That is the purpose.
Of course, if you can treat a patient with severe disease with a risk of progressing into cancer, of course, and nothing else helps them, you can get a premium price also these days. That is our ambition. We think that's possible here in the U.S., but that certainly also is possible in Europe, where we also might be the first PCAB in the market, and not only the best. Also, overall in the world, it's a possibility to actually have a premium if you have something else that helps patients with unmet medical needs that you can support with your drug.
I think this makes a good transition to start talking about your Phase III and your ambition to, I mean, in your position of markets. Your Phase III recently started in Europe, where you have designed it with a superiority claim over PPIs. Could you elaborate a bit more on the rationale behind the design of the study? If positive, how will having this superiority in the label impact pricing, market positioning, so on and so forth?
Yeah, and as Jesper mentioned, I mean, our ambition all the time has been to deliver a product that actually meets the Holy Grail in this market, more or less, to reach the full acid control over 24 hours. Of course, it's not only acid control. We want to meet that in clinical data as well. Of course, the ambition is to deliver superiority in healing for the most severe patients. That's the primary endpoint in the first healing study that we're now performing. Also, we don't want to do it only superior. We also want to do it in half the time compared to the standard. We want to, I mean, 50% of the time spent on a healing treatment. That's the first one. Of course, patients are, I mean, they want to treat their symptoms as well.
It is not only about healing. It is also about symptom relief. Here we also have a very good possibility to deliver superiority when it comes to symptom relief and faster symptom relief as well. We are focusing on the most severe problems with the symptoms, and that is the nighttime symptoms. Actually, approximately 50% of every second patient is complaining about that. We have an ambition to deliver superiority also there. Everything we are now developing, we have the mindset to deliver superiority. That, of course, should be included in the label. That is the ambition. Also, just to mention, I think it is important to also say, already in the Phase II trial, which was not intended to deliver superiority, that was a dose-finding study.
We actually had an active comparator in lansoprazole 30 mg. Already there, with that minor number of patients, we could actually deliver superiority on the severe patients in four weeks in healing. That is the primary endpoint in the Phase III. Now we're going to repeat that. Of course, that's important for us to do that. It's definitely possible. That is how we're going to differentiate the product versus anything else.
Yeah, it makes total sense. If we look at just the more broader Phase III design, how many patients you're recruiting? It's divided between a healing phase and a maintenance phase. What are you looking at in terms of endpoints there?
Yeah, I mean, of course, it will be, I mean, this first trial is 500 patients-ish and a little bit more than 500 patients. The primary endpoint, what I mentioned, is healing within four weeks for the severe patients. Of course, we will have other endpoints in healing of all grades in four and eight weeks. We are looking into the symptom relief. In the second healing study, in the second Phase III trial, we also will investigate the maintenance as well. There also, we will have the opportunity to deliver superiority.
Yeah, got you. The data you've written so far in the Phase II study shows definitely a best-in-class potential with probably the only PCAB that shows 24-hour acid control. How does this data mitigate the risk for the Phase III trial? Are there any biomarker studies that show the correlation between acid control and healing?
Yeah, yeah, absolutely. I mean, this is a perfect biomarker, actually. We know if you can reach 100% acid control over 24 hours, we know that we will heal the patients. I mean, this disease is caused by acid content going in the wrong direction up in the esophagus. If you can get that content being not acid, then you know that you will heal them. That's for sure. It is a totally linear correlation between this. Of course, you can predict your healing rates based on your acid control.
You came out with a new formulation for the Phase III compared to the one you used in Phase II. Was this aimed precisely to increase the acid control at the 24-hour period? What modifications did you do there?
Yeah, actually, I mean, we actually definitely improved the acid control thanks to that formulation. That was one purpose. The other purpose was, of course, to make a better substance to manufacture from a commercial point of view, better cost of goods, and much more effective manufacturing possibilities. It was a combination.
You actually kicked off the Phase III in Europe a couple of weeks ago, a couple of months ago. How is the recruitment going on? Do you already have some feedback from investigators, from some patients?
Yeah, it looks very good. Recruitment is according to plan. Everything is, but of course, it's quite early still, of course. It's always like that when you're initiating a trial. Initially, it takes first, it's a screening period of almost 30 days. Then, of course, before you get all sites up and running, that takes some time. Most of the recruitments will be during the second half of the study, so to say. This looks very good.
Yeah, and we can add, I mean, we have patients randomized. And every week, it's growing. It's growing exactly like it should. So it's looking good.
Yeah.
Sounds good. Maybe if you can turn a bit to the competition. Obviously, it's a huge point of focus with Phathom Pharmaceuticals . So there, and Phathom, they've already started to commercialize vonoprazan in the U.S. The launch is going pretty well. When linaprazan glurate will be launched in a couple of years, how should we think in terms of treatment algorithm and where in the treatment landscape will linaprazan glurate position itself?
Yeah. I think there are really two things to keep in mind when trying to answer this question. The first thing is, as I've already mentioned, if you can, the more you can control the acid, the better you're going to be able to heal the patients and treat the symptoms. Phathom, as you point out, they're doing a very good job. And there's nice uptake. That is because the drug is better than the PPIs. It's better for this reason. It has better acid control. That's number one. Number two, though, is this is an extremely dynamic market. Every single time, as Christ pointed out, the source of the issue is that there is a dysfunction in the valve that's supposed to shut off between the stomach and the esophagus. The stomach content keeps coming up into the esophagus.
That physiological issue is not being addressed. What's being addressed is that you're making sure that when the stuff comes up, it doesn't burn a hole in your esophagus or in the lining of the esophagus. These patients, they don't get cured per se. They get healed. Then they go into maintenance. At some point, they get sick again and have to come back. The patients keep coming back. In contrast to, for example, blood pressure medication, where if you have a drug, it's working for you, you're going to be on that for the rest of your life. That's not the case here. Every time a patient comes back, there's a new opportunity for the physician to examine the patient, the situation, and what's the best pharmacological intervention that they can do here.
When we launch, we will be coming into a market where the PCABs are known. The PCABs led by Phathom, as you say. We wish Phathom all the best. We think the better they do, the better it is for us. Because the more people know about PCABs, the more people are focused on the issue of acid control, the better it's going to be for us when we get there. Because it will be very, very clear that for a certain part of the patient population that really need that full acid control, there's something new available. The doctor can choose that. It is a very dynamic marketplace. It will be very dynamic in 2029-2030 when we come to market as well. There will be every opportunity for the physician, together with the patient, to choose the best available treatment.
Actually, you can go back to the example which you mentioned yourself. I mean, Prilosec and Nexium, it was 12 years between these two launches. It took them three years, actually, to switch. I mean, it's a very dynamic market during that time. We still see the same. Actually, I'll give you a number of patients we're talking about suffering from the severe erosive GERD. In Europe and the U.S., 10 million patients. It's a huge number of patients. On top of that, many milder patients do, I mean, are not fully symptom relieved by the standard of care today. They keep coming back. You will have many patients also in the future.
I think this also answers a lot of my next question, which is, you mentioned that LG will launch in 2029, 2030, depending on regulatory approval. Vonoprazan will likely go generic a couple of years after that. How do you think this might be impacting your launch? Will it impact in any way pricing? Will it impact in any way the treatment algorithm that physicians currently have?
Yeah, so I mean, it's a very important question. This is a question that we ask ourselves at the start. This is a question that we were faced with when we started this entire program. We've faced it every single time we try to raise money when we did our IPO last year. Of course, we only have a reason to exist if there are patients that need our medicine, irrespective of whether or not it's generic. If there is an unmet medical need, which there is, there's going to be a need for the best treatment. Like in any other disease, in any other disease category, there's going to be generic options available. For some patients, either because of monetary considerations or because of the disease itself, that's perfectly fine. That's how it always is.
There is going to be a very significant, as Christ mentioned, very large number of patients for whom that's not OK and that need the best treatment. That is going to be linaprazan glurate.
Also, another what we can mention on that is quite obvious what the strategy has been also for Phathom. Post-expiry of the patent is going OTC. Of course, I mean, is this exactly the same situation as they are facing now, launching a new incremental, better product compared to the generic and OTC? Obviously, they can have a premium price on that. That will be the situation also in five years or three or four years. Obviously, another thing is important here as well. I mean, we are targeting the most severe patients. There also, we are targeting the gastroenterologists, the specialists. Of course, there must be a prescriber's choice here. I mean, patients will have tested OTC choices before they come to the physician, especially before they are referred to the specialists.
There will be good alternatives out there for them. This is something also that we're looking into how to work on.
It's interesting because since the start, you've always been very vocal about your specialty pharma approach, targeting specialist GIs in view of commercialization. This is something that Phathom has really recently pivoted into, more targeting GI prescribers, which is a supportive approach, obviously. It will also mean that they will be stronger in that segment. How do you think this might impact, if any at all, your market penetration?
Yeah, so I sort of hinted at that in my previous answer. I mean, again, the fact that Phathom is going to the specialist, it makes perfect sense because the specialists are treating the most severe patients. It is the most severe patients that need the best drug. Right now, the best drug is vonoprazan. It makes perfect sense. For us, our view is, the more success they have, the more effective they are in bringing this message out to the specialist, the better it is for us. We will be making the exact same case to the exact same doctors as they are now doing, except they are comparing themselves to PPIs. We will be comparing ourselves more or less to them and to the PPIs. Another thing to keep in mind, there are so many patients, right?
Even at the most optimistic projections of Phathom's or vonoprazan's market share and all other PCABs' market share in the U.S., there's still going to be a huge number of patients that have not seen PCABs. There's plenty of space. There's plenty of opportunity for somebody to come in with a superior product, a best-in-class product to take market share and serve the severe patients.
This first Phase III will read out top line approximately second half of next year. What is your strategy going into readouts? Because you have a delayed first Phase III and the second Phase III. Could you just walk us through your thinking around this readout timeline and how it will impact the second start of the Phase III?
Maybe I can answer the question from a commercial point of view. Christ, you can also add from a clinical development point of view. From a commercial point of view, we have done, and maybe we'll get some time to talk about that, we've done a deal in Europe where we have outlicensed the commercial rights to linaprazan glurate to Zentiva in a deal that we're very, very happy about. We are purposely keeping to ourselves the U.S. rights, and we will continue to do so. The strategy going into the readout is basically, we have the validation from having been, if you will, selected by our partner in Europe as being the best PCAB and the one they want to bet on. We come into the readout, we get the data.
From there, we'll continue to execute on the clinical. At that point, of course, consider our commercial options. We're very clear that we will keep the U.S. rights, certainly to that point and most likely beyond that point.
OK, makes sense. In your first Phase III, you only have European patients. Obviously, if you want to then file for an approval in the U.S., you will need U.S. patients. How many will you need? How many centers do you plan to open in the U.S.? I mean, what is your global strategy for the second Phase III trial?
Yeah, yes, of course, we will include U.S. patients in the second. We're talking about 10%-20% of patients in that should come from the U.S. That's the plan. Yeah.
Good. Maybe jumping back to the Zentiva deal, obviously was a major achievement for your company this year. After, you know, good strategic interest from another partner and obviously maybe even de-risking some aspect of the commercial strategy. Could you just walk us through the deal, how they approached the size of the markets, how they approached pricing, peak sales opportunity? And then maybe based on this deal, how do you view what you could get from U.S. rights for the drug?
Yeah. Right. So again, here, if you think about what this deal brought to us, there are a couple of things. I mean, first of all, of course, it's tremendous validation just in terms of Zentiva being a fantastic team that we've gotten to know very well. They did an extraordinary amount of due diligence, of course, as they should. At the time that we did the deal, they were owned by Advent. Zentiva has recently, Advent sold them to another private equity fund, GTCR, based out of Chicago. At that time, they were owned by Advent. We were negotiating indirectly with Advent but directly with the Zentiva team. I think there's a very strong sense of validation that there's actually been someone that's gone through every single document and have come out thinking, this is the asset that we want to invest into.
If you then think about what we've been talking about from Zentiva's point of view, Europe is a wide open space. They, of course, I mean, I don't have any particular insight into any other discussions they've had. If you just, there are other options out there, right? Also other PCABs out there that they could have done a deal with. They didn't. We know the reason they didn't is because they said our PCAB is the best. In their view, there will never be a better PCAB because you can't get closer than 100% than what they think we're going to get to. In Europe, to your point about pricing, if you want to get a good price in Europe, you have to really have a lot of blue water between yourself and the PPIs as much as possible.
You have to show superiority at sort of every turn. Discussions with European payers are very much focused on superiority. It is very clearly their view, as it is ours, that our drug is the one that is the most superior, if you will, to the PPIs. That is the reason why they chose to go with us because they believe with our drug, you are going to have, therefore, the highest chance to get a good price. We are not going to disclose specifics about that. We are actually very pleased with the sort of pricing range that we are now talking about with them.
It gives kind of an insight into what potential market size will be in the U.S. based on severe pricing.
Right. So I mean, so if you think about it like that, I mean, we got about $20 million up front in nearest term milestones. We got a fantastic royalty that we talked about, slightly above and slightly below 20%, depending on sales. I mean, that's an extraordinary royalty. We had EUR 220 million of milestones. And that's on Phase II data, not Phase III. And it's for Europe, right? If you now think about the U.S., the U.S. is a larger market. It's a more valuable market. If we at some point do a deal on the U.S., it will be on Phase III data, not Phase II data. So everyone can choose their favorite sort of scale-up multiplication factors of whatever we got to accommodate for those two facts.
It certainly bodes well for, and it provides a good indicator, we think, about what is the value of the U.S. opportunity as well.
Definitely. Maybe you can switch and talk a bit more about exclusivity and IP. Obviously, getting an approval in H. pylori would be an important step to get an exclusivity in the U.S. markets. What is your development plan for this indication?
I mean, when it comes to IP overall, you can say that, I mean, we have a very good patent situation. We have a minefield of different patents, I mean, both with substance patent, but also with the different polymorphs and then also with the specific polymorph patent that we have. That looks, and that's until 2042 and beyond. We have a morph patent. We have user patents. We have formulation patents. On top of that, we also will have the data exclusivity from a regulatory point of view. Normally, you get five years in the U.S. from the approval. In Europe, you get 10 years and a different number of years in different markets, obviously. In the U.S., we already have an FDA grant. If we go with the H. pylori indication as well, we can have another extension of five years of the data exclusivity.
We get 10 years in total from the approval. These two together, both the patent situation beyond 2040 and with the 10 years from launch, more or less, it looks very good and strong.
Since we only have a couple of minutes left, maybe we can conclude with what would be your main takeaways for Cinclus Pharma going to 2026 and above?
Yeah, I mean, what we are now focusing very much is, of course, to deliver our first Phase III trial. Definitely, it will be a very interesting value inflection point in the second half of next year, which, of course, will lead us into the next phase. Also, that will open up huge interest, I suppose, because we really believe in the figures that we will get. It opens up also for business development projects as well and also preparation for the next and the last part of the Phase III program. What we do and what we're working on on a daily basis is focusing on how to accelerate everything as fast as possible to get to the market as fast as possible as well. I think that is important.
Of course, further develop the project together with Zentiva in this case is also important during the next 12 months as well. As you mentioned, H. pylori is another indication which we are also exploring now and to make sure that we get that indication in time as well.
Perfect. I think that wraps it up. Thank you very much, both of you, for joining us and doing this fireside chat. I wish you all the best.
OK, thank you very much.
Thank you very much.