Hello everyone, and welcome to the Hansa Biopharma Q2 2024 conference call. Today's call is being recorded. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question during the Q&A, please press five star on your telephone keypad. I'll now hand the call over to CEO Søren Tulstrup. Please begin.
Thank you, operator. Good afternoon, good morning, and welcome to the Hansa Biopharma conference call to review the first half and Q2 results for 2024. I'm Søren Tulstrup, President and CEO of Hansa Biopharma. Joining me today is Evan Ballantyne, Chief Financial Officer, Matthew Shaulis, Chief Commercial Officer and U.S. President, and Hitto Kaufmann, Chief R&D Officer. Please turn to slide 2. Please allow me to draw your attention to the fact that we'll be making forward-looking statements during this presentation, and you should therefore apply appropriate caution. Now, please turn to slide 3 and an overview of today's agenda. Today, we'll discuss the progress we made during the first half of 2024 and review our near-term priorities. The presentation should take roughly 15 to 20 minutes, after which there will be an opportunity to ask questions during a Q&A session.
Please turn to slide four and an overview of our Q2 highlights. I'm pleased to announce we have delivered our third consecutive quarter of solid sales, with total revenue of SEK 54.2 million. Of this, SEK 47.1 million can be attributed to Idefirix sales. The strong sales performance we saw in the second quarter is a result of the team's successful efforts to expand access to Idefirix for highly sensitized kidney patients across Europe. During the quarter, we secured our first commercial sales in Italy, following achievement of reimbursement status in key regions. To date, we've had commercial sales of Idefirix in all of the top five European markets. We're also seeing strong momentum in our pipeline and clinical development efforts. In May, we announced that ConfIdeS, our pivotal phase 3 U.S. trial in kidney transplantation, had been fully randomized.
This marks an important milestone for Hansa, and following data readout in the second half of 2025, we expect to submit a biologics license application to the U.S. FDA seeking accelerated approval. Matt will cover the status and next steps for the trial in more detail during his section of the call. Our post-authorization efficacy study in Europe is progressing at a good pace in parallel with the continued commercialization of IDEFIRIX and as part of our obligation to EMA. Beyond generating data that could further support the adoption of IDEFIRIX as desensitization therapy to enable incompatible kidney transplants, this study offers additional opportunities for important transplant centers to gain experience with IDEFIRIX. Data readout is expected in 2025. Looking beyond kidney transplantation, we have advanced several trials in autoimmune diseases.
Our phase III anti-GBM disease trial continues, with more than 70% of patients enrolled in the trial. Completion of enrollment expected in 2025, as previously guided, and based on the strong momentum in enrolling patients, we now also expect data from the study in 2025. Our phase II trial in Guillain-Barré syndrome also remains on track, and we expect to share additional efficacy data later this year, following promising high-level data communicated in 2023. Our efforts to advance HNSA-5487, the lead candidate from our next-generation enzyme program, continue as planned, and we look forward to sharing further analysis on endpoints in the phase I trial and the development path forward during the second half of this year. Finally, I'd like to congratulate our partner, Sarepta, on the recent achievement of FDA full approval and expanded label for ELEVIDYS in Duchenne muscular dystrophy.
While this approval enables more patients the opportunity to benefit from the therapy, some patients remain ineligible due to anti-AAV antibodies, and we're excited to continue our collaboration with Sarepta to determine the potential for imlifidase to enable gene therapy in these patients. With this, I'll hand it over to Matt for a business and operational update. Please turn to slide five.
Thank you, Søren. Please turn to slide six for an update on IDEFIRIX's launch in Europe. As mentioned, this marks the third quarter of strong commercial sales for IDEFIRIX. We attribute the continued commercial utilization of IDEFIRIX to several things. The first is that we have seen additional centers come on board throughout Europe and continue to progress reimbursement in key European markets. As Søren mentioned, we secured our first commercial sale in Italy in Q2. As of today, we have reimbursement in 14 European markets, including the top five markets, and we have access to approximately 75% of the European transplant market. By Q2, 28 centers gained clinical experience with IDEFIRIX. This is an increase from last quarter, with 3 additional centers gaining experience with IDEFIRIX.
Importantly, 60% of those centers have used IDEFIRIX more than once, and there are over 50 transplant centers in Europe that have the capability to perform kidney transplants in highly sensitized patients. Repeat utilization underscores the growing clinical confidence in IDEFIRIX and clinicians' ability and willingness to identify IDEFIRIX's appropriate patients. Given that we see increased uptake in new clinics in new markets, we believe that repeat utilization could happen at several clinics in the remainder of 2024. While we have full confidence that our strategy is the right one, we recognize the volatility of the transplantation market, particularly with respect to organ allocation, and therefore, we'll continue to broaden our base of opportunity, including the progression of health technology assessment processes in several countries to ensure ongoing expansion of IDEFIRIX availability and reimbursement to even more markets and patients.
The second reason we believe we are seeing good progress in Europe is that desensitization strategies within the clinical community continue to advance. In fact, the European Society for Organ Transplantation, ESOT, published a consensus paper in April entitled "European Consensus on the Management of Sensitized Kidney Transplant Recipients: A Delphi Study." The paper recommends imlifidase as a desensitization strategy for deceased kidney transplantation in selected patients for whom no other treatment options are available. This follows the organization's publication of the first-ever guidelines on desensitization in 2022, which resulted in IDEFIRIX-specific guideline implementation at the national level in key European markets. Finally, Eurotransplant's desensitization program is helping identify patients eligible for IDEFIRIX. To date, the program has identified and treated five patients with IDEFIRIX, including in Germany, the largest market in Eurotransplant footprint. This validates that participating transplant centers are now receiving IDEFIRIX-designated kidneys.
Eurotransplant is an international allocation system responsible for the allocation of donor organs across eight countries, including Austria, Belgium, Croatia, Germany, Hungary, Luxembourg, the Netherlands, and Slovenia. Please turn to slide seven. Advancing the science of imlifidase in kidney transplantation is also important. To that end, there are two key studies we continue to progress, including a long-term follow-up study, the 17-HMedIdas-14 study and the Post-Authorization Efficacy Study, PAES. As we have communicated previously, the long-term study has demonstrated that for important endpoints, such as graft survival and overall survival, imlifidase-treated highly sensitized patients achieve similar outcomes as non-sensitized patients. Both studies are on track, and Hitto will share more about them in just a moment. Additionally, a real-world evidence study has been initiated in France to evaluate outcomes in nine imlifidase-treated patients.
Through the initial follow-up period, there has been no graft failure and no deaths, and these real-life data demonstrate that the use of imlifidase to desensitize highly sensitized patients can have an acceptable short-term efficacy and safety profile in selected patients. Please turn to slide 8. Finally, we are happy to announce that ConfIdeS, the pivotal U.S. phase III trial, is now fully randomized. As a reminder, the ConfIdeS study is evaluating imlifidase as a potential desensitization therapy compared to treatment according to standard of care to enable kidney transplantation in highly sensitized patients waiting for a deceased donor kidney. A total of 64 highly sensitized patients on the wait list for kidney transplantation were randomized on a 1:1 basis to either desensitization with imlifidase or standard of care.
What's important to know about the study is that a total of 23 sites were enrolled in the trial and consented over 140 patients. Approximately half of these sites, about 11, were responsible for randomizing two or more patients. The sites in the trial represent about 20% of the total transplantation volumes in the U.S. Currently, 13 sites have treated patients with imlifidase thus far, which is very encouraging and we believe further validates that clinicians are recognizing the clinical value and patient benefit of imlifidase in highly sensitized patients. Following full randomization, all patients will be followed for 12 months per the study protocol, and we expect data readout in second half 2025, and followed by submission of a BLA to the U.S. FDA to seek accelerated approval. I will now turn to Hitto for an update on the pipeline.
Please turn to slide 9. Thank you, Matt. Slide 10. Please turn to slide 10. During the second quarter, we have made progress across our three key therapeutic areas with all trials. Let me orient you to this slide and talk through the progress as well as what's to come in the second half of 2024 and beyond. Importantly, Matt mentioned that we've completed full randomization in the phase III U.S. trial ConfIdeS. We now look to follow all patients for the next 12 months per the study protocol and begin to prepare for BLA submission to the U.S. FDA in second half of 2025. In parallel, we are also advancing to additional trials in kidney transplantation.
The long-term follow-up study, 15-HMedIdas-14, is a prospective, observational, long-term follow-up study of patients treated with imlifidase prior to kidney transplantation to measure long-term graft survival in patients who have undergone kidney transplantation after imlifidase administration. The data shows sustained positive outcomes out to five years in the majority of highly sensitized patients who received an imlifidase-enabled kidney transplant. Data were presented at the American Transplant Congress in June, and we expect it to be published in a peer-reviewed journal later this year... and the post-authorization efficacy study, PAES, continues to progress as part of our obligation under the European conditional marketing authorization. The study will support full marketing authorization, and data readout is expected in 2025. In autoimmune, we are progressing three trials.
Earlier this year, we reported initial data for our phase II study in GBS, the 16-HMedIdas-09 study, an exploratory single-arm study with several efficacy endpoints. We plan to share contextualized efficacy data later this year based on a comparison between the data of the study and a matched cohort from the IGOS database. The International Guillain-Barré Syndrome Outcome Study, or IGOS, is a large-scale global research initiative that collects extensive clinical and biological data from GBS patients to enhance understanding and treatment of the disease. GBS is an acute, rare, paralyzing inflammatory disease of the peripheral nervous system, usually preceded by an infection or other immune stimulation. Two-thirds of patients have severe symptoms, resulting in the inability to walk unaided. The Good-IDES-12 phase 2 trial in anti-GBM disease has enrolled over 70% of patients in the trial, 36 out of a total of 50.
We anticipate full enrollment in 2025 and data readout later the same year. The trial is an open-label, controlled, randomized, multicenter trial across Europe and the US, and is evaluating renal function and the need for dialysis at six months in patients with severe anti-GBM disease. We believe imlifidase can have significant potential in improving the outcome of these patients and address the unmet medical need. Anti-GBM disease is a serious and ultra-rare acute monophasic autoimmune disease affecting approximately 1.6 people in a million. In anti-GBM disease, antibodies are directed against the patient's own organs, causing acute injury to kidney and/or lung function, and in worst case, organ failure. Rounding out in autoimmune, the phase 2 trial in AMR has been submitted to a peer-reviewed journal, and we anticipate publication sometime in 2024. Moving now to gene therapy.
I'm pleased to share that we continue to progress our collaborations with all three partners, AskBio, Genethon, and Sarepta. These collaborations will help determine the potential for imlifidase as a pretreatment to gene therapy in those patients with anti-AAV antibodies. With both AskBio and Genethon, we continue to progress preclinical efforts. In May, at the American Society of Gene and Cell Therapy, ASGCT, annual meeting, AskBio delivered an oral presentation on preclinical data as part of the Hansa AskBio partnership. The data evaluated the potential use of imlifidase as pretreatment to gene therapy, and demonstrated that imlifidase can keep AAVs in circulation for a longer time period, thus allowing a longer window for gene therapy transduction.
Together with Genethon, we are finalizing our preclinical work and have plans to commence the clinical study later this year, evaluating imlifidase as pretreatment to GNT-0003 for patients with Crigler-Najjar syndrome. GNT-0003 is currently being evaluated in a pivotal clinical study in France, Italy, and the Netherlands, and has received PRIME status from the EMA. I'm also pleased to share that we continue to collaborate with Sarepta in DMD. A phase I-b trial was initiated last December, and we anticipate initial data from the trial will be available in 2025. This is a slight change in the timeline to allow for protocol amendment. In June, Sarepta communicated that it is putting a strategic focus on making their AAV-based therapies available for antibody-positive patients. Finally, we are making good progress with next-generation molecules as part of the NiceR program.
Previously, we announced high-level results related to safety and tolerability from the NICE-01 trial with HNSA-5487, the company's lead candidate in the NiceR program. The trial included a total of 36 healthy male and female adult participants. Further analysis of other endpoints will be completed in 2024, including a decision on the clinical development pathway. Hansa is developing novel IgG-degrading enzymes with the objective on enabling redosing in autoimmune conditions, oncology, gene therapy, and transplantations, where patients may benefit from more than one dose of an IgG-modulating enzyme. I will now turn over to Evan to cover financial performance.
Thank you very much, Hitto. Let's walk through the company's financial performance in Q2 and for the first half of 2024. Revenue for the second quarter of 2024 was SEK 54.2 million, including SEK 47.1 million in product sales before a SEK 19.9 million provision. Revenue included approximately SEK 4.6 million in contract revenue, mainly from the agreement with Sarepta. Including the provision, product sales for the quarter totaled twenty-seven point two million SEK. The provision is associated with cumulative sales since the launch of Idefirix in Europe. What's important to remember is that as a new market entrant, establishing the provision reflects ongoing price and volume discounts, and this is not unique to Hansa, nor is it unique to the transplantation market.
Excluding the provision, we've delivered our third consecutive quarter of strong Idefirix sales.... As we continue to expand our commercial footprint in Europe and other key, key markets, we expect this to increase. SG&A expense. Oh, please go to the next slide. Slide 13. SG&A expense totaled SEK 88 million in Q2 2024, and SEK 179 million in the first half of the year. SG&A expense have been affected by restructuring reserve of approximately 3.5 million SEK. Restructuring activities have reduced total SG&A expense compared to prior quarters. Non-cash expense for the company's long-term incentive program, the LTIP program, were included in SG&A costs and totaled SEK 16 million for the first six months of 2024.
Additionally, R&D expense for the second quarter of 2024 totaled SEK 92 million and SEK 195 million for the first half of 2024. R&D expense included a restructuring reserve totaling SEK 6.6 million. Compared to the same period a year ago, in 2023, the decrease in expenses was primarily, primarily driven by restructuring activities. As Hitto mentioned, R&D expense, including costs associated with the U.S. ConfIdeS study, EMA post-authorization commitments, and anti-GBM phase 3 studies, as well as the CMC development for HNSA-5487. Non-cash expenses for the company's LTIP program were included in the R&D expenses and totaled SEK 6.5 million for the first half of 2024.
The operating loss for the quarter was SEK 187 million, and was driven by lower SG&A expenses and lower R&D expenses, offset by higher cost of goods sold. The operating loss for the first half of 2024 totaled SEK 347 million, and was driven by lower SG&A expense and lower R&D expense. Please go to the next slide for cash flow, slide 14. In Q2, the company completed direct share offering of approximately SEK 372 million, or $34.6 million. This helped extend the company's cash runway into 2026. Operating cash flow for the second quarter of 2024 totaled SEK 189 million and SEK 378 million for the first half of 2024.
The decrease in Hansa's operating loss compared to the first half of 2023 was driven by increased sales and a reduction in overall expenses. At June thirtieth, 2024, cash and cash equivalents totaled SEK 705 million, compared to SEK 732 million at the end of December of 2023. I'd like to turn the discussion back to Søren for Q&A in this portion of the call. Søren?
Thanks, Evan. Please turn to slide 15. With this overview, our presentation is now concluded, and we'd like to open the call for questions. Operator, please begin.
Thank you. We'll now start the Q&A session. If you wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. There'll be a brief pause while questions are being registered. The first question will be from the line of Alexander Krämer from ABG. Please go ahead, your line will now be unmuted.
Yes, good afternoon. I have two questions. One, about the sales development in Q2, in light of the additional markets that you have gained in the quarter, the quarter, and also, in relation to the post-approval study, could you comment, the post-approval study did not recruit much many, or additional, many additional patients. Could you comment on, how you see the patient numbers, like, evolving based on, like, also in the context of the post-approval study? That's the first question. And, the second question is about, the 5487 program, which maybe I will ask later.
Okay, well, thanks for those questions or the first question, Alexander. So, the post approval efficacy study continues, right? In the last quarter, we had a few additional patients added. You know, some centers are reaching caps and so on, so that plays into that. But we're on track to have that study completed by the end of 2025, per the commitment we have to the EMA. And obviously, as these post approval efficacy study centers reach the caps, they will convert into commercial use of the Idefirix, and so that's gonna benefit our sales going forward. As to patient numbers and so on expected, I can't be more precise, as you know.
You had a second question as well, around the 5487?
Yes, on the HNSA-5487, and that's a question, I guess, either to you, sir, or to Hitto. HNSA-5487, so we will see data soon, so I'm looking forward to that, and my question here would be, when it comes to the announcement of the first indication, if this will come together with the data announcement or if it will come later? And``` a lso, like, like, Monica, yeah, that's the question, basically, yeah.
So once we get the data, in the second half of this year from, you know, the, healthy volunteer study, you know, when we have the full data set, including the 12-month, follow-up, we'll, of course, make a, an assessment, and then we will chart out the path forward, including selection of indications and so on. We're currently looking at a number of different indications that we find attractive and, and potentially, feasible. And so that decision will be taken also, you know, in the second half of this year. Whether we will communicate the, the path forward together with the data, or we will first communicate the data and then subsequently the, the, the path, I can't, say at this point in time. I don't know if Hitto, if you have additional comments to this.
No additional comments, Søren. As you outlined, there's a certain likelihood that we will initially talk about the data, and then, digesting the data further, we'll inform later about the clinical development part.
Great. Thanks, Alexander.
Thank you.
Thank you. The next question will be from the line of Matt Phipps from William Blair. Please go ahead. Your line will now be unmuted.
Hi, thanks for taking my questions, and congrats on continued execution in the quarter. Can you guys give us a little details on why the Sarepta trial results moved into 2025? I think previously there had been some update later this year. And then on 5487, why do you feel the need to have 12 months of follow-up? If I recall from early imlifidase data, you know, the immunogenicity response is fairly soon and short half-life of the molecule. Just curious, what do you hope to see by 12 months that maybe you wouldn't see by six months?
Well, good morning, Matt, and thanks for those two questions. So first on the Sarepta trial, you know, as Hitto said, the reason why data will be forthcoming in 2025 is because Sarepta has guided that data will be available in 2025, and that follows the implementation of a protocol amendment. Right, obviously, you can have a full data set, you can have a slice of the data, you can have data, the first patients, and so on. We will let Sarepta you know, continue to communicate around the timeline here and also the granular aspects of the trial.
But we've certainly noted, you know, with satisfaction that Sarepta is clearly communicating that this is a key priority for them, and it's more toward we'll get data in 2025. On the second question, Matt, 5487, you know, why are we waiting to get a 12-month data? I will let Hitto expand on this, but essentially, what we are, what we want to see is the ability to do short-interval redosing, essentially, you know, extending the IgG-free window upfront, and then also redose later, typically when you have these flares and crisis in a range of autoimmune diseases. And they can appear, you know, several months after initiation of the disease, or a year after, or 2 years after.
So we want to see over the 12-month period, the development of ADAs and also the development of IgG. But maybe, Hitto, you have some additional comments here.
Sure, Søren. Thanks, Matt, for this question. Søren, you outlined it. Matt, what we're trying to do here in this study is an exploratory endpoint. We are taking samples of patients at the different time points, and then we subject them to in vitro cleavage experiments, which will help us guide to the right indication. Typically in indications where you get reoccurring acute phases, that doesn't happen very, very shortly after the third acute phase. It happens sometimes 6, 12, 18 months later. So what we're trying to do is to cover the relevant endpoints for the diseases that we currently have in mind.
At the same time, we want to get a nice, complete ADA profile to test the hypothesis that we have, that overall ADA levels will be lower compared to in this case. Hope that helps.
Can I ask? Yeah, thank you, Hitto. Can I ask one quick follow-up? As you see some of the additional clinical data read out from both the FcRn class, positive and negative trials, and then also, non-FcRn degraders, such as for Biohaven, do those play a role as you're thinking about indications, or do you feel you're in just a different class, compared to those anyways, as far as diseases that you're looking at?
Well, thanks for that question as well, Matt. So clearly, we think that FCRN inhibitors and also biodegraders are more complementary than to our enzyme. I feel we have a pretty unique profile in the ability to knock down IgG completely and immediately, right? And we don't see any data suggesting that FCRN inhibitors or biodegraders should be able to do the same. So we're essentially playing in different fields. Our enzymes potentially could be ideal at the onset of also a chronic autoimmune disease or when you have these crises and flares. Hitto, do you have additional comments?
No, just to specify maybe the comparison with FcRn. So if you look at pathogenic IgG levels, if you treat with an IgG-cleaving enzyme, you bring them down to something below 5% for an FcRn type of treatment, you will only ever bring levels down to something like 30% or 40% within weeks after treatment. And that's, that's why we think of it as complementary.
Great. Thank you. That answers my questions.
Thanks, Matt.
Thank you. The next question will be from the line of Dr. Tsao. Please go ahead, your line will now be unmuted.
Hi, good morning. Thanks for taking the follow-ups. Just in terms of 5487, I'm just curious that, you know, I understand the rationale for waiting over the 12 months to see potential formation of, of anti-drug antibodies, but I'm just curious, I mean, given the relatively short half-life, I mean, would we expect most of the ADAs to have been formed within the first few weeks of, of dosing?
Hitto, will you take this one?
Sure. Of course. Yes, that's true. However, as I said, that's probably not the most relevant data point for what we have in mind, therapeutically speaking. So we wanted to make sure we cover the data points that are probably most relevant for the indications that we currently have in mind.
I mean, can you, I mean, and I know you don't want to give too much because you don't want to sort of disclose the indication quite yet, but maybe just give us some examples of types of things that might be occurring in these latter months, you know, from after dosing?
I guess I'll pass it over to you.
Yeah. So, as we said, we will talk more about it at a later point in time, but I just, you know, wanted to point out that there are a number of diseases, for example, autoimmune diseases, with severe effects on the central nervous system, where, unfortunately, 90% of the patients have reoccurring acute phases within the first five years after the first occurrence. And that is one group of indications that we're currently having in mind, but there's certainly others as well.
Well, no, no, I get the reoccurrence and the concept of flares. I'm just curious, in terms of the trial results or the data that you're analyzing, you know, what is there any sort of biomarkers right now that you're particularly focused on? That would be forming or sort of developing in the later stages after, you know, several months after dosing with 5487?
Well, just, just ITT, right? But Hitto, I don't know if you have additional-
No, no, just as a reminder, we're talking about a study in healthy volunteers at the moment.
Yeah.
So the markers that we're looking at are ADA levels, and the cleavage experiments that I have alluded to before, where you basically take serum samples of patients that have been dosed once with 5487 at the relevant dose for our phase 1 study, and then you subject them in the laboratory to a cleavage assay that we have established as well.
Okay, great. That's helpful. And then just in terms of a question for Evan: so the adjustment to product sales that was done today, that's a one-time event to account for rebate levels, or is that something that will happen on a, you know, somewhat regular basis? Thank you. Just to clarify that.
Yeah, it... Go ahead, Søren.
No, I'll hand it over to you, Evan, just to say that, as you know, Doug, in Europe, getting market access is a complex, you know, multi-year effort. And we have a stellar team that has been able to achieve access now in Europe for the majority of kidney transplant patients at a price point that we think, you know, reflects the value we're bringing to the table. And they've actually been able to do that ahead of the typical kind of timeline for this. Each country applies its own standards and models and so on. And in some countries, you benefit from special early access programs, where you can actually charge a price upfront that will not be the final price because you're negotiating in parallel.
And then once you have achieved full reimbursement, it is with the obligation to then pay the delta between what you charged upfront and then what you have agreed to. That applies in certain situations, and in certain other situations, you have, you know, volume-based discounts and so on and so forth. And so we have been making, you know, provisions also in past periods, but now we have better and fuller insight as to what the outcome will be in certain specific situations. And that's why there is this, you know, material provision in this period. But Evan, I don't know if you have additional info here.
Yeah, yeah, Søren, that was a great explanation. And we look at the provision every single quarter, and as negotiations with various European authorities get closer to a final price, we will adjust the provision. So we didn't see anything unique in Q1, but in Q2, we felt that we had to adjust it. And then volume discounts, we typically pay those at the end of the year. So if we pass a volume discount hurdle rate, and we realize that we're going to have to refund a European authority money, we will increase the provision and reflect that in the quarter. And that's what's happened here.
Okay, great. Thank you.
Thanks, Doc.
Thank you. As a reminder, if you have a question for the speakers, please press five star on your telephone keypad. We'll have a brief pause while questions are being registered. The next question will be from Peter from Carnegie. Please go ahead. Your line will now be unmuted.
Yes. Hi, this is Erik Hultgård from Carnegie. Thanks for taking my questions. I have two, if I may. First, if you could comment on, it's obviously very nice to see that you have sort of reached a new level for Idefirix sales in Europe. But I was wondering what the confidence level is in terms of ramping sales in the second half, and what will be the main driver of that? Will it be retreatment or will it be new clinics coming on board? That's my first question, and what visibility you have on that progress. Then secondly, if you could comment on the gross margin in the quarter, and what the level will be in the coming quarters, that would be very helpful. Thank you.
Well, thanks, Erik, for those questions. So yes, you're right. Obviously, it's nice to see that there is some level of stabilization of sales. We certainly do expect volatility to continue, given the specifics of the sales situation here. But we are seeing, you know, growing repeat usage across Europe, and that kind of will stabilize and increase the growth. So that's very reassuring. Looking forward, clearly, we expect countries like Italy and Spain that have come online recently to start to contribute more meaningfully. We're happy that we've seen, you know, good progress in Germany and the Eurotransplant area, and France continues to be a growth engine.
Hopefully, the UK, typically is also a relatively conservative market, will also start to contribute more, more meaningfully. It's, as you know, very, very difficult to predict, but we're certainly very pleased with the overall development, and we expect growth to continue. But Matt may have additional comments here.
Sure. Happy to just provide some color commentary around that, Søren, and you have outlined the framework for growth quite well, so thank you. And the comments I would add are that in France we certainly have a number of centers already, but we are actually seeing additional centers. So, you know, with each center we have the opportunity for, you know, numerous patients on the wait list, and then it just becomes a matter of organ allocation. So we're pleased with France and believe that there are good prospects for the future there, and I would count that as a driver.
Søren had mentioned, and I had mentioned earlier in the call as well, Eurotransplant and Germany in particular, we're pleased to see some momentum there, and we believe that that will continue, and that that will very much be a source of growth, particularly given the size of, of Germany, but also other markets that fall within that Eurotransplant footprint. And then Søren had also mentioned that we are moving towards achieving regional reimbursement in both Spain and Italy. These will be opportunities both for you know, additional centers, as well as further identification of patients on wait lists. So we absolutely see that as a catalyst. And then, you know, finally, I would say that there are continued opportunities in the UK.
We previously got some of our first sales there, and we continue to see patients get identified in that market. All of this bodes well, knowing that you know, we've achieved you know, some caps at some PAES centers, and we believe that in the future, we'll reach you know, the completion of that study. That is another factor that across numerous markets is gonna create an opportunity for further commercial sales. So, overall, I would say that we're you know, we're quite confident that we have prospects for growth in the second half of this year and also into next year. What we can never account for is the volatility associated with organ allocation and how that might impact a particular month or even a particular quarter.
Suffice it to say, the base is getting broader, more markets, more centers, more patients on wait lists. Thanks for the question, Erik.
Thanks for the perspective, Matt.
Thanks.
I'll hand over the question on gross margin to you, Evan.
Yeah. So our Q2 gross margin was negatively impacted by our manufacturing. We manufactured three large batches of drug substance in Q2, specifically in June, and that increased the cost of goods sold. Had we not manufactured those batches, cost of goods sold would have improved by approximately SEK 25 million, and we would have had a gross margin, if you used the SEK 47.1 million in sales, less the new gross margin after you back out that SEK 25 million of close to 70%. But I should point out that the batches of drug substance we manufactured will last us for the rest of the year, and as sales increase, we won't have to manufacture additional batches.
Although we have excess manufacturing capacity, this will ultimately help us when we enter the US market. Oh, and I should point out, if we manufacture excess or excess, drug substance, and we don't think we're gonna use it, we have to write it off in the quarter or the period that we did that, and that's why you see the increased cost of goods sold in Q2.
All right. So, is it that there was some sort of write-offs in Q2, if I understand it correctly, but also that you produced more than or so basically, so we will have a positive impact on the gross margin in the second half. Is that correct?
That's correct. Yep. Our gross margin will improve in the next two quarters.
Can you say something about the sort of average gross margin that we should expect for the full year, assuming all these factors?
I'd rather not, but I can tell you this, that as we increase sales, as sales increase and we produce more Idefirix in the finished product, our gross margin will improve because we'll have sufficient inventories to cover the increased sales.
All right. Thank you so much.
Thanks, Erik. Thank you. For the next question, please state your name and company. Your line will now be unmuted.
From Kempen. Just-
Please go ahead. I don't think... We can't hear you. As a reminder, if you wish to ask a question, please press five star on your telephone keypad. We'll have a brief pause while further questions are being registered. And the next question is from Johan from Redeye. Please go ahead. Your line will now be unmuted.
Thank you for taking our calls, and sorry, I was disconnected for a while there. Yeah, some follow-up. What to expect on the cost of goods going forward in terms of manufacturing for batches? Are we going to expect some efficacy gains as the volume increases into 2025 and 2026?
Yeah, Evan, will you take this again or?
Yeah. So, our primary supplier for drug product or drug substance currently manufactures at minimum levels, but levels that we do not fully use or utilize at this stage. So as sales increase, we'll still continue to manufacture at these minimum levels, but more of those will be used in sales, so our gross margin will improve. And then that'll be further impacted very positively by entering the U.S. market. When we enter the U.S. market, we'll still have sufficient manufacturing capacity to fulfill U.S. initial drug substance and drug product sales, and also increase sales in Europe. So our expectation is that our gross margin will continue to improve.
Yes, and to some extent, I suppose it will be easier to manage and expect the volume, as well. And also according to provisions and true ups, the core dynamics is, you explained earlier, but, it would be interesting to get a feel for, presumably you have expected, the need to do some, true ups and provision revision. Have you, have you planned for be sort of sufficiently right, or, have you-- do you, have you expected a sort of a more substantial revision, if you see my point? So, I mean, ideally, I guess you would be in a position where you have sort of taken sufficiently high, high for future revision and then have not so substantial revision.
Yeah, I mean, establishing a provision really is an exercise in estimation and judgment. We use the best available data at the time, including discussions with our pricing committee and discussions with the various European authorities that try to set price. So we monitor that on a quarterly basis, and if we think we need to increase the provision, we will do that. Ultimately, though, once we get to final prices, we won't be making these provisions anymore. And we are, look, we're a new market entrant into the European market, and that this is a very common process as you get early access to various European markets.
Yes. So this is mainly a result of the sort of a tricky initial launch period where different regions market and you have early access and different dynamics in terms of volumes and as you get firm approval and sort of normal reimbursement... we should expect, well, much less relative provision, revisions ahead then?
Absolutely. That's, that's fair.
Yeah. Okay, go ahead. That's fine.
Yes, and also clarification then on Sarepta and the protocol and the phase one study, is that, will you include patients from the revised label as well, or will they include patients from the updated label?
So this is not something that is, I, I'm not gonna comment on, on the specifics again of the, the trial. You have to talk directly to, to Sarepta, right? But essentially, the patients that are being included in general are those that have too high titers of neutralizing antibodies against, their, their vector. And, you know, that's the trial design going forward. There's, there's in this, this, amendment, and, and as soon as it's, you know, implemented, we'll start getting the data.
Yes. And also, what to expect from the U.S. once you sort of approach approval and once you're approved, will you expect the initial launch to be targeting the clinics that already are included in patients that has not been given active treatment?
Sorry, what, what, what is - what indication are you talking about now in the US?
Oh, now, the main indication in the U.S., you have the pivotal ConfIdeS study, and it's fully randomized, and you plan to submit in late 2025. And, of course, it looks like you will be having approval in 2026. And, a lot of half of the patients hasn't received active treatment, and some centers are included, and some center hasn't been sort of given the opportunity to participate, but they have been interested. Is this a natural sort of target for the initial launch?
Absolutely. I'll let Matt comment on this, but there's a huge difference between Europe and the US and the fact that at the time of launch in the US, you know, we hope we'll have, you know, centers essentially representing, as Matt said, you know, 20% of the kidney transplant volume in the US already having experience and have worked on the basis of protocols and so on. So that's a very, very big difference from the European scenario, where we just had a couple of clinics, you know, in a couple of countries at the time of launch, and where the experience, you know, has had to be developed over several years, right? So there's a very, very big difference there. But Matt, you may want to comment on this.
Yeah, happily, Søren, and thanks for the question, Johan. It's an excellent one, particularly around targeting. And as Søren said, you know, we'll absolutely have an initial focus on those 23 centers that have been involved in this study. And of course, those centers, you know, will have familiarity with how to identify the appropriate patients on their wait list. And, you know, by reviewing and being familiar with our protocol, we'll also be familiar with things like patient delisting, that will help enable organ allocation, as well as the incorporation of imlifidase into their treatment protocol. So that's a significant head start, when, you know, when compared to Europe.
We also understand that there's a sizable number between 50 and perhaps 70 centers in total in the United States out of over 200 centers that do transplants in the US. Wherein these 50- 70 centers have all the necessary infrastructure to do complex immunologic transplantation procedures like treating the highly sensitized patients. This is a group of centers that have the access to 24-hour immunology and pathology labs. They have access to T-cell and B-cell depletion. Importantly, they have the expert clinical staff in place to take on these complex procedures. That group of 50- 70 centers will be sort of the total number that we initially put our targeted effort on.
The 23 that we've already worked with are a significant portion of that, but we think there's, you know, there's plenty of opportunities for further engagement here. We'll be doing some other things in the US, like, you know, working with the right stakeholders for things like US guidelines. Then one other notable advantage of the opportunity or the market conditions in the US when compared to Europe is that whereas it takes, you know, quite some time to work through pricing, reimbursement, and access with European markets, and often much of that work must be done post-launch through health technology assessment and other, you know, governmental payer reviews.
In the U.S., we have opportunities for pre-approval information exchange with the public and private payers, and that's gonna allow us to, you know, review our data and, of course, our health economic value proposition with those payers, before, you know, and, and during the time of launch. Which we think, again, will similarly be an opportunity to accelerate things in the U.S. when, when compared to Europe. So, thanks for the question. And, you know, hope that that addresses your area of interest.
Absolutely. And I suspect then, as we should expect your U.S. commercial launch team to sort of reflect this commitment and approach already in 2025.
Yeah, I mean, we definitely will be working towards building out the team, you know, into 2025 and into 2026. You know, we'll be happy to provide further, you know, perspective on this as we get closer to launch.
Great. Finally, not that you're in the business of guiding for milestone support, but just to provide some flavor. I suspect in this situation, it's more realistic to expect some support on that side in 2025, for example, relating to Sarepta.
No, we can't be specific around the, the milestones, right, Evan? So but you know what the total amount is, Johan.
Yeah. But less realistic to expect that in 2024 than I suspect.
I don't know, Evan, do you wanna add some comments? Yeah, we can't be specific on, on these,
No.
These milestones, comments on, yeah.
Yeah. But we'd rather not be specific on them.
Okay. That's appreciated, and thanks again.
Thanks, Johan.
Thank you. The next question is a follow-up from Erik from Carnegie. Please go ahead, Johan, and you'll now be unmuted.
Yes, hi, Johan. Yes, hi, Johan. So I have two follow-ups if I may. First, on your cash position, and you've said that the cash would take you into 2026. So given that the operational burn has been more or less constant over the past two quarters, and if your cash would take you into 2026, that would imply a quite significant reduction in the quarterly burn in the 6 quarters that remain. So my question is basically, how much of this will come from cost savings, and how much will come from top-line growth, more or less? No sort of exact numbers, but just sort of ballpark where you see this reduced burn will come from. And then secondly, a medical question.
Obviously, your ConfIdeS study will hopefully get you an accelerated approval. I was wondering what, if you know, if you know, what the FDA would require in order to get to get the full approval in the U.S. Will there be another study or will it be just more collecting more data from the same study? Thank you.
Well, thanks for those two additional questions, Erik. As far as the reduction in the burn rate is concerned, I mean, you're absolutely right, of course. There are two contributing factors. One is the growing top line, the other is cost savings. I don't know, Evan, if you can provide any guidance there, but I think, you know, this is essentially what we can say. But over to you, Evan, on this.
Yeah, I mean, you can see that SG&A expenses have come down quarter over quarter for the last 4 or 5 quarters. That's generally the same for R&D, a little more mixed. But we should recognize or realize the full impact of the restructuring activities we took earlier in the year, in the third and fourth quarter, and then into 2025. So... And then, as S`oren m entioned, obviously, we expect sales to increase in 2025 compared to 2024. So it's gonna be a combination of both those activities or actions.
Yeah. Great. Thanks, Evan. And so, on your second question there, Erik, the fact that, if, as we hope, we get accelerated approval, we will need to, to run a confirmatory trial to get full approval. So that's part of the negotiations and the discussions with the FDA prior to initiating, you know, a trial that could lead to accelerated approval. There is this high-level discussion, but the final outcome of this is something that is subject to, again, alignment with the FDA. So, we can't be more specific at this point in time. But we will have to run a confirmatory trial. That's clear.
All right. Thank you.
Thank you. As there are no more questions left in the queue, I will hand it back to the speakers for any closing remarks.
Thanks, operator, and thank you, everyone, for your time and interest in Hansa Biopharma today. We look forward to continuing to update you on progress going forward. Thank you.