Welcome to Oncopeptides Q4 2023 report presentation. For the first part of the presentation participants will be in listen-only mode. During the questions and answers 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 Sofia Heigis and CFO Henrik Bergentoft, please go ahead.
Hi everyone, and welcome to this presentation of our report for the fourth quarter and full year 2023. These are our standard disclaimers. With me I have Henrik Bergentoft who will give a financial update, but before that I will go over some key points for the fourth quarter. I will then come back with an update of our European commercialization process along with some updates on recent events. Kicking off with some key updates from the last quarter and recent weeks, let me start with that our revenue hit SEK 5.3 million in Q4, an increase of 90% compared to the third quarter, and in line with our communicated ambition to show increasing growth quarter-over-quarter. In fact, we have also sold as many vials in Q4 as the first three quarters of 2023 combined.
I will come back with more details on this result and how we plan to accelerate this growth further in 2024. We remain on track to cash positive in 2026, which would mean about 400 million SEK in annual revenue. To get there, we first need to ensure financing to bridge the gap until we reach cash positive, and let me ensure everyone listening that this is currently a main focus for myself, Henrik, and our board of directors. While we see sales in Germany picking up, we have also received some other news in recent months that support our belief in European success. This includes extension of our market exclusivity for Europe, and to be clear, this means that we will be able to sell Pepaxti in Europe near or at peak levels for five more years, which means a great addition to our commercialization.
Another positive news item we recently shared was the fact that we have taken a big step forward to be able to launch in Spain already in the second half of 2024. I will come back with more on Spain in my update later. One last event from outside the fourth quarter that I would like to address is the U.S. Food and Drug Administration decision from last week to confirm their withdrawal of Pepaxto from the U.S. market. Now, I know that there are both shareholders and other stakeholders who have nurtured a hope that we would receive a positive decision. We do, however, need to remember that Oncopeptides has not marketed Pepaxto in the USA since October 2021, and our key strategic focus of this company has since then been the commercialization of Pepaxto in Europe, where we do have a full marketing approval.
The reasons for the FDA drawing another conclusion than EMA in Europe comes down to the accelerated approval process with focus on the current US indication not being confirmed by the result in the overall OCEAN population. As Pink Sheet wrote referring to this process, the U.S. FDA's hammer now falls on Oncopeptides Pepaxti. Important to remember is that this is a very different process in a very different environment than the full approval process that EMA used, which concluded a positive benefit risk for melflufen. For those of you who wish to understand the FDA process better, we will be publishing a short video on our website later this week. Before I hand over to Henrik, here is a reminder of the key events of the fourth quarter and the first months of 2024.
In addition to what I have already mentioned, it's important to stress that we continue to analyze and present our data from various studies, most recently at ASH in December, and we look forward to communicating additional publications and presentations during 2024. I'm also happy to point out that Henrik took over as CFO formally in November, and he has already proven to be a great addition to our senior leadership team. With that, I would like to hand over to Henrik for a financial update.
Well, thank you, Sofia. So next slide, please, and starting off with a high-level summary of our profit and loss statement for the quarter and for the full year. As Sofia said, net sales came in at SEK 5.3 million and SEK 35.2 million for the full year. Now, the sales for the full year includes effects of reversals regarding previous year's reserved income of returns in connection with the withdrawal of Pepaxto in the U.S. with SEK 24.3 million. Excluding the reversals of return reserves, sales in the fourth quarter was still SEK 5.3 million, and full year sales was SEK 10.9 million.
The turnover in previous years mainly refers to reversals of the returns. Operating costs for the quarter, excluding cost of goods sold, amounted to SEK 86 million compared to SEK 101 million last year, and for the full year, SEK 290 million down from SEK 358 million last year.
More details to follow on the next slide. Research and development costs in the quarter amounted to SEK 33 million compared to SEK 57 million last year. For the full year, it was SEK 107 million down from SEK 218 million last year. In 2023, only a few clinical studies have been ongoing, and the phase III study OCEAN was completed in the third quarter. During the year, refunds of close to SEK 44 million have been received regarding final settlements for these completed studies. This has affected the cost positively. Marketing and sales costs in the quarter amounted to SEK 35 million compared to SEK 20 million last year, and for the full year, SEK 120 million up from SEK 58 million last year.
The cost increase during the quarter and the full year is driven by the ongoing commercialization activities in Europe, where we have already secured market access and sales in Germany and Greece, and are on the way with more countries where we just announced an important milestone in Spain. Administrative costs during the quarter amounted to SEK 16 million down from SEK 20 million, and for the full year, cost came in at SEK 69 million down from SEK 84 million. The decrease should be perceived as a result of the company being very cost conscious. Next slide gives a view of our liquidity situation, and the cash flow from operating activities for the quarter amounted to SEK -55 million compared to SEK -78 million last year. For the full year, it was SEK -280 million compared to SEK -420 million last year.
So all in all, we are spending less money this year than last year. And at the end of the period, cash and cash equivalent amounted to SEK 173 million, confirming the trajectory previously communicated of having liquidity until the end of the second quarter. The company is currently overseeing what type of financing that will be optimal considering all aspects. Next slide, please. We believe that we over time have the opportunity to take advantage of a very profitable business model, and here I want to make a few comments on the ingredients in this model. The company has had the ability to start from a blank paper, building a cost-efficient structure where all functions possible, such as IT, R&D, finance, quality, HR, are centralized for efficiency, and locally, we have only the sales and marketing costs needed for each specific territory.
All combined, the setup is a so-called global cost-efficient setup. Next flavor of the cost side is our cost of goods sold, and in relative terms, manufacturing Pepaxti is cheap, which generates a high gross margin above 95%, making the business model close to being scalable. As said, each territory will have a setup fit for purpose. If we take Netherlands as a very recent example that has a very centralized healthcare structure, we can manage this region successfully with as little as two employees locally, of course backed by the central functions already installed here in Stockholm. All this combined, we have the potential to generate a high-margin business with EBIT margins on a country level above 50% at peak year sales. Peak year sales is on average year three after launch date in a certain country.
This also means that we have a short time to break even, which on average is the second year in a country, and from that, we rapidly move up to the 50% gross EBITDA margin just mentioned. I want to clarify that the 50% margin is on a country level and overall head cost will be added to the overall profitability. But with that, I would like to hand over to you again, Sofia.
Thank you, Henrik. I will now cover some of the key points regarding our European commercialization and provide updates on our recent accomplishments in Spain as well as German progress, along with an overview of both the market access process and the changing treatment landscape for Pepaxti. First, a recap of some of the key investor highlights of our European commercialization. Multiple myeloma is an incurable disease that offers an expanding market opportunity, currently estimated at SEK 1.5 billion. Pepaxti is fully approved in Europe in a late-stage patient population with very few treatment options, and we have a strong potential in this growing patient population with a unique positioning. This provides the foundation for a highly profitable business with really good potential over time that, according to our estimates, will take us to cash flow positive by the end of 2026.
This means about a full year of sales of SEK 400 million. I mentioned we had a product that is increasingly unique in its position in the treatment landscape, and I will now explain why. Multiple myeloma treatment landscape is rapidly evolving. Most new drugs are immunotherapy and require a responsive immune system. This means two things. As more patients benefit from these drugs, more patients will get an exhaustive immune system, and more patients will enter late lines in need of a new mode of action that is not dependent on the immune system. The late line market is driven by that multiple myeloma is an incurable disease and that hematologists in general have a tradition of continuing to treat their patients. These two factors mean that the market is expanding.
Looking at the treatment landscape, there are three common drug classes used in the earlier lines that can be combined, commonly in triplets, and in fact, the latest clinical trial readouts from ASH tell us that even quadruplets may be more beneficial, which means that these three drug classes may be exhausted even earlier than before. Looking at the late line setting, CAR-Ts are now moving to earlier lines, and BiTEs are generating data to move to earlier lines. But even if they are currently in the late line setting, they cannot support patients that well who have an exhausted immune system. Belantamab is being withdrawn in Europe, and selinexor is currently marketed mainly for earlier lines due to better efficacy and tolerability in combination therapy.
This means that there are very few options left, and Pepaxti has the potential to take a strong position in this growing segment of patients. If we turn to our commercialization process, we have, as previously communicated, divided our European launch into four phases. As you can see, the first two phases that are currently ongoing account for little more than half of the total market potential in Europe, and these are the countries that we include in our projections to become cash flow positive in 2026. I have earlier covered the timelines for the different steps in the commercialization process, and one of the most common questions we get from shareholders is if we can provide details on certain steps or timing for different countries.
While I wish we could, these timelines are largely controlled by payers, and we can only do our very best to ensure we access and work together with them as quickly as possible. If we move to our current sales in Germany, we see increased European sales quarter-over-quarter related to the build-out of the German market team that was completed last year. We, of course, do expect sales to level up in 2024 because we have now negotiated an innovative price. We do have a full team in place. We have managed to add the possibility to our label to administer the drugs peripherally, which has been sought after by German doctors. In general, we see increasing awareness, support, and momentum. Even though Germany is a scattered market that takes time to launch in, I'm confident that we will see this pickup materialize during the year.
We are already seeing our market position strengthen, and Pepaxti, in fact, experienced the largest growth of all new multiple myeloma drugs in December of 2023, according to sales data that we are purchasing. We have recently announced having received a positive opinion from the pricing authority, CIPM. Spain is a market with high potential for Oncopeptides, with more than 1,500 patients in our target population. We have both clinical experience, and we do have KOL support. In fact, the Medical Spanish Society has published a report clearly stating the need for Pepaxti in Spain. We hope to have finalized the administrative contracting process with the Ministry of Health within shortly to obtain national reimbursement, which will be followed by regional access work leading us to be able to launch in Spain and see sales in the first regions already during the second half of this year.
To give you an idea how quickly our Spanish market access team has worked, we have gone from providing a value dossier in October last year to positive pricing opinion in five months. For the belantamab, one of our competitors, this process took two years. For one of the CAR-Ts, Abecma, it took close to one year. For selinexor and teclistamab, these processes are not yet over, and they are not reimbursed. This, to me, is a testament of two things. First, the competency that our team possesses and its ability to successfully push through market access processes across Europe, first in Germany and now in Spain, with both speed and ensuring that we receive prices that reflect innovational capacity, is a prerequisite for us to be profitable in the market.
It also manifests that there is a high unmet medical need for a product like ours, and as I outlined in my previous overview of the treatment landscape, we have had a few team members in Spain working in close collaboration with our global team on this process to prepare the launch, and we are currently recruiting to extend the team in Spain. I would like to thank our current global medical market access teams for the hard work that you have put in to ensure this great milestone for the company. Outside of Spain, we have also been able to move two other countries forward since our last quarterly presentation, France and Sweden. We have gained KOL support and are currently working to submit the value dossier in France, and we have started to engage with hematologists and regional stakeholders in Sweden to explore regional access.
As we have concluded, this is the most viable path to allow patients in Sweden to benefit from Pepaxti. We will, of course, continuously update you on our progress in obtaining market access over the coming quarters. As I have said before, our full potential goes outside of our current focus, which is Pepaxti in Europe. In parallel, we are working to meet the global unmet need by exploring partnering opportunities in other markets, and we do continue to see China and Japan as our most viable non-EU markets. But we also do have ongoing dialogue with potential partners in the Middle East and North African regions.
Lastly, the process of realizing the potential of our pipeline assets has also progressed during the last quarter of 2023, and we have made the strategic decision to focus our short-term efforts on advancing our SPIKE platform towards an investigational new drug application. We are currently in the process of selecting a drug candidate. Meanwhile, our PDC platform already has assets ready for clinical development, and with clarity on the U.S. situation, we will now consider this outcome and conclude how we realize the value of this platform for both shareholders and patients in partnership with others.
To recap, we are looking back at the quarter and start of the year where we have reached a number of important milestones in Europe, including an increase of 90% in net sales between Q3 and Q4, five more years of peak year sales due to an extended patent, strengthened market position for Pepaxti in the treatment landscape, and a decisive step forward in our Spanish market access, which will allow us to launch there during the second half of 2024. We are working with an expanding market opportunity in Europe, and we remain on track to become cash flow positive at the end of 2026. With that, I would like to say thank you to everyone for listening and hand over to the moderator for any questions.
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. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.
So since there are no questions on the phone, we have one written question. Is melflufen still on clinical hold in the U.S.? If so, when do you expect it to end? With our revised study design in elderly patients, I presume you can avoid the complexity with IMiDs and Pls. You were right with your appeal.
Thank you, Philip, for your question. So the clinical hold in the U.S. will be lifted if we would agree and when we would agree on a new study program, basically. As I said, we have a platform of PDCs, and we are currently looking into the strategy for this platform where we, in addition to melflufen and Pepaxti, do have a sister molecule, melflufen called OPD5, and we also have a second generation of PDC called OPDC3. And we will, of course, keep the market informed on any strategic moves that we would be making on the PDC platform.
That's all the questions. So back to you, Sofia, for final reports.
Once again, thank you for listening in to the presentation. Should you have any questions, you are always welcome to reach out to David, our Investor Relations and Communication Director. By that, I would like to wish you all a nice day.