Welcome to Oncopeptides Q1 report for 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 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 first quarter of 2024. This is our standard disclaimer. With me, I have Henrik Bergentoft, who will give a financial update. Before that, I will go over some key points for the first quarter. Additionally, some events in the second quarter. This, given that we are reporting late in the spring due to our recent rights issue. I will then come back with an update of our European commercialization process and next step value drivers. Starting off with some key highlights, we have already communicated the revenues for the first quarter, which arrived at SEK 5.1 million. This is comparable to the revenue in Q4 of last year.
The sales in the first quarter were influenced by seasonal effects, which we anticipated as in line with the development for the full late-stage multiple myeloma market this season. We have communicated that we expect an acceleration of sales in 2024 to reach profitability in 2026, which is still a valid guidance. During the quarter, we reached a major milestone in our market access efforts as we received a positive opinion from the Spanish pricing authority. Post the period, we received the final confirmation for national reimbursement, and since May 1st, Pepaxti has been available in the country, and we have even seen our first order from a Spanish hospital, which is a proof of the high unmet need in Spain for Pepaxti. I will come back to Spain and our next steps there in a short while.
Another milestone I wanted to highlight is how we have taken a step outside of Europe with our partnership with Vector Pharma for the MENA region. Before I hand over to Henrik, here is a reminder of all key events of the first quarter and in addition, some in the second quarter. One significant event that Henrik will speak to in a few minutes is the rights issue that we announced at the end of Q1, and which was recently finalized. Let me take this opportunity to thank all of our shareholders for your support throughout the process. I would also like to welcome any new shareholders that might be listening in. And with that, I would like to hand over to Henrik for a financial update.
Thank you, Sofia, and move to the next slide. We're starting off with an overview of the profit and loss statement for the first quarter compared to the same period last year, where I want to point your attention to total sales and total cost, both metrics pointing in the right direction, meaning that we are showing sales increase compared to last year, and we are doing so with cost control, demonstrated by the fact that we see a lower total cost compared to last year. In summary, this quarter very well summarizes our strategic plans onwards, with sales growth combined with cost control. Now, if we move to the next slide, we take a closer look at our operating expenses. Research and development cost amounted to SEK 28 million in the quarter, down from SEK 30 million last year.
No clinical studies are currently ongoing, and the Phase 3 study OCEAN was completed during the third quarter of 2023. Also, during the third quarter of 2023, refunds of SEK 43.5 million were received regarding final settlements for the COMPLEMENT study, which positively affected the cost during 2023. Corresponding refunds will not occur during 2024. Marketing and sales cost amounted to SEK 28 million compared to SEK 23 million last year. The increased cost relates to the ongoing commercialization activities in Europe, which Sofia will describe further later in the presentation. Administrative cost during the quarter decreased from last year to SEK 18 million compared to SEK 22 million last year. Combined, this gives us a cash flow from operating activities of -SEK 67 million in the quarter.
Now, from cost and cash flow, let's move to the next slide for our liquidity position. Our cash position at the end of the first quarter was SEK 105 million, compared to SEK 178 million by the end of 2023. Of course, very important to point out here is that the rights issue now completed in May 2024, amounted to SEK 340 million before issue cost, will increase our liquidity position during the second quarter. And as communicated, the liquidity position after the rights issue is estimated to last until we are cash flow positive at the end of 2026. And with regards to the rights issue, let's move to the next slide...
The completion of the rights issue was announced separately on May 6th, and here's a summary of the outcome of that. So in total, we raised SEK 340 million before issue costs. These funds will mainly be used to support the commercialization of the Pepaxti in Europe until the company is profitable towards the end of 2026. Also, to progress pipeline assets and partnerships discussions in the rest of the world. The subscription rate amounted to 94%, where we could see a strong commitment from a couple of our main shareholders, among others, the two different HealthCap funds and also the Redmile Group, and also from the board of directors and company management. The updated ownership after the rights issue will be published a couple of days after the end of May 31st, meaning next week.
Also, as a direct consequence of the rights issue, as per press release separately this morning, the increased number of shares requires an adjustment to the warrants awarded to the European Investment Bank, which is part of our current loan facility. That was all on the financials now, so back to you again, Sofia.
Thank you, Henrik. I will now give an update on our European commercialization, followed by an update on our next step value drivers, meaning the geographic expansion for Pepaxti to the rest of the world and our pipeline. First, a recap of some of the key investor highlights of our European commercialization. We have a fully approved drug for treatment of an incurable disease that provides an expanding market opportunity valued at SEK 1.5 billion. Since our last quarterly update, we have enhanced our efforts in Austria, we have gained access to Spain, adding further potential and diversity to our revenue stream, and we are now fully financed to reach our profitability goal by the end of 2026. To understand the future, let me remind you briefly of the past.
2023 was the year when we started to gain clinical experience in Germany and entered a partnership for Greece. We sold at low volumes and saw a positive trend quarter by quarter, with close to 90% growth between the third and fourth quarter. Based on our past, we had to launch while we got dressed. At the end of the year, we had, however, managed to recruit the full German team. We negotiated the price successfully in Germany. We started to gain clinical experience, raised awareness, as well as initiating some critical activities, such as working to launch a real-world study. Even though Germany is a market that is taking time to unlock, it serves as a good potential, and we are confident we will be able to capture that over time.
In 2024, we expect an acceleration of European sales by growing in Germany and adding Spain to our revenue stream. The fact that we have managed to agree on a price that reflects our innovation in these two major markets, and that we are managing to attract talent with both experience and network within our field, is creating a solid foundation for this acceleration. When Pepaxti is used, we get the same feedback from all countries. The clinical experience is, in general, positive, which is continuously strengthening the position for Pepaxti as an important treatment option for late-stage multiple myeloma patients. This may sound given, but it is not always the case, as many drugs come along with cumbersome administration schedules, a lot of side effects, and reduced quality of life.
One of the focal Multiple Myeloma congresses, COMy, just took place in Paris, and we can see a great shift in how Pepaxti is positioned by key opinion leaders and how the interest is increased for the full platform of peptide drug conjugates due to the unmet need for Pepaxti's combination of efficacy, manageable tolerability, and not least, maintained quality of life. There is a similar unmet need in other geographies, which is why we see interest from partners around the world to take Pepaxti beyond Europe. We have taken an important step to enter a partnership agreement with a member company of the World Orphan Drug Alliance, Vector Pharma. This partnership will allow us to provide patients in the Middle East and North Africa with Pepaxti on a named patient sales basis.
If we look at the launch sequence in Europe, let me remind you that while we are, of course, working to pull through all four phases, it is, it is the first two launch phases that will contribute to our profitability goal. I will come back to a more updated look at where we are in the various countries. The business model for our European case is based on a global approach with strong support by the headquarters here in Stockholm and only adding local resources needed without duplicating any efforts in the headquarters and in the countries. In addition, we have a low cost of goods for Pepaxti, which concludes the opportunity for an effective and profitable business. The EBITDA margin on a country level during peak sales, we estimate about 50%, and we estimate to reach break-even within two years in each country.
These are the different steps in the market access process. As a reminder, the timelines, and in particular, the review and negotiation phases, are country specific and at large, controlled by payers. If we look at where we are in the various countries, we have added Austria to the countries with healthcare access. We have previously been able to sell in Austria, but the inclusion in hospital list, which we achieved during the first quarter, is now enabling for HCPs to prescribe. Due to this important step, we have, since April, an MSL working for Oncopeptides focused on Austria. We have also started price negotiations in Norway, and just recently, we took the first step in those negotiations by making our first offer for a price. This offer was rejected by the Norwegian payer body.
It is common practice that payers reject the first offer, and this means that we will have to require a new round of negotiations before a new decision can be made. While it might look dramatic sometimes, looking at various government summaries of meetings, this is a completely normal part of a market access process, and we commonly do not get, yes, but rather no at first. This doesn't mean that we are ending the process in the country. The negotiation is sometimes only a dialogue between the company and the payer, and sometimes made official, which triggers questions about what we intend to do. I want to emphasize to all of you that should we decide to move out of a country, we will ensure to communicate that clearly.
As for France, we expect to submit the value dossier and initiate the cost-effectiveness benefit review, followed by a discussion in the next few days. Regarding Germany and Greece, we continue to see great progress with continuous positive feedback from the field, and our confidence and focus remained unchanged for these markets. The biggest step taken is, of course, Spain, and I wish to give you a better understanding of where we stand and are heading towards. We have reached market access in Spain in 5 months, and to put that into context, the average approval time in life science in Europe in Spain, reported is 611 days. That is more than 20 months, and our competitors in the same position as us took up to 24 months to conclude.
This means that we have achieved national reimbursement in record time, and I think it speaks to the competence and our strategy and our ability to succeed with the concluding price negotiations and market access processes across Europe. To add to that, Pepaxti has been available in Spain for doctors in urgent need of the drug since May first. Even though we do not have regional access, we are already seeing the first patient treated just weeks later. While we are glad to see the drug fulfilling this large unmet medical need and that we can already, through special procedures, help some patients, we will expect to see more material sales taking place the second half of this year as we are working to achieve regional access. Spain is a market with high potential for Oncopeptides. We have more than 1,500 patients in our target population.
We can compare this to Germany, with a target population of around 2,500 patients. There are two important differences to point out between Germany and Spain. Germany is a more scattered market, with thousands of customers prescribing drugs to multiple myeloma patients, compared to hundreds of customers in Spain, which in that sense, makes Spain a more centralized market to work with. From Pepaxti's perspective, the great difference is the clinical experience with more than 100 patients treated in Spain in our clinical development program and 16 sites having gained experience through our studies. This compared to zero in Germany at launch. I was recently in Spain to meet with the full team, and I also met with media.
I am proud to see the strong team we managed to recruit, how far they have come already in preparing the launch, and I am truly excited to see the interest from media in our company and drug. Looking forward, we continue to build out the team with more commercial competence and ensure we continue to build onto the robust clinical experience we already have in Spain. This by real-world data generation and advancing our science in partnership through investigator-initiated trials that are, in fact, already running. We will, of course, also spend time attending and presenting at congresses, an important way to build further awareness and understanding of Pepaxti among Spanish physicians. The multiple myeloma treatment landscape is rapidly evolving, with different types of immunotherapies being launched. The development of the landscape is confirming the need for a drug like Pepaxti in the later lines.
All of our competitors are focused on moving towards earlier lines of treatment, and for example, CAR Ts are now already approved in this setting. This due to better efficacy and tolerability earlier on. This means that late-stage patients who commonly have an already exhausted immune system and are in need of a different treatment approach, we have the opportunity to take a strong position with Pepaxti. Finally, I want to spend a few minutes on our next step value drivers. We continue to see China and Japan as our most viable non-EU markets, and we have also added South Korea to our prioritized Asian markets. This due to that we already have patients studied in South Korea, which we hope can facilitate a shorter regulatory path than in other Asian countries.
Looking at the rest of the world opportunities, this map illustrates both the potential in new markets assessed outside of Europe through partnership in yellow, and also our capability to make these opportunities materialize. As we have recently done in Middle East and North Africa region, I am looking forward to see more countries going yellow and orange on this map as we progress. Having more countries where we sell Pepaxti not only adds revenue, but it also diversifies our revenue stream and make us even more solid. When we have announced the rights issue and explained where we are planning to focus our efforts, we have been very clear that our European commercialization is the focus, but equally clear that we plan to keep progressing our pipeline to ensure that Oncopeptides remains a full biotech company, providing shareholder value both in the present and in the future.
Our short-term efforts on advancing our SPiKE platform towards an investigational new drug application is going well and continues, and we are currently in the process of selecting a drug candidate. 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. The next question comes from Luisa Morgado from Van Lanschot Kempen. Please go ahead.
Good morning, team. Thank you for taking my question. I have a few. Maybe, Sofia, as you pointed out, market access in Spain happened quite quickly. Do you think this was indeed due to the activities of the team, due to the product characteristics, perhaps a combination? And do you expect that this will be replicated perhaps in other countries?
Good morning, Luisa, and thank you for the question. I think there are three aspects I would like to point out, as it is a mix of all these factors. First of all, the clinical experience and the expert support generated a report from the medical society to the authorities, highlighting and pointing out the high unmet need for a drug like Pepaxti in Spain. That is a very important argument in the different negotiations. When it comes from the physicians as strongly as it did in Spain, it is of course highly supportive to the process. Second of all, we have a very competent team who know how to manage this process accurately, creating a constructive discussion.
Then there is always a strategy behind market access, because you need to, you know, with the competence you have, you need to analyze the market, the situation, the context, understand where the payers are coming from in the specific country, to be able to create this win-win situation, where you have sustainability for the company, but also for the authorities. I think that based on the very experienced country manager we have in Spain, with a solid market access background, based on what the landscape looks like and how it develops, we managed to conclude that in record time. It's a combination of the factors you mentioned. Yes, we are, of course, aiming in countries where we have similar support from experts, where we have similar context.
We are, of course, aiming to conclude as fast as possible. One such country is Italy, but having said that, Italy's payer authority has been through a lot of restructuring that is out of our control, and that is why we believe that the timeline for Italy is probably more normal than quicker, even though we have the same factors in place.
That's clear. Thank you. And perhaps on the partnerships, in the map that you just showed, maybe my mistake, but I did not see any of the countries highlighted. Could you provide a bit of a status update on these?
So first of all, David, from IR here, we noticed that there were some technical issues with the map. We'll upload a complete slide after this conference call on our website, on the IR page, and let Sofia answer that question.
Yeah. So then I will have to visualize it for all of you instead. So what we are doing is that when it comes to going for regulatory approval and full commercialization, we are, of course, continuously assessing different markets in dialogue with partners, but our main focus currently is on China, Japan, and as I said, South Korea. When it comes to the named patient sales opportunity, that is an opportunity for us to enter the markets more rapidly and also to pressure test the demand and understand whether the named patient sales will create a push for regulatory approval and market access, and can then facilitate the more rapid process. So that is a bit more to the tactic of doing that.
Looking at that map, we have several different regions highlighted, as you will see when it gets posted on our website. We have in Latin America Brazil and Colombia as two countries. We have, actually, discussions with the African region with our primary interest and focus on South Africa, even though there may be more countries there to add to the mix. We're also in discussion with Israel. We have discussions around the small cluster of countries in Kazakhstan, Uzbekistan, Azerbaijan. I think that is our current focus, in addition to, of course, Central Eastern Europe, where we have already before said that we are discussing where to go first.
Okay, that's very helpful. Thank you. Maybe one last question. In terms of timelines for 2024, so what would you highlight here? What are the main events that we should be on the lookout?
For 2024, obviously, now we're in the second quarter, and when Spain takes off, and if we just focus purely on revenue, which of course, both you and we are very focused on, I would argue that adding Spain, even though it's, of course, you know, unlocking region per region, it should, together with the growth in Germany, give us a boost. We are still standing behind the acceleration in 2024, which I think is our most important goal and what we are really focused on achieving, of course. When it comes to partnership discussions, I can foresee that we will conclude more partnerships on the inpatient sales. I can also tell you that we're aiming for concluding at least one out-licensing deal in Asia this year.
And then when it comes to our pipeline, as we have been mentioning, we are advancing well when it comes to the CD selection for SPiKE, which is a truly exciting platform. So that's also something that we are looking forward to. And then today, I didn't speak too much about our PDC platform because we are intensively strategizing around this, and we'll get back on our strategy in the second half of this year for our PDCs.
Okay, thank you. That's all from our side.
Thank you so much, Luisa.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.
In written questions, we have one: What is the likelihood of more new equity issues before becoming cash flow, cash flow positive in 2026?
So, thank you, Yuri, for that question, and as we have communicated, we are aiming to become profitable in 2026. That profitability will be for our European commercialization and progressing our preclinical pipeline. Our current strategy is to aim for partnerships when it comes to the different pipeline compounds. But we are not already with our full R&D strategy, and we'll of course come back to how we aim to do that. So to your question, our aim is to have these rights issue supporting us until we becomes profitable.
Two more questions that you have been answering, but maybe just a quick recap. The one, one question is: How big is the estimated market for China, Japan, and Korea, and when we can expect an update? The other one: When do you expect to announce the next drug to move forward in the R&D portfolio?
So when it comes to China, Japan, Korea, it's three very different markets. Of course, both in size, in terms of, market access, as well as actually regulatory processes. I think it's too early to become too specific, but I can speak a bit to the different dynamics of the different markets that is feeding in to your question and hopefully gives you more clarity. So let's start with Japan. So in Japan, we've already started to interact with regulatory authorities. We are discussing with different partners, and it's clear to us that given that we do not have Japanese patients in our clinical development program, we would have to generate a bridging study.
A bridging study is a fairly light study in the context of studies that is proving that we have the same benefit-risk profile in Japanese patients versus our studied patient population. In general, if you talk about time to market, considering this type of study, the fastest you can get to the market is three years from the initiation of the study and the regulatory process. When it comes to China, we have a similar situation there, but the regulatory interaction looks slightly different. It takes more preparation to get to the regulators, and that is what we have been focused on so far. In parallel, been discussing with different partners. But we assume we will end up in the same situation in China, where the partner will then have to do a bridging study.
I want to be very clear that these bridging studies, we are aiming to have the partner take the cost of. Time to market in China is then similar to Japan if everything runs smoothly. In China, there is actually also an opportunity for named patient sales that one can start to look into once you have concluded your regulatory strategy. When it comes to Korea, that is a much smaller market, obviously. As I stated, we find it interesting because we do have clinical experience, and as everywhere we have clinical experience, the physicians tend to ask for Pepaxti, which speaks, of course, to the benefit of the drug and the high unmet need for these patients.
And that is what has happened in South Korea, and that is also why partners are really interested to take on South Korea. And even though the potential is fairly low, we believe it will grow over time, and that is actually an expanding market opportunity we could look at with a fairly swift timeline to market. So in the best of cases, if the kind of most positive regulatory scenario takes place in Korea, we could enter Korea already ahead of 2026 or in 2026. But that still needs to be confirmed because we are working to also interact with the Korean regulatory authorities to get that clarified. So I hope that gave you all some more favor to these three markets, and then as we are advancing and progressing, I can give you more details.
There is also a question, when do you from, Martin—thank you, Martin. When do you expect to announce the next drug to move forward within your R&D portfolio? So as I've said, we are now in candidate drug selection from our SPiKE platform, and once we have selected the candidate drug, we will of course announce that and the next steps for the SPiKE platform. And in regards to time, science and research is always science and research. It's difficult to put a specific timeline, but our ambition is to get back to you, within, you know, the coming months, basically.
That's all the questions. Some closing remarks?
I would like to thank all of you, and again, as I said in the beginning of my talk, we are very appreciative and thankful, both to our major owners, but also to all of you shareholders whose owning shares or who has has been with us for a long time, or who have just entered the company, for all the support throughout this process. Because with the rights issue, we have now stabilized Oncopeptides to be able to focus on our European commercialization and to rebuild the company, with, of course, now the sales of Pepaxti taking off, but also with an exciting future, with, I think, very promising assets in our pipeline. So thank you all for your confidence.
We will continue to work hard to deliver on our plan and get back to you after the second quarter, which is actually not too far away.