Welcome to Oncopeptides Investor Call 2024. 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 call for investors and analysts concerning our recently announced rights issue. Before we begin, let me show you our disclaimer and underscore that information in this presentation is not for release, publication, or distribution directly or indirectly in whole or in part in or into the U.S., Australia, Hong Kong, Japan, Canada, New Zealand, Singapore, South Africa, or any other jurisdiction in which such publication or distribution would be unlawful. Now, my name is Sofia Heigis, and with me on this call I have our CFO Henrik Bergentoft. And on this call we will cover what we announced today and provide a recap on the most important next steps for investors. I would encourage you to always check oncopeptides.com for recent updates and information.
Earlier today we published a video interview with me and Henrik together with our IR head David, and we will keep posting updates and address questions that we might receive along the way. After we have covered this, we will then speak to our journey to achieve the goal to become profitable in 2026. By that, I would like to hand over to you, Henrik.
Yes, thank you, Sofia. Today the company announced that the company will undertake a rights issue of SEK 300 million, and it is fully guaranteed, which is an important message to each and everyone. It still continues on an extraordinary general meeting, which is planned to be held on April 15. That said, we want to highlight that the rights issue is supported by a number of the company's largest shareholders as well as members of its board of directors and management. The proceeds from this rights issue will primarily be used to support the commercialization of Pepaxti in Europe until the end of 2026, where the company with sales of around SEK 400 million expects to be profitable. We will come back to that journey later in the presentation.
So there are a couple of steps and dates to keep track of in this process. First and foremost, perhaps, is that the rights issue is continued on an extraordinary general meeting that will be held on April 15th. There will be a separate call for this meeting, again underscoring that larger shareholders have already committed to vote in favor of this rights issue. For existing shareholders, May 3rd will be the last day where you can subscribe to participate in this rights issue. And the rights obtained in this rights issue will be traded during April 19th throughout April 29th. For potential shareholders, you have the opportunity to be included in this rights issue and be given rights if you buy shares before April 15th. And trading of these subscription rights, again, will be done between the 19th of April and the 29th of April.
So by that, back to you, Sofia.
Thank you, Henrik. This injection of cash will support our journey to become profitable in 2026. I will now speak to the major contributor of that, which is the European commercialization. A recap on our European commercialization case. Multiple myeloma, the disease we are addressing, is incurable, and it offers an expanding market opportunity. Currently, estimated at SEK 1.5 billion for Pepaxti. This is based on the full approval we have in Europe in a late-stage population with very few treatment options left. As we have previously communicated, we have launches ongoing in Germany, Greece, where we have, with different means, managed to successfully access the markets. In Germany, we have successfully negotiated a price through the regular process, and in Greece, we are selling together with a partner on an inpatient basis.
Other European markets will follow near term as we conclude the different market access negotiations, where we have just recently announced that Spain is first in line. We are looking towards a highly profitable business, taking us to profitability with around SEK 400 million of sales in the full year of 2026. What is then supporting this profitability goal? Well, first, we have a highly attractive business model that Henrik will speak more to in a short while. Of course, most important is that we do plan to accelerate sales as we are unlocking markets. We are primarily during this time period looking at the countries that are included in our launch phase I and II that we are working intensively with. Altogether, as already mentioned, this would mean full year revenue of around SEK 400 million in 2026. There are additional upsides to this.
So if we would be able to unlock market access in launch countries in phase three and four, and if we would be able to close deals to commercialize Pepaxti outside of Europe or generate value from our pipeline assets, that are upsides to this case. And we do have a strong research organization that is primarily supporting the commercialization but also developing our pipeline. And a small amount of these proceeds will ensure that we progress with the preclinical work we are doing to generate value from those assets. If we make a recap of what we reported just recently, we had SEK 5.3 million of sales in the fourth quarter of 2023 and a cash position of SEK 173 million. And we communicated back then that financing to ensure that we can reach 2026 has been a high priority for us.
That is due to that to commercialize in Europe is over time profitable, but it is a region that takes time to unlock in terms of both market access but also when it comes to penetrating the different markets. However, commonly concluding in a very profitable business at the end of the day. The recent positive news both from Spain is confirming our trajectory, our competence to achieve this plan, but also the recent news on that we have prolonged our market exclusivity in Europe with five years is further supporting that we will be able to generate a lot of value until 2037. What we have guided the market on is that based on that we have been building as we have been launching, we have guided on a positive trend quarter by quarter.
We were happy to announce this for the full year of 2023, where we between Q3 and Q4 had a 90% increase in net sales. If we look at further details of the European commercialization and how we are moving about, our ambition is, of course, to launch as fast as possible with a price that is reflecting our innovation because this will then provide both patients and shareholders with the best value possible. Based on that principle, we have set up a launch sequence where we have phase I and II standing for 55% of the potential. The German-speaking countries and Greece, where we already have the ability to sell, and then the next wave of markets, including Spain, Italy, Ireland, the Nordics, and Netherlands, will support our goal of profitability in 2026.
In addition, we have big markets such as France and the U.K., where we are working on access strategies. We also have Central East ern Europe, where we are looking for a partnership standing for a smaller portion of the potential, which is 10%. If we start to look at the German market, which is the first and the largest market in Europe, based on where we came from, we had to both put the product on the market and build the team and start to prepare the market at the same time. During 2023, we did this buildup, as you can see to the bottom of this slide with the green bars. We managed to recruit and complete the team by the fourth quarter. Along with this build, we could see how European sales generated a positive trend in line with what we guided on.
In addition to building the team and starting to sell and generate the clinical experience in a market where we had basically no clinical experience or awareness, we also managed to negotiate the price within the given time for a price negotiation in Germany. We managed to do that within the target of our corporate goal, which is not to be taken for granted. I believe it's a testament to the market access competence we have in the company. We could also see from a very low level, we started to increase spontaneous awareness, and we also have started to gain more support. Germany is a scattered market with many customers that are prescribing drugs to multiple myeloma patients, and it commonly takes a long time to penetrate.
But to my first point, it's a large market, and over time, it is commonly shown to be a very profitable and fruitful market. So in 2024, we are looking to, of course, accelerate the sales and continue our journey to capture the full value of this market in the coming years. And one activity that we have put in place that is important to Germany but also to the rest of the European commercialization is the real-world study that we planned for and where we started to initiate sites earlier this year. If we look to the further commercialization and expansion across Europe, the market access process consists of different steps where you start to build your value dossier, and you start to engage experts to get feedback and input on your position.
Based on those activities, you then submit a dossier in most countries to authorities, and you discuss the benefit, which is then leading to price negotiations and either national access will conclude or you have to also do regional access. This is our roadmap. So in Sweden and France, we are at the first step. For Netherlands, Ireland, Norway, and Italy, we have moved into the second step of this process. We were really happy to announce that we, in record time, managed to move Spain into price negotiations and actually also conclude with a positive price recommendation. We are now in a process where we are working on the contract again with the Ministry of Health, which will lead us to the regional access process.
What we foresee is that we will be able to start to sell at the uptake second half of 2024. This is the overview of Europe and what's behind us becoming profitable in 2026. The important part of that is, of course, also how we operate. I would like to hand over to you, Henrik, to speak to our business model.
Yes, thank you, Sofia. So as Sofia just stated, that the business model is one of the important ingredients that will take us to profitability towards the end of 2026. And here we want to highlight a couple of the ingredients in this business model, starting off with the fact that we do believe that we have a very cost-efficient business model. That really comes from the fact that after us retracting from the U.S., we had the ability to start from a clean sheet and really tailor-made an organization fully focused on the European commercialization. So we have designed our organization in a way that we have as much as we can of corporate functions centralized to the Stockholm office, making it an efficient organization both from a cost perspective and operational perspective.
Locally, in each country, we will only have what is required for that specific local market in order for us to reach the commercial potential in that market. Another flavor of cost is our cost of goods sold. And manufacturing our drug, Pepaxti, is, in relative terms, fairly cheap. So that means that we foresee a gross margin that will be above 95%, making our business model not scalable but fairly close to being scalable. Coming back to the cost side, and as said, we will design our local setup in each country with an organization fit for purpose, meaning it will reflect the specific conditions in each and every country. So if we take the Netherlands, for example, that has a very centralized healthcare structure, we need as little as two of our employees locally in the Netherlands then backed by corporate functions here in Stockholm.
All of this combined gives us the ability to generate high profit margins. On average, in our plans for each country, we have EBITDA margins above 50% when we reach peak year sales. Peak year sales, we usually reach year three after a launch. This also means that our time to break even is fairly short. On average, we have a break-even result on a country-level year two after a launch and after that quite rapidly move towards the 50% EBITDA margin. By that, back to you, Sofia.
Thank you, Henrik. So the injection of cash will primarily support the journey of our European commercialization for us to become profitable in 2026. But we do also have next-step value drivers. And we are continuing to work to find ways to commercialize outside of Europe, where we have our greatest focus on China and Japan, where we have been interacting with regulatory authorities but also doing business development activities as we do look to find partners to take on those regions. And we are also looking into other parts of the world where named patient sales can be a start of providing access for patients to Pepaxti, where we have, among other regions, been focused on the Middle East and North Africa.
When it comes to our pipeline assets, a small amount of the proceeds and the funds that we have been raising now will be funding the progression of the preclinical work that we are executing in relation to our pipeline assets. Here we do have two platforms: the SPiKE platform, which is an NK- cell engager platform, and in essence, it has the potential to become both effective and very tolerable immunotherapy, and then the PDC platform, where we have two more peptide drug conjugates. OPD5, which is a sister molecule to Pepaxti, is actually already granted an Investigational New Drug status by the FDA. Then OPDC3, which is building upon Pepaxti's benefits with even more enhanced selectivity, that could potentially also be used outside of hematology. We are looking for partnerships to further develop these PDCs.
When it comes to the SPiKE and NK cell engager platform, we are currently selecting a candidate drug and again looking for partnerships to develop these platforms further. By that, I would like to summarize the core of our business that we are now building on the Pepaxti from, which is the European commercialization case, where we are operating with an incurable disease and an expanding market opportunity that is currently estimated to SEK 1.5 billion for Pepaxti. This is, in many ways, a de-risked case from a regulatory perspective as we have a full approval and from a clinical development perspective as we then have no post-marketing commitments. We have the ability to take a unique position here given that there are very few treatment options left for these patients. We have just initiated the launch across Europe with sales in Germany and Greece.
As I have been walking through, we are working intensively to have more markets following in the near term with Spain first in line. We are looking towards a highly profitable business taking us to profitability with SEK 400 million in sales in 2026. By that, I would like to thank you all for listening and opening up for questions and answers.
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 Raquel Martins Morgado from Van Lanschot Kempen, NV. Please go ahead.
Hi team. First of all, congrats on this fully guaranteed rights issue. That's a very good sign. I have just a couple of questions. First of all, I wanted to ask if there is maybe any seasonality factor that we should take into consideration for the development of sales for this year and from here onwards.
Thank you, Luisa. I mean, first of all, thank you so much. I agree with you. It's a very good sign that we have it fully guaranteed and that there is a great interest in the company from that perspective. Second, yes, as multiple so it's a very good question. As multiple myeloma is a disease of the immune system, there is commonly for these type of diseases a seasonality factor where the first quarter can be slightly slower due to that there are a higher rate of infections in the society, of course also influencing and affecting the patients that are quite vulnerable to infections, which is the case for the multiple myeloma patients.
Okay, very clear. If you could also expand a bit, you mentioned our RWD study initiated this year. If you could elaborate a bit more on that.
Yes. So for us, it is important to generate data in our target population to further support the commercialization over time and further support continuous market access across Europe because payers commonly want to see how the drug is behaving in real life when they, in many markets, come back and potentially want to pressure test the first negotiation of your price. So with Germany being the first market to launch, we have seen the opportunity to, I think, in a very short time, we managed to set up this study. And it will run mainly in the office-based setting in Germany, but we also have some big study sites like the Würzburg site included in the study. So from my perspective, it will generate really valuable data and will, of course, also generate good study activity on the German market while the study is running.
Okay, very clear. Thank you for taking my questions.
Thank you so much, Luisa.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.
Yeah. Again, if there are no more phone questions, there's one in writing. Maybe presenting an opportunity to repeat the key message here because the question is based on a Q for positive cash position or at least cash, would you really need the rights issue? Is the main question, and what would you do with that current cash injection?
Thank you so much for the question. So yes, the assessment of the board and the management of the company has been, and we stick to that and confirm that we have liquidity until the second quarter of this year. Looking at our commercialization plans and as I alluded to, the European region is, over time, a really valuable and with potential to become a very profitable market. But it does take time to unlock access in the different markets. And it, of course, also takes resources to build out the teams. And that is why we are now injecting cash into the company. And we have chosen this way to do it to ensure that we can, with these means, can take us to become profitable in 2026 based on our launch plans.
Another question in writing. Are you planning on re-entering the U.S. market?
So when it comes to PEPAXTO, though, which is the U.S. brand name of melflufen, we have really been doing everything we can to showcase our science to the FDA and to try to make them consider the science in the manner that EMA did when they gave us the full approval. They have, however, rejected the appeal that we made on withdrawing the drug due to pointing strictly at their regulatory accelerated approval process. So when it comes to PEPAXTO, though, we are not looking to re-enter with that drug. We, however, do have, as I mentioned previously, two more PDCs in our pipeline where one of them is fairly similar to melflufen yet being a new entity with, of course, then a longer IP.
We are looking into our PDC strategy currently and are also looking then for potential partners that could be interested in taking on the U.S. market because, as I think I've said many times, I do believe, based on our experience in the U.S. and looking at the various pipelines for multiple myeloma, that the U.S. patients both need and deserve to get the peptide drug conjugate as there is still a high unmet need for the late-stage population.
One final question in writing. What's being done to reassure the private investors?
So what we are doing and will continue to do is to be very transparent. We believe we do present an attractive case to you today. We know it's been a journey, and it's been a tough journey for many of our shareholders just as for the company. But we are now seeing the opportunity to reset the company and to be able to generate a profitable business. I would encourage you to educate yourself, reach out to us. We are more than willing to respond to your questions. We will continuously, of course, keep you updated on our progress to hopefully ensure that you feel comfortable and confident in us and our journey to profitability. By that, I can see that we have no more questions. Once again, thank you for taking time to listening in.
Feel free to reach out to us should you have any more questions. Please visit our website for more information. I wish you all a nice day.