Welcome to Oncopeptides Q1 report for 2023. 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 Monica Shaw and CFO Holger Lembrér. Please go ahead.
Good morning, everybody. I'm delighted to welcome you to our Q1 webcast. This is our usual disclaimer slide. Today, what we'd like to cover is our Q1 highlights, the progression of the commercialization of Pepaxti, our next steps as a company, and our financials for the quarter. Looking at our Q1 highlights, I started as CEO on the fourth of January, and Holger started as CFO on January the 18th. We continue to be rewarded for our innovation with a research grant from the Sweden Innovation Agency to explore our PDC platform further beyond hematology in solid tumors. We continue our scientific engagement with publication of LIGHTHOUSE, ANCHOR Data, and OCEAN Quality of Life. After the period, we're pleased to note that we were able to issue warrants to utilize our first loan tranche from the EIB, which prolongs our cash runway.
Looking at Oncopeptides as a company, these are the value drivers which were some of the reasons that I joined Oncopeptides as a company. Pepaxti now is a proven concept of our PDC platform. This is a product that has a clear place in a growing market of multiple myeloma and a differentiated product profile versus our competitors. We have a strong leadership team which is purpose-led and diversified to bring depth of experience in multiple myeloma and launch to drive this product further. We also have a promising pipeline being able to build on our PDC platform, but also with more innovation coming through from our SPiKE NK cell engagers. Our aim, our vision ambition for patients is to have treatment without compromise, treatment that prolongs life, but not to the detriment of quality of life.
We look to underpin this with a financially disciplined company, making sure we target our cash resources where they generate the most value for the business. Looking at our leadership team, we have a small leadership team, but with a depth of experience and expertise that allows us to successfully launch in a space such as multiple myeloma. We have clear commercial excellence with myself with 15 years of launches, Sofia, our Chief Commercial Officer, and Holger, our Chief Financial Officer. We remain rooted in our science and are pleased that Jacob continues as our Chief Scientific Officer, ably supported by Eva, our Chief Operating Officer. If we look at our experience, we have credentials that allow us to combine scientific discipline with commercial expertise.
We have both strong medical but also scientific experience and what is important in this area, deep hematology launch experience and a healthcare professional network that allows us to reach our target customers. In the field, we have a hybrid science and business mindset that allows us to make the most of the small focus team that we have. We have a depth of launch experience with over 24 products launched across our leadership team. We are a diverse team with diverse experience across different backgrounds, utilizing our experience in both big pharma but also small company and rare disease. We have a focus on inclusion with multiple companies being represented and a strong gender balance. We continue to have a scientific focus that is rooted in the multiple myeloma market. This is the second most common hematological disorder and continues to be an unmet need for patients.
As I've talked about before, my father passed away 10 years now from multiple myeloma. I know that Pepaxti is a product that he would have wanted to take due to his differentiated profile. There are new therapies coming through. The focus of CAR-Ts and BiTE is better suited for younger and healthier patients, given the logistics and given the side effect challenges that these products bring. The treatment of multiple myeloma is a marathon, not a sprint. These are patients whose treatment options as they progress through each relapse diminish. We know that these patients also experience treatment fatigue. Imagine going through this journey and having each time after each treatment the necessity to go into hospital to engage with intensive treatments that take you away from your friends and family.
By the time that patients reach their later life of family, it's important for them to have a product that really allows them to have efficacy, but not at their detriment of quality of life. This is what our multiple myeloma patients deserve. A product that is accessible and affordable in a space where there is currently limited treatment options. Options that have been used are often exhausted. This is also what we hear from our KOLs. These are some of the top customers who are looking to partner with us because they see that unmet need continuing. Whether it's because patients with multiple myeloma in the more advanced setting are often not fit and suffer from side effects, whether they've already had so many treatments that they need something that doesn't impact their quality of life.
Underpinning it all, that they still want to have disease control and a meaningful extension of their life where possible. This is what we believe we offer with Pepaxti. The unique mechanism of action based on our PDC platform allows us to reach this trinity of efficacy, safety, and quality of life. We are able to bring meaningful benefit to patients with triple class refractory multiple myeloma. This is an opportunity for patients who have been through a number of therapies to switch to a new mode of action that allows them a new efficacy in patients who have been heavily treated. Compared to our competitors, we have a strong safety profile that is of adverse events that are manageable by hematologists and are not a detriment to patients.
We have shown also over time that treatment with Pepaxti allows us to sustain or improve our quality of life. This is underpinned by our clinical development program through HORIZON, OCEAN, and LIGHTHOUSE, demonstrating data that supports Pepaxti in this patient population. Within our label population, as confirmed by our label with EMA, we have a progression-free survival of 9.3 months. This compares very favorably with our competitors in this line of therapy. Pepaxti is at the foundation of our company, but we also believe that we have a differentiated go-to-market approach. We have very specifically targeted our country rollouts to maximize our profitability.
Starting with Germany, where we are able to go to market early and discuss pricing as we go, we are now understanding our pricing reimbursement approach across Europe and ensure that we are targeting the countries where we can join maximum potential with pricing reimbursement and an efficient cost base. Our strategy in the field has been to have a focused field force that has a strong mix of science and business backgrounds. We are already seeing the benefits of this approach in Germany with our customers being eager to engage on the science, but with our field force being able to engage and understand how to translate this into patients. We have taken a deliberate approach to centralize where we can to optimize costs.
Our internal resources are centralized around marketing, medical, and market access, but utilizing local market access agencies to ensure that we have the correct payer discussions where needed. We have a strong value proposition for Pepaxti. When we talk about some of the competitors that are on the market, we are at a competitive cost and offer an affordable treatment solution for patients in this line of multiple myeloma. Lastly, we are looking to optimize through a mix of self-commercialization and distributor model to select our investment profile, make sure that we protect our margins, and optimize our P&L that provides us a future of a profitable business. How do we see the future of Pepaxti rollout? We have already launched in Germany. We are starting to acquire both the breadth and depth of prescribing advocacy that we are looking for.
We have a couple of examples now of clinics where we've had access that we are able to get people to try Pepaxti. Once people have that clinical experience, they start to use. What I find very encouraging is that where we are able to get access and engage with customers, we hear a willingness to prescribe. We hear that people agree with our assessment that there is an unmet need in this elderly population looking for efficacy, safety, and maintenance of their quality of life. They believe that the data that they see with Pepaxti addresses this. We will continue to negotiate our price with the German payer authorities. We believe this should be finalized by quarter four. Our Type II Variation is in progress. We have had good discussions with EMA. The outcome is due later this year in quarter three.
We are initiating our expansion into new markets, starting our pricing and reimbursement discussions with a clear value proposition. We are encouraging, where we can, early access programs to allow patients to access the treatment and doctors to get early experience with our product. We are exploring distributor options in parts of Europe and already have an agreement with Ariti in Greece. This came about actually because we had investigators from Greece as part of our clinical studies, and there had been a strong pull from them having used the product already to be able to have the product for their patients in the future in Greece. We were able to start this partnership option already. We will explore partnership options in both China and Japan that we know are potential significant markets for this product.
When we look forward, our goal is to have Pepaxti launch in the majority of European countries by 2026. When we look at our financials, we believe that will allow us to become a profitable business after three years. As well as engaging within Germany, we have had strong activity across Europe to increase our scientific trust and conviction with Pepaxti. It's important that we continue to engage on the science, and we have issued data this year in combination with LIGHTHOUSE and ANCHOR but also importantly, given our positioning for OCEAN quality of life. We have increased our presence on the ground at multiple congresses, both in Germany and across Europe, to reestablish our presence in this area and allow us to engage with our customers, not only in Germany but across Europe in preparation for future launches.
While Pepaxti is of course our flagship, we continue to progress our pipeline powered by two platforms. Our PDC platform, of course, is proven with Pepaxti, but we have the ability to impact not only multiple myeloma but beyond. This platform allows us to exploit the difference between healthy and cancer cells to target the cancer cells specifically. This potentially improves patient quality of life through less side effects. With this platform, we are able to build up a number of potential follow-up molecules that can expand within hematology but also beyond into solid tumors such as glioblastoma, mesothelioma, and triple-negative breast cancer. We have already received a research grant from Vinnova to explore this PDC platform further in this area, and we're excited to continue these collaborations. We have a further innovation with our SPiKE platform. This is a natural killer cell engaging immunotherapy.
Natural killer cells are becoming an increasingly interesting target to avoid cytokine release syndrome associated with T-cell activating immunotherapies. For us, the SPiKE platform enables us to engage not only with natural killer cells but also using an antibody platform, develop a small molecule that allows us to target the receptor more closely and also potentially offer a larger, more cost-effective manufacturing progress. We are excited to progress both of these platforms. I will now hand over to Holger for the financials.
Thank you, Monica, and good morning all of you also from my side. Please next slide, Monica. Starting with the financial summary of the first quarter. Sales ended at 1.1 million SEK, up from 0.6 million SEK in the last quarter, and this sales is all related to Germany. COGS was rounded minus 0.0 SEK, giving us a gross margin of 1.1 million SEK. Operating expenses decreased from 99.1 million SEK in Q1 last year to 75.3 million SEK in this quarter. EBIT for the quarter was -72.7 million SEK, down from last year's -98.9 million SEK. Net financial items for the quarter was 0.5 million SEK, due to interest and the revaluation of our currency accounts. Next. Looking into operating expenses, we see a decrease from last quarter with 26%.
This is mainly an effect of SEK 23 million in refunds we have received from completed clinical studies that is resulting in a lower R&D cost in the quarter. Sales and marketing expense is continuing to increase as our commercial activities in Europe is now ramping up in the quarter. We are continuing to onboard people in the coming quarters, this cost will continue to increase slightly quarter by quarter in line with our commercialization plan. General administration costs decreased compared to last year, mainly due to savings on the consultant side. Cash flow from operating expenses was minus SEK 89 million in the quarter. Next. Looking into our liquidity, we ended the quarter with a good cash level of SEK 254 million compared to SEK 194 million last year.
Depending on how sales developing in the coming quarters, our current cash might last until end of the year. To ensure we have sufficient liquidity for the coming 12 months, we have decided to utilize the first tranche from European Investment Bank of EUR 10 million with expected payment during May. When it comes to capital rise in general, we, as many other biotech companies in the startup phase, is continuously evaluating options that is on the market, likely we will need some kind of equity rise in the future to bridge until we have a positive result and it's cash positive, which we are targeting for 2026. With that, I'm leaving back to you, Monica.
Thank you, Holger. We are doing all we can to reach the market opportunity by being financially disciplined, as you heard. We believe looking at the market potential that we have the ability to be cash positive by 2026 with a targeted European launch plan. We have clear aligned goals for 2023 that center around strong financial discipline, launch success in Germany, geographic expansion both in Europe and through partnerships beyond progressing our pipeline and a foundation of people and culture. I joined Oncopeptides in January because I strongly believe this is a company with clear foundations. For me, Pepaxti is a clearly differentiated product with a clear positioning for patients who are looking for efficacy without having to sacrifice their quality of life.
We have an innovative pipeline that allows us to expand not only within multiple myeloma but beyond, and we have a positive cash discipline that allows us to see a future as a profitable company. With that, I will open for questions.
If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Luisa Morgado from Van Lanschot Kempen. Please go ahead.
Hi. Yeah. This is Luisa dialing in for Susanna. I have a few questions to ask you. First, if you could maybe elaborate a bit more on how is the launch going in Germany, but also when can we expect updates on which countries, additional countries, will you do launches next? And the also I would like to ask regarding the Peptide Drug Conjugate platform, what are you looking to do here with this platform? Do you already have any more specific plans, let's say, for product candidates?
Sure. Let me address those in turn. The Germany launch is going according to plan. We know that in this space of multiple myeloma, if we look at our competitors in terms of launch trajectory, the early launch months are always gradual because HCP customers will always use these products in later lines of therapy where there are fewer patients and less cycles of treatment. What you see from competitor analogs is that that's where HCP start using the product, and as they gain more comfort, they start to use it in earlier lines of therapy. What I'm really pleased about is that when we do engage, when we have access to customers and we present the data and the product profile, what we hear consistently is that they do recognize that there is an unmet need.
Clearly everybody is interested in CAR-T and BiTE, all of these products are targeting a particular type of patient, young, fit, able to be resilient to the side effects that come with it. There is really this underserved patient population, which is the older patient population who are fatigued with treatment. They've been through a number of treatments already, and they're looking for something that of course gives them that efficacy but maintains their quality of life. When they hear the product profile of Pepaxti, they are very clear that this is a product that has value for them in the market. The launch will be gradual, the product profile is being extremely well received, and I think that's the most important indicator for me at this point in time.
In terms of which countries we will launch in next, we are engaging in pricing and reimbursement discussions. We're starting that activity now in a number of countries. Of course, as you know, each of the markets is slightly different in terms of how they approach pricing and reimbursement negotiations. We are still working on that currently and we will share more information later on in the year. Our PDC platform has a variety of potential. We have done some preclinical work in a number of indications. What we are looking to do now is to really match up where we see the highest probability of scientific success, also where we see the highest likelihood of commercial success then formulate a strategy for that moving forward.
Very clear. Thank you. Also, if I could just add a few more questions. Will you provide in the future any annual sales guidance? Besides that, what can we expect in terms of sales for Pepaxti for the next quarter, so for the remainder of this year, let's say?
So as I mentioned you know, these launch uptakes are always gradual, so we will not be of course, providing guidance just yet. I think as we've communicated previously, we see a potential market of SEK 1.5 billion-2 billion. With what we have been working on the last few months, we see that as attainable and with a clearly profitable business case and a path to profitability in the future, which I think makes us very excited for the business.
Thank you so much.
Thank you.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad.
So perhaps, Holger, we could take, there's a question around could you please give us some color on the cost side? You've spent SEK 100 million during Q4 and nearly SEK 90 million during Q1. R&D explained some of the costs, but what does the rest represent?
We're breaking it down, we have operating expenses of SEK 75 million in the quarter, in the first quarter 2023. It was a split of R&D, research and development cost of SEK 30 million. We had about SEK 23.5 million spent in marketing and sales and medical affairs operations. SEK 21.8 million was related to administrative costs for us in the quarter. The significant difference from the fourth quarter in last year was the lower R&D costs. As mentioned before, related to refunds from completed clinical studies, as well as somewhat lower cost for clinical trials. What we see on the other side, cost going up is for the launch and the commercialization we are now building up in Europe.
I will also take the question, any chance you'll be able to get approval in the U.S. at any point again, or is that a lost cause? As I mentioned the last time, you know, I believe that the data that we have for Pepaxti is clear that this is a product that has a place in the market that is able to help a significant number of patients. EMA clearly is very aligned with that view. It would be great to think that there is a potential path forward with the U.S. We are certainly open to discussions. I think for us at this point, it's about understanding whether there is a development pathway forward that makes a business sense for us. That's something that we will continue to be looking into.
Maybe another question for yourself, Holger, when do you expect to have to raise capital again?
As I mentioned before, we as many other biotech companies in the startup phase, is always evaluating the options there is on the market when it comes to fund the operation. As mentioned before, likely we will need some kind of capital equity rise in the future to bridge until we are coming into positive result and cash positive as well as we're targeting for 2026. In point of time, there is no exact date to give at this stage.
Thank you, Holger. I'll give it a minute to see if there's any...
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Thank you again for your interest in Oncopeptides. I think we have an exciting future as a company to serve patients and also become a profitable business. I look forward to sharing our progress during the rest of the year.