Welcome to the Oncopeptides Q2 earnings call. 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, Holger Lembrér. Please go ahead.
Hi, everyone, warm welcome to the Oncopeptides presentation for investors and media of our report for the second quarter. These are the standard disclaimers. My name is Sofia Heigis, and on the call, I have our CFO, Holger Lembrér. After my introduction, Holger will give you the financial summary for the second quarter, followed by a commercial update by myself. While I have been the CSO of the company less than a week, I have been with the company for more than 3 years and focused the last year to lead the commercialization of Pepaxto. I therefore believe that the runway into my new role will be short. I am both humbled and excited about my new role, but I am also full of confidence for 2 reasons. I know the Oncopeptides organization, the competencies, the mindset, the engagement, and the drive.
I feel tremendous support from the entire team, the leadership team, and the board of directors. Secondly, I have a strong belief in our portfolio, not least our flagship product, Pepaxto. It is a smart innovation and a key reason for me joining the company. I will come back to the commercialization in a few minutes, but before we move into going over the second quarter and a deep dive of our European rollout, just a few words about myself, for those of you who don't know me that well. I am a pharmacist by education, and I joined the industry back in 2006, when I started in customer-facing roles within sales, clinical operations, and medical affairs. I gained a really good understanding of customer needs and how to create collaborations and true partnerships that have supported me throughout my career.
Majority of my work life, I have spent at AstraZeneca, leading teams across different functions, preparing for launches and launching. I joined Oncopeptides in 2020, preparing for and launching Pepaxto in the U.S. That is an invaluable experience for the European launch that we are currently focused on. As a person, I am resilient. I don't fear taking on challenges, but rather get energy from finding solutions together with both internal and external stakeholders, realizing opportunities through teamwork and partnerships. The key priority for me as I take on this new role is to ensuring that our many stakeholders in the investment community, including analysts following Oncopeptides, as well as both large and small investors, get a good overview of our business and can follow our progress. I look forward to getting to know many of you better in the coming quarters.
I would like to take the opportunity to say a big thank you to Monica Shaw for our close and good collaboration over the last six months, and I wish her the very best on her future endeavors. Moving to the second quarter, I am happy to see sales continuing its positive trend with 1.9 million SEK in revenue in the second quarter. Over the summer, we have also seen a strong start of the third quarter, with German sales in July slightly exceeding those of the entire second quarter. This is, of course, very encouraging, but when you assess our prospects for the third quarter, do remember that August is the main vacation period in Germany, which, in my experience, can affect sales. Holger will soon give you some more details on the financial slide.
Among the key events for the quarter, we have presented new data at several conferences. We have received the first loan tranche from EIB, which will support our cash situation. We have also seen our first sale in Greece. Outside of the second quarter, we did in July, receive a formal request from the U.S. Food and Drug Administration, FDA, to withdraw Pepaxto in the U.S. This was a formalization of what has already been communicated by the FDA. We have formally appealed this decision, as we strongly believe that our OCEAN study clearly demonstrates the clinical benefits for multiple myeloma patients, in particular for the non-transplanted elderly patients, where the unmet need remains very high. We will continue to keep our shareholders posted on our continued dialogue with the FDA.
That said, our key focus as a business is the commercialization in Europe, which I will cover in some more detail shortly. I also wish to highlight that we have announced a new CFO. Henrik Bergentoft will join the company in the fourth quarter. Henrik has a strong and varied background, and I'm sure that he will be a positive addition to our leadership team, and I look forward to working closely with him to support the future growth of Oncopeptides. With that, let me hand over to our CFO, Holger Lembrér, for a financial update.
Thank you, Sofia, and good morning, all of you, also from my side. Starting with a financial summary of the second quarter, sales ended at SEK 20 million, including SEK 24 million in reversal of provisions for returns in the U.S. That was last year, SEK 8.8 million. SEK 1 million remains as provision in our balance sheet, and that will be reversed in the third quarter, since we have not received any further returns in the U.S. Adjusted for reverse provisions in the U.S., sales was SEK 1.9 million in the quarter, up from SEK 1.1 million in last quarter. This sales is including both Greece and Germany, as Sofia mentioned. COGS was rounded to -0.0 for the quarter, and gross profit ended at SEK 25.9 million.
Expenses increased from SEK 72.6 last year to SEK 89.1 million in the second quarter. EBIT for the quarter was minus SEK 62.4 million, up SEK 1 million from last year. Net financial items was quite high in the quarter with SEK 5.8 million, and that is due to higher interest on our short-term placements, as well as revaluation of our currency accounts. Looking deeper into the operating expenses, we see an increase from last year with 23%, while R&D is going down SEK 6 million compared to last year, and we see this continuing into the year as we have now completed the OCEAN study, and no other clinical studies are currently ongoing. On the other side, we see sales and marketing expenses continuing to increase as our commercial activities in Europe is building up.
Since we are onboarding people also in Q3 and Q4, these costs will continue to increase slightly quarter by quarter, in line with our commercialization plan. General and admin was slightly down compared to previous quarter due to low costs for consultants, but up SEK 1 million compared to last year. Cash flow from operating expenses was minus SEK 77 million in the quarter. Looking into the liquidity, we ended the quarter with a good cash level of SEK 294 million, compared to the SEK 345 million in the start of the year. This is including the first loan tranche from European Investment Bank of EUR 10 billion that we received in June, and that is aimed to be repaid in June 2028. The interest for the loan is fixed at 7% for the period.
Depending on our sales developing, our current cash is expected to last until Q2 2024. When it comes more specifically to capital rise, we, as many other biotech companies in our phase, is continuously evaluating the options there is on the market, and likely we will need some kind of equity rise in the future to bridge until we reach positive result, as well as cash positive, which we are targeting for 2026. With that, I'm leaving back to you, Sofia.
Thank you, Holger. The purpose of this is twofold. First, to give you an understanding on how we are working towards expanding our efforts to sell Pepaxti across Europe. Second, to give you a better understanding of how the launch is progressing in Germany. As we have previously communicated, while our current focus is on building a team and the momentum in Germany and continue to build on the partnerships with Ariti S.A. in Greece, we are in parallel working on launching Pepaxti in other parts of Europe. Current focus across Europe is to market access for Pepaxti to prescribe Pepaxti at an approved price by the payers. We have divided our launch strategy into three phases, with the first being countries where we have sales channels today in Germany, with Austria, Switzerland, and Greece able to buy Pepaxti from Germany.
Phase two being countries where we are relatively close to submit a value dossier or launching. Phase three consists of markets that we are still assessing for the optimal path. I will go into more detail on these phases and what steps needs to be taken to be able to launch a drug. The process of gaining market access includes several steps. First, a value dossier needs to be submitted, including evidence and arguments for the price we are suggesting. The second step is the review by authorities that is leading to a third phase, which is the negotiation phase. The timeline for this process is highly variable, and conclude an approved price commonly takes between 12-24 months. In most countries, drug prices are negotiated between the government or insurance companies, companies, and the pharmaceutical company.
The negotiation takes into account various factors, such as the drug's effectiveness, the existence of alternative treatments, and the ability of patients or healthcare systems to afford the drugs. In addition, there may be a fourth step, as quite, quite a few markets require regional negotiations and guideline work based on a decentralized healthcare system, such as Sweden. The process from marketing authorization to established sales in a country or region differs vastly across Europe, and this slide shows average timelines for the various steps. I will come back to this slide in a minute for some more granularity on where we are in specific countries. First, let's take a look at Germany, our key market right now. In Germany, we are compared to a normal launch, still catching up to ensure we have the accurate awareness and understanding of capacity to reach patients.
This is, of course, dependent on having a full team in place with the right competencies and network to cover all of Germany, which I am proud to say that we will have by the fourth quarter 2023. We initiated the launch last year with hardly no clinical experience in the market, very low awareness, and only one person dedicated to the field. As we have been onboarding more people, I can see how fast we are progressing to reach an activity level that over time can translate into more patient uptake. The feedback we gain is very consistent. The product is compelling, the unmet need is evident, and it is now a matter of identifying the right patients. This takes time in Germany, as we do have over 2,000 prescribers treating multiple myeloma patients.
We have confirmation that we are doing the right things as we are seeing a positive trend also in our sales, although from low levels. Finally, I wish to share that we are price negotiating to conclude a price in Germany. The process is so far progressing according to plan. Moving back to Europe, in some countries, we have managed to agree with the payers to submit a more simple dossier, given multiple myeloma is a rare disease and a high unmet need in later lines. This has allowed us to already enter the second phase in the Netherlands, ensuring we can submit a dossier in Norway faster than what the payer authority had first indicated. We are this of process other smaller markets with the aim to gain access faster.
For larger markets such as Italy and Spain, we need to follow the regular processes and are currently working on the value dossiers for those countries to be submitted later this year. In parallel with the market access efforts, we are working to prepare the markets for launch together with key experts and medical societies, ensuring we have a good understanding of capacity and the target patient profile at launch. We have a collaboration with Xenios Healthcare, supporting us with people in Netherlands, Spain, and Italy, while we have hired our own MSL in the Nordics. The launch sequence and sales strategy for Europe is based on a thorough assessment, concluding how we can achieve market access as fast as possible without lowering the price to a level that is not reflecting our innovation and provide enough patient and shareholder value.
The multiple myeloma treatment landscape is evolving rapidly, and it is clear that our greatest opportunity is in the late-line setting, which is our current indication. It is important to remember that what was true 12 months ago may not be true today. We have developed an effective and tolerable cancer drug aimed at providing time and quality of life for patients. Payers do not per se value incremental innovation, but within multiple myeloma, they do value effective, tolerable drugs that supports patients and maintain quality of life, and at the same time, do not drive high levels of additional healthcare costs. Our current focus is to demonstrate that this is exactly what we can provide. In essence, our pricing strategy is about striking the right balance between the risk-benefit and the affordability.
We aim to make a difference in the lives of late-stage multiple myeloma patients as quickly as possible. This approach not only positioning us to serve a critical medical need in the market, but also enhances our long-term growth prospects. Lastly, Oncopeptides submitted a Type II variation in the fourth quarter, 2022, to potentially enable access to early lines of treatments for patients. We expect an opinion from EMA and the CHMP in the third quarter. Should we receive a positive CHMP opinion, we have to assess the rapidly evolving landscape at that time to conclude the very best way forward from access perspective, securing that we can deliver the best value for patients and shareholders. By that, I would like to thank you for your attention and open up for Q&A.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad.
There are.
The next question comes from Luisa Morgado, from Van Lanschot Kempen. Please go ahead.
Hi, team. Good morning. This is Luisa, dialing in for Susanna. I have a few questions. Maybe on the formal appeal that you are initiating now, what are the timelines that you expect here? What is the process? What is the length of the process here, and when do you expect the first answer, let's say?
Hi, Luisa, this is Sofia speaking. I'm sorry, I could not quite hear the first part of the question. Can you please repeat? I understood you asked about timelines and length of a process, but I missed the topic.
Hi, sorry. Indeed, so, that's regarding the formal appeal that you are doing now against the, the request from the FDA to withdraw Pepaxto.
We, we have submitted our appeal, and to respond is now in, in the hands of the FDA. It's difficult for us to assess when they will come back to us, but according to the legal processes, we would assume that we would hear from them the second half of 2023.
Okay, clear. Thank you. Maybe also regarding the cash position, well, as you said, the cash position includes the first tranche of the EIB loan. When do you expect more or less, or do you have any idea to when are you going to withdraw the remaining tranches?
Sorry, can you repeat the question, Luisa? I think the line was breaking off, breaking off.
I'm sorry. I was asking regarding, so, the cash position right now, includes the first tranche from the EIB loan. When do you expect to withdraw the remaining tranches? Do you already have any timelines, or will you evaluate this as you go?
As you see in the report, we have currently EUR 294 million in cash. We expect that to, of course, depending on how sales is going, to last until Q2 2024. At this stage, we are not taking any decisions regarding the second and the third tranche from European Investment Bank, that will be assessed as we go going forward.
Okay, thank you.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Before the closing comments, we have one written question for Sofia and Holger, that is: how are you competing with bispecific antibodies that are being rolled out in multiple myeloma now?
Thank you. Bispecific antibodies is a great innovation, and we welcome new medicines into the area of multiple myeloma based on the high unmet need. We do believe that there is room for both Pepaxti and bispecific antibodies based on the different profiles of the drugs. We can serve a need, in particular in non-transplanted elderly patients, and those patients do need efficacy, but they also need reasonable tolerability and maintenance of quality of life. If they can still get a bispecific antibody, we believe they should get a bispecific antibody, but we also do know that many patients can't tolerate or can't access these drugs, and then Pepaxti should be the preferred choice.
Second question, written by Erik Hultgård: What is your confidence level in previously announced sales targets of SEK 1.5 billion for Pepaxti?
Thank you, Erik. It's too early to say anything [audio distortion] We do have price negotiations ongoing in Germany that will set the reference price for Europe. I would like to come back to this question later on when we have are more informed and can give a better guidance to you. By that, if no more questions on the line, I would like to thank all of you for listening in. I would like to repeat my excitement and my confidence in the future of Oncopeptides, and I really do look forward to getting to know many of you better and interact with you the coming time. By that, I wish you a nice day. Thank you so much.