Earnings Call: Q2 2020

Aug 21, 2020

Thank you. So hello, everybody, and welcome to this call with the purpose of presenting the interim report for the 2020 and give a little bit an overview of the highlights during the quarter. So of course, as for everybody, this quarter has been impacted for us by the ongoing corona pandemic. We took early appropriate measures, I would be saying, order to limit the contamination amongst our staff and but still being able to keep the operations up and running at the pace we needed to push forward the development of our different biosimilar candidates. So essentially all the people that are working in the lab have been working at the office, while as we've been trying to have as many of the office workers or the people working from desk, let's say, to work from home. And I think this has been working out pretty well for us. And actually pretty amazed how much you can accomplish in a digital manner. I think this has been a great discovery for us as probably for many other companies. We were able, despite this environment, to close the partnership with Bausch and Lomb and also to conduct the direct to share issue. Obviously, a lot of those interactions leading up to those events being done digitally. So I think we've been able to continue as planned despite the corona pandemic. The main impact for us as a company has been related really to the recruitment into the EXPLORER trial, which slowed down during the worst part of of the pandemic, let's say, to May and they then picked up. We'll look more into detail in the recruitment interest for in a short while. So I think that those are really the highlights for the quarter. The Bausch and Lomb partnership, the share issue which we conducted when we also welcomed two new institutional investors into the ownership of Xpeng Tinfond and Serbancruber Neutecnik and then got continued support from a lot of the existing shareholders. So we're pleased for the support from new and existing shareholders in that share issue. And then also we signed an agreement with Academia Schedules for new facilities. We'll talk a little bit more about that as well. And I think that's great for the future development of the company and really what's needed for us to push forward a broader portfolio of biosimilar candidates going forward. Susana will be talking more about the financials, of course. But regarding the cash position, we came out of second quarter with SEK $232,000,000 in cash position. Okay. Then on this page, we can look more into detail on the recruitment into Explore. And this is something that's been requested by quite a few of our investors. So just to kind of provide a more detailed overview about how this has been looking over time. So in mid August, we had recruited four ninety patients into EXPLORER. So that's roughly 85 of the targeted five eighty patients. And you can see on this graph, the blue line, which is essentially the number of recruited patients into the trial and the purple line, which is the activated clinics that we're participating in the trial. So you can see, as you all recall, we had a little bit slower start than anticipated and that was mainly due to slower activation of sites than anticipated. But you can see that when we reached the target of 150 activated sites being recruiting into the trial, you can see that the recruitment really picked up. And if you look at the first quarter of this year, the period here we've highlighted as the pre COVID-nineteen period, we were recruiting some fifteen, twenty patients a week roughly. So that's the rate we were running at. And then, of course, there was an impact with regards to COVID-nineteen and a slowdown in the recruitment. But then from May and onwards, we saw a pickup as there was a lower degree of contamination across the countries where we are recruiting patients, but also that restrictions, which we're putting in place by different by the governments in these countries were kind of lifted. And then August was a little bit of a slower period, which was fully anticipated given the vacation impact in many of these countries where we're recruiting. So anyway, now we are at four ninety patients. And when we look forward, we believe that we shall recruit somewhere between 10 to 20 patients a week coming into September and onwards. It's a little bit hard to say exactly. Of course, as you can imagine, it's dependent upon the potential continued impact of COVID-nineteen. And you all see in the news what is happening and the uncertainty around this. But in this period, May to July, when we saw a pickup, we were recruiting some 10 to 15 patients a week. And as I said before, before COVID-nineteen, some 15 to 20. So I think it's reasonable to assume we will be in that range, if you will. So we're pretty confident that we will be able to close the recruitment in the trial. If we are at 15 patients a week, we will end by September. If it's a little bit lower than that, we will go into October. But latest by October, I believe we shall have finalized the recruitment and recruited the five eighty patients into the trial. So that's really the way it looks like. And we're pleased that we're actually coming towards an end with regards to the recruitment and getting closer to being able to do the first interim readout and then proceed to filing. So with that said, let's move on to the next page. So yes, on the overall timeline. So from the day that we have the last patient into the trial, we estimate it will take eight to nine months before we can publish the top line data of the trial. We're doing the interim report at readout at month six. So six months after the last patient came into the trial, we're doing the interim readout. And then it takes two to three months for the statistical analysis and everything for us to then be able to publish the top line data. And that is also the kind of interim readout upon which we are going to submit the marketing authorization application both to EMA and FDA, and this is in accordance to agreement with both authorities. So we expect to be able to do that mid-twenty twenty one. And then counting on a twelve month regulatory process, it takes us to mid-twenty twenty two for an expected approval of exleucane. And that is also the timing for when the patent of the originated product for centres expires in Europe. So that's the overall timeline for exleucane. And if we move on, I know we spoke about this in the last call, but I think it's important to stress again that the partnership with Bausch and Lomb and really the strength in that when it comes to the North American part of ExLucane sales. We really believe that Bausch and Lomb is a perfect partner for us when it comes to sales and marketing of ExLucane. It's a 150 year old company specialized in eye products and pharmaceuticals for the ophthalmic segment. And really having the sales force in place already targeting the roughly 2,500 eye clinics in The U. S, which currently are prescribing Lucentis and therefore, we'll be prescribing Exlucane in the future. And Bausch and Domb being really strong brand amongst eye clinics and in the ophthalmology segment. So I really do believe that Bausch and Lomb is the company best suited to really maximize the commercial potential out of Exelicane in North America. So I think we couldn't have had a better partner than them. And now maybe some of you saw that there were news coming out of Bausch and Lomb in the August with their intentions to split up the company in two parts, both then intend to be listed in The U. S, one being focused on the eye products and one being focused on the rest of their portfolio. And I think this, if anything, strengthen us Bausch and Lomb as a partner for HTK. It provides more focus in the high part of their business on specifically that portfolio and XLUKANE being an even more important part when it comes to future growth of that entity. And also, it will increase the transparency around the expectations for the different important components in their portfolio and amongst them executing an important one from the for the investor community and there will be more kind of focus from analysts covering them on the growth elements, including Exleukain. So I think this, if anything, is good for us and for exleucane. So we're very happy with this partnership. And of course, now we, together with SADA, are working intimately to do all the preparatory work filing and then regulatory approval of HKD in the North American then subsequent launch. And then also now we signed an agreement with Academia Scenus with regards to new facilities for Xbrain. And they're going to be located in Campo Sorna, which is close by Karolinskaya Institute and with a large facility, so 2,000 square meters. And that's really good for us. We will be able to establish a development lab for biosimilars, which encompass both E. Coli drug product and also mammalian cell based products. So we're going to have a biosimilar development lab, really significantly higher capacity than what we have today. And that of course means that we can undertake development for broader portfolio, which we intend to start by the time we move into these new facilities, which is expected March. And this of course goes hand in hand with what we've been doing the last couple of years to develop and strengthen our platform technology. And I think that's really doing well and it looks almost surprisingly good. We've had the strength we've had since the inception of the company in the E. Coli space and LIMO technology, which provides a significantly higher gene than competitive systems when it comes to production of E. Coli derived proteins. And that is a strength of course, when it comes to exleucane and ranibizumab since that is expressed in E. Coli. But what we have been doing the last couple of years is to expand into mammalian cell based products. And already now we have a couple of patent applications sent in with certain aspects in that field where we believe also we will have a yield advantage when it comes to that environment. So we're very happy with the development of the platform technology and it's really what we have to do to now scale up and move to larger facilities to really leverage that platform and being able to broaden the portfolio of biosimilars with this great platform and bring to the market. So we're very happy to take this step and more news to come, of course, on this topic as we move in and kind of start to talk about which will be the new products we're add to the portfolio. Okay, with that said, I'm handing over to Sanna to go through the highlights when it comes to the financials. Thank you, Martin. Let's move over to page eight and the update on the q two financials. On the left hand side, we present total income quarter by quarter. And here, we have added both revenue and also other operational income. In Q2, we had total income of 5,300,000.0 and that consists of part of the milestone from Bausch and Lomb and as well as exchange rate gains on receivables and payables. Looking at SG and A to the right, we had total expenses of SEK 9,700,000.0 in Q2, which is an increase by 23% from last year. The increase is related to expense growing organization, but also related to transaction expenses. Let's move forward to page nine. In the table to the on the left side, we have R and D expenses amounting to million in Q2. This is fairly in line with the previous quarter and also same quarter last year. Due to the corona pandemic, there were lower activities, particularly in the recruitment in the EXPLORER study and this leading to lower expenses than what would have been the case without corona. I should also mention that we have made a restatement of previous seven quarters and that relates to the timing of the SADA prepayment for procurement of Lucentis for the EXFOR clients. And this can be found in appendix one. The co development with SADA is structured such as Expern Received Prepayment for the development of Exocaine, which should cover 50% of expenses. Part of the prepayment for the census from Stata has however been recognized too early, and this has resulted in lower expenses in the P and L statement. We have corrected the figures for this period, which have been explained in Appendix one. This adjustment affects the results and thereby shareholders' equity and also current liabilities. Although very important to emphasize is that this is just a timing difference, and this will not affect the payments from SADA and therefore have no cash impact for XPRIME. All the prepayments from SADA are estimated to be recognized as revenue within twelve months. So if we look at the net result to the right, it amounted to minus 53,400,000.0. The loss is fairly in line with previous quarter and which which most of the quarters have experienced lower R and D activities due to the outbreak of the corona pandemic. Let's move forward to Page 10. On the left hand side, you can see the variation in operating cash flow quarter by quarter. And for Q2, the amount was positive SEK 15,800,000.0. For changes in trade and other receivables and payables, we usually have quite big fluctuations due to the re invoicing structure that we have with our partner Skada. And this was also the case this quarter. Looking at the cash balance to the right, we ended the quarter with a cash position of 2 and 32,500,000.0. And the cash balance has increased since last quarter due to the equity issue of SEK136 million after transaction costs. Let's move forward to Page 11. Looking at the summarized figure of the balance sheet in blue, you can see that it has increased to 437,500,000.0 compared to the balance sheet date of previous quarter. Starting off on the asset side, we have non current assets of SEK91.6 million, which is fairly in line with previous quarter. Current assets amounted to 113,500,000.0 in Q2, where SEK 86,600,000.0 is prepayment primarily for the EXPLORED study and SEK 21,200,000.0 is receivables from out licensing activities. The cash amounted to SEK 2 and 32,500,000.0 and the increase is due to the equity issue. Moving over to the other side of the balance sheet, we have shareholders' equity amounting to 191,300,000.0 and also here an increase is due to the equity issue. Non current liabilities amounted to SEK 14,000,000 and it's fairly in line with the previous quarters. Current liabilities amounted to SEK 232,100,000.0 and that includes deferred income and accrued expenses amounting to 191,900,000.0 Swedish crowns, whereas 130,600,000.0 Swedish crowns is deferred income from Stara. That was all on the financials. So back over to you, Martin. Yes. And we try always to be as active as possible to meet with existing and new investors and participate in a couple of events during the spring, some of them which are updated on the video recording and also available on our webpage. What we plan to do now during the fall is to participate now in the September in two events, the Pareto Healthcare Conference, which is September, and then LSX Nordic Congress, is happening the September. Now these both of these events are taking place digitally, but the presentations will be recorded and also presented on our webpage. Then we plan to participate in the Jefferies Conference in London in November and the LSX Conference in connection with the Jefferies Conference. We are going to participate in more Capital Markets Day and so on and so forth. We're trying to put the full schedule in place here, but we will also communicate with the market, let's say, a week in advance of planned Capital Markets Day. So I really hope to be able to meet actually as many of you as possible, provided that the circumstances allow. But otherwise, many of these events are likely to take place in a virtual setting, but then to be able to meet as many as possible of you in the video context and audio context. Okay. I guess that is all from us from the formal presentation. And then I guess we're to shift over to the questions here. Okay, so first question is, does XPRI announce the primary eight week endpoint results at the last patient in and tested at the eight week period immediately when the results have been evaluated? So the answer to that question is no. We're going to do the first interim readout when last patient has reached month six in the treatment schedule. And then we're doing an evaluation of primary endpoint, which as rightly stated here is at week eight. But we're doing the interim readout at month six. Next question is the pace of recruitment has been approximately 31 to 32 patients per month for EXPLORER study. If this keeps constant, the study is fully recruited mid November. Do you still see that it is realistic to get the study fully recruited before Q3 ends? So this figure might be right if you look at the whole study, but really one would have to look at really these different periods, which I tried to highlight in that slide. The period in Q1 this year when we had all the sites activated, we were running at 15 to 20 patients recruited per week. And then as I said, in the pickup period after May to July, when we saw a pickup after the most severe COVID-nineteen impact, we were running at 10 to 15 patients recruited per week. So going forward, now when people are coming back in the clinics from a vacation, I do believe that we will be somewhere between 10 to 20 patients a week. It's a little bit hard to predict given the potential continued impact from COVID-nineteen. But we already see this week that's picking up towards these levels. And if it's, let's say, 15 a week, we will be done by September. If it's 10 a week, it will be approaching October. If it's 20 a week, it will be even sooner, sometime in September. So that's probably what we can that we can say here. So I'm pretty confident that we will be ending the recruitment by, you know, September or stretching into October, but latest by October. Okay. Last last question we have here. Do you think Bausch and Lomb will be an owner in XPLAIN in the future? Well, this is similar to a question which we've been getting a lot of times with regards to Stardust potential, let's say, ownership and or acquisition of EdgeSpring. So it's very hard to speculate into this. I know as for Bausch and Lombard has for a start that they're more engaged in the sales and marketing of pharmaceuticals and focusing more on licensing in products than doing development from scratch themselves. But with that said, Starda is an owner today, and they've been very supportive from the equity investment side. And we will have to see now going forward whether that interest also will appear from the Bausch and Lomb side. So that's probably what I can say as of now on that topic. Okay. And just to remind everybody on the call that you can type in potential questions in the Ask a Question section in the webcast. And one more question that came up here. Have you checked study results as blinded? And do you still see there should be not any unexpected when it comes to efficacy and safety? So what we do throughout the trial is to look at the blinded data with the main purpose of see if there's something which sticks out from a safety perspective. So if you were to see a higher level of adverse events than would be expected from normal usage of Lucentis, that would trigger a deeper evaluation of the data. Because if that would be the case, it could be so that from an ethical perspective, one would have to stop the trial, right? So we've been following the trial and the data from a blinded perspective in that context. And we have seen nothing when it comes to the safety parameters in the EXPLORER trial, which deviates from normal usage of Lucentis. The same is true when it comes to efficacy, but more from the perspective to see that it's not so that a higher percentage of the participants in the trial, let's say, severely deteriorate their vision. Because that would also be an important parameter that could trigger a more detailed evaluation and if that would be the case from an ethical perspective, stopping the trial, right? And here we haven't seen anything either that deviates from normal usage of Lucentis. So that probably provides some kind of a better picture on what we're doing from that perspective. Okay. There was one more question coming in here, specific and interesting one. Can you tell us more about Exoncane? Which formulation will be pursued for the drug and will there be bridging studies for approval? So Exoncane is a biosimilar candidate to the leukemia drug Oncaspar, which is a PEGylated asparaginase product. And what we do when we do biosimilar development is at the outset targeting the exact same formulation used by the originator. So that is what we're doing. We are working towards both pegylation, which is identical to originator of the Oncaspar and also formulation being identical to Oncaspar. And there are also in the cases there are different formulations, there is a judgment to be done with regards to development of all the formulations or the one who is selling most. So I don't know if this question alludes in that direction that there's life life form, which of course is the most interesting one. And when it comes to clinical studies for such a program, for sure, clinical trials will be required as per the biosimilar guidelines. We haven't yet approached our authorities with regard to specifically that program and the clinical design. So I can't be more specific than that at this point in time. Okay. Then there was one more question here. Can you talk a little bit about Sveratide? Are you looking to bring it through Phase three clinical trials by yourselves? Or do you foresee a sale of Sveratide? So as we've been indicating last year or two, we have seen really the need for focus in the company and put our limited resources into the programs, which we believe have the strongest commercial potential going forward. And we prioritize clearly our biosimilar portfolio, which we develop here in Sweden with Exleucane, Exynsea, Biosimilar and the others. With Ferrotide and our Italian subsidiary, we've said that we are not willing to invest more into that subsidiary and that program ourselves. We want to find a partner that either would be interested in acquiring the whole subsidiary or in some kind of co development or license arrangement, undertake the required financing for that program, in particular, Phase III trial. So this is an ongoing process. And I think we mentioned also now in the Q2 report that we are now in discussion with a couple of companies that are interested to engage in such a way. And we we will see where that leads and obviously come back to that topic as something hopeful now matures during this year. Okay. So I see no more questions here in the webcast. And I therefore think we can conclude the call. I want to thank everybody for participating and also thank everybody for the questions. It's very helpful and makes it more fun when we get some questions to talk about. We will publish this audio cast, I think, on the web page and also do transcript as we've done the last couple of quarters and put on the web page. So with that said, I call this call final, and thank you everybody for participating.