Earnings Call: Q1 2021

May 6, 2021

Quarterly report

Thank you very much. Welcome everybody to this call where we're going to present the quarterly report for 2021. Myself, I'm the CEO of Ekspen, and I have with me Annette, our CFO as well on our end. So first of all, let's go through the highlights for quarter. So this has been a quarter where a lot of the activities within X Brain has centered around preparation for filing for exelukraine. This is, as many of you know, massive undertaking where we need to put together all the preclinical documentation, everything centered around the supply chain for the product as well as the clinical study report eventually. So it's a massive undertaking to prepare such a file to apply for marketing authorization to EMA and FDA respectively. So that's consuming a lot of the efforts within the organization today. And of course also related to exlucane and the continuous support on the trial, the Phase III trial EXPLORER, which is coming towards an end during this year. We're also spending a lot of time on our development program for Eximsa and our Simsa biosimilar, where we are finalizing now process. In pilot scale, we are also spending a lot of time to discuss with partners, both on the contract manufacturing side, but also CROs with upcoming clinical trials and also potential commercialization partners. So we hope that we shall be able to scale up this process with the select contract manufacturing during the course of the year and then during next year being able to take the product into clinic and hopefully also together with commercialization partner. Then of course, we have, as many of you know, moved into new facilities at Campus Sorna. It's a new biotech lab where we really have expanded our development capacity significantly. And we have Capital Markets Day planned for 17th May where we're going to provide a virtual tour of the facility and explain more in detail our capabilities in this new facility. So I hope that as many of you as possible are able to are going to be able to join that Capital Markets Day. But really, the plan and what we can do here with the team also we built up is to initiate 1 new development program on an annual basis. So we really now can gear up and develop a broader portfolio of biosimilars. Thinking about next 12 months, what can be expected with regards to milestones? Of course, then Keptomax on 17th May is important. And then top line data, we're going to talk more about the ongoing Phase III trial and what can be expected with regards to top line data. And then that we can submit marketing authorization application to EMA and FDA during Q3 and Q4 this year. We hope that we're going to be able to complete additional licensing deals for exelukraine in some territories where that is required. So we're thinking particularly about China, Latin America and Japan. And then as I spoke about with regards to Exim Sain taking that development program further into commercial scale manufacturing and also establishing a partnership with the commercialization partner. So this is the timeline for exlucane. So As you know, then EXPLORER is the ongoing pivotal Phase III trial. We had the last patient in into this trial in November last year. So we have recruited 5 83 patients into this trial. Then We are going to do an interim readout when the last patient has reached the 6th month in the treatment schedule. And that is essentially happening next week. The last patient in is having its month 6 visit next week. So then we're going to do a cutoff and we are going to work on in the database and also doing the required statistical analysis to get to an interim study report, which is going to then support the marketing authorization application to both EMA and FDA in agreement with both authorities. So we expect to be able to file in Q3 to EMA and Q4 to FDA. Then that the study is continuing up until November this year since it's a 12 month treatment schedule. So last patient will have reached the month 12 by November this year. And then we are complementing the regulatory file with the final study report throughout the process. But all in all, counting on 12 months regulatory process, we expect to be able to have approval in place from EMA and FDA during the second half of twenty twenty two and then subsequently allow for our partners to be launching the product. Okay. So just to repeat a little bit here, maybe for those of you who have listened to us before, what this pivotal Phase III trial is about. So this is an equivalence trial with the objective of demonstrating equivalent efficacy and safety compared to the originated fertilizers. And we had then recruited 483 patients with HLA macular degeneration. We're splitting them up in 2 groups, 1 group being treated with our biosimilar candidate exlucane and 1 group being treated with the originated pro placentas. Now the primary endpoint occurs at week 8, so when the patients have reached week 8 in the treatment schedule. And it's related to relative improvement of visual acuity, exlucaine versus Lucentis. That's the primary endpoint. So with that said, when we now are doing the interim analysis, all the patients will, of course, have concluded week 8 and we will have the full data set for the primary endpoint. So when we come up with the top line data mid this year, it's going to include the final analysis on the primary endpoint. Then of course, there are a couple of secondary endpoints. We are, from a safety perspective, monitoring adverse events. We are following efficacy with regards to improvement in initial acuity throughout 12 months. And we're also following a couple of other secondary endpoints throughout these 12 months. But on the right hand side, I guess to give you a little bit more flavor on how this works statistical with regards to the primary endpoint. You can see this is data from one of the pivotal trials of the originator product Lucentis where the red and yellow lines are improvement in initial acuity for 2 different doses strengths of originated product and the blue line is placebo. So essentially what it means now is that At week 8, we compare the different the visual improvement of visual acuity of exukain to Lucentis. And the difference needs to or the confidence interval around the difference, correctly said, needs to fall within the predefined for less margin by the authorities. So that's illustrated on this graph. And then we feel pretty Confident around this upcoming top line data, you can look at it from a statistical perspective. We started trial at 90% power initially. But then during the course of the study, we got and agreement with our authorities to actually expand this Equivalence margin. And we but we decided not to reduce the size of the trial also due to the emergent COVID-nineteen pandemic and a certain fear about the increased dropouts in relation to what we initially expected. Now that did not really materialize to the extent that we expected. And now we clearly have power which is well north of 95%. So we feel confident around the power with regards to the primary endpoint and the statistics in the trial. And also during the course of this trial now, Probably some 6,000 injections have been performed and the blinded Data Safety Monitoring Board is looking into levels of adverse events on blinded level, of course. And So far, we haven't observed any abnormalities with regard to adverse events compared to normal usage of the originated product. So we feel confident around that this top line data is going to come out positive. And we can go to next slide. And also, of course, based on the extensive comparative analytical work we have been doing, which of course is a requirement for regulatory approval and also is a requirement for initiating trial. As you know, the mode of action here is that the product binds into a growth factor called DG Alpha in the human eye. And we have, as a part of this comparative analytical package, been able to and test the binding into this growth factor in the laboratory setting. So we have demonstrated that Hexagon binds of the same place, same strength, same duration to the growth factor VEGF alpha as Lucentis. And that in combination with another 20 or so analytical methods. We feel that we have a very robust comparative analytical package. And of course, we've been discussing this with the regulatory authorities and also got their agreement on that. This actually looks like We have been demonstrating analytically very high level of similarity. So that, of course, brings additional comfort to the upcoming top line data from Xtron. That is, of course, exciting. And, of course, the next very important milestone in the development of the company. Okay. So with that said, I will leave it over to Annette to go through some of the financial highlights for the quarter. Thank you very much, Martin, and good morning, everybody. As the CFO of Xbrain, I would like to take a few moments to take you through the financial analysis of the Q1 results. Starting with the total income, on the left hand side, that amounted to SEK 4,100,000 Trans versus EUR 4.9 billion in Q1 2020. And those of you who have listened in on our previous presentations, you'll remember that we accrued the first milestone on payment from the licensing agreement with our commercial partner, Bausch and Lomb, and this over a 2 year period. And this contract was then signed in Q2 2020. The other components refer to income from non core operations and some exchange rate gains. A bit more interesting on the right hand side, our expenses, they amounted of €54,800,000 which is really on par with last year's Q1 of €54,500,000 The R and D costs represent 84% of the total costs. It was slightly lower in Q1 2020 versus lower than Q1 2020, but this to phasing only. Notable is the lower spending Q1 versus the Q4, But that is then explained by the QEXPLORATE study, as Martin said earlier, that, that was fully recruited and peaked cost wise in November last year. For the G and A or the admin expenses, They were a bit higher in Q1 versus this year versus last year. And this is mainly then one off costs related to the move to our new at Campus Solna. The net results for Expray is really the net of what's shown on the previous slide amounted to a loss of SEK 51,300,000 and this is SEK 0.5 million less than the net results for the same period last year. As a reminder, please also note that we all R and D costs are fully expensed in the P and L and nothing is then capitalized on the balance sheet. For shareholders' equity, that now amounts to we did the quarter with to SEK 8,400,000 versus SEK 139 1,000,000 in Q1 2020. And that's, of course, a result of the 2 successful share issues we made in 2020 and those amounted to total SEK 325,000,000. For the operating cash flow, we had a positive cash flow in Q1 of net SEK 7,300,000. However, this is just due to our reinvoicing mechanisms with our commercial partner, Stata. Him in this instance paid a fairly large invoice to us in January 2021. On the left hand side, you will notice that our cash Position is significantly strengthened by the 2 share issues performed in last year. And then hence, we lead the quarter in a fairly strong position with a cash of around about SEK 240,000,000. And that completes really the financials. And then back to you, to you, Martin. Thank you, Annette. So we've also been growing the company from a team perspective. We are now 51 employees, And I think we've been able to attract and recruit many excellent individuals with experiences from some of the well known pharmaceutical companies here in Sweden and abroad. And I think that now when we are growing, we can also Look a little bit statistically on the team from a diversity perspective. We have high or Good level of gender equality with 50% men versus women, both in the staff as well as in the management team. We have a diverse team from an international perspective with 52% of international origin within the staff. And so this is a very in science driven activity. So we have a high degree of people with PhDs, so 33%, which we're happy with and is really required because we really are and are have the ambition to be at the forefront when it comes to the development of biological drugs. And we're starting to also track the motivation in the team. Of course, the key for us as in any knowledge based activity is to keep the team motivated and to ensure that all the good people that we are attracting to the company are staying with us. And We are tracking the satisfaction, if you will, with H. Sprain with the measure we called employee net promoter score, which is 42%. I won't go into the details of how it's measured. We can only say that average globally amongst companies using this metric is 6%. So 2% is very good actually. We're happy with that and this we're tracking on a quarterly basis and course, taking action on anything which is perceived as negative and making sure that we have a motivated and happy team in place. And we'll also have spent some time to establish core values within the team, which really is an Articulation of what we believe has made us successful in the past and also what we want to articulate going forward continue to be successfully. And you see this on the upper right hand side of this page. This is really about in a way keeping the entrepreneurial spirit what we had in the beginning with Impossible is Nothing and make it happen and have an innovative edge beat yesterday and really recognizing that this is at the end of the day team effort where everybody is needed and we win as one. So we're happy with that and we're happy to have such a great team in place. And upcoming capital markets events, as I said in the beginning, we are organizing an event on 17th May where we are Going to go into more depth on explicane, of course, but then also on our platform technology, Our CTO and Head of R and D, David Wickstrom, will present the platform technology and go into more depth around that. And Sjagad Prasir, our Deputy CEO, will be present and will do a virtual tour of the facility and also present more details around our team. Anders Sturgren, our Chairman of the Board will Also joined that event and present his view on the future of the company. So I really hope that as many of you as possible are going to be able to join that event. And then we are participating in a few Capital Market Day is arranged by some banks here. Kempen on May 3, ABG on 25 May and then Redeye on 2nd June. So if there is the possibility to see us there, you're very welcome to do so as well. Okay. So with that said, I think we have come to the end of the formal presentation and can shift to Q and A. And we are going to look here on the questions that have been posed and do our best to answer to them. So first question, is the 6 months plus 2 months estimate, How exact for publication of Phase 3 top line data? Okay, so let's see if I understand the question. Correct, so The 6 months that's fixed. So as I said, last patient who reached month 6 in the treatment schedule is happening next week. So that last visit is next week and then we're going to do data cutoff. Now 2 months for database cleaning and statistical analysis, of course, somewhat approximative. So therefore, we have said that mid of this year, so during the summer, we're going to be able to communicate top line data. Next question. Which steps there are remaining before eximshane could be taken into clinical trials? Will there be, for example, PK study in animals or similar preclinical? Okay. So next step is really about scaling up the production process to commercial scale together with the contract manufacturer. There is not a requirement to do an in vivo trial in animals. So we are not going to do that. We're going to go straight into Phase I trial in humans and health volunteers, which we expect should happen during 2022. Okay. So next question. Could you tell more about financing strategy until exelucan will generate enough cash flow? Do you estimate 2 financing rounds before that, okay? So as we've stated before in our annual report, For example, the cash we currently have will take us at least to Q3 this year. Now On the back of Exelukain net income generated from Exelukain, We hope that we shall be able to reach a cash flow positive state sometime during 2023. Then of course, It's a gap in between, which needs to be closed from a financing perspective. And we are currently evaluating how we shall do that, and we are discussing with our financial advisers and as usually presenting the company to existing and new investors to gauge their potential interest. But there is a financing gap to be closed. And How exactly that will be done, we'll have to get back to. Next question. Thanks for your time this morning. Are there any updates on exoncaine development? With exoncaine entering the clinical trials this year. Thanks, Jocaine. Okay. So ex oncane is our biosimilar candidate to Oncaspar. And this is actually a program which have been down prioritized internally. We're focusing on exlucaine, exlucaine, our sims are biosimilar and in our OPDIVO biosimilar. So there is not any clarity on if or when we would do such a potential clinical trial. Rather, our intention here and our strategy here is to be able to find a partner that can continue to invest behind this program and take it forward. And we have such ongoing dialogues and we hope to be able to conclude that, but that will be under the premises that Xpeng would not invest in a meaningful way going forward into this program. So I hope that we'll be able to provide an update on that end during the course of the year. Okay. Next question. You said that you're confident that the Phase III study result. Is it correct to say that by now You have at least 90% of 6 months of Phase III data available to you. Thanks. Okay. So next week, 100% of the patients will have passed March 6. And actually, well above 50% of the patients have concluded the full study. But we do not have that data at hand. Now it's a data cutoff and it's a process of database cleaning and then a statistical analysis before we as a sponsor can take part of analysis of unblinded data. So we do not have any underlying data at hand as of now. Okay, next question. In the Q1 report, it is mentioned that positive cash flow from sales of Exaxe is expected during 2023. Until then, additional financing is needed to run the company, okay. How much capital do you expect the company will burn until positive cash flow from Exelukin? So this with the financing strategy we discussed, there is a gap, yes, between Q3 this year and 2023. Exactly how big that financing gap is depends on so many variables, particularly what we select to do and how when it comes to our current preclinical programs. Now as I said, our ambition is that we shall and do licensing deal with the commercialization partner for our Exim Sain program. And our intention there is to get some financing support for the upcoming clinical trials. But the exact terms of such a deal are, of course, as of now unclear and are very important in terms of estimating exactly what the gap would be. So we cannot give any further based on that right now. Okay, next question. Can the market expect any further information regarding commercialization deals for ex Du in new geographic areas with new current partners ahead of top line data. Can the market expect any research analysis being published during the upcoming 6 months. So as I said in the presentation, we are by ourselves and together with our partner Stata, discussing with potential commercialization partners for distributors in 3 particular territories being China, Japan and Latin America. We hope that we shall be able to conclude such partnering deals during the course of this year. And when exactly during the course of the coming 12 months that would happen is hard to say. So we cannot say anything with regards to if that would be expected to happen before top line data. We're working on it, and I'm confident that we'll be able to strike such deals, but the exact timing we cannot comment on. Okay. Next question. Is there any upfront payment from Starda if top line Phase III is positive? That is to be explained. Answer is no. The arrangement with Stata is that they paid an upfront payment when we enter a deal And then there is a fifty-fifty cost sharing of the investments that we're doing into the program, but there are no milestone related payments. That is different when it comes to at Bausch and Lomb, but their milestone payments are on regulatory approval and loans. Okay, next question. When might we get an update on excellent game partnering dialogues? Okay. This I discussed a little bit earlier. I hope during the course of this year, we should be able to come back with some news on that. Okay, next question. What is the target commercialization date for exelucane? Okay. So no exact date is set. It's up to our commercialization partners, DADA and Bausch and Lomb on the exact timing of launch. As I discussed, we hope that We shall have the regulatory approval in place during second half of twenty twenty two, which then would allow for a launch thereafter. And it's different from country to country. In some countries, a launch could be happening more or less immediately, taking into consideration processes for pricing and reimbursement, but not the contrary, it's anything from a 0 to 6 month process if you look at Europe. So a little bit different from country to country, but ultimately the exact timing in each specific country is a decision by our to respective partners. Okay. That concludes the list of questions here. So I and Annette, we thank you very much for participating in this call. And should you have any further questions, don't hesitate to reach out to any of us over e mail or phone, and we shall happily discuss. But for now, thank you very much. Thank you.