Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Marinomed Biotech AG Q1 2022 Results conference call. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Andreas Grassauer. Please go ahead.
Thank you very much, and good morning. My name is Andreas Grassauer, and I will guide you through this investor presentation for our Q1 results. The agenda is okay. I'll give you an update on the highlights, then Pascal will jump into the financials of Q1, and then I'll give a brief outlook on the strategic horizons for Marinomed to give you an update on key projects and investment highlights and outlook. Of course, for us, important and what were the highlights this quarter, we strengthened our business development with our new Chief Business Officer, Cornelia Kutzer. We drew down EUR 6 million European financing tranche. That was possible because we were meeting all predefined milestones.
We've got a new agreement with Hanmi Pharmaceutical Co., Ltd, a leading, stock listed, South Korean company for marketing our Carragelose products in South Korea. You see, we published the strong 2021 financials, and you'll see the record sales just in a minute. Most importantly, or what was very important for us on Friday, we were able to announce that we've done a deal with Procter & Gamble for Carragelose in the U.S. It's the biggest company in the OTC field, especially when it comes to common cold market leader there. That somehow closes a white spot because we didn't have a U.S. partner so far. That's pretty important step forward for the entire portfolio. Having said that, I hand over to Pascal.
Yeah. Thank you, Andreas. Jumping right into the financials. We, you know, had a good year, 2021. Building on that, we also started this 2022 quite strongly. You can see that Q1 again beat the Q1 2021 figures, which were on a record high. It's great that we were able to not only maintain, but even overachieve last year's results. That's because the Carragelose products still sell very good. We also have other revenues which we later see in the P&L from the Solv4U unit. That's also a good event. We have new business, as Andreas mentioned already, the new partners in Korea and USA.
They don't, or haven't generated revenues as yet. That forms the basis for future revenue and revenue growth. This improves overall the outlook. Also the Solv4U unit has attracted quite a few clients. There we have the chance to build revenue streams for the future. At the moment, more feasibility and optimization studies, but going forward, they're eligible for milestones and royalties. That's the goal of this unit. We see that there is demand for our Marinosolv technology. Also a good sign. On the outlook side, we clearly see that the order book is still quite full.
We are happy to see that viruses continue to spread, not only COVID-19 pandemic, but also influenza, et cetera. For our products, that's good. Yeah, may people stay healthy using our product. We also still face severe bottlenecks in the raw material. Inventory is again up slightly, but surely. We have to see that we maintain our ability to deliver products to our customers. Looking into the details here, we have the profit and loss, and you can see the increasing revenue mostly from sale of goods, as you see on the right top side. But also other revenues which I just mentioned is from the Solv4U unit. Nice to see that we have a movement here.
Overall, revenues are up. Cost of goods sold are in line. Again, as regularly mentioning, we have the a product and country-based margin, so it may go up and down a bit. Even at the lower margin, still, being over the 30% threshold, that's a good level. We are happy if we can keep like that. Q1 was extraordinarily high. Looking into the research premium and grant income, which is in other income, this is in line with the lower R&D expenses, especially on the service expenses side. If you look into the fourth line item service expenses, that's mostly clinical studies. Clinical studies mostly in the data readout phase.
Going down from the cost perspective, and with that also the research premium and grant income. R&D is also slightly lower, as said, due to lower activity in the clinic. It will go up from a quarter-to-quarter perspective, again, but overall and as already previously stated, for the full year will likely be lower than last year's full year R&D expenses. The financial result is picking up, and this is obviously due to the full EIB loan, which is now drawn down. Here we obviously face some payments of interest, not only payments, but also accruals and valuations under IFRS.
If we look into the statement of financial position, we can clearly see here in the non-current assets that we have reached the peak in both intangible assets and property, plant, and equipment. The building is completed in which we are at the moment we are starting depreciation and therefore it's going to decrease over time slightly. Inventory, as already mentioned, here they've gone up slightly, which is mainly to stay in the position to deliver on short notice on relatively short notice goods to our customers, as already mentioned, and it's not gone better.
From some raw materials, we now have lead times beyond the 12 months, so more than a year that we need to pre-order in order to fulfill orders, short-term. In the cash and cash equivalent side, you can see that we drew down the last tranche, the EUR 6 million. Pretty much exactly the EUR 6 million is the difference from end of last year to end of Q1. That's almost the full amount. Looking at the equities and liabilities side, here the increase in capital reserves are mainly related to the convertible note funding program as well as not in the Q1, but generally the ESOP, so the stock option plan. In the borrowings, you can see the uptake of the EIB loan.
On the short-term borrowings, this is important to understand. We now have the short-term portion of also the EIB loan. The last tranche has an annuity, so we annually have to repay some part of the last tranche. Current contract liabilities and other contract liabilities, here we have the element of the subsidized COVID-19 trial, which we only recognize as income at the time we also have the expenses on the other side. With that, I hand back to Andreas, and later I'm available for Q&A.
Okay. Thank you, Pascal. Wanna talk a little bit about the strategy and our horizon. Today we have those who are invested in our company or think to become invested. In the short term, there is the growth of our OTC portfolio and the growth in Carragelose products and then the cash flows. We plan to partner and launch Budesolv in Europe. That's a short-term perspective here as well. This product has been developed, and it's in preparation. We are working on partnerships here. Of course, we just, as we mentioned, we've broadened our global footprint through additional partnership and launches and just Procter & Gamble for the United States is just a recent one.
Here, for the U.S., next step is of course to go to the FDA together with Procter & Gamble. It will take a little time, but we're really confident that we can achieve marketing authorization there together with Procter & Gamble. When we think a little bit more ahead, as mentioned or outlined last time in the update call, our strategy is moving forward with higher valued Rx drugs addressing unmet medical need and therefore succeed with the next generation of products. In particular, what does it mean to develop and launch Tacrosolv in the anterior inflammatory eye diseases, develop and launch our inhalation product Carragelose in viral pneumonia, and based on that, build a strong pipeline and establish the commercial partnerships for this product.
By doing so, we aim to, in the long-term vision, to become the leading biopharma company for rare and auto-reactive immune disorders and viral infectious diseases. By using our technologies, we can and already do that. We enable the sustainable therapies, take precision medicine for the next generation therapies, add precision medicines here, and do that together in global partnerships, in order to provide a growth and a royalty stream for the company. That then translates into our pipeline.
As you see, our OTC segment, much more developed, far developed here, the short-term growth perspective, but the future growth, where the potential we pursue, these are the products that will really give us the push in the next couple of years. We pick one of these products. In order to demonstrate or to explain why this market is so interesting for rare diseases. When we talk about herpetic stromal keratitis, one might think that this is a rare disease, with the stromal version, about 80,000 cases in the developed world outside China occurred. In principle, this is caused or the consequence of a infection, a herpes virus infection of the eye.
Eventually, some part of that herpes-infected patient, around 400,000 patients worldwide, they develop this stromal version, which is at the end of the day an immune reaction against the virus that continues to inflame the eye, and it's a cause of blindness, of severe visual impairment, and one of the major causes of blindness in the Western world caused by infectious diseases. When we talk about this, it's an unmet medical need. It's currently has been treated with topical steroids, which they also increase the ocular pressure. It gets stromal vascularization. It has a high recurrence rate, and prophylaxis with antivirals has at least some effect, but it also may lead to treatment-resistant keratitis. It's an unmet medical need.
We, with our product, solubilized tacrolimus can treat exactly that. What is our product? The tacrolimus, which is the macrolide immunosuppressant. It's a pretty well-known substance licensed for organ transplantation, atopic dermatitis, and also vernal keratoconjunctivitis. What we've done, we enabled the solubilization of this compound that it in an aqueous solution. We could show, and that's the figures on the right side, that we have a strongly increased bioavailability when we compare it, for example, with a suspension of the product, Tälemus, and put it on the eyes in an ex vivo or in vivo setting where we gave the standard oral dose and compared it to what we can reach at the topical setting.
This was also tested, and that's the important thing. We're not here on a preclinical level. We've took this into a clinical proof of concept trial in an inflammatory eye disease. We used a model disease, the allergic conjunctivitis, because in this setting, you can put allergic patient into a chamber, expose them to allergen, and they get an inflammation of the eye. Like you can look whether or not your compound has an effect. The answer is yes, the compound has an effect and the treatment has an effect, at least the higher dose that we applied, which is also important.
You can see the development of the total ocular symptom score on day eight, and also the reduction in comparison to base, which is a pretty significant reduction. What does it demonstrate? It demonstrates that treatment with tacrolimus eyedrops can reduce the inflammation. In an independent clinical study where a group diluted the Prograf, which is the suspension form of tacrolimus, and tested it in comparison to a placebo in a trial with herpetic stromal keratitis, it showed a clinically significant benefit. This was a investigator-driven trial and no product development trials. It clearly shows that this compound can have a clinically significant benefit.
That's why, together with our data, we're pretty sure that, when we initiate the phase two study in this indication, we have a very good chance that we can finally develop a trial. The strategy here is to partner that compound and that product in or during the development in phase two. This is the timelines and milestones we expect. I just mentioned in the introduction the news flow to date. Most important for us, of course, the deal with Procter & Gamble that will keep us busy in the next couple of months in order to get the product to the market, which is the biggest OTC market in the world.
We have short-term, mid-term, and long-term milestones. We'll see a clinical readout of our Kerugelo studies. We're working on additional technology collaborations. We'll see new supervisory board members and of course, our continuous reporting on half year and Q3 financials in the short-term. In the mid-term, we're working on a deal for Budesolv, initiate the further clinical trials, including the one for Tacrosolv. Of course, we're working on additional launches in new territories. We're looking forward to get additional patents granted, and also we're working on new technology-based product candidates. For the longer-term vision, of course, for herpetic stromal keratitis, as this is an orphan indication, we're working on this drug designation in both for the EMA and the FDA.
We are working, Pascal already mentioned this, the Solv4U platform. We work on new technology partnerships, and together with all these measures, we expect a accelerated revenue growth of the company. This is all done in a sustainable way. We've published our ESG report this year, and it's of course, we keep all these elements of ESG further on. Important with our technologies, and we contribute to the use of less active pharmaceutical ingredients, which ultimately helps the patients and the environment, because if you can reduce the dose, for example, like our product Budesolv, we were able to reduce the dose by 85%.
That makes a difference on the use of products or even the synthesis of products. This is our story. We have a highly experienced management which has been in the field for quite some time altogether, more than 100 years. We have a short-term growth perspective, a medium and a long-term growth perspective. We have working on therapies for diseases with a high unmet medical need and there is the value for the future. We can keep and maintain our lean and efficient business model, and by doing so, we also develop sustainable therapies and in combination, it's a compelling story.
With that, I close the call and just keep a look on the financial calendar and if there is any questions during the time or any inquiry, Stephanie is here, also she will answer all your questions. In the meantime, I will, I'll stop here and we are open for questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to temove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Vladimira Urbankova from Erste Group. Please go ahead.
Hello. Good morning. Thank you very much for the overview. I would have a couple of questions. First one would be related to the recently signed Procter & Gamble deal. If you maybe could give us an estimated timeline, when should we expect the market launch? What are the necessary regulatory steps in your opinion? Then, of course, if you could maybe indicate little bit more the size of the milestones and possible royalties. Last but not least, as you do not manufacture products yourself, who would be taking over the manufacturing for the U.S. market, and how do you in fact see the market potential for Carragelose products in the U.S.?
This would be first round of questions. In the second round, maybe, I would like to ask you if you could give us any indication which clinical trials are currently running, which you expect to open still this year, and if some of them depend on partners or if you plan to do them on your own. This would be my question. Thank you.
Okay. Thank you, Vladimira. This is Pascal speaking. On the Procter & Gamble deal, the estimated timeline is as follows. We seek to go with them to the FDA and get a request for designation to classify the product from a regulatory perspective, and then move ahead with the registration process. Overall, in a best case scenario, we can hit the markets in the season 2023-2024. With regards to your question on size of milestones and royalties, we haven't disclosed that and won't do so. Mostly, we're looking obviously at royalties as for an OTC product, milestones are not that significant.
As written in the ad hoc statement, we plan a tech transfer from Marinomed to Procter & Gamble. Production will be handled in the future by Procter & Gamble or a contract manufacturer of them. Overall, the market potential should obviously be significant. We don't have clear numbers, obviously, but also understandable that the market from its size is one of the largest in the world, and therefore, that this should definitely go into the millions of nasal sprays if we're looking at those. For the clinical trials, I hand over to Andreas.
Basically, there is two trials running. We're expecting results from those two trials. One is the prophylactic trial in healthcare personnel, which was run in centers in Austria, where nasal spray was applied in order to protect healthcare personnel. We know already that we won't get that much out of the trial because due to the vaccination status of people, especially in the hot phase of our trial, people simply didn't. We didn't get enough SARS-CoV-2 or COVID-19 cases in the healthcare personnel in order to have a significant readout. As we found a couple of other infections in this healthcare personnel, we are still motivated to see some, at least some result.
The second is the inhalation trial, which is also ongoing. Here we have we are facing the same story that other companies in the COVID-19 phase are facing, that the recruitment has been extremely difficult of this patient. In contrast at what you read in media, it was not that many patients eligible for these trials. But at least what we tend to get out from this trial is safety data because it was an inhalation trial. Our product was inhaled, at least by some patients, and we should see whether or not it had side effects in these patients. At least that can serve as a basis for future trials.
Those two trials, we expect in the near future results. Although we don't expect extremely insignificant scientific readout, but it helps to progress and support the entire Carragelose story. In terms of the other trials we are working and preparing the trial for Tacrosolv in herpetic stromal keratitis. As these trials have some lead times, most likely it will not start before 2023. In the meantime, we're working here to find a partnership. We're discussing partnerships, and that's maybe can be on the way, at least.
At the moment, we work with the hypothesis that we start the trial from our. Hope that helps.
Yes. Thank you.
As a reminder, if you would like to ask a question, please press star followed by one. The next question is from the line of Naresh Chouhan from Intron Health. Please go ahead.
Hi there. Thanks for taking my questions. Firstly, on the HSK opportunity, which looks very exciting. Could you tell us whether it would be possible to expand the phase two dose ranging trial to allow you to file? Or will you have to do a dose ranging study and then move to a phase three? Are you likely to get orphan drug designation in this indication? And then, given that, half of the patients fail within six weeks, how long do you think your pivotal trial will be?
Secondly, on that, do you think you'll be able to incorporate an interim analysis in your pivotal trial to allow for early filing if the efficacy is strong enough? Then just a broader question on this, the pivot to being a more Rx-focused company. Can you help us understand your financing needs to fund those clinical trials, whether it's dependent upon milestones that you expect to receive, for example, from the P&G deal? Or, will you potentially need to raise new capital? Just a bit of sense as to where the funding is coming from for the shift. Thank you.
Yeah. In terms of HSK, thank you very much for this very good question. HSK, Herpetic Stromal Keratitis, is really exciting opportunity. We'll plan to do the dose-ranging trial based on the findings of the study that we've done already. Typically it would, as the data available from this one trial I mentioned, it should be something around 100 something plus patients in order to find, but it should be a dose-ranging trial. Yes, the plan is to do it and to get the Orphan Drug Designation.
In terms of details planning whether or not one would do the trial in terms of efficacy in a way that would allow an early unblinding, that's not fully decided yet. One would have to discuss it with the authorities and the principal investigators. Obviously that's an obvious that would be a good strategy going forward. In terms of timing, yes, you're correct. As these patients in the treatment could be relatively fast with just probably 6 weeks time of treatment. You should see the benefit that could lead to a pretty fast development here.
In terms of financing, of course, our idea of the best would be preferred to finance it with milestones in particular with a deal done for this product itself. We would not exclude to do additional financing as a company in order to keep that trial on track. On the other hand, it's not that extremely expensive due to the relatively low number of patient populations.
Great. Thank you very much.
For questions, please press star followed by one. There are no more question at this time. I hand back to Andreas Grassauer for closing comments.
Yeah. Thank you very much, everybody, for joining and, yeah, we're looking forward, although our share price has shown some volatility, we are really looking positive into the future, especially in all directions, short term, midterm, and long term based on what is ongoing. Stay with us and keep healthy. Thanks a lot for attending today.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day.