2cureX AB (publ) (2CUREX) Earnings Call Transcript & Summary

Good afternoon. Welcome to our Q4 report webcast. Thank you for joining us. Together with me today, we have, as usual, Kenneth, our CFO; Ole our Founder and CSO, and the agenda of the meeting today, we will go through, as usual, the geographic expansion and the Ignite program update, which are the 2 main goals that we have set for 2022. We will discuss a little bit about market access, competitive landscape and then we will move to the financials to be followed by a Q&A. You can use your Q&A function at the top of your screen to pose your questions any time during the presentation. And then Ole has can volunteer to be the host of the Q&A session. So without more delay, I will start by the geographic expansion. As you have seen in our report, we have reached our goal of being present in 20 countries during 2022. Last developments in the last month were that we signed a distribution agreement for Switzerland and Austria with a company, [ PedoMedical ]. Switzerland and Austria represent 1.5 million people, 9,000 new colorectal cancer cases per year. So it's not that big in terms of a market. But what is interesting about these countries is that their IDD expenditure per capita is more than double the average of EU, U.K. and FDA. So these are the 2 countries, by far, that spend more in IBD. So that's relevant for us. We have also included Iceland in our direct operations run from Nordics. And as explained also in the report because Iceland is a special place in terms of personalized medicine. They have this very early initiatives in genomic generic testing population wide that they started already back in the '90s. And they are very mature in terms of personalized medicine. We think this is a good environment for a test like in titin. So with this, we have now promotional and reimbursement activities being conducted in 20 countries. This has allowed us to make more than 150. So we have presented, we have introduced Ind directly or through our distributor network to more than 150 hospitals in 2022. So we think this is a very good reach that we are getting. And it's not only the presentations, but also the logistic structure is also critical to push the adoption of invite in routine clinical practice. So we are very satisfied with what we have here. For 2023, we have -- our goal is to add just 5 more countries because as you can see, we have pretty much filled. The gaps that we have are very obvious, Benelux, U.K., France, Italy, this is going to be where we are focusing in 2023. In terms of the IGNITE program, we have to say that we had a very encouraging Q4 result. You might remember that Q3 was slow. We could only enroll 3 new sites. And that was basically during the summer period, we knew that the summer period is typically lower, but it was much lower than we anticipated. And in Q3, actually, we were only able to add 3 hospitals to the group of Ignite hospitals. In Q4, we have been -- we have added 9 new hospitals. This is the largest enrollment that we have had in any single quarter. Our revised plan when we saw the results of Q3, we had revised the Q4 and the total annual plan. It was that we would enroll 5 new hospitals. We have achieved 9. Ignite is a very valuable tool for us. And this is not only to familiarize the oncologist with the benefits of Indi. But the oncologists are one of the stakeholders in the hospital that we need to convince, but not the only ones. There are a lot of other people who are involved and the Ignite program allows us to also work with all these people, setting up the processes inside the hospital like. I mean, somebody has to use the nitrites acquisition for online, how they are asking for the test. We have to coordinate the tissue collection with surgery or with radiology. The pathologist has to prepare the sample prior to picking up by the courier. There is the logistics, there is the transportation. All these things are also being, let's say, tested because this is hospital by hospital that we need to roll out this. So this is really a very important element also of the Ignite. And therefore, we will certainly continue in 2023 to offer ignite to hospitals that are interested and that fulfill the criteria that we have set. So with this, our 2022 goals finished like this. So countries, we started the year with 11 countries. We finished the year 20 countries. That was our goal. Czech. We had 1 hospital enrolled in the Ignite program at the beginning of 2022. We were setting for 30, which we revised them to 20. We ended in '24. So it's not the original goal, but it's better than the revised go. And then in terms of products, we started the year with 2 products in the portfolio in the start and Inditreat extend. And we have now added Inditreat explore to it. So we have 3 products in the portfolio. That was our goal. All in all, considering the challenging conditions and the environment where we are working in, we are quite satisfied with the results of 2020. One thing that we have shared also in a special section of our quarterly report is the technology adoption and market access. And we think this is really important. You have seen this. This is how we have modeled our -- what we expect to be the adoption of the technology by hospitals. And I want to emphasize here that Inditreat is a test based on functional drug sensitivity testing. This is not a technology that is used today in clinical routine in any hospital in the world. Therefore, there is a process by which they have to start using this technology. It's not the same when we are launching a product that is in an already existing market. That's simple. But here, we are building a market. And therefore, this is the shape that we are anticipating for this curve. But what I want to emphasize here is the difference between the curve in a drug. So when you're looking at a biotech or you're looking at the pharma and you're looking at the drug rollout, if you want, what you have there is you have a period of 15 years between the drug starts to be developed or the first targets are identified, and the drug is launched. -- approved by authorities and then launch. And then you have, let's say, a shorter period of rollout because everything related to everything related to clinical guidelines and everything related to reimbursement is, let's say, more standardized in the pharma world. What you have in diagnostics is different, but actually a shorter line because in diagnostics, it takes you 3 to 5 years to develop a new product and launch a new product. But then the rollout is longer because in Diagnostics, the reimbursement and the clinical guidelines process is not as structured as it is in pharma, therefore, it's much more fragmented. That's the reason why you see here a long curve, but keep in mind that this long curve is following a very short curve in terms of product development, while in pharma, you are seeing these 2 things kind of reverse. In any case, this curve depends on the [ diet ] of market access, which is regulatory approvals, reimbursement and protocols and guidelines. How does it look like? First, I mean, nothing can start before there is regulatory approval, seeing marking in this case. That's something that we have achieved. As you already know, we have 3 products already [indiscernible] . And then comes these 2 parallel trucks, if you want. One is how do you change practice. How do you -- how will you convince people to use your test. And here, we have to rely on different profiles of oncologists. We have oncologists who are early adopters who like to test new things. We have people who are followers, fast followers, slow followers. To change the guidelines, you need to have a critical mass. So it is very important that we focus in this group of innovators and early adopters, we allow them to use the test. We allow them to get familiar with it. That's the purpose of the Ignite program. And then over time, some others are going to follow to this. And together, they are going to create the critical mass in order to be able to change the guideline. So -- but this is why also we are asked very often, why do we go in so many countries at the same time instead of going into one country only -- and the reason for this is that these innovators and early adopters are spread all over. So we have to identify who in Poland, who in Sweden, who in Spain, who in Germany are those willing to take the first steps. And for that, of course, the more geographic reach we have, the better. In terms of reimbursement, as also explained several times, there is not one single system for the whole Europe. We have countries where there is national scheme of reimbursement, be it Germany, for example, or France, we have countries where every hospital is making its own decisions. In every country, there is one or another way of getting out of pocket payment of patients, but only in certain cases on in certain environments. This is everything that we are working now together with our distributors in order to get to the mainstream use of the test. And this is something that is not specific to 2curex actually. So what we are doing is we are pushing all this because this is a new technology, as I said. So the more companies are in this space, the better because the more companies are pushing in the same direction. And from this perspective, we are following -- we have defined a peer group companies that are having some kind of 3D cell culture technology. We are following 37 companies. Out of this 37, there are some that are focusing very much on research on using this technology as a research tool drug discovery to. That's not what we are doing. What we are doing is therapy decision-making. And here, we are following approximately 22 companies who are calling like this, more direct competitors in this sense. From these companies, 15 are in colorectal cancer, but only 5 have products launched and, let's say, regulatory compliant. 2curex and OncoMedics are European companies. Invitrocue is an Asian company from -- it's from Singapore, Chinese capital and [indiscernible] are U.S.-based companies. Now what we expect, obviously, is that this competitive landscape will be -- we will be seeing increasing pressure because -- first, because these 15 companies that are developing testing colorectal cancer are going to launch at one point or another. Also, we are seeing signs of maturity in this space. So this space was until recently, it was a space of start-ups of small companies. But we are seeing changes in the last couple of years. One example is a company [ Silic ] based in the U.S. This company has raised in one funding round and one extension of that funding round, USD 89 million. So that's important funding already in our space. I want to emphasize that this company is pre-revenue still. So -- we are also seeing globalization in the sense that until recently, the Asian companies were active in Asia, American companies were active in America, European companies were active in Europe. But we are seeing changes here. We are seeing a company like [ Onco Preficion ] from Latin America moved to the U.S. SNG has started activities in Europe. Invitrocue has started activities in Europe. So we are starting to see this globalization. And we are also seeing some M&A activity. In 2022, we have seen 2 deals. OncoMedics was acquired by the company, ClinicSciences, and Celeste was acquired by the company molecular devices. Prior to that, Oselo had been acquired in 2021 by CrownBio outside by Exentia before that Helomics and Precision Therapeutics have merged. So we are starting to see also this consolidation that indicates this higher maturity of the segment. We think this is good. We think this is showing the interest also because, I mean, Crown Bio is a much larger company than osseous Molecular Devices. It's a huge company that is acquired in Sales. So what we are seeing now is that this is starting to attract the attention of large companies, large players, which also shows that this is going to crystallize in the coming period. We expect to see more moves of this kind as companies build their positions, emphasizing again that this is still a pre-revenue space. This is still a space where nobody is selling routinely test for clinical decision-making, okay? But it is clear that with all these movements, with all these players with additional money coming in, this is going to be happening -- and importantly here is to emphasize that through the activities that we have conducted in '21 and '22, we are still ahead of the pack in terms of market readiness, too. So we have our technology proven and IP protected. We -- our technology provides good better fidelity to the original tumor. That's very important. And also, we use AI power image analysis. And this is also very important, I think, to emphasize. Image analysis has a lot of potential. There is a whole new field called radiomics where artificial intelligence image analysis is used to interpret and diagnose city scans and MRIs in a way that humans cannot do, so to say. So we think that there is a lot of development in this area, and that's part of our core technology. We have Mark test already launched, the ISO 1345 certification, which is a must to have the CE market. We have, as you all know, our clinical trial, our TIC study that showed the clinical evidence of patient benefit. We have the commercial and logistics reach in 20 countries, as mentioned, 24 countries enrolled at hospitals enrolled in Ignite and ongoing conversations with more than 100 traditional hospitals and our team. So from this perspective, we are as market ready as we can be. What are our strategic priorities for 2023, 2 blocks, one block is how do we increase the penetration. So again, if you think of the curve that we showed before, we cannot sell more than the curve. So to say the curve is showing what is the available market. But what is important is all the activities that we do to get the highest market share below the market, below the curve. So we will continue to work with our distributors, local activities, the Ignite program, we are going to initiate several clinical trials to support reimbursement and guideline change. Remember this market access slide that I was showing before. And we will cover the new countries, as I mentioned also before, to complete what is still pending in terms of relevant markets. More midterm activities -- or midterm impact activities, but very important for us are the automation project, which is going to allow us to expand geographically beyond Europe and is enabling a transition from being a service supplier to being a product supplier, which is a crucial transition for a company like us. And also, we have started the development of Inditreat Neo. And this industry new addresses earlier stage colorectal cancer patients. So the size of the market that you see in this curve is only for the current products, any new products that we can add when we add upstream, we are going to be seeing additional curves filing to this one. Putting numbers behind it, then we said we are going to achieve 25 countries within the 3 vessels. We want to have 500 samples tested in 2023 by patients and dose tested. We want to reach the phase of performance assessment with Inditreat Neo the automation project, we want to have a first prototype that is ready to be tested at hospitals. We want to have the first Inditreat test run directly at the hospital. And in terms of revenue, we are -- this is the first time, by the way, that we are disclosing revenue targets. We are going to -- we expect to achieve SEK 6 million total revenue from which at least SEK 3 million should be coming from sales. That's it from my side. I'm going to hand over now to Kenneth for the financials, and then I'm happy to take any questions afterwards. So. Kenneth?

So. thank you very much. We'll have a little look at the back mirror and the side mirrors to see what we executed in Q4 -- can you see it in terms of a little bit sorry for this. So what we had in Q4, there's some financial highlights for our Q4. We take it from top. So the equity ratio was 90% compared to 93% last year, that the sol per share for Q4 was 0.4, sorry, compared to $0.36 last year as a cost. Our operating income in Q4 was SEK 2.1 million, which compared last year was SEK 2.5 million. The operating expenses in total in Q4 was SEK 9.2 million compared to 9.9% last year. So that's a little bit less than what we spent in the same quarter last year. We have a cash position by the end of '22, which is almost SEK 45 million compared to SEK 73 million last year. And that is our capital resources -- in total, we still consider that to support the runway for the current commercial plans that we have and been discussing in this. If you look at the financial development on quarterly basis, the last 5 quarters just to include Q4 last year as well for comparison. The numbers I just presented here, you see a total earning loss in Q4 2022 of SEK 7.2 million versus SEK 6.2 million last year. The total equity is SEK 43 million by the 31st of December in comparison to SEK 74 million at December '21. And the total cash flow spending for Q4 was approximately SEK 3 million compared to a positive cash flow in Q4 2021 of SEK 442 million due to financing income from that aspect. If we look at the development here in the graphic growth format is simply to show what I think is visible from the numbers as well that the investment obviously into the commercial activities and our R&D activities here is, as we already had in the plan, spending on the cash that we had available for it. So you can see it in a graphical format for a quarterly basis. And I will quickly jump to a -- since this is a full year as well to show the full year report numbers as well, where we had a total loss for 2022 of SEK 30 million compared to SEK 18.9 million last year. The cash flow in total for 2022 was a spending of SEK 28 million compared to a positive cash flow in last year of SEK 14 million due to the cut increase that we had in 2021. The full year and again, in just graphical form to see the developments in it, obviously, from 2021, there was a development in the cash at hand from the equity increase just mentioned here. And with this, just a quick run through, so we have time for Q&A. -- not looking too much at the back mirror. What I also would encourage here is to look at the quarterly report at the [indiscernible] website for this. and what you would also be able to see from the website, if you have not had the chance yet other than the quarterly report and the previous quarterly report is our financial Calendar. So the next thing on the financial calendar from my end and our end would be the group annual report that will be published and distributed by the 20th of April 2023, obviously. And on the 25th of May, we will have the Q1 '23 report out as well for your reading. And as mentioned, I do encourage you to look at the report here catching this on the website. That was, for me, a quick view in the back mirror. So I will leave it to Ole on this.

Yes, then I will take over. Thank you so much, Fernando and Kane. I have the pressure of trying to run the Q&A session. I mean you can all place questions to us using the Q&A tab on the Teams app. I also have a few questions that we have received from shareholders over the last week or so. So I will supplement with those. Now we promised you that this whole webcast would take 45 minutes, and we will try to keep that. So please post questions to us. And just as you sort of prepare your questions, I could take 1 or 2 of these that have come in before, and there's one that we have seen actually a number of times. -- instated here, you claim that the value of 2curex should not at present we evaluate it based on the revenue then, I guess that's for you, Fernando.

Yes. And yes, this is a recurring question. I think the value of the company is -- when you are in pre-revenue stages, typically, the value of the company is related to the size of the opportunity and to how ready this company is to save this opportunity. And this is what we are seeing. I mean I was mentioning, for example, this company cites before, I mean, they raised $89 million and not based on any revenue, but basically based on projection of their future development of the company. So I think we are still at this stage where people should be looking at the readiness and the risk profile that the company presents. I think we have, in the last couple of years, we have tremendously derisked in the sense that we have proven that we can see mark products. That's important. That was not there before. We have shown that actually there is a market and there is a willingness by oncologists to use such a test. Remember, our market survey that we conducted during summer, where it was overwhelmingly positive in terms of intention to use, et cetera, et cetera. We have a much stronger team now than we had before in the sense, not in the sense of individuals, but in the sense that we have areas covered today that we didn't have before. We have our sales teams out there covering 20 countries. All of this, I think -- and then the fact that larger companies are getting -- taking an interest in functional traction C testing. All of this is actually strongly derisking, I think, the investment. So that's how I would look at it when thinking of the valuation of 2crex...

Thank you. Then we have a question here, a short and precise one. Are we on track for the 2023 cores. I think that's for you again, Fernando.

And I would say, yes. I mean I would be worried if by the end of February, we are not on track anymore. So yes, I think we are on track. We have obviously been working -- since we disclosed these goals, we have continued to work on it. The Ignite program is developing very nicely. And yes, we are on track.

Okay. Then there's another one here that is a little bit more technical maybe. Have you seen any issues with the product when it comes to robustness for instance, issues with damages doing to fight template changes shelf life, aging, et cetera. I don't know if I could start maybe with that one and say the -- we are covering 2curex by the countries shown by Fernando. And we do limit it to Europe at this point in time because of the transportation time. We have said that we need to see the samples in our testing lab in Copenhagen within 24 hours. And if we have time, we can start to discuss the automation that will expand this geographic space. The transport is done in a so-called transport box it's a box that is sent to the hospitals. Actually, they are now sitting at our distributors, and they extend it to the hospitals. There is a very clear description of how they should handle the tissue, how they should put it in the specific bobs. We have buffers that are dedicated for transportation. We have a temperature locker because as soon as the samples are in the box, they just punch it and then it will keep the box between 4 and 8 degrees. So we do have, I would solid control this temperature lower if the temperature has gone about this in 2 hours, the sample is simply rejected. So -- and with regard to shelf life, we have a strong QMS where we simply are required to have the shelf life detailed by the -- from where we buy our consumables, and we stick to that carefully. So I would say we -- this is an area that we are really spending an effort to make sure that it is completely controlled.

Yes. But if I could complement to this, if you allow me, because I think it's important. And so, this is under control, as Ole said, but obviously, it is complex. And this is one of the reasons why we are so interested in decentralizing the testing into the hospitals because all of this complexity around the sample transportation would go away if the testing could be done straight in the hospital where the sample is taken. So hence, the strategic importance that we are giving to the automation project and to the decentralization.

Then there is a question that actually relates to this. Will the automation box test on site at hospital start in H1 or H2 on 2023 and how long is the plan to run this test. I think, Fernando, so you can maybe comment on overall, I can comment a little bit on the technical aspects.

I just want to emphasize one thing, which is that we are talking about a prototype here, okay? So what we are going to place in the hospital during this year is a prototype. And then because we need to understand how this prototype is going to work in the hands of, let's say, regular like technicians. We have to understand which parts of the process are more complicated for them, how we are going to cover, et cetera. So this is not -- this is a project that I would say it's going to be to the specific question. It's going to be in H2, not in H1. But emphasizing that this is a prototype and not yet the final product. Final product has to go among other things through a regulatory process.

And if I could add a little bit on the technical aspects, we did present here in November that we have just received the latest prototype from our partner, [indiscernible] of [ Viborg ], a partner that we are really content with. It's very impressive what we get from them in a very intense interaction. We have used these months to test that part of the process, and that is actually going well. So I would say that we can push it in, as Fernando says so in the first half of this year to really get an understanding of how would this operate hands of technicians that have not been born with Inditreat in the hand, so to speak. So we are on track, and we certainly see a huge potential in going out with an automated system. And let me then take one from the earlier questions. And that could be the number of Ignite agreements increased sort of the last month, more than expected. And you did comment on that, Fernando, but maybe a little bit more on the Ignite sort of why it went so fast and will we see a continuation there on the speed...

I mean -- we have a pipeline. As you know, because we have been explaining this. We have an ongoing dialogue with more than 100 hospitals throughout Europe. And let's say, this dialogue follows certain steps, which we call the commercial pipeline. So we start with the first time we ever contact or first time we ever make a hospital aware of Inditreat all the way to a specific presentation to the relevant stakeholders all the way to them being interested in joining the Ignite program all the way to sending them the contract for review by their legal departments, all the way to signature, all the way to that. So it is a pipeline. And this pipeline is, let's say, faster or slower as we have seen, depending on the quarter. But it's not that all of a sudden in Q4, we found 9 hospitals like this that we're willing to join. It is that this pipeline matured all the way to signing. So that's how we are seeing it. And we -- what makes us comfortable and confident is that we have this robust pipeline behind it. So it's not that the pipeline is drying but actually, it's expanding. Our distributors, our -- the sales teams of our distributors are constantly pitching and promoting and explaining Inditreat to their customers. [ Jesper ] and his team are visiting together with them, we are attending the conferences, et cetera. So it's all about building this pipeline and then, let's say, managing it as it matures.

Then there's one here that you have talked about moving into non-metastatic clerical cancer with a new Inditreat test. Where are you with that?

And you touched upon Fernando, the importance of moving down through the stages. Maybe I could comment a little bit on where we are technically with this. I should say that non-metastatic colorectal cancer, that was actually where 2curex started. So as some of you may know, we live the first several years around our life. We lived at a major university hospital in Copenhagen, a hospital where a lot of colorectal cancer surgery was conducted. And so, the whole test was actually developed on what we call primary tumor, and we had hundreds and hundreds of tests being done to develop the Inditreat test. We then moved to metastatic to the metastatic situation, simply to be allowed to run clinical trials. And therefore, our products were firstly in metastatic colorectal cancer, so the most advanced stages of the disease. Now when we have shown that active works, we are able to move to earlier situations. And that is what we are going to do with the Neo. What's very interesting about primary colorectal cancer is that we see a huge push to actually treat the patients before surgery. -- see that the patients will actually perform a lot better and all the way to all survival if they will have a chemotherapy treatment before surgery, but you need to select the right treatment. So that's where Neo comes in as our new product. And the interesting thing there is that we believe and our clinical partners are supporting that, that all patients, all colorectal cancer of patients that are going into surgery will have a chemotherapy before then some of them will have chemotherapy after surgery as well. But all of them will go in before. So we are pretty confident with regard to the technology, and we have now several hospitals that are interested in being involved in these studies. So I see from a technical point of view, I'm pretty comfortable that this will be achieved -- and I don't know whether you will supplement seen from sort of a commercial point of view of how that will strengthen as a business.

So just -- I mean, maybe a couple of comments first. Of course, unfortunately, when you look at the colorectal cancer patients by stages, there is an attrition rate. I mean people die from the disease. So the more you move upstream, the larger -- the number of patients that you can reach -- so the number of patients in Stage 3 is larger than the number of patients in Stage I. That's one aspect. The other aspect, of course, is the sooner the intervention, the more impact you can make on the patient's outcome. That's at the end what we are doing. That's at the end the full value and the purpose of Inditreat is to have an impact on patient outcomes. So it's much the impact that you can make on a patient in Stage 3 is much higher than the impact you can make in a patient that is already in stage 4 third line or fourth line of treatment, where unfortunately, drugs can only give them additional weeks or months, but not more. The more we move upstream, the more we move to earlier stages, the more impact the drugs can make on the life of that patient.

Thank you. Now if there are no further questions, this is your last chance to send that question here. I would say, however, that we really welcome that you send us comments, questions to our [email protected], and we will make sure that we get them answered as swiftly as possible. But if no more, then I will close the Q&A section and hand it over to you, Fernando, to close the whole webcast.

From my side, just again, thanking everybody for participating, for your interest in 2curex for following us for supporting us even in tough -- even in tough moments. We will continue our effort to explain what we are doing to explain where we are to show transparently everything that's going on in this exciting journey that we have taken. And yes, we hope that we will continue to have you by our side as we have. So thank you very much, and have a good weekend. Thank you.