Acrux Limited (ACR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to this investor webinar for Acrux Limited. My name is [ Gaby Holles ]. I assist Acrux with Investor Relations. And joining me this morning is Acrux CEO, John Warmbrunn. Welcome, John.

Thank you. Lovely to be here.

Before I hand over to John for the formal presentation, just a reminder that this webinar is being recorded, and there will be the opportunity to ask John some questions at the end of the presentation. [Operator Instructions] Okay. Over to you, John.

Okay. Thank you, and welcome, everybody. It's a real pleasure to be here talking today. And the main topic I'm talking about is female testosterone and bring you up to speed with where we're going and what's happening. But -- my slide isn't clicking forward. gosh. My apologies. Why is my slide clicking forward. Okay. Okay. Just a quick disclaimer as usual. But what I really want to talk about is female testosterone and where we're at, and we're in a great spot. We've got a Phase III assets. We've got a really big growth opportunity. We're aiming to be first to market. We've got a unique product, and we're also having success with our co-development pathway. So we're in a great position to help millions of women with hypoactive sexual desire disorder. So what is it? Some way to describe it is low Libido, but it's not just low Libido. The impact of that flows through in a whole lot of different areas. And it's very common. The classic numbers are quoting a 10% of the adult population. There's a Monash study that actually sits at 32% of adult women were impacted. But we're talking a large group of people and a significant impact. It really impacts a woman's well-being and a whole raft of aspects that flow through to their life. So if we're able to help it, we can really make a big difference. And we're lucky in Australia and lucky at Acrux that we have one of the world's leading experts, Professor Susan Davis, who actually is involved in writing the 2019 consensus on the use of testosterone therapy for women. And as you can see there, the words I like that she's got the irrefutable evidence of testosterone therapy in doses that result in blood levels as well as in physiological range, improved sexual desire, et cetera. And she's got experience working with our patchless patch technology. So but beyond just HSDD, which is our core thing that we're aiming for with the launch, this product will continue to develop. There's other sexual health issues that can help deal with. It may be productive with cognitive function, bone and muscle skeletal health, like a lot of hormones, it's quite broad reaching. But our focus at the moment is HSDD and getting to market with HSDD. And it's the reason why you're seeing these sorts of headlines coming up more and more often. In fact, those who read the Australian will have seen an article just came up yesterday around testosterone and HRT. But because there hasn't been anything available, it's an area of really huge, huge interest. So we do see this as a potential blockbuster. And some of that comes from our history. So just a brief version of our history. We're a spin-out of Monash University designed to commercialize a transdermal technology. And we were successful in doing that, particularly in the hormone space from 2007 to 2016, where we were able to launch Estradiol products and also male testosterone and had some great success there. Now what did happen after that was HRT lots of scares, lots of issues and the market really went into hibernation, and we had to take -- go into hibernation with it. But from that work, we still have Estradiol products in the market, and we have good long-lasting partnerships with experts in the area. For the last 10 years or so, we actually pivoted towards topical generics in the U.S., which are hard to register and have maintained all of our skills and expertise, which is why we're so well positioned to be able to get female testosterone to market. So just a little bit on our technology. This is something that nobody else has been able to do. And it's an applicator that has a spray that you can see from the diagram there that it gets the product into the skin and that the skin acts as a reservoir, which is slowly dissipated throughout the body. That's what we call a patchless patch technology. And because we already have Lenzetto and Evamist using exactly the same applicator, we're in a great position to scale this when we go with testosterone. I mentioned before, the history of hormone replacement therapy has been highs and lows. But most recently, what we've seen last year is the FDA in the U.S. actually took off what were black box warning. So there used to be warnings on HRT products to say to be very careful, they are all these side effects. But actually recognized and they said, look, we didn't get the science right. And that has opened up and actually generated really big growth in the market. The Australian market has almost doubled in size in the past 12 months. The U.K. market actually grew 3x, and we're seeing growth in the U.S. So it's generated a lot of interest in women's health around HRT. And that's important because we're talking a significant market. This is a mainstream market. We're estimating worldwide around $21.3 billion. And you can see the numbers there in the U.S. alone, we're talking a big population. But also the other indications that will come will grow this even further. So particularly when we're talking to partners, they're excited because this is all unmet need and big potential. So where are we on the pathway to get to market? So we did our Phase II trials 10, 15 years ago. So what we've been very pleased with is that the FDA recognized that work, and we're able to use that moving forward. But the Phase II gave us a very clean readout on dosing, which is exactly what you want for a Phase II. Now we're moving to Phase III. Now I can't talk in huge detail about this because we just met with the FDA a few weeks ago, and we're waiting on the formal minutes. But what I can say is that we've got a very clear direction coming out of the FDA guidance on how do we get this to market. And how do we do it properly because this is an area that there hasn't been that final trial and testosterone Phase III in market. And that's kicked off a whole lot of different planning. We also had feedback from the TGA back in December from Australia. But as you can see there, our endpoints are around sexually satisfying events and desire score. And that's what we're focusing on before we expand out. But we have had that initial -- or several rounds of feedback now and the last round is we're absolutely confident about. But we also see with our device that this has a lifespan around it. So historically, it was just a device without any smarts. We're certainly working towards putting some of those in, which can actually create more of a platform for management of this particular disease. So we see great potential to expand indications and actually the device. But that's the thing that's most interesting to talk about is how we're going with our co-development pathway because that's our chosen way to do things. Why? Because we did have a long gap. And we actually want to partner alongside us so that we can go right through to market and get a bounce and launch this quickly and have those early years of opportunity where we've got exclusivity to enjoy dominance of the markets and good returns. So the approach that we're taking has been that we're in co-development discussions at the moment, and I'll talk about those in the next slide. Then we'll move through to plumbing a CRO, which we're obviously already starting that work and then cascading through the classical manufacturing and other bits that make up the pathway to get us to market. But we're well positioned because we've already been -- we've had partners in this space before. So we know what we're doing, and we can do co-development well. The other thing that has been really pleasing is that because of the growth in women's health products around the world, the boom, if you like, there's huge interest from potential partners. So everything there is progressing very well. But the co-development is one I really want to focus on today. So obviously, we had existing partners, but we headed off to BIO, which is the big pharma conference, 22,000 people in the U.S. in July. And that gave us an opportunity to showcase what we had. And from that, we've been able to create a really good shortlist because the interest was really strong. And so we've got a range of organizations we're working with who are moving through to the next phase. But a mixture of global pharma, companies that are specialists in women's health care and a mixture of the U.S. and Europe, which is exactly what we wanted because we've got to work out a pathway for co-development and see who's going to be best. Nice thing is, if you like, we've got a bit of competitive tension, and we're quite confident about getting the right partner. And all of them had said they're open to co-development. So that was in July, we shortlisted. And as I mentioned, we've just had the FDA discussion that's given us clarity on next stages. So that's exciting. And in a few weeks' time, we'll be able to talk more about that as we get the formal minutes. But we've opened up a data room and the partners I'm talking about are already in there. In fact, we've seen a couple of them double the size of their teams looking at the data room as they go through it. And always encouraging when normally in business development, you're talking business development people, but we've had endocrinologists at the table very quickly looking at this. So a lot of really positive signs around the data room. And then, of course, that will lead into the business discussions and the detail of the co-development and how we make this work. But at the moment, we're on track and very excited about it. So underpinning this journey towards getting female testosterone to market is our existing business. And I think it's worthwhile talking about the fact that we're a full development fund. Given the changes in capital gains over the past month with the government policy, we're in a fairly unique position. There's only about 18 full development funds left. The benefit of that is that capital gains in the hands of shareholders aren't taxable nor dividends. So as we manage to get upfront payments and we tend towards dividend and we get capital growth, this puts Acrux in a great position from an investment perspective. There are downsides, of course, investors can't claim capital losses. But from where we're at the moment, we're mainly looking at upside. The other side of it is the business that we have. That's particularly the topical generics business that is, as you can see from the chart on the right there, is really generating a core income for us, which means that we're not having to raise capital all the time. We're also successful with one of our older products during the year, Lenzetto. We're able to work with Gedeon Richter to license the product finally in Australia. And that's going to deliver around $6 million over the next couple of years as we hit different milestones. But also, we were working on a development pipeline for our generics business. Now clearly, we're not going to take that all the way through, but we're having some good discussions now with potential partners who would be able to take over those products and take them to market. So again, another potential source of income. And we sold off prilo, lido, Prilocaine, Lidocaine cream late last year, all with the aim of making sure that we can support what we're doing with testosterone. But the other change is that given we're not going to be topical generics, we are looking very closely at our cost structure and aligning it with testosterone, not our old business. So we're reducing -- we're going to -- we don't need to run a big lab. We're reducing the size of our team, and we're going to be in a good position in the second half of the year to be running on a low cost base. In fact, it's only a few weeks ago that we started the first round of redundancies where we had 6 staff leave, and we'll see that continue so that we are able to make sure every effort is going towards female testosterone. So look, in summary, I think you can see we're in a good position with female testosterone. Because of our history, we've got a Phase III asset that's ready to go, that has FDA clarity around where we're going. The market we're targeting is a big one and it's unmet need. So we've got that first-mover advantage and the opportunity to really get growth. We also have a unique delivery system that provides us some protection as other products eventually get to market. And we're having a positive experience so far with the co-development pathway, which means that we have some confidence about getting to market. And the journey on the way there is good because we have a strong base from our generics business, and we have the experience. We've done this before that this will be our fourth goal of getting an HRT product to market. So we've got the know-how and the experience, and we've got the right partnerships in place to make it work. And the top of all, as I said, we're a PDF, which means investors who come on the journey are going to be well and truly rewarded. So on that note, I'd like to thank you and take any questions that you may have.

Thank you, John. [Operator Instructions] First question, John, I mean, you mentioned the unmet demand and your early mover advantage. But how many other companies are developing similar products? And what stage are they at in terms of the regulatory approval process?

Okay. Look, most companies hadn't done the work we did 10 years ago. So we're several steps ahead of most other businesses looking at testosterone. Most of those are in the very early clinical phases. There is another product that has testosterone in it, but it's a combination product, and it has a slightly different indication to what we're looking for. So at this point in time, we believe we will be first to market -- and with a 505(b)(2), we expect that to give us 3 years of exclusivity before we see competition. But all the other products are in the formats of gels or patches. Now the issue with gels in particular, is you can get transfer of testosterone to be messy, but you also don't get a specific dose. It's a little bit random. So our product is dosage controlled. So it's dosage controlled, which is exactly what doctors want, the FDA want. And it's also very convenient. You don't have the inconvenience and unattractiveness of a patch or the falling of all those issues. So we think we're in a good position to be first in market and to have an extended period of protection and also to develop our device as well as we go.

Okay. John, you mentioned that you're talking to co-development partners for female testosterone. At what point in the treatment development and regulatory approval process will revenues start accruing from those development partners to [ A products ]?

Okay. Look, we're in the middle of those discussions. So being precise, I can't be [indiscernible]. But over the years with all our products, we've had upfront payments, we've had milestone payments. And indeed, with Lenzetto in Australia, we've got milestone payments coming through. So we expect a mix of those. But there may also be the willingness to contribute directly to some components of the clinical research rather than an upfront component. So we'll have discussions about what actually works best and what's the optimum for us and also our partners. And whether we have one global partner or a partner in Europe and the U.S. also will be one of the factors. But we have been doing some work on one of our older products with one of our partners, and we've got a good handle on the value of these products. And we know from those discussions that they see high value in being able to access this. And that offer of being first to market, unmet need is really attractive to partners. So we're anticipating a good outcome over the next few months in terms of income. And then, of course, that will flow over time, the time line I showed where we're a bit over 3 years to market when we start to generate the actual commercial revenue, which, of course, we expect to grow quickly. Thank you.

Excellent. Thank you, John. So next question says great progress on female testosterone. On your estrogen and progesterone products, can you touch on the tailwinds for APR with shortages of both products in Australia?

Yes. Look, what's happened there? I talked a little bit about the boom in women's health. But as the different advisory bodies have said that it's appropriate to treat women as there's building awareness, there's been big demand on a global basis. So in fact, there's not just a shortage in Australia, there's a shortage -- global shortage of Estradiol products. So we know from our partners, particularly in Europe, they're going absolutely flat out to meet that demand. And in the U.S., we're starting to see a build there as well, all of which flows through to our existing sort of network helps grow that, but it does point to how exciting this is going to be as an area in the future for testosterone.

Okay. Excellent. And on that, I mean, in terms of testosterone and those broader markets, are there any plans to launch the female testosterone in the lucrative EU market? And if so, what's the indicative time line for this potential broadering of your geographic footprint?

Good question. We are looking at this as a global project. And that's partially because of our experience with male testosterone where we work with Eli Lilly on a global basis because there's global demand. So we're working with the FDA now because they're obviously the premier regulatory body, and we've got clarity. We're in fact, in the process of preparing to be able to have a scientific discussion with the European EMA in the near future. All of this comes together so that we can do the trials, and they will be accepted in both Europe and the U.S. So as part of that with our protocols, we're looking at a mixture of sites in the U.S., Europe and Australia. So we have a cohort that's acceptable to all the regulators. But the recent FDA discussion was the important one. We now go -- move on to Europe. And later down the track, we'll look at other markets. But they're the 2 big ones, and we definitely want those and our partners. But there's a lot of European companies in there as well as American. And certainly, one of our existing relationships with Gedeon Richter, who's the #1 women's company in Europe. So of course, they're very keen to see testosterone in Europe.

Thank you very much. So next question is, what would a successful or ideal co-development agreement look like for ACR on female testosterone?

Look, the ideal for us, I think it would be a mix of some upfront components and some directed investment and support on some of the Phase III clinical components. There's areas that we think are appropriate for us to fund, but the core work on those clinical trials, we think it would be good to have a major party that also has clinical research expertise alongside us and using that as a launch vehicle for when we go to market. So using the clinical trials, in fact, as premarketing and building awareness. So we see a combination of what might be involved. I can't really answer at the moment, we haven't made that decision between one global or we do the 2 regions separately is what the mix looks like. But they are the discussions as the data room is open, they're going through it that we'll be getting into in the very, very near future.

Okay. Thank you. Next question is about your male product and the investor asked, why not reengage that product?