Almirall, S.A. (ALM) Earnings Call Transcript & Summary

Good morning, everyone. My name is Federica Lussana, and I'm part of the healthcare investment banking team at JPMorgan. It is my pleasure to introduce our next presenting company, Almirall. You're going to hear from the Chairman and Interim CEO, Carlos Gallardo, here with us. After the presentation, we're going to have a Q&A session, and we're going to be joined by Mike McClellan, the CFO of the company, and Karl Ziegelbauer, the CSO. We also have Pablo Divasson, the Director of Investor Relations here with us. If you want to ask questions, if you are in the room, we are going to have the mic passed on to you. You can also ask questions on the platform, and I'm going to be the one reading the questions for you. So thanks all for joining us today. I'm going to hand it over to Carlos.

Thank you, Federica. Good morning, everyone. Thank you very much for joining us today and a special thanks for JPMorgan as well for inviting us. It's a pleasure to be here. I'm Carlos Gallardo, I'm the Chairman of the Board and Interim CEO of the company and delighted to show you the journey we're in, in medical dermatology. Can I spend a few seconds here on the disclaimer slide? So I'm going to start with a little bit of background on the company for those of you that are not that familiar with us. So the company was founded 8 years ago by my grandfather, Antonio Gallardo in Barcelona, Spain. We have today an established portfolio of products with growing dermatology business and a promising pipeline. I'll spend, in later slides, I will take care of the different buckets here. We have a very experienced and international leadership team in the company. You're going to meet some of them. Some of them are here; Karl, Mike, sitting on my left and will be able to participate in the Q&A session. And the company was listed in the Madrid Stock Exchange in 2007, and the family, the reference shareholders still own 59% of the company. In terms of some key figures, I won't go through all of them, but some of the key ones, we closed last month, December 2022, with EUR 1.6 billion in terms of market cap. Our last year of audited sales figures is 2021. So EUR 827 million revenue, EUR 236 million EBITDA and a very strong cash flow generation for the company. We are an R&D-based company that runs in our blood, R&D, and 2021 we spent 12%. Last year, we spent a bit more, and we have a very well-defined R&D innovation roadmap that is going to increasingly take resources from our P&L. 1,800 people in the company, of which a significant number are face-to-face with our key customers, dermatologists. Today we are a very strong leader in medical dermatology in Europe. As you can see in this graph, most of our sales are in Europe, 84%, where we have a very strong footprint, particularly in countries such as Germany and Spain, but also we have a very solid presence in the rest of the key countries such as the U.K., France and Italy. We have a very strong product portfolio and a promising pipeline. I would say that we have a combination of more established mature brands that are very resilient. We are not facing the risk of patent expirations for this more mature portfolio. Then on top of that, we have the very exciting dermatology portfolio that is driving the sales of the company for the last few years with Ilumetri, Wynzora and Klisyri. And we have a very exciting pipeline, particularly with Lebrikizumab that we will have time to discuss later on. In the U.S., we have a smaller presence. It's more of a niche presence driven by Seysara and Klisyri, but it's also a growing operation there. Why dermatology? Well, dermatology is a very attractive therapeutic area, first, because of the size of EUR 40 billion market. Also we all hear about the challenge in pharmaceuticals today that is about growth. Well, in dermatology it is foreseen that it's going to keep growing double digit for the foreseeable future. So probably it's one of the few therapeutic areas in pharmaceuticals that is poised to -- for continued growth in the future. So that's where we are present. And in addition to that, it's an area where there is still tremendous unmet need. So only looking at rare diseases that are more than 800 diseases, of which a large majority don't have any treatment yet. So there's a lot to do in this therapeutic area. Most of the growth is coming from the biologics and biologics today, we win in psoriasis, we win in atopic dermatitis. And that's where we have our most important products. We have Ilumetri, in psoriasis is an anti-IL-23 that is competing very well in this category. And also we have Lebrikizumab that is our late-stage asset in the pipeline. We have submitted the drug for regulatory approval. We are expecting approval later this year and is going to be completing in this exciting class in atopic dermatitis that is also growing tremendously. Additionally, as you will see later, in some of these diseases, we are building broad ranges. So not only we are aiming for the more severe patients, but also we're looking at what are the unmet needs in mild and moderate patients. And also this -- which is great also for our commercial efforts because it brings a lot of efficiency and synergies. Despite our very exciting near-term future -- present and near-term future, we are also investing a lot of time and effort in building for the future. This is a multi-generational company, so we cannot forget about the future. So we're putting a lot of effort in bringing assets to our pipeline. So we need to feed the pipeline. Last year was a great year in which we in-licensed 2 very exciting assets that I will explain later on. But also we are increasing the number of internal programs in the pipeline. Today we are present in 5 key areas that are here in this slide; Atopic dermatitis, onychomycosis, psoriasis, actinic keratosis and Acne. We are focusing on our R&D efforts in other very exciting areas where there's very limited therapies available today. So there is tremendous unmet need such as alopecia areata, vitiligo, non-melanoma skin cancer and, as I mentioned, rare diseases. And again, this is an illustration of the exciting portfolio and pipeline that we have in dermatology. And let me start with psoriasis and psoriasis is an example of what I was talking about before, which is a disease where we really have a very good understanding of where the unmet need is, and we've been able to come consistently with product to tackle some of these unmet needs, starting with more mild-to-moderate patients with Wynzora, with another formulation with our partner, MC2. Also Skilarence, that is a systemic product for those patients that don't respond well on topicals. And lately then for more advanced products, patients, sorry, moderate and severe, we have our anti-IL-23 biologic Ilumetri that we made available for patients 2 or 3 years ago. And we are very, very happy with the performance of Ilumetri today. Ilumetri is our top product in terms of sales. The growth last year was very high and is a product that will continue to grow in the years to come. Atopic dermatitis is the other area in dermatology that is very hot. There's a lot of action going on here because of the unmet need. Again, there's patients that are suffering a lot that they need new therapies. And Lebrikizumab hopefully will be one of these new therapies in a few months from now as we are expecting approval by the European authorities in later this year. We have -- I mean we have the rights for this product in Europe for European countries. But we have more products in other very important diseases where there's still a lot of unmet need. We have Seysara for the U.S. market for acne. We have Ciclopoli for onychomycosis in Europe. We're in the process of launching in the different countries in Europe and in the U.S., Klisyri. This is a novel treatment for actinic keratosis that we launched a first indication for a small field. So that's the treating field of 25 square centimeters. But we are also developing a large field formulation. There's going to be a formulation for surfaces of 100 square centimeters, and that's where the majority of the patients are. So we are delighted with the performance of Klisyri. We are receiving very good feedback from practitioners, but we think also that with a large field, we're going to bring another very innovative and exciting solution to the market. And again, as I mentioned before, we are working on a number of other diseases with our internal programs in R&D. Let's take a look at the pipeline. So again, the very exciting biologic in atopic dermatitis, Lebrikizumab. We've submitted it to the authorities for approval in October last year. And therefore we are expecting approval later on this year in Europe. Klisyri, that's the product that I was talking about before for actinic keratosis. It's approved in Europe and in the U.S. for the large field -- sorry, for the small field indication. And we are now doing the clinical trials for the large field indication, both in the U.S. and in Europe. Sarecycline is a product that is already available in the U.S. for American patients for acne, and we are now finalizing the Phase III trial for the Chinese market. Efinaconazole for onychomycosis, this is under registration as well. We're expecting approval this year too, and that will be for Europe. And then these are the 2 early-stage assets that I was referring to before, the anti-IL-1RAP antibody that is already in the clinic in Phase I. This is a product that we licensed from Ichnos with worldwide rights. And more recently, we licensed from Simcere, a company based in China, an IL-2 mutant fusion protein for a number of autoimmune diseases that hopefully we will move into the clinic in a few months from now. We will license the worldwide rights for these 2 compounds. I will come back to these products later on. Let me spend the next couple of slides with Lebrikizumab. Lebrikizumab is a product that we think can be transformational for patients in atopic dermatitis, but also can be transformational for us, for Almirall, as a company because of the huge potential that it has in Europe. Atopic dermatitis remains an area where there's significant unmet need. There's been a lot of innovation in this area, but still there's a lack of efficacious treatments for all type of patients, is a disease that is very heterogeneous. So there's still a need for a number of products there. The data that we have is very compelling, consistent, and it shows a combination of efficacy, safety and tolerability that we think can potentially put the product in a first-line position. Also we're aiming to have a maintenance dose of once a month. What will be the unique -- the only product in the market with such a dosing schedule. As I mentioned before, all the regulatory data is out there. It's very consistent, it's very strong. We have submitted it this year for approval, in October last year. And hopefully everything is on track to get approval later this year. In terms of the product profile, as I mentioned, we have tested this compound in more than 2,000 patients. The results have been very consistent across the different trials that we've seen. So what gives us a lot of, let's say, peace of mind that we're going to see very strong results in the real world. We believe that IL-13 is the dominant cytokine or the relevant cytokine in this disease and Lebrikizumab is the best antibody that targets very selectively the cytokine. And as I mentioned before, we are aiming for a maintenance dose of once a month that we think will provide a very convenient dosing schedule for patients. In the clinic, the once a month showed the same efficacy results or even slightly better than the twice a month, twice weekly dose. So we are aiming for this maintenance dose. And now let me spend this -- a few minutes talking about the very exciting early-stage pipeline. I think over the recent years, we have moved to a -- in our R&D to look for very more first-in-class, very highly innovative molecules. And I think that these 2 products that we have brought into our pipeline recently is a testimony of that commitment, 2 very exciting science. Let me start with the one on the right. This is anti-IL-1RAP that is already in the clinic. This is a monoclonal antibody that blocks the signaling of 6 members of the IL-1 cytokine family. We believe that by blocking more than 1 -- more than 1 cytokine, more than 1 signal, we think that we'll be better positioned to tackle a number of autoimmune conditions. As I mentioned, we think there's a number of diseases that we're exploring. We have the Phase I ongoing and we have global rights. This is a product that was licensed from Ichnos. And more recently, we licensed from Simcere, extremely exciting program, an IL-2 mutant. But again, it is for a broad spectrum of autoimmune diseases. This product is a mutant fusion protein that activates regulatory T-cells and has the, we believe, has the potential to restore the immune balance. So really is a very novel approach to what we're trying to do here, and we are very excited about this. We hope to move this compound into the clinic in the coming months. Similarly, to the product that we licensed from Ichnos, we have global rights for this product with the exception of Greater China. In terms of news flow and events that you've heard from us recently or that you can expect in the coming months, we submitted Lebrikizumab for filing. Recently we started the Phase I of our exciting anti-IL-1RAP a few months ago. Klisyri, I mentioned that we are now doing the clinical trials for the large field indication, both in Europe and in the U.S. We expect the product to be approved first in the U.S. in next year, 2024, and later on in Europe. In February, we will show our full year results for 2022, and we will share our guidance for the full year 2023. So we have to wait a little bit here on that. Seysara, we expect the data for the Phase III that I think the study is completed now. So we should have the Phase III data relatively soon. We expect to move the IL-2 fusion mutant into the clinic during this first half of the year. And of course, we are all expecting the approval of Lebrikizumab by the end of this year. And also let me finish with also the approval and launch in Europe of Efinaconazole that will happen sometime this year as well. So that's my last slide. And just a commitment that we are really allocating the capital towards creating long-term shareholder value. So where are we allocating this capital? I see that it's been a long time in the company where we haven't had this tremendous opportunity in front of us. So we have a combination of products and pipeline that is extremely exciting for us. We have already 3 products in the market that we are launching or we have recently launched with Ilumetri, Wynzora and Klisyri that we already are bringing tremendous growth into the organization. Remember that I mentioned before that our base business is very stable. We are not going to lose any -- we're not facing any patent cliff. We're not going to lose sales from this very stable material portfolio. So on top of this base, we are adding a very exciting dermatology portfolio that I mentioned with Ilumetri being the best-selling product in the company ever. And now we have Lebrikizumab on top of that. So very, very, very exciting time for us in Almirall. And of course, we need to allocate capital to make sure that we maximize the opportunity of this brand. So we are in a period of investment. Secondly, as I mentioned, we need to continue to think about the longer-term future. We need to feed the pipeline. We need to fill it and that's what we're doing. And again, very excited with the anti-IL-1 and anti-IL-2 products that we just licensed. We plan to secure the stable dividends to shareholders as we've done in the past. And of course we have a very healthy balance sheet so that we plan to use selectively with a lot of discipline, but hopefully, we will be able to close on a few opportunities that are going to be more kind of bolt-on, more selective to reinforce our operation in a number of places. So thank you very much. That was all that I was planning to share with you in the presentation. And we can now move to the Q&A session.

Thanks, Carlos. Maybe I can start with the first question on Lebri. And I was wondering if you are planning to do a head to add against Dupi [indiscernible]?

Yes, maybe I can take this question. So as Carlos has alluded, we're seeing a very exciting profile so far with Lebrikizumab in our clinical studies. And now as we have submitted, we are, of course, considering various options how to maximize the value of Lebrikizumab. We are already doing one study in patients that are not adequately controlled by Ciclosporin A. That is a study that also has been done by competitors. At the same time, our partner, Eli Lilly is studying Lebrikizumab in patients that have been pre-exposed to Dupixent to explore the activity in that population and also in patient of skin of color. Yes. Furthermore we're discussing, and this is ongoing, what additional studies Eli want to do. I mean, doing head-to-head study is one option. Other options is, for example, to study the long-term safety, which I think will be an important data point as our clinical trial program has shown that in the maintenance phase, Lebrikizumab can be dosed once monthly. So we're potentially looking at a situation where patients can be long-term controlled by just once a monthly injection.

And what is the time line for these additional studies? Like when do you expect data?

I mean the Ciclosporin A study has been fully recruited and prospecting results this year.

Okay. And then maybe I don't know if they are going to -- they're going to bring the microphone to you.

So I have a question with regard to your, one, is it? It might be that you're addressing also a lot of other immunology indications. What is your strategic way forward with that? Do you want to go with different indications? Do you want to commercialize it? So what is your fuel looking forward on that?

Maybe, Karl, you can start a little bit with the -- and maybe I can...

Yes. I mean a lot of the targets in the immune system have a broad utility in dermatology, but also beyond dermatology. The way we think about this asset as we want to first explore this in autoimmune skin diseases. But if we learn that there is utility in autoimmune diseases beyond dermatology, will then either discuss, is this something we do a proof of concept in and then partner? Do we do it on your own? That depends then on the data we're seeing and the situation we're in.

That means the current is dermatology?

The current focus is dermatology, yes.

And then maybe going back to Lebri, given indeed, there is an expectation for approval and for further data release this year. What are your plans on a commercial level? And what are the peak sales that you expect in this indication? And then maybe another question. What is the current SG&A burden in terms of commercial preparation on Lebri?