Arecor Therapeutics plc (AREC) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Arecor Therapeutics plc year-end results investor presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Sarah Howell. Good morning to you.

Good morning. Thank you, Jake. So good morning, everybody. Thank you for taking the time to join us today. It's a pleasure to be here. So my name is Dr. Sarah Howell, I'm the CEO of Arecor, and I'm joined today by Susan Lowther, our CFO. And today we really will give you an introduction to Arecor, our technology and the proprietary products that we're developing and also kind of some of the highlights from our year ending 31st of December 2021. So to draw your attention to our customary legal notice. So by wave introduction at Arecor, we -- our purpose here is to transform patient care by enhancing existing therapeutic medicines so that they're safer, more effective and affordable. And we do this by leveraging our innovative and proprietary formulation technology platform, Arestat that we develop a novel formulations of existing therapeutic products that enhance their properties. As a technology platform company, intellectual property is absolutely critical to us, and we have very broad and robust IP protection of both the Arestat platform itself, but also the enhanced versions of therapeutic products that we develop using that platform. We are a clinical stage biopharmaceutical company. Our first area of therapeutic focus is in the diabetes space where we're using Arestat to develop much faster acting and more concentrated faster-acting insulins, and I'll talk about those in a little bit more detail later. And we've also expanded further into an area that we call specialty hospital products. This is where we're taking products that are already on the market that used in the hospital setting often in chronic care for oncology, for example, or in emergency use. However, those products are only currently available as in powder forms that require a complex mixing procedure prior to use. So here, we're able to use the Arestat technology to develop stable liquid ready-to-use and ready to administer versions of these products, which means that they can be used safely and effectively and quickly importantly, at point of care. And we entered into from our specialty hospital franchise, we've licensed 2 of these products to hitting the pharmaceutical under co-development and licensing agreements, and they're progressing well through development currently. And again, I'll talk about those. And our strategy overall from our proprietary pipeline is to develop these closer to market to a higher value inflection points prior to partnering with major pharmaceutical companies for late-stage development and/or commercialization under our technology licensing model. So alongside our own in-house proprietary products, we also partner with leading pharmaceutical and biotech companies. This is where we work on their proprietary products in-house at Arecor and we're applying Arestat technology platform to develop superior versions of their products and these could be products that are either in development or on the market as life cycle management. This is a revenue-generating model. Our partners pay our record to perform. The development work. So that's the application of the Arestat technology. And when we've developed a novel formulation of their product with enhanced properties, they have the option then to take that further forward in development and ultimately to market under a technology licensing model, and these tend to be milestone and royalty bearing. So overall, we're very much a commercially focused business. We have revenue-generating partnerships with leading and pharma and biotech companies and also upside potential from the future partnering and licensing of our proprietary product pipeline. As many of you may know, we also had a very successful subscribed AIM IPO in 2021, and we're using those proceeds to further enhance and develop our proprietary product portfolio. So just looking at some of the operational highlights from 2021. This also includes some of our post period events. So in terms of our proprietary product pipeline, we made very significant clinical progress across the year, and that's flowing into 2022. We received and very pleased to receive IND clearance from the FDA and that's the U.S. regulator for our second clinical study for AT247, which is our ultra-rapid-acting insulin. So this study is ongoing in the U.S. at the moment, and it's a 3-day insulin pump study. And I'll talk a little later around why that's so important. We're also really pleased to be able to announce a very positive results for AT278, which is our ultra-concentrated rapid-acting insulin. And this was a Phase I first-in-man trial and those results certainly hit the high end of our expectations. And again, I'll talk you through those. Earlier in 2021, we were awarded a GBP 2.8 million Innovate U.K. grant to support the Phase II clinical development of AT247. Preparation for that study are ongoing at the moment, and that can start and initiate after we have the results from the current U.S. study that's ongoing. We also -- as I mentioned, we partnered with major pharmaceutical and biotech companies, and we entered into 5 new technology partnerships in 2021. So these are revenue generating, but pre-licensed at this stage to offer that upside potential from milestone and royalty bearing licenses. And as you can see here from some of the names of the companies that we're able to announce such as Eli Lilly, Par Pharmaceuticals and Intas Pharmaceuticals and we're partnering with well-established and large pharmaceutical companies. And that really does validate the strength and the need for the technology and also our commercial focus. We do build relationships with pharmaceutical companies, and we do deals with them. We've also had some significant progress across our intellectual property portfolio. I've noted earlier this year, in fact, we had our first U.S. grant of 1 of our key patents protecting AT247 and AT278, which is a part of a much broader strategy and to protect those valuable product assets. So just assuming in a little bit to the technology, just to give you a feel for what the technology platform really is. So as I've mentioned, we're taking products that are suboptimal in some way, applying the Arestat technology platform about enhanced or improved versions of these products. So some examples of these are as is in the case with our insulin products, we can take those products and use our Arestat technology to modulate and change the pharmacokinetic and pharmacodynamic property. So this means that we're changing how that drug works and post injection here. And here, we're making -- accelerating that absorption and making very rapid acting insulin. We very routinely work on taking products out of the cold chain and developing heat stable versions of those products. Obviously, that's been very topical over the 2 years now, I guess, with the COVID vaccines where we saw the first vaccines coming to market, requiring minus 80 degrees, so being stored and distributed on dry ice. So those are the kind of programs that we work on with our partners taking those products out of the cold chain. As is the case with our specialty hospital portfolio. We also work routinely on taking products that are dry powders that require this complex mixing procedure at point of care and developing stable liquid ready-to-go versions of these products. And we're also seeing very much a trend towards trying to take patients out of the hospital setting, and one area here that we work in both ourselves and with our partners is taking products that are currently administered by an IV infusion in the hospital setting and developing very highly concentrated and stable versions of these products that could be delivered then by a single injection and then opening up the opportunity to take that patient out of the hospital setting, even to self-administration at home. So the technology platform itself here, we're taking a suboptimal product. We're applying Arestat to develop an enhanced version of that. And essentially, the platform is a series of tools, and each of those tools is a very specific combination of ingredients or excipients that have been designed and developed by Arecor to enhance specific properties of a product. So when we work on a program, whether it be an in-house development product for our core, 1 of our partner programs, we start in the same way. The first thing that we'll do is define the target product profile, what are the enhancements properties that we're looking to achieve. And once we've define that, we use our internal expertise and know-how to then understand what are the problems that we need to overcome, how -- what's preventing those enhancements of properties being achieved today. And once we define that, we then select specific tools from our platform, each of those tools and each of those combinations of ingredients then being designed to overcome and enhance a specific property. Now these are complex, often biological products that we're working on here. So there's always more than 1 challenge that we need to overcome. So we'll select those tools that overcome each of the challenges that's required for that particular product. So we might, for example, select tools 1, 3 and 5, for example. We'll combine those together, which means combining all of those ingredients together with the pharmaceutical products within our labs in Cambridge in the U.K. and then test that product. And what we're looking for here is, are we seeing broadly the enhancements of properties that we'd expect to see. And once we know we're in the right design space, this is where we use our proprietary algorithm, which helps us fine-tune and select the exact ratios of those ingredients or excipients that will give us the optimum product profile and the optimum enhancement of properties. And using this process, which is very transferable and scalable we're able to routinely develop enhanced versions of products that were otherwise unachievable. And as I mentioned earlier, of course, intellectual property is absolutely critical here, and we have over 50 granted patents currently and, of course, a growing and evolving patent landscape. So just moving on to our portfolio here. So what you're looking at here is a combination of Arecor's proprietary products in the dark blue and our partnered programs in the orange. So perhaps if we start with our proprietary products in dark blue, there's a number of important aspects to note here. The first is here that we're taking products that already on the market and approved such as insulin. And we're using Arestat to develop enhanced versions of these. And this is important because it means that the safety and effectiveness or efficacy of these products is already known. And this means that we can follow abbreviated regulatory and development pathways to market because we're not having to perform those long and often large and clinical studies to demonstrate the safety and effectiveness of the products. Here, what we're doing in our proprietary and clinical programs here are looking at demonstrating the superiority and the clinical benefit to patients. So this means that we can develop these products in a faster time frame to market and to lower cost and lower risk compared to a traditional biotech model. And so as you can see here for our diabetes products, AT247, AT278, and we performed 2 Phase I clinical studies for these products. We are in a second clinical study for AT247, and we plan to enter our next clinical study for AT278 later this year. And really, our strategy here is to develop those data packages that we know that pharmaceutical companies will be looking for partnering, but also data package, which proves that clinical benefit to patients, which would be key for those patients, but also to ensure reimbursement of these products in the market. And here, we'll be looking to take with our partner market share within an existing $6.4 billion market, and we don't anticipate these being milestone royalty-bearing partnerships with those pharma partners. So perhaps moving on to the specialty hospital portfolio now. And I'll start with our partner programs with Hikma Pharmaceuticals. So these products started their life as Arecor internal products. So they're in our research group. So these are products that we've selected that were on the market, used in the hospital setting that these powders that require the complex and mixing procedure prior to use. So for AT282, which is the most advanced of these programs with Hikma, for example, we developed a stable liquid ready-to-use version of this product in-house at Arecor and then we filed intellectual property protecting that novel formulation and that new format of this product, and it was at this stage that we entered into a co-development and license agreement with Hikma Pharmaceuticals. Now here, we're not looking to change clinically how these products work post injection. So this means that we can follow an even further abbreviated pathway to market. It's called a 505(b)(2) regulatory pathway in the United States. And what this means is that there will be limited or no clinical data required for approval here. And with our partner, Hikma, and their -- and capabilities and the commercial capabilities to bring these products to market. We'll be looking to take market share within those existing market segments, so around $600 million market, for example, for AT282. So perhaps then moving on to AT220. So this is an example of a pure technology partnership. So this is where a pharmaceutical company is come to Arecor with their proprietary products and we've developed an enhanced and superior version of that product with the Arestat technology, and they've taken a license to that and taking it forward in development. So AT220 is important because it's likely to be first product on the market incorporating the Arestat technology. It's in late-stage development by our partner at the moment, and we'd anticipate this product, if successful, could be on market from 2023 onwards. Again, this is a royalty-bearing agreement to Arecor in an existing multibillion-dollar segment there. So we're generating a recurring royalty revenue from our report from next year onwards. And at the bottom here, you can see those technology partnerships. So these are pre-licensed partnerships where we're working on developing those enhanced versions and superior versions of the products for our partners and offer that future upside potential from licensing. So I'm now going to talk in a little bit more detail around our diabetes products. So maybe taking the macro view first, the International Diabetes Federation published their updated statistics for diabetes at the end of 2021. They describe now diabetes as being in crisis. They're actually around 537 million adults living with diabetes and the cost of treating them in their diabetes complications, it's just under $1 trillion currently. And certainly, 6.7 million people died due to diabetes in 2021. And where Arecor is focused here, we're focused on developing improved insulins to help these people living with diabetes better manage their blood glucose and ultimately improve their outcomes. So I'll try and explain this a little more in this slide here. So the daily challenge for somebody living with diabetes is to try and maintain the blood glucose inside a healthy target range, which you can see in the light blue is schematic on this slide. And they can do this through most of the day and night, but the challenge becomes around meal times. So when we eat food our blood glucose rises very rapidly. And the fact is that the current gold standard best-in-class insulins on the market today are still not fast enough. There's still improvements to be made there to bring that blood glucose back inside a healthy target range quickly enough and counter out that very swift rise in blood glucose. As a result of this, on average, personal diabetes spends around 25% of their time with their blood glucose is too high in hyperglycemia and about 5% of their time with their blood glucose too low in hypoglycemia. And it's this time spent out of range that needs the serious disease complications associated with diabetes. So for example, it's a 200% increase in Arecor's morbidity and 70% of people with diabetes die from cardiovascular disease. So at Arecor we're developing 2 superior insulins, AT247 is an ultra-rapid-acting insulin where we're really targeting an improved insulin and treatment option for people living with type 1 diabetes and I'll talk through the data and why that is in a moment. And AT278, which is a concentrated rapid acting insulin, again, targeting an improved treatment for type 2 diabetics. And both of these products are novel formulations of existing insulin and that we've enabled using Arestat technology. And as I mentioned earlier, we have a very broad and robust and patent strategy, protecting these products for that first U.S. grant earlier this year, and we would expect patent protection out until at least 2037. So if I move on to AT247, I'm going to talk you through our clinical data here for this study. So in this study, it's a Phase I clinical study in type 1 diabetic patients. We're able to go straight to patient population because we're not having to demonstrate the safety of insulin. So we could skip the healthy volunteer phase. And we were looking at comparing AT247, the gold standard insulin that are on the market today. So both from Novo Nordisk and NovoRapid, which is their rapid acting insulin and Fiasp, which is their next-generation ultra-rapid-acting insulin. And if you look first to the graph on the left-hand side here, this is the pharmacokinetic curve. So essentially, what you're looking at here is the increase in insulin in the blood in a type 1 diabetic patient after a single injection of either AT247 in the green, NovoRapid in the red or Fiasp in the blue. And I'll talk about these results now in relation to Fiasp, this was the fastest acting comparator within this study. And the first thing you'll notice here is there's a shift to the left of the curve the AT247 in the green. And what this means is that we indeed saw an accelerated absorption insulin, so insulin was appearing in the blood much faster. And we also then saw a significant acceleration of the exposure to the amount of insulin on board in the blood over time, and particularly in that first 2 hours and this is an important period where we've eaten food our blood glucose has risen very rapidly, and we need that incident on board as quickly as possible post injection. So we knew from our pharmacokinetic data that we'd achieve our goal of accelerating the absorption and getting more insulin on board. And then if you look on the right-hand side here, this is the pharmacodynamic data. So this is essentially the glucose lowering profile of the insulins. Again, what we saw here is that we've seen that increase in insulin exposure post injection and this did indeed result in an increase -- a significant increase in glucose lowering profile. So we saw a greater and faster glucose-lowering profile for AT247 when compared to both NovoRapid and Fiasp. And the reason we're so excited about this data and where we see the most patient benefit for AT247. We've proven now against those gold standard insulins in the market that is a faster acting insulin that it has a superior glucose lowering profile and then really has the potential to enable really a transformational treatment option for type 1 diabetics, which is called a pretty closely artificial pancreas. And this is a system as you can see on the slide here where the patient was a continuous blood glucose monitor, so this monitors and the blood glucose measurements at any point in time. These measurements are fed to a control algorithm which calculates based on blood glucose reading, how much insulin they need to maintain the blood glucose inside their healthy target range. And then this insulin dose is automatically administered by the insulin pump. Now this is sci-fis systems are available today and in use by patients in real-world use, but they're called hybrid closed loop systems. And the reason that their hybrid systems is that a patient needs to come out of the system at meal times announced that they're going to have a meal and instruct the insulin pump to administered to them a large dose or a bolus dose of insulin. And the reason for this is, as I was explaining earlier, those gold standard insulins are still not fast enough acting, so they don't respond quickly enough in real time to that swift is in blood glucose to bring the individual back into their healthy target range quickly enough. So there's a real need here for these systems for a much faster acting insulin to enable the system to be used throughout the day, night, including at meal times. And this is really considered the holy grail for people living with type 1 diabetes. It's well demonstrated at the time that they spend within the closed loop system that improves their time and range, so it could improve their time spent in their target blood glucose range and ultimately then improves their outcome. So there's a real potential here AT247 to enable this system. And the study that's ongoing in the U.S. at the moment is a delivery of AT247 comparing again with NovoRapid and Fiasp over -- once administered continuously over 3 days via an insulin pump. So that will to give us some data around the compatibility with the insulin pumps and the superiority again of the PK/PD profile is what we'll be looking to achieve there, and that can lead to then a longer-term study where we can start measuring time and range, for example. so just moving on to AT278, just to explain the difference between the 2 products. So again, we take an existing insulin and we've used the Arestat technology. In this case, develop a highly concentrated so it's 500 units per ml which is 5x the concentration of standard insulins. So in the AT247, study AT247 is at 100 units per ml as are all the comparators there. But we've used the technology to make this very rapid acting. And the need here is that there is a growing number of people with diabetes, particularly type 2 diabetics, who requiring high daily doses of insulin to control their blood glucose and this really goes hand-in-hand with the obesity pandemic. And currently, there are no concentrated rapid-acting insulins available for this patient population. So essentially for them currently, they have 2 choices. They can either select one of the gold standard rapid acting or ultra-rapid insulins that are available to them today. So this provides them with good blood glucose control, but it means that they have to administer very high daily doses through high injection volumes, which can be uncomfortable and painful and buy multiple injections multiple times a day. Or they can select the only other concentrated insulin on the market, which is also a 500 units per ml so the same concentration as AT278 but this is a more intermediate acting incident. So it's a slower acting insulin. So they get all the benefits of lower injection volume, fewer injections per day, however, compromising on glucose control and hence, ultimately, outcomes. So with AT278, what we're looking to achieve here is very concentrated, but very rapid acting insulin so essentially patients then can have the best of both worlds, lower rejection volume, fewer injections a day, but not compromising on blood glucose control and outcome. And the challenge here essentially is as you concentrate up insulin, it becomes slower acting. So we have been able to use our technology to overcome this. And we have a market leader position here. As far as we're aware, we're the only company certainly clinically that's demonstrated being able to achieve this sort of profile, this concentrated rapid acting instrument profile. And I'll just talk you through the results. This is -- these results are actually hot off the press and presented for the first time last Thursday to diabetes conference here. And what we were looking to achieve here, we're looking at AT278, 500 units per ml comparing pharmacokinetics and pharmacodynamics compared with NovaRapid, which is Novo Nordisk rapid-acting insulin, which is a 100 units per ml. We've got a 5fold difference in concentration here. And again, what you-'re looking at on this slide is the pharmacokinetic data. So this is the increase in insulin in the blood post a single injection to type 1 diabetic patients. And you'll notice in what we were looking to achieve what the primary endpoint for this study was that it would be noninferior to NovoRapid despite that increase in concentration. And we met that primary endpoint in fact, with secondary endpoints in the study. But you'll also notice there is again a shift to the left, the AT278. So we not only achieved non-inferiority, but we also achieved superiority in terms of that acceleration of absorption, so the onset of appearance of insulin in the blood and also the amount of insulin over -- in the blood over time in that first 60 minutes. So we saw a 4-fold increase in insulin exposure to 4x more insulin onboard in the first 30 minutes post injection and 1.5x more insulin onboard on the first 60 minutes post injection for AT278 versus NovaRapid. So this really is a very exciting profile here. And as I mentioned, we have a market leader position as the first and concentrated rapid-acting insulin. And then if we look at the pharmacodynamic data, so this is the glucose lowering profile, again saw a faster onset of action of glucose lowering. So it started lowering blood glucose much more quickly. We saw a very dramatic 9-fold increase in glucose lowering in the first 30 minutes and a 2-fold increase in the first 60 minutes. So we know here that post-injection you've eaten food, inject your insulin, and it starts bringing down that glucose much faster and to a much greater extent here. So I'll just draw your attention to an event that's coming up actually at the end of this month, which you may be interested in attending, if you are, please do and get in touch and we'll make sure you receive the link. So this is a key opinion leader event where Professor Thomas Pieber will be talking through AT278 clinical data in much more detail than I have today. And then we have a panel of world-leading experts within the diabetes space, who will talk through the patient need for more concentrated and rapid acting insulins. So -- and as I said, I think it would be really interesting and insightful event if anybody would like to join that. So I am just moving on here in terms of key upcoming milestones. As I mentioned, the AT247, we're currently in the middle of a U.S. clinical study. This is a 3-day insulin pumps, so we'd expect to be reporting headline results in the second half of 2022. And the AT278 and on the back of our resource, which were very much at the high end of our expectations as we're looking to initiate next study here, and that would be looking at AT278 in the target patient population. So in the type 2 and diabetic patient population. So I'm just going to hand over to Susan to talk through the financial highlights.

Thank you, Sarah, and good morning, everyone. Our cause admission to aim occurred on the third of June 2021. We raised new investment of GBP 20 million from existing and new shareholders. The proceeds raised are to progress our proprietary development pipeline. As I've mentioned, we had a share price of GBP 2.26 and a market cap of GBP 62.5 million. Our 2021 P&L shows that we have a commercial focus with total income of GBP 1.8 million derived from revenue and grant income. R&D investment increased to GBP 5.4 million in 2021, and we expect this to increase further in financial year '22. Our R&D expenditure this year will include the U.S. Phase I study for AT247, which is in progress plus a second study for AT278 in the second half of this year. Our cash at 31 December was GBP 18.3 million compared to GBP 2.9 million in the prior year, and our balance sheet was further strengthened with the conversion of GBP 4.4 million of shareholder loan notes into ordinary shares at a 10% discount to the IPO price. Our key financials. We recognize revenue from our technology partnerships in 2 ways. Formulation development revenue is recognized as the projects are performed. And as you'll see our 2021 recognition of GBP 1.2 million was up on the prior year. This included revenue recognized against 5 new technology partnership agreements signed in the year and agreements signed in prior years. Our formulation development projects represent future licensing opportunities. 2020 prior year revenue included the recognition of licenses and milestones, which are periodic in nature. Revenue is recognized at a point in time when a milestone is achieved or a license is granted. Our other income of GBP 0.6 million was derived from the Innovate UK grant award in March 2021. And we have GBP 2.2 million of grant income to be received over the remaining project term. Our improved net asset position at the end of 2021 primarily reflects cash. We also have an R&D tax credit receivable of GBP 0.8 million and GBP 1.4 million receivables from formulation development projects. Our payables of GBP 2.1 million included accruals of GBP 1.2 million related to the U.S. clinical trial, which became cash outflows in early 2022. Back to you, Sarah.

Thanks, Susan. So just to round off today. Hopefully, we've given you a good overview of our core, our platform technology and also our partner programs and proprietary products. As you can see here, we met a number of really significant milestones in 2021 both clinically across our proprietary portfolio, obviously, our successful AIM IPO raising GBP 20 million and continued progression across our technology partnering portfolio. And we're certainly taking that momentum into this year. So things to look out for really in 2022 would be the clinical results from our 3-day insulin pumps for AT247, which will be reporting in the second half of this year. The initiation of the important type 2 diabetic study for AT278 we'd expect to hit our next license milestone under our Hikma and AT282 co-development and licensing agreement and also found that portfolio of specialty hospital products that Arecor is working on internally here, and we're looking to progress those and generating the data and the intellectual property to lead to more Hikma type licensing deals. And we would certainly expect to see continued technology and partnering growth through the year as well. So that concludes the presentation for today, but of course, we'll be happy to take any questions that you have.

[Operator Instructions] But just whilst Sarah and Susan take a few moments to review those questions submitted already. I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Susan, Sarah, as you can see, we've received a number of pre-submitted questions as well as a number of questions that have been submitted during today's presentation. Firstly, can I thank all investors for submitting their questions. And Susan, sir, if I could please hand back to you just read out those questions and give a response where it's appropriate to do so, and then I'll pick up from you at the end.

Sure. No problem. Thank you, Jake. So the first question that was submitted, so as given the Novo Nordisk long and established market position in producing insulin whilst the pharmaceutical company not able to adjust the composition straight formulation of this existing insulin products in order to improve the PK/PD profile. And following on from this, is any of the excipient stroke ingredient used by Arecor's AT278 or AT247 available only to Arecor. So I think in the first part of that question, so Novo Nordisk have used the formulation approach to develop a second-generation version of their incidents. So their first products on the market is NovoRapid, which is a rapid acting insulin, and they have further developed Fiasp, which is a reformulation of NovoRapid essentially to develop an ultra-rapid acting insulin version. So there's very much a drive from the major pharmaceutical companies and an understanding really of that need for patients that they do need more faster acting insulins particularly those and type 1 diabetic patients that are looking to use artificial pancreas type systems. And as you will have seen from our clinical data, so that was a Phase I clinical study head-to-head with Novo's, NovoRapid and Fiasp, we've been able to further and significantly improve on that profile to develop a faster acting insulin with a greater glucose lowering profile compared to Fiasp there. So I think, again, we see all insulin is that next-generation moving towards more physiological insulin that acts more like a healthy person's response to an increase in blood glucose. In terms of those excipients, could they be used by others, the barrier to entry here essentially is our, of course, intellectual property. We filed extensively protecting the formulations and the compositions of AT247 and AT278 as well as methods of use as well. And as I mentioned, we had our first U.S. grant for 1 of those key patents protecting those formulations of AT247 and AT278. So that would be the barrier-to-entry in preventing either Novo or Lilly or any biosimilar companies essentially copying our course approach. So the next question is, how do the partnerships work with the likes of Eli Lilly? How are your partnership deals structured? And what is the revenue profile? So I'm assuming, I think this is referring to the technology partnerships. As you will have seen from the slides, we do have a partnership with Eli Lilly and 1 of their proprietary products. So these are structured in a way that there's a development program that's agreed with our partners where we're applying the Arestat technology to look to achieve a predefined target product profile, so an enhanced profile that we've agreed with them. So our partner will pay Arecor to perform those studies, and you've seen from seasons slides and the headlight financials that kind of magnitude of those revenues to Arecor. And then on completion of the study, our partner then has the option to take a license to that formulation. So that's a license to allow them to further develop and commercialize that novel combination of ingredients as applied to their product. And also a license to the Arecor -- Arestat intellectual property that they need them to further develop and commercialize that product. And they tend to be milestone and royalty-bearing agreements. To give you some sense of value because that's probably the follow-up question to this answer. For our proprietary and programs where we are developing them, we're investing in those, we're developing those closer to market and generating those data packages, including clinical packages for our diabetes products. We'd expect those royalties to be in the mid-single digit to double-digit range on commercial sales for technology partnerships where Arecor is investing, of course, our own capital, and we're applying our technology and our partner is paying for those from day 1, you're looking at more in a single-digit range on the royalties there. And then, of course, the absolute value of those depends on the market size of the product and our partners' success in capturing market share. The next question is what do you believe differentiates Arecor from its competitors, especially in attracting new partnerships? I mean I think the key here essentially is that Arecor USP is that we can use our innovative and proprietary Arestat platform to deliver and develop enhanced versions of therapeutic products that are otherwise unachievable. So that really drives our partners to us because they would have always -- these are large pharmaceutical companies. They would have always attempted to achieve their target product profile themselves. So they come to us when they're looking for a technology approach, something over and above standard approaches to formulation science essentially. And that's really what drives our licensing model. But under those partnerships, there's a recognition of the value that Arecor's bringing to the table, which then obviously converts into the upside potential of those milestone and royalty-bearing licenses. So the next question is, any major impact as the Cmax being slightly lower for AT than with NovoRapid. I think it's probably referring to AT278 there and actually for AT278 versus NovoRapid. There was no statistical relevance of differences of that Cmax. There are in fact very close and on those key values very close on these -- on the statistical relevance. So there's no clinical difference between the Cmaxes for those 2 products. So next is, I'll read out the complement. Great progress to date. Thank you. What near-term catalyst news flows can we expect? And what do you see as the ongoing R&D cost? I'll take the first half of that question, Susan, and then I'll hand over to you for the second half. So I think in terms of near-term catalysts, here. We have some clinical catalysts upcoming. So those results -- clinical results from the current 3-day insulin pump study in the U.S. for AT247 would be a key catalyst. That's in the patient population using the intended delivery mode, so delivered by continuous infusion and insulin pump there. So we certainly see that as further validating the superiority of that product, clearly initiating our next clinical study in the type 2 patient population, the AT278 as well would be a milestone then leading to a readout of those studies, which will likely come outside of 2022 there. And across the portfolio, I think we expect to see additional partnering growth in terms of both our current partners and products and the license progressing closer to market, but also our technology partnerships with pharma moving towards these licensing stage and more technology partnerships coming on board through the year. So I'll hand over to Susan to talk about the ongoing R&D costs please.

Thank you, Sarah. In terms of our R&D cost for 2022. We do expect that to increase. As I said earlier, we're running cost of 2 studies in this year, and we expect that to probably reach double-digit millions. On an ongoing basis, we will certainly be in single-digit millions, and that figure will effectively flex depending on the timing of those clinical studies.

Thank you, Susan. I think that's the last question at the moment under the Q&A but if anybody has any additional ones, we'd be happy to take those.

I will just give it just a moment if there's any questions that come in. Okay. Perfect. Sarah, Susan, thank you very much to address all of those questions that came through. And of course, if there are any further questions submitted today, we'll make these available to you immediately after the presentation has ended. And ladies and gentlemen, we'll publish all those responses where it's appropriate to do so on the Investor Meet Company platform and will notify by e-mail when these are ready for your review. Sarah, Susan, perhaps will be directing investors to provide you their feedback, which I know is particularly important to yourselves in the company. If I could just ask you for a few closing comments, wrap up with that would be great.

Yes. No, thank you, Jake. Thank you, everybody, for taking the time to join us today. I think as you've seen, we've -- as a company, we've evolved and being able to use that technology to develop these enhanced versions of therapeutic products. And I think we really do have the potential here to bring products to market with our partners that can transform patient outcomes and quality of life, which really is the purpose of Arecor, and in doing so, we should be able to build a large and self-sustaining biopharmaceutical company, which is ultimately our strategic aim here. So thank you for taking the time, and we look forward to engaging with many of you in the future.

Sarah, Susan, that's great. And thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. It's going to take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of Arecor Therapeutics plc, we'd like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.