Arecor Therapeutics plc (AREC) Earnings Call Transcript & Summary

So good morning, everybody. It's a pleasure to be here. Thank you for taking the time to join us today. It's lovely to see so many faces in the room, and welcome to those of you that are joining us online. And I think as most of you know, my name is Sarah Howell, I'm the CEO of Arecor Therapeutics and joined today by Susan Lowther, our CFO, and we'll be talking you through the interim results for the 6 months ending 30th of June 2023. Now for -- I should draw your attention. I shouldn't forget this. So our customary legal notice. So I know many of you know and very familiar with Arecor now. But for those of you that are new here today, there's a few new faces in the room, and I'm sure there are online today. I'm going to just walk through a very high-level introduction to the business and really how we're creating value through our pipeline. So Arecor, we're very much focused on transforming patient care by enhancing existing therapeutic medicines so they're safer, more effective and easier to use. And we do this by leveraging our innovative and proprietary formulation technology platform, Arestat. So this is a formulation platform, and we use this platform to develop these enhanced versions of existing medicines. So we're going to talk you through here a little bit around our proprietary pipeline and how we build value. So our vision here is to bring these enhanced medicines to patients that can transform their care, and in doing so, building a significance and ultimately self-sustaining biopharmaceutical company. I think as you can see here, I can't really see, it's behind me. As you can see here, we're building a diversified and derisked portfolio of in-house and partner programs and to really drive that significant revenue growth and value within the business. So if we start on the left-hand side here in our early-stage R&D portfolio, this consists of what we call our proprietary pipeline in the specialty hospital space. So these are products that are used currently within the hospital setting, so existing medicines and that's used in emergency care and opportunity to treat chronic conditions such as cancer, but they're inconvenient to dose in some way. So in this case, we're looking at products that are lyophilized powders that require a complex reconstitution procedure prior to use or mixing procedure prior to use, and we can use the Arestat technology to develop stable liquid ready-to-use and ready to administer versions of these. So they're safe, effective and convenient to use at point of care. And our strategy here is very much to develop these ready-to-use medicines, to develop the data packages, to demonstrate that they're developable and can be brought to patients and also importantly, to build strong IP protection around these differentiated ready-to-use products that we're developing. And then it's really at that stage that we'll be looking to partner strategically there to conduct that late-stage development and bring these products to patients. And we'd expect these to be under pretty standard product licensing, and we'll talk about one of these with Hikma Pharmaceuticals, which tend to be milestone and royalty bearing, so can bring that significant upside potential in the future. And then we have our technology partnerships. These differ from our in-house portfolio in that they're revenue generating from day 1. This is where major pharmaceutical and biotech companies are coming to Arecor, looking for something special essentially. They're looking for an enhanced profile of their proprietary products. They can be pipeline products that are on the market that they've been able to achieve themselves and they're looking to achieve this via the Arestat platform and Arecor's expertise. So our partners pay Arecor to perform the initial development work. So this is applying the Arestat technology platform. And once we've developed a data package to demonstrate that these differentiated profiles are achievable, they have the option to take those forward into further development and commercialization under a technology licensing model. And again, these are milestone and royalty bearing. So these are both revenue generating now, but offer the upside potential from licensing in the future. And then I think as we move up the value chain through into our clinical development portfolio. So this is our diabetes product portfolio. They're in-house currently at Arecor, and we're in clinical development here. And really, our strategy here is to develop superior insulins. We're developing very rapid acting, very concentrated, rapid acting insulins that meet key unmet patient needs, and we'll talk about those needs in more detail shortly. And we're developing these clinical data packages to demonstrate the superiority of our insulins compared with gold standard best-in-class insulins today and also using those packages to maximize the value for partnering and maximize the value of that partnering also there. And then for our license partnerships. So there are 3 products and development at various stages of developments and pre-commercialization at the moment that incorporates the Arestat technology, and these are licensed to our pharma partners. So they're fully within their control, fully funded by our partners and their commitment to develop those and bring those to market. So these bring a combination to the business of both near-term license milestone revenues, and again, we can sort of step through some of those that have been achieved this year and moving forward into the second half of the year. And clearly then the upside potential, which we're much closer to for the license programs of recurring commercial streams such as royalties. And we still expect the first product to be on the market incorporating technology to be a biosimilar product is with an undisclosed partner, I know you're going to ask me, undisclosed partner still at this stage, and we do anticipate regulatory approval for that product in the coming months and then subsequently launch. Of course, the timing of that launch is within our partners' control, but once on market that will bring a recurring royalty stream to Arecor, and we can start to move towards that more predictable self-sustaining growth. And then if we look towards our commercial focus on our commercial products, as you know, we acquired Tetris Pharma in August of last year. And the main reason for that driver was to have access to their lead product to Ogluo. So this is a ready-to-use glucagon for the treatment of severe hypoglycemia in people with diabetes. And this fits Arecor's purpose and that there's an unmet patient need here that we're addressing, but also there's a significant commercial opportunity with the Ogluo. We're looking to gain market share within a GBP 100 million existing market segments across the license territory. So that's the U.K. and Europe. And we're seeing good growth across the Ogluo portfolio. And again, we'll talk that in a little bit more detail. And then ultimately, we can see as we move forward, those license partnerships, both those existing now and new partnerships in the future, products moving to market, which meet those patient unmet needs, but also start to build that recurring royalty revenue for the business and ultimately to grow that large self-sustaining biopharmaceutical company. So if we just move to the pipeline in a little bit more detail here. I won't spend too long on this slide, I've probably covered a lot of this in the previous slide. So as I mentioned, we have our in-house proprietary portfolio of diabetes products and specialty hospital care. I think most important to note here is that we're able to follow a derisk pathway to development to mention that derisk portfolio. And the reason for this is because these are existing medicines where the safety and efficacy or effectiveness of these products is already known, which means that we can follow these abbreviated and regulatory pathways to market. Now for our diabetes products, we're looking here to demonstrate superiority and clinical superiority against those best-in-class insulins, which is why we're conducting these clinical studies and generating these data packages to prove that benefit patients and also position those then for future licensing and bring those to market with a partner. And for our specialty hospital programs, we're making assumption here that these will be developed under a 505(b)(2) pathway here. So that's even further abbreviated where limited or no clinical data is required for approval. And to a certain extent, this assumption has been validated by our partner, Hikma, so an AT307 which you can see on the pipeline slide here. This is a specialty hospital ready-to-use product, which started its life as an in-house program at Arecor, and then we've partnered and licensed that to Hikma under a milestone and royalty-bearing agreement. And very recently, Hikma had a very positive pre-IND meeting with the FDA, which confirmed the 505(b)(2) pathway as being applicable for the development of this product. And that really then translates and derisks our own in-house specialty hospital portfolio that this abbreviated pathway is applicable to these products. So if we just move on to the highlights. These are both operational highlights during the period and some post-period events as well. I think for me, one of the major highlights for the business is very significant progress across our partner program. So these are the 3 license programs with our partners. And for all 3 programs they're certainly progressing much closer to market. So AT307, so that's ready to use specialty hospital product with Hikma. Earlier this year, in January, we triggered the full transfer across the Hikma. So they've taken on full development responsibility and commercialization, and that's fully funded by Hikma there, and that's also triggered a license milestone payment Arecor under our milestone and royalty bearing agreements. And as I just mentioned, I had a very positive recent meeting with the FDA, which really derisks the further development of this program and give certainty around the next development steps for Hikma, and we're very much looking forward to continuing to work with them as they bring this product closer to market. Then AT292. So again, this incorporates the Arestat technology. It's a novel therapeutic under development by Inhibrx. It's called INBRX-101. Inhibrx initiated what they expect to be their pivotal registrational clinical study earlier this year, they initiated that in April. So this has the potential to be the last clinical study required prior to approval, and we'll be looking forward to them dosing their first patient hopefully, shortly, which would also initiate an additional license milestone to Arecor under that agreement. Inhibrx also, you may have seen announced a private placement in August of this year, so they've raised $200 million. So they're fully funded to complete that study and additional study and additional indications for that product, so it's looking in good shape. And then AT220, as I mentioned, this is biosimilar product that we anticipate to be the first product on the market, incorporating the technology. We do expect regulatory approval in the coming months and then obviously launch thereafter in the time frame if that obviously sits within the control of our partner, and we'll update you on that as soon as we can. Then from our technology partnership portfolio, we've entered into 3 additional partnerships and during the first half of the year, so that brings us to 11 since the IPO. So these are revenue generating now, but obviously offer that upside potential from milestone and royalty bearing license agreements in the future. Now in our in-house proprietary portfolio, for AT278, we are in the middle of clinical study for this product. It's comparing AT278. So this is all very concentrated, rapid-acting insulin to the 2 treatment options available to patients today in type 2 diabetic patients, and I'll talk about that in a little bit more detail. Recruitment is going exceptionally well, actually for that program, and we'll be looking forward to reporting the results on that. We also presented our second Phase I clinical data for AT247 in the summer as in June at the American Diabetes Association, and that really is the leading medical conference for diabetes, and it generated a lot of interest there. And I think as I mentioned earlier, we're making a key development progress across our specialty hospital portfolio. So this is our in-house portfolio. We've been very busy filing IP around these ready-to-use, ready-to-administer formats that we're developing, and we look forward to opportunities now moving forward for that existing portfolio to license across those products, and take those closer to market. And then from a commercial perspective, of course, we have Ogluo, as I mentioned here. So we've seen continued sales growth of Ogluo. It now represents -- sales of Ogluo represent a significant proportion of the total Tetris Pharma sales, which really gives us confidence in the continued growth of this business. We've now -- the product is now available in 5 territories. We've launched in 3 additional territories so far in 2023. We've also very recently signed an exclusive commercialization agreement with GoodLife and for the Benelux region, and we'll be looking forward to launching in the Netherlands in the first half of 2024 with that partner. And then in terms of intellectual property, this really is the lifeblood of Arecor and the company here. We have a very broad portfolio, we have more than 75 granted patents protecting both the Arestat technology itself and also the enhanced products that we're developing using the technology. We've had 5 additional patent grants during the period, including key patent grants across our AT278 and AT247 portfolio, so across our diabetes portfolio. So if we talk just a little bit more detail about some of these partnerships here. So starting with Hikma. So this is AT307 and it's a specialty hospital product here. As I mentioned, we transferred this fully to Hikma. So they've taken on full responsibility early this year. That triggered a license payments. We see the program now as being significantly derisked post the positive FDA feedback and the applicability of that 505(b)(2) pathway, so that gives ourselves and obviously, Hikma as our partner confidence in the development pathway moving forward and also the lead times to that. There are additional license milestones under our license agreement with Hikma that are prior to commercialization. So they're linked to specific development milestones, so that will bring in near-term revenue generation to the business. And then ultimately, we'll be looking forward to the launch of this product by Hikma Pharmaceuticals in major territories, and that should then bring a pretty healthy recurring percentage royalty stream into the business. And that's really the strategy here of why we are investing ourselves in internal proprietary product development is because we can drive higher-value deals with our partners because we've developed the products to a certain points in a higher value inflection point and importantly have that IP protection and the IP being owned by Arecor. I think Hikma is a very good example of that. And then if we move on to our 2 further license programs. So for AT220, I think the key elements to note here is, we do expect this to be the first product on the market. It's under a recurring royalty revenue agreement, license agreement with that partner, and we'll be looking forward to giving you more details on that once we're able to, but we're expecting this in the relative near term. And then for AT292, which is the Inhibrx program, again, as I mentioned, they've initiated that pivotal registrational study. They anticipate and they reported the anticipated readouts of that late 2024, and that should be the last study prior for the filing for approval. And they also received fast track designation from the FDA. And our next milestone under that agreement is very near term there. The risk associated with first dosing of the patient within that clinical study. So moving track now and talking in little bit more detail about the diabetes portfolio. I mean as we know, diabetes is still, and we expect it to remain, unfortunately, at pandemic levels worldwide. There are around 537 million adults living with diabetes and its complications. And at Arecor, we're very much focused on specific patient unmet needs and how we can address those with our technology. So we have 2 products in development, the first is AT247. So this is a novel formulation of existing insulin at its standard concentration. So it's 100 units per ml, which is the concentration that most patients use. And we have used our Arestat technology to accelerate the absorption post-injection. So our aim here is develop the fastest-acting insulin that's available to patients. And we've got 2 clinical studies now in type 1 diabetic patients supporting the speed and action of AT247. And the reason that we're looking to develop the fastest-acting insulin is still a very significant unmet need and being able to close the loop. So to be able to enable a fully closed loop artificial pancreas system, which is really seen as the holy grail treatment option for people with type 1 diabetes. So these systems, as you can see on the slide, the patient would wear a continuous blood glucose monitor, which measures their blood glucose at any point in time. This measurement is fed to an algorithm, which calculates based on their reading, how much insulin dose to keep them inside a healthy target blood glucose range. This is then dosed automatically by the insulin pump. And these systems are in use today, but they're called hybrid closed loop systems. So at meal times, the patient needs to instruct the system to give them a bolus dose or a large dose of insulin. And the reason for this is that standard insulins are still not quite fast enough acting to counter at that very swift rise in blood glucose around meal times. So the aim at AT247 here is if we can develop a much faster-acting insulin and enables the patient to stay in a closed-loop system, 24/7, significantly reducing the burden of the disease. And we can see from the body of clinical data that patients do better when they're in the closed-loop system as well. So looking at improving outcomes. And then if we move on to AT278. So this is our highly concentrated, it's 500 units per ml, which is 5x the concentration of standard insulin doses today, but very rapid-acting insulin. And the real need here is that there's a growing number of people with diabetes that require higher daily doses of insulin to control their blood glucose. And currently, they have 2 options available to them today to deliver these very high doses. They can choose one of the gold standard rapid-acting or ultra rapid-acting insulins albeit not quite as fast as AT247. But these require high injection volumes and often multiple injections, multiple times a day to achieve their high doses, but they get good blood glucose control. So that's why they would select a rapid acting or ultra rapid acting insulin or they could choose Humulin R U-500. It's the only highly concentrated insulin on the market. And it's the same concentration as AT278. And this gives them advantages fear injections and lower injection volume. However, they're compromising on the blood glucose control because this insulin is an intermediate acting insulin, so it's slower acting than those gold standard insulins. So with AT278 here, has the potential to offer the best both worlds essentially. So very rapid-acting insulin for blood glucose control, but importantly, lowering the injection volume and fewer injections a day, so reducing the burden of the disease and compliance associated with it. Also for AT278, which I'll talk about in a little bit more detail, it has also the potential to be the only insulin that can enable the next generation of miniaturized and longer wear devices, which is very much where we're seeing the insulin pump markets moving. And again, I'll talk about that. And the challenge here is, simply as you concentrate up insulin, it slows down its time action profile, it becomes slower acting. So we've used the Arestat technology to counter at this effect and develop this very highly concentrated rapid-acting insulin. We have data on from 1 Phase I study. So far in type 1 patients that demonstrate that it has a very fast-acting profile, at least equivalent, and actually, it was superior in the first 120 minutes compared to those gold standard rapid-acting insulins. So perhaps talking a little bit more about the future and the future as we see it here. So we see the insulin pump market, very much moving towards this next generation of body worn, so patch pumps, miniaturize longer wear pumps. So up until recently, there's 3 major device players essentially in this area, those being Insulet, Medtronic, and Tandem. And until recently, it was only Insulet really that had a patch pump that was broadly available in the large markets such as the U.S., 2 patients. But very recently and certainly, since the end of last year and through this year, we've seen movement from Tandem, who have bought a private Swiss company called AMF Medical and for access to their patch pump. It's called the Sigi patch pump, so essentially a small body worn pump, which also has extended wear options, which I think gives us a hint to where they might be moving towards this longer wear devices and also Medtronic intent of announced their intention to acquire, which we expect to close in the second half of this year as South Korean company, EOFlow, for their, again, patch pump technology called the EOPATCH, and that was for a deal value there to access that pump over $700 million, which really shows you the value in this market. And then you've got Insulet, who have a patch pump on the market, it's called the Omnipod, and they really talk about their drive towards penetrating and leading that type 2 pump market. And we see those type 2s tend to be those higher daily insulin dose and need patients. So we can see that the market is very much moving towards patch pumps, longer wear time, miniaturization and AT278 is, at the moment, the only highly concentrated rapid-acting insulin. We're not aware of any other insulin in development that's been able to achieve this profile and miniaturization and extended where is simply not achievable without an ultra-concentrated, ultra-rapid-acting insulin. So we think we're in a really great position here alongside that movement now with the device companies to move forward and realize this future of insulin pump delivery. So just to talk about the ongoing clinical study for AT278. So here, we're comparing AT278 to those 2 treatment options that I spoke about that are available to patients. So this is NovoRapid. As Novo is rapid-acting insulin, but it's 100 units per ml and also Humulin R U-500. And what we would expect to see this in this study is in type 2 diabetic patients, high BMI, so very much our target patient population. And what we would expect to see is at least noninferiority. So no compromise on blood glucose control compared to NovoRapid despite that fivefold increase in concentration and superiority against that slower time action profile for Humulin R U-500. The recruitment is going very well for this study. And you may have noted if you -- read the results that came out this morning, we are also considering increasing the number of subjects and the number of patients in this study from to 30 to 40 to increase the power of this study and ultimately increase the value of the data to patients here. So just very quickly on Tetris Pharma, and then I'll hand over to Susan. I think I have talked slightly longer than I intended. So yes, Tetris Pharma, as we mentioned here, we're seeing that continued success in the rollout of the product. It's available now in 5 territories across the U.K. In Europe, we're seeing that sales growth now. So as we deemphasize the rest of the portfolio and really focus on Ogluo where the real growth is across the Tetris Pharma business, we're really pleased to see that uplift in Ogluo sales which we expect to see continue to track through the second half of this year. We're partnering strategically where it makes sense. So the partnership with Goodlife and planned launch in the first half of 2024. You may also note from earlier updates that the current MD, Shafiq will be leaving the business later this year, and we have initiated a search for a new leader for the Tetris Pharma business. And we've now got a really high quality. We're really pleased actually, shortlist the candidates for that leadership position, and we'll be able to update you on the chosen candidate in due course. But it won't be too long there. And so this really gives us confidence in the Tetris business, both in Ogluo moving forward, but also in that strong strategic fit for the group. It really does give us that optionality moving forward to bring some of our specialty hospital products to market ourselves and retain more of that value across the U.K. and Europe where it makes sense. So I'm just going to hand over to Susan to talk through the financials.

Okay. Thank you, Sarah. So our revenue in the first half of 2023 has increased by just over 140% to GBP 1.7 million over that prior period. We also received additional other income from that 2021 Innovate U.K. grant, and that increased in first half too. And as a result, our total income increased to GBP 2.3 million or an increase of over 100% compared to our prior period of first half ending 2022 of GBP 1.1 million. Our investment in R&D decrease, which was as we expected, and that is GBP 2.9 million for the first half compared to GBP 4.8 million last year, the prior period. That investment is focused this year on our ongoing trial for AT278, which Sarah has described. And last year, our R&D investment included a U.S. Phase I clinical trial for AT247, as well as costs for AT278 ahead of initiating that study this year. Our closing cash at the end of the period was GBP 8.2 million. And post period, we received an R&D tax credit of GBP 1.3 million in early August, and that was about GBP 0.5 million above the GBP 0.8 million we received in 2022 and reflected that investment that we made in 2022 in R&D. Just teasing out some key financials. Effectively really a breakdown of our total revenue that we've recognized in first half, which has increased over the prior period, but it's also broadened and our mix has now included our formulation development projects, but also milestones, including the milestone from Hikma, which was triggered in January and also product sales from Tetris Pharma. So the product sales by Tetris Pharma of GBP 1.2 million in this first half were above the H1 '22 pre-acquisition sales of GBP 560,000, which we reported at the time of the acquisition. So our total revenue of GBP 1.7 million compared to GBP 0.7 million in prior year. Grant income has increased, as I said, and that reflects very much the first half expenditure on AT278. Our loss after tax reflects our planned lower R&D expenditure and also increased SG&A. And those SG&A costs include Tetris Pharma and includes product costs as well as sales and marketing activities and distribution activities. Our net assets of GBP 13.2 million include cash and investments of GBP 8.2 million. And in addition to the GBP 1.3 million tax credit, we also received in early July, the GBP 0.4 million reimbursement of grant expenditure that we incurred in the first half of the year. So that just sneaked into early second half. And as a result, we reported as a post-period event. Our trade receivables include obviously [datas] from Tetris Pharma as well as from Arecor and our payables and accruals again reflect the combined group. From a cash perspective, we continue to manage cash very carefully as our working capital. Our cash flow forecasts include cash resources, existing cash resources, which, as you've seen, have been busted prior -- post the end that first half and our forecast receivables. And they are used to plan our expenditure, including R&D. Our forecast only assume receivables from existing contracts or new deals as they come in, represent an upside to our working capital modeling and downside scenarios that we model effectively include the timing of receivables, which, as you've heard on always under our control -- advanced with our planned expenditure. And then those down side scenarios, our cash flow forecasts extend to a period of at least 12 months from the date of approval of these interim financial statements. And therefore, these interim statements released today on a going concern basis.

Thank you, Susan. So I hope what we've been able to show today is that we've made significant progress across our in-house proprietary product pipeline, our partnered portfolio and also our commercial operations during the year. We've been through really many of those milestones across our partner programs and probably what I would draw your attention to here is that we're expecting a strong second half to the business that has a number of milestones that we expect to achieve across our licensed partner portfolio. So that first dosing with Inhibrx, we look forward to further updates on AT220 around regulatory approvals and then more clarity on launch time lines and really seeing that continued growth as we've seen that through the year of Ogluo, which we'd expect to continue there. And as we move across into 2024 and beyond, we can really see that this provides us with a robust platform to realize our vision of growing the company here. So we see those continued progression of those products towards markets. So the existing license programs, we've got opportunities through this year and certainly into next year for additional licensing across our specialty hospital portfolio. So those are in good shape. Now as I mentioned, we've been very busy filing IP, which is a precursor really to entering those partnership discussions. So we've got confidence in that portfolio. And then we can see, as we go further forward '24, '25, as you can see from the pipeline slide, we start to see the opportunity for more products to come market and build that recurring royalty and commercial revenue streams, and that really helps realize a vision of bringing improved products to patients that can genuinely improve their quality of life and outcomes. But in doing so, of course, building a significant and self-sustaining biopharmaceutical company. So that's the last slide in the formal presentation today, but Susan and I will be happy to take any questions that anybody might have. I guess we'll start with questions in the room first and then we'll go across to any questions from online.

I was just wondering, with the shift in sort of interest in the patch pumps coming through, is that changing the discussions you're having with potential partners for your diabetes portfolio?

Yes, definitely because I think if you roll back a few -- a number of years ago and the conversations with major pharmaceutical companies would be, yes, great, fantastic, we agree. There's an unmet need here, but what's the device. I think now, obviously, with that movement from those device companies and they very publicly moving towards patch pumps, they're talking about longer wear time. They're talking about form factors. And really, they're competing obviously, the 3 giants amongst themselves as well for market share and also interestingly, talking around wanting to penetrate that type 2 markets. In the U.S., less than 5% of type 2 patients use an insulin pump. So there's a really significant there untapped market. And from a patient perspective, patients do better on pumps. That's well demonstrated now. So there's a patient benefit there. There just wasn't the right devices available for those patient populations to encourage them to move across. So I think there as they get smaller, longer wear time that kind of almost fit and forget simplify that care, we'll see that market growing. And as I said, AT278 is the only highly concentrated rapid-acting insulin. But I think now that within those discussions, everyone can see the ecosystem has moved. So the hardware is there now, as well as our course insulin to be able to realize that vision.

Excellent. And just on a different subject. With Inhibrx adding in additional indications -- Inhibrx-101 does that -- how does that fit into the agreement you have with them? Because obviously, initially, it was just AAT deficiency they were looking at.

Yes. So the agreement sort of accounts for new indications as well and being able to include new indication, clearly, it's great news because that means one of them more likely to come to market with one or both indications, it gives them more opportunities there, and obviously spreads the risk of any clinical failures, albeit they're at quite late phase now in the first indication. And I think it shows Inhibrx belief and commitment to that product. So again, for us, it gives us more confidence that they're going to take that to market. And as I mentioned, they're well-funded now to do both of those studies and both of those indications.

It's Max Herrmann from Stifel. A few questions, if I may. Firstly, just on the Hikma FDA meeting. You mentioned -- and you've also mentioned, obviously, this could be PK or it could be clinical data. Are you able -- I appreciate your obviously restrictions here from Hikma. Are you able to say anything about the FDA meeting? You've obviously said it was very encouraging, but anything more beyond that?

Yes. I mean, what I can tell you, I mean the meeting was very positive, and that confirmation of that 505(b)(2) pathway was really key there. In terms of the requirement for clinical data, the FDA will never give a final opinion during a pre-IND meeting on that. They will give an opinion that, yes, if you deliver data XYZ to support that a clinical study is not needed, then they would consider that, but it's ultimately a review item there. So there'll be a judgment call from -- not Inhibrx from HIPPA based on the FDA feedback, but it was very positive.

And I assume that study will start next year.

If they need a study.

Yes. Okay. And then secondly, on AT220, is there a PDUFA date for the program? Are you able to say anything on...

Well, I think the update we've given is that we're expecting regulatory approval in the coming months.

And then just a little bit more detail on AT278, the trial expansion from 32, I think you said to 42 patients. What was the driver? I know you alluded to that you wanted to improve the power of the study. Is that reflective of any data that's coming out of the study? Or is it...

No. No. I mean, because the study is ongoing because it's a blinded study there. We have no and the investigators at the site as well have no insights into the data and the individual data there and who's being dosed which test article, whether it's NovoRapid, Humulin or -- well, they know when they dosing human because it's slow-acting or NovoRapid or AT278, but it was initiated by the investigator. They've some addition reviews of published data for NovoRapid actually in type 2 patients. There's not actually that many studies in type 2 patients. And they felt because of that variability and the high BMIs of these patients where there is inherent additional variability. We've never studied AT278 in type 2 patients. Their advice was to increase the number of subjects to increase that powering, essentially to be sure that we get really definitive data. I mean, I would stress here, we're not concerned about the outcomes of that study. We -- the first clinical study, you might remember for AT278, it was in type 1 patients, but the data really was compelling there. We saw in that study compared to NovoRapid that it was equivalent. So it was noninferior to NovoRapid despite that 5 fold increase in concentration. We actually saw superiority, which was not what we would look expecting necessarily to see in that study. It was the high end of our expectations in that first 120 minutes, so it was faster on. It was on board faster and a great glucose lowering profile. Now that's not really essentially needed for this product. This is around, can it be as good as the gold standard insulins despite that 5 fold, so that's upside. So I think given that margin there that we've already seen what AT278 can do, we're not concerned about the study is to ensure that we have the right data package to prove the value to patients, and ultimately for partnering as well. So for a small incremental extension, so it goes into early 2024 and very manageable incremental increase in cost is not proportional to the number of patients. We felt that this is a potential for us to really firm up that study even further.

Edward Thomason from Liberum. I just wanted to actually ask about AT247. So you called out in the slide, you have a slide on it. But if you actually look at Slide 20 to your upcoming milestones, there's no mention of it at all. So the future plan for AT247, has future R&D be deprioritized? What's the update?

Yes, definitely prioritize. So AT247 is slightly ahead in terms of AT278 in terms of clinical development. We've completed 2 clinical studies there in the major target patient population. So we had a single injection study, which was our first in man study for AT247 against the 2 gold standard insulin, so Fiasp and NovoRapid, so rapid-acting insulin and also in this case, the ultra-rapid-acting insulin where we showed superiority, so more insulin on board, faster and greater glucose lowering potential post dosing. And then also, importantly, a study, a 3-day insulin pump study. So we see the AT247 the most value in terms of closing the loop and the artificial pancreas, which is where the insulin pump study was important, but also still many patients, 60% of patients plus probably still use injections, so multiple daily injections. So it's important to show its utility to both of those options available to patients. But essentially, here, we're looking at results for AT278 because we see, from a partnering perspective, that partner is most likely to take both products together there because they meet a broad range of patient populations there, and obviously leveraging the same technology platform. We don't expect to partner with leaving one of them on the table for a competitor. So it's a case of generating the AT278 data and then making that decision on the best next steps to create maximum value for those products.

So has that strategy been done as a proactive measure right from the beginning, you want to try and sell them together? Or has that been reacted to the reception post the data?

Well, I think we're obviously guided by partners. We're always in discussions with potential partners there, and also collaborators, both the device companies and the pharma partners and biosimilar companies who are all potential partners for here. So we take their feedback into account. The feedback that we've taken into account has mainly been around clinical study designs. They've been quite open in terms of the types of data that they want to see, what would give them confidence in the profiles of those products there. So there's been no specifics we would look to take both, but we get a good indication from discussions around that.

And then a question just for Susan. Just about the cost base, where you feel it is at the moment? Do you think it's a little bit too heavy, too light still? Obviously, there's a big jump in SG&A expenses. Should we expect that level going forward? Just a bit of guidance there.

I think that our cost are very carefully controlled and particularly, as I referred in the presentation as part of our working capital, but also our investment. So we have focused investment this year. You've heard -- our focus has been on 278. Last year, we had investment on 247 and 278. So that was all part of our cost base and our planning. And those clinical studies, obviously, are above cost base because they're external, and they're not part of our run rate costs. So I think that our cost base is where we would expect it to be in order to deliver the things that we'd like to deliver. So it's appropriate. The SG&A increase was again as expected because that cost includes product or materials, both from Tetris Pharma, as well as materials that we purchased at Arecor. And in addition, there's investment there in the business and the Tetris Pharma business from a regulatory and distribution and sales and marketing. So there's an element of cost that we would expect to have as a base. But we certainly would not expect that to increase proportionately. The increase will be around the materials and the products, not the overhead.

Okay. So on an ongoing basis, we expect the fixed cost for SG&A to be relatively stable and then some variable cost coming through?

Yes, exactly.

Diabetes as a couple, you've got a new CBO on, does macro changes in the pump market, which you've alluded to? Do you think -- we ask you when and where, when and how much. Do you think the heat map of the deal is increasing when you see that the macro environment and companies are paying out a lot of money that your chances are that the value creation point is going to come sooner, perhaps we have in our models?

Yes. I mean I think certainly that competitive tension is building across the major players within the space. It's still significant market and a growing market for this particular meal time insulin is still over $6 billion market in itself, and that's the insulin market. And then you layer on top of that, obviously, the pump markets as well, and you've got those 3 players very much competing again for the same space there. And I think there, we've got products that it's -- meet unmet needs in both areas. The artificial pancreas is very much a strive from those device companies to close the loop to have the best time and range, and that's what they're competing on. And there's only so much you can then do with technology before the insulin becomes your rate-limiting factor. And I'd say we're there now. You need faster-acting insulin to really move the dial significantly, and they're on time and range. And then for obviously, the miniaturization and longer wear you need to have a concentrated rapid-acting insulin. So I'd say, yes, definitely, for us, we've talked, as we've been developing these products around that future and miniaturized next-generation devices. I think as was saying -- answering Julie's question there, the question was always -- but yes, wear the device. We were never going to develop a device. Of course, we're not a device company, but now seeing those in development and that traction. And yes, I think the value there, if you see Medtronic prepared to pay over $700 million for a patch pump -- South Korean patch pump company. I mean it's on the market in Europe, South Korea and a few other territories, clearly, they're eyeing up the U.S.

And next one is on the biosimilar. Quite a lot of public -- in the public domain new versions of Stelara biosimilar potentially coming to the market via [Indiscernible] and Samsung. Now J&J has a history of delaying by paying the biosimilar company of. Is that a concern for you? If your partner gets such a payment to delay launch, will that impact the economics on that for you? Or will you get a slice of that?

Yes. I mean it's a good question. I mean the biosimilar market is quite complex and settlement agreements between originators and biosimilar companies are not uncommon. We don't have access to any information around settlement agreements with our partners, so we don't know. And of course, when settled agreements are made, and it's quite often that, that information is in the public domain there. But we've got no indications around the delayed launch. But I mean, as we mentioned earlier, that's where these time frames for these commercial milestones are out of our control.

And final one, Susan. In the press release, it was mentioned that the Ogluo growth in the U.S. was 36% quarter-on-quarter. It was just quite impressive. Is that the kind of rate, I know the different market space. So that the kind of rate we should be looking at, like a very high sort of teens, low 20s quarter-on-quarter growth?

Should I answer that?

I can answer too.

No, no, you go ahead.

I was going to say there are lots -- what we -- when we draw sort of the parallels to Gvoke which is the same products in the U.S. there. It gives us confidence that there is a real pull. The patient needs are the same. The prescriber behavior is very similar there. So I think it shows there is a pull and a need for ready-to-use glucagon, so leasing auto-injector pens, like the EpiPen for glucagon. So we would expect to see the same behaviors across Europe and the U.K. So I think that gives us confidence that we will see that growth and we're seeing growth. The rate of growth, there are some differences in the market. So pricing is the main difference here. There's pricing parity in the U.S. against all the competitor products, including the lifeline kit. That's not the case in the U.K. and Europe. I think you might remember at the time of the acquisition of Tetris, we talked about those differences in pricing. At that time, it was GBP 11.52 million, you see it in my mind, for the GlucaGen kit, so the Novo product and it's GBP 73 a pen for Ogluo. The advantage here is as we see patients come across. It grows the value of that market as well. And we are seeing more prescribing, particularly in the U.K., where we've been on the market for the longest with that. So I think we will anticipate that year-on-year growth. And I think we expect to start -- when we are seeing that upward tick of the curve, it took us -- a few, a number of years to get to that growth. They've been on the market now for -- I think this is their fourth year. And what I would probably add to that as CFO is that our approach is capital efficient. We are looking to, as I said in answer to Edward's question, we focus our cash and our resources very carefully. So we are looking for growth, but that will be measured growth that we will effectively be balancing investment as well as our working capital.

Philippa Gardner from Trinity Delta. I just wanted to ask about your business development activities because you're obviously potentially quite busy with new technology, partnerships and then you're talking about specialty hospital and sort of developing your internal pipeline there. With your new Chief Business Officer, what have you tasked them with their priorities to focus on?

Yes. I mean, as you can imagine, it's very busy. That's a relief to me. So he's very much focused on -- and he's doing a fantastic job focused on our diabetes portfolio. We've got great relationships there, both with the pharma companies, device companies, KOLs. We have the top KOLs in the world here, beating the drum for AT278 and AT247, which is fantastic there. So he's really working with them and really building that. What's the -- real value proposition case here, which will help us drive alongside our clinical data packages will help us drive the partnering opportunities and value of those products. So that's clearly for him key focus. And then secondary to that is the -- well, alongside that's not really secondary. Everything is priority one is the specialty hospital portfolio there. So we have that pipeline now that's maturing that we initiated since the time of the IPO. And we've got great data that demonstrates the technology can deliver these profiles. We've been filing IP. So I think the focus there through the remainder of 2023 and into 2024 is that first wave of partnering across that portfolio. And I think we're in good shape there.

James Orsborne from Stifel . Just a quick question around GLP-1 landscape and how you're seeing insulin prices perhaps impacted of those coming in. And obviously, Novo nearly being primarily focused on that area versus perhaps since previously? Just your views on that would be great.

Yes. I mean I think the GLP market, obviously, is really hot at the moment. It's really interesting. And you know the products that are coming out, [indiscernible] fantastic products. There's no doubt on the data there that we're seeing and from the clinical data seeing good weight loss profiles, which is needed as we see within the diabetes space. I think for us, as we look at it, and I think for everybody, there's not much experience of our market experience yet. Obviously, they've recently been launched. And the challenges that have always affected GLP once will remain, it will be a combination of pricing, affordability both the individual patients. And if you look at the U.S., again, largest market, co-pays, access. We know there's been challenges with access for these products. And ultimately, and what we look at more closely is adherence over the longer term and compliance, and that's always been one of the challenges with GLP-1s because of the GI side effects. And can the patients stay on them for the long term. Because if they don't, you get the yo-yo effect of their BMIs and their weight goes back to where it was before and quite often above as well. So I say this as if I'm hoping they're successful because there's a real need. But we don't see -- and when we talk to endocrinologists and leading endocrinologists in the space, their view is there's always going to be a need for insulin unless there's something transformational there on the cure pathway. And patients are getting larger. BMIs are really pushing up, not just type 2s, but type 1s as well, which the so called double diabetes. So effectually average out here that you've got that continued drive outwards, hopefully suppress by the GLP-1s, but we don't see any significant long-term change in those high insulin needs for those patients. Once you're on insulin, you're staying generally on insulin.

At this time, there are no questions on the conference line. I will now hand back to Dr. Sarah Howell for any closing remarks.

Thank you for all joining us today. You asked a lots of question. So I think we've earned our money today. And thanks for all coming. I mean, hopefully, as we said, I think we hopefully giving you that overview that we're making great strides towards really bringing forward our proprietary pipeline. We're really pleased with the progress, albeit it's out of our control, but all of our license partners are making progress, which gives us confidence in that future value generation for the business. And we're looking forward to a strong second half of the year, thank you.

Thank you.