Ascelia Pharma AB (publ) (ACE) Earnings Call Transcript & Summary

Thank you. So welcome, everyone, to the webcast for Ascelia Pharma Q2 report for the fiscal year 2019, 2020. This covers the period of October to December 2019, due to our skewed fiscal year. As you know, at the Annual General Meeting held in November 2019, it was decided to change our fiscal year to follow the calendar year in the future. This implies that the period from July 2019 to December 2019 will be full year report from a financial perspective. So going forward, 2020 will be -- officially it would be the calendar year. So I have with me here the executive management team, and we look forward to updating you on our progress in the quarterly report. Please move to the next slide. We will be making certain forward-looking statements, so please pay attention to this, and move on to the next slide, please. So Ascelia Pharma is an orphan oncology drug development company, focusing on developing novel drugs to address unmet medical needs for patients, which are not adequately served by currently available drugs, to focus on drugs where we understand the mechanism of action. And in combination with the well-defined ways for market, we believe the likelihood of successful development of our drug candidates are higher than industry average. We have a very exciting clinical pipeline. Mangoral, which is a novel diagnostic drug in a global registration-enabling Phase III program and FDA open drug designation, is targeting an addressable market of $350 million to $500 million annually and has completed 6 Phase I and II studies. Our other program is Oncoral. It is a novel and patented tablet formulation of a chemotherapeutic drug irinotecan, and it is being developed for the treatment of patients with advanced gastric cancer. It has completed Phase I development with very encouraging data. Since March last year, the shares of the Ascelia Pharma have been traded on NASDAQ in Stockholm. Please move to Slide #4. In Q2, Ascelia Pharma continued to make significant progress in relation to our strategic goals. As we are preparing for launching Mangoral in U.S. in 2022, just 2 years from now, we have strengthened our executive management team with the appointment of Julie Waras Brogren as Chief Commercial Officer. Julie has a strong background in commercialization of novel drugs and is a great addition to the Ascelia Pharma team. Also in the last quarter, we initiated the SPARKLE clinical study, a global registration-enabling study, which we have already discussed with the FDA and EMA. The contract with the first hospital has been signed, and we're working to get more hospitals involved, as previously communicated in our past. Please move to Slide #5. So we have a very exciting pipeline with a significant potential for making a substantial difference to patients. Our lead program Mangoral is a novel imaging drug for liver MRI in the Phase III registration-enabling study, SPARKLE. It's being developed to serve a patient population with no safe and effective drug today. And it will be the only product targeting this market segment and has a market -- addressable market of $350 million to $500 million in U.S., Europe and Japan. As mentioned, we've started the SPARKLE study. And as previously guided, we expect to finalize the -- get the full study report in first half 2021 and file for registration later that year. Following that, we will -- if approved, we will launch the product in 2022 in the U.S. Oncoral, the novel tablet formulation of irinotecan has completed Phase I development and is being developed for treatment of advanced gastric cancer. These patients have a significant unmet medical need and have a poor prognosis after being diagnosed today. We completed the Phase I program and are now planning for the Phase II program, which we expect to start enrolling patients in 2021. The ongoing preparations include detailed product positioning and preparations in manufacturing. Please move to the next slide. So now we'll go in more depth on Mangoral. And I'd like to hand the word over to our Chief Medical Officer, Carl Bjartmar.

Thank you, Magnus. So what's illustrated on this slide, and we are on Slide #6, is a bit hidden behind the text block is a patient in a Magnetic Resonance scanner or MR scanner. And Magnetic Resonance Imaging or MRI is the recommended and most sensitive method to detect liver lesions, typically in metastases but also primary tumors. So the aim is to detect the localized metastases as early and as small as possible in order to decide on the appropriate treatment. And in order to get the good quality image, the contrast agent also called imaging drug is needed. And this is where Mangoral comes in. So please move to next slide, #7. So contrast agents available today are all based on gadolinium, the heavy metal which is dosed intravenously. And in most patients, gadolinium can't be used. The problem is that gadolinium-based imaging drugs are not safe in all patients. Specifically, they should not be used in patients with poor kidney functions, since gadolinium is excreted through the kidneys and slow elimination can cause serious side effects. And for that reason, the regulatory authorities, for example FDA in the U.S. and European regulators have implemented the restrictions for patients with impaired renal function. So that's a very specific unmet medical need. And this is illustrated on this slide. So today, the patients with normal kidney function like most patients can receive gadolinium-based imaging drugs. However, patients with severely reduced kidney function lack an imaging drug today. So in the future, this unmet need can be met by Mangoral. So this specific target population is approximately 4% of all patients requiring a liver MRI. And that's approximately 280,000 patients per year in the major markets, U.S., Europe and Japan and also meets the criteria for an orphan indication. So please move to the next slide, #8. And on this slide, it summarizes the clinical pathway to market for Mangoral. And importantly, Mangoral is the only liver-specific contrast agent in clinical development. So we are way ahead of any competition. And as shown on the left, there's a strong clinical proof-of-concept from 6 individual Phase I or Phase II studies with very consistent results. And these data were confirmed by an independent reanalysis by blinded reader, which showed highly significant effects on parameters that will also be used in upcoming pivotal Phase III study. And that is shown on the right side of this slide, which illustrates the Phase III design. So this study, which is a global study with 200 patients has been agreed with FDA and EMA, as mentioned. And the strategy is to repeat and confirm the Phase II results using similar endpoints. So the primary endpoint is lesion visualization and that's based on the co-primary parameters, lesion delineation and lesion contrast compared to background. And those are standard back -- standard endpoints used in these kind of studies. And since there's no available contrast agent for patients with impaired renal function, the comparator will be unenhanced MRI, which is currently the standard procedure in these patients. So therefore no randomization, but each patient is served as its own control. And that's a design which has advantages on sample size and also on statistics. And finally, the follow-up for each patient is very short compared to most clinical studies. So we will therefore have finalized study relatively sooner than a typical study of similar size. So now I will hand over to our Commercial Officer, Julie.

Thank you, Carl. So on Page 9, as Magnus mentioned, I've recently joined Ascelia. I'm very excited to join this engaged and experienced team. And I look forward to bringing Mangoral to market while advancing other pipeline opportunities with the team. I originally joined life sciences about 16 years ago after some years in consulting. I spent 12 years with the Danish diabetes leader, Novo Nordisk in Denmark and in Latin America. And I later spent about 4 years with the life science start-up in Toronto, Canada. It's very exciting with Mangoral and what's exciting is that our market potential of USD 350 million to USD 500 million is accessible through, firstly the clear unmet needs in the market and secondly through the clear benefits to clinicians and payers that Mangoral provides. Regarding the unmet need on the left side of this page, market research shows that 85% of physicians in a survey confirmed that they are likely or extremely likely to use Mangoral upon launch. Regarding the second point, on the right side, the benefits provided match the unmet needs in the market. Firstly, Mangoral is the only contrast agent for the target patient population. Secondly, we demonstrated scientifically an improved visualization of focal liver lesions and metastases and will have more data to support this from our Phase III trial. And thirdly, we have recognition of the value of early detection, i.e that addressing this unmet need has significant impact on patient outcomes and survival rates. If we now turn to Page 10. So what is that we need to focus on in 2020 in order to deliver a successful launch. So with Novo Nordisk, I've done the first global launch of -- to bring the GLP-1, Victoza to market, that's about 10 years ago. Today, it's DKK 22 billion product, and it was the fastest-growing launch at that time. It was a new class of diabetes products and Novo Nordisk had not launched a product in decades. So while the Orphan Drug Designation and showtime to market is unique to Mangoral, there are some key learnings from the Victoza launch and from many other launches in the life science industry that will help us drive a successful launch in a very smart way. Firstly, it's a highly cross-functional effort. And secondly, to achieve the maximum uptake, we need to start preparing now. We've already some important insights and feedback from doctors and healthcare payers. And in the next phase, we'll go to a new level of detail and planning. Here are some of the activities that are key this year. We will expand our pricing and reimbursement strategy. We'll continue the dialogues with key decision makers in the medical and reimbursement space. We'll build a prioritized plan of where the biggest and the first opportunities are. And we'll detail our plan for readiness and the milestones and the design of our future commercialization organization and a U.S. team. With this, I'll hand it back to Carl to turn to Page 11.

Thank you, Julie, and we can go directly to Slide #12. So on Slide 12. In the same way as we have strong clinical proof-of-concept from Mangoral, there's also a strong clinical proof-of-concept for irinotecan, which is the active ingredient in Oncoral. So irinotecan is a well-established chemotherapy, which is currently given intravenously. So as a novel oral formulation, Oncoral has several potential advantages. First, the convenience of an oral administration, the drug can be taken at home instead of intravenously at the hospital. And secondly, the well-known side effects associated with intravenous bolus dosing and high plasma levels, for example, nausea can be avoided. The daily oral dosing of Oncoral permits lower but still therapeutic plasma levels of the drug. And third, cancer therapy is often a combination of drugs and Oncoral provides a possibility for an all-tablet, all-oral chemotherapy combination together with other established chemotherapies, for example, capecitabine or Xeloda. So for Oncoral the intended indication is gastric cancer, which is a severe cancerous problem with significant unmet need. So gastric cancer is a rare, orphan indication, which provides several potential advantages from a drug development perspective. And once approved on the market, the label expansion can be considered. So let's move to the next slide please, 13. So Phase I for Oncoral, as mentioned, is now completed. The 2 studies have been published in the medical journal of Cancer Chemotherapy and Pharmacology. And the first study, a single-agent study, was also presented at the major International Oncology Conference. So what this study show is that Oncoral appears well tolerated and in particular, the hematological side effects, such as cytopenias, which is often associated with chemotherapy, were few and/or mild to moderate. Also, exposure and variability of the active substance of this new oral formulation is comparable to the intravenous formulation. And that's very important information. So the second study also showed good safety profile in combination with oral capecitabine, Xeloda. So to conclude, these results are as good as we could hope for, and we are now ready to move this compound into Phase II. So as seen on the right side of the slide, now the focus is to finalize the Phase II study design in context of the overall clinical development plan and the positioning of Oncoral in the clinical setting. So with that, I'd like to hand over the word to Kristian for the financials.

Thank you. If we now turn to Page 15. If we look at the operating results for the current quarter as well as the 6-month period July to December, we have an increased operating loss compared to last year. This is as expected and also logic and reflects the overall higher R&D activities compared to last year. And the activities have been driven by Mangoral, in particular. In the quarter, October to December, we have, as already described, made detailed preparations for the Phase III study Mangoral and also opened up sites that are now ready to recruit patients. We've also upscaled our manufacturing capacity and done the regulatory preparations. So that is, as I said, higher R&D costs compared to last year, but that is highly as expected. If we now turn to Page 16, and the liquidity position. The key message here is that we continue to stand with a very strong liquidity position with SEK 184 million in cash and marketable securities by the end of December 2019. With this very solid liquidity position, we have a fully financed Phase III program for Mangoral, which is very comforting. Before rounding off, I agree with Magnus comments at the beginning that we have changed our financial year to harmonize with the calendar year. So the next quarter report will be the report for the first quarter, January to March 2020. That concludes our presentation, and now we open up for questions. Operator, please we can now open up for questions.

Yes, I will open up for questions. [Operator Instructions] And there are no questions at this time. So I would like to hand back to you speakers.

Yes. Thank you. Thank you, everybody, for listening to our quarterly updates on our progress. And we look forward to keeping you informed about our future significant steps forward, as we move through development with Mangoral and our -- and Oncoral and potentially other activities we have. Thank you very much.