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

Please begin.

Thank you, operator, and welcome, everyone, to the Webcast for Ascelia Pharma's Q2 Report in 2020. As mentioned, I have the full executive team here with me, and we look forward to updating you on our progress in the quarterly report. Now please turn to Slide #2. We will be making certain forward-looking statements on this call, so please pay attention to this before moving on to Slide #3. Cancer is a major health burden for mankind, with millions of people being diagnosed and treated every year. Annually, more than $150 billion is being spent on therapies, making this one of the largest segments of the pharmaceutical market. Within this huge market, orphan drugs used to treat patients for rare cancer indications is an important high-growth segment, and this is the focus area of Ascelia Pharma. Within this orphan oncology area, we focus on drugs that address unmet medical need and also have a clear development path and an attractive commercial opportunity. This is the case for both Mangoral and Oncoral in our clinical development pipeline. We have a very strong and experienced team based in Malmö, Sweden with a strong track record in late-stage drug development and commercialization. We are well financed to execute our strategy. Now please move to Slide #4. For Ascelia Pharma, 2020 is the year of clinical development focus and preparing for commercialization. In February, we announced the first patient have been enrolled in SPARKLE, our registration-enabling global Phase III study for Mangoral. In April, Oncoral patent was granted in Japan. This is an important milestone as Japan is the second largest market in the world for Oncoral. In May, in the midst of the COVID-19 pandemic, we recruited the first patient in the hepatic impairment study for Mangoral. And at the end of June, we issued shares to a number of strong institutional investors in order for us to invest more aggressively in the prelaunch activities and, thus, further improve our ability to create shareholder value. Now please turn to Slide #5. We have a strong pipeline with a very substantial potential. Our lead program, Mangoral, is a novel diagnostic drug in a global registration-enabling Phase III program on SPARKLE, and it has FDA orphan drug designation. It's targeting an addressable market of $350 million to $500 million on an annual basis which is not served by any other products currently. And Mangoral has already completed 6 Phase I and II studies. Study is ongoing -- the SPARKLE study is ongoing, and we expect to complete it in the second half of 2021. As communicated during this quarter, there's been some impact from COVID-19, which is why the completion is expected to be delayed compared to our earlier expectation. Our other program is being prepared for Phase II. It's Oncoral, which is a novel tablet formulation of a chemotherapeutic drug, irinotecan, and is being developed for the treatment of patients with advanced gastric cancer. It has completed Phase I development with very encouraging data. Now please move to Slide #6. So here, I'd like to give the word to our Chief Medical Officer, Carl Bjartmar, for more in-depth on our pipeline.

Thank you, Magnus. So I will now provide some more details on the clinical development of these 2 candidates: so we have Mangoral, it's contrast agent for MRI [ explanations ] of the liver; and Oncoral, the novel tablet formulation of irinotecan for gastric cancer. So please go to Slide #7. So the contrast agents that are available today for liver MRI are all based on gadolinium, the heavy metal which is dosed intravenously. So in most patients, gadolinium can be used. The problem is that gadolinium-based imaging drugs are not safe in all patients. And specifically, they should not be used in patients with poor kidney function since gadolinium is excreted through the kidneys, and slow elimination can cause some serious side effects. And for that reason, the regulatory authorities, for example, FDA in the U.S. and the European regulators, have implemented restrictions for patients with impaired renal function. So that is a very, very specific unmet need. And this is illustrated on the slide. So today, patients with normal kidney function, and that's most patients, can receive gadolinium-based imaging drugs. However, patients with severely reduced kidney function [ cannot use ] imaging drug today. In the future, this unmet need can be met by Mangoral. This specific target population is approximately 4% of all patients requiring a liver MRI. And that is approximately 280,000 patients per year in the major markets, and that's U.S., Europe and Japan. And it meets the criteria for an orphan indication. And it's important to note here that Mangoral is the only liver-specific contrast agent in clinical development, so we're way ahead of any competition. Please go to next slide, #8. So the pivotal Phase III study SPARKLE investigates the efficacy and safety of Mangoral in the target population with focal liver lesions and poor kidney function. And the study is expected to be completed next year. And as shown on the left, there is a strong clinical proof of concept through 6 individual Phase I or Phase II studies and with very consistent results. This data were confirmed by an independent reanalysis by a blinded reader which showed highly significant effects on the parameter that is also used in our pivotal Phase III study. And this is shown on the right side of the slide, which illustrates the Phase III design, the SPARKLE design. And the study, which is a global study with approximately 200 patients, has been agreed with FDA and EMA. And the strategy here is to repeat and confirm the Phase II results using similar endpoints. So the primary endpoint is lesion visualization, and that's based on co-primary parameters, lesion delineation and lesion contrast compared to background. Since there is no available contrast agent for patients with impaired renal function, the comparator will be unenhanced MRI, which is currently the standard procedure for these patients. There is therefore no randomization, with each patient serve as its own control. And the design has advantages when it comes to sample size and statistics. Finally, the follow-up for each patient is very short, as you can see on the slide, compared to most clinical studies. We will therefore have the finalized study relatively sooner than a typical study of a similar size. Now I'm going to switch over to Oncoral, our second candidate in clinical development. Please go to Slide 9. Yes, so in the same way as we had a strong clinical proof of concept for Mangoral, there's also strong clinical proof of concept for irinotecan, which is the active ingredient of Oncoral. Irinotecan is a well-established chemotherapy which is currently given intravenously. As a novel oral formulation, Oncoral has several potential advantages. First, the convenience of oral administration, the drug can be taken at home instead of intravenously in the hospital. And second, 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 therapies, often a combination of drugs, and Oncoral provides a possibility for an all-tablet, all-oral chemotherapy combination, together with another established oral chemotherapy. For example, capecitabine or TAS-102. For Oncoral, the intended indication is gastric cancer, a severe cancer form with significant unmet needs. Gastric cancer is a rare orphan indication which provides several potential advantages from a drug development perspective. And once approved and on the market, a label expansion can be considered. And here, we are, as mentioned, currently preparing for the Phase II study. With that, I want to hand over to our Commercial Officer, Julie.

Thank you, Carl. Please move to Page 11. So on our commercial preparation from Mangoral this year, we have advanced our strategy. That includes defining our prelaunch plans and decision points going ahead. We've developed our positioning and targeting for Mangoral. And we've collected further pricing and market access insights in key markets. For the remaining part of the year, our focus will be on progressing our go-to-market blueprint. That includes defining and developing a blueprint for U.S. operations run by Ascelia and also a plan for partnering in the rest of the world. We will also be advancing our market sizing and rollout priorities, and we will kick off with more externally oriented dialogues with payers and clinical decision makers. Next year, our focus will be on expanding these external activities and prepare towards a launch, as mentioned, towards the end of '22 or early '23. Moving to Page 12, an update on our outlook for the optimal market launch strategy. We believe there is a strong case for developing our own U.S. commercial organization. A team of 10 to 20 FTEs can reach the target health care professionals using MRI and contrast agents. These are typically radiologists. And they would be larger hospitals with nephrology units or they would be independent MRI clinics. This U.S. capability will include commercial functions, but also a support team. And we believe the best setup is to partner with local organizations to optimize logistics and distribution. For the rest of the world, our assumption and plans are that we will leverage the market potential by finding partners. First of all, we will define the markets with the highest potential. And we will use the synergies that we have from our global data and U.S. operations in these markets. But we'll find an ideal partner who has synergies in each individual market. So that's the end of the commercial update.

Thank you, Julie. If you now just turn to Page 14. If we look at the operating results for both the second quarter and the first half, we have an increased operating loss compared to last year. This is logic and expected and reflects the continued progress and spend on the clinical development program for Mangoral as well as ramping up on our commercial and manufacturing preparations. If you now turn to Page 15 and our liquidity position. The key message here is that we continue to stand with a strong liquidity position. By the end of June, we had SEK 145 million in cash. And this cash position was further amplified with the directed share issuance that we completed at the end of June, where we raised SEK 99 million. We are very pleased with the participation in the share issuance from highly reputable institutional investors, including those, the existing long-term shareholders, AP4 and Handelsbanken Fonder; as well as a new group of investors, institutional including Healthinvest Partners, Länsförsäkringar Fondförvaltning, Unionen and OstVast Capital Management. We see these strong investors as a further validation of our attractive drug pipeline. And we will continue to work hard to demonstrate the value to all our shareholders. The funds obtained in this share issuance are important as we progress Mangoral and prepare for the market launch. Accounting-wise, the proceeds from the share issuance was received in the beginning of July, i.e., just after the accounting period. With proceeds, the cash position in the beginning of July was SEK 239 million, again underlying the strong cash position. With that, I leave the word over to Magnus.

Yes. Thank you, Kristian. And please move to Slide #17. So our priorities for the rest of the year is to continue our progress in our ongoing clinical programs. Our team is working very hard on this, and I have great confidence in them to deliver. Also preparing for commercialization, and we have many activities ongoing that will enable us to, say, further elaborate our value-maximizing strategy for Mangoral. A lot of work is ongoing, as mentioned, and we expect to be able to update you further as we progress. Another important activity, as Carl mentioned, is to complete the design and plan for the Oncoral Phase II program. We could pave the way for potentially starting the Phase II study next year. So moving on to Slide #18, summarizing Ascelia Pharma. We are advancing orphan oncology, where we focus on the unmet needs with a clear development pathway and market opportunity. We have a strongly -- a strong balance sheet to fund our activities with Mangoral, the only product targeting a $350 million to $500 million addressable market with no competing drugs and getting results next year. Oncoral, ready to start Phase II next year as a novel oral chemotherapeutic agent for gastric cancer, very strong data in the Phase I program, which bodes well for the future. This concludes our call -- our presentation on the call, and we'd be happy to take any questions.

[Operator Instructions] Our first question comes from Lars Hevreng, Danske Bank.

Yes. Do you hear me?

Yes. Yes, we can hear you, Lars.

Yes. Can you just remind me about the enrollment into the SPARKLE trial in brief, the comparison for patients who will do a scan outside a clinical trial environment and within this trial? Just remind us, please, the differences in the procedure, the number of visits, et cetera, in very practical terms.

Okay. So your question is about the differences in clinical practice and in a clinical trial setting, if I understand correctly.

Yes. What's the additional burden, so to say, so we'd just understand, is this a big effort, so to say, from the patient to participate.

Yes. The short answer there is -- and this, of course, depends on the individual cases, the individual patients and the workup to before they do the scan. But basically, in our side, you need a screening visit when the patient comes in and you assess if the patient is eligible. But to answer that, the procedure is very much close to the clinical practice. You do an unenhanced scan and you do an enhanced scan with a contrast agent, and then we can get back to you today. And then we have a few follow-up visits after that. But in that context, they are relatively few and compared to -- definitely compared to most other conventional studies. And as you could see on the slide here, I believe that the follow-up is 5 days plus/minus 2 days. So it's a relatively short follow-up. And to the extent there are follow-ups in clinical practice, I mean there are sometimes. So I mean, to answer your question, there are some more visits, a little more burden, but it's very minor, I would believe.

Okay. And again, the number of participating centers, I guess, this could be a difference, of course, from number of patients presented. But in rough terms, what's your current assessment of number of centers that you would like to have participating in the trial?

Yes. We have roughly -- we are aiming for roughly 35 centers. And that's what we have from the beginning. Having said that, in order to meet the time lines for enrollment and completing the study, it could be that we will adjust and add on the new sites, and that depends a little on our recruitment. And that's, at the moment, to see you always do that. You monitor your recruitment rate. And then if needed, you can open up more centers, more sites. But it's 35, and there may be more centers as we go.

And I fully agree with that. And I think just to add on to that, being sort of a global Phase III program, this is also -- we're getting very close to commercialization. So with that in mind, we are also thinking of, I would say, important opinion leaders that will influence -- will have an important say in the market, to include them not necessarily because of added enrollment fee but just to make them champions and give them more experience with our products so they can endorse it once this product becomes commercially available. So that's another factor for considering the number of sites.

Okay. And if you would target, so to say, a new center today, when -- what's the time frame for that trial center to -- I mean typically to enroll the first patient?

Yes. That depends on how you start and when you start. But usually, if you start from scratch, you need -- it's a regulatory procedure and paperworks for you need a [ big ] approval and regulatory approval for that site. And there, you're talking about 2 to 3 months perhaps, and that varies. So you need a contract with the site, and that could take sometimes longer. We'll be talking about months here.

[Operator Instructions] Okay. There appears to be no further questions, so I'll hand back to speakers for any closing remarks.

Well, thank you, everybody, and we look forward to continue our operational progress and updating you on that as we move forward so in these very exciting times for our company. So thank you very much for listening in and have a great day.