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

Welcome to the conference call part of the Capital Markets Day for Ascelia. My name is Phil. I will be the operator for the conference call part. [Operator Instructions]

Welcome to Ascelia Pharma's Capital Markets Day 2020. We look forward to updating you on Mangoral's market opportunity and our commercial preparations. This morning, we released presentations from members of the executive management team and an independent U.S. commercialization expert. We hope you found the presentations interesting. And if you haven't had time to look at them yet, they will remain accessible on our website. So with me now in this Q&A session, I have the executive management team. We also have [indiscernible], who will moderate this session. Before getting into the Q&As, I just wanted do a brief recap of the messages that we sent today. Mangoral is in Phase III development. And in parallel with that, we're doing a lot of commercial preparation. This morning, we sent out a press release, upgrading the market -- addressable market estimate to $500 million to $600 million annually. We've done this based on extensive commercial preparation work, and Julie has presented that in her presentations which are on the website. So with that said, we continue to make progress, and we expect to launch Mangoral in the U.S. in the fourth quarter of 2022 or first half of '23, which is consistent with our guidance. So that was sort of the key message. And now I'd like to hand the word over to you, [indiscernible].

Thank you, Magnus. Now we're having the Q&A. Feel free to ask any questions either via telephone or if you send an email to [email protected]. We have the whole management team here, as Magnus said, but we also have CFO Kristian Borbos, for questions. So I'll start off with you, Julie. You're at the star of the day today here with all the research you have done. You gave an update on the market. Could you elaborate on the changes? The patient population hasn't changed but the other 2, points.

Thank you. Yes, so as you said, our target patient population is the same. But we have new real-world data based on actual medical procedures and number of patients and the medical procedures per patient. That's one part. We also have additional insights from experts in pricing, reimbursement and market access in our key markets where we've talked to around 50 experts. So that has led us to upgrade our estimate today. The main driver of the estimate is the number of imaging procedures in our target patient population. And with regards to pricing, there are no major changes to our previous estimates. So that's where we are now. And it's exciting to see these upgraded numbers. And just one more note is that it does not include the market growth from now on to launch.

So how do you look upon market growth? Do you have a figure for that? Or...

If we look at volume and prices from the insights we have, I think we are working on estimates between 5% and 4% annually in market growth.

45%.

4% to 5%.

4% to 5%. And first question to you as well Carl, COVID is everywhere, how has that affected your study, SPARKLE?

Yes, it's a fair question given the current situation. And it has affected the time lines already. And we communicated that earlier this year. But I think as for anyone in the industry, we have to adapt to the current situation. So that the clinical research can continue, and it does. So we have to learn. And for example, in addition to the regular precautions in society, many of the meetings that we have in interaction with the hospitals, for example, that were previously face-to-face can now be done virtually and online. We are all learning. And I think, in our case, importantly, the patients are still there and medical need is still there. And in particular, our study design, I think is less susceptible for disruptions because if I mentioned in my presentation to follow-up for each patient is very short, only 5 days. So that's very unique. So I think we are in a very good position here. Having said that, this is our estimate today. Should things change, we will communicate that. But I don't see that.

You feel confident in the time line you have?

I do, yes. Yes. I do.

Great. And Kristian, the question to you, you can understand what it is. You had $240 million in cash last time you communicated it. How long will that last?

So the current cash position will take us into 2020. And that is important. because we expect to have Phase III data in the second half of 2021. So the current cash position take us beyond this critical clinical milestone, and that's very important.

And then what happens next? I mean, I guess, it doesn't cover the commercialization that Julie has talked about in the U.S., what do you do then?

Yes. So our game plan is to commercialize by ourselves in the U.S. and also build an organization. That will require additional financing. And assuming we have positive Phase III data, then we think it's clearly feasible to obtain financing at that stage.

So once you have the data then you're in an even better position.

Yes, of course.

Magnus, you seem to have a great team in place here. What's your job?

Well, my most important job is having the right team. So I've done well on that and not just the people who are on the stage here today, but everybody in Ascelia Pharma is doing a great job. And also all the advisers and people we work with and the doctors in the studies. So I think that's really the most important thing because as you can see we have -- as Julie presented, we have an attractive market. We have an attractive clinical trial design that Carl and his team are moving on full speed with, and we have a good cash position. So we are in a good position. Probably the -- you would say, the challenge is as we grow, how can we continue to recruit very good people that can join our high-performing team. I think that's probably my biggest challenge right now.

Yes. That was one of my questions, actually. What is the biggest risk in this?

Yes.

But that is -- you're not worried about the study, you're more worried about recruiting the right people.

I agree. I think we have very -- as Carl mentioned, we have very good data from Phase I and Phase II. And we have similar endpoints in our Phase III. I think we're working with some of the best radiologists in the world in the study. I think we're in good shape there. So I think it's more -- continue to attract great people to the team.

Let's see if we have any questions from the telephone conference. Is there anyone there? Operator, please?

[Operator Instructions]

And while we have that pause, I guess we can continue with questions in the room. Carl, I'll start with you. You have a vast experience from previous studies. So you told us you're confident with the time line. How certain are you about positive outcome in SPARKLE?

So, yes. So one thing I learned. My experience there is you can never take anything for granted. There's never a 100% security that you will succeed. However, having said that, I could say that, in our case, given, as you mentioned the Phase I data, Phase II data we have, and I described in my presentation, and given the study design, given that we are comparing to unenhanced MRI, not another contrast agent, for example, I think the chances are unusually good with our study and our program compared to many other programs I've been involved with. But again, there's never a guarantee, but I think in our case, we have very good chances.

I happen to know you were involved in Wilson. So...

I was.

I guess that is a good...

That was also a good case.

That was a good case. You've recruited the good people.

I go for the best.

You go for the best. So did we have any questions from the telephone conference?

At this moment, there are no questions. [Operator Instructions]

Good. So Julie, again, the $500 million to $600 million, and it's going to grow at 4% to 5%. Can you say anything about the division between the regions that you're targeting, the U.S., the EU and Japan?

So the U.S. is by far our biggest opportunity. That's represented by the size of the patient population, the majority of clinical practice in imaging and also the market access and pricing opportunity in the U.S. and then we have Europe and Japan also interesting markets based on the size of the population again in clinical practice and reimbursement. So by far, U.S. is most important opportunity.

And you're planning to launch yourselves in the U.S. because that is the most important. Can you say anything about the EU and Japan? Why did you land in this decision? Might you change your mind?

I can open up with some comments and then hand over to Julie. So I mean, to succeed, we need to be extremely focused. And we are a small company. So if we succeed in the U.S., which is the biggest market, we think that's absolutely feasible. It will be a hard work, but I think we will be successful. To succeed there will require all -- everything we can do. And the best thing there then is to find partnership to access patients in other geographies, such as Europe and Japan. But maybe you can...

No, absolutely, I should say, to succeed in the U.S., it is going to take a lot of focus from us. And in Europe and Japan, we see that a partner with existing operations, existing relationships and experience with decision makers and pricing reimbursement and in clinical practice is going to help such a partner be successful. So we believe that, that strategy will maximize the value for Ascelia also in those markets, while we focus on the U.S. and, of course, help the partners we will have in time.

In terms of partners, do you have any preferred, what are the prerequisites for being a good partner to Ascelia in this?

I think the -- always, when you do -- I can start up and Julie can expand on that. But I think when you do a partnership, it's absolutely critical that it's a profitable venture and a mutually enjoyable venture for both parties. I think that is the prerequisite. Maybe, Julie, you want to expand on the capabilities of what we're looking for in a partner?

Yes. I think it depends a little bit on the market. In Japan, there's also a process with local clinical data and local regulatory approval where partner also would have experience in that. Otherwise, it's really about existing relationships and experience with key decision makers and the dynamics in each market. So hopefully, it's someone who works in a related field, the therapeutic areas, the decision makers and so forth. And in Europe, again, also synergies in the, you could say, the sales force and the medical support and so forth. I think it's important for mutually, you say, beneficial case for partner and for us.

Carl coming back to you. Today, you're upgrading the size of the market. But isn't it so that the prevalence of NSF has gone down. So how do you get these 2 together? The market is growing, but NSF has been shrinking.

Right. So NSF or nephrogenic systemic fibrosis, which is this very serious side effect of gadolinium that could help any patients with poor kidney function, it is rare, first of all. And it's partly rare because of the restrictions that are on the market today. So it is a rare condition. Having said that, still more than 3,000 cases were reported to the FDA only since 2006. And there are recent cases as well. So it does exist. And importantly, the restrictions and warnings are still there for the currently available contrast agents. So the unmet need for a safe alternative is there today, I would say.

And I guess the prevalence has gone down because they are untreated. So they don't get gadolinium and that's...

Well, exactly, that's what -- yes, you're right. And that's what I said. It's a consequence of the warnings and restrictions that are there.

So they're left with nothing.

Yes. That sounds correct, yes.

But it sounds so good. I mean, if I went into a clinic, and they said you were going to have gadolinium, isn't it so that this could have other places of being used than in other patients than those without renal impairment?

Yes. I mean we're focusing on the patients with severe renal impairment, who have this risk of this devastating side effect of the existing category of products. And that's how we're developing. And Carl, maybe you want to expand on. So we are focusing on the -- on our development program.

Yes. It's partly a strategic decision because focusing on this rare population, then you can develop this as an orphan drug, you can get an orphan drug designation from the regulators. And that gives you certain advantages when you do clinical development. For example, in -- from a conventional drug for a larger population, you're usually required to do 2 Phase III studies, larger studies. If you have a rare indication or designation, then one study is sufficient, for example. So a number of advantages doing that way and going that way. And for example, if we were to compare to another contrast agent, which would be the case if we go for a broader indication, then that would be a completely different development program, a completely different study. It would take longer, for example. So I think this is in the best interest of our particular patient is to go this way, the patients in need.

Or the patients in...

Yes, and also to expand on that is that we have -- with the data we have, we have -- we understand that based on everything we know that this is safe for this patient population. And we want to get our product on the market and be available to these patients as soon as possible. And that is by executing on this strategy.

And you said in your presentation that you're the only imaging drug in clinical development. Would you say that you would then weigh ahead of competition. Why is that? Is it because the market is too small? Or is it because you -- Mangoral is so good.

Yes. It's maybe both. No, it's a very fair question. And I think there are probably several reasons for that. One is that this unmet need, the risks of gadolinium in this particular patient group hasn't been known for that long. It's only 10 years or so that this unmet need has been known. So that's one reason. The other one, I think, is that this particular market, our market has been underestimated. So it was more -- these are so few patients, so why bother about them. And then what we have done in Ascelia, I think that's very unique. We have done a very thorough analysis of what is the real market here. We have defined the business case basically. Today is an example of that, right? So there is real case for our compound here. And there's a business case for that. So that's the second. And the third one, I think, is that there has been a relatively recent interest and incentive for rare diseases or developing treatment for rare indications or rare conditions. And that has been traditionally for treatments, for drugs, but it also applies to diagnostic like Mangoral. So I think we're taking advantage of that as well. But I think those are the 3 main explanations.

And this orphan drug designation that you had in the U.S. is obviously very important then. Is there something similar in Europe? Or how does that work?

Yes, there is a similar orphan drug concept in Europe. At present, we have the orphan drug designation from the FDA in U.S., which is the most important market. So that's a big achievement. In Europe, the legislation is somewhat different. And as of now, we don't have it in Europe. We may get it or we may not get it, that depends on the future developments. But it's not as critical for us in Europe. So we're in good shape regardless of whether we get it or not.

And can you talk about how you -- when you get the Phase III results from SPARKLE, you will go for U.S. first?

Yes.

Can you say anything about any application to Europe?

Yes. No, it's also a very relevant and complex -- it's a good question, it's a complex answer. So you're right, we will focus first on the application to the U.S. We will -- depending on the situation, if we have a partner on board, what is the strategy for Europe, that will determine what will be, you say, the filing date in Europe. Also, when you do apply for drug approval, you submit a very massive amount of data and documentation to the authorities. And they will give you a lot of questions during the examination period. And if you are answering questions from 2 agencies in parallel, you will get not only busy, but extremely busy. So there are lots of considerations that we weigh in. But really, the focus is on being successful in the U.S. If we are successful in the U.S. with Mangoral, that's going to be tremendous for us. We also want to get to the patients in Europe, in Japan and other countries. But we think the most important thing is to succeed in U.S. and then make sure we can get out to the rest in wave #2.

And coming back to what Carl said about this is a fairly new market that you basically have developed in some way, you could say, or about to develop, are you worried you will get competition now that it's even bigger than you said before?

We might. And if we do, that's because we are successful, and people see there's a real unmet need that we are addressing. So I think when -- if and when we see competition coming forward, it's a sign that we have been successful. So I think that's a good starting position. I think it may happen. But then again, the development time lines in drug development are so long so that if somebody starts on a competing product with a similar profile, they will get to market maybe 10 years after our launch. So I think it's a very unique situation actually to be in.

Is there anything else we could be worried about? I mean, there's so much technical development. Are you worried about something like that?

We're not worried, but we are aware of it. I mean, the 2 things is the software thing and it's also the quality of the upgrade of the cameras that could create better qualities of the images, but I don't see that as a negative thing because given the mechanism of action of Mangoral, I think it would be hard to add on to that. So if you have better quality of the imaging and then add on Mangoral on top of that, it will only increase the quality of this. So I don't see that as something negative necessarily. I think that will still be a case for a contrast agent, that's what I'm saying.

And I think it might even be a positive because when the software algorithms improve, and they can see more and get more information out of a high-quality image, which we can provide with Mangoral, then it may even expand potentially in the future on the kind of information you can get from an [indiscernible] . So it's not only something that is a risk on the downside, it's actually also an opportunity for doing something better for the patients in the future.

That's reassuring.

Yes.

So do we have any more questions or any questions from the telephone conference? Operator, please?

At this moment, we don't have any questions. [Operator Instructions]

And we don't have any. Magnus, I think I'll leave it over to you for any closing remarks.

Yes. So thank you, everybody, for your attention, and taking time to be here with us on our Capital Markets Day 2020. We hope you found the update that we've given interesting. I can assure you that we are working very hard and are very dedicated to moving our company forward both Mangoral and Oncoral. And we will look forward to updating you on the progress that we make as we move forward. Thank you.

Thank you for participating in this conference call. You may now all disconnect your lines.