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

Welcome, everyone, to the webcast for Ascelia Pharma's Q2 report in 2020. I am Magnus Corfitzen, CEO of Ascelia Pharma, and with me today, I have Julie Waras Brogren, Chief Commercial Officer; Carl Bjartmar, Chief Medical Officer; and Kristian Borbos, Chief Financial Officer. We look forward to updating you on our progress in the quarterly report. Now please turn to Page #2. We will be making certain forward-looking statements on this call, so please pay attention to this before turning to Page #3. Ascelia Pharma is focused on improving the life of people with rare cancer-related conditions by developing novel drugs to address the unmet medical needs. We have 2 drugs in clinical development: Mangoral in Phase III; and Oncoral, which is being prepared for Phase II. We have a very strong and experienced team headquartered in Malmö, Sweden with a strong track record in late-stage drug development and commercialization. We're well financed to execute our strategy. Please turn to Slide #4. Ascelia is in a transformative phase as we're moving from late-stage development into commercial stage. Our lead program, Mangoral, is expected to be launched in the U.S. at the end of 2022 or first half '23, and we are highly engaged in the preparations. In the same time frame, we expect that the Phase II of Oncoral will be nearing completion. As part of our strategy, we might expand our portfolio with additional drugs that fit our orphan oncology strategy and where we can make a significant benefit to patients in need. This is a truly exciting time for Ascelia Pharma, and we see tremendous value-creation potential as we progress on our journey. Please move to Slide #5. Third quarter has been a busy period. On June 30, so slightly before the start of the third quarter, we raised additional capital, and the strengthening of our balance sheet happened in the third quarter, which you can see from the financial report this quarter. In September, we announced that we have successfully manufactured Mangoral at commercial scale with consistent good results. This is an important milestone, which will ensure we are ready for launch as well as provide important information for the registration filing for approval. There's also been some major events after the end of the quarter. In October, we held a Capital Markets Day, where the key focus was on the Mangoral commercial opportunity, which included an upgrade of the addressable market for Mangoral to $500 million to $600 million annually in U.S., Europe and Japan. Julie will elaborate a bit more on this call as well. Earlier this week, we announced that EMA has confirmed that Mangoral is eligible for the centralized regulatory procedure, which was also an important confirmation. So all in all, we're making good progress and look forward to giving you a bit more detail now. So please turn to Page #6. Now we'll go into more depth on our development pipeline, and I'd like to hand the word over to our Chief Medical Officer, Carl Bjartmar.

Thank you, Magnus. So please turn to Slide #7, where I will provide some more details on the clinical development of these 2 candidates. And I'll start with Mangoral, the contrast agent for MRI examinations of the liver. So contrast agents for liver MRI is a little but today are all based on gadolinium, which is a heavy metal, which is dosed intravenously. In most patients, gadolinium can 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., have implemented restrictions for patients with impaired renal function. So that's a very specific unmet medical need. And this context is illustrated on the slide. So today, patients with normal kidney function, and that's most patients, they can receive gadolinium-based imaging drugs. However, patients with severely reduced kidney function lack an imaging drug today. So in the future, tomorrow, this unmet need can be met by Mangoral. The specific target population is approximately 4% of all patients requiring a liver MRI. So these patients, Mangoral aims to be the standard of care. And important to note here is that Mangoral is the only liver-specific contrast agent in clinical developments. We are way ahead of any competition. Please go to next slide, 8. So our ongoing pivotal study, Phase III pivotal study, SPARKLE, investigates the efficacy and safety of Mangoral in the target population with focal liver lesions and poor kidney function. The study is expected to be completed next year. And as shown on the left, there's a strong clinical proof-of-concept through 6 individual Phase I or Phase II study with very consistent results. This data were confirmed by an independent reanalysis by a blinded reader, which showed highly significant effects on [indiscernible], is also used in our pivotal Phase III study. And this is shown on the right side of the slide. You see this Phase III design, the study, which is a global study, with 200 patients that's been agreed with FDA and EMA. The strategy is to repeat and confirm the Phase II results using similar endpoints. 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 areas for patients with impaired renal function, the comparator will be unenhanced MRI, which currently is the standard procedure for these patients. There's, therefore, no randomization, but each patient serves at his own control designed with advantages on sample size statistics. And finally, the follow-up for each patient is very short compared to most clinical studies. We will, therefore, have to find out set of results relatively sooner than a typical study of similar size. Please go to next slide, 9. SPARKLE is a global study. The targeted 200 patients are enrolled at approximately 40 to 50 hospitals. Some examples are listed on the slide. And you can note that these are all top institutions. This also means that we are already now have the leading experts and opinion leaders involved in the program. So we are already now building a relationship and creating awareness about Mangoral. In addition, their participation validates a large unmet medical need for these patients. So the next slide, please, #10. So the clinical development of Mangoral is making good progress despite the COVID-19 challenges. As mentioned, Phase I and Phase II are completed. And earlier this year, we enrolled the first patient in SPARKLE and thereby became a true Phase III company. Top line results of SPARKLE are expected second half of 2021, followed by filing in 2022 and market introduction shortly thereafter. So by that, I'm now going to switch over to Oncoral, our second candidate in clinical development. Next slide, please, 11. So in the same way as we have a strong clinical proof-of-concept for Mangoral, there's also a 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 at the hospital. Secondly, the well-known side effects associated with intravenous bolus dosing, for example, nausea, can be avoided, the daily oral dosing of Oncoral to its lower but still therapeutic plasma levels of the drug. And this slide illustrates how Oncoral will differentiate from the intravenous irinotecan shown on the lower left corner. So these indications are colorectal cancer and pancreatic cancer, although sometimes used also for gastric cancer in the clinic. For Oncoral, the intended indication is gastric cancer, a severe cancer form with potential or significant unmet need. Gastric cancer is a rare indication where a potential orphan drug designation can provide several advantages from a drug development perspective. So the next slide, please, Slide 12. So Phase I is now completed. What this study show is that Oncoral appears well-tolerated. For example, the hematological side effects, such as cytopenias, which are often associated with chemotherapy, were few and all mild to moderate. Also, the bioavailability of this new oral formulation is comparable to the intravenous formulation. So to conclude, Phase I results were as good as we could hope for, justifying moving this compound into Phase II. Phase I also included combined administration with another established oral chemotherapy, demonstrating the potential for an all-oral regimen. So we believe that this is an attractive case given the market size and given the potential for orphan status. The current focus is to finalize the Phase II study design. This work is well advanced, and we are supported by leading clinical experts in the field. So we expect to start the Phase II study next year. And finally, it should be noted that once the indication gastric cancer is established for Oncoral, there is the potential to explore other indications where irinotecan is currently used. So with that, I want to hand over to our Commercial Officer, Julie.

Thank you, Carl. We're now on Slide 13, and I will go back to talk about Mangoral. I'll now share some key highlights on the market opportunity and on our progress preparing for commercialization of Mangoral. First, in connection with our recent Capital Markets Day, we communicated an upgrade of our estimate of the addressable market for Mangoral to be between $500 million and $600 million annually in our key markets, the U.S., EU and Japan. Secondly, decision-makers understand the value that Mangoral provides. And thirdly, our preparations for launch progress as planned, and we continue to see a strong case for building our own commercialization in the U.S. Please move to Slide 14. As mentioned, we have upgraded our estimate of the addressable market for Mangoral. This estimate is based on a well-defined patient population. This is unchanged. These are the patients that Carl talked about previously, who have suspected liver cancer metastases and need liver imaging for diagnosis or for ongoing monitoring. In this group, Mangoral is developed for patients who have severe kidney impairment and at risk of developing severe adverse events if they're exposed to the currently available contrast agents. While in our previous estimate, we based assumptions on solid covenant and epidemiology data and market research, we've now obtained new data from actual recorded medical procedures, real-world data. This data gives us a solid understanding of patients eligible for Mangoral and the number of imaging procedures per year for each patient. We have also obtained additional insights from payers and reimbursement experts in key markets. These insights have helped us advance our understanding of the value proposition of Mangoral through the health care systems and the pricing potential in each market. This new real-world data and additional expert input has led us to upgrade our estimate of the addressable market. The main driver of the upgrade is an increase in the total volume of imaging procedures. We are pleased to see this progress and to be able to validate further that the unmet need and the commercial opportunity for Mangoral is clear and strong. When preparing for our launch -- so I'm going to move now to Slide 15. When preparing for our launch, it's important to understand how Mangoral helps patients compared to other contrast agents in the landscape. If you look at the landscape for MRI contrast agents, all the currently available options abate on the toxic heavy metal, gadolinium, and they had mentioned black box warning for patients with severe kidney impairment. And this is due to the risk of developing nephrogenic systemic fibrosis, which is multi-organ and potentially fatal disorder with no treatment option available. This risk exists both for contrast agents that are specific to liver imaging, which Mangoral is, and also to all other contrast agents available today. For Mangoral, this means that there's no contrast agent currently advised for liver imaging in patients with severe kidney impairment, and it means that Mangoral has the potential to be the only safe and effective imaging contrast agent for this target patient population. Please move to Slide 16. We have recently held advisory reports and interviews with around 50 experts on pricing and reimbursement in our key markets. We asked them to evaluate a number of parameters related to currently available contrast agents to the unmet need and to the clinical profile of Mangoral. They said that they are aware of the limitations of gadolinium-based contrast agents, and they agree that Mangoral has the potential to address important unmet needs. They also provided valuable input to us on how we can best prepare for dialogue with decision-makers to get a strong outcome on pricing and on access for patients. Please move to Slide 17. In summary, Mangoral has a clear value proposition to patients, physicians and the health care systems around the world. This is because of 3 things: there is no contrast agent advised for these patients; Mangoral provides improved visualization compared to an unenhanced MRI, which is the current standard of care for this patient population; and three, contrast-enhanced MRI can enable early detection which, in turn, allows for early intervention and higher survival rates for these patients. Please move to Slide 18, a little bit about our plans for commercialization. For the U.S., the attractiveness of the market and the clear path to market provides a strong case for commercializing Mangoral on our own, i.e., building a U.S. commercial affiliate. For other markets, the EU and Japan represent the most attractive opportunities in size and value to payers and in time to market. In these markets, the EU and Japan, the value of Mangoral have been maximized by working with a partner who has existing local expertise and relationships with decision-makers. We will be reassessing other markets for future considerations, such as China. Please move to Slide 19. In our most important market, the U.S., we already have strong relationships with leading radiologists among the SPARKLE clinical study investigators that Carl has talked about. We've also partnered with specialists and organizations within manufacturing and radiology. The case for commercializing in the U.S. by building our own team is strong. We can reach priority decision-makers at launch with a sales force of around 20 FTEs. These will work closely with a cross-functional support team. And for other functions, such as logistics and distribution, we'll work with established third parties. Building our own commercial team in the U.S. allows us to build an attractive top line and to retain profit and value in Ascelia. Please move to Slide 20. We've also mapped decision-makers in the U.S. With regards to market access, data shows that 70% of Mangoral's target patient population is covered under the U.S. Medicare and Medicaid program. This allows us to approach the vast majority of health care providers in the U.S. directly from launch for adoption into the care that they provide. Because our target patient population has multiple health complications, the adoption and use of Mangoral will mainly be in specialized hospitals and clinics. Our data shows that 750 hospitals and clinics handle around 75% of MRI procedures, and around 400 of these serve most patients with kidney impairment. We also have data showing that radiologists are the most important decision-makers on liver imaging contrast agents, and our data shows that around 2,000 radiologists perform regular MRIs for patients with kidney impairment. That was the end of the Q3 update on Mangoral commercialization. And I'll now hand over the word to Kristian, our CFO.

Thank you, Julie. And let me now turn to Page 22. So the picture on earnings compared to the corresponding period last year, it's the same as we've discussed on earlier calls. The increased loss year-over-year, both for this third quarter as well as the 9 months results, is as expected and reflects the continued progress and the spend on clinical development program for Mangoral. It also reflects that we are ramping up on our commercial preparations. So if we now turn to Page 23. The key message here is that we continue to stand with a strong liquidity position that was further strengthened by the directed share issuance we did earlier this summer that brought us around SEK 94 million in net proceeds. The fund obtained in the share issuance are important as we progress the development of Mangoral and prepare for market launch. The current cash position will take us into 2022 and consequently beyond the clinical milestone, with top line Phase III data from SPARKLE, which we expect to have in the second half of 2021. With that, I leave the word over to Magnus, please?

Yes, thank you. And please move to Slide #25. So I'd like to end this quarterly update with our focus for the rest of the year. The clinical development of Mangoral is highly important to us. This work continues despite COVID-19 impact, and we continue to work with investigators and consultants to make the study a success. We're obviously adapting to the circumstances to ensure that patients, medical staff, employees and everybody else are safe in this process. We're also preparing for Mangoral commercialization and have many activities ongoing to enable us to detail and implement a value-maximizing strategy. At the Capital Markets Day, we all gave you an update, but I can assure you that our work continues with high effort. Another important activity is to complete the design and plan for the Oncoral Phase II development, which could pave the way for starting the study next year. We hope to be able to share more information with you in the not-too-distant future. So now move to Page #26. So to summarize, Ascelia Pharma is focused on developing drugs to address unmet medical needs for patients with rare cancer conditions. Our lead program, Mangoral, is in Phase III development, and we expect the study results in the second half of next year. The addressable market is $500 million to $600 million on an annual basis in U.S., Europe and Japan, and there are currently no products to address this need. We believe Oncoral will be an attractive option for patients with gastric cancer. Based on solid Phase I data, we're preparing the Phase II, and we look forward to updating you on our plans. This was our final slide, and we'd be happy to take any questions.