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

Ladies and gentlemen, welcome to Ascelia Pharma Q4 Report for 2020. Today, I am pleased to present Magnus Corfitzen, CEO, and Kristian Borbos, CFO; Carl Bjartmar, CMO; and Julia Waras Brogren, CCO. [Operator Instructions] Speakers, please begin your meeting.

Thank you. Welcome, everybody, to the webcast for Ascelia Pharma's Q4 Report for 2020. I'm Magnus Corfitzen, CEO of Ascelia Pharma. And with me here today on this call, I have the entire executive team. 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 moving to Page #3. Ascelia Pharma is focused on improving the life for people with rare oncology related conditions by developing novel drugs to address unmet medical needs. We have 2 drugs in clinical development. Mangoral is in Phase III, and we expect to complete the study in the second half this year. It will be the only product targeting an addressable market of $500 million to $600 million annually. Oncoral is being prepared for Phase II in the treatment of gastric cancer based on encouraging results in Phase I. We have a very strong and experienced team headquartered in Malmö, Sweden, a strong track record in late-stage drug development and commercial assets. We have a solid financial position. In addition, we have built an extensive global network to help us bring our drug candidates to the patients who need it. Now please turn to Page #4. Ascelia Pharma 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 '22 or first half '23, and we are highly engaged in the preparations. In the same time frame, we expect that the Phase II for Oncoral will be nearing completion. As part of our strategy, we might expand our portfolio with additional drug candidates that fit our orphan drug strategy where we can make significant benefit for patients. As you can appreciate, this is a truly exciting time for Ascelia Pharma, and we see tremendous value creation potential as we progress. Now please move to Slide #5. Q4 has been a busy period. In October, we held a virtual Capital Markets Day with a focus on the attractive commercial opportunity of Mangoral. We have done and continue to do a lot of commercial operations and the findings led us to increase the addressable market to $500 million to $600 million annually in the U.S., Europe and Japan. In November, we announced the information from European Medicinal Agency that Mangoral is eligible for the centralized regulatory approval process. In December, we announced the result of a reread study, which demonstrated that Mangoral was as effective as the liver-specific gadolinium agent in terms of visualization of focal liver lesions. The same endpoint as in SPARKLE, our global registration-enabling Phase III study, which is ongoing. Carl will provide more information on this later on this call. Also in December, we announced that the U.S. patent office had accepted our patent filing for its second-generation version of Mangoral. This patent will run to at least 2040, and Julie will provide more information on this on this call as well. Shortly after the end of the quarter, in early January, we presented our plan for Oncoral Phase II development at the prominent group of leading oncologists who make up our advisory board. Now please turn to Page #6. We'll now go into more depth on our pipeline. I'd like to hand the word over to our Chief Medical Officer, Carl Bjartmar.

Thank you, Magnus. So I will now provide some more details on the clinical development of these 2 candidates. I will start with Mangoral, the contrast agent for liver MRI. Please turn to Page 7, Slide 7. So contrast agents for liver MRI available today are all based on gadolinium, [ it has a metal ] which is dosed intravenously. Gadolinium-based imaging drugs can be used in most patients but should not be given to patients with poor kidney function since gadolinium is excreted through the kidneys and slow elimination can cause serious side effects. So for that reason, regulatory authorities, for example, FDA in the U.S., have implemented restrictions for patients with impaired renal function. So that is a very specific unmet medical need and this context is illustrated on the slide. So today, patients with normal kidney function, as most patients, can receive gadolinium-based imaging drugs. However, patients with severely reduced kidney function lack an imaging drug today. In the future, tomorrow, this unmet need can be met by Mangoral. This is a specific target population, and it's approximately 4% of all patients requiring liver MRI. For these patients, Mangoral aims to be the standard of care. Importantly to note here is that Mangoral is the only liver-specific contrast agent in clinical development. So we are way ahead of any competition. Please go to Slide 8. Our ongoing pivotal Phase III study SPARKLE investigated efficacy and safety on Mangoral in target population with focal liver lesions and poor kidney function. And as mentioned, the study is expected to be completed this year. As shown on the left, it's a strong clinical proof-of-concept through 6 individual Phase I and II studies with very consistent results. So this data were confirmed by an independent reanalysis by a blinded reader, which showed highly significant effects on the endpoints that are also used in our pivotal Phase III study. The primary endpoint is lesion visualization based on the co-primary parameters, lesion delineation and lesion contrast compared to background, which were both highly significant in the Phase II program. The existing data as contains a direct comparison to gadolinium base liver contrast agent, which showed similar effect on lesion visualization, and I will come back to that study. The right side of the slide illustrates the Phase III design. The study, which is a global study with 200 patients, has been agreed with FDA and EMA. As mentioned, the strategy is to repeat and confirm the Phase II results using the same endpoints. Since there is no available contrast agent for patients with impaired renal function, the comparitable will be unenhanced MRI, which is currently the start of a procedure for these patients. And finally, the follow-up for each patient is very short compared to most clinical studies. This simplifies the operational procedure, and we'll also have a finalized study relatively sooner than a typical study of a similar size. Go to next Slide 9, please. So as mentioned, we recently released the results of a blinded reread study using the same endpoints and evaluation criteria as the ongoing Phase III study SPARKLE. This was an independent study where Mangoral was compared both directly against the gadolinium contrast agent, but also against MRI without contrast enhancement. And the key outcome was that Mangoral was as effective as gadolinium for visualization of focal liver lesions, where 2 out of 3 independent reader even reported higher scores for Mangoral. In addition, Mangoral MRI provided improved diagnostic efficacy compared to MRI without the contrast agent. So this data will not only strengthen the data package to the regulatory authorities, it also supports our expectations of a positive outcome in the SPARKLE study. So I will now turn over to the commercial outlook of Mangoral. Julie?

Thank you, Carl. We are now on Slide 10. I will share key highlights on the market opportunity for Mangoral and on our progress preparing for commercialization. First, in connection with our Capital Market Day in October, we communicated an upgrade of our estimate of the addressable market for Mangoral to be between $500 million and $600 million in our key markets. Secondly, decision-makers understand the value that Mangoral provides, and our preparations for launch progress as planned, and we continue to see a strong case for building our own team in the U.S. Lastly, in December, as Magnus mentioned, a patent was granted in the U.S. for our second-generation Mangoral, which provides patent protection until 2040. Please move to Slide 11. As mentioned, the addressable market for Mangoral represents $500 million to $600 million annually, covering the U.S., EU and Japan. This value is driven by a well-defined patient population. These are patients who have suspected liver cancer or metastasis and need a liver imaging for diagnosis of ongoing treatment or monitoring, and they have severe kidney impairment. Our data on patients and procedures come from actual recorded medical procedures, real-world data, which gives us a solid understanding of patients eligible for Mangoral and the number of imaging procedures for each patient per year. In terms of pricing and access, our analysis is based on extensive insights from payer and reimbursement experts in key markets. This gives us a solid understanding of the value proposition that Mangoral provides to the health care system and the pricing potential in each market. For these patients and these procedures, there is no competing drug. As Carl talked about, the alternative to Mangoral is an unenhanced MRI, which as Carl showed, does not provide an adequate image quality. Please move to Slide 12. For the U.S., the attractiveness and clear path to market provides a strong case for commercializing Mangoral on our own i.e., building and U.S. commercial affiliates. We already have strong relationships with key radiologists among our Phase III clinical study investigators, and we also have partners among specialists and organizations within manufacturing and radiology. The target patient population for Mangoral has multiple health complications. Therefore, the decision to use a contrast agent is centered around 2,000 radiologists who can be found at 400 hospitals. Therefore, a sales team of 20 FTEs can reach priority decision-makers at launch. Building our own team in the U.S. allows us to create an attractive top line and retain profit and value in Ascelia. For other markets, the EU and Japan, we believe the most attractive opportunities are the next priority for Mangoral launch. In these markets, our strategy is to maximize the value by working with partners with existing local expertise and relationships with decision makers. Please move to Slide 13. In December of 2020, we announced that the U.S. patent office issued a new patent covering our second-generation formulation of Mangoral. This second-generation formulation provides patent protection until 2040 in the U.S. A global patent application for our second-generation Mangoral was also filed and decisions will follow in each market according to their national procedures. The second-generation formulation provides further value to the Mangoral franchise. This is an effervescent tablet, where the first generation is 2 separate stick packs that are to be dissolved in water. The effervescent tablet formulation will further improve ease of use for patients and health care professionals. So we can turn to Slide 14 and go back to Carl and Oncoral.

Thank you, Julie. So I will now provide some more details on the Oncoral program. We can go to Slide 15. The active substance of Oncoral is irinotecan and irinotecan is an established chemotherapy with well documented anticancer effects. It's currently used in several solid cancer indications and it is approved for colorectal cancer and pancreatic cancer. In Japan, it is also approved for gastric cancer. Today, the administration is intravenous bolus infusion, typically every third week and typically high dose. Now Oncoral is a novel oral formulation of irinotecan. It is a tablet for daily dosing that could offer valuable treatment option for cancer patients in the future tomorrow. There are several potential advantages of oral daily dosing. Most important, efficacy, it is well-known that many cancer types have suboptimal treatment outcomes today. An oral daily dosing may improve efficacy through a favorable pharmacokinetic and pharmacodynamic profile based on more constant even therapeutic plasma levels of the active substance and there are both nonclinical and clinical data supporting this concept. Then there is tolerability or safety. Intravenous dosing of chemotherapy is frequently associated with severe side effects, for example, gastrointestinal and hematological side effects. An oral daily dosing has the potential for improved tolerability by avoiding high plasma levels and by offering dosing flexibility. In addition, there's convenience and cost. It's more convenient and cost-effective to take a tablet at home than going into a hospital and prepare for intravenous administration. Please go to Slide 16. This is an example of improved outcome. In this case, overall survival with a more frequent dosing. These are patients with metastatic breast cancer, where overall survival was improved from 20% with dosing every third week irinotecan intravenously, high dose, to 32% with weekly dosing with a slightly lower dose. So this is, if you will, a proof of principle. Go to the next slide 17, please. So the concept of frequent low dose administration is called metronomic dosing. The figure to the left illustrates simulation model comparing levels of the active substance, SN-38, after irinotecan intravenous dosing every third week with the gray line and oral Oncoral dosed daily as the yellow line. And over a 3-week cycle, the exposure or area under the curve is comparable, although the plasma peaks associated with toxicity are avoided by daily dosing. Approximately 1/3 of the side effects observed after intravenous dosing are reported as severe or even life-threatening, grade 3 or 4. Metronomic dosing may not only reduce peak-related toxicity but also brings the possibility to adjust the dosing quickly if adverse events should occur. Our own Oncoral Phase I results showed that Oncoral was well tolerated overall and importantly, the hematological toxicities were mild to moderate, grade 1 or grade 2. In addition, our Phase I data with Oncoral indicated activity or stable disease even in patients that previously progressed on irinotecan given intravenously. So that is encouraging. Can go to the next slide, 17, please. 18, sorry, 18. Yes. So this program is supported by a high-profile advisory board. So we have Prof. Tabernero from Barcelona, Spain, former President of ESMO; Prof. Ajani from US University of Texas; Prof. Van Cutsem from Belgium; we have Prof. Jeff Evans from the University of Glasgow. And here, there is a joint view that Oncoral will be an important treatment option for cancer patients in the future. Can go to the next slide, 19. Now we are preparing for the Phase II study and the objectives for the Phase II study are several. First of all, to establish a clinical proof-of-concept in metastatic gastric cancer. Gastric cancer is chosen partly because of strategic reasons. There is potential for orphan drug designation in gastric cancer and the clinical guidelines and clinical data support efficacy of irinotecan in gastric cancer. Subsequently, there's potential for label expansion into other solid tumor indications. Another objective is to generate compelling Phase II data for further development, potentially with a partner. The study is a randomized, controlled, multicenter, multinational study, comparing Oncoral on top of standard of care with standard of care alone. The primary endpoint is typical for a Phase II study in oncology, progressive free survival and there's a battery of secondary endpoints, response rate, PK safety and overall survival. This will include approximately 100 patients with the anticipated study to start second half of this year, 2021, and the duration into 2024. Thank you. And then I turn to Julie, Slide 20.

Yes. So again, to reiterate our position to pursue gastric cancer in our Phase II study. Gastric cancer represents an attractive opportunity because there's a large unmet medical need and because there's a value of potential for Ascelia Pharma. Today, irinotecan is approved in colorectal cancer and pancreatic cancer. But in gastric cancer, irinotecan is not approved. As Carl showed, there's a potential for improved patient outcomes with a daily dosing. Gastric cancer is the third most frequent cause of death in cancer, it represents a $3 billion to $4 billion market today, and there's an opportunity for an orphan drug indication and value in the U.S. and Europe. In the future, there may be opportunities to expand our indications into other areas, either colorectal or pancreatic or new indications. So with that, we'll move to Slide 21.

Thank you, Julie. And jumping directly to Page 22. So the development in earnings compared to the corresponding periods last year, it's the same as we have discussed in previous calls. The increased loss year-over-year, both the quarter alone and for the full year is as expected and reflects the continued progress and the spend on the clinical development program on Mangoral. It also reflects that we are ramping up on our commercial preparations. We now turn to Page 23. The key message here is, as I also said on previous calls, is that we continue to stand with a solid cash position. The cash position will take us into '22 and consequently, beyond the clinical milestone top line Phase III data from SPARKLE on our Phase III study, which we expect to present in the second half of this year. With that, I'll leave the word over to Magnus.

On Slide 24. Thank you, Kristian. I'd like to end this quarterly update with the focus -- with our focus on 2021. The clinical development of Mangoral is highly important for us. This work continues full speed despite some COVID-19 impact, as previously communicated, and we continue to work with investigators and consultants to make this study a success and are adapting to the circumstances to ensure patient medical staff employees and everybody else are safe. We continue our preparations for Mangoral commercialization, have many activities ongoing to enable us to detail and implement the value-maximizing strategy as outlined by Julie. Another important activity this year is our progression for the Oncoral Phase II study, which we expect and hope to start in the second half of this year. This was our final slide, and we'd be happy to take any questions.

[Operator Instructions] We have a question from the line of Ludvig Svensson from Redeye.

All right, Ascelia Team, thank you for a nice presentation. So my first question is related to the patent covering the new formulation of Mangoral. Could you elaborate on your strategy here on how you will use this asset to prolong exclusivity on the market?