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

[Audio Gap] [ this event with Ascelia Pharma. ] With me today, I have the Deputy CEO and COO, Julie Brogren from Ascelia Pharma. To the audience, just some practical issues on your right side, you have the possibility to post your questions. And please do while Julie is presenting, I will pass on questions to Julie. Today's event will focus [ explicitly ] on Orviglance, latest -- late finish of the Phase III study and what to come. And then we will deep dive more into the commercial side of Orviglance. So with that said, I would like to hand all the word to Julie. Welcome, Julie. And please carry on.

Thank you, [ Claus ]. I will be talking about Ascelia Pharma and our commercial opportunity for Orviglance today. I will be making some forward-looking statements, so please take a -- pay attention to this slide. So Ascelia Pharma is a biotech focused on improving the life of people living with cancer to offer them better treatment options. We have focused on rare cancer conditions and our capabilities are in identifying, developing and commercializing these assets. We have 2 products in development. One is Orviglance. It's a diagnostic drug. And we have just finished the enrollment in our Phase III study, and we have an Orphan Drug Designation from the FDA. The other [ compound ] is Oncoral. It's a daily tablet formulation of a chemotherapy that is well recognized in many solid tumor types today. I will be focusing on Orviglance today. So Ascelia Pharma, we are based in Malmo, and we are funded into Q4 this year, and we're listed on NASDAQ in Stockholm. So today, I want to talk about Orviglance because, as I mentioned, we have just finished the enrollment in our Phase III study, so it's a very exciting time for us as we ramp up both towards the NDA approval and towards commercialization. Orviglance is addressing a well-defined patient population with the need for liver imaging in cancer patients with poor kidney function. I'll talk more about that. We are addressing a global market opportunity of $800 million annually, addressing 100,000 abdominal imaging procedures in the U.S. alone. And we have an ambitious and also focused plan for the launch, and that is progressing as we speak. So just a little bit about Orviglance and what it is. What is the problem we want to help patients and physicians with? We are addressing a population that has cancer in the liver, that could be primary liver cancer or liver metastases. That's a critical part of cancer care because in many cancer types, where tend to develop metastasis in the liver. For example, 70% of colorectal cancer patients develop liver metastasis. So it's important for physicians to detect it as early, to detect where they are in the liver and to determine the course of treatment for patients. And to do that, they do an imaging procedure where the gold standard is an MRI. And when you have an MRI imaging procedure, you would use a contrast agent. So a contrast agent is a diagnostic drug that improves the image, so it's easier to see these cancer lesions. Today, all contrast agents for MRI imaging are based on gadolinium. That's a toxic heavy metal, it's been around for years. And what happened some years ago, about 15 years ago, is that it was discovered that gadolinium was associated with a very severe, not very common, but a very severe side effect called Nephrogenic Systemic Fibrosis. That was, in particular, a risk in patients who have severely impaired kidney function. So they have bad kidneys, you could even be on dialysis, for example. And these patients are quite vulnerable, so what happened is the authorities implemented these Black Box warnings for this particular patient population. So the clinical practice for these patients today is to have an unenhanced MRI, so to have a contrast image without -- well, an image without a contrast agent. So that doesn't give the physician the same quality of the image to determine the course of treatment and to detect these lesions. So Orviglance is a contrast agent for liver imaging based on manganese not gadolinium. And essentially, we make the healthy parts of the liver brighter and the unhealthy parts or the cancer parts of the liver will stay darker. And we can -- we are targeting specifically the patients with severely impact kidney function. So those who fall under the black box warnings. So to move on to where we are. We have completed a very extensive clinical program, 9 studies, almost 300 patients. And across all studies, we have consistent data supporting the efficacy and the safety of Orviglance. Our latest study, the SPARKLE study is our Phase III study, and we have completed patient enrollment very recently. So we are now waiting for the headline data, which will come out in the middle of this year. So just to show you a little bit about what is it we are looking for, for example, for the SPARKLE study. On the left side, you see an example of 2 images of the liver. One is the unenhanced, which our target patient population typically will get today. On the right side, you have an MRI image where we -- the patient has received Orviglance. And as you can see in the circles, there is a lesion that you can see on the right side, but you can barely see it on the left side. So the endpoint as for our Phase III study. So the success criteria for the Phase III study is that we ask, which is common, 3 independent radiologists to look at all the images from all the patients and they need to determine whether or confirm and determine that on the right side, the contrast between the background and the lesion is better than on the left side. And they also need to say that the delineations of the border of the lesion that you can see on the right side is sharper than what you can see on the left side. And 2 out of these readers need to say it's better on the right side than on the left side. Then we have achieved our headline end point for the Phase III study. So this is what we are waiting for. And as we do that, we are preparing for the launch. So...

Sorry, -- just a question here. Sorry, I interrupt you because there's a question about Orviglance and Orviglance as a drug. You going to register this as a medical device or as a drug?

Contrast agents are regulated as drugs, so we follow the drug pathway. It's a certain department and with the authorities, but it is regulated as a drug.

And just for size, you have this Orphan Drug Designation. And of course, that's a major help for you. Could you just very briefly elaborate what gain for us?

Sorry, what it means to have an Orphan Drug? Are you saying this?

Yes, [indiscernible]

Yes, several things. It means, first of all, that it's recognized that you address on a significant unmet need for a small patient population. When you show that, you have some support from the regulatory authorities. One is the development program is leaner, and they will help you address questions along that process. So they understand that it's difficult to invest in the very large Phase III studies for small patient population. So it's faster and cheaper to develop these compounds. Another part is from a commercial perspective is that you have a longer called exclusivity period, where they will not approve another drug for this exact patient population and indication. So that will give us 7 years exclusivity period in the U.S., for example. So there's both advantages in the development and regulatory pathway and also when commercialized.

So in your case, that's [indiscernible] due to gadolinium being only -- the only alternative with quite severe side effects.

Yes. And that today, these patients will typically get an unenhanced MRI, which is inferior to a contrast enhanced image.

Yes. The picture you showed before. Yes, please, carry on, Julie.

Yes. Thank you. So just a little bit more about the market background seen from sort of the commercial perspective. When we ask physicians, what are your concerns about using a contrast media with gadolinium. They are all concerned or 90% of them are concerned about NSF and the toxicities related to using gadolinium. And many -- many of them have experienced this very rapid quite severe side effect. So this is our target patient population. And so that is recognized in clinical practicing as well. But what has happened over the last couple of years is when we look at our community, the medical community, the scientific community and among regulators, a couple of other key topics are coming up around gadolinium. First is that we know that gadolinium is retained in the brain and in other body parts in tissue, the organs, but we don't know what the safety impact is. So both the regulatory authorities and the bodies making the medical guidelines, they want to find out. So for example, the FDA has asked the big manufacturers to conduct a long-term study, where they are following patients who receive multiple procedures with gadolinium over 5 years. Another area is that we know that gadolinium is excreted through the kidneys into urine and into our sewage systems, it's very difficult to clean. So we can find gadolinium now in our rivers, in our -- so water and there's more scrutiny now into what does this really mean. So the industry is reacting. And what we see around the big players and manufacturing gadolinium today, is that they're looking into developing compounds with less gadolinium so half doses. And the ones that are being developed now are actually for the full body, not liver-specific. And another interesting development is GE HealthCare, who have completed a Phase I study also with manganese. So they are not as far as we are in the development. And also, this is for the full body, not specific for the liver. So we are excited that we are part of a future with less or without gadolinium and that we are far ahead and will be the first to market with the manganese-based contrast agent. So into the commercial opportunity. The addressable market for Orviglance is $800 million in the U.S., Europe, Japan, the mature Rest of World markets. And U.S. almost represents half of this. And when, we have looked into real-world data, as so we understand the volumes, and we tested our pricing assumptions to build up our addressable market and our launch plan. So because the U.S. is such a big opportunity, by far, the largest standalone opportunity, our plan is to lead the commercialization ourselves as an emerging pharma. Actually, there are more and more emerging pharmas launching on their own. 1/3 of the launches in the U.S. are actually done by companies who do it for the first time. The better practices are to determine what are the strategic capabilities that we want to build and where do we want to use some established outsourcing partners who run certain processes for a number of these companies and do it well. In other markets, Rest of World, we want to find partners that they have a local infrastructure and we can leverage that while we use the synergies across a global launch in terms of data, strategy and so forth.

Very briefly, Julie, just in relation to the market estimates. So the total addressable market of $800 million. Out of this, you estimate that $500 million to $600 million is related to your primarily target markets. Yes, this slide. This $500 million to $600 million, is that the severely patient group? Or is it the total group of liver -- liver patients?

That is the patient population with severely impaired kidney function. So specifically the ones that fall under the Black Box warning. The way we do the market estimate is that we have real-world data, so actual claims procedures conducted with 4 patients where we first find out how many patients have -- with cancer referred to an abdominal imaging procedures. In the U.S., that's 1 million patients per year. Then we ask how many procedures do they have per year. And we can see in this data, they have a little bit more than 2. So 2.2 million procedures, liver abdominal imaging in cancer patients. Then we find out how many of these have severely impaired kidney function. So it's measured primarily by an eGFR under 30 [ ml/min/1.73 m2 ] or an acute kidney injury and then we can estimate this patient population. So in the U.S., it's around 50,000 patients with 100,000 procedures.

And out of those $500 million to $600 million, is that -- is it fair to say that it's a little more U.S. and a little less Japan and Europe? Or is that unfair?

In terms of volume?

In terms of total market.

Yes. In terms of volume, U.S. and Europe are a little similar. The population in Europe is larger, but in terms of the number of imaging procedures per year. It's -- some countries in Europe have a bit less than the U.S.. So -- but by far, the U.S. has a different pricing structure. It's a different market, different setup in terms of payers. So the U.S. is -- has -- is driving a lot of value per patient. It's not significantly different from other drugs. It's just the structure of these markets a little different.

Very interesting. I have 2 more questions about Orviglance. But I think if you carry on, we take them a little further down the road.

Good. I'm looking forward to that. So I'm going to move on here. Talk a little bit about emerging pharmas. So as I mentioned, it's more and more common, 1/3 of all launches are by first-time launches and actually out of the estimated sort of blockbusters coming out of the FDA, the $1 billion drugs, half of them are from companies who will plan -- who will launch for the first time. So why is this possible? And why do companies do that? It's possible because over the years, the significant innovation has been into improving care for very specific smaller patient populations where you find out which patient population will really benefit from this drug. So we call it more narrow indications, so it's a more focused launch. It's not so much about volume and how many thousands of sales that you have, it's really about focusing on working with the key opinion leaders and the payers and into the key decision makers. And so that's why a lot more companies are doing this. And then because it's possible to focus on strategic capabilities and use and some of the -- as a good, well-balanced mix with some of these outsourcing partners, who are out there and who run these operations that are not effective to run and build up as a single company. So they succeed really by making sure they understand the market, making sure they are focused, having a core team with the right skills and then timely investment, so you balance when you invest and when you create value, which is exactly what we want to do as well, and we are doing as well. So I mentioned the U.S. market, and I think we covered the first part to dig into this market a little bit more. As I mentioned, 50,000 patients have cancer, need liver imaging and fall under the Black Box warning, and they have a bit around 2 procedures per year in rounded numbers. We've looked at pricing 3,000 to 4,500 per dose. We looked into diagnostic drugs that address specific small patient population, so innovative diagnostics. We tested our product profile with experts in the U.S. payers access experts, and that gives us a solid foundation for preparing for launch and for preparing for access and pricing. So in terms of the U.S., what does it then take to reach these patients? These patients are vulnerable. They both have cancer and kidney disease. So what we can see in this real-world data set is that we need to reach around 2,000 radiologists at 400 hospital groups to address 75% of our market potential in the U.S. So to do that, we need a very focused team. This is a hospital launch. So what you would have is a focused field team with field medical, field access account managers and some sales, of course, but it is really sort of a cross-functional, very focused team and you build up gradually the adoption in these hospitals. So an affiliate or a team in the U.S. of around 40 FTEs will drive the initial launch. We already had our manufacturing partner in New Jersey in the U.S., and that is also on track for our preparations. So just to the last piece, our launch plan. So as I mentioned, it's quite a unique opportunity addressing and will define unmet need for liver imaging, both with an agent that isn't associated with the gadolinium safety risks for patients with poor kidney function, but also addressing the increasing demand for alternatives to gadolinium in the future. We have a very clear ambition that we want to be the standard of care liver imaging choice for this patient population. And to reach this ambition, we need a focused and an ambitious launch. And we work with that strategy, both in terms of preparing the label and the regulatory process and product supply, but also in terms of how we prepare ourselves to launch and we start the dialogue with key decision makers. So we have our road maps, and we have a solid foundation with our strategy and we have started working with these stakeholders. We have a very experienced team across the team here. We have more than 20 global launches with U.S. focus in our experience and then we would work with selected outsourcing partners. I just want to say at the end here, one piece from our market research. When we ask physicians about whether they would use Orviglance at launch for our target patient population, 85% say they will definitely or are very likely to use Orviglance at launch. So this is even without us having been out there with our data and promoting the product. So this is very exciting, and we have now completed our Phase III study, and we are really looking forward to ramping up this work. And as we start just from a practical or a real-world perspective, it is ongoing already. A lot of the key journals or industry journals that cover radiology and imaging, have written some article about us, and we have a lot of support from both our SPARKLE investigators who have very positive experience with the drug and are supportive of the unmet needs. And we are building up our partnerships in the relevant -- among the relevant stakeholders here. So I think that was -- led me to the last slide, an exciting year for Ascelia Pharma. We've completed the patient enrollment in our Phase III study for Orviglance. We will have the headline results in the middle of the year and our preparations for the launch, including the NDA, of course, are on track.

Thanks a lot, Julie. Thanks a lot. And with that said, we open up for a couple of questions and we have some coming in here. In relation to these readers, the blinded readers of your Phase III study. Have they started already to evaluate the images? How far are you...

Yes, you can start reading them in batches. So when you have a certain volume collected, they can start reading. So that has started. And so we are completely on track with that. So -- and that's going well. There's a lot of standards you need to follow so that they don't remember one image with the unenhanced and the enhanced but absolutely, yes.

Good. And then in relation to the approval, the estimate approval. So you will give us, the investors, headline data, sometimes mid of 2023. And if you get -- when you get this positive feedback, then you apply for approval. And you do that dual, both in Europe and in U.S.

We have not communicated yet the timelines, specifically for this. But in our strategy, we have the U.S., Europe and then some of the other mature markets. U.S. is by far the biggest. And so -- but we haven't communicated the specifics of the timelines.

But due to this orphan drug designation, if everything is good, you would be able to start up your launch or soft launch in '24?

Yes, because as you say, the focus launch is a gradual approach. So yes, you can say pre-launch in the industry language. That is an ongoing process we've started. And yes, we can ramp that up when we look into '24 to make sure we're ready to make sure the stakeholders are ready. So the adoption can be as quick as possible.

Yes. And then just a question here about Orviglance compared to gadolinium price-wise, could you elaborate a little bit on that? So you expect a dose price of USD 3,000 to USD 4,000. And I know in U.S., there's a lot about insurances rebates and stuff like that, but that's the headline price as I understand you.

Do you mean list price?

The list price. Yes.

Yes. So when you ask about the price and what it compares to the advantage of addressing -- having an orphan drug designation or more precisely that we address a well-defined unmet need for small patient population. It is that the alternative for these patients is to have an unenhanced MRI. So that is what we compare to, that's an advantage, both in terms of, of course, the clinical study and the regulatory process of the label, but also in terms of pricing because we -- the payers will not compare Orviglance to the gadolinium compound. So that is a generic market. They've been around for years. The newer ones are launched at slightly higher prices, but it's really not what we are comparing to. So when we look at innovative diagnostics, for example, for PET scans and other, what they would have is they would have specific product pricing and access and reimbursement for the drug alone. So not as part of the bundled procedure. That is possible for innovative diagnostics. That's not possible for these [ odds ]. It's a lot more difficult for these, sort of in many cases, generic gadolinium contrast agents. So that's an advantage for us.

And then there's a question here about your partnering. So in Europe and Rest of the World, you will look into a partnership. That's 1/2, then have U.S. where you have an affiliate and where you want to not established, as I understood you with the Ascelia Pharma as [ sheet workers ], but more in a [ arm's length ] cooperation. Could you share a little -- could you elaborate a little more on the strategy in the U.S.? So you have -- you mentioned you have some pretty strong teams working there. Do you have any name or anything, just to get more insight to who you going to work with.

Yes. And we have not communicated the names yet or we haven't -- I mean that's part of the ongoing process to find what is the right mix. So currently, we are working more with the established specialists who will -- who are good at developing access strategies and involving experts and payers and pricing to help us prepare. All companies that are good at helping us have a dialogue with the key opinion leaders. So that's more than that all working with patient associations. So we're working with selected experts who help us. In terms of the strategy for the U.S. When we say it's an Ascelia-lit strategic -- launch, we do believe that we are the right ones to drive the strategic part of the capability development and the launch and that there are some processes where it may not make sense to build it up. So we have not communicated exactly what these processes are. But you -- I'm not sure it's sort of you -- arm's length in that sense -- I mean let's just say theoretically, if you have certain processes, they've outsourced -- oftentimes, it will still be Europe business card, they would still be Ascelia 100% allocated. So I am not -- we have not communicated what kind of processes, but there's a lot of the back-office processes, its data and reporting, a lot of things where typically, it makes more sense to find a company that it has these things up and running. So it's typically some of the things where it requires a big investment. That isn't maybe the right priority right now and we want to focus on the strategic things that really drive the launch.

Yes. That makes sense a lot because as I hear you say, you would do it in a cost-efficient way. And there's companies over there who already have systems in place, but you want to do it aggressively to of course, capture these market shares.

I will steal those words for next time, cost efficiently and aggressively.

That's fair enough. And as soon as we have the headline data, you're probably also can share some more insights into your strategy. They call that a very important milestone. And in terms Europe, can you shed some light on that? Is it a big pharma company? Or is it a more specialized pharma company? Or are you going to take a little same approach as in U.S.?

In Europe and Rest of the World, we are looking towards more like a full partnership, a partner with all established back-office, infrastructure and also field team. So it would be their team owning it, and that's what we are looking at now in terms of partnering. It needs to be a mix of things that will drive the right fit. So it is, of course, a pharma company that has some synergies in this. And as I mentioned, it's a focused launch. So some of the key synergies are really around the ability in medical affairs, as to say, to work with these key opinion leaders and also in market access to work with payers and access stakeholders. Then, of course, you need a field team, but there are many ways to have a synergy, I think, to -- with a field team. I think one important thing is that this is primarily a hospital drug. I think that's one part. That's probably the most important really. And then it needs to be someone where there's a good fit to their strategy and their portfolio. So it could be smaller, could be larger. But it's someone, of course, who believes in the value of a focused well defined launch as so for smaller patient population. Someone who believes in that and had some -- have a track record of being successful with that.

And then one more question here about, that's more about the capital situation. So if we assume you get approval and your commercial milestones are delayed, how big is your flexibility in terms of capital? Because right now, you hold a pretty strong balance sheet. You also announced how far the current capital situation stretched to. But could you shed some more light on that? Are you able with the current balance sheet to start up the launch in U.S.? Or what are we talking about?

Yes. So we have funding into Q4 this year. And among the priorities are these things we have on this slide, Phase III finishing that, generating the headline results and preparing the launch, including NDA and some of the selected prelaunch activities. And as some of the examples that I mentioned on the previous slide working with key opinion leaders and so forth, we are really focused on making sure that what we do now adds value. So that is covered in our current activities. We'll focus on the things that add value now. Yes, we need more resources for a launch, that's obvious. We have not communicated exactly when, of course, or how much. If you look at benchmarks from Nordic companies or from emerging pharmas, what does it take to break even in the U.S. If you just follow some of the benchmarks, the first break-even, 2 to 3 years after launch is one benchmark that you can find. But also overall, until you have a positive return, many companies are looking at around $100 million. But that's, of course, a gradual process. And when you get to that point, another benchmark is that some money is -- can be raised on the stock exchange with investors, but there are also other sources of funding there. For example, the partnerships that we're looking into. Of course, that will be cost effective, as you said, but potentially also have some cash impact but -- and then companies do other mixes of funding. So again, it's about finding the right balance at the right time.

And that leads me to the final question here because now you touched upon it, royalty rate in a partnership model. And then royalty can be a combination of upfront payments, some milestone payments and then traditional royalty, when the product is in the market. Could you shed some light on that? Have you thought about that? Of course, you have. But what are you looking into with this very strong product that you are ready to launch?

Yes, it's definitely the answer. Yes, we have looked at that. And we have not communicated what our strategy is because we also want to be in the best possible situation to negotiate it. But you could say, typically, as you move along, you want to find the right timing. So the more -- the further we move along, the more value we create and the lower the risk for the partner, but we also need to make sure that a partner has time to prepare the launch. And so the further you move ahead, the better the deal is for you and the more potentially of the value theoretically is what you get more in the hand than in the future. But I mean, it all depends on the right mix, the right partner, roles and responsibilities and so this is more like theoretical from benchmarking than specifically for us, but that is typically what happens.

Good. Thanks a lot, Julie. I don't know if the audience have more questions to Julie. If that's not the case, I think I will close the event for today. First of all, very interesting future ahead for you, Julie. We really appreciate that you could shed some light on your commercial strategy today.

Thank you.

And we really look forward to host you as soon as possible. First of all, thanks a lot for all the great questions. And Julie, thanks a lot for participating in this event. And we will, of course, on our HC Andersen Inderes platform, post the video afterwards. So you can dive more into Julie's presentation and answers to the questions. So with that said, thanks a lot, and enjoy your day.

Thank you.