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

Welcome, everyone, to the webcast for Ascelia Pharma's Q3 report here in 2023. The headline for this quarter is that the reevaluation process is on track. And in this report, we'll give you an update on the business before opening up for questions. We will be making certain forward-looking statements on this call, so please pay attention to this. Our quarterly call is structured so that we start with the Ascelia Pharma highlights on recent key events. That will be followed by a portfolio update before moving to financials. So I'm Magnus Corfitzen, CEO of Ascelia Pharma. And with me today, I have Julie Brogren, Deputy CEO; and Andreas Norlin, Chief Scientific Officer. Ascelia Pharma is dedicated to improving the life of people living with cancer by offering better treatment options. In particular, we focus on rare cancer conditions. Our business model is to identify, develop and commercialize novel drugs that address unmet medical needs within orphan oncology. We have 2 drugs in clinical development. Orviglance has completed patient enrollment in the pivotal Phase III clinical study, and readout is expected by May next year. Orviglance has orphan drug designation from the FDA and is targeting an addressable market opportunity of $800 million. Oncoral is ready to stop Phase II in the treatment of gastric cancer based on encouraging results in Phase I and a high level of unmet medical need. Our company is based in Malmö in Sweden and we are listed on nasdaq.com. The most significant event in Q3 was the unexpected and very disappointing news that issues in the image evaluation phase in SPARKLE meant that we couldn't conclude on efficacy and a reevaluation is needed. To ensure our current cash can fund operations beyond getting the SPARKLE results, we have made a significant reduction of the size of the organization and canceled or put on hold a lot of external activities and hence cost. As announced in September, we expect headline results from SPARKLE by May next year, and our cash extends into Q3 2024. After the end of Q3, we announced acceptance of an Orviglance review article in Investigative Radiology, one of the highest-impact radiology medical journals. In October, the Board of Directors called for an Extraordinary General Meeting on November 13, which is on Monday to vote on an employee stock option program. Now we'll talk about Orviglance, and I would like to hand the word over to our Chief Scientific Officer, Andreas Norlin.

Thank you, Magnus. We are developing Orviglance to meet a well-defined and high unmet medical need for patients with severely impaired kidney function in need of a liver MRI. Liver metastasis are common in patients with a variety of cancer types. The liver metastases are developed over time and are often the primary cause of mortality. Being able to visualize and detect metastases are crucial when making treatment decisions for patients with the metastasizing cancers. Today, contrast-enhanced MRI is the gold standard procedure for examination of patients with suspected or known liver metastasis. The available contrast agents are all based on the heavy metal gadolinium, which works well as MRI contrast agent. But in patients with severe kidney impairment, use of gadolinium-based contrast agents has been associated with an increased risk of a severe side effect, a condition called nephrogenic systemic fibrosis. Both the European and U.S. regulatory authorities have for that reason issued warnings for the use of gadolinium-based contrast agents in this group of patients. The consequence is that patients with impaired kidney function may not get the best MRI procedure and risk not having the optimal management and treatment of their cancer. We envision that Orviglance will address this unmet medical need in the future and become an efficacious non-gadolinium contrast agent for cancer patients with impaired kidney function. We see a significant potential in Orviglance, and we do this because of the positive results we had from the completed Phase I and II studies. The clinical development program consists of 9 studies, which includes a total of 286 patients and healthy volunteers. Eight studies have been recorded with consistent and strong indication of a positive efficacy safety profile of Orviglance. To validate the efficacy results from the first 6 studies, 2 additional evaluations, rereads of liver images have been carried out. One reread included all the patients from the Phase I and II program plus patients from a compassionate use program. And the second reread was an evaluation of a Phase II study that compared Orviglance against the liver-specific gadolinium contrast agent. The results from these rereads confirmed with high statistical significance that MRI with Orviglance improved visualization of liver lesions compared to unenhanced MRI, and that Orviglance had a comparable efficacy as the gadolinium contrast agent. The food effect study and the hepatic impairment study that recently were reported adds to our current positive understanding of the efficacy safety profile of Orviglance. The last patient in the Phase III study SPARKLE was completed in March this year. And currently, we are reevaluating the efficacy from this study, which is also the last study in the development program. This work is on track, and we expect to have headline results by May 2024. Efficacy in the SPARKLE study is evaluated by assessing how much the visualization of liver lesions are improved with Orviglance. Three independent blinded radiologists or readers evaluate border delineation, which is a measurement of how sharp the lesion border is seen against the background and lesion contrast the difference in brightness between lesion and background. Each reader scores both these measurements for all the observed lesions from all patients, and the difference in scores for the 2 measurements between enhanced and unenhanced images are then evaluated through statistical testing. Improved visualization is concluded if 2 out of the 3 readers score both border delineation and lesion contrasts for Orviglance MRI higher than unenhanced MRI, with statistical significance. A new evaluation of the effect on visualization of Orviglance in the way I just described is necessary because of an unacceptably high level of intra-reader variability of the visualization scoring for 2 of the 3 readers in the original evaluation. This variability was seen for both unenhanced and enhanced images. And with this high variability, the difference between Orviglance enhanced and unenhanced visualization scores cannot be reliably calculated and no conclusion can be made. It is important to keep in mind that the intra-reader variability is not the consequence of Orviglance not having an effect. What happened was that our method of measurement did not work as it should. A new evaluation with new independent readers is therefore planned. Importantly, we do not need to repeat the entire study. Apart from the efficacy evaluation, all the data from the study has been collected. We already know that the common adverse events in the SPARKLE study were in line with previous studies. To summarize, our confidence in Orviglance remains strong because we see that the high, well-defined unmet need for liver images, imaging in patients with core kidney function is still there and the encouraging data from the Phase I and II studies have not changed. The reevaluation process is on track. And with the cost saving activities we have implemented, we expect the headline results by May next year with the currently available fund. And I would now hand over to Julie.

Thank you, Andreas. The addressable market for Orviglance has a global value of $800 million annually. The U.S. represents almost half of this. Our addressable market is based on a well-defined patient population supported by real-world data, i.e., realized procedures in cancer patients with poor kidney function who have abdominal imaging procedures. The well-defined patient population with a clear unmet need also drives an attractive pricing opportunity. As mentioned, the U.S. is the largest commercial opportunity. In the U.S. alone, our real-world data shows that every year, 100,000 abdominal imaging procedures are performed in 50,000 patients that fall under the black box warning for gadolinium contrast agents. This is about 4% of people with cancer undergoing abdominal imaging. In terms of pricing, we have extensive input from market access and pricing experts with whom we've tested different pricing levels and collected insights on the evidence needed to support access and reimbursement. And we have investigated pricing and access benchmarks of other innovative diagnostic drugs in the U.S. 90% of health care professionals are concerned with the issues related to gadolinium contrast agents, including NSF. In fact, 16% of providers have experienced gadolinium-induced NSF. These insights come from market research with 270 U.S. health care professionals and answers from radiologists, nephrologists and oncologists. And the insights confirm the concerns with gadolinium in clinical practice and the unmet need for Orviglance. Beyond the risk of NSF in kidney-impaired patients, gadolinium is well known to be retained in the brain and tissue in all patients, and scrutiny over the possible safety effects is a key concern of regulators and medical body. It is also well known that gadolinium is excreted via the kidneys in urine. Because it is difficult to remove in our sewage system, it is discharged into the environment and into our drinking water. There's an urgency from regulators and medical bodies to find a viable alternative to the growing use of toxic gadolinium, an alternative that is not associated with the short- and long-term safety concerns of gadolinium for patients nor the unknown effects of gadolinium in our environment and drinking water. In short, the momentum for an alternative for gadolinium is getting better and better. And the industry is responding. Recent dynamics tell us that innovation from the large gadolinium manufacturers is focused on smaller doses of gadolinium and thus, even an early-stage, manganese-based full-body contrast agent. We are excited that we have a head start and that Orviglance is expected to be the first in class to lead a gadolinium-free future. In September, we communicated an expansion of our commercialization strategy to also include partnership opportunities for launch in the U.S. In the scenario of a U.S. or global partner, we will be able to leverage established capabilities. This would lead to significantly lower investments required by Ascelia Pharma and reduce our fundraising needs. To summarize the opportunity for Orviglance, the unmet need for liver imaging in cancer patients with poor kidney function is well defined, and this represents a global addressable market opportunity of around USD 800 million annually. Orviglance has demonstrated consistent positive efficacy and safety in 8 Phase I and Phase II studies that we have completed. SPARKLE is [ third ] and last clinical study in the development program, and we are preparing for the new evaluation of efficacy of Orviglance. All patients for this study have been completed and all data has been collected. The safety reporting in SPARKLE showed that common adverse events were in line with what we've seen before. The reevaluation of the images is on track, and we expect to conclude on efficacy of Orviglance by May 2024. Hereafter, we can continue the process of bringing Orviglance to the patients in need of a non-gadolinium liver contrast agent. I will now -- with this, I will hand it over to Andreas to talk about Oncoral.

Thank you, Julie. So the active substance of Oncoral is irinotecan, a well-established chemotherapy. It is approved for colorectal cancer and pancreatic cancer and is also included in U.S. and European cancer treatment guidelines for treatment of other cancers. In Japan, it is also approved for gastric cancer. Today, the administration is intravenous bolus infusion, typically every third week and at a high dose. Oncoral is a novel tablet formulation of irinotecan, based on a drug delivery technology designed to overcome challenges with absorption of the drug. The tablet formulation enables more frequent daily dosing that could offer several potential advantages on both efficacy and safety. 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 with more constant drug exposure at therapeutic plasma level. There are both nonclinical and clinical data supporting this concept. Intravenous dosing of chemotherapies frequently associated with severe and dose-limiting side effects, typically gastrointestinal and hematological. An oral daily dosing has the potential for improved tolerability by avoiding high plasma levels and by offering dosing flexibility. We are planning for taking Oncoral into clinical Phase II. The objective is to generate a clinical proof of efficacy in metastatic gastric cancer. The strategic reasons to choose gastric cancer are several. First, gastric cancer is a severe cancer form with a high unmet need and the potential for orphan drug designation. Secondly, the clinical guidelines and clinical data support efficacy of irinotecan in gastric cancer. Lastly, as shown in the figure, there is data from animal models of gastric cancer that indicate a synergistic effect of irinotecan when combined with LONSURF. And LONSURF is another oral chemotherapy developed by Taiho Oncology, which was approved for monotherapy treatment of metastatic gastric cancer in 2019. So this oral combination of Oncoral and LONSURF could potentially provide a more potent treatment alternative for gastric cancer. The planned study is therefore a study comparing Oncoral combined with LONSURF against LONSURF alone. The study will randomize approximately 100 patients and involves a clinical collaboration with Taiho Oncology, who will provide LONSURF for the study. After an initial dose escalation part to establish the Oncoral dose in combination with LONSURF, the proof of concept will be demonstrated by the assessment of progression-free survival, which is a typical endpoint for a Phase II study in oncology. A start date has not yet been communicated as we are prioritizing the successful completion of the Orviglance development. As already mentioned, irinotecan is a well-established chemotherapy with recognized antitumor effect in solid tumors. Our strategy is to start on drug development in gastric cancer, which is today a $3 billion market. And for these patients, there is a high medical unmet need for improving outcomes and opportunity for an orphan indication. We also see opportunities for developing Oncoral in other solid tumors indications, where daily dosing tablet formulation can demonstrate an attractive efficacy and safety profile. Irinotecan as an IV formulation is already approved in colorectal and pancreatic cancer. In addition, irinotecan is clinically demonstrated and recognized in guidelines for many cancer types. We are assessing these opportunities as part of our ongoing strategic plans for Oncoral. And back to Julie.

Thank you, Andreas. I will move to the update on our financials and priorities. In Q3, our operating result was a loss of SEK 21 million. This is a significant decrease compared to Q2 this year, driven mainly by the lower activity level in SPARKLE following the completion of patient recruitment activities. The cost for our organizational reductions are also included in Q2 results. We expect a significantly lower cost level going forward. This is driven by our sole focus on the reevaluation of SPARKLE images and personnel costs will also be lower as a consequence of the organizational reduction. At the end of September, we had SEK 39 million in the bank. We expect to reach SPARKLE headline results from the reevaluation with the currently available funding. This is possible because of our already implemented cost savings and because other activities are postponed. We will need additional funding to continue and grow operations beyond headline results, and we will explore suitable funding options in due time as part of our efforts to progress Ascelia Pharma. With that, I will leave the word over to Magnus for the summary of our priorities.

Thank you, Julie. We continue to be confident in Orviglance and the commercial opportunity. The need for reevaluation hasn't changed the unmet medical need nor the opportunity for Orviglance to become the product of choice of people with severe renal disease who need a liver MRI. This year, we completed patient enrollment in SPARKLE. And in September, we provided a time line for the reevaluation that we need to do. The reevaluation is on track, and we expect to announce results by May next year. In addition to Orviglance, there's Oncoral, which has an attractive potential in gastric cancer as well as other solid tumor types. This ends our quarterly update, and we'd like to open up for questions.

Operator, we are ready for questions.

The next question comes from Ludvig Svensson from Erik Penser Bank.

Yes. I was just wondering if you have received a confirmation from the regulatory agencies that they will accept the reread of the existing images for market approval.

Thank you for the question. Well, as we have said, we are -- overall, reevaluation is on track according to our plans. At this point in time, we are not updating on the FDA interactions.

All right. And what changes are you making in this evaluation process in order to reduce the risk of the inter-reader variability?

Thanks again for an excellent question. We have looked into each step of the process, and we have reached out and have a good collaboration with KOLs and industry peers to identify in each of these steps what can be made differently and to reduce the risk of this happening again. So there are multiple things that we have improved in this process.

The next question comes from Johan Unnerus from Redeye.

Firstly, obviously, the financial situation is under pressure. And can you provide us a little bit more dynamics regarding the outlook? For example, R&D, we suppose that, that will be reduced from the Q3 level?

Yes. So the main change in R&D cost is that all the costs for collecting images and recruiting patients and working with sites, they have been paid those commitments. So now the focus is on the reevaluation, which is a much lower cost. We're not sort of providing details in terms of the actual cost split. But as you know, our organization is now 13 full-time employees. So it's a significant reduction of the R&D cost in this year looking forward.

That's useful. And should we assume that the sort of lagging costs from the complete study are down at this stage?

The cost from the -- from SPARKLE have been -- is that what you're asking, what part has been paid?

Yes. Yes.

Almost everything has been paid, but there are always some steps. If you think about collecting the data, recruiting patients and working with sites, that's almost entirely paid. Of course, there are other steps in the future in terms of reporting the data and so forth. So that comes after headline results. But essentially, the vast majority of possible SPARKLE itself, except the reevaluation has been paid.

Yes. We cannot provide any specifics, and I think Julie described it very precisely. But just in terms of thinking of costs associated, we've been running a global study with 50 hospitals involved, a CRO that is attending to sites regularly and collecting the data. The cost associated with that is quite significant. And those -- that process has ended, so that's a dramatic reduction in R&D spend.

Yes.

That's useful. And also in terms of risk management, as you clarified earlier, you've taken methods to minimize the risk on normalized variability. But of course, the risk is not far off. Is there -- with hindsight, what's your sort of reflection of what you should have done differently during -- ahead of the first readout?

Well, we have worked with experts in the field that have a long experience with different studies. And it is surprising what happened [indiscernible]. And I mean, you can always look back and wish it was different. But we have also [indiscernible] and these learnings we are now implementing in the new reading so that we are mitigating and minimizing the risk of this happening again.

And this process of assessing the structure and providing the support, is that all past now? Or are you still in this process?

Please, come again.

Oh, yes. And this process of using the methods and the support, presumably manuals and different procedures to support the readers, there are always specific certain purposes, specific studies. Is this process completed? Or are you still...

Yes. Yes, we are working or progressing according to the plan. So we are still expecting to have the headline results by May next year. So we are on track.

Yes. And finally, you are pretty open that you are considering a partner strategy. Given the tight time line, there is -- there will be limited signs after the readout considering the cash position should be -- is it possible to provide any sense for if you are in sort of any discussions now with the sort of potential partners that are at some degree of readiness to go forward on the back of the future results?

Yes. I mean partnering is an ongoing process. So we don't comment specifically on the details, but the right time of course depends on the profile of the partner or so on and everyone in the regulatory and launch process. So if any time [ product post ], we -- ideally, it's good to find a partner who could take on and remote the duration of a launch successfully both internal and external.

Would it be wrong to presume that you have a number of discussions at some stage?

We are not commenting on the details of discussions, but it's an ongoing process.

What we said, it's part of our strategy, and we are executing on our strategy on all parameters, which includes getting the reevaluation completed with good quality outcome and maximizing the value of our pipeline. So...

There are no more questions at this time. So I hand the conference back to the speakers for any questions from the web or closing comments.

Yes. Thank you, everyone, for joining our Q3 update here in 2023. So overall key message is that the reevaluation process is on track. We will continue to keep you updated as events happen and we progress towards the May results. So thank you, and have a wonderful day.