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

Good morning, and welcome to this event with Ascelia Pharma. With me today, I have the CEO, Magnus Corfitzen. I would like to welcome the audience as well. And as always, you're more than welcome to post your questions during the presentation, and you post your questions just below the video window, and I will forward them to Magnus either during the presentation or after the presentation. So with that said, welcome, Magnus, and please carry on.

Yes. Thank you, [ Claus ], and everyone who joins us for the update. So I'm happy to share the Q4 of 2023 update with all of you. So earlier this morning, we released the quarterly Q4 and full year report. And we had an official announcement, and this is a session where we give an executive summary, and then we can have a question-and-answer session dialogue towards the of the presentation. As usual, I will be making forward-looking statements. So Ascelia is dedicated to improving the life of people living with cancer by offering better treatment options, in particular within rare cancer conditions. We have 2 drugs in clinical development, which I'll talk briefly about, with Orviglance, which is our lead asset, a lot of excitement going into the Phase III readout in May this year and Oncoral ready for Phase II. So we are a Swedish company based in Malmo, Sweden and traded on NASDAQ Stockholm since 2019. So you could say the key update on this quarterly update is you're going through the events that we had end of Q4, but also after the close of the quarter. So an important milestone was that we got an acceptance of an [ review ] article, which really goes into all the data that is available as of now on Orviglance into one publication in Investigative Radiology, which is one of the leading radiology and medical scientific journals. After the announcement that it was accepted, then it has later become available online. So we've also had a general assembly within -- for an incentive program. And then we have had -- the beginning of December, we gave an update because we met one of the important milestones in the [ rehabilitation ] when we look at images and then the 3 radiologists who are evaluating the images, which is the final part that we lack of the Phase III study. They have all started reading, so it means that the training was complete. They've been doing tests before they could start looking at the images, and everything is up and running. So now it's about them going through all the images, and we are on track for getting the results and announcing in May this year. After the period, we've had, not notably, the financing of up to SEK 35 million. That was announced Sunday this week, and I'll come to that a bit later. So first, I'll give a couple of words on Orviglance. And this summarizes the highlights of Orviglance. So it's a diagnostic drug that is given to patients before they have an MRI scan, and we target exclusively patients with severe kidney function disruption. So when the kidneys are not functioning very well, they have a very special unmet medical need. That commercial opportunity translates into a global opportunity of a $800 million addressable market, and we have a first-in-class product to target this. We're very optimistic about Orviglance, the potential of Orviglance, and that's based on the successful completion of 8 clinical studies to date that have all been reported. We have upscale manufacturing, so we can do commercial scale manufacturing and supply the market. And a key milestone ahead of us is the result from the Phase III clinical study, SPARKLE. So what we have reported is that the common adverse events were consistent with what we've seen previously, which is a good profile. What we are looking for is the efficacy results, which is the result of the 3 radiologists who are looking at all the images and scoring that. And as mentioned, that's on track from May this year. So in reality, the outcome will be determined by whether they see better lesions or see the lesions in the liver in a better way than doing the scan without any contrasting agent drug. In one of our Phase II studies with 20 patients, we have seen a statistically significant improvement by using Orviglance [indiscernible] [ Orviglance ]. This Phase III study is larger. There are some other minor differences, but this is a much larger patient population. And that gives us, from a statistical perspective, a very strong reason to be optimistic about a positive outcome. And then obviously, with a positive outcome, we will progress towards a new drug application, apply for regulatory approval in the U.S. and in other geographies. And then, as mentioned, the commercial opportunity is very substantial. As you can see here, the U.S. is almost half the global market, which is a [ huge ] priority #1 for us. But other markets are also interested, and a lot of patients are in need of Orviglance. So we look forward to advancing Orviglance towards commercialization and being available to these patients. Shifting gears a little bit, moving to a summary here on Oncoral, so Oncoral is based on irinotecan. So we take a very potent cancer-treating molecule, put it into tablet so we can dose the patient every day. By having daily doses, we believe we can improve both the efficacy and safety, which will obviously be a great benefit for people with serious cancer disease. That's also a major improvement compared to the usual way of using irinotecan in clinical practice today, where it's given in one large, very large dose every third week, which we think is not optimal, both in terms of side effects but also in terms of efficacy. So we have completed 2 Phase I studies with encouraging results, and we are planning for a Phase II study where we will take Oncoral in combination with Lonsurf, which is a tablet-based anticancer drug. And we will aim to demonstrate the combination of Lonsurf and irinotecan [ with ] Oncoral would be better than Lonsurf alone. What you can see to the left is an animal study which shows the synergistic effect between Lonsurf and irinotecan. It looks like it's significantly better than Lonsurf alone, and that's what we will aim to demonstrate in this Phase II clinical study. We have a clinical collaboration with Taiho Oncology where we're getting some advice and drug for free. It's a [ supported ] study, but obviously, that's a super interesting opportunity for us as well. So moving to the financials and the outlook, as mentioned, we made an agreement with Formue Nord on Sunday, this last Sunday. And we will be able to raise up to SEK 35 million. The first tranche of SEK 20 million has already been, you would say, executed. And then we have the option in the second quarter to call Tranche 2, which is another SEK 15 million. We think this is a very attractive financing structure for Ascelia and shareholders. The maximum dilution from this will be around 4%, so we are raising it on attractive terms and can really capitalize on this opportunity. It gives us a lot more strategic and financial freedom heading into the headline results and building the company from there. So we can also -- the loan is due on May 20 next year, but we have the option to repay early without any [ costs ], so it's a very good structure which I think is well aligned to take the company and the shareholder structure. So in the quarterly report, we reported a net loss of SEK 11 million in Q4. As you can see on the graphing to the right, this is where the effect of our reorganization and significant cost-cutting activities has had a massive impact. We also see that the large costs of running the global SPARKLE study have gone away because we completed the phase -- we said the patient enrollment, and now we're doing a [ reiteration ], which is a completely different construct. So we continue to expect a much more modest cost level in 2024. So this keeps us on track for having financial runway until Q2 2025. So I'd like to end up with this slide, really summarizing the opportunity and the value creation opportunities we have ahead. We have Oncoral, which is a -- sorry Orviglance, which is a first-in-class drug targeting an unmet medical need with orphan designation, a $800 million addressable market with solid data from an extensive Phase I and II program, and we are heading into a Phase III readout by May. And positive data will allow us to move forward in the registration -- towards commercialization. Very exciting. Oncoral, we are ready to start a Phase II clinical study in gastric cancer, where we will combine with Lonsurf, as I mentioned. This is super exciting. But obviously, we need to make sure that we have the funding to complete the study and then we start that activity. So a tremendously exciting year for Ascelia this year, and we're looking very much forward to all everything that's going to happen this year. With that, I'd like to open up to any questions.

Thanks a lot, Magnus, for your presentation.

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I can't hear what you're saying, [ Claus ].

You can't hear? Okay, two seconds. I'll try again. Can you hear me?

Yes.

You hear me? Good. That's very good. Thanks a lot. And sorry about the technical problem. And thanks for a very good [indiscernible].

I think we need to do a short break to fix the technology. I think something has gone wrong here.

Yes. Two seconds [indiscernible]. Yes, you wrote that to me. Two seconds.

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So we are live again. Sorry about the inconvenience. We're experiencing some technical flaws on our side. We are ready again. And Magnus announced - made his presentation thoroughly. And actually, he also asked the audience to post some questions. And in the meantime, a lot of questions popped in. So with that said, I would like to welcome everybody to post more questions, and I will present the questions for Magnus. So Magnus, there's a question coming in here about expectations to market share, of course, for Orviglance in the U.S. $800 million market, which is equal to the total addressable market for your indication in the U.S. And you mentioned in your strategic update in autumn 2023 that you expect to -- that you consider to go with a partner. Could you elaborate a little on -- is it the normal 25%, 30% you're looking into, or is it less or more?

So 25% in terms of market share or [indiscernible].

Market share, sorry, not growth, but market share.

Yes. No, so I mean, in the fall of last year, we expanded our, let's say, strategy on commercialization, where previously we've been focused on building a U.S. team, a senior team, that would commercialize this. It's a small, dedicated task force that could be very successful in doing this with great economics. That's still on the table, but we also expanded to say maybe a more capital efficient way would be to have global partners or partners in the U.S., Europe and Asia and different geographies. And so that gives us, I would say, a bit more flexibility in terms of how we will approach that. What we're looking for in partners is companies that have the skill sets that will make Orviglance a successful product in that geography. What is important is obviously being able to access the key decision makers on the clinical side, which means a hospital-focused sales force. It would be people who are -- or an organization that have people who are very good on market access and pricing, making sure that the health care payers will reimburse the product and we get paid according to the value. We have already done a lot of work in terms of the prelaunch activities. And that work supports the opportunity for a value-based price where we've given some ranges in terms of what to expect. And we would say a partner would capitalize on that work, take that -- those insights and move forward in the commercial execution process. Ultimately, what the penetration rate will be is difficult to say, of course. What we have shared is that, based on our detailed market insights, I think roughly 75% of the patient volume is in 400 medical accounts. So that means a targeted approach would be -- would allow us to target to most of the vast majority of the patients. And obviously, the economics are not in so that you could say a patient in a very remote area, far from large hospitals, we will not be able to reach that patient, most likely, but there will be great economics in terms of getting to a very sizable opportunity here. And today, what our market research shows is that most of these patients are getting an MRI procedure without any imaging drug or contrasting at all, which means that we will come in as an add-on. We are not replacing, in those cases, another product. We are adding to give a better procedure for this patient. And we think that's a much more attractive, we would say, entry point. So we think -- I mean, we're not providing, I would say, guidance in terms of revenue projections, but we think this is a very compelling value proposition to this patient population, very vulnerable patient population. So we think definitely we'll get a significant share in particular in the U.S.

Thanks for your question. And just to be a little more specific, it's fair to say or it's important for the investors to understand, Magnus, that these $800 million, the total addressable market, that's for the livers with impairment. It's not the healthy liver segment. Isn't that true?

That's correct. So when we look at the $800 million addressable market, that's based on people with cancer, severe renal problems, so that they are in the highest risk category from potentially fatal side effects from [indiscernible] products out there. When they do liver everything, that is our target population. If we did additional clinical studies and expanded the -- let me say the label and the target patient population, that would be an add-on in terms of procedure volume and also in, I'd say, dollar value. But we are focused -- the $800 million, that is exclusively patients with severe renal disease.

And that brings me to the next question because there's one in the audience that I think that you early on mentioned $500 million to $800 million. So $800 million is not new, but that's the U.S. indication. But Magnus, as you showed on your chart, you, of course, will address Europe and rest of the world as well, or rest of the developed world as well. And that market is around $500 million to $600 million. Isn't that true, Magnus?

Yes. And maybe, previously, we had a commercial outlook where we said, if I recall correctly, $350 million to $500 million in U.S., Europe and Japan. So when we look at a number of other geographies, there are also a lot of patients who fit into this description. And when we look at those collectively, then that increases the amount from the $350 million to $500 million up to the $800 million estimate. So our estimate has not really changed. As we have progressed, we have continuously done additional market research to understand the pricing opportunity and the volume opportunity in each of those geographies. So the increase is primarily driven by volume in rest of the world and not just focusing on U.S., Europe, and Japan. The partners -- or you could say the commercialization has been throughout -- for Europe, Japan and the rest of world will be through partners. So that's clear. In the U.S., we're looking at potentially a partnership, but if the right opportunity arises, it could also be very attractive economically to develop [indiscernible] on its own. So that's still on the table, so to speak. But we're exploring those things.

And you already hold an orphan drug designation. There's a question here from one in the audience, if you can still use this in the U.S. market, if you team up with a partner, be something, what an orphan drug designation is and how you can use these [ metrics ].

Yes. So an orphan drug designation is you take a special category of drugs that is intended to be used in a small patient population, a so-called orphan condition. The legislation was put in place first in the U.S. with the purpose of incentivizing biotech and pharmaceutical companies to develop therapies or treatments and diagnosis for rare diseases. The most attractive is obviously when you can develop a new product to help a large volume of patients because that's a bigger economic opportunity. But the orphan designation really creates a number of incentives that will help, that will make -- you could say, make it less costly to bring products to these patient populations. So among these, the benefits is that there is a -- you would say, the regulatory agencies understand that, with having a rare patient population, very few patients, there are some limitations in terms of what you can expect when you run clinical trials. And that is giving some more flexibility, but we still need to prove compelling efficacy and safety and a good risk-reward profile for the drug, like any product. But there are some, you could say, some additional considerations that give them potentially more leeway for orphan drugs. And there are some tax incentives as well. But very importantly, it also [ contracts ], in the U.S., 7 years of marketing exclusivity, which means that when -- for the 7 years after Orviglance has been approved by the FDA, the FDA will not approve a comparable product for the same indication. So that gives us a lot of benefits in terms of building a good product opportunity on Orviglance because, we would say, a direct competitor would not be able to get approved. So usually, when -- in the pharmaceutical market, if you launch a competing product, there may be some patent disputes, which will be a lawsuit between, I'd say, the innovator and, you could say, the one that comes second. In this case, it's a different kind of protection because it's a regulatory protection. So the FDA will say, potentially, provided the data of a competitor that is similar, when that is asking for approval, the FDA will say, yes, you can get approval, but it's going to be 7 years down the line or 5 years depending on how much is left on our exclusivity. And if you disagree with that decision, then the other company will need to sue the FDA. If it's a patent dispute, they would surely see that. So I think the bar for -- in all fairness, I think the bar for suing the FDA is a bit higher than suing another company. So that gives a very strong protection and that is extremely valuable.

Excellent, Magnus. And it doesn't matter whether you commercialize on your own or use a [ path ] -- sorry, use a partner in terms of orphan drug designation. It's not [indiscernible] in that sense. It's just an exclusivity for you as a company. Isn't that true?

Yes, that's correct. So we have an orphan designation covering the Orviglance product, and that, you could say, follows with the data file, the clinical documentation and everything else. That's combined into one asset. And if we were to do a partnership, then there could be different models, but it could either be that a [ singular ] files and get the product approved and have that be a [ singular ] [indiscernible] in the FDA files, or it could be that we transfer to the partner, and they will then get the approval. But the orphan drug designation follows [ irinotecan ].

Yes. Thanks a lot for elaborating on that. And now we talked about healthy impairment plan levels. Is there any regulatory requirements that limit you to marketing Orviglance towards healthy liver lesions?

I think you're thinking about healthy kidneys?

Yes, sorry, healthy kidneys, yes.

Yes. So we intend to get an approval based on the patient formulation we studied in the Phase III study, which is patients with severely impaired kidneys, so badly functioning kidneys. And that is our intended label where we hope that, you could say, the patients were consistent with our orphan designation, patients where using [indiscernible] may be medically inadvisable or cannot be administered. So with that label, that approval, from the FDA, that is the only patient population that we can and will market the product towards. If we want to go to other patient populations, that requires new scientific data based on clinical trials or potentially other information, and then a new submission to expand the label. But if we go abroad, that would not be consistent with the orphan drug designation and those benefits. So what we want to do is we see the highest need, a very significant unmet medical need, for patients with severe renal disease. That is the orphan designation. That's where we want to get Orviglance approved and be brought to this patient population.

So you talk about -- sorry. So even though you have much better data results compared to the agent they're using in healthy kidneys, like gadolinium, this is probably also a matter of the price difference between the 2 products. Isn't that true?

Yes, and I think, in all fairness, I mean, we have limited data in direct head-to-head comparisons. We had one study with 20 patients where we did sort of a 3-[ reader ] evaluation. I think what we concluded was it was comparable. Some of the scores -- for most of the regions, most of the scores were a bit higher, but not statistically significant. So we can, I think, conclude that we are better. That will require a different kind of study to answer that question. So what-- but I think, based on the data, we could say that we are, on the parameters we tested, we are at least comparable.

Yes. That's fair to say. Thanks a lot. Well, let's jump into finances. And you mentioned your latest announcement where you secure finances through Formue Nord. And there's a question here about your burn rate in Q4. Does that reflect the burn rate going forward, or are we going to a new level? Could you elaborate a little on that, Magnus?

Yes. We have not -- I mean what we're seeing in Q4 is definitely that the decisions we made in August are starting to kick in significantly. We're also seeing the fact that the SPARKLE -- the operational part of the SPARKLE study has stopped because all patients have been enrolled. I think we're going to see something, I will say, along these lines in terms of 2024. Obviously, a new financial situation after positive data with the partnership, things may look very different, but what we are planning now is to continue the work, diligent work, in terms of getting the results by May and then preparing the FDA submission. And I think this is the order of magnitude that we should expect to see. But obviously, depending on what happens, it could change. But we're planning for something along these lines for quarterly cost.

Good. So that's fair to say that you don't include a commercialization in U.S. and Europe with the current balance sheet you hold after the financing?

That's correct. We think that's not the best way to invest the capital of the company at this point in time.

Yes, and that's really fair to say. It's also fair to say, Magnus, that you haven't made any strategic changes in relation to Oncoral. It's still on hold.

Yes.

And I could imagine, later on this year, we'll get a strategic update when and if you, of course, get a positive readout in May?

Yes, I think -- and I said before, I would love to get that study going. I think it's so interesting. And I think, when we look at the data, this is only animal related, but I think the opportunity to show demonstrated benefit to patients, I think, is pretty good. And I think that would be an important opportunity for people with gastric cancer, which is a really devastating disease. So whenever we feel that we -- it's a prudent decision to initiate the study based on a financial perspective, I would love to get going on this one. But on the other hand, the most important thing is to make sure, right now, that we get the results from SPARKLE, and we have the data we need for Orviglance to go through into the registration phase and the commercialization. And I think that is what we need to -- that is what we're prioritizing as step #1. But I think it's a really good opportunity to have Oncoral to initiate development, Phase II development, of that asset as soon as possible once everything is in place for that.

Thanks a lot, Magnus. What time line should we expect from when you get the positive readout in May? Is that 6 to 9 months?

We've not communicated our time lines. I think it's -- we'll probably come with it a bit later. I think we are -- what we are thinking is consistent with what we see other companies doing. So I think it shouldn't be unusual, but it does take some time to finalize. But I think, when you look at companies having the Phase III data and when they are able to submit, I think, that time line will probably be pretty much on par with that.

Including everything, Magnus, I think it's important for the investors to understand, when you get that read out, you don't start selling immediately.

Yes.

There's a lot of work behind that. But as you mentioned in your CEO work in the recently announced -- in the report from this morning, but also early on, you have, more or less, prepared the launch. You have looked into different possibilities, either on your own or with a partner, and you have, early on, at events at HC Andersen, presented your strategy. So it's fair to say that, as soon as you get the approval, you are more or less ready to go into the market.

Yes. I mean we have, you could say, a high-level blueprint in terms of what needs to be done with what the corporate stakeholders -- how -- what do we need to do from here. We have built relationships to some of the leading experts, in particular in the U.S., but in Europe, that are enthusiastic about what we do and how Orviglance can help patients. We think that's a great position to be in. But there is -- I mean, we have the plan and everything, but there are still a number of activities that need to happen between now and the launch date. We have a plan for that, and we would say either we will do that with a partner or potentially with an Ascelia in the U.S. That remains to be seen, but we know what needs to be done. We know which activities we'd like to get going on in the case of doing the work. But what I think is also extremely important to recognize is that this high-quality work that we've done in preparing the launch will also be extremely valuable to our partner in terms of using for their planning in terms of how to launch the product. So I think it is extremely value-creating work that we've done, not just on the clinical side, but also on the manufacturing and upscaling side and on the prelaunch side and the regulatory interactions we've had with the authorities. I think all of those are -- you could say we are in a very good position.

Thanks a lot, Magnus. Thanks a lot for updating us on all the interesting parts going on in Ascelia right now. I don't know if there's any other questions from the audience. We are more or less [indiscernible] there's no more questions, Magnus. So with that said, once again, Magnus, thanks a lot for participating here and presenting your Q4 and the latest events. And thanks a lot to the audience for all the great questions. By that, I will close today's event, and I will bid everybody a good weekend.

Thank you.

You're welcome. Bye.