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

Thank you, and welcome, everyone, to the webcast for Ascelia Pharma's Q3 report for 2024. On this call, we will be making forward-looking statements. On today's call, we will start with recent key events and then head into our portfolio update before moving to financials and priorities ahead. After the presentation, we will open up for questions. At Ascelia Pharma, we identify, develop and commercialize novel drugs that address unmet medical needs within rare cancer conditions. We have two drugs in our pipeline. Orviglance is in registration phase as we have successfully completed the pivotal Phase III clinical study SPARKLE, and we're preparing the NDA submission. Orviglance has orphan drug designation from the FDA and is targeting an addressable market opportunity of $800 million. Oncoral is ready to start Phase II in the treatment of gastric cancer based on encouraging results in Phase I and a high level of unmet medical need. Ascelia Pharma is based in Malmö, Sweden, and we are listed on Nasdaq Stockholm. So, communications in Q3 were dominated by the rights issue that has now been completed. The rights issue was fully subscribed to SEK105 million. And as part of this transaction, we repaid half the convertible loan to Fenja Capital, so it is now at SEK7.5 million. Since the end of Q3, there have been a number of activities that we have reported. The Phase III primary endpoint results from SPARKLE have been accepted as a cutting edge or late-breaker oral presentation at the RSNA, which is the largest radiology conference in the world. SPARKLE results have also been presented as a late-breaking abstract at Kidney Week 2024, which is a large nephrology conference in the U.S. This is important as the target indication for Orviglance include people with severe renal disease who regularly see a nephrologist to manage their kidney disease. We're pleased that Marianne Kock has been elected to the Board of Directors at Ascelia Pharma, which happened at an Extraordinary General Meeting on October 30. Marianne has a long experience from pharma in executive roles and including work within drug development, regulatory affairs and commercialization. Yesterday, we announced the completion of the full study report for SPARKLE, which reinforces the successful outcome of the pivotal Phase III study. Andreas will talk about this in a few minutes. We're very excited about Orviglance and here is why. Orviglance is addressing a well-defined unmet medical need for a subgroup of people living with cancer. This is an $800 million global market opportunity, and Orviglance is a first-in-class product to target this and has orphan drug designation from the FDA. We have strong data from nine clinical studies and manufacturing has been upscaled to commercial scale. With a strong Phase III data, Orviglance has now been advanced to regulatory phase, and we are preparing for an NDA submission. We're pursuing some important value creation opportunities with Orviglance. The first objective is a timely submission and approval of Orviglance with the optimal label. The key steps on the way are completion of the SPARKLE clinical study report here in early Q4, which is now in place with our announcement last night. The next milestone is the conclusions from the pre-submission meeting with the FDA, which is expected in Q1 and submission of the formal application of the NDA to the FDA in the middle of next year. The second key objective is to progress Orviglance for commercialization. The key activities here are to continue to advance our launch readiness by ensuring manufacturing and supply chain is ready for launch as well as working with medical experts, including key opinion leaders, payers, patient advocacy groups and other key stakeholders. The other part of that is to entering into a commercialization partnership, which is also a process that we are continuing our efforts in. I'm very happy with the progress we are making in Ascelia Pharma and the efforts made by our team to ensure we will meet our objectives and create value for shareholders. We will now start the portfolio section of our presentation with Orviglance, and I'd like to hand over to Andreas to continue the presentation.

Thank you, Magnus. Orviglance is a first-in-class liver MRI contrast agent, which addresses a very specific unmet medical need for which there are no good alternatives available today. Treatment of liver cancer and liver metastases is an important challenge within oncology. Adequate visualization of liver tumors and metastasis is critical for making the right treatment decisions. Contrast enhanced MRI is the gold standard procedure for examination of patients with suspected or known tumors or metastasis. The most used contrast agents are all based on the heavy metal gadolinium. In patients with severe kidney impairment, use of gadolinium-based contrast agents has been associated with an increased risk of a very severe side effect called NSF, nephrogenic systemic fibrosis, which may even have lethal outcome. 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 typically will get an MRI without contrast, which will result in liver images of suboptimal quality with a risk for that their cancer is not managed in the best possible way. We envision that Orviglance, which is based on manganese will address this unmet medical need and, in the future, become an efficacious non-gadolinium contrast agent for liver MRI in patients with impaired kidney function. In May, we shared the positive results from the SPARKLE Phase III study. We found that Orviglance enhanced liver MRI were superior to unenhanced MRI. All three readers of the images reported strong statistically significant results. We also noted that the common side effects were related to the gastrointestinal tract, which aligns with findings from previous studies on Orviglance. We have now finished the full study report for SPARKLE, and I'd like to share some of the key data and conclusions. First, let's have a look at the primary endpoints, the enhancement of focal liver lesion visualization assessed through two co-primary variables, border delineation and lesion contrast. These were rated on a scale of 1 to 4 by three independent readers. And the mean scores for each patient aggregated across all readers are displayed in these bar charts. In the upper panel are the border delineation and in the lower panel, you can see the lesion contrast. The height of each bar indicates the percentage of all patients receiving that score. Blue bars represent unenhanced imaging results, while orange bars show the combined evaluation of unenhanced and Orviglance enhanced images. For unenhanced images, scores predominantly range from 2.1 to 3. In contrast, the combined assessment revealed a shift towards scores of 3 to 4, clearly indicating improved lesion visualization with Orviglance. The statistical evaluation compared Orviglance enhanced scores with unenhanced scores within patients and the mean pad differences along with our 95% confidence intervals are presented here. Notably, all mean pad differences are positive, indicating that Orviglance MRI is superior to unenhanced images for visualizing focal liver lesions. The analysis yielded a p-value of less than 0.001 for both variables across all readers, underscoring the significant advantage of combined MRI. To further validate our findings, subgroup analysis was conducted and, in every subgroup, combined MRI was preferred over unenhanced MRI. The study also included various secondary efficacy analysis and safety evaluations. The secondary endpoints aim to assess different aspects of Orviglance performance, reinforcing the primary conclusion that Orviglance enhances lesion visualization. Among the secondary endpoints, we observed that Orviglance increased the detection of lesions measured as the proportion of patients with at least one additional lesion identified compared to unenhanced. Additionally, Orviglance improved the ability to detect and measure smaller lesions with the mean size of the smallest lesion being, on average, 2 millimeters smaller with Orviglance compared to unenhanced imaging. The results from other secondary endpoints consistently demonstrate the superiority of Orviglance over unenhanced MRI with no analysis favoring unenhanced MRI. These endpoints include a quantitative assessment of signal intensity in the images, recommendations for the next step in treatment and reader confidence in detecting and localizing lesions. Importantly, the performance of Orviglance alone was similar to when both Orviglance enhanced and unenhanced images were evaluated together. The primary safety analysis indicated that no serious adverse drug reactions were observed and more than 80% of reported reactions were mild and short-lived, primarily related to the gastrointestinal tract, including nausea, diarrhea and vomiting. The safety results from this vulnerable patient population were consistent with previous studies. With SPARKLE, we have completed the clinical development. The comprehensive clinical program includes a total of 286 patients and healthy volunteers in nine clinical studies. Taken together, these studies have consistently demonstrated positive efficacy and safety of Orviglance. With the Phase III SPARKLE study confirming the superior visualization of focal liver lesions in the target population of patients with severe kidney impairment and an adverse event profile consistent with what we were observed in the other studies, we are moving ahead with the submission of the marketing approval application, the NDA for Orviglance. We are on track to submit the NDA for Orviglance by mid-2025. Having completed the full study report for SPARKLE, we are now focusing on finalizing our pre-NDA interaction with the FDA by the first quarter of next year. This step is crucial for laying the groundwork for our NDA submission and review, ensuring alignment with FDA and to facilitate a smooth review process. After submission, we expect a standard 10-month review period from the FDA. So, in summary, the strong results from the SPARKLE study show that Orviglance provides superior imaging compared to unenhanced MRI, allowing us to move forward into the registration phase of Orviglance. So, now I will 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. This market opportunity for Orviglance addresses the unmet need for a well-defined patient population, cancer patients who need imaging of their liver and who also have severely impaired kidney function. Our strategy for commercialization is to launch through partners. This strategy supports our ambition to secure the optimal balance between future revenues and the investment required. Our focused ambitious launch strategy and plans built on advanced market insights are in place to support this partnering strategy and the launch. As mentioned, the U.S. is the largest commercial opportunity. In the U.S. alone, our real-world data, i.e., data from realized procedures in our target patient population show 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. The well-defined patient population with this clear unmet need also drives an attractive value and pricing opportunity. And we have extensive input from market access and pricing experts with whom we have 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 issues related to gadolinium contrast agents, including the severe side effects associated with our target patient population, NSF. In fact, 16% of providers have experienced cases of NSF in patients exposed to gadolinium. 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. When speaking to experts whether in radiology or nephrology, they confirm that an alternative to gadolinium for our target patient population would address concerns of today with the potential to become a valuable addition to their clinical practice. In clinical practice, this need is indeed well recognized. Physicians tell us that patients who need liver imaging and fall under the black box warning for gadolinium today receive MRIs that balance the trade-off between being either without a contrast agent, i.e., an inferior image quality or by being half dose gadolinium. These are around 80% of the patients or by being a full dose gadolinium with the awareness that gadolinium is not recommended for these patients due to the black box warning. In addition, we are both excited and optimistic that almost all physicians tell us that they would like to use Orviglance when it's available on the market. Beyond the risk of NSF in kidney impaired patients, gadolinium is well known to be retained in the brain and in other tissue in all patients and scrutiny over the possible safety effects is a key concern of regulatory and medical bodies. It's also well known that gadolinium is excreted via kidneys in urine. And because it's difficult to remove in our sewage systems, it is discharged into the environment and into our drinking water. There's an urgency to find a viable alternative to the growing use of toxic gadolinium, an alternative that is not associated with these potential safety and environmental concerns for patients and for the environment with gadolinium. In short, the momentum is getting better and better. And the industry is responding. Recent developments from the large gadolinium manufacturers are focused on smaller doses of gadolinium and there's even an early-stage injectable manganese-based contrast agent, which is not liver-specific like Orviglance. We are excited that we have a head start and that Orviglance is expected to be a first-in-class to lead a future with less gadolinium and improved outcomes for our target patients. The go-to-market strategy for Orviglance is to launch with commercialization partners, and our dialogue with these potential partners is progressing. This supports our objective to secure the optimal balance between future revenues and investment required. This strategy also allows us to leverage commercial capabilities already established by a partner. The focus of Ascelia is to continue the dialogue with potential partners and reach an attractive agreement for the commercialization of Orviglance. We are also working to ensure that Orviglance and the partner is ready to launch upon approval. We are excited to announce recently that the headline data from SPARKLE, the Phase III study for Orviglance was accepted in the late-breaking or cutting-edge categories for key conferences, RSNA for Radiology and Kidney Week for nephrology. Our efforts to publish SPARKLE data and to build relationships in the medical community continue as we progress the NDA and our commercialization with partners. In summary, Orviglance addresses a well-defined unmet need and represents an attractive commercial opportunity. Our focus is to ensure that Orviglance is ready for launch with a partner and our efforts to help patients and to launch Orviglance are well recognized by experts and partners in the industry. And with this, I will hand over to Andreas to talk about Oncoral.

Thank you, Julie. So, yes, let's talk about Oncoral, the other asset in our development portfolio. Oncoral is a daily tablet formulation of irinotecan, a well-established intravenous chemotherapeutic agent. A daily tablet formulation enables a frequent low-dosing regimen that could offer potential advantages on both efficacy and safety compared to the infrequent high-dose intravenous administration used today. We have completed a Phase I study, which demonstrated a promising safety profile and an uptake of the drug after oral dosing consistent with the daily dosing concept. We are now planning to take Oncoral into clinical Phase II. The objective is to generate clinical proof of efficacy data in metastatic gastric cancer in combination with LONSURF, another oral cancer treatment approved for gastric cancer. Animal data has demonstrated a synergistic effect of irinotecan when combined with LONSURF, which makes this combination very interesting. The planned Phase II study is designed to study Oncoral plus LONSURF against LONSURF alone. The study will randomize approximately 100 patients and involves a clinical collaboration with Taiho Oncology, the developer and marketer of LONSURF, who will provide clinical advice on LONSURF for the study. Irinotecan is a well-established chemotherapy with recognized antitumor effect in solid tumors. Our strategy is to start Oncoral development in gastric cancer, which is today a $3 billion market. For these patients, there is a high unmet medical need for improving outcomes, and there is an opportunity for an orphan indication. We also see opportunities for developing Oncoral in other solid tumor indications where a 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. And in addition, irinotecan is clinically demonstrated and recognized in guidelines for other cancer types. So, we are assessing these opportunities as part of our ongoing strategic planning for Oncoral. Back to Julie again.

Thank you, Andreas. So, we are moving to financing. In September, we completed our rights issue financing. With this rights issue, we raised the full maximum financing of SEK 105 million before costs. A minimum of SEK 70 million have been secured through investment commitments and guarantees. None of these guarantee commitments were executed and the guarantors were paid in cash. Of the full financing, SEK 7.5 million of convertibles to Fenja Capital have been amortized as part of the rights issue. We also have the opportunity to raise proceeds of up to SEK 70 million in April 2025 from potential execution of the warrant Series T01. The financing secures resources for completing our NDA submission to the FDA mid next year, including the key milestones on the way. The proceeds will also be used to obtain a partnering agreement for the commercialization of Orviglance and to secure that Orviglance is ready for launch by approval. With the fully subscribed rights issue, we now have a cash runway to late 2025, well beyond the NDA submission. In Q3, our operating result was a loss, i.e., cost of DKK 17.8 million. This is a slightly increased loss compared to Q2 this year, driven by our cost for the NDA preparations. At the end of September this year, we had DKK 96 million in the bank. With the full financing in place, as mentioned, our cash runway extends to late 2025, well beyond the NDA submission mid-'25. This runway excludes potential payments from a commercialization partner as well as the potential financing from exercising of the warrant series of up to SEK 70 million. It also excludes the repayment of the remaining SEK 27.5 million in loans to Fenja. So, to wrap up for today, we have substantial value creation opportunities ahead for Orviglance and for Ascelia Pharma. With Orviglance, we are bringing to market a first-in-class diagnostic drug addressing an $800 million U.S. market for patients with a high unmet need. We have 2 key objectives. One is the timely submission and approval of Orviglance with the optimal label. The key steps on this way are the completion of the SPARKLE clinical study report, which was announced last night. And we are also on track for the pre-submission meeting with the FDA with conclusions available in Q1 2025. And we plan to submit the NDA in the middle of next year, 2025. Our other key objective is to progress Orviglance for commercialization for patients in need by entering into the partnering agreement and for the launch by securing that a partner and Orviglance are ready when Orviglance is approved. All in all, the strong headline results from SPARKLE marked the completion of clinical development for Orviglance and reinforce our confidence in the regulatory and commercial path ahead for Orviglance. We look very much forward to executing on these opportunities ahead, both for Orviglance and for Ascelia Pharma into 2025 and beyond. With this, we have completed the presentation.

[Operator Instructions] The next question comes from Johan Unnerus from Redeye.

Congratulations on the progress made. The first question then is to perhaps give a bit more meat on the process up to the preadmission meetings. When can we expect sort of date for the next time of interaction with the FDA?

So, you're asking about the process for the pre-NDA meeting. Did I understand that correctly?

Yes.

Yes. So, we are preparing for that, and we are expecting to have the feedback from that process and the meeting in Q1 next year. And that the information or outcome of that meeting will then guide us to the NDA submission in mid-2025. So, we are in the midst of preparing this. It's a quite lengthy process to get it all right, but it's very important we do it diligently.

And by the sort of end of Q1, that will also include the minutes from the meetings just for clarification as well?

Yes. So, in Q1, we will have the final outcome minutes from the meeting, yes.

And the OpEx run rate has been slightly higher due to presumably some external resources related to the NDA, the clinical protocol process. And should we expect some external resources also during the pre-submission meeting and during the time up to submission?

So, we are working with external resources, CROs that have the capacity to put everything together. It is a lot of documents and data that should be placed in the right place, so to say. So, that is all in our current budgets and covered in the runway.

So, is the recent quarter a good indication? What the range could be during this period in '25 or slight variations, I suppose?

Yes. So, we haven't specified the timing of the cost. But as Andreas said, the resources we need for the NDA submission and beyond to late next year are included in the current run rate. And as you saw, we had this DKK96 million end of September. So, we haven't specified beyond that.

And on the secondary endpoint, which is new as from yesterday evening, that clarification looks positive. Is it possible to put that in context like the mean size of the smallest lesion was two million smaller with Orviglance, what was compared with the average size of the smallest lesion? Is it possible to give that sort of granularity to the results?

Yes. I don't have the exact numbers in front of me. But as I recall it, the mean size for the unenhanced were around 17 or 20 millimeters. And then with Orviglance, you have a little bit smaller than that, so 2 millimeters smaller.

So, approximately that sort of range. And also in terms of detections of new lesions that were not detected by unenhanced, it is possible to give a reference to what the sort of true numbers were in terms of, I suspect you wouldn't detect all the lesions even with enhanced contract?

No. The study is designed to measure lesions, number of lesions and detect. And, of course, we don't know the truth. But as we have communicated in half of the patients, we could find at least one more lesion, so the proportion of patients were around 40% to 52% across the readers in which we find more lesions.

And also, in terms of interaction with potential partners, presumably these conferences are important. One of the conferences was staged just very recently and another one is coming up very soon. Is it something to be said about that? And if possible, any sort of sense of the level of interest from potential partners?

The partnering dialogues are progressing. And, of course, the partnering agreement also involves getting to know each other. So, some of them are maybe at the conferences, but I think it's a little bit separate because to that or let's say, it's an independent process. When we are at conferences, we always want to use the opportunity to meet the people we know or key people we don't know yet, including physicians and other players in the industry. So, it's always valuable with the key conferences, not least to be recognized with our science, which also creates some good awareness for us.

And, of course, even if it's not possible to give any feedback on the numbers and stages of discussions, you can confirm that there are ongoing discussions and interest?

Yes, we can confirm that.

And a final question from our part. It's useful with the sort of mapping up and providing some more feedback on the market opportunity out of this. Do you have a sense of how the number of early likely take-up clinics, especially on the U.S. market. Can you provide some sense on that side?

I think that's probably not sort of really a measure that we would sort of share or track at this stage, right? What we are focused on right now is getting the NDA through the process and making sure we have a strong commercialization partner that is able to drive the launch. I think that is really the key parameters. We have a good understanding of the market on a number of different parameters, a lot of the different stakeholders that's in our launch road map that we will be working with a partner on. So, I think we are in really good shape. It's a lot of hard work ahead of us, and we're looking very much forward to those activities.

And presumably, a potential partner wants to be well in place and prepared for the launch at the time of the future approval and if an approval comes in sort of mid-'26, for example, or maybe slightly later, presumably it would be interesting for a partner to be in place by at least later stage of '25, just our final thinking?

Yes. I mean, obviously, it would take even for a large partner would take some time to get ready for the launch. We don't have sort of a specific, I would say, perspective on the timing. I think we are in good shape. And obviously, having a good partnership is more important than getting one signed too early. So, I think the process is progressing well. And, yes, we're having some dialogues that are we think are very encouraging. So, as we said, we have a strategic objective, finding a partner, and that is progressing as it should.

The next question comes from Ludvig Svensson from Carnegie Investment Bank.

While I understand that you're targeting a patient population for whom the full doses of gadolinium is not an option, it would still be interesting to hear if it's possible to put this data into context in terms of what would be expected for gadolinium-based contrast agent, both regarding the primary and secondary endpoints?

So, you are asking about if Orviglance is comparable to gadolinium-based contrast agents in terms of image enhancements, right?

Yes.

So, we have one study. We have not used any comparator in the Phase III study. I think that is important to remember because it is a vulnerable patient population. So, we don't have data from that patient population to compare with. But we have one study, one of the Phase II studies that included an arm of gadolinium-based contrast agents. It's a smaller study, but it still showed that the outcomes were comparable. So, Orviglance is comparable to the Multihance, which was the comparator drug in that Phase II study.

And you said that you expect a 10-month review time for Orviglance. Does this mean that you do not see priority review as an option? Or have you gotten any indications from the FDA on this?

We just conclude that the standard time line is 10 months. And any changes to that, we will communicate when we know more about it. But you're right, there is an option prior, Sorry.

So, when negotiating a potential licensing deal with a partner, what would you say are your priorities in terms of deal economics? How important is the size of an upfront payment compared to a higher royalty rate, for example?

Well, I understand the question, but it's not really possible for us to provide, you would say much flavor. I think whenever you make a partnership, it's important that it's an attractive agreement for both parties. And if our partner is successful, they should be rewarded and we should be rewarded. So, I think that is really the balance we need to go for. And I'm sure we'll find some way that is going to be good. And I think what would be fair would be have a traditional transaction type with upfront milestones and royalties, and then we'll see how that structures. I know it will probably not help your modeling, but I think that's really all we can say now.

[Operator Instructions]

Yes. We have received some questions here in the system here. So, we have one question on the European market and launching in Europe about what steps and what could happen. Julie, do you want to take that one?

Yes. So, Europe is a separate regulatory process, as we know, but a large part of the filing and the data, of course, from an FDA process is similar in Europe. In Europe, it's the same strategy to work with a partner, maybe the same, maybe someone else. So, it's definitely part of our strategy, and we would like to make Orviglance available in as many markets as possible. European is the second largest market opportunity.

Yes. We have another question here asking for some more light on our commercial, how we are thinking about commercialization partners and the process and what type of partners and so forth and whether we're using an adviser or not?

So, one more question here is what the process and what kind of partners we're looking for. The process, I think we talked about it's ongoing. We are fully ready, of course, we have data room and so forth. In terms of types of partners, what is really attractive for Orviglance is that it could be valuable to many types of pharma companies. It could be someone who works in radiology, could also be someone who works in a related field. The most important is, for example that, that this partner is promoting to hospitals. And also, it's a partner who has the capabilities to launch a product with a high value. So, it's a focused launch for smaller patients where the efforts are really in market access and medical affairs. But many types of partners, potential partners have these capabilities. We haven't commented further on the process and whether we are using help. But, of course, this is a key goal. So, we are doing everything we can to make sure that we have the broadest possible outreach and we have a high-quality dialogue and process.

Then we have another question about, you would say, exclusivity for Orviglance, a question relating to the orphan drug market exclusivity of 7 years from launch and something about 2040. Can you share some light on that?

Yes. So, Orviglance will be protected by the orphan drug designation in the U.S. That is 7 years from approval. This is a regulatory exclusivity for that specific, you can say, patient population and label. The patent we have that extends to 2040 is a patent we have for our second-generation compound. So, an effervescent tablet that otherwise would have a similar profile or use as Orviglance. And this effervescent tablet is a very interesting opportunity for, for example, life cycle management of Orviglance. So, we have both of those things. So, Orviglance 7 years, second-generation patent to 2040.

Well, thank you, everyone, for joining our Q3 quarterly report. Thank you for the questions and for the interest, and we continue our efforts to move Orviglance forward and creating value in Ascelia and developing the company for the future. So, thank you, and have a wonderful day.