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

Hello, and welcome to this live Q&A with Ascelia Pharma. I have the pleasure to have Magnus Corfitzen here, CEO of Ascelia. Welcome.

Thanks. Great to be here.

Yes, yes. And you can send in questions to Magnus, and I will ask them. But first, I was thinking that you could talk a little bit about the pre-NDA meeting that you had with the FDA. What was the outcome of this meeting?

Yes. No, I'm really happy with the way the meeting went. I think we had prepared well, and we had some -- as we put in the press release, some clear and constructive feedback from the FDA. So keeping in mind that this is a meeting that is usually held prior to submitting the NDA, the big documentation, the application to get the approval. And this meeting is useful for clarifying any sort of open issues that have not been sort of finalized before, including things such as how you structure certain analysis and because there's so much data, it can be analyzed in so many different ways. And we just want to make sure that we do it in a way that the FDA prefers. So we will have less questions during the review process because there's going to be like any other review process, a number of questions. So the less, the better. So overall, very good meeting. We got the clarification that we were hoping for, which means that now we have a clear objective in terms of how to finalize the submission.

Right. And no big issues, I guess?

No. So as we said, we keep with the time line that we have communicated. So no major changes to the plan. It's just execution, move ahead.

Great. And maybe for new investors, what's the remaining stages before Orviglance can get approved, it's the submission now and what happens then after that?

So the process works in the way that when you have the submission, which is really a tremendous amount of documents and data, you submit it to the FDA, they will review it. And they have -- for our product, it will be a 10-month review process unless we file for and get approval for a priority review, then it's 6 months. But during that review process, the FDA will analyze the data. They will review the text. They will do their thorough evaluation to make sure that when the product is approved, it has, you would say, a benefit to patients on a risk-based approach. And so in that period, there's going to be a lot of questions from the FDA, and we will respond to those quickly during the review process. And once the FDA has sort of said all of this is -- we're happy with all the results, then there will be a label discussion and approval. So as part of that process is also -- I mean, it includes everything about the drug, right? So it's -- one section is obviously on the chemical, which is there's a lot of focus on in the investment community. There's also the nonclinical work. It's a long time ago for our product. But obviously, there is a nonclinical package. And then there's the CMC or the manufacturing quality package. And we have a good manufacturing setup and scale to commercial stage manufacturing levels. So I think we have a very good setup looking forward to the process.

Yes. And regarding the priority review, do you actually want a priority review?

So we've not decided that yet. It also depends a bit on the partnering process and the time lines for that because we have an orphan drug designation for Orviglance, which means that from the date of approval and 7 years later, we have an orphan market exclusivity. So the clock starts ticking when we have the approval. So we need to make sure that the partner is ready to launch. And that time line obviously needs to be aligned with whoever is the partner.

Obviously. Yes. Another question. Does the contrast agent follow the same regulatory route as a normal drug, if you understand the question?

Yes. So it's a contrast agent is, in FDA language, it's a diagnostic drug. So it follows the same, you could say, assessments and criteria. It's just, you would say, a different purpose and different endpoint compared to a therapeutic product.

All right. And the whole process that you described now, pathway to market, are there any risk for delays in this process? And where could that happen? Where is the highest risk of delays?

Always a good question. And I mean, the world, as we know it, things can change very quickly. You could say if you look across the board, what has delayed drug approvals, that's -- typically, if there are some questions in the FDA process where the companies have not been -- do not have the answers that would satisfy the FDA, then there will be some delays in that process. Based on what we have discussed with the FDA, what we see we have in terms of our documentation, we don't expect any delays. But I mean, yes, world is unpredictable, but I think we are in a really good place in terms of being prepared and having the documentation that the FDA has requested.

Perfect. Sounds good. And do you see any impact from Trump's extra tariffs and from China's restriction on gadolinium?

Yes, it's -- I think as of now, it seems like there's at least a 90-day delay. But when the product comes to market, we don't know what the situation is going to be. So we know what it...

It changes very...

Very quick iterations. So I think for us, the key market is the U.S. We have our manufacturing in the U.S., which means that the impact of the tariffs is going to be, I would say, minimal. I think it's hard to tell what the future will bring, but I think we are in a good place in relation to the U.S. market. You mentioned the -- some of the potential supply issues with gadolinium, which I think is going to be interesting to follow. And on Friday last week, China put in some tariffs on U.S. products and also mentioned that they would put in place export controls on some rare earth metals, including gadolinium. And what that means, I think it's way too early to tell whether that will be implemented. Time will tell. And gadolinium is used both in contrast agents for MRI. We're using manganese, and manganese can be sourced from a number of different countries. But it's used -- gadolinium is used in contrast agents, but also in wind turbines and I think some battery technology, some defense technology. So it's going to be competitive in terms of who will pay the most. But yes, I think right now, it's a warning signal on many parameters. And -- but maybe that could be an opportunity for Ascelia to bring in a manganese agent. But I think it's too early to tell. We follow very closely, of course.

Yes, yes. And could you share a bit about what you will be presenting at the upcoming medical conferences? And why is it important for you to present here at these conferences?

Yes, absolutely. So May is going to be really busy. We have at the ESGAR Conference, the European Society for Gastrointestinal and Abdominal Radiology. We have 3 presentations from both Professor from -- an investigator from Karolinska Hospital. We have from -- an investigator from the SPARKLE study from the Charité Hospital in Berlin and then Professor from Bologna. So 3 very important, you could say, investigators in our study who have a lot of experience with Orviglance presenting to their peers in a European context is extremely important to spread the word, spread more data from the SPARKLE study. We have also recently announced, I think that was last week that we have an abstract presentation approved for the ISPOR conference. That's the same week in May. And ISPOR is for health economics, market access. So it's a different kind of -- it's not the doctors, it's more the -- you could say, the access part. This is a [ preeminent ] conference in that space. And the study relates to our patient population. So we have done a real-world study looking at the burden of disease as it's called. And it's really about in the real world, the patients that have severe renal disease and cancer in the liver. What is you -- how can you describe those? And it turns out that they are typically having a lot more comorbidities or other diseases compared to other patients. They're typically having more scans, more MRI scans and the overall cost of care for these patients is higher. So there is a very significant unmet medical need for this patient population, in particular, because they're more vulnerable. And I think that's very positive in terms of the value that Orviglance provides to this vulnerable patient population.

Right. Perfect. And given the strategic importance of the NDA submission and the role of pre-approval inspections and CMC readiness, do you consider partnering prior to submission to be the most advantageous path, both from a regulatory and commercial standpoint?

Well, it's a good question. I think the answer is probably that it depends, right? So it depends on the partner, their capabilities and how you would say the roles and responsibilities are divided. So one could think that there could be some partners who would say we want to take full control. We want to submit the NDA in our name and do that. Then, of course, they -- it would make sense for them to make a partnership agreement before we make the submission. There could be others who say, I think Ascelia has a very competent team. They've put some great consultants and advisers around them, and we would want to be part of that process, but Ascelia can actually do the submission and lead the response to the question from the FDA. I think both options are quite feasible and would have potentially good outcomes. So I think I don't see that as...

Do they prefer any of this...

I prefer to get the best deal for Ascelia. So that's what we are looking at, right? So I think we'll see what -- how that will pan out. But I think it's -- I think there are definitely advantages to partnering before. I also see some rationale for why it might be slightly later, I don't know. So we'll see. We're working towards getting the best deal for Ascelia.

Yes. And how is this process going?

As you know, Ludvig, I can't really say anything in addition to what we're doing. So we are out having dialogues and talking to relevant companies. I can understand why some people are, for lack of a better word, impatient in terms of they want to see a deal, I can share the same. But I think it's important to -- once you're close to the process, it's easy to understand why it takes a bit of time because it's not just that they are looking at the data and say, oh, the data looks good. Yes, you've had some good meetings with the FDA. It's going to get approved. But for them, it's also to understand the whole dynamic, this patient population, how to position, how to do the work with payers to get a good price and access, all of these different piece and elements. And the partner will take over those activities. So that's why they are -- basically, there are some people in the potential partner companies that are looking at this and say, okay, if we do the deal, this is my job. So I'm going to be successful doing this, which is great because they're building the launch plan. They're preparing for how to make Orviglance very successful. And it takes a bit of time. So we're working with them, and that's why it's -- I think it's a benefit for us that we have had previously a strategy to launch -- build our own commercial team because we've done a lot of market research. We've mapped some payer pathways, and we've done some -- a good deal of the work that we can hand over to them so they will get a running start. We also built a very strong network of key opinion leaders within our segment and continue to talk to them with [indiscernible] and et cetera. And that's also extremely valuable for the partner. So that is also creating some good value and helping them be successful.

And can you say if you have seen any increased activity following this successful pre-NDA meeting? [ Or ] were they some partners that wanted to see this before they...

I think it would probably not be appropriate to -- I think it was -- I would say it's definitely not a turn off, of course. So...

Yes. Okay. More on the partnering. Are potential partners contacting you because of your product? Or is it Ascelia contacting them trying to sell it? What does demand look like? So if I understand it correctly, it's more about who's initiating the processes...

It's probably a mix. So there is mostly in the radiology community, it's the only, I would say, late-stage asset that is does not belong to one of the big companies. So we are fairly well known. And then some companies that may not have had sort of a historic presence in the radiology and think this is maybe a good product to enter that space, there's kind of a, you would say, a learning curve for them to where we talk to them and say, this is how it works. These are the dynamics. This is actually a really good specialty product for you guys to enter the space. And so I think it's a little bit of a mix.

Right. And here's a question in Swedish. I will ask it in Swedish, and you can answer it in English. [Foreign Language] You touched on it a lot, I guess.

Yes. Yes. So I think they would definitely want to be there. I think most would want to be there before the approval. I think if the -- you would say, if not, then basically we need to fund a launch, and that's not our strategy. I mean that's -- it's a huge investment. So I think that's probably not in the cards. But I think for them, it's also to be part of preparing the launch, making sure that once you have the approval, you know exactly what to do. You have to build a team that will do these things and some of the activities can even be initiated prior to the approval. And often, companies may have a good idea, I would say, in advance depending on the -- how the dialogue goes on whether you increase launch investments or you decrease because you want to -- you see increased risk probably. So I think there are some -- yes, some things to consider that. So that's why for a partner, it would also be nice to be not post approval, but prior to approval.

Yes. Makes sense. And what's your thoughts on Oncoral? Would you rather see someone buy out Orviglance than fully focus on Oncoral?

I think there are lots of different scenarios that we could pursue. I think I would have loved to move forward faster with Oncoral, but I think we prioritized our resources wisely with Orviglance. I think Oncoral has a lot of potential initially in gastric cancer, but there are also a number of different other solid tumor indications where we could demonstrate efficacy and safety of the drug. So yes, I think in the scenario where we have partnered Orviglance, then our key focus would be on Oncoral moving that forward. I think that's going to be very interesting longer term. I'm also -- our strategy is to bring in additional assets by in-licensing or acquisitions. We don't have a technology platform. So bringing in some early-stage development assets and do the right positioning and developing those and partner those at the appropriate stage of development. So I think excited about Oncoral. And once we have a partnership on Orviglance, bringing in an additional asset, I think would be super interesting for us.

Yes, yes. And if you could just talk a little bit about the status on Oncoral and when you could start a potential Phase II study, when you have the financing and so on. And there is no frustration from Taiho Oncology that has not started yet.

No. I mean they -- I mean, we are very -- we have sort of regular meetings with them, and we are very transparent with them, and we have very good dialogues. They understand this. We're not the only biotech company that they are working with that had had some financing challenges recent years. So they're being very constructive and good discussions. So I think that's important. So obviously, we have a study plan. We will -- once we, if and when we have a partnership with Orviglance, have a good handover to the partner, depending on our role in that relationship, then we will -- in parallel, we will ramp up on Oncoral. But exactly when and how, that's post partnership.

So what's your long-term vision of Ascelia? Is it that you sort of sell or out-license Orviglance and then you build on Oncoral and you in-license project in the cancer space?

Yes, exactly. So...

Low-risk assets.

Yes. So we are dedicated to -- we're focusing on helping patients with rare cancer conditions. And Orviglance is our lead product. We have Oncoral, and we'd like to bring in additional assets that fit that space. And that's kind of the business model that we have. We don't believe that we are -- we don't have discovery skills. And so we want to bring it in once, you could say, there is, you could say, a drug like a potential from late preclinical and then move it into clinical or maybe it's an early clinical and move it into a development and get the positioning right. And I think that's where there is a lot of opportunity. I think that's one of the things we've done well with Orviglance, doing something similar for Oncoral and want to do for additional license down the line. But right now, focus is on Orviglance partnering NDA process.

Yes. And you're obviously a shareholder yourself. Why do you believe it's a good investment opportunity from here, from Ascelia?

Yes. As you say, I'm a shareholder, I've invested a lot of my own money in the company over the years. So I continue to be super excited about what we do. When I look at the data across all studies, it's just very solid efficacy, impressive efficacy that we have. Safety profile is good. There's an unmet need beyond doubt. And I think it's a good specialty product. And I think the -- once the product gets to market, I think it's going to be super exciting to see how it will perform. And if you look at our market cap today, I think there is a lot of upside if you think about the opportunity for the product to get go to market and the milestones and the royalties we can achieve. I think that's -- I think there's a lot of upside.

Right. And I know we have talked about this a little bit before, but in a deal, what do you sort of prioritize in terms of upfront and milestones and royalties? Do you want to keep as much royalties as possible? Or is it upfront that you want?

I think there has to be an upfront element because I want the partner to be committed and say, we want this. On the other hand, I'm also conscious of a partner to have a successful launch, they need to invest a lot between now and the launch. So you would say from their liquidity budget, if I have put a lot of, you could say, demands on the upfront, that is squeezing maybe a little bit the launch preparation to some extent. So I think it's important that there is a meaningful upfront shows that they are committed and they want to do this. I also want to make sure that they are allocating investment budgets to make sure we get a good successful launch. And then this -- I think the milestones and the royalties are going to be quite massive compared to the market cap. I think that's -- if you look at the revenue projections and so forth, it's going to be attractive in the context of our market cap. So I think it's finding the balance. I think there's a lot of value in Orviglance. And I think partnerships works best if it's a win-win. So if they are very successful, we will be very successful. And I think that's the way to make a successful partnership.

And this is maybe a bit hypothetical, but let's say that you get a big upfront from Orviglance in a deal, would you -- how fast would you be able to start a Phase II trial with Oncoral? Would you do it as fast as you could?

Yes. I mean we would do it with priority, but sensibly. And that is to be understood in the context that we want to -- we have the protocol from previously that was an open IND. So we have a lot of the information. I think it's important to sort of circle back to our advisers -- clinical advisers and looking at the developments in the gastric cancer space and make sure that we are taking any developments into account, so we make sure that if and when the study is successful, everybody is going to be super excited. So if we're missing something that has developed in the past since we designed the study, then that would not be a good thing. So we want to make sure that we can be as excited about this study as possible.

Right. There is actually no more questions online, but I was thinking that maybe you could wrap up with just the important events this year.

Yes. Yes. So we've started the year, I would say, really well. And most importantly, the FDA meeting that provided clear and constructive feedback and guidance to us in terms of how we need to put in -- finalize the NDA submitted in the middle of the year, which is sort of end June plus/minus 1.5 months, sort of skewed quarter. And we are on track for submitting in that time period. And then, of course, we are working on a partnership deal. And hopefully, we will be able to announce it, you would say, this year. I think that would be a good time line for getting it. So I think that's -- those are the key priorities this year.

Right. Perfect. Thank you very much for coming, Magnus.

Great to be here. Pleasure as always. Thanks, Ludvig.