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

Welcome to today's presentation where we have the pleasure to present Ascelia Pharma. So [ about ] -- today's presentation, we are joined by Julie Brogren, Deputy CEO of the company. Today, of course, the Q3 announcement yesterday is the occasion, but as always in a biotech, of course, more focused on the regulatory milestones on the pipeline achieved during the quarter, and of course, a short reminder of the case into Orviglance. As always, ask questions in the box down below. Do it in Danish, if you feel for it. I will try and translate to the best of my ability. But for now, I'll hand the call over to you, Julie.

Yes. Thank you, Mikael. It's good to be here. So Ascelia Pharma, I'll be making some forward-looking statements. So please pay attention to this. We work in orphan oncology. We identify, develop and commercialize novel drugs that can help people with different rare cancer conditions. We are listed on NASDAQ in Stockholm. And we have 2 assets in our portfolio. Orviglance is first-in-class liver -- diagnostic drug for liver MRI, and that's the drug I will be talking mostly about today, because we submitted the NDA, the new drug application to the FDA in Q3 in September this year. Oncoral is a daily tablet formulation of a well-known chemotherapy, and we have the potential to help patients with a better efficacy and safety profile in treatment. It's ready for the Phase 2, but I will not talk so much about Oncoral today. So in Q3, the key events, we submitted the NDA, as mentioned to the FDA for the approval of Orviglance. And then we strengthened our balance sheet significantly. We raised SEK 30 million before costs. We also converted -- or Fenja converted all the outstanding convertibles of SEK 7.5 million. So now we have a clean balance sheet, you can say. We did update the timeline for the NDA submission, but as mentioned, submitted that early September. And then earlier this week, we announced some changes to the management team to support the future growth. We have 2 focus areas and opportunities to create value with Orviglance. The first one is to advance Orviglance to approval at time we submitted the NDA mid-November. So very soon, the FDA is expected to communicate the continuation of the review, and by which date they expect to make their decision on an approval. That is a standard review with 10 months. The other focus area is to secure a partner that will commercialize Orviglance. And we, of course, work in the background to make sure the product is ready for launch and approval by a partner. So, if we talk about Orviglance today, as mentioned, I will not focus on Oncoral. The highlights, it's an attractive opportunity. We address a well-defined unmet need for liver imaging in cancer patients who also have severely impaired kidney function. I will get back to this. We address an $800 million U.S. addressable market, and we have commercial-scale in manufacturing established. We completed all the clinical development with very strong data, including our Phase 3 study. And then as mentioned, we submitted the NDA, and our strategy is to commercialize with the partner. So Orviglance, it's a first-in-class liver imaging agent, which addresses a very specific unmet need for a group of patients, who don't have as good alternative today. Cancer and the liver is a key challenge in cancer care, both because of primary liver cancer, but also because many cancer types develop metastases in the liver, colorectal, pancreatic cancer and so forth. The standard for following up and identifying these metastases, for example, is to have an MRI procedure. And today, MRI procedures are done typically with a contrast agent to improve the image, and those contrast agents are based on a toxic heavy metal gadolinium. And a while back, it was discovered that gadolinium is associated with a very severe side effect called Nephrogenic Systemic Fibrosis, potentially lethal side effect. And so the regulatory authorities added warnings to the gadolinium products, specifically for the patients where the risk is highest. That's patients that also have severely impaired kidney function, because this gadolinium is excreted through the kidneys. So with Orviglance, which is based on manganese and not on gadolinium, we aim to be the imaging option for cancer patients who need liver imaging and the option that is not associated with the potential side effects of gadolinium, including NSF. So it's a manganese based and a liver-specific contrast agent.

Yes. And I've seen some -- a little bit of writings about that some of the -- you might say competitors, which is -- might not be the gadolinium, are trying to maybe lower the dose. Everybody knows it's a very toxic agent. Is that a pressure to you? Or is that not enough, because the reaction will be there no matter what the dose? So any thoughts, could that be a threat to some of your business? Or what are you hearing from your key opinion leaders on that?

We believe it's a strength and an opportunity for Orviglance, because when we look back, let's say, 5 years ago, the big manufacturers have had gadolinium in their portfolio for years and years. And of course, their messaging is we don't have to worry, it's very rare. These patients are very, very small proportion and so forth. But actually, we know for the patients with severely impaired kidney function, there is a potential risk, but we also know gadolinium is retained in all tissue, our brains and so forth for all patients. So, with these other players coming to market talking about -- we should perhaps be careful about gadolinium in general. It really supports also Orviglance. And just a very interesting [indiscernible] is that when we -- the cases that have been studied with gadolinium, they don't show necessarily that the side effects are linked to the dose -- size of the dose, because if you have the severely impaired kidney function and you cannot excrete the gadolinium, well, then it doesn't matter what the amount of gadolinium is. So we think it's good.

And then looking also on the other side, I guess you have a very good overview of what is coming. So I guess that's the trend you can see or trend you kind of argued for that is not -- you don't see others agents being developed. I know you can see through the pipelines and so on, something that --

We are following this [ of course ] -- Yes, we are following this closely. There is a manganese agent in early clinical development by GE and it's a manganese IV agent, so intravenous, it enters the blood circulation. So it's for a full body imaging. Orviglance is for liver-specific imaging. It's the same landscape you have for gadolinium contrast agents. Some are full body, some are CNS. There's a liver-specific agent as well. So it's the same dynamic. So we are not competitors. And again, we believe it's good for Orviglance that there is movement and others building, you can say, the messaging or, let's say, the awareness and advocacy around using manganese as a contrast agent. So we think this is good. And that's also what we hear from key opinion leaders and what we see at the conferences and so forth. So, with this opportunity, we're addressing an [ USD 800 million ] market annually and almost half of that is in the U.S. We have prepared all the work in terms of market research, working with payers, pricing reimbursement and a road map for a very focused launch of Orviglance, because these are very few patients. And our strategy is to commercialize with a partner where we can use the synergies, capabilities having a commercial infrastructure. If we just drill a little bit further into the U.S. market, the patient population that we are targeting is -- represents around 100,000 abdominal imaging procedures per year. It's around 50,000 patients, and we have real-world data, so actual realized procedures where we can see how many patients these are, how many imaging procedures they have. And we can also see that they are the larger hospitals. So 400 accounts in the U.S. is actually a very focused launch. When you can work with these 400 accounts, you can capture 75% of the market opportunity for Orviglance. And also, we work with experts in pricing and reimbursement and have really strong support for very attractive pricing. We looked also at other innovative diagnostics in the U.S. So a very interesting case for a focused launch of Orviglance starting in the U.S.

And looking at the pricing, is that -- if you say key opinion leaders, everybody is actually acknowledging this toxic way of treating it now. Why not treat none other kidney patients? I guess some can also not be seen as a risk, but actually it will show up anyway.

Yes.

So is the pricing too much? And I know it's through your partner, you will do this, but could it be more broad-based? Could it be a bigger population? Or is the pricing and the way you want to launch it, is that a barrier to maybe see it in not only the black box warning patients?

Yes. I mean the strategy for your label, so your target patient population and use in clinical practice starts very early on in the design of the clinical study, discussion with regulatory authorities. And we believe this strategy where -- for patients where there's a black box warning for gadolinium is where we add most value for the patients, but also -- and this was an opportunity for an orphan drug designation, which means the clinical development program is simpler, the launch is simpler and there's a premium value, because these patients are very vulnerable. It has very little impact for the budget holders to fund a premium product with high value for the patient. So that's the strategy we've chosen. And that trade-off is always there like between volume and value. The gadolinium manufacturers, it's a volume game. They've been there for a long time. So it also means in terms of commercial effort, this is the strategy chosen. So if we -- if you wanted to go with the big volume of all liver imaging, then you would need data for that. And you would also be under pressure from payers to say, listen, then is it for this broader patient population without the safety concerns is what's the value provided compared to the pricing. So then it's a different strategy. Is there someone where you could say you -- the label intended says where you have severely impaired kidney function or where gadolinium may otherwise be medically inadvisable? Are there places where gadolinium can be medically inadvisable? Yes, probably. And that's, again, for each physician to see, could that be someone who just had a transplant -- a kidney transplant and have been on dialysis before, for example. So you may not fall under the threshold now, but you did [indiscernible].

I'll ask you already to speculate in off-label.

I mean we are targeting the label. But of course, there are case -- I mean, it is a physician judgment when is gadolinium medically inadvisable. Of course, we have a label and data supporting our target patient population, yes. So just on this one, I mean, the concerns with gadolinium are recognized in clinical practice, when we speak to physicians, we've done market research, and many of them have experienced also these cases of [indiscernible]. And this is about the momentum for change, the momentum for an alternative to gadolinium. And you also brought up what is happening in the industry? And so, for the black box warning with the patient population we are addressing with severely impaired kidney function, all there we should be careful about using gadolinium. But as we also discussed a couple of minutes ago, we already know there might be other concerns with gadolinium, deposition in brain, all other organs, it contaminates our water because it's excreted in urine and to our sewage system environment and so forth. So that's -- those are some of the drivers behind these new, you could say, developments and current focus areas of the industry. We believe this is an opportunity for us, because we are sort of early -- first bringing to market this manganese liver-specific agent. And then the industry generally is talking about the being careful about using gadolinium in general. So we think this is very interesting for us, and really good momentum for bringing Orviglance to market. So our strategy is to launch with a partner that maximizes the value of Orviglance. We can use established capabilities and so forth. And we've taken this asset very fast. So it's an attractive opportunity for a partner. Derisk asset clinical development completed in the process of the NDA review, a high recognized unmet need, clear decision makers and so forth. So this is an interesting opportunity for many types of partners, especially also when we move out of the space of development, but into the pure, you could say, commercial execution. And the dialogues with potential partners is progressing. And -- so we're very excited about this opportunity to work with a partner for the launch. So all-in-all, addressing a very attractive USD 800 million addressable market for patients with a high unmet need, and we've taken this asset a long way. We can also see that our data is well received by the medical community at the conferences and so forth. So let's talk a little bit about this NDA process. So as mentioned, we are seeking approval for Orviglance as a liver MRI contrast agent for patients with severe kidney impairment or when gadolinium may be otherwise medically inadvisable, as I talked about. We submitted the NDA early September, very attractive benefit risk profile. And of course, we have the commercial scale manufacturing, orphan drug designation, which has given us advantages in development, and we'll continue to do so into the commercial stage. So yes.

Yes, it's just FDA, and I have to ask as an old pharma, have you had any discussion with FDA besides what is usual? They will ask questions to conduct their review, but I need to ask that you have had any unusual questions from the FDA?

So, as you also said that in the review process, you receive questions along the way fairly from -- fairly early on, all the way until approval. And based on the questions we have received so far, we have a high confidence in the FDA continuing the review process. So we haven't seen anything concerning our belief and plans. So, so far, so good. As I mentioned, jumping a bit back as the next milestone is around this day 74 letter mid-November, where the FDA will confirm the formal continuation of the review, and give us a date by when they expect to make a decision. So that could be 10 months after the submission, so early July next year. And then, of course, we can -- there are also opportunities to continue into other markets. So maybe I'll just quickly jump back, the whole clinical package, both strong efficacy compared to unenhanced imaging, which is agreed comparator for us, with this patient population and a very favorable safety profile, no concerns discovered, typically mild, moderate, and also transient, so temporary, say, nausea and so forth. So nothing concerning in terms of safety. And then yes, here's an example. You can really see how -- on the right image here, you can both see these lesions better, but there's also a lesion that you can see on the left side where you don't have Orviglance enhanced image. So visually, you can see the improvement. But on the right side, you can also see the outcome of the clinical study is a measurement on the scale from 1 to 4 where physicians score, so 3 readers score, how much to the right is Orviglance compared to Multihance. So, really strong results from our clinical study. And again, we are looking forward to this next milestone mid-November and continuing in the preparations, and we continue to be ready for questions from the FDA. So I'll just wrap up on financials, and then we have more time for other questions as well. In Q3, we had [Technical Difficulty] had an operating loss, so i.e., costs of SEK 15 million. It's lower than in Q2, and that's really due to the finalization of the NDA here in Q3. And we had at the end of the quarter, SEK 72 million in liquid assets. I mentioned clean balance sheet, because of the conversion of the convertibles with Fenja, SEK 7.5 million, which was a loan and now that's sort of -- out of the picture and we received shares instead. And then we have the directed issue of SEK 30 million based on inbound investor interest. This made good sense for us, because it means also now we really have a runway into Q4 next year, so well beyond the FDA approval date. And that's also an advantage when we think about negotiations with the partner and so. So yes, that brings me just to the summary here of our focus areas, timely approval by the FDA of Orviglance according to our target label with a near-term milestone mid-November for the continuation of the approval, and the date -- and then mid next year, early July, Orviglance is ready to be brought to market with a partner, and that's an ongoing process to set up an agreement with a partner for the commercialization. And of course, make sure from -- for example, manufacturing perspective, Orviglance is ready for launch. So that gives us some minutes or so --

Questions -- just jump into -- anybody would want to know, and I think that's very natural. Partner timeline before New Year, everybody is asking, any comments on the timeline, Julie?

I understand both the questions, the curiosity and the impatience. And I think what's important is to think about, it is not in the interest of Ascelia, and therefore, also not in the interest of investors to be very specific here, because a deal is a deal, and we will -- when it's signed, and of course, we will communicate when it's signed. Until then, we talk to investors about what kind of partners and what makes it an interesting asset and so forth. And it really truly is an asset brought very far, derisked a focused launch with a clear unmet need. So a very interesting opportunity for many types of partners, right? Because this is a hospital product. So if you have a field team in the hospitals, there are some commercialization synergies. So it depends on the partners, is it someone who works with orphan drugs, high-value drugs, is it someone working in radiology and so forth. So that's our focus, and I hope everyone appreciates that, that is in the interest of all of us that we have all eyes on establishing such an agreement.

And a big small partner, bigger presence, small [Audio Gap] your product is more important to them. Any thoughts, you have done there anything?

Yes.

And I guess you don't need such a big partner where you could actually drown in their strategy suddenly, I guess, with your targeted audience. Is that correctly understood?

It's an important point, right, because it should be meaningful for a partner, because otherwise, you can risk that the product is neglected if something else comes up or they have other issues. But meaningful can be both in terms of contribution to their P&L. It could also be meaningful in terms of portfolio strategy, for future [ launch ] strategy, not the current P&L, but the other future portfolio and pipeline. So there are different ways of having a synergy, not only the size. There are also other -- there are some companies that are purely sort of specialty pharmas, that really focus on commercial execution. And there are many things that come into play. If that's your game, then you have a field team that needs a new product at certain time points, and this can be a good fit in a portfolio. So meaningful and -- it's contribution to the business of a partner, I think that's important for the success of Orviglance.

And there's also a question here a little bit. When would the optimal time be to have a partner in and being ready to launch? I think it's a question on if you could choose what's the optimal timing, but I guess you can't choose exactly the timing?