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

Welcome to today's presentation, where we have the pleasure to present Ascelia Pharma. Today's event, of course, covering your Q4 full year report sent out yesterday, but as the situation is with you, it's maybe not the financials that's the most interesting. We have a lot of questions. So I think we will get very well around the case. But of course, that's the occasion why we are doing this, but let's take a broader look also at your company. To help us through it, we are joined by CEO, Magnus Corfitzen. As always, there's a box down below. Ask questions during the presentation. We got a lot in advance, and we have -- we need, unfortunately, a little bit after half to break off the event. So let's see what we can catch. But for now, I will leave the floor to you, Magnus.

Yes. Thank you, Michael, and welcome, everyone. It's great to be here and give you all an update on the Q4. So I will be making forward-looking statements on my presentation here. So Ascelia Pharma, we are focused on identifying, developing and commercializing novel drugs within the rare oncology setting. And we are a Swedish company based in Malm�, traded on NASDAQ Stockholm since 2019. We have 2 drugs in our pipeline. The lead program, and that's where I'm going to talk, spend most of the time today is Orviglance, a first-in-class diagnostic drug. We've come very far. We are in the FDA review process, and we expect a decision made on approvability by the FDA around the 3rd of July this year. The other program, also very exciting, but earlier stage Oncoral, which is a patented tablet formulation of irinotecan with potential in various solid tumors, gastric cancer being the lead indication as of now. So a strong pipeline, and we'll focus on Orviglance today. And the reason we want to focus on Orviglance is that we've come very far, and it's a really exciting opportunity. And what excites us and others about it is that we address a very well-defined unmet medical need within liver imaging. That's important for cancer patients and particular patients with severe renal impairment. It's an $800 million global addressable opportunity. We have commercial scale manufacturing in place. We have an extensive clinical program with 9 individual studies and very good results and particularly also in the Phase III trial. And as mentioned, we have submitted the NDA. I'll come back on the time line and the specifics later in the presentation. Our clearly stated strategy is that we will commercialize with a partner. The process to find a partner is ongoing, and we'll talk more about that as well later in the presentation and in the Q&A session. So fourth quarter was a very exciting quarter for us with a major milestone of the FDA acceptance, and that's called in some phases, it's called the day 74 letter, 74 days after submission of the file, which was in September last year. So that means the FDA has reviewed the application and considered to be of sufficient quality and content that it warrants sort of a full deep dive review, which is obviously a major positive. We were expecting and hoping that, of course, but it's a very important milestone. We also filed a new patent application for Orviglance relating to the manufacturing process. In part of the manufacturing development, we've made a number of insights and ways to optimize and control the manufacturing, and we think that is very important IP that could provide extended protection for Orviglance. We also announced that we would have a CFO, Anton Hansson, joined the company. We announced that in Q4. And a few weeks ago, he had his first day in the company and very happy with having him join us and be on the journey ahead of us as we are heading into sort of a transformative 2026 with key milestones. We -- there was a small amount of shares issued in relation to the incentive program, long-term incentive program in November. And we also announced a Nomination Committee, so a committee appointed by the largest shareholders that will provide recommendation for the Annual General Meeting this year. So a busy quarter. And here, after the quarter in January, we announced that Julie will be leaving Ascelia, our Deputy CEO, to head up the CEO position in another company. So Julie has been with us for 6 years and been very active in various fields. So we are happy for her on her new opportunities and wish her best of luck in that. And she is with the company. She will start her new position in early April, and she's ensuring sort of a smooth handover period. So everything is working well there. So now moving into the pipeline. We will start with Orviglance. And many of you will be familiar with Orviglance. But for those of you that are more new to the story, the key problem that we're solving is part of a major problem in cancer care, cancer in the liver, in particular, liver metastases when cancer starts in one organ and metastasizes spreads to the liver is a major problem. So what is -- the gold standard today is an MRI and by using gadolinium, which is a heavy metal, toxic heavy metal. It's put in a chelate chemical structure to minimize the toxicity. But unfortunately, in patients with severe renal impairment, there is a risk of a potentially fatal side effect called nephrogenic systemic fibrosis and that related to the gadolinium. And because Orviglance is based on manganese, this risk does not -- is not existing with Orviglance. We have orphan drug designation from the FDA for use in liver imaging in patients with severe renal impairment. So we have well-defined unmet medical need accepted in clinical practice and in regulatory settings. And that's why we have a very strong unique offering to this group of patients. So this translates -- this unmet medical need translates into an $800 million global addressable market opportunity. Almost half of that is in the U.S., and we are -- therefore, we've been focused on the U.S. opportunity in terms of the development and commercial preparations. We've also stated that we will commercialize through partners, both in U.S. and in other geographies. Overall, when we think about the U.S. market, this is -- the patients that we are targeting is a small subset of the overall cancer population, but it's about 50,000 patients a year with about 100,000 procedures that could potentially be addressed by Orviglance. What is also interesting is that these patients, because they're very sick, suffering both severe renal disease and cancer, very often, they are at some of the major medical centers. So 400 health care providers have 75% of the patient population in the U.S., which gives us the opportunity or the partners' opportunity to address a lot of these patients through a sort of a very focused commercial effort. We -- on top of doing a lot of market research to understand the patient volume and the patient flow, total patient journey, we've done extensive work in terms of understanding the pricing and reimbursement opportunity. Based on this work, we have identified a pricing benchmark for other innovative diagnostic products in the range of 3,000 to 4,500. It clearly proves that there is a good pricing opportunity for innovative diagnostics if they provide real value to patients, which we certainly believe that Orviglance does. So we are focusing on the patients with the severe renal impairment. That's where the gadolinium agents have a black box warning. That's the indication we go for. On top of this concern and issues with gadolinium, there are concerns about the fact that every time you inject gadolinium, there is deposition of gadolinium. Most of it is excreted from the patient, but there is deposition in bone and skin as well as the brain and other organs. And that is something that is being evaluated to understand what are the clinical implications of this. Today, it's not fully understood. Another growing concern and where more and more data is coming up is that tons of gadolinium is being used in medical imaging. And because the gadolinium, most of it is excreted through the urine, it goes into our sewage system and drinking water. The concentration of gadolinium is low. So therefore, it's very difficult to remove the gadolinium from the drinking water, which means that it's perpetually accumulating and the increase in drinking water is quite significant over the last few decades. Again, that's an important concern, especially for the longer-term sustainability. So the way that these dynamics play out is that, obviously, we are leading the pack with an FDA review of a manganese agent. GE Healthcare is developing an intravenous injectable manganese agent. Not liver-specific like ours. They have completed Phase I. So they are clearly also in the direction of finding alternatives to gadolinium. Some of the other gadolinium manufacturers are developing lower-dose gadolinium, so they still use gadolinium, but have optimized the formulation so that they're able to use roughly half dose, but having similar image quality. So all of this plays into the same, you would say, overall trend, macro trend that there is a recognition that alternatives to gadolinium are needed and using less gadolinium is better than using more. So we are happy to be leading this with the NDA review process that we have now with Orviglance. So one thing is getting the approval. We're well on track there. I'll come to that in a minute. But obviously, the key thing is to help patients out there. And we will need a partner to drive the commercialization. We've stated that clearly that, that is our strategy. The process is ongoing. We have, we think, a very attractive asset, highly differentiated. There is nothing out there like Orviglance. And we have shown that we have strong clinical data. There's a good, say, commercial opportunity, both in terms of patient volume and value per dose. And we see a number of relevant partners that could drive the launch and the successful commercialization of Orviglance. It could be manufacturers of gadolinium products, could be other companies in the gadolinium space. It could be specialty pharma companies with sales forces at hospitals. So we think that we have a good range of potential partners. We are also talking to multiple partners who have expressed a clear interest in Orviglance and the partners, and these discussions are progressing. So very happy with that progress and the outlook for getting a deal done. Switching gears from the commercial side to the regulatory side. As mentioned, we had -- initially, we had 9 clinical studies completed, so almost 300 patients and healthy volunteers tested. So we have, I think, a very solid database, both in terms of the efficacy, the visualization. We also see detection of more lesions in the liver, in particular, smaller lesions. And then we have a good safety profile in these very sick patients. We see some gastrointestinal side effects, nausea, diarrhea, mostly mild, which is to be expected in this population and with such a product. So nothing serious. We think this is a really good package we have. So one of the things that came out, obviously, was from the Phase III trial is what you see here is that to the right, you see the efficacy, the primary endpoint, and you see the improvement. So this is a score that is the Orviglance score minus the comparator, which is the unenhanced score, clearly above 1, which is sort of an important improvement from a clinical perspective. And you see the 95% error bars, very far from the 0 line, which means that we have a high statistical significance. You can see the images illustration from one of the patients in the trial and sort of anecdotally and kind of visually, it shows a very strong enhancement of the visualization, which is represented in the overall scores. As mentioned, we have submitted the new drug application on the 3rd of September last year. We got the day 74 letter, acceptance of the filing from the FDA, and we announced on 15th of November. So we are in good place in the regulatory process. The way such a process works is that we make the submission and the FDA team is reviewing the application, which is a lot of information. They will ask us a number of questions throughout the process, and they continually sort of send questions and we respond to those questions. So far, we are very happy with the interaction with the FDA and feel we are in a good place and optimistic about a positive outcome. That concludes the Orviglance story. So briefly on Oncoral. So Oncoral is a tablet formulation of irinotecan. Irinotecan is a chemotherapeutic drug, very potent, but also a very strong safety, you would say, side effect profile like any other chemotherapeutic agent. What we can do and where we can make a difference is that instead of a dose -- very large dose every third week, we can get daily dosing. There's a lot of data supporting that, that has potential for both better efficacy and better safety, and that's what we want to demonstrate with Oncoral. Here is some of the data from a Phase I study that we did where we show that by giving daily doses, we give a comparable amount of irinotecan over a period of time as the infusion product. And what we also saw indications is that we saw sort of a better safety profile, in particular, neutropenia, depletion of white blood cells. So we think that is very encouraging. We also saw activity, patient stable disease in very sick patients and patients where they've gotten the intravenous irinotecan and progressed on that. So I think encouraging signs, and we're excited to move on. Initially, we look at gastric cancer, but we will -- there is potential in a number of other tumor types as well. Just to round up and time this line quickly. So in terms of the quarterly report, we had an operating loss of about SEK 16 million in Q4. We are on a lower run rate now in the last couple of quarters compared to previously, reflecting that we have completed the NDA file and submission, which is obviously a lot more work than responding to questions, even though they can be extensive as well. So we have financing until into Q4 this year. So we had SEK 50 million at the end of last year. So overall, in a sound financial position with an expected FDA decision in the middle of the year. We have 2 tracks here to drive value. One is getting the drug approved. We've submitted. We got the day 74 letter and a PDUFA date in July. Everything is on track there. We also work on maximizing the commercial potential, working with key opinion leaders and other preparations for the launch. That is on track. And then the process for getting a partnership on board is also on track and progressing as we speak. So with that, I'd like to open up to any questions.

Perfect. Let's jump into it. There's a lot on the partnering. We will cover that by some angles. But I think there was also a very good one. You were at the JPM, the biggest conference there. Some feedback you got with there from their investors, potential partners. Can you talk a little bit about the talks you had in this JPM conference? And what was it surrounding? So I know it's a little bit of a broad one, but I think it is nice to hear what you were talking about over there and what you were met with?

Yes. No, I'm happy to elaborate on that. And let me start with a sort of a caveat. I think it's -- partnering is super important. We are very focused on getting a deal done, and we're making good progress. It's also -- I mean, it's not only our investors who are listening to what -- to this. It's also some of the potential partners that we're talking to. So it's very much in the interest of all shareholders to make sure that we do the negotiations in the best possible way and not give away sort of negotiation chips to potential partners, but that we keep the relevant information internally to elaborate on where we are. So at JPMorgan, it's always good to be there, always interesting, good dynamic and an opportunity to meet a lot of different companies, also very senior representatives from the different companies. And I think that's really what sets JPMorgan week apart from a lot of other conferences. So we definitely were there, had meetings. And I think what we have experienced and also put that in the Q4 report is that the day 74 letter, the filing acceptance from the FDA is a clear and important milestone. We were very optimistic in advance, but nice to see. But I think on the potential partner side, they see it as a clear recognition that we're doing really good quality work. This is thorough and credible. And we're a small company. We are in the order of 10 people in the company. We're obviously working with consultants, but demonstrating that we meet this milestone and that we are solid on the science is an important part of the negotiation process as well. So I think it's fair to say that, that has been kind of recognized in the -- among the potential partners that we are speaking to.

Yes. Perfect. And then there's a little bit of a question on the time line approval mid-summer launch. Is that possible when you haven't had a partner in Q3 and Q4? Are you giving something away by negotiating on the time line? Or do you still think it's possible to catch this time line in the second half, even if you haven't signed up a partner yet?

Yes. No, I think absolutely. I think I'm not -- I want to get the right partnership for [indiscernible], somebody who can drive Orviglance launch in the best possible way. Obviously, more time is always better than less time. But I think on the other hand, when you have less time, then you tend to be more focused and pull resources together in a different way than if you feel that you are okay on time, right? So I think there are some dynamics on the partner side that will be different depending on the time line to approval. The other part -- I mean, a part of the reason -- an important part of the reason why we're taking a partner on board, that's our strategy is that all the capabilities that are important for launch, they should already be in place with a partner. There may be some -- obviously some product-specific knowledge with Orviglance that they will have to learn and we will teach them and our KOL networks will support us well there. So there's a learning process, of course, on the product, but all the capabilities will be in place. So from that regard, I think we are in a really good place. I don't think that's not causing any stress. It doesn't mean that it will take forever to get a deal done. I certainly don't hope so. But I think it's not -- I mean we're not getting nervous in terms of this jeopardizing the launch or anything like that. We think we're in a good place. It's important to get the right partner and get the right structure in place, and we are on our way to do that.

And then maybe attack it from another angle because I know I have to protect yourself in your negotiation. I'm not going to get much more from you, but key hurdles derisking potential partners, what do you see as the key hurdles for them or you becoming a final agreement?

It depends on which partner we are speaking to. And they -- it's like when people are looking at a house and thinking about buying a house. Some people like the garden, some people don't like the garden, right? Some people like the kitchen, some people don't like the kitchen. So it's similar here. I think the -- it's a little bit also a factor of their existing product portfolio in terms of what they're thinking. It's maybe some challenges they've had with other products that influence where they put more attention in the dialogue with us. So it's not like we have one common theme that is kind of a big issue for everybody. It's kind of -- it's a little bit mixed, which I think is a good sign. It shows that we have a good solid package all around. But obviously, there's always going to be something -- when you look at something, there's always going to be the most challenging topic. So I think -- so we have potential partners that we talk to that have absolutely no concern on one topic where that is the biggest concern for another company. So I think that illustrates quite well that it's not -- we have a good all-around package, and we'll get there. But then we'll -- it requires more work.

And then regarding the review with the FDA, have you had a 5-month review? I don't fit it in the time line, but there's a question here. And is there actually something like that on the orphan drug status approval process?

Yes. So there is -- so we're following -- we've not applied for fast track, which sort of compressed the review time line, which has some advantages. On the other hand, we think the most important thing is to get through the process and have as much time as possible to respond to the FDA questions. And so I think from that perspective, the process is like any other drug. In the FDA process, they have an internal -- I think that's what this question is referring to. There's -- the FDA has a mid-cycle review, which is 5 months after submission, which should have been sort of Tuesday this week. And that's a meeting where the FDA review team is having a conversation about where they are and what the questions and so forth. It's not, you would say, an event or a milestone as such where we will necessarily get any information out of it. We may get some additional interaction, we may not. We may get some more questions immediately after we may not. So it really, really depends. And I think every review process is -- the mid-cycle review has a different, you would say, role. So I think it's more like an internal FDA coordination meeting, yes.

There's a question also. You earlier said milestones and deal being significant compared to market cap. Is this something you still stand by? You might say the question here is, why don't the shareholders then stand by it. So -- but I know you can't answer for them, but do you still stand by this statement?

Yes. I -- if you think about the commercial opportunity, which is $800 million globally, roughly half of that in the U.S. If we think about sort of a -- sort of standard split of value between a biotech company and a pharma partner, and we just get sort of a reasonable subset of the U.S. opportunity in itself, it should be quite attractive economics compared to the market value. I mean that's at least when I do the math. But everybody is doing their own math, and we don't have sort of an opinion about the share price. But when I got that question in a previous interview, that was more kind of reflecting the magnitude of, you could say, upfront milestones and royalties compared to the market value. So obviously, you need to discount -- if you're an investor, you need to discount with the likelihood of this happening, and that's kind of probably what is playing out. So we are very -- as I said, we're very optimistic on the regulatory approval process and on the partnering process. So it's our role to deliver on that strategically and operationally in the company and hopefully prove to everybody that there's a good reason to be excited about Orviglance.

And there's a question on price, and I'll just jump back to one of your slides. I guess you don't -- you haven't told what the price is, but you kind of indicated it. Is that correct? Around -- similar -- sorry, I couldn't find the slide, so I'll go back again. But you're estimating something similar products could give. So could you repeat -- remind us what that was?

Yes. So that's what -- we've done and work with sort of expert consultancies within drug pricing area. And when we look at the value that we believe that Orviglance brings, when we look at other innovative diagnostics, they are -- many of them are in the PET imaging space, but solving other important questions in the diagnosis and makeup of patient treatments. They are priced in a range of, let's say, $3,000 to $4,500 per dose in the U.S. And based on the work that we have done, we see sort of -- I think it's fair to assume that there is a comparable pricing window that we'll be looking at. So we've done a lot of work because previously, our plan was to launch Orviglance with a senior team in the U.S. That's no longer the strategy. It's to partner. So we have prepared a lot of work, done a lot of market research that once we have signed with the partner, they will obviously have access to that and use that to drive the pricing and reimbursement process.

And actually, there's a question of fits good in here. Red Eye, it's an analyst, some analysts has other estimates that is addressing -- is estimating the market smaller than you are. I don't know whether you ever read it or where you are disagreeing or you just want to keep to that you have done extensive work because you actually wanted to launch this yourself, and this is the $800 million. And it has actually been stuck there for quite a while. So I guess you're pretty comfortable with it has prices gone up, down, patient groups and so on. So a little bit -- I don't know whether you want to comment compared to the Red Eye, but a little bit comment on why you are comfortable with this $800 million opportunity.

Yes, you're right. I will not sort of comment on specific analyst reports. I think what I would like to comment on is that the work that we have done to get to the $800 million. So what we've done and we've done most detailed analysis on the U.S. where most accurate data is also available. So on the volume of patients that could potentially benefit from Orviglance, we've looked at various different sources. We've looked at claims databases, which is really sort of a database of medical procedures actually being performed and built in the U.S. system. So something that has really taken place and down to a level where you could see who was the radiologist responsible for the imaging procedure. And then saying all those imaging procedures, which ones would be relevant for Orviglance, estimating the value from there, using sort of advanced epidemiology modeling to understand what from a literature perspective, and we know how many patients, cancer patients and other and renal disease patients that they are out there, what is the volume -- what is the expected volume. And I think that those 2 approaches get us sort of pretty close in the same range, which I think is a good sign. So in terms of the patient volume, I think we are -- we've done -- we've invested a lot of money and a lot of time getting comfortable on this number. And that's also the numbers that we are speaking to potential partners with. And the same on the pricing and reimbursement, invested a lot of money and time to understand sort of what is the pricing potential and opportunity and what is required to achieve this price, what is we need to document and show up with in the negotiations with the payers. So I think I'm not going to comment on what other people think. I think we have sort of a very reasonable estimate. We said the $800 million, that's an addressable market, which also means that I mean there are no drugs that will ever get 100% of all potential patients. We've not provided any revenue estimates. But I think the work we've done is good and solid.

And then finally, there's a question here. Do we need capital before a partner, before a partner decision, before a potential approval? And if you go out and see capital before that, should we then interpret it as this is plan B. So I know it's a little bit first, we need to assume and then we need to assume something. I don't know so whether you want to answer that. But on the capital side, is there anything we should be aware of?

Yes. I mean, we are obviously not raising money now, then we would have made an announcement. But I think I think it's -- we got some inbound interest in last year in September, and we raised 30 million. So that was a, you could say, a dilution, but I think we only had a 7% dilution in that transaction. We thought that was a good number because that would take us with a sort of meaningful buffer beyond the expected approval date of the FDA. So previously, we had money into Q2, then we would not be able to fund the full review process ourselves. So I think that was like a really important financial transaction to lower the financial risk of the company. I think that's -- I'm very happy that we have sort of a good buffer on the back end of, you could say, the approval -- expected approval date. And I think that's the most important. We expect financing from the partnership in terms of an upfront milestones and royalties and which is different to, you could say, negotiate because potential royalties should hopefully come, not probably not a lot, but something in this calendar year.

Perfect. And then the final question before I let you off the hook, Magnus. You have said at some point in time that there has been read that you said before '25, you will have the partner. And I think people read something into it, then something must be wrong. So I think maybe it's good to get clarified what you said that -- I think it was an event in the spring. And I know it's -- that's always be said. But maybe we should actually clarify it because I think people read a lot into it, whether you said and they have heard that you said it will be before '25. And I guess that was not what you stated on that event. Is that correct?

Yes. No, I don't think -- at least not to my recollection, I never said it's going to be happen. I think -- it's always -- that it would happen in '25. It's always very difficult to predict something that is outside our control. What I have said in one interview last year, early last year was that I was asked if it would be -- a deal could happen in '25, and I said that would be nice. And I stand by that, that would have been nice. I think we're still in a very, very good place. I think the important thing for me is that we are making good progress reducing risk in the regulatory process. We are having a good number of conversations with strong serious strategic partners and entertaining those dialogues. I think to me, that is the key. So I think the timing is a bit more uncertain because I don't control the decision process on their side.

That was the last question. I will let you off the hook, Magnus. Can you have a good weekend, and thank you to all the listeners listening in. May they also have a good weekend.

Yes. Great to be here, Michael. Take care.