BioArctic AB (publ) (BIOAB) Earnings Call Transcript & Summary

Hello, and welcome to the BioArctic's Q3 reports 2020. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present CEO, Gunilla Osswald; and Vice President, Investor Relations and Communications Officer, Oskar Bosson. Please go ahead with the meeting.

Thank you so much, and welcome to BioArctic's Interim Report for the third quarter 2020. I'm Gunilla Osswald, and I'm the CEO of BioArctic. Normally, I share this presentation with our CFO, Jan Mattsson, but he had, unfortunately, to cancel at the last minute for personal reasons, and he will not be able to join us here today. So instead, we have our Head of Corporate Communications and Investor Relations, Oskar Bosson. And he will share the presentation with me here today. This year has been very good for BioArctic so far, in spite of the tough situation around us with the COVID-19 pandemic. Our great portfolio has progressed well. And thanks to our great personnel and our great partners, it's really advancing in the way we want. Eisai has broadened the scope for BAN2401 and have started an additional Phase III program in even earlier stages of Alzheimer's disease, and I'll talk more about that. Next slide, please. BioArctic is listed on Nasdaq Stockholm Mid Cap, and this is our disclaimer. Next slide, please. BioArctic is a unique Swedish biopharma company, with the aim to improve lives for patients with central nervous system disorders. When I say that it's a unique company, I mean that based on 4 different areas. The first one is that we focus on R&D of innovative treatments for CNS diseases, where there is a high unmet medical need. These diseases affect large patient groups and the relatives and have large cost to society. Today, there are only symptomatic treatments available, and we work on disease-modifying treatments, affecting the underlying disease and slowing down the progression of the disease. So these areas have large commercial opportunities. The second aspect is that we have a great organization with very experienced and engaged coworkers, an important fruitful collaboration with both universities and with strategic partners like Eisai in Alzheimer’s disease and AbbVie in Parkinson's disease. The third aspect is that we have an attractive and well-balanced project portfolio. We have project spanning from discovery phase all the way to Phase III. We have partnered projects that generate revenues by milestones, where our strategic partners carrying the cost for the clinical trial. And we have earlier fully owned projects, which we finance ourselves with substantial marketing and out-licensing potential. The fourth area is that we are well financed, and we have a strong cash position with approximately SEK 1 billion from the bank. We have valuable collaboration agreements with big pharma like Eisai and AbbVie at a value up to SEK 9.6 billion plus royalties, if we come all the way to the market. And of course, this solid financial situation is a great benefit in this challenging time. So we can focus on driving our internal projects forward in a good way. But I think that BioArctic is a dynamic and very exciting company with a huge potential, which I'm happy to lead. Next slide, please. Then I will start with some highlights for the third quarter. And we have just celebrated 3 years as a listed company. And if you reflect on those 3 years, we have made significant progress with the projects in both Parkinson's disease and, of course, Alzheimer's disease. If we start with Alzheimer, where BAN2401 got positive results in large Phase IIb study. And that formed the basis for Eisai to progress BAN2401 into Phase III confirmatory trials in early Alzheimer's disease patients. In Parkinson's disease, AbbVie exercised the full license deal and ABBV-0805 entered Phase I study. Our market value has tripled more than that since the IPO, and we have very exciting times ahead. If we then think about what happened in our program, BAN2401, the confirmatory Phase III trial in early Alzheimer's disease is called Clarity AD, and it is progressing well. Eisai has presented new data from the ongoing Phase IIb open-label extension study at an Alzheimer Congress in July. And there, they show that -- they saw a rapid decrease of amyloid in the brain, they saw an effect already after 3 months of treatment with BAN2401, and this was in the patients who earlier had got placebo in the core study. What they also saw was that there was a continuous further decrease of amyloid from the brain by BAN2401, and it was more decreased after 6 months and even more decreased after 12 months. We also reported the same low frequency of the side effect ARIA-E, the brain edema, which is seen by several of the big antibodies. And BAN2401 has a low frequency of these side effects and that low level was also now seen in the open-label extension study, which is consistent with the previously reported levels in the core study. And this is one of the things which differentiates BAN2401 from competitors at -- in late stage. Then the news for this quarter is also that Eisai, together with Alzheimer's Clinical Trial Consortium, in the U.S. have initiated and started now an additional Phase III program called AHEAD 3-45, and that started in September. And in this program, BAN2401 is given to very early stages of Alzheimer's disease. So we think, I mean, it's really exciting to see the broad scope that Eisai is driving for BAN2401. In Parkinson's disease, our partner, AbbVie, has canceled the second part of the Phase I program with ABBV-0805, and they are instead working on a detailed plan to accelerate the projects directly into Phase II. And we think this is very good news. The third quarter was also a great quarter for us with regard to our internal projects that continue to progress well in spite of the COVID-19 situation. Next slide, please. Here we see our attractive and well-balanced portfolio. We have organized the portfolio in 5 focused areas: Alzheimer's disease, Parkinson's disease, other CNS disorders, blood-brain barrier technology platform and diagnostics. The portfolio is balanced in 3 different ways: The first is that we have several projects in different areas, all focused in CNS; the second one is that it spans from discovery phase, all the way to Phase III; and third one is that we have a combination of fully financed partnered projects at innovative, fully owned projects with great potential. And our strategic partners, they finance the expensive clinical programs in Alzheimer's disease and Parkinson's disease, and we finance the less expensive preclinical phases, and we develop the programs to increase the value further before going into future partnering. In this quarter, we can also notice that we have -- the portfolio has been expanded with an additional Phase III program in a new patient population that has been added to the project portfolio. Next slide, please. Here we see our 2 long-standing and extensive partnerships that we have. In Alzheimer's disease, together with Eisai, they are very committed to dementia overall and the BAN2401. So far, we have received EUR 63 million, and the total aggregated value of the milestones is up to EUR 221 million. So there's still a lot left if the program continues to progress well. And if we come all the way to the market, we will get royalties. And these royalties are -- could be of substantial value. It could be like blockbuster revenues for BioArctic, which means added more than USD 1 billion per year without having any cost for the clinical program. So I think that this is a really good business model that we have at BioArctic. We also have the right to other indications, and we also have the right to commercialize BAN2401 in the Nordic region for Alzheimer's disease. Then if we look at Parkinson's disease, we have a great collaboration with AbbVie since 2016. And we have so far received USD 130 million out of the total aggregated value of up to USD 755 million. So even here, there is a huge possibility for further revenues. And if we come all the way to the market, we can also hear the significant royalties for BioArctic. And as we have already mentioned that they will start with Parkinson's disease for ABBV-0805, but they are also looking into other indications such as, for example, multiple systemic atrophy and Lewy body dementia. So this could also then, of course, lead to substantial revenues for BioArctic. So I think we have 2 great collaborations ongoing for BioArctic. Next slide, please. So now we go into Alzheimer's disease and BAN2401, which is a potential disease-modifying antibody for Alzheimer's disease. And here, we have positive Phase IIb results, and we are now in 2 large Phase III programs. As you know, Alzheimer's disease is an area where there is a huge population, about 3 million people are suffering from Alzheimer's disease and it's expected to double in 20 years. There is a huge unmet medical need since there are no disease-modifying treatments available yet. BAN2401 has a unique binding profile, especially designed and generated to selectively bind and eliminate the toxic forms of aggregated amyloid data. We have a unique clinical fingerprint that was shown in the strong Phase IIb result in a large study with 856 early Alzheimer's disease patients. The effect was seen as it was rapid, and we saw a consistent effect on preclinical scale. We saw a dramatic reduction of amyloid from the brain. We also saw an effect on several neurodegenerative biomarkers, and we saw a good safety tolerability profile. Even though we do not have any titration in the Phase IIb trial and in Clarity AD, the top dose was given directly to patients. And still, we have a really good tolerability and safety profile. So Eisai now has 3 studies with BAN2401 underway that we can see on the next slide. So here at Slide 8, we can see that Eisai, who are strongly committed to BAN2401, they have now expanded the program. So if you look in the middle of the slide, you see the stage 3 and 4 of the FDA classification, the mild cognitive impairment and the mild Alzheimer's disease. These populations are together called early Alzheimer's disease. The Clarity AD, the confirmatory Phase III trial, which is ongoing with 1,566 patients, they are focusing on these patient segments. And the open-label extension study, which is ongoing is also, of course, the same patient population. The Clarity AD study is progressing well. And according to Eisai, they expect patient enrollment to be completed this year, and they expect the 18-month result to be ready at 2022. The new Phase III program is called AHEAD 3-45, and that's comprising of 2 sub-studies, A3 and A45, and it started in September in the U.S., and it's also going to be a global program expanding over the world. And it's driven together by Eisai together with Alzheimer's Clinical Trial Consortium, and there is a total of approximately 1,400 subjects to be included in this program. And this is for Stage 1 and Stage 2 according to the FDA classification. So those are together called preclinical asymptomatic Alzheimer's disease. And these individuals, they don't have any cognitive decline yet, but they have intermediate or elevated levels of amyloid in the brain. And the program is aimed to evaluate the therapeutic effect of BAN2401 on the progression of the disease. So it's more like a prevention program. So we are really looking forward to the progress of this impressive broad program that Eisai is driving in Alzheimer's disease. Next slide, please. So now we come to Parkinson's disease and ABBV-0805, which is a potential disease-modifying antibody for Parkinson's disease. And here, we have very strong preclinical results, and now we are in Phase I. Parkinson's disease are, as you know, the second most common neurodegenerative disease. And there are no disease-modifying treatments available yet. ABBV-0805 has a similar unique binding profile in a similar way as BAN2401. 0805 was also especially designed and generated to be highly selective to bind and eliminate the toxic forms of alpha-synuclein that are called protofibrils or oligomers. The program is based on solid scientific grounds, and we have very encouraging preclinical data. Next slide, please. There has been great progress in our collaboration with AbbVie on the alpha-synuclein portfolio. AbbVie licensed the whole portfolio of all our alpha-synuclein antibodies at the end of 2018. The Phase I program is ongoing with the aim to evaluate safety and tolerability of ABBV-0805. Our partner, AbbVie, decided during this quarter to stop the recruitment of the second part of Phase I with a multiple ascending dose. And instead, work on a detailed plan to accelerate the project directly into Phase II in Parkinson's disease patients. And we are very happy to see that AbbVie has a huge commitment to ABBV-0805 and they are -- that they are already now preparing for how they, in the best way, can go directly into Phase II. And then, of course, simultaneously reducing risk of delays. Our collaboration with both AbbVie and Eisai are very successful. And having a great track record of successful partnering is, of course, important when you consider future partnering, which is according to our business model, and I will talk more about the early projects on the next slide, please. So here, we see our early-stage portfolio, which continues to progress well and according to plan, despite of the COVID-19 pandemic situation. Of course, we work a bit differently. But so far, we have managed to progress our early portfolio without any noticeable disturbances, and we are very proud of that. Our largest area in Alzheimer's disease, and here, we have 4 fully owned disease-modifying antibody projects. Each project has a different mechanism of action different from each other. And in Parkinson, all our programs are partnered with AbbVie. Then if you look in the third box, other DNS disorders, there we are looking into other potential indications for Alzheimer's disease for BAN2401. And we are also progressing our new neurodegenerative program that has got a very good start. And of course, our efforts with our BBB technology platform that I'm very excited about, this has expanded further and is progressing really well. And then, of course, it's important to focus also on diagnostic tools in order to identify patients at an early stage and to follow disease-modifying effect in Alzheimer's disease and Parkinson's disease. Next slide, please. So by that, we come to the financial summary, and I will hand over to Oskar Bosson, who is our Head of Corporate Communications and Investor Relations. So please, Oskar? And Slide 13.

Thank you, Gunilla. So looking at Slide 13, then maybe just to start off for those of you who don't know us so well yet, I would like to point out that we currently don't have any steady revenues from products on the market but have a business model focused on partnership agreements. And that means that our financials are very much linked to milestones and income related to research products with partners, et cetera. So that explains some of the ups and downs here, but you'll get into it, believe me. So with that said, let's look at the revenues and operating profit. Net revenues were down 11 -- were SEK 11 million for the quarter compared to SEK 21 million same period last year. This is primarily related to lower activity in the Parkinson's disease program and according to our plan. If we look at OpEx, the total costs are down with SEK 8 million from SEK 40 million to SEK 32 million. This was primarily due to lower currency exchange rates or losses but also less travel and less consultancy costs. Also, project expenses in total decreased to SEK 11 million compared to SEK 13 million last year, although expenses in our own project increased during the same period due to higher activity. Moving to operating profit. It was down minus SEK 21 million in the quarter compared to minus SEK 11 million Q3 last year. Just as for net revenues, this relates to lower activity in the Parkinson's disease program. And based on this, we've slightly adjusted our expectations on the total operating expenses for the year and now expect them to come in somewhere between SEK 150 million and SEK 170 million. Next slide, please. Looking at our cash and net profit. Cash balance continues to be in good health and amounted to approximately SEK 1 billion at the end of the quarter. Our cash flow from operating activities was minus SEK 9 million compared to minus SEK 49 million in Q3 last year. And the net result for the period was minus SEK 21 million compared to minus SEK 8 million same quarter last year. In summary, we continue to be in good financial shape. And with that, I hand over back to Gunilla.

Thank you very much, Oskar. So I will now conclude today's presentation with upcoming news and some closing remarks. So Slide 16, please. With regard to upcoming news flow, Eisai are progressing the broad clinical program for BAN2401, which we spoke about here today, and they will present more information at the coming Alzheimer's disease congresses. And the next one, we are really excited and looking forward to is CTAD in November. And this is a fully virtual congress again. And we will see at least 4 oral presentations regarding BAN2401. And everyone in the Alzheimer field is, of course, also very excited to follow the FDA advisory committee meeting on the 6th of November regarding aducanumab. In Parkinson's disease, we look forward to the continued Phase I program, and -- but that will be completed, and AbbVie's preparation for starting the Phase II program. Also in the diagnostics area, there is great progress in the Alzheimer field with, for example, the blood biomarkers like phospho-tau 217 and this is also very important and can make a huge impact in having an easier way to diagnose the patient when you plan to give disease-modifying treatment. So we're concluding that we have had a very good year so far, and we have exciting times ahead. Next slide, please. So I would like to end today's presentation with BioArctic is built on great science. We have great projects. It is driven by great people. And everything we do is with patients in mind, and we really want to help patients to get better lives. Next slide, please. So by that, we say thank you so much for your attention, and we are happy to take some questions.

[Operator Instructions] Our first question comes from of Joseph Hedden from Rx Securities.

We think that second reduction in the year of operating expense lines, this is not related to COVID then what is the reason?

No, it's not related to COVID. I would say, I mean, it's mainly due to that we have less expenses in our Parkinson's disease program since we have delivered most things to AbbVie. So I think that's the main reason. And then, I mean, we have more costs since we are increasing the efforts in our early programs. Of course, we have been traveling less. But I think that it's not really the reason. I don't know, Oskar, if you want to comment on that?

Yes, we can add also that if you look at currency, I think the -- there's -- the currency loss last year was SEK 5.5 million. And this year, it's down to only less than SEK 0.5 million. So that also makes a big difference on the OpEx.

Okay. And then just on BAN2401. I was wondering if you had any kind of idea when I find my present first clinical measures from an open-label extension studies, the first signs of efficacy, we noticed [indiscernible] very positive back at AAIC, [indiscernible] some efficacy on competition?

Yes. Thank you so much, Joseph. I'm as eager as you are to see that. And I think -- I mean we should be aware that this is an open-label extension study. It's ongoing. And since it's open, Eisai, they are able to compile data along the way and to present it. What they so far has been presenting and also will continue to present more data in -- at CTAD is the biomarker data, where it's easy to show a dramatic effect with BAN2401. Last time they showed that there was a decrease already at 3 months and then more at 6 and more at 12. But -- and I think now at CTAD, we will see more data on that and also to follow -- to see how the adverse events on the tolerability side, if that continues to look as good as it has done before. That's what we hope for, and we will see that at CTAD. But you're asking for the clinical effect. And that in order to look at clinical effect data, you need more patients and more data. So I think realistically, we should see that next year.

Okay. And then finally, if I could just ask on ABBV-0805. It was interesting to see the outcomes of the PASADENA trial presented recently. And I fully appreciate this, after AbbVie the confirmatory Phase III study. But just wondering what your thoughts are on having seen those results, is there anything that you would do differently to Roche and Prothena in that trial? And maybe just if you could shed some light on what you found particularly interesting?

Yes. No, thank you so much, another great question, Joseph. So of course, we are eager to follow Roche/Prothena and the PASADENA study. They had their first kind of readout with the first part of the study, and they did not hit the primary end point, which was very highly set. But what we saw, which we thought was really good was they had some signals on several secondary end points. And we think that we have, of course, a much better compound in ABBV-0805 since it's generated to be much more selective and not bound to monomer as much as we think some of the competitors do. We think that we have a much more selective antibody that really targets and eliminates those toxic forms that exist in the brain. So it's really important to not go so much on -- to bind on monomers. So we are really encouraged to see what AbbVie are doing. And of course, they are taking all the learnings they can from this -- the results that we have presented so far. And Roche/Prothena continue with the second part of the Phase II that we also will follow closely. So I think that it's really, really exciting to see when AbbVie are ready with a detailed planning on Phase II and when they will present the design of the Phase II programs and what learnings they have taken into that.

[Operator Instructions] Our next question comes from Gergana Almquist.

I have a question about the new exciting research on the ApoE mechanism of action. Is there anything new there you could share with us, Gunilla?

Thank you so much for that question, an excellent question. So you also know that during this quarter -- I didn't mention so much about that. So thank you for the question. We have, during this quarter, also initiated collaboration with Oslo University or maybe that was at the end of last quarter, maybe -- time is flying, so. But that was -- I think it was like June or so. Then we initiated a great collaboration with Oslo University, where Professor Lars Nilsson, who is one of the world leaders in the ApoE arena. He will help us to study this target a bit further. What we have disclosed is that AD1801, 1 of our 4 fully owned programs, are -- have a mechanism of action which is linked to ApoE. We are still quite eager not to disclose too much details yet on the mechanism of action. It will be coming in not too long time, more details. But so far, we have revealed that it's linked to ApoE. And you know that ApoE4 is the most common genetic risk factor for Alzheimer's disease. So what we can say is that we have initiated this collaboration with Oslo University, and they are now recruiting, for example, a post lock that will work with this work. But otherwise, the program is progressing well internally and according to plan.

And I would like to incur some more about the new generation research that you were doing on new potential compounds and targets?

Yes. And I wish I could tell you because this is very, very exciting, and we are working on a broad target here, which has an opportunity for several different neurodegenerative disorders. And we -- quite recently, we had this as a pre-project and then started like a true project early this year. And I can just say that utilizing all our great experience in this area with antibodies and aggregated proteins. We have a very good progress in this project. I'm really excited about this one. I just wish I could tell you more, but I need to wait.

There appears to be no further questions. So I'll hand back to the speakers for any other remarks.

So thank you so much for your attention and for so many great questions. I wish you all a great day and safe day. Thanks. Bye.

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.