Biovica International AB (publ) (BIOVICB) Earnings Call Transcript & Summary

Welcome to the Biovica Q3 reports. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present CEO, Anders Rylander; CFO, Cecilia Driving and Mattias Bergqvist, Clinical Development Director. Please begin your meeting.

Thank you. Hello, everyone, on the line. This is Anders Rylander, CEO of Biovica. And we can move to Slide 2 right away. Together today for the presentation, I have CFO, Cecilia. Cecilia?

Hello.

And Mattias.

Good morning, everybody.

Together, we will go through a short introduction of the company, the highlights during the period. And we will have time in the end for questions about the presentation and the report. Moving on to Slide #3. Just an introduction about our product and our company. So Biovica develops blood-based biomarker assays. And the purpose of that is to improve prognosis and especially monitoring of cancer therapies. The way we do it is that we measure cell proliferation from a blood-based test. And as you all knew -- all know, cancer is defined by uncontrolled cell proliferation. So we can provide very important information all along the treatment process. The benefits of the product is that cancer patient can be monitoring and you get quick feedback of the treatment efficiency. So you can either ensure that the patient is on an efficient treatment or, as quick as possible, switch to a more effective treatment. So patients are benefiting from the product, but also payers that are paying big money for cancer treatment. And of course, we want to ensure that the treatment is also effective. Going forward to Slide #4. The market -- the product has potential within all cancer areas, as all cancers are defined as uncontrolled cell proliferation. However, Biovica in our go-to-market work has chosen to focus within a specific area, which is monitoring of metastatic breast cancer treatments in the geographies of U.S. and Europe. This market consists of about 450,000 patients that are currently living with this disease and on treatment. And the market potential for this area is estimated to SEK 6 billion per year. The market potential is also verified through a market research, where we have interviewed a lot of key opinion leaders that is oncologists, but also payers which have confirmed the need for the product, the test frequency but also the price levels for such a product, which then compares to the SEK 6 billion per year figure. There's also a lot of potential outside the initial area. We have clinical results outside the breast cancer in large areas like lung cancer, gastrointestinal cancers, for example. We also have positive results in early phases of the cancer. However, we believe that focus in reaching market is very important. Hence, we focus on the metastatic breast cancer area. One should remember that these 450,000 patients is only about 1% of all the 43 million patients living with cancer currently. So there's a great improvement to expand. Moving on to the next slide, Slide #5. These are the highlights, the significant events in our Q3 report, which we published this morning. During the third quarter, we have a number of clinical trials that have been presented or -- and published. We have -- in earlier phase of breast cancer, we have a trial with Institut Curie. These were communicated at an earlier call already as significant events of the period in the Q2 report. So I won't go through them today. However, the TREnd study, which has been published will be covered by Mattias on the later slides. So I'm leaving that for the next presenter. And also with the newest edition, the trial together with the Lund, which was presented -- published this morning in scientific reports, which is our Nature journal, which Mattias will cover as well. Both of those are within the metastatic breast cancer. We have also strengthened the management team. We have communicated this in previous reports, Otti Bengtsson Gref, as R&D Director; Henrik Winther, as Business Development Director. Both of these have now joined the company as of beginning of January. And finally, we have, a couple of days ago, submitted a PR regarding our FDA process update, which I will also go through on a separate slide. So moving on to Slide #6. And please, Mattias, could you take us through the results from the TREnd trial that we have published results from during this period?

Thank you, Anders. It's my pleasure. Obviously, the TREnd trial and the Lund trials are the results of the substantial clinical trial program that Biovica launched several years ago. And the TREnd trial is actually the first study with evidence of a blood biomarker used for evaluating efficacy of a CDK4/6 inhibitor in metastatic breast cancer. And these new drugs, the CDK4/6 inhibitors, are a very important additions to the armamentarium of oncologists when treating women with metastatic breast cancer. So in this trial, patients were thoroughly monitored at baseline at 1 month that has progression in the study. And I will highlight the conclusions here that it is very important to identify resistance and to identify resistance early on, so you can switch therapy, therapy that's more effective and work. And by doing that, you can, of course, also avoid unnecessary side effects. And in the trial, it was also found that decreasing levels of TK activity during treatment actually signals better patient outcome. And that gives you evidence of -- that the treatment works. And that is, of course, comforting for both doctors and patients. This topic were -- to be more specific to topics that biomarkers are highly needed for identifying patients benefiting from CDK4/6 inhibitors was actually highlighted in an article by FDA [ of authors ]. And they were focusing on the need to identify subgroups that benefit more or less from these kinds of therapies. So this is a very good timing that we, as the first company in the world with our biomarker, can deliver these data to the market. Okay. We can then go to the next slide.

Yes. We move to Slide #7.

And this is the Lund study of 142 women with metastatic breast cancer that was published in the Nature journal Scientific Reports yesterday. And we had a press release on it this morning. And these patients were thoroughly monitored at 4 times at baseline, and that is 1, 3 and 6 months of therapy. And this was standard therapies administered in this trial. And the results support that DiviTum predicts patient outcomes. And it's been invaluable to improve prognostic precision and monitoring of metastatic breast cancer. So decreasing TK activity levels correlate well with longer time progression and survival. And you can see in the quote by the principal investigator, the oncologist Anna-Maria Larsson, Skåne University Hospital in Lund and Lund University that for me as an oncologist, this means that I can get supplementary information on the development of the disease that can influence treatment decisions with a goal that it will lead to better patient outcomes and quality of life for the patient. And that's, of course, very comforting words for a biomarker like DiviTum. So back to you, Anders.

Thank you, Mattias. Moving on to the next slide. I'm now on Slide #8. So this is a slide showing our clinical development program within breast cancer. So the clinical results that Mattias talked about is part of this program. And this is essential for Biovica to document the value of the product, together with leading oncologists and academia, and in order to display the results, but also to reach out to other oncologists and increasing the demand for the product. And as you can see, we're now starting to build a strong foundation, especially within the metastatic breast cancer area, which is our initial focus where we have now several clinical trials that is proving consistent results and prognostic, that we can -- prognostic identify risk for progression and during treatment, by monitoring the patient that we can give quick feedback on to treatment efficiency. So this is very important, and this will be the foundation for our commercial session and launch of the product. Going forward, we have a number of important clinical trials that is going on. The SWOG trial, which will be the foundation for our FDA application. The samples are now being analyzed for the publication, it will also be published. And we will also analyze them once again with a validated not-for-the-FDA application. And we have -- I could also mention the Johns Hopkins trial in U.S. and the PYTHIA trial in Europe, both are prospective trials for CDK4/6 inhibitors and also are filing to the evidence of the value of the product. Moving on to the next one, Slide #9. It's the FDA status update. So we currently are doing the analytical validation of the product, which means that we technically are validating the performance of the product against the criteria that we have set up. And we have set up the criteria based on this discussions that we've had with the FDA for several years. And so far, we have -- the analysis we have done have met the criteria, so that's very positive for us. At the same time in parallel, as I said, we have analyzed the SWOG samples for the upcoming publication and will reanalyze them after completion of the clinical -- analytical validation for the FDA application that is called the clinical validation. So that's the positive parts. However, we haven't been able to complete the analytical validation yet. And the reason for that is that we are dependent on a delivery from a subcontractor for a component of the product in order to produce the last lot, which we will use to complete the analytical validation. The status is that we now know that our component has been produced and is on its way to the Biovica. So that is comforting for us and also reduces the risk going forward. And just to give you some background about this, of course, having suppliers that meet the criteria that we have set up is essential for us. And this supplier was identified as a high-risk one that is not meeting our criteria long before we got this delay. So as part of the FDA application, we go through all our suppliers and do this classification in making sure that we can trust them. We did a visit to the supplier about 3, 4 months ago, and we found out that this is a supplier we need to switch. The good thing here is that the component can be acquired from other supplier, and we're able to do an outsource strategy. But in the middle of the analytical validation, we can't switch the supplier. And so that's why we have this dependency that led to the delay. So in the short term, it has caused us a problem. But in the long term, we feel confident that we can switch the supplier and remove this dependency in time for us to prepare for mass production of the product. So that was a short description of this -- I think it's well, it's both positive and some challenges. And going forward to the commercialization process, we have a number of parallel trials going on. Of course, the product development, which is now in validation phase, which I talked about. The clinical validation, which we covered on previous slide, which is the foundation for all the other activities going forward, like the regulatory pathway where the 510(k) application to FDA is the most important one to provide access to the U.S. market. We're also working in parallel with the guidelines in reimbursement in order to have the product reimbursed and commercial partnering in order to have benefits from an existing sales channel to get to our customer and also after-the-test service. And the last piece of all this, tying it all together, we are preparing for a market launch when the product has received its 510(k) FDA approval. And now with this change in time plan, we see that our 510(k) submission is due quarter 3 this year, 2020, and we're planning to have the approval by early 2021. And hence, the market launch that -- right after that. Going forward to Slide #11. I'll hand it over to Cecilia for the financials. Cecilia, please.

Thank you. I'll start talking about the sales. During the period, it was SEK 55,000. And if we look at the third quarter, sales during the 3 quarters of the year exceeded last year by a 32%. And after 3 quarters of this year, we have reached 55% of the last year's full year sales. At this point last year, we were at 42% of the total. So that looks good. As you can see, there is not an even flow of sales. The reason for that is that the timing of sale is linked to our customers' research studies, and we focus our efforts now on taking DiviTum to the clinical market, which will generate regular sales after regulatory approvals. And now we leave the sale chart and look at the cash balance. At the end of January, we had SEK 52 million in cash, which will cover operations for more than 12 months. And the expenses during the 9-month period have increased compared to last year by SEK 5.7 million. As previously announced, the higher level of expense compared to last year is attributable to set up of operations in U.S. and in preparation for launch. There has also been a high level of activity in the DiviTum regulatory project. Part of this is also reflected in a higher amount of capitalized work performed by the company for its own use. And this amounts to SEK 5.4 million, an increase of SEK 0.8 million compared to last year. In addition, we have started several activities towards commercialization, which has slightly increased the cost so far. And this will continue to increase as we get closer to market approval. And I'm handing back to you, Anders.

Thank you, Cecilia. Moving on then to Slide #12, the last one. To summarize this presentation and the situation, we have a product, which can provide great value both for patients and payers with a great market potential. We are in very exciting times because we are in early conversations -- commercialization phase, working on FDA application. This mid-2020, we just commented in Q3 [ financial ] but that means beginning of '21, we expect the FDA approval and launch the product. And these are also tough times. It's not normal times with the coronavirus changes. Biovica is, of course, affected as well. But still, we believe we are in a relatively okay position. And cancer treatment is, of course, a great need during these times, and we still have a product with great value within this area. We've had this high-risk supplier, which occurred -- which is hurting us short term, but the long term, we -- that mean that we have control over suppliers and no negative external dependencies going forward, working with our FDA application. Looking forward to our launch plan, we're, of course, planning to be present in a lot conferences that is currently being canceled but this is 9 to 10-month away, so the situation could be different by then. And if conferences still are being canceled, we will find other ways for communicating. So in a tough situation, we still feel that we are in a fairly good position and are looking forward to our upcoming activities. That was it for us. As now, we open up for questions.

[Operator Instructions] Our first question comes from the line of Rickard Anderkrans of ABG Sundal Collier.

Congratulation to the publication in Nature as well. So first question, I was just looking a bit closer into the analytical validation process. Can you communicate how far you have come more specifically? Because I remember last quarter, you communicated that 2/3 of the lots had been analyzed. Can you communicate on the progress there?

Yes. That's a good question. And we have started working on the third lot and we've actually, in order to minimize the impact of this delay, we've been able to replan and so we'll be do -- fourth lot. And it's the fourth lot that we're waiting for components to be able to complete the analytical validation. So the analytical validation has proceeded and we're heading up to the -- during the 3 quarters and the next step would then be to produce and complete analytical validation during quarter 2.

Excellent, perfect. That's -- and in terms of -- obviously, it's hard to tell. But in terms of switching suppliers and perhaps pursuing sort of a multi-sourcing strategy, do you expect that to, first of all, impact any commercial partnering discussions? And do you expect that to have a notable impact on the operating expenses going forward as well? Or should -- how should we think about those 2 factors?

Not really, actually. There are a couple of factors when looking into supplier management and also determining -- setting the criteria in order to manage risk. And so what we have done as part of our FDA application work is to go through all the suppliers. We have categorized them according to risk and the one within the category of high risk, we have visited. So first of all, it takes some effort to do this. And that's what also we have done and discovered this even before we got the delay. The next thing is that if this is a standard component, it's easier to multisource. If it's a unique component, you can't; hence, you need to find other solutions. So a good thing here is that this is a standard component, which is available from other suppliers. That makes this a lot easier. And the third one is how long the stability of each component is? And in this case, there is stability enough that we can build some stock to secure our work going forward. So those factors are important, and we feel that we have control over those factors that we can change this during the time -- after completion of analytic validation until we need to have mass production capability in place. So we feel confident with that. And the cost, the biggest cost is -- here is to do the work to -- which we have already done to a great extent to quality assure our -- all our different suppliers because that takes time and effort.

Our next question comes from Johan Unnerus of Pareto Securities.

Just a follow-up initially. First, on the change of supplier than for the -- ahead of the commercial stage. When can you give feedback and confirm that, that is all changed, that you have a new supplier in place?

Yes, we can make changes to the product. We can do changes in the middle of this process because we need to start validating 1 product, we cannot do changes in the middle of the validation. After we've closed the validation, we can make some changes to the product. Those changes is dependent on that we can show that it doesn't affect the product performance. And this kind of component that we're talking about, we are certain that we can change it without changing the performance of the product. So yes, if it's another component that would change the performance of the product, you have to go back and it's a new round with the FDA, and this is not the case here.

So is it realistic to expect you to be in a position to confirm this a couple of weeks after completing the validation or something like that?

No. No, no, no, not a couple of weeks, it takes more time than that. And -- but we have until -- yes, it will be during the latter part of 2020. We haven't decided even -- normally, we don't press release when we do supply, that's routine work to agree with suppliers. We could, of course, consider in this special occasion since we have had this delay. We'll have to come back on that.

Yes. But when you file, obviously, that is completed and then the next -- and that process to follow. Okay.

Yes. Yes. And the way things are now, that will not be on the critical path. There will be other activities on the critical path. And we like the clinical validation and submission as well.

And some other COVID-related questions, issues. And what about the -- will you aim to secure extra stock in this situation, inventories? When you're ready to do that?

Yes. Yes. And that we have already done. With the supply we will get now, we have secured extra stock levels. And it's also dependent on that the component is stable enough for you to do so, which, in this case -- which is also a good thing that we have the ability to store it.

That's good. And that process will continue, I suppose. And also...

Yes, to reduce -- so we do everything we can to reduce risk in the project. And that's a good example of how we are thinking. Of course, we -- the cost for extra volumes of component is -- so it's nothing compared to delay. So that's why we are thinking that way.

Another potential disruption is that some of the clinical trials ongoing and perhaps planned, it could be in the regions which are affected, and it could disrupt the progress of the trials. I'm thinking perhaps on the support to secure reimbursement in Europe that will follow, hopefully. Is that some -- what -- any comments regarding those issues or potential risks?

That's true. And that's factors, to some extent, is outside our control because we're working with partners. However, I think a good thing here is that we have a number of trials going on in parallel, so we're not dependent on a single one. And we already have significant data that we can build upon. So it's not a binary risk in that case. And when the SWOG trial, which will base our FDA application to clinical validation, it's a retrospective trial, where we already have the samples in-house, and we have verified that the samples look good through our analysis so far. So I think that reduces risk of those factors. I don't know if you want to comment to that, additionally, Matthias, since it's your area.

No. I think the way you addressed the question, Johan, it's -- regarding the clinical development and the studies that we have, we have control of this since we have so many samples in-house and we have published 2 trials this quarter -- this first quarter of 2020. And there will be, of course, other trials also published during -- later this year to support the reimbursement cases, both in Europe and in the U.S. And we work very closely with SWOG and our partners to carry us through this case with the analysis, and you can do a lot also online and by interacting with them through videoconferencing. So I think we are in good track to get the studies to analyze in time.

So is it a reasonable summary that the risk regarding the trials that support the filing is low and -- very low, but there are some risks relating to future supporting trials.

Yes, it's difficult to quantify as it's low. But we're doing what we can to reduce risk. That's the general message. And when it comes to the different clinical trials, we're not dependent on a single one. Of course, SWOG, we're dependent on -- for the clinical validation, of course, we have backup plans, but that would be -- cause delay. One interesting thing with the Lund trial that Mattias talked about, which was communicated this morning, it is that those patients are very similar, a subset of those as the patients in the SWOG. So the SWOG trial is another trial on similar patient that we have analyzed with positive results in the past. And that's also, of course, which we -- it's comforting for us.

Yes, the Lund trial seems to suggest that you're getting earlier signals in the cases for the patients that are sort of where the therapy is not helping them. And then to confirming that patients are sort of supported and helped by the therapy, it seems to be taking a little bit longer. That's, of course, a very, very rough summary, but...

Yes, I think you're totally right there. Yes, I mean, these are standard therapies, and there are 3 different subgroups that you have looked at and [ standard ] is not involving CDK4/6 inhibitors. And for the endocrine therapy that, that subgroup behaves a little bit different towards the chemotherapy and versus the HER2 therapy. But I think that's a great strength of the biomarker because these mechanists of action are effected differently, also from proliferation rate from the tumor perspective. But at the end of the day all of these subgroups are actually reflected by TK. And if you decrease the TK over time, measured with DiviTum, that's a great evidence that patients will be doing good. And of course, vice versa, you also get good signals with DiviTum that maybe the treatment has stopped working and that you can switch therapy. So in this case, not exactly the same thing as the SWOG trial because in the SWOG trial, all patients are just endocrine treated. But the good thing, of course, is for SWOG we have complete control of that, with all samples in-house and good communication with SWOG to run the analysis.

Our next question comes from the line of Richard Ramanius of Carlsquare.

I had a first group of questions relating to your studies. The question is, how do all the studies relate to each other? You're now, for example, doing the SWOG study, which is intended to make up a base for the 5(k) (sic) [ 510(K) ] approval. So what is your intended use of the other studies? For example, the study you made with CDK4/6 inhibitor at the Institut Curie, which you can call it, like a -- that's like a companion diagnostic for test for DiviTum. So is that intended for reimbursement for that intended use, for example? And if you could do a general answer for the intended use of your different studies?

Yes. I think the intended use that we are aiming for and -- or first of all, the metastatic breast cancer treatment environment is constantly changing. And there are a number of lines of good therapies out there. And that is, of course, great for the patients that they have many different treatments that works. But it is, of course, also challenging for a biomarker company because you need to document your biomarker for several different therapies and different settings. Because if you have used one line of therapy, you can jump to the next and jump to the next. And there are these 4 or 5 really good lines of therapies today that patients can benefit from. So that means that for us, as a company, we need to document DiviTum in several sort of lines and with several therapies. And to get DiviTum approved, we have chosen the SWOG group because they are a great group to work with and they have the largest trial in the world who have actually collected blood samples treated with standard endocrine therapy. So that's a good start to look at those patients who are treated first-line in the SWOG trial. We aim to get that through the FDA and have had positive discussions with the FDA as we have communicated earlier. So that's one set of patients that will be addressed using the large SWOG trials. Recently -- or in recent years, the CDK4/6 inhibitors have become much more common. And they are now part of the standard therapies in the armamentarium of treating these women with metastatic breast cancer. So being a biomarker that -- we are aiming to have as a standard biomarker, we need documentation also for the CDK4/6 inhibitors. And I'm happy to say that we were able to submit an application to the Horizon 2020 program already in 2015, to foresee this that DiviTum would be a good biomarker for these treatment and for these patients already in 2015. And that was supported by the European Union. And hopefully, that can also help us when talking to reimbursement agencies in Europe. So looking at all of these, you need documentation in several lines of therapy, you need it in first-line and second line, which we have now. You need it internally monitoring patients at several occasions, which we learned is a great contribution and a fantastic trial and a fantastic group to work with. And you need it for several therapies. And that's where is on the road where we're heading.

And -- very good summary, Mattias. And can I add, you need both on European, but specifically on U.S. patients, if you're going to do an FDA approval, you need evidence from U.S. patients. So all those factors together is what makes up the clinical development program to cover all these factors.

Okay. So a follow-up question. What is needed to launch the product in Europe?

Well, in Europe, the authorities -- if you look at the regulatory setting, we believe we can use U.S. patients for the documentation as well as Europeans. So it's easier from that perspective. When it comes to U.S. regulatory, you have to have American patients or you have to prove that these are equivalent to American patients, which can be really challenging because it's not always the same treatment regimes and processes. And so you end up with American patients. And that's why we are investing heavily in U.S. first because it's easier to transfer to Europe than the other way around.

Okay. And second part of questions. How -- or do you have any activities planned for the market introduction?

Yes. We have a market plan that is being developed and executed and which we will launch at launch events after the approval of the product in the U.S. So -- and yes, we'll come back with more details as we come closer, but in that slide with the commercialization process, that's when we tie everything together with regulatory approval, guidance, reimbursement, commercialization. And then we need everything in place when we launch the product. And one key strategy when launching the product is that we're going to use one of our key strengths. That is the collaboration we have with different key opinion leaders and academia in order to get the message out. Oncologists listen to other oncologists, especially if they are key opinion leaders within this area. And that's also, as we communicated before, by such an organization like SWOG that organizes more than 12,000 oncologists and 1,000 hospitals, becomes a very important partner for us because it allows us to reach a lot of potential customers.

[Operator Instructions] And there are no further questions at this time. I'll hand back to our speakers for the closing comments.

Thank you very much for listening in and for some very good questions. And over and out from the Biovica team.