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

Welcome to the Biovica International Q3 Interim Reports FY '21/'22. [Operator Instructions] I'll now hand the floor to CEO, Anders Rylander. Please begin your meeting.

Thank you very much for that, Mark, and welcome, everyone, to this Q3 Interim Report presentation. So if we move into the second slide, we have the presenters of today. It's me, Anders Rylander, CEO of the company. And together with me, I have EVP and CFO, Cecilia Driving; and Warren Cresswell, President of Biovica Americas, they will also support me and makes part of this presentation. So if we move forward to the third slide, you have the agenda for today. So I will start to make a very short introduction about the company and our product, then we will quickly move into the quarter, the report and the highlights and then we'll dive in a little bit deeper to topics that we've selected, the FDA status and give an update on that. And Warren will go through our U.S. go-to-market strategy and how we intend to move ahead there. And then Cecilia will give us an update on the financial before I summarize and we open up for a Q&A session. So with that said, I think we should move into Slide #4, which is a slide of our [indiscernible] and our product DiviTum. And the product DiviTum stands for dividing tumor, which gives some guidance on what we do, we measure cell proliferation. And we do that from a simple blood sample. And as you all know, cell proliferation is what cancer is growing -- defines cancer growth or uncontrolled cell proliferation defines cancer. And hence, we have some very important information that we can provide with our test. One area which we are focusing, where we can provide a lot of value, is in the phase where cancer patients are being treated and need to be monitored during that treatment. Typically, those patients today are monitored using image diagnostics, which you can see on this slide, that requires several months from you take the first image to establish a baseline, and several months later, you can follow up with the second image and you can compare the size and thereby, draw a conclusion if the tumors are growing or not. With DiviTum, we have shown in several clinical trials that we can provide earlier feedback from a simpler solution for the patient or I might say, a more convenient solution for the patient with a simple blood test, and as we measure cell proliferation. And in a clinical trial presented or published recently from the Washington University, it was obvious that we could see up to 3 months ahead of the imaging diagnostics if the patient would go into progression or not. So of course, this has a great value for the patient getting that quicker feedback, but also for the treating physician and the health care providers to make sure that the patients are getting effective cancer treatments. Our ambition and our focus is to start within the breast cancer area, in metastatic breast cancer to launch the product at the U.S. market, and then from there, widen into other geographic markets like Europe and other cancer indications outside of the breast cancer establishing as a standard way of monitoring cancer treatments. With that said, I'd like to move on to Slide #5, which is a short summary of our company. The company is based on research performed at Uppsala University and was founded in 2009. We've been at the Nasdaq First North Premier -- now we're currently at Nasdaq First North Premier, and we have been at Nasdaq since 2017 when we IPO-ed. We have our headquarters in Uppsala, and we have a subsidiary in the U.S., which Warren will cover in his part of the presentation. We have a regulatory certification since many, many years, DiviTum is CE labeled. And we are also in a 510(k) submission process with the FDA, which I will give you an update on going forward. So with said, I'd like to move to Slide #6, which is a summary of the highlights during this third quarter of the fiscal year for Biovica. And significant events that took place during the quarter, which has actually already been reported in previous reports after the period is that we have strengthened our already strong documentation and evidence, both on the clinical side, but also on the health economic side. With health economic, the budget impact model that has been presented on several conferences now also has been published which, of course, gives an even higher value proof of evidence and it was published in the Journal of Medical Economics. The conclusion in that paper is for every dollar invested in DiviTum, the health care providers will get savings 3x that. So $3 per dollar invested. So strong health economic benefits. We also had 3 studies clinical trials presented at the San Antonio Breast Cancer Conference being the major conference within the area of breast cancer to further strengthen the already strong evidence supporting the value of the product. And then we also started a very important study with the Washington University in St. Louis, the TK IMPACT. And Washington University briefly mentioned on previous slides, that they in clinical trial concluded that we will -- using DiviTum, we will be able to discover progression month ahead of imaging, and they are now continuing pursuing this path to add further strength to the documentation when DiviTum, our product is compared to imaging. So we will look forward to the results of that trial. So after the end of the Q3 period, we have also communicated an update on how we are progressing with our FDA process, and that we will be complementing with additional data in May, and I'll get back to you with that on the next slide. We have additional clinical results are being published. PYTHIA is our first prospective trial with DiviTum and it's done together with IBCSG and BIG against breast cancer, 2 major European breast cancer oncology groups, which has a major impact in Europe. So that's also a milestone, important one for us. And then recently, we communicated a little bit more about our go-to-market strategy in U.S., which where CLIA lab is essential. And then Warren will give you the details about how we're thinking there. So with that said, I'd like us to move to Slide #7, which is an update on the FDA 510(k) process. And the last update we made was in beginning of February, where we have had a meeting with the FDA, and we received positive feedback in many ways. One is that all the questions within the clinical validation area has been resolved and agreed. So we have a common opinion on that going forward. So that feels really, really good, and we're very happy with the outcome of that discussion as well. The other area in the report is the analytical validation or the performance studies. And we also resolved the open questions within that area. And with the comment that we should complement with some additional samples to an already performed precision study. So we'll complement with that data due to the study design needed to be extended, and we feel confident that we can reproduce the already positive results that we've shown in that study in the past. So that feels also good. We're glad with that feedback and the work to be able to complement with that data has started. And we aim to be able to do that during May here just in a couple of months, and the work so far also progressed very well. We've been able to produce the lots that is supposed to be used for this trial. And the next step is to perform the actual trial and send back the data to the FDA. So we feel confident that we will be able to meet that deadline in May. And with that and the feedback we received earlier, we believe we have a good chance to close the substantive review because -- by doing so, we will have resolved all the outstanding questions that we are aware of. And then the next step will be the actual decision process, which normally takes 30 to -- up to about 60 days, if the FDA choose to stop the clock and that will be only for a short period of time, so about 6 days during normal conditions. However, in the last 1.5 years or so, the conditions haven't been normal, especially not within the IVD area that has been greatly affected by the pandemic situation as a lot of COVID tests have given priority. But we are seeing now that the FDA communicates that they're going back more and more to normal. And we believe also that, that will have a positive effect on the review of our application. So we expect this to be able to close within a couple of months going forward. So we look very positive on the development on this process within this area. All right. So that was the FDA update. And the next one on Slide #8 is our go-to-market strategy in U.S. and I'd like to hand over to Warren Cresswell. And Warren, maybe you could introduce yourself a little bit before going into presenting the slides. Thank you.

That sounds great, Anders. Yes, my name is Warren Cresswell. I joined Biovica back in August of 2021, and I come with about 25 years of diagnostic experience. About 2/3 of that time, I worked for a U.S.-based Danish owned cancer diagnostics company called Dako, and Dako developed and commercialized 510(k) cleared and PMA-approved products. My career at Dako span from working in the lab as a chemist to managing operations to being a sales rep for about 10 years, I had sales leadership positions and finally, general management, where I operated businesses in the U.S., Canada, Latin America and also Asia Pacific markets. During about the last 1/3 of my career, I was the CEO of an organization called Prometheus Laboratories and Microbiome Diagnostic Partners concurrently [ until I ] engineered a successful exit of the businesses. At Prometheus and Microbiome Diagnostic Partners, we focused on developing and commercializing novel high-value, multi-analyte algorithm-based test provided through our own company on CLIA lab and sold into specialty physicians. It should be noted that these products were laboratory developed test, also known as LDTs. So like with Biovica, we developed test aimed at changing the standard of care. So with that being said, my experience along with my network have a pretty broad and deep understanding of the U.S. diagnostic business. So that's a little bit about me. So on Slide 8, as we progress towards commercialization in the U.S., our go-to-market strategy has evolved. The most meaningful strategic change will be to launch DiviTum through Biovica owned CLIA lab, which really allows us to manage a number of critical success factors, which I'll talk about on the next slide. It should be noted that we are confident that our evolution and strategy will be successful as it does align with the largest and most impactful high-value diagnostic companies globally. As you can advance to Slide 9, that would be great. So what are some of these success factors that I just mentioned. So owning the relationships are one of the most important factors to a successful business. We'll own the relationship with patients, physicians and payers. If we were to not evolve into a CLIA strategy, but rather sell DiviTum to any interested labs, we would not know who the patient was, when the patient was tested, how often the patient was tested, what physicians were ordering DiviTum, how often physicians were ordering DiviTum, what clinical benefit or utility that physicians were extracting from DiviTum. Essentially, this would be a blind approach to commercialization. So launching DiviTum through a CLIA lab enables us to know the who, the what, the when, the where, the why with respect to DiviTum utilization and that's very critical to our business. Reimbursement is an element -- a key element in getting insurance coverage and driving product utilization. So we will work closely with public and private insurance providers to maximize DiviTum's value and, of course, maximize coverage. And with the CLIA lab, all patients can have access to DiviTum, which is very important to us. When we launch, we'll have logistics and systems in place to receive, test and report samples. With respect to data mining, having a CLIA lab allows us to build a significant database of patient test results, therapeutic responses, disease progression, physician treatment decisions, DiviTum utilization and so on. So you can imagine there's no shortage of how data can be interrogated to strengthen our business. And lastly, we will be collecting patient samples with consent, which will allow us to build a sample biobank. We can use these samples to conduct follow-on analysis, prove new product hypotheses, fuel product development and more. So as you can imagine, building a database and a biobank become valuable assets and our tools, which help contribute to the long-term success of the business. If you could advance to Slide 10, please. So with respect to the CLIA lab status, if we read the time line from left to right, we've selected a lab location to be San Diego, California as this is one of the third largest biotech hubs in the U.S. and it's rich in CLIA lab professionals which then support our business. Once we made the decision of the location, we identified and leased a commercial property that was already outfitted as a lab and was also move-in ready. We've hired some key individuals to lead operations and commercial functions. Currently, we are working on the CLIA lab application and certification process. So once we receive FDA 510(k) clearance, we'll be able to scale the organization extremely fast as we have already identified resources for nearly every position needed. And once this is completed, we'll launch. If we could move to the next slide, slide 11. So to illustrate what our evolved go-to-market strategy looks like, we are not just managing the commercial process, but we're really managing the entire business process start to finish. We will have highly trained clinical sales force that has experience working in both specialty diagnostics and the CLIA lab business model. We will engage breast oncologists with sophisticated call plan targeting process. We will manage the ordering process, the blood collection and the shipping logistics, and we will receive the samples, test and report those results. And finally, we will manage a revenue cycle to ensure payment. So with that being said, I'd like to hand it over to Cecilia.

Thank you, Warren, and we are going over to Slide 12, and going over to the financials. And you can see in the graph, the sales we accumulated during the period. And it's not that much already because it's still only researchers only sales. And we have planned to launch the product already, but due to the delay of the FDA process, we haven't. So it will stay kind of fall until we launch the product at [indiscernible] medical market in U.S. that's the first market, and we are trying that as you have heard. And we are turning to Slide 13. And at the end of the quarter, we had SEK 108 million at the bank. And we are well capitalized with the current capital, and we expect that it will last for more than 12 months of operations. And due to the delayed commercialization in the U.S., we haven't taken on that many new employees already. So we haven't started to increase that much in expenses, but that will come further on and also the revenues that will start to come in after launch. And the organization is growing, and the average number of employee is now 26 compared to last year's 20, and we will continue growing slightly while preparing for the commercialization, and after clearance, that will start increasing again. Thank you. And I'm handing over to you, Anders.

Thank you, Cecilia. And to sum it up, we have a very important product that addresses a need for cancer patients being on treatment to get a quicker feedback, which in itself will enable more personalized treatment regime and within metastatic cancer in general and our initial focus area is within the metastatic breast cancer area. And this has been well documented in collaborations with some of the leading key opinion leaders and academic institution in the business within, especially within the breast cancer area, but we also have evidence outside of the breast cancer area. This very strong foundation of evidence is also the foundation for the commercialization activities that we are now planning as Warren briefly covered. And the upcoming milestones. As we talked about earlier, our key milestone now is to by -- during the month of May, just a few months away, to submit the complementary data to the FDA in order to complete the review phase of our product. The next step is 510(k) clearance. And as we have gone through the open issues and only provide complementary data to the [ labs ] outstanding we expect this to happen a couple of months later, depending on the workload of the FDA, but we also have great hope there since the FDA has signaled that they have increased their resources within the IVD area and also that the pandemic effects are less and less. So we are looking forward to that. And that will be the starting point also for our upscale for the U.S. launch, which we have been preparing and are preparing currently, as Warren told you about. But then we will upscale the sales organization to be -- a couple of months later be able to launch the product on the U.S. market, which will be the starting point for our commercialization and sales activities of DiviTum for clinical use. So it's only months away, and we're all really looking forward to that in order to create great benefits for patients and health care providers. And with that, I'm opening up for questions.

[Operator Instructions] And so far, we have one question in line. That's from the line of Jakob Lembke of ABG Sundal Collier.

This is Jakob Lembke at ABG. I have a couple of questions. And my first question is on the development towards getting the 510 clearance. Maybe you can just sort of elaborate a bit more on what sort of additional data you have to complement your application with?

Yes. Perfect. So I'll try to give some more background and try to, at the same time, avoid being too detailed, as the topic is a bit complex, and the application is extensive. So basically, we've been in the discussion since May when we got received the first feedback, and we resolved many outstanding questions. And in that process, both within the precision area and within the clinical area and to a great extent, it is about understanding each other. A lot of the questions could be resolved only by explaining and discussing and the FDA has accepted our explanation. But in that process, when we made 1 -- change in 1 area, that actually affected a precision study, which we had already performed with success. So the study design had to be modified slightly. We had to add some samples that have to be analyzed. And that's basically what we're doing. So we're doing a precision study that we already have performed with a successful outcome, but we're adding some samples because the FDA requested a slightly different study design due to some of the other topics that were discussed and had the tendencies to disrupt the study. Could you follow, what I said there. It was a bit complex, but did you understand?

Yes. Yes. I follow. And my second question...

Sorry. I'll just sum it up. That since we've done this in the past successfully, and we're redoing it, we are -- we feel confident that we can do this again.

Understood. Then my second question also on the FDA. Is sort of your impression of how the FDA is transitioning to a sort of post-pandemic state is sort of the degree of uncertainty regarding the time line and review times and so on are improving?

They have been super specific about that, but they have given some information away. They did a report recently, where they summarized the year 2021 that they sent to the Congress and they identified the IVD area as the toughest one that they've done that before as well due to the number of COVID tests, but, they, at the same time, communicated that it's improving due to 2 factors that they've had increased the number of resources within this area, and at the same time that the pandemic effect is getting less and less. So that is what we know, and we know that their normal time line. And we -- if the normal time line is 1 to 2 months, we believe that it will take maybe some extra time, but it's not more than a couple of months is our hopefully qualified guess based on the feedback that the FDA has provided officially.

Okay. And if we move on to your new sort of U.S. go-to-market strategy, obviously, I mean, it's a good opportunity to be able to have a direct interaction with the clinicians, but I'm wondering a bit on your view of sort of your ability to reach the broader market and how this new strategy will impact sort of sales ramp-up, if maybe the sort of penetration development will be a bit slower with this strategy?

Yes. So I'll introduce this, and I'll hand it over to Warren, if you want to complement. But first of all, I would say that it's not a new strategy. It's an evolved strategy, we have detailed it further. And we still have the opportunities -- we will have a 510(k) cleared test in a couple of months is our ambition. So we still have the opportunity to do partnerships and if we find that a good way forward. But then we will negotiate from a more powerful position because we would been able to validate the assay commercially and also achieve reimbursement. . When it comes specifically to the sales team, we had already planned in our own -- communicated previously that we will build up a sales team that will initially address and focus on the NCI-designated cancer centers. And I know also that this model scales well and are being used by other companies within this field, but maybe that's where I should leave it to you, Warren, and maybe you could talk a little bit about how well it scales and how you see that sales force developed?

Yes, absolutely. And thanks, Anders, and thanks for the question as well. I agree. Certainly, Anders, everything you said was -- we're completely aligned with. I think from a -- the one thing to note as well is that from a strategy perspective, it was always Biovica that was going to be the ones driving demand. So that does not change whatsoever. So initially, we will start out with a smaller sales force of these very technical folks. And as we receive feedback and utilization of the product, we will scale appropriately. The real benefit to calling on specialty physicians, it's unlike the primary care market where there's 10x as many, you can make a pretty significant impact with the small sales force and then scale appropriately moving forward. So from that perspective, this evolved strategy of having a CLIA lab really does not impact what we'd always planned on doing in regards to meeting with the physicians directly and driving utilization.

Okay. And just a follow-up on that. I mean, with the, let's call it, evolved strategy then and also the establishment of the CLIA lab, how will this impact sort of the near and midterm costs, think of all, let's say, rents and maybe also increase of head count?

Well, the most immediate change is the head count that it takes to run the lab. So that's an addition. And in order to do so, it's only a few couple of individuals required to do so initially. But of course, when the volumes increase, we need to increase the head count in the lab as well. And we also have the opportunity to automate part of the process. So that part will scale very well, especially if you consider that the margins will be greatly improved because then we will offer the lab services as well ourselves.

Understood. And my final question, just Warren, you mentioned that you had previous experience from working with lab-developed tests. And I guess that is dependent on having a CLIA lab. So just going forward once you have that, is a lab-developed test a potential route you're going to explore as well?

Yes. So we will offer our DiviTum as a 510(k) CLIA test from our own lab. But going forward, we have options to choose. Is that fair to say, so Warren?

Yes, absolutely. So I completely agree.

[Operator Instructions] Okay. There seems to be no further questions from the phone lines at this time. So I'll hand the floor back to our speakers.

Thank you very much for everyone dialing in and join this conference. Bye-bye.