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

Hello, everyone, and welcome to the Biovica Q3 Interim Report. Today, me, Anders Rylander, the CEO of Biovica; and our CFO, Anders Moren, will be the presenters and the agenda will be a short introduction about Biovica, our company. We'll go through the Q3 highlights. Anders will go through the financials, and we'll finish off with a summary from me, and we'll open up for a Q&A session. During the Q&A session, we will invite our analysts to the call to ask questions, but we will also take questions from the chat using the chat function in the event. And don't forget to check the anonymous check box if you want to remain anonymous. Let's go into a short introduction of Biovica. So Biovica was founded to commercialize our product, DiviTum. And DiviTum stands for dividing tumor, which indicates what we are measuring. We're measuring cell proliferation. And as you all know, cell proliferation is what's essential within cancer. That's the way cancer grows. And by measuring cell proliferation, you will get many benefits. You get an indication before start of treatment how aggressive the disease is. But also, it has proven to be an excellent way of monitoring certain targeted treatments within cancer, and be able to provide quick feedback earlier than with the methods being used, which is today's image diagnostics several months ahead of imaging. This is, of course, most important for the patient, getting feedback so that the necessary treatment decisions can be made, making the treatment as optimal as possible for the patient, but also for the health care providers and the payers because these treatments within the metastatic area in, for example, breast cancer, where we currently have our focus are priced at $15,000 to $17,000 per list price, so being able to spend money where you get efficacy is, of course, very, very important. Our product DiviTum is implemented as a blood test. So it requires a small amount of blood from the patient to be able to analyze and come up with the result. And it's also a very convenient way of monitoring patients on cancer treatments. These claims that I'm making now are something that has been proven in many clinical trials over several years. To date, we have more than 30 clinical trials that we have performed with some of the leading oncologists in the world. That has resulted in peer-reviewed articles that has been published in some of the leading scientific journals in the world. And the results are consistent that DiviTum is an excellent prognostic tool that can indicate before treatment how severe the disease is and how it's going to develop and also as a monitoring tool to be able to monitor disease over time while the patient is being on treatment. I especially want to highlight some new data that was presented in December '24 a couple of months ago on the biggest conference within the breast cancer area, San Antonio Breast Cancer Conference, where Biovica together with our partners presented 7 clinical trials both within metastatic breast cancer, but also within adjuvant breast cancer, an area where there's a strong demand and the need for a biomarker like DiviTum being able to support patients being on adjuvant treatment to get the best possible treatment. I'll go through that application a little bit later in the presentation. Having this result is a super strong foundation for our commercial journey going forward and also having it with some of the leading institutions in the world. Within this area, it's also something that has contributed to our 510(k) clearance, to our Medicare price inclusion and also to create demand for the product going forward. If we talk about the market and the potential, our focus is initially within breast cancer. We have our 510(k) clearance from the FDA in U.S. covering metastatic breast cancer, hormone positive, the largest group within the breast cancer area, where we are active and commercializing our assay and selling it for clinical use currently. Our second priority is the European area where we have focused on some selected key markets, where we also now have partners that are acting and selling and bringing the product to the market. Maybe more long term, we're looking into Japan as our third area that we want to commercialize. And the big news, as I mentioned, is the adjuvant area where there's significantly more patients that are being treated for adjuvant and with recent approvals of new therapies within that area, it creates a demand for a product like DiviTum. And at the same time, we present data that supports that application, so that's the big news in the recent months. If we should move into what's happened during our third quarter. Our quarter spans from -- our third quarter starts in November and ends in January. If we go through U.S., I already mentioned the San Antonio Breast Cancer Conference and the adjuvant data. That was one of the key news. Another one was the agreement that we signed with a health care giant, so-called IDN, an organization that both have hospitals and an insurance part of their business that we signed in December, and we have started using DiviTum now during this month in February, and I'll go through a little bit more in detail where we stand in that process. Another important news that happened during the third quarter is that our CLIA lab was now certified for the last of all the states in the U.S., which is New York. So now we're able to serve the entire country from our lab in San Diego, and it works excellent. And it's another sign of the quality that the team there has been able to achieve setting up that lab. One important news that came after the end of the period just yesterday is the collaboration that we have with Outcomes4Me, a patient group that has more than 250,000 patients, and it's an excellent opportunity for Biovica to create awareness of DiviTum in the patient group that can benefit from the product. And I'll go through a little bit more background on that also going forward. Within our second area, the Pharma Services area, we were able to sign 2 master service agreement, and we also had several work orders in Q3. So that's something that will be reflected in sales going forward. And also talking about future sales, we now have a pipeline which we expect to be, when we closed our fiscal year by end of April, that will be SEK 25 million. So we made significant gains. In fact, we will then have doubled our pipeline of sold but not yet delivered within the Pharma services area. I'll go through that in detail as well. And earlier this week, we announced news with a partnership that we signed together with Eurobio Scientific, covering 8 markets in Europe, and that completes the key markets that we have set out for as the strategic one in Europe. So that's also a great news and a partner which we have strong belief and confidence in, so very positive. And then financial that Anders will also go through the details going forward. Our accumulated sales was SEK 6.3 million, which is an improvement if you compare it to last year. And also, we continue to improve our cash flow compared to last year with SEK 7.3 million for the third quarter compared with the same quarter a year ago. So a breakdown of the U.S. highlights and the sales and what's behind the numbers. If you look at the growth quarter-by-quarter, you can see that we are doing great compared to the same quarter last year, but the sale has flattened out compared to the second quarter where we only are marginally ahead of second quarter. For us, the third quarter is a little bit difficult because it's a shorter quarter with multiple holidays when we compare to Q2. We have Thanksgiving and Christmas and New Year, for instance. However, we're not happy with the growth we expect to be able to grow it better than the 2%, of course. With that said, we're happy to see that recovered well in January, which is part of the third quarter and also February that we just closed before this presentation are our best quarters so far. And we can see that the data, the 7 trials, including the adjuvant data that we presented on the San Antonio conference, not only seems to generate more revenue, but also we see an increase in interest. 30% of the total number of prescribers that has used DiviTum since the start, about 1.5 years ago, have come in since the San Antonio meeting. So we see a growth in number of prescribers, both new ones and new institution, but also that it's growing within our current customers. That's something that we really appreciate and are happy to see. So there are some highlights here that I want to point out, for sure. I just want to repeat also what do we mean with early setting and adjuvant therapy and how does it differ from metastatic therapy, metastatic monitoring that we have been active for a couple of years now since we got our 510(k) clearance in the U.S. If we start with the metastatic setting to the right, as we saw on that slide with the market potential it's fewer patients for a shorter period of time. However, tested more frequently. But when you add it up, the market potential is a lot smaller than with the early setting in the adjuvant treatment. In this area, we have our 510(k) clearance and our Medicare price that we have in the U.S. covers the metastatic setting. If you look at the early setting where the process is as described here, you have the diagnosis. And typically, you do neoadjuvant therapy, which is therapy before you do the surgery, then you do the surgery. And then when you have done the surgery, most often, the vast majority of cases, you do a different type of adjuvant therapies. And for the patients that is in our focus, the hormone-positive patients, typically, it has been endocrine therapies in the past. And just recently, new therapies, the CDK4/6 inhibitors that has been so widely used now for almost 10 years in the metastatic setting has been approved in the adjuvant therapy. That creates a demand for a biomarker like DiviTum to be able to find patients, to sort out patients who has the best possibility to benefit from the treatment and also during treatment to monitor in order to make sure that the treatment is effective. That market is significantly larger based on the number of patients. Typically, you treat these patients over 5 years, and the testing frequency is initially quarterly and then 2x per year. Our 510(k) clearance does not cover that, but we have, during the last couple of months, developed a version of our test, which is called a modified FDA cleared test. It's actually a version of an LDT test. We have completed the validation and now we have administrative work that is remaining before we can launch that as something that could be communicated to our customers, and we can use in our communication, on website and et cetera. So we're making steps here going forward. And also, it's important to say that the Medicare scope is based on the PLA code, and the PLA code does not differentiate on metastatic and early phases of breast cancer. It's breast cancer-only. So this is really positive. And I think this is something that has resulted in an increased number of prescribers. It has increased interest of pharma customers. We've signed new customers and new work orders. And also the interest from diagnostic companies has increased, and I'll come back to that. So we are starting to see some effects of these new results. We also announced in the beginning of December an agreement, a frame agreement, so-called Client Bill agreement with what we call a health care giant. And the reason for that is that this company, so-called IDN, Integrated Delivery Network, customer that has both health care hospitals and -- is a health care provider with its own hospitals as well as an insurance company, and thereby have the ability to make treatment decision that can affect their insurance part of their business. And then by doing so, can benefit from using DiviTum to make smart decisions, both for the patients but as well as for themselves in their insurance part of the business. The frame agreement regulates price and logistics and processes to order, et cetera. And something that we communicated in December is that we expect to see that they would start use it for metastatic breast cancer during the first quarter of 2025, which has happened now during February. So that's very, very positive. But the big potential here is in the early breast cancer adjuvant -- early breast cancer phase for adjuvant treatment monitoring where we are now in discussions of establishing DiviTum as a standard tool to be used for their patients in this setting. And the work here has progressed well, and we have a common view on how to proceed, and we expect to be able to communicate this before summer on, yes, agreements and mentioning the client name, et cetera. So this is a great progress for us, and this is also a very important contributor for us when it comes to reaching our goal of becoming cash flow positive. The Outcomes4Me collaboration that was announced yesterday is also very, very interesting. For a small company like Biovica, at least in this world, you have to find ways to be smart and cost efficient to reach out to the market and create awareness and demand for your product. And I think this is an excellent way to do that. Outcomes4Me is not your ordinary patient organization. I think what really differentiates them is that they are very digital and thereby, they can do targeting. They have a very, very interesting background with the founder, Maya Said, who is a Syrian that came to U.S. and has several degrees from MIT before moving into the health care business that she, after several successful years, became an entrepreneur after being a patient herself and identified a demand for a service like this. And that led to Outcomes4Me that now has more than 250,000 cancer patients. Among those, a lot of them with breast cancer. Breast cancer is one of the most important areas for them, where they also have information about the treatment status, et cetera. And they are doing this collaboration pro bono, which is not typical for them. But the reason that they're doing this and also providing information to the patients about DiviTum is, of course, because they believe it has -- DiviTum has such a great value for the patients. So we appreciate that a lot. We're very grateful for this collaboration and believe that this can make a big difference when it comes to awareness and demand of our product. One thing that I'd also like to mention that we have been talking about on the previous calls, and we also made a change in our organization in April last year, where we communicated that our cost savings in U.S. in parallel with that, we'll be looking into finding partners that can complement our very qualified sales force in order to generate better leverage. And we made progress here as well. And the way we are approaching this is that we are especially looking into partnership that can support us when targeting the community oncologists. That's about 2/3 of cancer patients currently being on treatment. But for us, our current revenue volumes is only about 20%. I think here's where we don't have the optimal structure, and a large diagnostic company with a large sales force that has a big footprint and also structures, IT solutions and processes, resources to target this large part of the market can make a huge difference. So here's where we have been looking for partnerships since we announced that last year. And I think also the big -- this been a big leap forward here. The last couple of months where several companies proactively had reached out to us after the San Antonio data, and we are now in discussion with several companies, and our ambition is to be able in the coming months to announce a collaboration here. After we've done so, we would then use our sales force to target the high-value customers where we have been successful so far. It's a smaller part of the market in terms of where cancer patients are being treated. But it's an important one because those are the ones, the institutions that are well renowned that sets a priority for others. And also where we have strong relationships from both our clinical trials and our sales so far because 80% of our current revenues comes from this category. Another area which will positively impact both sales to designated cancer center and community oncologists are to work with the insurance companies, because if we can improve our coverage when it comes to insurance companies and create more agreements, making sure that we get paid on attractive price levels and also shorten the days outstanding, that will also be a great leverage for our business going forward. So we would focus on those 2 areas and then use partners to focus on the big community oncologist area where you need more strength and muscle than we currently have. All right. Moving over to Pharma Services. So the results that we have from our clinical trials has generated a lot of interest from pharma companies, especially the ones that are active in the CDK4/6 and the next generation of CDK inhibitors. When it comes to the number of companies active in developing new CDK, next-generation CDK inhibitors, we have now the vast majority of those as our customers where we support them in clinical trials. So in this simplified model with the 3 steps, we are now in the first steps of around 15 projects where we serve them with both services and kits. The next step then would be to enter a co-development project to develop a tailored product, the so-called companion diagnostic product, that will be sold after approval as a combination product with the therapy, which would have benefits for both the pharma company by reducing risk for not being approved and also increasing possibility of value-based pricing as well as for the society that -- or for the payers that you would be increasing the efficiency and precision when prescribing this type of therapy. And of course, for the patient that then would know that there is a highly likelihood of responding to therapy. And of course, for the diagnostic company, being Biovica in this case, getting customer financed product development and also to be able to benefit from the investment made by pharma when launching the product also have great benefits. So it's a win-win, win-win sort of collaboration. So we're making progress here as well. We have 3 new work orders. We also announced 2 new master services agreements, so frame agreements. And we expect our pipeline within the services area to be SEK 25 million when we end the fiscal year in April this year. And that should be compared to the SEK 12 million, which we entered the fiscal year, and then we have delivered services during the time. And on top of that, we have kit sales, which is about the same number currently. So it's a combination of the two. When assessing the pipeline, you should also be aware of an average clinical trial time is 2 to 3 years. So the revenue would then be distributed over that period of time. We also have noticed an increased the number of -- increased interest from Tier 1 customers. Tier 1, we define as pharma companies with revenues more than USD 10 billion per year. And now we've onboarded another one, and we have discussion on onboarding additional ones. So this is really exciting. Those customers have more resources, and we also noticed that our projects becomes bigger and our value proposition becomes stronger, and we're able to increase our revenues when working with these customers that have more resources. Also here, the San Antonio data that was presented, we've seen significant increase and also it led to agreements. So finally, for me before handing over to Anders is an update in Europe. As I said, starting this week, Eurobio Scientific was announced as the latest partnership. And this agreement covers Benelux, DACH, so that's Germany, Austria and Switzerland and the U.K. And that's 60% of the key markets as we have defined them in Europe. The other ones are the Nordics, where we now have Axlab working to cover the Nordics. And we also have Palex covering Spain and Portugal. We think this is a very exciting collaboration, and it started that Eurobio entered the oncology area by acquiring 2 products from Myriad, and that was a starting point and then they added DiviTum to be complementary to those products that they have acquired from Myriad. So really, really exciting with this collaboration. Okay. I think that was my slides for now, and then I'll hand over to Anders before I'll come back and summarize and open up for Q&A. So we switch places, and Anders, please.

Thank you, Anders. A few slides on the financials. Year-to-date, if we start looking at that, our net sales was SEK 6.3 million. That's close to SEK 1 million more than same period last year. If we zoom in on U.S., year-to-date sales by third quarter was SEK 2 million. That's a significant increase versus same last time. Then switch over to the quarterly sales and have a look at quarter 3 sales this year versus last year. You can see here, we sold SEK 2.3 million almost. You can see here also when we break it down by revenue streams or segments, we have a significant increase on all revenue streams. The most significant ones are coming on research tests and IVD tests in the U.S., which is the area where we really want to be. That's higher value for us because we get higher margins on those and we have higher value because we also have access to the data from the tests, which we don't have when we are a kit supplier to the pharmaceutical industry. Summarizing just the key financial in terms of cash flow. You can see here that we have improved our cash flow from -- net operating cash flow from minus SEK 23 million to minus SEK 17 million. So that's a little bit more than SEK 6 million improvement from last year, and that is coming from reduced operating expenses coming from the restructuring of the company that we did in April last year, which we have delivered on and also higher sales compared to last year. So with that, I'll hand it back to Anders for a quick summary and also opening up for Q&A.

All right. Thank you, Anders. So to summarize our presentation here. So we have a product, DiviTum, that has proven itself to be able to provide a lot of value, especially for patients as well as health care providers and payers, and also now in the pharma services area for pharmaceutical companies developing new therapies within the area. And together with some of the leading oncologists and the leading institutions in the world, we've been able to document the product with great result, and we have a solid documentation of the capabilities of the product. And that work has led to a lot of key achievements the last couple of years, starting with the 510(k) clearance a few years ago, setting up the CLIA lab, getting into the Medicare price system. That has led to also our commercial agreement that now covers more than 70 hospitals, which is where we get the majority of our revenues through those Client Bill contracts, but also a significant part from the Medicare system. I think what we mentioned now, the biggest contract so far is with our health care giant with revenues over USD 100 billion, where we have been able to progress the work in order to initiate sales within the metastatic area, but also discuss a plan and the path to enable DiviTum as a standard tool for monitoring of adjuvant treatment in breast cancer area. Now also with the Eurobio Scientific agreement, we cover the key markets that we have set out in Europe, so that's also an important milestone. And now we have the majority of companies developing the next-generation CDK inhibitors as customers, and we are working to provide more value and thereby also being able to increase our revenues from these customers. And the latest is the data that supports monitoring of adjuvant, which is also a great milestone that has contributed to some of the others here that we mentioned that was announced in December last year. If you look ahead, I think we have some very important milestone coming up. The first one is very close, is that complete what we started being able to offer. It says LDT here, but it's really a modified FDA cleared, small but important difference from our CLIA lab in San Diego, which will happen here in the coming weeks. As we talked about our process together with the health care giant to establish DiviTum as standard of care, especially for the adjuvant monitoring is something that we are working on as well and expect to be able to present and make a PR on the plan before summer. Same thing we are in late phase of discussion with potential partners for U.S. sales, focusing on the community oncologist segment to complement our strong sales force who then can focus on the high-value areas that they have proven themselves to be strong. Looking a little bit further down the road, the NCCN guideline inclusion is something that we are also working with. The Breast Cancer Guideline Committee group had their yearly meeting in August, and our ambition is to submit a summary of all the clinical data that we have achieved within the metastatic area to initiate such a discussion to get a prognosis on when we can expect NCCN guideline inclusion. And the last one, which is a little bit more difficult to forecast, but I think with the strong portfolio of companies and also the addition of Tier 1 companies, we're getting closer to the first companion diagnostic project with a pharma company. We have discussions already, and that's also a potential game-changer for the company. So although we have challenges when it comes to our sales development recently and our liquidity, we are very confident and have great expectations for the future to come with the situation -- with the milestone that we've been able to pass and the upcoming milestones that we have. So thank you very much for that. And now we open up with questions in the Q&A session.

So I guess, questions that we have received beforehand, I think we can answer some of those. And I think the one is liquidity for long have you -- are you financed? And yes, we are. As we wrote in that quarterly report, we have -- our liquidity lasts until summer this year. So of course, we understand that's a very short runway. And we have, since some time, taken measures and are working on that as well. And we will, of course, get back to that when we have something that we can communicate. So that's ongoing as we wrote also in the report. I think that was the question that we have. With that said, I'll thank you all for tuning in. And yes, thank you all for your time and over now from the Biovica team. All right. Thanks.