Camurus AB (publ) (CAMX) Earnings Call Transcript & Summary

Welcome to the Camurus audiocast with teleconference Q3 2022. [Operator Instructions] I'll now hand the call to CEO, Fredrik Tiberg. Please begin.

Hello, everyone, and welcome to our third quarter earnings call. I'm pleased to present another productive and financially strong quarter for Camurus. Before starting the presentation, please note our forward-looking statements. So here is today's agenda, which includes a short introduction with third quarter highlights, followed by financial, commercial and R&D updates. With me on today's call is our CFO, Jon Garay; and our Chief Commercial Officer, Richard Jameson. As I mentioned, we had a good third quarter. Financially, it was our best to date, where we delivered positive operation results for the third quarter in a row and strong cash flow contribution of SEK 90 million. Based on the development, we raised our guidance for full year operations result by SEK 45 million in the interval midpoint. We will continue to gain market share. We reinforced our leadership position in the opioid dependence market in Europe and Australia and continued our market expansion efforts with new regulatory and pricing approvals. On the R&D side, we continue to progress our late-stage pipeline programs, including variation applications to expand the indication for Buvidal to include chronic pain. We reached a significant milestone of finalizing recruitment in our ongoing Phase III trial in acromegaly, and we also started dosing of patients in a Phase IIb study in polycystic liver disease. Finally, we held our Capital Markets and R&D Day in Stockholm and presented our 5-year vision for growth and innovation for Camurus. And here, I want to thank you, everybody, who participated in this meeting and made it such a great event. So with this very brief introduction, I'll hand over to Jon for a financial update.

Thanks. Hello, Fredrik, and good afternoon, everyone. We would like to share with you now the main highlights of our financial performance this quarter. From a total revenue point of view, Camurus achieved SEK 241 million in the quarter, delivering a growth of 57% versus same period last year, and with product sales of SEK 241 million, growing at 58% versus prior year and 7% versus prior quarter. Operating results for the quarter was positive and reached SEK 41 million, meaning a SEK 48 million improvement versus third quarter last year. And the trend displayed by the chart shows our commitment to profitability. Company achieved an earnings per share in the quarter before dilution of SEK 0.63 equivalent to a profit after tax of SEK 35 million in the quarter. On a year-to-date basis, company revenue was SEK 688 million, growing 65% versus prior year, delivering a SEK 53 million operating result and a SEK 42 million positive profit after taxes. If we now move to next slide, we can see the main components of our operating results this quarter once revenue has already been covered. Gross margin reached SEK 217 million, improving 360 basis points versus same period prior year and delivering 89.1% year-to-date. Three factors explain our gross margin improvement: firstly, 200 basis points driven by efficiencies in our manufacturing and supply chain operations; secondly, 85 basis points driven by better country and price/mix; and finally, 79 basis points driven by FX. On the OpEx side, company reached SEK 184 million, which is a 32% increase versus same period prior year, driven by following 3 factors: firstly, marketing and distribution investment to support our market penetration in own territories and expansion of Buvidal into new markets; secondly, administrative expenses driven by corporate functions development; and thirdly, R&D progress in the 3 indications of our CAM2029 program. Company operating results became positive by SEK 41 million in the quarter and SEK 53 million year-to-date, mainly driven by sales growth and gross margin improvement. As we continue our investment in our pipeline to bring product candidates to market, it may still take a couple of quarters to see our profitability stabilizing. At this point, Fredrik and I want to communicate you all an improvement in our operating result full year guidance. From a revised guidance range of minus SEK 20 million to plus SEK 40 million to an improved range of plus SEK 40 million to plus SEK 70 million. If we now move to next slide. Our cash position at quarter end was SEK 520 million, delivering a 22% growth versus same period prior year. Camurus generated SEK 90 million cash in the quarter, mainly driven by strong operations, generating SEK 55 million cash and warrant program exercised by our employees generated SEK 37 million. As you may see in the graph, our business growth has almost required no investment in working capital. And at end of quarter, Camurus has no debt. Our guiding principles for capital allocation continue being, firstly, reinvest in our business with 2 clear objectives. On one hand, to accelerate Buvidal market penetration and geographical expansion, and on the other hand, bring CAM2029 program to market as planned. And our second guiding principle is to support our company strategy in the area of synergistic M&A opportunities, enhancing our company value. Thanks a lot, everyone, for your attention. And now I would like to pass the word to Richard.

Thank you, Jon. As already mentioned, Buvidal sales grew 58% year-on-year and 7% versus the previous quarter. As expected, growth was impacted by the vacation period in some markets in Europe, with fewer patients initiating treatment, but then picked up again in September. Notable growth was seen in the U.K., where our new funding started to become available after government's decision to invest in improving the treatment system. In numbers, we passed the milestone of how we sold more than 1 million Buvidal units since launch and now have more than 32,000 patients in treatment at the end of the quarter. Our market expansion success continued with new regulatory approvals in Egypt and Saudi Arabia, where Buvidal became the first approved maintenance treatment for opioid dependence and launches are planned in Q4 in those markets. We also expanded our reimbursement in Belgium, taking away hurdles and opening up for distribution by community pharmacies, and we're announcing a very high interest among prescribers in that country. In addition to granted approvals, we have 5 additional regulatory applications under review with expected approvals in 2023. We remain committed to share the growing evidence for treatment of Buvidal at digitational meetings and congresses. And as you can see, our medical teams are very active across our geographies. In addition, we see continued flow of publications, describing use and treatment outcomes with Buvidal, and we have several new publications underway. Moving to the next slide and an update on information about the market expansion process in the U.S., where our latest news from Braeburn is that the FDA inspections of Braeburn's third-party manufacturer are about to be completed after various interruptions, including COVID and other external factors. We're now waiting for information about the inspection outcomes and tie to resubmission of the Brixadi NDA to the FDA. As we've mentioned previously, the nominal time for resubmission to approval is 2 or 6 months, depending on the FDA's classification. In waiting for the treatment to come available in the U.S., we are pleased that more than 2,000 patients have or will receive Brixadi in ongoing investigator-initiated trials, generating more experience and building the evidence base across the clinical settings in the U.S. On that brief update, I'll hand back to Fredrik for the R&D.

Thank you so much, and let's move over to an update of our latest R&D developments. And here, our Phase III and Phase II clinical programs for CAM2029 in rare diseases continued to progress during the quarter, along with programs for CAM4072 in genetic obesity diseases as well as CAM2043 in Raynaud's disease. We begin with an update on 2029, our octreotide subcutaneous depot product. It's being assessed as an investigational treatment in 3 rare disease indications as I mentioned, acromegaly, gastroenteropancreatic, neuroendocrine tumors and polycystic liver disease. The goal is to develop a best-in-class therapy with potential for enhanced efficacy as well as improved patient convenience and quality of life, and in the case of PLD, the first approved treatment. In acromegaly, we have made good progress with our 2 Phase III trials during the quarter. Recruitment has been completed in the randomized Phase III efficacy trial, and we reached our enrollment goal of 70 new patients in the long-term safety study. Based among other things on requests by patients and investigators, we have recently extended the study -- this long-term safety study by an additional 12 months period to continue to follow patients in the study in parallel with our regulatory submissions. We have a really exciting year ahead of us, topline Phase III results expected around the end of the second quarter 2023, followed by long-term safety results in the second half of the year. And then submissions of the first regulatory applications late 2023, early 2024. In parallel, we will be ramping up our pre-launch preparations, including building a U.S. commercial organization in time for a possible NDA approval late 2024. So we also had very good progress in our Phase III trial in neuroendocrine tumors. The study is uniquely designed to assess superiority in progression-free survival with CAM2029 versus current standard of care with Octreotide LAR or Lanreotide Autogel. This is the largest randomized controlled Phase III trial performed in this indication area today, and we have now recruited over 25% of the target 302 patients that will be enrolled in the study. Patient recruitment is expected to be completed mid-2023, and the efficacy part of this study will be completed after 194 progression events have occurred. Based on the expected progression-free survival for the 2 groups, we are planning for regulatory submissions in 2025 in this indication. We have a large and growing interest in the study among investigators and patients, and a great steering committee of leading international key opinion leaders as well as uniquely a patient representative, who brings important patient perspectives into the trial and also the study conduct. So talking about neuroendocrine tumors, today is the 10th of November. It is the World NET Cancer Day, supported by Camurus, among others. And the purpose of this day is to improve awareness of neuroendocrine tumors cancers, pushing for scientific advancement with focus on identified unmet medical needs for patients and promoting the 32-member organizations from 26 countries located around the world. So this is, I think, a very interesting initiative. Moving over to our last indication, polycystic liver disease. We have during the quarter started dosing of patients in our Phase II trial for treatment of PLD. PLD is a rare genetic and chronic disease with high unmet medical need and currently, no approved medical treatment. Here, we have started a 3-arm randomized trial with primary endpoint being to study liver volume. And the key secondary endpoint in the study is Camurus' in-house developed patient-reported outcomes symptoms tool, which we call PLDS. This has been developed in close collaboration with the U.S. FDA. We plan to complete enrollment in this study during the first half of 2023 and are expecting topline results in 2024. So all in all, we have had an impressive -- we have an impressive clinical program ongoing with 2029 and many near and midterm value triggers. Before I conclude, I would just like to mention 2 other programs in our pipeline. First, I mentioned that earlier, CAM4072, our long-acting formulation of setmelanotide, which we have in development or which is being developed by our partner, Rhythm Pharmaceuticals, for treatment of rare genetic obesity diseases. Rhythm has been progressing a Phase III trial of CAM4072 during the quarter. It's a switch study from daily injections, and we are expecting topline results here sometime in 2023. In addition, they are planning to start a second Phase III trial in -- now it's scheduled for first half of next year. That's slightly delayed compared to the previous plans. In the quarter, finally, we also completed the clinical trial report for our Phase IIa study for the treprostinil depot CAM2043, where one of the most interesting observations in the study was the significant effect seen in the Raynaud’s Condition Score after a single dose of CAM2043, and actually up to 15 days post administration. Following discussions with investigators, key opinion leaders and also performing updated market research, we are now planning to start a follow-up clinical study next year in this indication. So with that, let's finish off with some key takeaways from the third quarter. I'm very pleased with the overall development and performance in a challenging environment, where we have shown good top and bottom-line growth. And we're profitable for the second consecutive quarter. We continued our market expansion with approvals in EU and MENA, opening new possibilities and strengthening our position outside our core markets. Our late-stage pipeline progressed according to plan, and we have several important milestones coming ahead of us, including topline results from up to 3 -- Phase III trials next year. Finally, we raised our company operating results guidance, confirming profitability in the full year 2022. So with these last remarks, let's move over to Q&A and operator, please take over the call.

[Operator Instructions] Our first question comes from the line of Suzanna Queckbörner of Handelsbanken.

Suzanna Queckbörner, Handelsbanken. I have 3 questions. First of all, you shared a graphic of 37,000 patients by the end of the year with currently 2,000 patients added during Q3. That takes you to 32,000. How do you think it's still possible to actually reach your estimate of 37,000 by Q4? Is this appropriate?

Thank you, Suzanna. Yes, sorry, please go on.

No, no, please. I think maybe one at a time, it's easier.

Yes. Yes, I think -- I mean our view is that this is still possible. It is slightly challenging, but we have -- our projections are not deviating at this moment. So let's see when we end the year. We're working hard to reach this.

Great. Okay. And then how should we think about CAM2029 with the clinical trials going forward? At the CMD, you signaled that post 2023, the number of active CAM2029 trials was decreased. But now you talk of the long-term safety study is being extended to allow treatment and assessment of patients for a further 12-month period. I believe that, that in over 2. So that would mean it would potentially spill into '24 and '25. And I know you said that this necessarily impact your regulatory timeline, but how should we think about this decision? Will this support your regulatory submission? And why is there a need for this additional expense?

That's -- I mean very important reason, of course, is that these patients will be able to continue staying in treatment for a longer period of time during the time that the submission is being reviewed and before approval. And basically, the cost -- the additional cost of this is, we think, is well compensated by the value that this is providing. So this is nothing that impacts our timelines from an approval standpoint, but it's something that will yield a lot of valuable information to us. Also about the long-term use of CAM2029, including in these studies, we are studying a lot of patient-reported outcomes, and this is valuable information once we are in the launch mode. So I think it's well-invested money, and it's covered by our projections.

Okay. And then a final pipeline question on CAM2047. I remember from the Q2 report, but now again that you were unable to reach the primary end point for the Phase II trial here. And I'm trying to understand how -- why or how you're still pursuing this rather than other reformulation, for example?

Well, I mean we are certainly working with a lot of other early-phase programs, and that's not impacted by this. The outcome of our discussions with our investigators and as well as key opinion leaders and having performed market research makes us take the decision that we want to progress with another study to resolve and understand a few things that are outstanding for us and then possibly going into a registration study. So that's the situation right now, and we will, of course, update on this. But it is -- we think it is wise decision to take, of course. Otherwise, we wouldn't have.

Our next question comes from the line of Viktor Sundberg of Nordea.

I have 3 questions, if I may. So on R&D costs, I noticed that they were down quite a bit in this quarter versus last quarter. So I just wanted to understand what's driving that? If you could elaborate a bit on that, that would be helpful.

Yes. Overall, I mean, I can leave over to Jon here soon. But I mean, the -- our clinical studies and costs are very milestone-driven. So they are going a little bit up and down, but I'll leave it over to Jon to talk about the details there.

Basically, bit of that, that's the answer. So in Q2, we were reaching certain milestones in acromegaly mainly in Q3. We were not planning to reach those. We have planned them in mid-October in which as Fredrik has announced, the screening and patient enrollment and the Phase III study is completed, and this is where we have the milestone. Nothing strange. For us, it's normal to have this up and down in the R&D driven by milestones, Viktor.

Okay. Perfect. And also, I'm a bit curious here also about Australia. So I was a bit surprised that Australia did not deliver higher sales, given the favorable FX a little bit in the quarter. So just wondering what the dynamic was for the Australian market this quarter.

Yes. We -- I think -- I can be wrong, but if I remember what, we do not disclose Australia sales separately. I think we disclosed Asia, including Oceania, which is Australia. And perhaps, what you are referring to is that in this segment, in Q2, we had SEK 93 million -- sorry, in Q3, we have SEK 93 million, and in Q2, we had SEK 105 million. So you see a slight decline in there. Is this the topic you are referring to, Viktor.

Yes, that's correct.

So yes, so the topic is, it has nothing to do with Australia. It has to do with our expansion in Middle East and Africa. You may remember, in Q2, Fredrik and Richard mentioned that we obtain present investment in Kuwait, and we were able to supply the first order into Kuwait. So that's why we had SEK 93 million -- sorry, we had SEK 104 million. In Q3, Fredrik has shared with all of us that we have been able to obtain Saudi Energy price reimbursement. But the orders for those countries, they have not been delivered in Q3, okay? They are in progress. So that's why you see this phasing that from our point of view as a company. It's normal when we are expanding into Middle East and Africa region.

Okay. Great. And my final question was just -- I'm a bit curious if you can give any more details from the rollout in the U.K., which is going very well at the moment, I'm hearing. So I just wanted to get some more color on the sales momentum in the U.K., if that's okay.

Yes. Yes. I mean we had -- it's Richard here. We had a strong quarter in the U.K., and that is because the money is now making its way into the frontline treatment services from the government initiative. It's initially focused in some key target areas of which at the top of my head, I think there's about 100 where that will be focused. And as that continues to go, we have the more opportunity of patients being initiated on to move it out.

And also, I think we have seen very good feedback in the U.K. market and across the board. So it's a combination, of course, of great feedback, but also that we are seeing allocation of money coming through.

[Operator Instructions] The next person is Peter Östling of Pareto Securities.

A couple of ones, some of them quite short. Just referring to the increased guidance that implies around that Q4 will be around either minus [ SEK 13 million ] to plus [ SEK 17 million ] in EBIT. Can you just describe what the moving pieces will be that makes you ending up in the lower high range of your guidance?

Thanks a lot, Peter, for your question. The main leverage is the progress of acceleration in our R&D pipeline. As we have explained a few minutes ago, our main programs are based on milestones, and the earlier -- we can reach those milestones, the earlier we will have the triggering event. And as a consequence, we will need to do the milestone in our books. That's the main reason behind it.

Okay. So the previous guidance for R&D of around SEK 0.5 billion, that could be pushed out into early '23 instead some [indiscernible].

Yes. I mean, keep in mind, we are talking about SEK 0.5 billion, which is a huge number. So yes, we may be talking around SEK 480 million, SEK 470 million. Yes, it will be a pure phasing topic. So that's right.

Okay. And just 2 quick ones on CAM2043. You seem to go along with that keeping that project. And I was just wondering, the next one that you will do in Renard, will that be a similar size kind of study as the first one? And also, what is your plan within the larger indication, pulmonary arterial hypertension?

Yes. Good question. What we are looking at is a smaller study to resolve a couple of outstanding questions relating to repeat dosing and exposure. So it would be an intermediate study exploring those details so that -- and that study can be started relatively quickly. It will be -- and it will also be the foundation for a possible decision for the pulmonary arterial hypertension indication.

Okay. Are you still talking about the new study for Raynaud's? So that will also form the basis for -- if you will go along with...

Yes. I mean it's a new study for CAM2043. Yes, that's correct.

Okay. And finally, in the SORENTO study, in the control arm, is there any risk that in the readout, if you get an unbalanced between Somatuline and somatostatin. It seems like that Somatuline a little bit efficacious than somatostatin, if you go through the literature. So is there -- could there be a risk if there is an imbalance in the control arm that you may have more difficulty to reach your primary endpoint?

Well, I mean, we are, of course, stratifying for a number of different parameters. So that will be looked into. I think which pallet is most efficient in this case. I think if you talk to experts, it's -- I don't think there is any clear idea. But we feel comfortable that -- I mean when we started the study, we were, of course, looking also to the prospect of quite a number of patients would end up in the Somatuline arm. So I think that was part of our original hypothesis here around the study and also the plans. I mean there is no guarantees in these types of studies, but we see through our different interactions with both statisticians and the clinical community. We feel that the design is likely to result in a positive outcome, but that remains to be said -- seen.

And we've had one further person join the key. It's a follow-up from Suzanna Queckbörner of Handelsbanken.

I have one follow-up question. On the European growth, the CX Suite. Can you give me a breakdown of what countries are contributing and to what extent? And maybe also in terms of large or institutional customers versus smaller customers.

Richard, do you want to...

Yes, sure. So in Q3, obviously, we're impacted by the holiday period in some markets, some more than others. We had good growth in the larger markets in U.K. and in Germany in the quarter as we're seeing better access and better penetration into those markets. Sorry, was there a second part of the question, Suzanna, that I miss.

Yes, I wanted a proportion of how much each of these countries are contributing as...

I don't think we've heard that granularity.

And currently, there are no further questions from the phone lines at this time. So I'll hand back to our speakers.

Okay. It was a pleasure to have you all listening into this call today. Thank you again for your interest, and I wish you all a very nice day. And welcome back to our Q4 call on the 14th of February. It will be an exciting day. So thank you very much.