Cinclus Pharma Holding AB (publ) (CINPHA) Earnings Call Transcript & Summary

A warm welcome to Cinclus Pharma's Q2 report. And with me here today, I also have our CFO, Maria Engstrom. But let's start with the first slide, where we will have a short introduction. There might be some new investors in Cinclus Pharma where -- Therefore, I would like to introduce you to the company. We are a Swedish pharma company, focusing on gastric acid-related diseases. We have a lead candidate called linaprazan glurate, which represents a new mode of action, a new class called PCABs. We have developed the next generation of the PCABs, with a unique prodrug that gives us the opportunity to secure acid control over 24 hours, which is needed for the most severe patient population in eGERD, which is the indication. And also in this target population of the severe eGERD patient, that is where the biggest unmet medical need exists currently. So that will -- and there, we will have a unique possibility to heal these patients, thanks to this new product development. Which -- we also have already delivered very good, strong, solid Phase I studies and Phase II study. And now we are going to entering into the Phase III program, and that was -- and this -- and the first study of the Phase III is now funded via the IPO that we did earlier this summer. We also have a very strong investor base now, of course, we have many shareholders. And the corners in the IPO, we had investors, institutions with a good track record in the sector, such as Linc, AP4, Trill Impact, Eir Venture and Irrus and Regulus. So good knowledge within biotech. Also worth mentioning here is that we have also an interesting peer in U.S., which will be our main competitor in the future. And that is a company called Phathom Pharmaceuticals. And of course, that's good. I mean -- and they have just had an approval of their PCAB in U.S. and it looks very promising, the first quarters of sales and also with good feedback from the investors and increase in their stock values and market cap now coming above more than USD 1 billion. Going further then, I have already mentioned this is a very big market. If you look into the GERD overall. Also. But if you also go into the erosive part of the GERD when the patients get erosions in the esophagus, that represents approximately 1/3 of the entire GERD population. But as we said, as I said, our target population is the severe GERD patients, who suffer from the most severe erosions, a grade called C and D. That group is approximately in -- globally, we foresee approximately 19 million patients where of 10 million of these are in U.S. and Europe. And then we're talking about 10 million patients in the western part of the world. Of course, that gives us -- despite we are focusing on a niche population, a blockbuster potential, especially if you look at the price level as we now can benchmark with vonoprazan, which is the Phathom Pharmaceutical drug in U.S., they have a price level per drug -- per tablet or a little bit more than $20 per tablet. And that gives you a healing session cost for approximately USD 1,200. And in what we can foresee is that we have approximately 1 to 2 healing sessions needed per patient suffering from severe eGERD per year. And that by itself gives a very interesting market potential. Looking into Europe, the price levels are indeed lower, but definitely a very interesting market potential. In Europe, you also have the possibility to be first-in-class. So that's also interesting to see to follow. But as you can see, price level in Europe, we estimate approximately EUR 3 per tablet, going further. Okay. Let's go then to the next slide regarding our positioning and what we are aiming for. I have already mentioned that we have developed a unique prodrug which represent the next generation of the PCAB and that gives us the opportunity to more or less shut down the asset production and having PH -- of PH4 levels more close to 100% of the 24 hours. And that's really needed for a patient with severe eGERD, who has more or less an open wall between the stomach and the esophagus, where acid content flooding up in the esophagus and cause the erosions. And you need actually to stop that and you need to stop it for 24 hours to have a chance to heal them. And so they are also not relapsing as well. So that is unique compared to the other PCABs, the first-generation PCABs who has approximately 60% to 85% of acid control over the 24 hours. And then also compared to the first PPIs that is current standard of care, like Losec and Nexium might be familiar with who has acid control between 40% to 70%. We have a very fast onset. So it's you have full effect with our drug within 90 minutes, I would say. And that is definitely much better than what we have seen in the market. But this acid control, which is so important for our target population, we have already seen that, that will deliver healing, especially of the severe patient groups where we have a very, very good effect difference compared to the current standard of care, with more than 50% unit difference. And that should be compared with vonoprazan, our main competitors in the future, have effect difference to be the same -- compared with the same comparator between 10% to 20%. And we also have -- we will -- we are aiming for to have to decrease the healing time by 50% compared to a current standard. So we will heal the patients in 4 weeks, that's ambition. And of course, we have the ambition to deliver superiority in the Phase III program when it comes to healing of this target population, the C and Ds, both in 4 weeks, but also in 8 weeks. And also, we will have an ambition to deliver superiority when it comes to symptom relief, where we also are focusing on the 9x symptom, which is the most complicated and complicated symptom side effect they have these patients. And if we deliver that, which we think definitely is possible. We have already seen that we are significantly better in healing for the severe patients in the Phase II. And if we deliver and repeat that result, we will definitely have a possibility to claim that also in the label, which also will be unique. The competitors do have a noninferiority label today in the U.S. And so this is a very good opportunity for us. And the other thing -- the other perspective, which I think is important also when we look into our target population, is that we are in contrast to what we have seen when we have seen launches in this area before. We saw it when AstraZeneca launched Nexium, and we saw it when Takeda launched vonoprazan in Japan. And we can also see it now when Phathom is launching vonoprazan in U.S. They have a very, very broad ambition where they're focusing on patients with lighter disease and also only symptomatic disease. And that is -- could be, of course, if you are first in class that is a good opportunity, but also it takes a lot of resources, and it's definitely a big pharma strategy. We will, on the other hand, have a 180 degrees different strategy where we are focusing on the severe patients, and that will also I mean we will also then, therefore, only focusing on the specialists, the gastroenterologists who is treating these patients. And that is a very cost-effective way of launching. And it also gives you an effect positioning in the market, which is definitely needed. And also that meets the requirements, both from payers but also for the patients who is suffering from the most severe -- who is not treated with the current standard of care. So also there, you have the biggest unmet medical needs. So I think this looks very interesting and very cost-effective and definitely a possibility for us to differentiate versus potential competitors in the future. So if I summarize this, our focus is to have eGERD as an indication with all grades approved in the label, but the security ambition will be within the severe patient population that we have in healing, where we are aiming for superiority, and we are aiming for -- to heal them in the half the time compared to standard of care today. And also, we are aiming for superiority when it comes to symptom relief, both faster and better symptom relief. And then we have another indication, which we are in parallel looking into, and that is a treatment of Helicobacter pylori, an eradication of that. And we're going to do that only with one antibiotic, thanks to our acid control that actually have the potential to deliver this good acid control that's needed for amoxicillin to work and actually eradicate the bacterias. And -- that also -- the benefit with that treatment with that dual treatment compared with the current standard of care where they are using 2 antibiotics where one of them, clarithromycin, do suffer from quite high level of antibiotic resistance, approximately 30% in Europe and U.S. And if we can deliver as good as result as the triple therapy. Definitely, this has a chance to become the next -- the future first-line treatment for HP eradication, since you are reducing the risk of antibiotic resistant with only treating with a narrow spectrum antibiotic like amoxicillin. So this is also very interesting and very interesting opportunities for the future. We will talk more about this in the future and let you know more around our plans for this indication. Time lines. When it comes to our initiation of the Phase III. We -- as you have seen, we have already a CRO called PSI, a Swiss company. They will take care -- they will manage the eGERD Phase III program. And we are now preparing everything for having the first patient in during 2025. And we estimate a readout of the healing during the year after, so in 2026. And that is, of course, very interesting milestone for us, which then will lead us to initiate also the second Phase III program, but also to finance that based on that milestone. As you have -- as you can see in this, we also have a plan for a H. pylori development, which definitely we will come more -- come back to more into details later. News flow is also interesting. Of course, now we are looking to start up the Phase III program -- first Phase III study, as fast as possible. And that will create definitely news, but also medical and publications and congresses and abstract publication as well, will deliver news as well. In parallel, we are also working with different business development activities, which we also estimate to deliver during the next coming years here. So I think -- and then quite confident that we will deliver very interesting news during the next coming quarters here. Next slide, the summary of key events during the second quarter. I mentioned most of them already, but I can just give you them now here in the right order here. I mean we -- as you already know, we successfully managed to do the IPO in June, and we raised approximately -- we raised SEK 750 million. And currently, we have a market cap of SEK 1.5 billion approximately. And I think it's worth mentioning, this is the first IPO in Biotech in Stockholm main market since 2018. So it's -- so we are very proud of this, and this gives us definitely a very good fundamental for taking the next step and further develop this coming closer to the market and a registration of the substance. When it comes to operations, we also have finalized Phase I studies, which was definitely needed to bridge the old formulation we used in the Phase II and the new formulation, which will be used in the Phase III, but also will be the formulation that will be commercialized later on. And we will definitely also have publications on this and presentations of this, and we will come back about the results and the presentation, which will be holding in UEGW in Vienna later this fall. We also have finalized some preclinical studies. And as you can see here, and both of them with good results. We also -- as I also have mentioned before, we have a patent expiration -- the original patent expire after extension approximately 2035 in Europe and U.S. So therefore, we also have worked quite heavily on -- develop some kind of mine field around the substance. And the first one is, of course, the data exclusivity, which you will get in some markets from the product approval in Europe, you get 10-year data exclusivity. In U.S., you get 5 years, but we also have a grant from FDA. So if we view the H. pylori indication first, we will get an extension of another 5 years. So it's a possibility with 10 years data exclusivity also in U.S. On top of that, we are developing more patents. We have an approval of more patent in U.S., expiring 2042. We will have more polymorph patents coming up there. And we also have formulation patents and -- which would give us a patent until 2040. And these patterns, of course, we are adding up in more markets. And what we can see here is that we now have also new and national approvals in Hong Kong and Mexico, and we will have more coming up. Of course, we're also looking into other patents and filing of other patents. So we have a very, very strong mine field in this area later on. After the period, as I mentioned, we have -- we have signed with a CRO company called PSI who will manage the eager program and starting up that work. And -- and these processes have started during the summer. We are now doing the site selections and preparing to start up the study and the first patient recruitment next year. We also have, during the summer now produced the study medications for the new formulation. And that -- so we can make sure that we have these -- both the comparators and the placebos and also the active substance insights in time. So everything is ongoing. And here, we are working together with a company called Lonza, which is a well-reputated. Okay. I think that was the last slide regarding the quarter, but also worth mentioning, we also are working now and adding up people to make sure that we have the right team for the start and initiation of the Phase III program. Currently, we are approximately 26 coworkers, where of 50-50 when it comes to employees and consultants. And I think we have a very strong team with both know-how generally, our product development, but also specifically within this area of PPIs and specifically within PPI development as well. With that said, I hand over now to Maria regarding the financials.

Thank you, Christer. So I will now go through the financial overview, and we will start with the income statement. So net sales was compared to last year, both for the individual quarter and the first half of the year. The corresponding figure for the previous period was a milestone payment from the outlicense into Sinorda Biomedicine in China. The operating expenses both G&A and R&D was -- they were lower than the comparison period for the first half of the year. The G&A expenses were a little bit higher for the individual quarter, but we have realized a one-off IPO preparation expenses in 2024 for SEK 6.9 million for the first half. And also in the period in 2023, the comparison period, we had IPO preparation expenses of SEK 9.3 million, and that was basically IPO readiness and some legal expenses. The R&D expenses were lower than the comparison period, and that was -- they ended up at SEK 51.3 million for the first half and SEK 20.8 million for the individual quarter. We had no studies running in 2024. They were in the late stage, no patient recruitment. So the studies, the clinical studies were basically finalized in the first quarter of this year. And the comparison figure, of course, include cost for the Phase II study, which was running back then. The EBIT show an improvement of SEK 25.5 million in the first half of the year and in the individual quarter SEK 12.7 million. The financial net was also lower than the comparison period, and that was due to an offset by positive unrealized currency effect we have realized interest expenses from the shareholder loan that was fully converted in the IPO. But for the first half of the year, we had expenses for the interest expenses for that. The tax is due to an internal [ IP move ] from our Swiss affiliate to our parent company in Sweden. Net profit then increased with SEK 31.8 million for the first half of the year and SEK 19.5 million for the individual quarter. So -- and next slide, then I will go through the financial position and the cash flow and the cash position. The cash flow for the first half of the year was SEK 595.5 million, and that was, of course, the result from the new share issue in June. The cash position at -- in end of June was SEK 684.7 million, and the new share issue, as Christer already mentioned, brought in a gross SEK 715 million and approximately SEK 60 million in costs, ending up net at SEK 655 million. Equity also increased with SEK 750 million compared with December last year, and that was due to the new share issue, mainly but also the offset issue of the shareholder loan. Next slide, show our 15 largest shareholder at the end of June. And as Christer already mentioned, we had our all our current or some of our current shareholders even before the IPO, constituted a cornerstone investor Trill Impact, the 4th AP fund, Linc, Irrus Investment, Eir Venture and Regulus Pharma. We also still have our 6 founders represented in this list, and that was Peter Unge, Kjell Andersson, Mikael Dahlström estate, Nylof Holding, Lennart Hansson and MWP Management Consulting. So before IPO, we had 25 million shares and after -- sorry, yes, 23 million shares and after 46 million shares. Then I hand over back to you, Christer.

Yes. Just to summarize, sorry, we are -- we actually do have a very interesting substance with a very good potential to become best-in-class with a unique acid control here. And definitely, this next-generation peak, which we represent uniquely with this program. They have also the possibility to meet the unmet medical need still in the market within severe eGERD. We have definitely a clear Phase III road map now and a road map how to get it approved. And therefore, we are very glad now that we can initiate finally the first Phase III study. which we will have interesting readouts from in just near time, I would say, when it comes to development in 2026. We have the superior acid control profile. And we actually, we have not talked too much about it before, but definitely the fastest onset as well and time to steady state, definitely also important to get healing of the severe patients. Very interesting results already in the Phase II with very strong efficacy data on our target population, which we now we will want to repeat in the Phase III. So all in all, this is definitely a blockbuster potential despite we are focusing on a very niche population in this area and going 180 degrees compared to what we see now with Phathom in U.S. But still, there will be room for more than one player. I mean when we had PPIs in the market, we were 6 different PPIs. And now we are talking about approximately less than that in the Western world. And then to summarize it also -- it looks also that we have a very strong IP protection, including the data exclusivity. So all in all, this looks very promising, and we are now looking forward to start up the development into Phase III here. So with that, I stop the presentation and open up for questions.

[Operator Instructions] The next question comes from Alexander Krämer from ABGSC.

A couple of them. To start with the first one, could you provide more color on which Phase III preparation milestones you are planning to reach still this year and narrowed down? And could you also narrow down a little bit when we can expect the first patient included in the study next year? And then I have 2 follow-up questions.

Yes, you're asking -- I mean, when we're going to have the first -- I mean, the first -- what kind of preparation we do this year is very much site selection, contract signing with all sites and then, of course, order production and everything regarding study medications, ethical committee discussions, but also we also just need to update the IND in the U.S. with the final study protocol. And also in Europe, we need to have the SCTA approval as well. So these are some of the working elements that we will do this year. And then the first patient recruitment or that is -- will be during next year. We have not communicated exactly when that will be. We have -- so -- but definitely -- and then we foresee that we have approximately a little bit longer than a year to have a readout on the healing in the first study, and we have already communicated Q2, Q3 with that readout, the high-level readout. So then you can start to calculate backwards, but that is what we have communicated and that is -- we continue to do. Maybe I said wrong when it comes to readout. I meant -- read out 2026, Q2, Q3. So maybe I said next year, but I meant 2026 -- Sorry.

Okay. Good. And then 2 follow-up questions related to financial aspects. The first one being, when do you expect R&D related costs for the Phase III to ramp up? And do you already have an estimate what costs you expect in 2025 relates to R&D and the Phase III? That's the first question. And the second question is related to the potential and expected China approval later this year. Could you give us some indication on the financial impact or benefit from a potential China approval that your partners will achieve?

Yes. The first question is, of course, I mean, we will ramp up the cost levels now absolutely when it comes to R&D. We will start to have a cost for the Phase III already in this quarter. And then it will, of course, increase more when we started to recruit patients, that is when the real increase will be initiated. So during next year, you will see a higher level of that. When it comes to China, we are estimating to have an approval in China in the end of this year, by the end of this year. And there will -- will that be with a milestone payment with that. It's not, as I also have indicated when it comes to China, a milestone. They are not that big, but of course, it will be a milestone and the bigger payments will be then on royalty payments. And also sales milestone payments later on when they reach certain thresholds. When it comes to sales in China, which if you have an approval in China now by the end of this year, the first year from approval in China normally is a reimbursement year, so it takes approximately a year to get reimbursement in China. So we should not expect huge sales during the first year is -- so the sales will -- we started in real in 2026, I would say, if you have the approval in the end of this year.

The next question comes from Arvid Necander from Carnegie.

So first off, can you provide any more granularity on where you're at when it comes to CMC scale-up and drug production ahead of the Phase III start? And secondly, it seems like scripts for Voquezna, for Voquezna is trending strongly, which, I guess, is a good validation for the PCAB drug plus. But it would just be interesting to hear your thoughts, at the price you're targeting, which represents a slight markup compared to Voquezna, what would be the most robust economic argument for why payers should replace Voquezna on formularies?

Okay. Good. Thank you, Arvid. The first question when it comes to CMC, we are -- as I mentioned, we work together with Lonza when it comes now to the -- both with API production, but also when it comes to drug product. And when it comes to the study medication, we are, as we speak, having ongoing production now and finalization of that. So that is definitely ready to go by the end of this year, including both active substance and the comparator and the placebo that's needed in some of the cases. And so that will be ready to go and produce by a site in U.S. from them. And in parallel to that, we are also working with second sources when it comes to both APIs and the drug product. So we will have them ready, especially the drug product with a second source in approval of the product as well. And that we have ongoing discussion just currently. So we will come back to that. When it comes to Voquezna in the U.S., indeed, that's very, very good that they have a good sales progress, and it looks now that also the U.S. market start to realize the benefits with PCABs overall, as we already have seen recognized in Asia and especially in Japan, where they have become the market leader in past, Nexium since some years and become the most sold drug there in Japan some years ago. So it seems that we are -- that the history is repeating itself. And that's, of course, very, very good for us. And they -- when it comes to pricing and reimbursement in the U.S., they have a second-line approval in many of the insurance -- within many of the formularies. After the first line PPI. And that could, of course, be an OTC PPI treatment, but also prescribed. So that is a very, very good place to be at. And when -- but even though they start to become the market leader. We can see -- we have a -- we can learn from the Japanese market. They are -- they were launched there, 2015. And still, they are up approximately 30% in volumes, even though they are a market leader. So still, 70% is on PPI. So this takes time. So even though they start up now and have a market share, it will be -- it will take some time to get an interesting market share. And secondly, what you can see also in the -- in their clinical studies is that the disease by itself is very dynamic and it's never cured, so to say. It's a chronic disease and you will always come back, and you will have relapse. And so patients will come back also with vonoprazan treatment. You can see in their studies that they have relapsed approximately 30%, of within 6 months and most likely more within 12 months. So they will come back. And if you have the best acid control, which we, as we can see now, have in the market. Eventually, these patients want to test the best product because this is -- the disease is caused by acid and to treat that disease if you can deliver the best acid control then definitely, especially the specialists would like to test that for the difficult to treat patients. And then it comes back to your question then. I mean, could you get a premium on that? Yes, most likely. In our conservative calculation, though, we have benchmarked it in parity with vonoprazan. So that is our -- what we have done our calculation on now. But of course, a partner that we will work with in U.S. or will aim for having a premium price. But I think still, it's good to have a conservative aspect on this. And until we have the final Phase III, we'll put it in parity with vonoprazan. It's definitely a matter of also how your target population -- is definitely also a matter of how you define your target population and how you differentiate and position you towards vonoprazan in the end here.

[Operator Instructions] The next question comes from Bruno Bulic from Bryan Garnier.

The first one about China. Did you receive some feedback from Sinorda about the regulated process in China? What is the current status basically? And the second question about the Phase III in the U.S. When can we expect the clinical sites in the U.S. to start screening patients into that Phase III? Is it also for 2025? Thank you for your confirmation.

Yes. First question, China and Sinorda, the feedback we have from the Chinese authorities is feedback in the end of this year. So that is what I already communicated. So that is the feedback we have that we will -- that we are aiming for that date in the end of this year. And when it comes to U.S. sites, there is -- I mean, the approval time in the U.S. was starting up the study is a little bit shorter in U.S. compared to Europe. So it might be that we start up a little bit earlier in the U.S. On the other hand, this takes a little bit longer time to negotiate the contracts in U.S. So let's see, but we will not have any first patient in before the end of this year. So all patients will be recruited during next year also in U.S.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Then I stop there and actually thank you for your time and your interest in Cinclus Pharma, and I really hope and looking forward to meet you again and talk about our achievements in the future here. So thanks a lot, and let's stay in touch. Thank you. Bye-bye.