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

Welcome to this webcast Q3 report for Cinclus Pharma. And today, we will present the events that we have had ongoing during the last quarters and also update you on some topics on the company overall. So let's start and just to give you a short summary, a short background on what we are focusing on in Cinclus Pharma. We are developing linaprazan glurate, the next gold standard in healing of severe erosive GERD, that is what we are aiming for. We are -- we actually do have the new generation -- next generation of PCAB, where we are targeting healing of the severe patients in eGERD, where we also see the unmet medical need, the greatest unmet medical need. We have a superior acid control where we -- actually, we were going to show you more about that today. And we also have a very fast onset and the fastest time to steady state. And the superior acid control is crucial to heal the most severe patients where you need 24 hours acid control. And we also have already shown in clinical trials in our Phase II trial that we are -- actually have very good healing data, also in comparison with the active comparator of a PPI, where we have more than 50% difference delta in healing on the severe patient groups in 4 weeks, which is extraordinary, I would say. We are ready to start the Phase III. You will learn more about that today, and we are estimating to have readouts of the healing data in 2026. Despite we are focusing on the severe patients, we actually definitely have a blockbuster potential in this substance in this target population. We also will talk a little bit more about our IP today, which is very strong, and that definitely is beyond 2040 and also with good data exclusivity opportunities as well, both in EU and U.S. So let's start then with some updates also on the time frame and what we are working on. We managed to do the IPO before summer in June, 20th of June, which give us the possibility to fund the first eGERD Phase III study, which we will have first patient in, in next year, and the healing results will be presented in the mid-'26. That is the ambition. Based on this very important milestone of readouts of the healing data, we will go for the next financing round to finance the second Phase III trial as well as the H. pylori program that we are now also looking into. When it comes to ambitions we have, of course, we are all the time working on finding ways to accelerate the time plan and to initiate these trials as fast as possible. And that is a challenge we have on everyday business, and that's what we are working on. And -- but this is how it looks currently, the time plan. Let's go then in just a description of the market overall. We have -- we are confident that PCABs will take over after PPIs. The same way as we saw PPIs took over after H2 blockers many years ago. We can see the pattern in the market where PCABs has been launched, especially in Asia, where you can see that in Japan, the only PCAB is now the market leader, and they passed Nexium, and they have sales close to USD 1 billion annually only in Japan. We can see another strong market in Asia, South Korea, where we have 2 PCABs on the market with sales, and they have an annual sales approximately of USD 250 million only in South Korea, which is a population less than Germany and with a price level of a little bit more than $1 per day in treatment. We can also see in other markets in Asia, India, we have many different labels of vonoprazan and PCABs actually taking over the market. U.S., you have seen vonoprazan. Phathom have launched vonoprazan this year, and they have a very strong sales growth quarter-to-quarter, and they reported more than 100% growth in sales this quarter 3 versus quarter 2. So it looks promising step-by-step, they're taking improvement in sales progress. We can also see other markets where we have seen launches of PCABs. In Latin America, we have in Mexico, Chile, Peru, good price levels there, actually higher price levels there compared to Asia. And in Asia Pacific, we can see, as I mentioned, more than Japan, South Korea, we also have launches in China. We have also in Philippines, Malaysia and Pakistan, Bangladesh. So if PCABs are coming. And now you can see that we have seen the first launch in Western world as well with U.S., no PCABs in Europe yet, and we have the possibility to become the first one there. But we are working on it, and we will see more PCABs coming into this market as well. Let's go into the key events during the quarter and the periods after -- post quarter. And I will start to focus on the presentations we did in the UEGW, Indiana, the biggest European gastro congress, where we presented our PK/PD data from the recent study where we measured pH. And I will give you summary slides from that. This is quite kind of unique that you get the possibility to present a Phase I trial in a congress like this. So that shows the importance of the data that we have. And I think it's also important to remember when we're talking about linaprazan glurate, it's a prodrug of linaprazan and the treatment of acid-related diseases. Linaprazan glurate, we have 6 Phase I studies and 1 Phase II trials, totally approximately 500 individuals treated. We should also remember that we have with linaprazan, the active metabolite, more than 2,500 individuals treated as well. So in total, more than 3,000 individuals have been tested with linaprazan or linaprazan glurate. So it's a very strong background. And these results from the Phase II have been actually very promising healing results, which is the primary endpoint in the future Phase III as well. The old formulation we had, we actually have done Phase I trials on this. And I think it's important to remind you also about the biomarker, which is pH -- that you actually need to have acid control, meaning pH above 4 over the 24-hour period. And that is a very, very strong biomarker. If you can reach close to 100% coverage over the 24 hour of pH control, you know that you will heal the patients. So that is -- and what we have shown before with our old formulation, which was used in the Phase II, we saw that we have with -- we have approximately a little bit more than 90% acid control, which by itself is very encouraging and good, but now, we wanted to test our new formulation, which will be our commercial formulation as well and will be used in the Phase III trial. And what we have tested here, we have measured the pH levels day 1 and day 14. And that has been the study objective to show the acid control here. And we have tested in different doses and different dose regimes. And the results, what you can see here is that we actually even I mean, we had a very good acid control in the old formulation. But with this new formulation, we are outperforming that significantly. And what you can see where we have marked the circle here is on 50-milligram twice daily, where we're reaching 96% acid control over the 24 hours, which is outstanding, I would say, very good results. And as you can -- and this is the dosage we will use for the Phase III trial and also our ambition to use for the commercial approval later on as well. But as you can see, no one -- this is unique data, 96% healing -- 96% acid control is good. You can see that we actually can reach close to 100% if you go up in doses, but we have a balanced risk benefit, and we have picked a 50-milligram twice daily as our optimal dose for the future. But as you see, we have a very good dose response with this new formulation, a very strong formulation in this case. Going further then, other news from -- and other events from the quarter. We have new patents in new areas, in new territories. And I think I wanted to give you a little bit on -- an update on our strategy when it comes to IP and protection of the substance. And in this slide, we're trying to describe what kind of strategy we have, but when it comes to the patents, the composition of matter patent that is valid that will expire after the extension in both U.S. and Europe will expire approximately '34, '35. So that is the main patent. On top of that, we have already now an approval of an additional patent, a polymorph patent in U.S. valid until 2042. We have another formulation patent approved in Europe until 2040. We are working on developing a mine field when it comes to IP and patents. So there are more polymorph patents pending in U.S. We have additional amorph patents pending. We have new formulation patent, which will be our commercial formulation patent pending. We have user patents pending, and we will have more patents coming up where we will apply for. So what you can see is that we have, I would say, a very strong mind field beyond 2040 when it comes to patent protection in both Europe and in U.S. So that is by itself very, very strong. And then normally, in Europe, you get -- when you have an approval of a product, a new substance or in new usage for -- of a no substance, we get 10 years regulatory data exclusivity, meaning that no generic company can use your clinical data as reference during this time. So in Europe, we will have -- estimating that we have an approval in Europe by 2029, we will have additional data exclusivity there during the next 10 years, no matter what patents, but that's Europe. When it comes to U.S., you normally get 5 years regulatory data exclusivity from the day of the approval. And -- but in this case, we also have been granted from FDA QIDP grant that gives us additional 5 years of data exclusivity. So -- and that comes with the product if you have H. pylori as first indication. And that is something that I know that this has been ongoing discussion for now with our colleagues at Phathom Pharmaceuticals. And they have been questionized whether you get the 5 years extension of the entire indication -- of the entire product or if you get it only for HP indication. What it has been all historically, if -- and that's quite clear. All our advisers in U.S. tells us that this comes with a substance if you have this indication as first. And then the other follow-up indication will follow that exclusivity. And there is no reason for us to believe something else for the time being. But no matter what, I would say that we have a big difference compared to Phathom. We have a very strong IP situation with a mind field on many different patents, which will be very complex to come through for a generic company with or without data exclusivity. And I think that is the message I would like to give today. And also just estimate that you only get 5 years in U.S., even though we don't think that is reasonable to think. You also -- there is a big risk that this generic company will interfere in our patents anyway. And that, of course, will be an ANDA litigation process during that time. And the generic companies cannot launch a product under that kind of litigation process. So -- and that normally takes 30 months to get. So no matter what, even though they are not infringing our patents, which I think they will, there is no way that a generic company can get to the market closer than 7.5 years after our registration. So that is also -- but we are confident that our IP portfolio, our IP mind field is very strong, and that is valid until beyond 2040. Okay. I stop there. I suppose we will have more questions on that later on. Let's also look into the -- another important news here regarding the pediatric study plan, which we have now received an agreement with EMA. So we have now everything in place that's needed for the pediatric plan and actually also that is something you need to have to have a chance to submit the application also for the adults later on. So that is now ticked off, and it's also an important milestone. And this work was started up in 2023, and now we have the -- I mean, the approval in our hands, so to say. And of course, we are obliged to do something, not only a plan, but we actually need to do -- we need to execute a study on children, 100 patients to investigate safety and efficacy in the same way as we have done for the adults. And we do not need to start that up before the submission. I mean we can start it up after the submission in Europe for the adult indication. So I think this is a very good agreement with the EMA, and we are happy to tick that off. And actually, it also gives us an opportunity to expand the approval later on also for children. Okay. Other events that has been of importance during the quarter is that you have seen that we have signed and we have chosen PSI 0 as our main 0 for the Eagle Phase III trial. And as you understand, we are working hard together with them now to set up all the sites to get the sites ready to be recruiting patients in next year. And also the good thing is that we have also now secured the manufacturing of the products that will be used in the study with our contract manufacturing partner, Lonza, in their sites in U.S. So everything is set for the drugs and the supply of the Phase III trial. But also a good thing to know here is that batch sizes are so big, and they are more or less in the same size as the commercial batch sizes later on. And that's also a very good evidence that this looks very promising also from a commercial production later on. So that's also good milestones to kick off during the development process here. With that said, I also -- we also mentioned in the report today that we have developed our management structure, and we have an executive -- a very experienced executive management team. And the recent member is Margit Mahlapuu, who joined the company just during the quarter here. And as an R&D Director, she has very long experience in development, and she will be a very good asset for us. And with her experience, we are even more confident that we can deliver these clinical studies and the development of the products all the way to approval. So that's good. And I think I stop there and hand over -- yes, well, one more point I wanted to mention also. Now, when we're getting into the Phase III trial here and getting closer to the market, of course, an advisory Board getting more and more important. And I would say our global advisory board is very experienced. I would say that these are the people that are most well known in the market, and they are really supporting us and giving us very good advices now during the next -- I mean, both historically, but also in the future here. So I'm very proud to have this group supporting us. Okay. Let's go into some figures. Maria, I hand over to you.

Thank you, Christer. So some key figures for the quarter then. The cash in bank ended up at SEK 644 million compared to the last quarter of SEK 685 million. So a decrease in cash flow of approximately SEK 40 million. And that is, of course, due to the fact that we are up in speed for the preparation of the Phase III trial, as Christer said. Our coworkers were 29 people in Q3. And back in Q2, we were 26. 12 of these 29 are employees. The rest are in-house consultants. The R&D spending of our total operating expenses went back to a level of 81%, which was equal to the level in full year '23. In Q2, we had dipped there down to 56% due to the onetime IPO expenses, which, of course, is classified as admin expenses. So some comments on the income statement here. The net sales were 0 and also in comparison period, we're awaiting the approval here in China of linaprazan glurate. The G&A expenses were down compared to Q2 '24. And of course, in Q2, as I said, we had this onetime IPO expenses. So now we're down to a normal level. The R&D expenses are up a little bit compared to Q1 and Q2. And that is, of course, since we are up to speed with the preparation of the Phase II trial. Last year was a little bit higher because we had more studies ongoing. The financial net is now positive due to gains from -- or interest gain from cash and bank. And the net result then were back on the same level as Q1 '24. So ending up at negative SEK 36.5 million. Cash flow, as I said, negative SEK 40 million approximately in line with our plans and cash ended up at SEK 644.3 million. Going to the liability side in the balance sheet, we have lower total noncurrent and current liabilities compared to last year, and that is basically because of the shareholder loan that was converted into equity in connection with the IPO. The tax liability is in total SEK 14 million, and we're paying that off since we moved an IP from our Swiss affiliate back in 2022. We also have our shareholders end of September, still the IPO cornerstone investors are on the top 15 and so is our founders. So there is basically no change there. I think I hand over to you, Christer again.

Yes. Just to summarize what we are aiming for and our aspiration. I mean, we are developing a product here and with the next-generation PCAB with the ambition to have an eager indication, all grades, and that is the ambition when we're starting up the Phase III, but the focus will be for the -- where we have the unmet medical need in severe patients. And thanks to our unique acid control, we're expecting to have superiority in the label, both in healing and in symptom relief in half the time and also that we will heal and relieve them from symptoms in half the time compared to what you have in other PCABs in the market in Asia. So that is a unique product developed for the severe patients. With this uniqueness in acid control, we also estimate that we can also achieve a unique product when it comes to eradication of Helicobacter pylori, delivering us high acid control. So it's enough to use only one antibiotic in amoxicillin, a narrow-spectrum antibiotic with very low risk of antibiotic resistance. And that is if we can deliver, which we think definitely is a possibility, as good as eradication rate as the current standard of care or better with less antibiotic resistance risk, this is a possibility to become the future standard of care in this treatment. And that is, of course, a very interesting positioning to have. And that will be a difference compared to what you see in the pattern how to treat this today, where you're going from a triple therapy to a quadruple therapy with using many different antibiotics, increasing their antibiotic resistance, having problem with compliance, safety and antibiotic resistance. If we can -- if -- which we definitely think is possible to achieve what I mentioned, only using amoxicillin with a good eradication, we have easy-to-use drug with good compliance, good safety and also good eradication rate for the future. So I think this is 2 very interesting indication, which we are working on now and looking into for the future. I think I'll stop there and open up for question and answers here.

[Operator Instructions] The next question comes from Alexander Krämer from ABG Sundal Collier.

I have 2. I had to start with the first one, you talked about your progress this quarter with your Phase III preparations. What are your next upcoming milestones with your Phase III program? And how -- and when do you plan to communicate these as we go into 2025?

When it comes to the Phase III program.

That's my first question.

When it comes to the Phase III eGERD, I would say that the first next step is, of course, first patient in. That is definitely something that we will communicate. And then, of course, there are other interesting ongoing discussions. But that is the -- that is the answer on that question.

Okay. And my second question is around your international market opportunities that you talked about today. So are you planning to sign additional licensing deals there given the strong position that you see in Asia? And the question would be if these licensing deals would be in markets such as Latin America or MENA regions. And if you are planning to do such licensing deals, how does the regulatory path look like in these emerging markets compared to like U.S., Europe? Would you need to wait for the full Phase III program to finish, so which means until like 2028 when -- or like is something that you are planning to license in these emerging markets, license out linaprazan glurate in these emerging markets earlier?

Well, I mean, of course, we are looking to...

That's my second question.

Of course, we are looking into opportunities when it comes to out-licensing in all markets. Actually, I would say that in U.S., we have decided to wait until we have the Phase III trials as we have informed you about before. But like in Asia, we have a partner, as you're aware of, I mean, where they are focusing very much on China just now, but we have also ongoing discussions in South Korea there and looking into Japan as well. When it comes to MENA markets, we have also -- we are in discussions with some actors here as well. So, of course, that is on our radar and also including Europe, which we're also looking into possibilities to find good partners. So -- and that's something that we have ongoing. And hopefully, we will succeed there as well, and we are working on that. When it comes to approvals in markets outside Europe and U.S., there are unfortunately a few markets which we can rely on when it comes to accepting only Chinese data, which -- I mean, which we will have after approval there. So that -- so we will rely on the European and U.S. American studies. And many times, these markets are relying on the dossiers from either Europe or from U.S. So what you should expect is that these markets will come hand-in-hand with Europe and U.S. Of course, a licensing deal could happen before, but the approvals most likely will go hand-in-hand with Europe and U.S.

The next question comes from Oscar Haffen Lamm from Bryan Garnier.

I was just wondering if you could update us on progress in terms of -- Can you hear me?

Yes.

All right. So I was just wondering if you could update us on the progress in terms of the activation sites for the Phase III and if you have already started doing some work on that front?

Yes. I mean we are in the process now of -- I mean I would say that we have identified and identified all the sites, one of the sites that should be part of the study with some margin. And we are in site visits and site negotiation. And I mean, they are not fully activated yet, but we are according to plan when it comes to that. And I would say that the interest is high, and I think we have very good sites in place with good energy and possibility to recruit patients later on. So definitely, we are on plan, on target when it comes to the site selection here. But we are in -- I would say that we are in a...

Great. And maybe as a second question, if I may.

Sorry.

Okay. Got it. Yes. So maybe then my second question would be, I was just wondering if you could share your thoughts regarding the H. pylori trial, meaning if you could expect some kind of short Phase I study already being conducted in 2025, for example?

When it comes to H. pylori, as we have said, we are looking into the program there now and what's needed and actually the next steps there. And definitely, we would come back to the plans for H. pylori and in a separate call actually. So that is -- so we are mapping that now, and we will come back to you on that. But of course, when it comes to H. pylori, as you mentioned, what we already now see is that we, of course, need to look into finding the perfect dose for H. pylori in the eradication. So that is the first step, but that should be enough from a regulatory authority perspective to do only in a Phase I trial. The next one -- and then after we have that dose-finding study in place, you can go directly to a Phase III trial program. So you can actually skip to Phase II, which is the standard when it comes to H. pylori as well. So it's -- and the Phase III program, as you know, it's kind of a short 2 weeks study program with 2 weeks follow-up. And of course, you need to have 2 confirmative studies. But of course, it's another size of the study when it comes to financing a 2-week study compared to a longer study, but I will come back more on more exact plans for this.

The next question comes from Arvid Necander from Carnegie.

A couple, if I may. So first off, on what seems like some pushback from the FDA when it comes to gain exclusivity for Voquezna. Do your legal experts see any factors that could separate Voquezna and LG from previous cases when the FDA has granted gain exclusivity? Do you, for example, believe that the decision to include another API in the drug packaging for Voquezna for H. pylori could have mattered? Or is this irrelevant? I'll start there.

I mean, of course, we have -- you can always speculate here. But I mean -- and -- but the normal way is, of course, when you apply for a QIDP grant, you also state what kind of package you're going to have and specifically -- and so that is quite clear. And I suppose they have stated that as well as we have. We also -- I don't know if it could have affected that they actually had I mean, eGERD and H. pylori were more or less launched the same day. They were reapproved, as you remember. H. pylori was approved first from FDA, and then it was stopped due to the nitrosamine pollution. And then when they had a reapproval of H. pylori, that was the same day as the eGERD. I don't know if that could affect it. At least it affected the launch strategy where they only focused on eGERD and didn't do anything on H. pylori. I don't know if that has an impact on the value from -- or the valuation from FDA. Could, I don't know. That is -- but overall, looking to the regulation here, it's quite clear with our advisers telling us, if you have the first indication we included this gain grant or QIDP grant, that should be then -- that is for -- the data exclusivity you get is for the product. And if you prolong that, if you have an extension of that, that will come with the product and not with the indication. So that is quite clear, and we have seen example of that in the past. But obviously, it's not totally clear for everyone. So -- but if we will have another situation, we will definitely make sure if we go in with H. pylori in U.S. that we have a good margin to launch H. pylori first. And then as a follow-up indication, eGERD will come. So that is, of course, something that we need to make sure that, that should not be a question mark that the order of the indication will be differently. In this case, you had 2 indications more or less at the same day. But I don't know if that have any effect or not in this case. But I mean, we cannot more -- do more than what the regulation says and of course, follow this closely and the actions that we will see most likely Phathom will take accordingly to make sure that they are following this. But as I said, I think we are in a totally different position with a very strong IP setting with a good patent situation for our substance. And that is in contrast to what we see with Phathom.

Great. And then secondly, just on the approval process and partnership in China, how much visibility do you have on the overall progress and regulatory dialogue? And when do you expect this drug to be approved in China?

Our partner, Sinorda, they have had ongoing dialogue with the Chinese authorities. And it's under evaluation by the Chinese authorities. They don't have the same transparency, of course, when the date is coming. But still, we have the belief that this could come before that -- I mean, that is still our plan that this should come before the end of this year. So no other information is stated neither from the Chinese authorities or from our partner.

But I mean, it's not like U.S. where you get the specific date.

[Operator Instructions]

Any other questions? We have some questions in the -- I'm looking at that now. Yes, we have some question regarding China. I think we have already responded to that approval date. If we get an approval by the end of this year, then you normally have a reimbursement process thereafter, and that could take up to a year. So we should not expect any huge sales during 2025. The sales will come after the reimbursement approval, and that is the normal way of doing it in China. When it comes to licensing discussions, as I already mentioned, we are in dialogue with many different companies in different regions, and we are working there hard to get that forward. And you will know when we succeed, so to say. So yes, that is what I can say. And of course, when it comes to the development steps, we are looking into now, we do everything that's possible now to accelerate and work as hard as possible to deliver this as fast as possible when it comes to the first Phase III trial, but also when it comes to financing for the next trials that we have in plan. Any other questions? Okay. Otherwise, I stop there, and thank you for your time. And I wish you a great day, and we will stay in touch, and you will hear more about -- from us in the future. Thank you for now. Thank you.