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

Welcome to Cinclus Pharma Q4 Report 2024. [Operator Instructions] Now I will hand the conference over to CEO, Christer Ahlberg. Please go ahead.

Thank you very much. Welcome to this webcast and I will start to present here. And then also after my presentation, our CFO, Maria Engstrom, I will hand over to her later on then. So let's look into the first slide. I would like to give you a short update on the market and the market perspectives. I would say that the trend is clear. What we can see where PCABs are launched, they are taking over the market and where they are being introduced, you can see worldwide that they are following the model as we have seen in Japan and South Korea. They are rapidly replacing the PPIs. Actually, the pace is increasing. What we also noticed in the market is that Takeda and the Korean/Chinese manufacturers; they are licensing, registering and launching their products in many markets in rest of the world specifically. We can give you some examples here. We have seen now -- in Mexico already after a couple of years, we can see that they are taking a very strong position in the market with very good price levels, and they have increase in the market shares. We can also see in a market like India that also we see the physicians association now have a broad consensus on the recommendation of the PCABs and we can already now see 11 different brands of vonoprazan in the market. We also have seen a very positive opinion from American Gastro Association about the PCABs; an opinion of good efficacy, good safety. So it's also a very good sign at this early stage. We can also see that Takeda is refocusing on vonoprazan and have strategic activities in both South Korea and Brazil. And overall, our sources has that we have approximately 19 markets where you have seen at least 1 launch with PCABs and another 14 markets where we have confirmed submission and export licenses. So it's interesting to follow. And then of course on top of that, we have the U.S. launch of vonoprazan, which is also interesting to see how they are taking step-by-step when it comes to the launch. So going further then. I mean what we are trying to achieve here is that we are developing the next generation of the PCABs. As you can see on this slide, you can see the differences. First on the first line where you have the PPIs, where you have both lansoprazole, omeprazole/Losec and then later on the last generation of PPIs with Nexium. Vonoprazan belongs to the first generation of PCABs. They have delivered a faster onset, a better acid control compared to the PPIs and thanks to that, they are now taking over in the markets where they have launched, and this is interesting to see as I mentioned. Our prodrug that we have developed is unique and that gives us a unique possibility to more or less close down the acid production. We can deliver more or less a full acid control up to 96%. That gives us a perfect product to meet the unmet medical need still in the market to help also the patient with severe eGERD. And also, we can see already in our Phase II trials that we have very, very good effect on these patients and we're also looking to heal them, but also we are looking into the symptom relief. So this is an important step to develop the next generation of the PCABs especially now when we can see that PCABs taking over after PPIs. It's also important to learn from the history actually. We could see exactly the same pattern during the launches of the different PPIs where what you saw there is when Nexium, which was the next generation of PPIs, took over after Losec or Prilosec and they did that thanks to a superior profile including a superior acid control and you can see how fast it went. I mean they started, Losec had approximately sales about USD 6 billion and then over the coming years from when Nexium was launched, thanks to the incremental acid control, they took over the market and actually came up to the same level as Losec actually did in just some years before. So it's an interesting story and also interesting to learn from that history actually. And our ambition is to launch the next generation of PCAB with better incremental acid control compared to what Nexium had versus Losec. So this is just a reminder of how to learn about the history. So going further then, what activities and key events have we done during the last quarter of 2024. I think we have delivered 2 good regulatory milestones really when we have agreed with the U.S. and European authorities about the pediatric plans and both plans, they are aligned and that's also important. The plans are similar and aligned and we have agreement with both authorities here, which is important milestones. The biggest and most important milestone so far in, I would say, the company's history is actually that we now also have an approved product in a big market. We actually just before Christmas had the approval of linaprazan glurate in China and our partner in China, Sinorda, actually achieved a really, really important milestone here. And I also would like to give you some information about their Phase III trial. So going to the next slide, we can give you little bit information about that, the next slide. This Phase III trial it was done in China with 380 patients where you can see 17% or 18% belong to the C and D grading, the most severe patients. And in contrast to our plans, we are actually more or less going to have the double amount of severe patients, C and D, more than 30%. So that is of course important for differentiation later on when we want to since we are going to meet and work towards that target population. After the introduction and after randomization, they were randomized 3:1; 3 to linaprazan glurate and there you also can see they used 50 milligram once daily here and compared to lansoprazole 30 milligram once daily. Just worth noticing here is that our ambition in our Phase III trial is to push the doses so we can actually meet also and also heal the more severe patients. So we're also going to test the double dose of 100 milligram in our trials and that of course will give us even better acid control with that levels. They had endoscopy after 4 weeks and after 8 weeks and the primary endpoint was healing after 8 weeks and it was, as we have seen in all Asian studies, a noninferiority analysis study. So that ambition was to deliver noninferiority. And that is what has been common in Asia with all of these studies done on PCABs previously and also with PPI. And also of course they wanted to show secondary endpoint safety and tolerability. And next slide; what we see out of the 380 included patients, we have 346 left to do the per protocol analysis and that is what we are going to show you on the healing of the endpoint. Next slide where you can see then we have a healing rate in linaprazan glurate 50 milligram after 8 weeks of 94% compared to lansoprazole of 90%. This is very much in line with all Asian studies, very high healing rates and also it gives you -- I mean that has been the tradition that there are very high healing rates in Asia and this is how it looks obviously and it is very comparable to the other studies in this sector. But all in all, it's a product now that is showing very good efficacy and also good safety and it's an approved product now in China. And now we are of course looking forward to the launch. They are working now on price and reimbursement aspect and that will take some time in China. So we are expecting to have I mean the first real sales after reimbursement in 2026 then. Okay. Let's go further then to our own Phase III trial that we are now preparing for U.S. and Europe. And what we have seen here is now that we have prepared 96 sites in 8 different countries, and we divide them in Europe and in U.S. We're talking about approximately 500 patients and the ambition and we are aiming here for superiority in healing, in symptom control, and we want to do it in half the time compared to PPIs. And of course, the reason why we have this superior healing ambition is of course due to that we want to repeat the history where we can as a next-generation PCAB takeover after the first generation, the same as Nexium did when they launched 12 years after Losec was introduced to the PPI market. I stop there and hand over then to Maria on talking about the financials.

Thank you, Christer. So let's go into the quarterly overview of the financials in '23 and '24 and I will comment on the fourth quarter of '24 the actuals there. Cash ended up at SEK 567 million and cash flow of negative SEK 77 million. The reason for the increased negative cash flow is the Phase III study preparations ongoing. The deviation in cash flow versus EBIT, as you see further down, was mainly due to prepayments to our Phase III CRO in the end of the year. Revenues concerned the marketing authorization approval and the tech transfer milestone in China and the milestones in the beginning of 2023 concerned the Phase III meeting endpoints and NDA submission in China. The OpEx increased due to the increase in R&D costs, as I said, due to the Phase III study preparation ongoing and for the R&D, we are back on the same level as Q3 '23 when we had several studies ongoing and in final stage. And the R&D percentage of total OpEx ended up at 88%, which is much higher than the average in '23 and '24, which was 76%. The EBIT and net profit is then a result of the increasing R&D cost. The number of coworkers increased mainly due to an increase in number of employees in the fourth quarter and the increase was mainly within medical department, but also within finance and admin replacing consultants. So let's go to the next slide where we see financial overview year-over-year for the fourth quarter and the full year. And the revenues, which I commented on before, decreased with SEK 1.4 million for the full year and increased with SEK 4.6 million for the quarter. G&A decreased with SEK 2.7 million for the full year and increased slightly in the quarter with SEK 1.1 million. Both '23 and '24 includes onetime costs for the IPO preparations and although this slight increase in the fourth quarter, we expect G&A to be on a quite lower level going forward in comparison. The R&D decreased with SEK 30 million full year and increased with SEK 20 million in the quarter. And as said, the full year Phase III preparation is ongoing; but for the full year, it only affects part of the year mainly Q4. And the full year '23 contained study costs all over the year as I mentioned earlier. The financial net increased with SEK 16 million full year and increased with SEK 6.8 million for the quarter. And during the second half of the year we received interest from cash in bank, which was partly offset on a full year basis by interest paid on the shareholder loan, which was offset in an offset issue in connection with the IPO back in June. Tax small number here, but increased with SEK 0.2 million for the full year and decreased with SEK 0.3 million in the quarter. We're paying tax due to the group internal move of the IP back in '22 from Switzerland to Sweden. The cash flow from operating activities was SEK 31 million better full year, but worse SEK 16 million for the quarter. The better cash flow for the full year is also a consequence of the Phase III preparation basically only affecting second half of the year. Cash flow from financing activities increased with SEK 532 million full year and was of course due to the new share issue back in June of SEK 750 million gross. The total cash flow increased with SEK 563 million full year-ending up at SEK 477 million positive for the full year and cash at the end of the period increased with SEK 479 million ending up at SEK 567 million. For the balance sheet, no surprises. I already commented on that. But what we can say is that we have basically no noncurrent liabilities. We paid off the tax liability, the second tranche of that, in December and we will pay it off in full during this year. So next slide showing our largest shareholder by the end of the year and there are basically no changes. We have still our IPO cornerstone investors on this list and our founders. In the end of last year, we issued C shares and bought them back. So they are in the list here, 854,000 shares. So that's it.

Yes. That's the last slide and we open up for questions and we're happy to answer them.

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

So today you wrote in your report I mean there is quite some delay in the start-up of the Phase III compared to what was communicated at the IPO last year. And could you elaborate a little bit more on the reasons for these delays? And also now today in the presentation, I mean you showed that most patients are planned to be recruited in Eastern Europe. Do you believe that you will be able to start up in Eastern Europe before starting up in the U.S.? That's my first question and then I have a couple of others.

Well, it depends how you define a delay of course. In our prospectus, it's clearly stated that we're going to recruit first patients in 2025, which we are. Of course I have indicated also that we are recruiting patients during the Q2. But also what we mentioned in the report is that we had a very successful Type C meeting with FDA, an advice meeting, and what we agreed on was the last reports, final reports, that we needed to submit and these reports will be ready by second quarter and thereafter, we are free to go and start up the study and initiate patients. And from our end, we still will deliver the top line results during 2026 and that's not a major difference. And compared to what you said about Eastern Europe. Eastern Europe also follows the European regulation when it comes to approval of studies so they will have the approval to start up the studies the same time as Europe and the fastest start-up also is in U.S. though because they have a shorter approval time from the authorities. So I mean all sites will be more or less ready to go at the same time and that will be during the third quarter. And I think that is also an important message. The most important is not when you start the first patient. It's actually when you have the majority of sites ready to go and initiate patient recruitment. So I think that is an important message also. I mean now we will have all sites standing beside each other ready to start recruit from day 1 and that is very important.

Okay. I see. Then I have 2 additional questions. One on your financial runway like does this have any implications for your financial runway looking towards 2026 and 2027?

No. I mean our ambition is to have the readouts from 2026 and that we have run rate over that readout. So that is the ambition and that's what we are working for.

All right. And today, you also showed the data on the Chinese Phase III results. Did you receive any feedback from your Asian partner Sinorda or maybe also through Shanghai Pharma? How these results could or what are the implications of these results for the reimbursement and pricing negotiations in China?

No, we have not seen anything like that. But we should say that these results are very, very in line with the other PCABs and so from that point of view, it's okay. And it's -- I mean as you have seen, all PCAB studies in Asia has been so far noninferiority. So that's not a difference and it should not have -- I mean it's according to plan.

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

Oscar here from BG. So my question would be obviously the representation of C-D patients in the Chinese trial was much lower than what you are expecting in the U.S. trial. So maybe could you first remind us what percentage of C-D patients you are aiming at for the U.S. trial? And then what would have been the expected healing in Asian patients for higher C-D patient for PPIs roughly at the same levels that you are expecting at the Phase III in the U.S.?

We are going to have more than 30% C and D patients and of course we will aim to have more in D patients. But I mean of course it will be more C patients than D, but we are aiming to get more than 2% in this study. But in total, more than 30%. So it's almost double compared to what they had. And also when it comes to -- of course it's difficult to speculate in results. But if you look into -- and especially when it comes to Asian studies, I don't know the reasons, but more or less during all decades we have seen these kind of studies in Asia. We have seen that the healing rates are very high in Asia in comparison to what you see in Western studies and also the differences between the comparator and PCABs are also higher in U.S. when compared to what you see in Asia and the reason for that, you can always speculate about, but I don't want to do that. And what you can say though if you look into our trial and also if you compare the doses that they have used now in the Chinese study, we will have a totally different formulation, which we have now seen that we have a very good uptake and also we have a very good acid control win. And we will push the doses as we have said so we can actually make sure that we also deliver very good results in the C and D patients and also make a difference compared to the PPIs, which definitely will be a possibility when you push the number of severe patients. And also if you remember, I mean in our Phase II results, we were close to 90% with a formulation that had less acid control compared to what we're going to deliver today or in the Phase III and there we had a delta of more than 50% versus lanso. If you look at I mean normally what you say here in this trial; you had 90% healing on lansoprazole, 94% on linaprazan glurate. If you look into what NICE, the U.K. authorities says when it comes to their systematic reviews, lansoprazole have an average of 8 weeks, these patients between 60% to 70% should be in that area and that is a big difference of course compared to 90%. I'm not saying that these results are wrong or anything like that. But if you take the average from a central review by NICE, you have lower healing rates and that's a fact and that has always been the case with the Asian study that have a tendency to have higher healing rates. But we are going to work with Western studies here and the differences will be definitely bigger than we see here.

Okay. Makes sense. And then maybe 1 last question from my side also on the U.S. trial. So maybe what are your expectations in terms of recruitment pace and when do you expect to recruit the last patient for the first Phase III trial?

Yes. As I said, we will have I mean what we -- I mean we're going to have now the first patient in Q3 directly after we have finalized the last reports to the authority in FDA and then our recruitment time is approximately, I mean we're estimating less than a year. So during 2026, we will definitely [Technical Difficulty] the top line results of healing.

[Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Okay. We have some questions also via the web here. And as we have said regarding the Phase III trial, as we say here, I mean we are expecting the first patient in the third quarter this year and the major milestones and triggers for the future is of course very much regarding the trial and the results. But of course there are other potential triggers also when it comes to business development and other solutions that can actually improve and potentially accelerate things here. So of course we are working on different angles here from different perspectives to build a solid development program here that both can deliver in time and hopefully faster and also giving interesting trigger points when it comes to the share price. We also should remember when it comes to share price is we are not isolated company of course. We are looking to the globally and that's the reason also I wanted to mention that. I mean looking into the PCAB market now, we saw it when the PPI were launched and the H2 blocker and they took over after the H2 blockers and became the most sold drugs in the world. That took some years; but when it happened, it happened; I mean it was more or less 100% switch from H2 blockers to PPIs. And now what you see in the markets where you have launched PCABs is that we have the same pattern. And we also need to say it's not that they are selling these PCABs to price levels the same as PPIs. We're talking about at least 10x higher pricing compared to PPIs in these markets, as [indiscernible] mentioned in South America and Asia. We're talking about price levels that is more than $1 per tablet compared to PPIs who has less than $0.20 per tablet and less than that. And so in South America and Asia, we have price levels that are at least as high as we're expecting in Europe. So Europe and South America and Asia, we are in the same neighborhood of pricing and that means that this market will be very big in the future when this has been launched. And then of course on top of that, we have the U.S. market, which has another 10x higher price levels compared to the rest of the world. And that is of course interesting to follow now also following triggers when it comes to Phathom as well then. And the reason why they have had problem in the market is of course now lastly is due to their patent situation and we do not have the same issue at all. We have patent with our product beyond 2040 in U.S. and in many of the most important markets and so we are not facing the same problem. But of course, we are dependent on -- not dependent, but we are affected of their share price drop due to their patent situation, but we do not have the same problem. And the interesting thing here is also since we are now positioned and differentiate our product to become a superiority product versus PPIs with the best acid control in the class. Also we have always been taking that into account when we have developed this product that we might launch this product either close to generic position of other PCABs or in the generic market, the same way as Nexium did when it was in comparison to Losec and omeprazole. They were exactly in the same position. They launched this when Losec went generic and despite that, they could reach that sales level as I just showed you before USD 6 billion. So it's possible and it has happened before. It happens all the time when it comes to launches of drugs. You're always meeting -- you need to take into account generic alternatives here and that is what we have planned for and that's what we're trying to do in our Phase III program. That's the reason why we're aiming for full acid control and superiority ambitions in the trials. So I think that's important and I think the trigger we're facing here in the future is of course also based on the launches of PCABs in the future and follow that closely in the market. Okay. When it comes to the IP and Phathom, of course I should not talk about that. But I mean there is a citizen petition ongoing in U.S. and they are expecting to have response on that summertime this year and let's see after that what happens there. We are talking about 2 years' extension additional for them from 2030 to 2032. That's what we're talking about here. And what do we more have? Yes. I think that we have some questions about shareholding. It's difficult for me to comment on. It's very much on each of the shareholders to decide. But of course, what I mean everyone sees here is that we have a very low price on the share price now and I mean obviously if the PCABs now start to take over the market from PPIs, this is a very good opportunity from a price point of view here now. But I should not comment so much about that. But we are working to deliver the triggers, we are working on to deliver what we have said in the prospectus, and we are aiming to become a superior product and to be launched during 2029. And this is the objective we have and definitely possible to do. I mean we have a product that is shown now to be approvable. First country is China and it shows that we have very good efficacy and good safety and definitely that should give us a possibility and reduce the development risk. And now we are working on how to differentiate this towards all the other products in the market. And we have good opportunity to do that since we have this unique product that can actually give us the possibility to more or less optimize the dosing to push off the acid production more or less. So this is important and this is what we are working on with high level of focus. Okay. Any other questions or comments? Then I stop there and thank you all for your participation here and also for your support in the future and let's stay in touch. Thank you and have a nice day.