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

Welcome to Cinclus Pharma Q2 Report 2026. [Operator Instructions] Now I will hand the conference over to CEO, Christer Ahlberg; and CFO, Magnus Christensen. Please go ahead.

Thank you, and hi, everyone, and welcome to Cinclus Pharma second quarter 2026 earnings call. I'm Christer Ahlberg, and I'm CEO of Cinclus Pharma. And with me here today, I have also our CFO, Magnus Christensen. We will walk you through the key developments from the second quarter, after which we will be happy to answer any questions you may have. Our lead asset, linaprazan glurate, is the next-generation PCAB, and that substance offers sustained around-the-clock acid control that distinguishes from the current standard of care with the proton pump inhibitors, the PPIs, and also all other PCABs available in the market and also in the development in the market. And it's also for severe erosive GERD. This patient population we are addressing is large and underserved. Roughly 10 million people across the U.S. and Europe live with severe erosive GERD, and a substantial share of them are not adequately healed or treated by today's standard of care. This makes this a specialty-driven commercial opportunity rather than a primary care one. Better healing and better symptom control translate directly into clinical and commercial differentiation, and that's our goal. Our Phase III program, HEEALING1, began in September 2025, and I'm very pleased to report that it has completed enrollment total now. In early July, we announced that we had exceeded protocol-specified target number of patients. So that was a very good news for us. HEEALING1 top-line results are expected in the fourth quarter, already communicated before of this year, which, of course, could give us a potential major value inflection point for the company. Our program is derisked at this stage. We have a robust clinical data package alignment, both from the U.S. FDA and the European EMA, our regulatory strategy. And we have a well-defined CMC plan, which we already have communicated before. Linaprazan glurate has, in 2026, been launched in China as planned through our Sinorda licensing agreement and also through their partner, HuaDong, which is the 10 second biggest pharma company in China. We are also restricted to give any details on that about the launch at this stage. But of course, it looks very promising and good, and we are progressing very well during the launch in China. And we are, of course, excited that we have seen the first commercial launch of linaprazan glurate globally. And it's, of course, a very important validation of the drug. We see that the first-generation PCABs are rapidly gaining traction. PCABs are now available in more than 30 countries globally, and local treatment guidelines increasingly adopting recommendations. And that's, of course, very good for us. There is no doubt that the PCABs are about to take over the market from the current standard treatment with proton pump inhibitors like Losec and Nexium and other products in that group. If you look into the enrollment complete of the Phase III study, we are very pleased that with the execution of the first Phase III study, HEEALING1, that has developed according to our plans since the start last fall. We announced in early July that our enrollment in the study was completed. And that time, we had randomized 521 patients, exceeding our protocol-specified target of 501 patients. The total number of patients in the study now is actually 523 patients, and the study is being conducted across 8 European countries. The primary endpoint is superiority to lansoprazole. That's unique primary endpoint, and we're going to deliver it in healing of the severe erosive GERD patients, the LA Grade C and D. And we're going to deliver that after 4 weeks of treatment. Key secondary endpoints cover healing, of course, and symptom relief through 4 weeks, but also through 8 weeks for both C and D patients, but also, of course, all patients, so all grades as well, A, B, C and D. The study will be followed by our second and final Phase III study, HEEALING2, that will also evaluate maintenance therapy and will be done at clinical sites in both Europe and in U.S. as well. HEEALING2 is planned to initiate following HEEALING1 top-line results. This slide highlights our HEEALING1 progress. We screened the last patient in June and reached enrollment target randomized last patient in July. The remaining milestones prior the top-line results. Our last patient treated that we expect within a few weeks, and also the last patient last visit expected to be in September, October this fall, which will end the clinical phase. Thereafter, the remaining steps will be data cleaning and database lock and final readout that we expect during the fourth quarter of the year. We have good visibility over the remaining timeline of the study. This slide you have seen before, but it's very important. It shows how well a drug controls gastric acid over 24 hours a day predicts how well it heals the erosive GERD patients. The relationship is linear, as you can see, whether you look at PPIs or PCABs. That is the central scientific argument for the linaprazan at this stage. Acid control is the biomarker that drives healing in this disease. And the more of the day, the 24 hours, you can keep gastric pH above 4, the better it is for the patients. And that is precisely the variable on which linaprazan glurate is differentiated, but also what we have had as an aim and objective when we have developed the product from the beginning. This slide illustrates a number of hours pH in the stomach is below pH 4, which different treatment -- giving the treatment alternatives available in the market and over the decades and the history of the development of these kind of drugs. With the old H2 blockers, you can see to the left, such as Zantac, that were launched during the '70s. pH was below 4 during 16 hours per day. But still, it was a dramatic improvement compared to have nothing. And this drug became the most sold drug in the world and actually built Glaxo to the big pharma company as it is today. Looking into the development into the next step, for the proton pump inhibitor that came to the market in the end of '80s and the beginning of '90s. Here, you can see a reduction between 7 to 14 hours, with PPIs, below pH 4. And that, as you have known, these drugs, Losec, Prilosec, Nexium became the most sold drug in the world at the same time. And that actually built Astra and AstraZeneca to what it is today. So these drugs are important for companies and when they are developing the company. And also when we see now the next step in this evolution, you see that the first generation of PCABs were launched in 2015, and now in 2024 in U.S., where you can see that you drop -- you have another dramatic step downwards in hours of pH below 4. And actually, what they managed to do in Japan, where it was launched first, was to become the most sold drug in Japan, and with a close to $1 billion in sales only there. So of course, acid control improvement matter to actually build the market and to build companies launching these kind of products. And what you now can see then is our studies show that linaprazan glurate have a uniqueness to deliver pH below 4 only 1 hour per day. This is a major improvement to all existing treatment alternatives on the market and in the development, highlighting a significant market potential, as you understand them. This is really the end of the treatment ladder, you can say. I mean now we have reached the goal that also can help the severe ill patients. And also, if you remember the slide I showed you before with the biomarker relating the linear correlation between acid control and time and healing of these patients. We also wanted to control this and double check if it works also for PCABs. And the last study that has been performed, the Phase III trials being performed in U.S. and Europe, with vonoprazan, tegoprazan, and they have used the same comparator of the PPI lansoprazole. And if we start from the beginning here with the acid control of each of these drugs, lansoprazole, it's actually interesting to see. When you plot in these results into the curve that we've shown you before, the biomarker curve, it's spot on -- it's perfectly spot on related also to this curve. So if you actually look at the acid control of lansoprazole is 63% after 8 weeks. And in the results of the clinical studies of the Phase III clinical studies of tegoprazan and vonoprazan in U.S. and Europe, they came to conclusion of 68% to 72%. And that's perfectly on the line of the biomarker line here, showed you before. Going further then into the tegoprazan, they have acid control of 75%, and actually their clinical data showed 83% in the Phase III trial after 8 weeks of the C and D patient. And if you just compare 75% into this curve, you see it's perfectly on the line of 80-plus percent in healing. And also looking into the vonoprazan, they have a little bit higher acid control, up to 85%. And if you look at their clinical data from the Phase III, they have 91.7% of the C and D patients healing after 8 weeks. And it's also perfectly spot on the curve as well. So you can really predict outcomes with this data, with this curve. And therefore, it's very interesting to see that we have 96%, and it will be very interesting to follow our healing rates after 8 weeks for the C and D patients coming to the end of the year. Then we know absolutely in our Phase III trial. But of course, our ambition is to have in absolute figures also the best healing rates for the C and D patients. But not only the best healing rates, we also will look into -- thanks to our unique acid control, we also want to have the biggest effect difference compared to the PPIs, the biggest delta as we call it. Where we in our Phase II trial delivered 55% delta in absolute percentage figures, 93% versus 38% of the PPIs. That's 55% units in difference. If you look into the other PCABs, they have delivered something between 15% to 20% delta compared to -- versus the same comparator lansoprazole after 2 and 8 weeks. And of course, we want to have the best healing rates, but we also want to deliver the best delta, the effect difference between ourself and the PPI that we're comparing with. And that's the same as vonoprazan and tegoprazan has done. So we will have a uniqueness in reaching the best-in-class positioning here. On top of that, we also want to deliver superiority in symptom relief versus the PPI, which both in daytime symptoms but also in nighttime symptoms. And if we can do that, which we have good chance to do, this could definitely be a game changer and a unique position, best-in-class position that no one has delivered before. And that is, of course, something that we have tried, and that is, of course, done thanks to the uniqueness of our acid control. And that was the aim from the beginning when we developed this product from the very beginning, that we should have total acid control, which also could have a chance to help the most severe patients. Okay. I think I stop there, and then we let go into some financials, and I hand over then to you, Magnus.

Thank you, Christer. If we are turning to our second quarter results, we ended the quarter 2 with a cash balance of SEK 388 million, which is including the structured financing agreement drawn under the Claret facility in quarter 1 this year. The cash flow in the quarter amounts to minus SEK 88 million, which reflects the continued focus on this investment on HEEALING1 execution and its upcoming milestones. The R&D expenses remain the clear driver of our cost base at 89% of operating expenses in quarter 2, compared with the average of 87% over the prior year quarters. And if you're looking at the year-over-year comparisons for Q2, net sale was almost SEK 2 million, and the revenue consisted primarily of the license income from the Zentiva partnership for commercialization of linaprazan glurate in Europe. The revenue from Zentiva deal, which include an upfront payment of SEK 30 million in Q2 2025, is being periodized across the Phase III studies. Operating expenses were SEK 96 million, driven by the ongoing Phase III study activity. EBIT was minus SEK 95 million, reflecting the higher R&D expenses associated with the full Phase III execution. And if you look on the financial net line, we recorded SEK 16.3 million, and that's consisting mainly the revaluation of the structured financing of the Claret facility, as well as interest in bank and the interest payments to Claret facility mainly. Net loss for the quarter was almost SEK 79 million, and is driven by the high R&D expenses from the ongoing Phase III study. And if we look at the balance sheet, we have the noncurrent asset has increased, and that's primarily reflecting the leasing liabilities for the new office premises. Other current assets decreased mainly due to prepayments to the CRO, and that's in line with the contract that we have. Cash decreased by SEK 200 million, with the SEK 86 million structured financing drawdown partially offsetting the increased R&D expenses as the Phase III activity ramped full execution. Noncurrent liabilities decreased by almost SEK 30 million, mainly representing the contract liability from the Zentiva deal, which is periodized beyond 1 year. And the current liabilities increased by SEK 100 million, and are primarily driven by the structured financing in debt, convertibles and warrants, plus a short-term contract liability from the Zentiva deal. And with this, I will hand back over to Chris.

Okay. Thank you, Magnus. Thank you for these figures. And that brings us to the end of our formal remarks. Before we open the line for questions, a few important dates ahead. The Q3 results will be reported on November 11 this year, and the Q4 results will be reported on February 17 next year, '27. And of course, we look forward to keeping you updated on the remaining steps of the HEEALING1 study and results of the fourth quarter of this year, the defining clinical milestones ahead for the company. And with that, I would like to open the line for questions. Operator, please go ahead.

[Operator Instructions] The next question comes from Clemens Thiers from Stifel.

I have one on HEEALING1. So you ended up randomizing 523 patients versus 501. Was it simply because there was patients being still in screening when you reached the target? Or was that a deliberate decision? And does it have any meaningful impact on that stat signal in the end?

It's a very easy question. We had patients still in screening when we reached it. And of course, you want to give -- I mean, from an ethical point of view, you want to give all patients the possibility to be enrolled. So nothing on that.