Cosmo N.V. (COPN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Cosmo Pharmaceuticals 2020 Results and 2021 Outlook Conference Call. I am Alice, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to and over to the management team of Cosmo Pharmaceuticals. Please go ahead.

Good afternoon, everyone. This is Alessandro Della Chà, the CEO of Cosmo. And on the call with me also Niall Donnelly, the CFO. Thanks for joining. 2020 has been a very interesting year for Cosmo. Notwithstanding the pandemic, we have had major advancements on basically all fronts. We've seen a streak of approval. We've seen the return to operating profit, and we have seen the return to positive cash inflow from operating activities. So our outlook now looks very different from 2019, and we're very happy that we've been able to reach these achievements through hard work and also throughout the pandemic, which has disrupted many business and has been impactful for everyone on many fronts. Just to give you an example for what pertains more strictly to Cosmo, while our manufacturing activity has not been impacted at all, and we have continued to supply seamlessly, all our partners and clients, clearly, the introduction of very drastic travel restriction hasn't been very impactful on the sales of Aemcolo as the sharp production everywhere and in the U.S., especially, of all elective procedures, including colonoscopy, has been impactful on the sales of colonoscopy-related products and has been impactful for a specific case in sales of Eleview. If you look at the overall clinical trial activity that has been impacted throughout whole health care sectors. Access to hospitals has been challenging. Most clinical trials have been basically put on hold unless those that were COVID-19 related. And we've -- we're no exception in this. And furthermore, also the interaction with the public agencies and specifically the FDA in this case has been dramatically slowed down by the pandemic with everyone working or not working smart from home. So we've experienced significant delays in feedbacks and regulatory advancement. So if you look at these results in this setup. I think they are remarkable, and at least we're very happy with those. So revenues of EUR 60.9 million, of which EUR 32.8 million coming from manufacturing of our own products and EUR 10.8 million manufacturing of generic products and products on behalf of third parties, including related services. EUR 8.5 million of royalties and EUR 7.5 million in license fees, upfront and milestones. Our operating profit has been EUR 6.9 million. Our loss after tax EUR 7.9 million, mainly impacted by what happens below the line of operating profit, namely, the interest that we have to pay on the convertible bond and the share of the results of the associate, Cassiopea. This is what actually the 2 items summed up make the loss after taxes. The cash inflow -- this is the positive news, clearly, the cash inflow from the operating activities now is positive by EUR 10 million. And later on, you will see in the presentation, a very precise breakdown on how our cash has been deployed throughout 2020. I think you'll have the chance to appreciate that basically, all the cash that we have been deployed, has been deployed in investments and not in the financing of standard operations. So you will see that the money has gone into the purchase of the shares of Acacia in the context of the Acacia deal that we did in January 2020 in the financing of Acacia because within the agreements we had provided for EUR 25 million loan, the subscription of the capital increase of Cassiopea. This really -- these 3 items together, as you will -- we will see in a couple of minutes, summed up together makes all the -- or almost all the cash deployment of the company. So we have increased our cash position in respect of the expectation because of being cash positive from operating activities. Now cash at the end of 2020 is EUR 212 million -- EUR 213 million. The equity stakes in other company now are worth EUR 339 million. Treasury shares and loans, we have a EUR 25 million loan to Acacia, as I've said, is a EUR 72.5 million, and we have an equity position of EUR 400 million. Again, in this context, what I think is highly remarkable is that if you put together and sum up cash, bonds and fund investments, equity stakes in other company and treasury shares and loan, you reach a figure that if I'm not wrong, is around EUR 624 million, which is roughly CHF 680 million, out of a market cap of EUR 1.2 billion, which means that the business of the company is currently valued by the market around EUR 600 million. So I let everyone decide whether this is a good valuation for the business or not. What I think is important in understanding Cosmo, whose complexity is growing, is that our aim and our scope has always been to diversify as much as possible and decrease the overall level of risk of our activities. So I think it is in this context that you have to understand that we have stakes in multiple companies. We have stakes in Cassiopea, we have stakes in RedHill, we have stakes in Acacia, we have stakes in PAION. And simultaneously, we've entered into commercial partnership deals with many different partners from one another. So the medical device are entrusted with Medtronic. The antibiotic is entrusted with RedHill and Dr. Falk, the sedation agent Byfavo is entrusted with Acacia. LuMeBlue, which has been approved by the [ Ami ] in the centralized procedure is now in the hands of Alfasigma in Europe, Russia and Mexico. It's in the hand of China Medical Holding Systems in China, it's in the hand of Pendopharm in Canada. And we have an approval, hopefully, scheduled in Canada of LuMeBlue around the end of May. The company has 2 marketed medtech products as one which is Eleview and GI Genius for Europe, one approved therapeutic, which is Methylene Blue MMX. In Europe, 3 marketed therapeutics already, Lialda, Uceris and Aemcolo, a very interesting rich development pipeline that is being replenished, and I'll tell you a little bit more about this. And again, market cap of CHF 1.3 billion, CHF 1.2 billion and net cash up to EUR 212 million. This is a very brief description on I'm sharing -- sorry, Slide #7 of the breakup of our stakes in other companies as a result of spin-offs together with the other financial investment. As I said, this sums up to EUR 624 million. I think this is a very remarkable portion of our current market cap, and we should look at the business of Cosmo having an understanding of how much is business and how much is now financial assets and financial investments in other company. So I think, if I'm not mistaken, Niall, that the part and key events will be covered by you, right? So I'm passing you the word.

Thank you, Alex. So the key events during the year were the sublicensing of Byfavo to Acacia Pharma in an equity for product deal. So we took in EUR 30 million in shares -- in Acacia shares, over the course of the year in various milestones. And we released the intangible on our balance sheet into the P&L. So we had a net gain on that of EUR 4 million. We had very positive results from the first investigator-initiated trial of GI Genius. And this demonstrated a significant increase in adenoma detection rate and also adenoma per colonoscopy in the GI Genius group compared to the control group. GI Genius is already approved in Europe, and we had further approvals in 2020 in Australia, Israel and the United Arab Emirates. Of course, Byfavo received FDA approval during the year, and that triggered a milestone and inflow from Acacia in the form of shares. And the protocol and related statistical analysis plan from Methylene Blue has been filed with the FDA for final comment. And we're hopeful that, that trial will commence in 2021. Our associate, Cassiopea received FDA approval for Winlevi for the treatment of acne. Methylene Blue, as Alex mentioned, was approved in Europe for the visualization of colorectal lesions during colonoscopy. And the Japan's Pharmaceuticals and Medical Device Agency approved Eleview. We expanded our license agreement with Dr. Falk to include the new 600-milligram formulation in IBS-D. We licensed our China rights for Methylene Blue to China Medical Holdings. And we had announced a successful outcome of a Phase II proof-of-concept for Aemcolo in IBS-D. In February of this year, we licensed the EU rights for Methylene Blue to Alfasigma. In relation to the Acacia Pharma deal, we've touched on that already, we now hold 19.66% or 19.6 million shares in Acacia. We're entitled to a further $105 million based on the achievement of Byfavo commercial milestones. And as Alex mentioned, we have a loan to Acacia with a 5-year maturity and an 11% interest rate. Methylene Blue, I'm on Slide #15. We have covered those points. And in terms of Aemcolo, we've already discussed the successful outcome of the Phase II proof-of-concept trial. GI Genius, our U.S. trial is ongoing. And sales in the U.S. are expected to begin immediately after, hopefully, the product is approved in the U.S. So we're hopeful of that product. We'll receive approval for that product within the first half of 2021. So in terms of the financial review, our revenues for 2020 was EUR 60.9 million, and this compares to EUR 62.5 million last year. Our expenses came down by EUR 20.8 to EUR 54 million and this was mainly as a result of the closure of a U.S. organization during 2019. So we've seen the full year impact of those savings flow through into the 2020 P&L, and these were approximately EUR 16 million. The net reduction in expenses also includes the EUR 4 million gain on the sublicensing of Byfavo. And we should point out that these expenses include noncash e sub costs of EUR 9 million and depreciation and amortization of EUR 6 million. We're back to operating profit with a profit of EUR 6.9 million, and this compares to a loss of EUR 12.3 million in the prior year. We generated a cash inflow from operating activities of EUR 10.1 million, as Alex mentioned. This compared to an outflow of EUR 17.6 million in the prior year. So really, the core business is in good shape now. Our net financial expenses were EUR 8.9 million, and this compared to net expense of EUR 3.9 million in the prior year. This includes an imputed convertible bond interest of EUR 8.4 million, and the actual cash that we paid out on the bond to bondholders was EUR 4.4 million. Our loss after tax, therefore, was EUR 7.9 million, and this compares to a loss after tax of EUR 24.5 million for the prior year. And this includes a share of Cassiopea's loss of EUR 4.9 million. In terms of more detail on our revenue on Slide #21, our Lialda sales increased by EUR 5.9 to EUR 27.6 million, mainly as a result of orders from Shire in the USA. Our Uceris income was EUR 4.9 million. This compared to EUR 9.3 million in 2019, net sales of Uceris reduced to EUR 34.1 million from EUR 66.1 million. So we're seeing the impact of the generic on Uceris. Cortiment income was EUR 6.7 million, and this was up from EUR 3.9 million, 2019. And net sales referring were EUR 18.1 million compared to EUR 16 million in 2019. We had upfront fees and milestones of EUR 7.4 million, and these mainly relate to the out-licensing of the China rights for LuMeBlue to CMS and also to the amendment of our Rifamycin license agreement with Dr. Falk. In terms of our balance sheet on Slide #23, our total equity is EUR 400 million. We had cash and investments in funds of EUR 212.9 million at the end of the year. And the noncurrent and other current assets include our shareholdings in Acacia, PAION, RedHill, which totaled EUR 114.5 million. Our investment in Cassiopea was traded at EUR 136.1 million, and the market value of that stake at the end of December was EUR 225 million. We had intangible assets of EUR 26.6 million. Property, plant and equipment of EUR 29.3 million and trade and other trade receivables of EUR 57.9 million. This includes the EUR 25 million loan to Acacia. On the liability side of our balance sheet, the main liability, there is the liability component of the convertible bond, which is at EUR 162.2 million. Moving to Slide #25, some more detail on our cash flow. So we had a total net out -- cash outflow of EUR 55.4 million over the course of 2020, but you see from the detail that we generated a positive cash inflow from our operation. In relation to Acacia, we made a EUR 20 million equity investment and advanced the EUR 25 million loan. So EUR 45 million out of the EUR 55 million outflow related to the funding of Acacia. We purchased treasury shares to the tune of EUR 5.7 million. We paid convertible bondage of EUR 4.4 million, incurred capital expenditure of EUR 4.1 million, and we participated in the Cassiopea capital increase and advanced a further EUR 4 million for that. We had capitalized development expenditure of EUR 4 million and we made lease repayments of EUR 1.8 million. We received a tax refund of EUR 2.9 million, and we had other inflows of EUR 749,000. So Alex, I'll hand back to you for the key priorities and outlook for 2021.

Thanks, Niall. So let's see what's going to happen in this 9 months of 2021 ahead of us. Main overall priority is for us to complete the trial, GI Genius, and start sales. We are hopeful that this is going to happen within the first half of this year so that the second half will be already dedicated to sales. And clearly, our second priority is to have Cassiopea enter into a strategic deal to launch Winlevi. Here, I have to open a bracket and explain the following. The environment in the U.S., and especially the environment in the German market continues to be extraordinarily challenging there are large companies such as the business -- the Derm business division of Bausch, who has all of the sales force. This has gone through the whole sector with several companies active in Derm and cutting their commercial infrastructure and commercial organization in Derm. Access to cabinets and visits with patients is still very challenging. So in this tough environment, Cassiopea, who's the owner of the product, has the luxury of not having to rush into a launch, but select the best deal because no matter who the final partner for the product will be, there's frankly no need to rush into anything because the environment is highly challenging. And this is a view that is largely shared but every month it [ operates ] rates into the market. So Cassiopea is currently having multiple discussions with multiple potential partners. And I trust that they will be able to come up with the best possible deal. In fact at Cosmo, we would be happy, whatever deal occurs, and especially a deal that produces immediate results. And the reason why a deal that produces immediate results would be nice for Cosmo is because Cosmo has to book his share of results of the associates. And therefore, if Cassiopea makes a very nice profit because it enters into a transaction that generates a profit, then customer would have to book 47% of this profit within its own P&L. So this is something that we're looking at with great level of attention because we certainly take the largest part of whatever result is generated by Cassiopea. But we are hopeful because we have information on how these negotiations are proceeding, and I think they're proceeding well. So I am -- I'm optimistic. The important thing in this context is to have optionalities. And I think that Cassiopea has all the optionalities that are needed at this point in time. Maybe I should add something more upon request of investors, but this is certainly something that's going to be covered by your questions afterwards. In respect to the sales of GI Genius, in the United States, as I said, I hope that they will begin in the second half, but it's very, very difficult for us now to make any specific forecast because we don't know how much access will be provided to the Medtronic reps and how easy it's going to be for them to enter into hospitals, make the promotion, the way you need to do it. As you can understand, one thing is to have Teams or Zoom meeting with someone you are very well acquainted to and you just have to give updates and check how things are going versus meeting someone for the first time for making a sale of a very sophisticated equipment that needs to be tested live and seen in real procedure. So if there's limited access there, this will necessarily be impactful on sales. So when we will come to the guidance, we have been extraordinarily cautious simply because we do not know how that is going to play out. I hope as everybody that things will clear up in the course of the year and that we will be able to have a lot of visibility. But when we have given the guidance that you have seen already in our presentation, we have been very, very conservative. I hope the guidance is not going to disappoint anyone because the guidance is showing that we will continue being with an operating profit, and we will continue to be cash positive. But the fact is that we don't know. And I think that anyone, unless someone's got a crystal ball can exactly say how 2021 will play out. We all thought that because of the pandemic 2020 would have been a transitional year, and now it looks like 2021 will be a transitional year as well because the impact of the pandemic is certainly more protracted than originally expected. The third priority is to commence the Methylene Blue confirmatory, a Phase III trial required for the U.S. approval. Again, here, this largely does not depend on us because the interaction with the FDA has been extraordinarily slowed down by the pandemic to the point that at certain moments, we had to wait for months before getting an answer. So I'm hopeful that we're going to get the green light soon, but I have to tell our audience that even if the approval and the okay from the FDA would come tomorrow, it is very unlikely that we will be able to start any clinical trial, not just the methylene blue trial because there's very limited access to hospital. As an anecdote, I can tell you that, as an example, not even the Medtronic people and technical people were allowed to access the hospitals and the sites where the clinical trial was ongoing. So they basically had to drop the box containing the device to the reception of the hospitals and then everything else including installation, had to be done with phone calls and therefore, something that would have taken 3 minutes to do it in presence at all of a sudden, becomes very cumbersome exercise because the box went here and there and had to be retrieved through phone calls and all this turned into the things being enormously more complicated. Fourth point, as a priority, is finalize what's needed with the FDA and our partners to start the Phase III clinical studies for IBS-D. As you will recall, and if you don't recall, I'll say that again, because of the license agreement that we entered into with both Dr. Falk in the new amended version and RedHill, we did the transaction and the deal with them back at the end of 2019, we have completely shifted the financial responsibility and the regulatory responsibility of conducting this Phase III trial to our partners. Now the cost of this will be allocated 75% to RedHill and 25% for Dr. Falk. So the nice thing is that Cosmo just have to coordinate the activities of the partner, but further development in IBS-D will come at no cost for us. Fifth point is progress our product pipeline. And as I have already said to the investors I've spoken to, we are in the progress of replenishing very materially our pipeline, and we intend to announce new pipeline in due course, which we would expect would occur after the summer break. We are now in the process of doing a lot of preliminary testing and crafting the intellectual property protection that needed to be in place before we can announce to the market what we're doing, I think that you will see significant boost in the pipeline. We have identified a lot of areas with great unmet needs in GI. We intend to work overall with API, which are already approved for other indications in order to shorten significantly the development pathway and have a faster track in terms of safety, in terms of safety data. We will announce it, as I said, in due course, but our expectation is around September. And what we're thinking of is about organizing an R&D Day in Zurich, where we would presenting all this. Now how much all this milestone, as I said before, will be potentially influenced by the pandemic, I can't say. This is just reflected in the following slide on Page -- Slide 20, where we have been issuing, as I said, a very, very conservative outlook. Again, I hope no one is disappointed. I would like our audience to understand that when you look at our expenses, a significant portion of those EUR 57 million to EUR 59 million is actually non monetary items such as cost of the ease up or the cost for depreciation and amortization, which totaled together close to EUR 13 million. So it's a significant -- significant items, but they're non monetary ones. And again, this is a point that I want to stress guidance for operating profit doesn't take into account the outcome of a potential Cassiopea transaction because this will occur clearly below the line of an operating profit. Specifically, let me just make an example, just imagine that Cassiopea is going to do a licensing deal and gets -- I'm shooting from the hip, just for the sake of the example, is going to receive EUR 15 million down payment, which would be hefty or then 46%, 47% of this would be impactful and positively impactful on our accounts as a result of the -- share of result of the associates. So we will see how that will play out. But again, consider that many of our different pieces are likely to continue to be influenced by the pandemic throughout 2021. So we need to make -- to provide a guidance in light of what we really think is going to happen. And again, in this specific range of revenues, the impact of GI Genius is very, very limited because we cannot yet predict nor can Medtronic, to this extent, predict what exactly is going to happen in 2021. So I think that this is all for now. So thank you very much. And happy to answer to any question you may have.

[Operator Instructions] The first question comes from the line of Bob Pooler with ValuationLAB.

Just a few questions. First, starting with methylene blue. Just on the brand name, you have Methylene Blue MMX and LuMeBlue. Are these regional brand names? And where do you use LuMeBlue where do you use Methylene Blue?

Well, Bob, thanks. Actually, LuMeBlue has always been the name that we wanted. Clearly, because of the setback with the FDA, a name has not been decided yet, but that has been chosen by us a long, long time ago. This was immediately approved by the Ami. And therefore, we're using LuMeBlue because LuMeBlue is the registered trademark. So when we refer to Methylene Blue MMX, that's just the product name, but it's not the branding, but when we refer to LuMeBlue, that's the brand. And we hope that also in the United States, we'll be able to call it LuMeBlue. Clearly, there are some advantages in having a global brand name.

Okay. That's clear. Just on -- again, on LuMeBlue, when do you expect the e-launch to occur by your partner?

Within months from now. But for the very same reason, we haven't planned together with Alfasigma. We haven't planned a launch data yet. So we're in the process of refining the forecast. We're waiting for them for indications that we can organize the supply, we're really at the first stage because the first thing that you have to achieve in order to allow them to make planning is the transfer of the marketing authorization, which has not occurred yet. It has not occurred yet because we're in the process now of obtaining grandfathering for the U.K. indication because U.K. now is out of the EU. And therefore, we need to grant further in the U.K. before we can transfer the marketing authorization of EU. Otherwise, if we would be transferring the marketing authorization straightaway to Alfasigma, they would lose the chances of grandfathering in the U.K. And because the U.K. is going to be a large market, we want to make sure that first we get the grandfathering, and then we transfer the marketing authorization. So this is why the process is taking a little longer. But again, even if that could be transferred tomorrow, issues in respect of promotion and access to doctors will be more or less the same. So this is not going to be ultimately impactful.

Okay. And then just on the U.S. Phase III trial, when you start there, are you already factoring maybe additional precautions due to COVID-19? And will that have an impact potentially on the trial duration and costs?

No. No. No. No, that's not the issue. The issue is simply that if we listen to the data that is coming and the information that's coming from Medtronic, the drop in the number of colonoscopies in the U.S. is massive, massive, massive. This is true for all elective procedures, but it's particularly impactful in terms of colonoscopies because this is what we know better. And therefore, even if we would be getting the green light from the FDA tomorrow because of the condition of the market and because of the restriction of access to hospital is very unlikely that the trial will begin. But once that will begin again, and therefore, activities for screening and surveillance will resume to normal levels or close to normal levels, no specific precaution will be required.

Okay. Great. And do you see somewhere or Medtronic, do they see somewhere maybe the sort of pent-up demand for colonoscopy? A lot has been delayed now, but maybe in 2022 that you might have a spike of colonoscopies due to the...

No. No, the -- no, oddly enough, they're not expecting that. And actually, I had the same question this morning, and apparently, no one is expecting that. What they expect instead is that they will -- the number of colonoscopies will go back to normal in 2023. But you're not going to see a gigantic spike in 2022 because of the backlog. What they're projecting is simply that people that had scheduled for their screening or surveillance colonoscopes simply would skip it. And this means that you would unfortunately have, like, in many other diseases, like oncologic diseases or cardiovascular diseases. Within 3, 4, 5 years, you will see the severe impact of not having done the screening and surveillance activities in the patient's population throughout all diseases for a couple of years. I don't think that people have yet realized the self-inflicted damage, if I may say, that has occurred because of certain choices that would be made throughout all countries. But there will be an heavy toll down the road. Anyway, no one is expecting a specific spike in 2022, but rather an increase in respect of 2020, a little increase in 2021, another increase in 2022 and back to normal in 2023.

Okay. Very clear. Just 2 more questions on your products. Lialda, the growth, which is -- it's generic now or facing generic competition. Where is this growth coming from? Is still that people prefer Lialda over the generic versions?

Precisely. Precisely, which is something that, by the way, we would expect should occur for Uceris as well.

Okay. Yes. And that was my follow-on question, especially also for Uceris. You had a sharp decline, of course, but do you see this now bottoming out maybe this year?

This is the information that we have -- that we should have plateaued now and that, therefore, we should expect a rebound. We will see whether this is going to happen or not, but that's the expectation.

[Operator Instructions] We have a question coming from the line of Philippa Gardner with Jefferies.

Alessandro, I wonder if you could maybe sort of outline for us, I guess, you sort of touched on this, talking about the pipeline. But I guess sort of your longer-term vision for Cosmo. You've obviously got the manufacturing, you've got all these investments in companies, and you're now looking to replenish the pipeline. So I guess when you look at Cosmo in sort of 3 to 5 years' time, what do you -- how do you see the company sort of shaping up?

Thanks, Philippa. for the question. Well, first of all, I would need to say that I'm expecting a lot from GI Genius, and I'm kind of surprised hat the market hasn't seen it yet coming. Because if we have seen it, this is not reflected at all into the share price. And sometimes, I suspect that if Cosmo Artificial Intelligence Ltd, which is the company that's fully dedicated to AI would be listed separately and autonomously because of the validation coming from the deal of Medtronic and because of the very close FDA approval, I suspect that it might have a value, which would be probably higher than the value that the market is currently giving -- given to our business. So what's going to happen in, first of all, in the next 3 years is that we will position ourselves as highly significant player in this field of AI. And I don't think that people has also yet understood that we have really developed, as not so much, an artificial intelligence device on a stand-alone basis, but it is more of a platform. So there are a lot of indications that we're already working on that can expand significantly the use of our device into other areas, not to mention the fact that within the business model of Medtronic, normally, they buy out the product once the product produces certain sales. They don't like the impact of royalties or other outflows that they have to pay to their partners. And in our specific case, because we've entered into a revenue share agreement whose terms are not allowed to disclose the outflows from Medtronic to us would be pretty significant. So my first piece of answer to your question would be you're going to see AI taking a very important role and be hopefully a significant source of revenues. In terms of the most traditional pharma activities, as you will see when we will present in due course, the new pipeline. Our intention is to concentrate on very early stage projects, so namely, preclinical and Phase I of known APIs that we will reshape and use for previously not tested indication. And we have quite an array of opportunities there. And the nice thing, which is going to be an integral part of our business model is that we intend to start from the earlier phase because that is precisely the phase where you can create more value with the lower investment. It's true that you create a lot of value when you do, for example, a Phase III, but it's also true that a Phase III as the most expensive of all clinical phases. What we will be doing instead is that we intend to play on multiple tables by running simultaneously, several preclinical and Phase I activities on different compounds for different indications, all within the GI space because that's where we have the know-how. And the good thing of this is that each of this program will have a very low deployment in terms of CapEx because that initial phase is the least expensive and the intention would be to gather early efficacy signals and early activity signals soon as possible, so that by the end of the Phase I, which will be relatively rapid, we can then partner up with other companies and other players for the subsequent basis. So this is how I see the next 3 to 5 years, and I hope that this answers your question.

[Operator Instructions] We have a follow-up question from Mr. Pooler from ValuationLAB.

Just on the strategic deal for the launch of Winlevi. Do you have any preferences? And how far you may be involved with that? Yes. Of course, it needs a lot of value for Cosmo as well. How is that process working?

Well, thank you for the question. As you know, we're not really part of that process because Cassiopea is run independently by independent directors. What I think, I should say, in this respect, that I'm relatively agnostic in respect of the kind of the deal that will be eventually chosen. So I don't have a specific preference. The only thing that I think Cassiopea should not do is try to pursue the setup of the commercial infrastructure by itself because that would not be economically and financially convenient would expose the company to a very high-risk when there are a lot of other people -- sorry, entities there or companies that you can do a combination with that already have the infrastructure. So this is the only thing that I am frankly, against, to the creation of a stand-alone organization with a single product that I would not be supportive of -- unless, of course, clearly, unless this would come in conjunction with the other partner. But when I say stand-alone, I mean Cassiopea just by itself. Then I would not be -- I would not be supportive of that. And when it comes to licensing agreement, I think that even if there's an licensing agreement would be okay, if this is done at the right if this is on the right conditions because that could be very convenient. Again, what I think that the market should understand is that no matter what the performance of Winlevi will be. If there has to be a wild card, the wild card is Breezula, it's not Winlevi because Winlevi has very high potential, but in the U.S.-only because that's where you can do most of the money if you have an acne product because that's the place where acne products are reimbursed. Whereas an Acacia product, yes, that's not a disease that's a cosmetic product. It will be a cosmetic product that needs to be prescribed because you will need to have the prescription, but that is a global product. It's the product that you would sell in China, you would sell it in India, you would sell it in South America. So if that is successful in the end, well, that is Cassiopea's wildcard way more than Winlevi. So if Cassiopea should enter into licensing agreement that doesn't entail any consequence for Breezula, then Cassiopea would be comfortably sitting on a high revenue-producing license with Winlevi, which would mean no further capital needs for Cassiopea at all that could concentrate on the advancement of the other product and namely Breezula having unfettered rights to that product. And then, therefore, the capacity of selling the company with Breezula in any other product at any time. So this is why I'm basically agnostic. Even a licensing deal would work at least for Cosmo because it would put the company in a perfect track with making it completely independent in terms of financial needs. Would make it highly profitable over the years. And with all the money that's need to advance the Breezula program as quick as possible.

Okay. Yes, that's very clear. It seems you're in that respect that aligned with Cassiopea after yesterday's call. So I think that's going very well. So thing is cross for a good deal with them there. And with -- of course, it's also a breakthrough product for acne. So that should see some interest from companies, I think, there as well.

No. Well, in respect to Winlevi, I think we are registering a lot of enthusiasm from potential stores. So this is good. And again, what people need to understand is that what you have in acne is always a poly products approach. So there's not going to be, in any given case, just one product that will be prescribed for acne. And because this is brand-new -- it has a brand-new mechanism of action. It will be very highly sought for. And on this specific point, well, basically all suitors agree, and this is the reason why they want it. They know it will be prescribed because it is very new and it works, and it works on the -- actually on the factors that generate acne, so it makes perfect sense to use it together with other products.

And just a question, when would you consider then reducing your stake in Cassiopea? What would trigger that?

Well, if there's a transaction in terms of combination, well, probably our stake would be automatically reduced by effect of the combination because we will be diluted. So I think we'll have to see what comes next. I'll be also -- and if Cassiopea decides to enter into a license agreement, I'd be very curious to see how the market will react. What I know for sure is that Cassiopea is run very efficiently. So my expectation is that even if they would enter into a licensing deal. This licensing deal in terms of net present value would probably absorb a very, very significant portion of the overall value of Cassiopea. So as long as this is what's going to happen as a shareholder I'll be happy. And if Cassiopea becomes highly profitable, well, I don't know whether I will want to immediately divest. Let's see, right, because if I have a 46% stake in a highly profitable company, and I have the luxury of booking as a profit, the profit that this company makes, well, this is going to be advantageous for us as well.

[Operator Instructions] There are no more questions.

Okay. Thanks, everyone, for your time, and we're happy for any of you to reach out to us if at any moment you want to have further clarifications or information. Thanks again. Have a good afternoon.

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