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

Ladies and gentlemen, welcome to the Cosmo Full Year 2021 Results and 2022 Outlook Conference Call and Webcast. I am Alice, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Alessandro Della Chà, Chief Executive Officer. Please go ahead, sir.

Good afternoon, everyone. Thank you very much for joining our presentation of the full year 2021 results and outlook for 2022. So let's start with a quick introduction for those who don't know us already, and let's explain who we are, first of all. So Cosmo is a pharmaceutical company that develops and manufactures innovative products in three fields: one is gastroenterology, the other one is dermatology and the third one is health tech. In gastroenterology, we develop drugs to treat inflammatory bowel disease, to prevent colorectal cancer, to treat irritable bowel syndrome and to treat infectious diseases in the colon. In dermatology, we develop drugs for the treatment of acne, and we develop drugs for the treatment of alopecia, androgenetic alopecia, which stands for hair loss. In the health tech, we're developing artificial intelligence applications in endoscopy. The first one, GI Genius, is an artificial intelligence-driven device that detects lesion during colonoscopy. And we're working on further application of this device as a platform in other applications. Our business model is, I think, relatively different from that of many pharmaceutical companies. And we think it's an innovative business, which is based on three pillars that have the aim to increase opportunity and decrease risks. First, we develop and manufacture our own products. Second, we distribute our products through selective partnership with strong and reliable partners. And third, we develop drugs and manufacture them also on behalf of third parties. I see that there's a little bit of a disconnect in terms of delay probably between the slide that I'm looking at and the slide that's being projected. I don't -- I hope this is not the case. Because I'm looking to two screens at the moment. Anyway, the purpose of the business model is to maintain a lean cost structure, to reduce the overall execution risk, increase diversification and allow us to focus on research and development. In terms of a very quick overview, the company was founded in 1997; listed in 2007 on the Swiss Exchange with the ticker, COPN; had a market cap at the end of December 2021 of CHF 1.15 billion. We have in total 290 employees. And the breakdown, I think, is significant. We have 59% of our people working in production and logistics. We have 14% people in SG&A, but 27% of people working in R&D. We are quite balanced in terms of gender diversification, 59% male, 41% female. And we have people coming from 14 different nationalities. Cosmo has an impressive track record in terms of approval of drug products. And I think I can say fairly that you're not going to find another company the size of Cosmo with such a track record in terms of approval. And most important, this is not an approval track of me-too drugs. Because all of our products have a unique selling point, USP, meaning they are differentiated than from whatever else can be found on the market. I don't need to go through the list of all the products. You probably know all of them already in a way or in another. But it's important to understand that each one of these drugs has a unique selling point, which is what has entitled us to enter into partnerships. And the same actually is true for our medical devices that you can now see in the subsequent slide. They're all very special devices and one of a kind, to start with GI Genius, as we mentioned, the first and so far only artificial intelligence-based medical device for the detection of lesion during colonoscopy. The next two slides are there just to exemplify in visual terms the quality of our ongoing partnerships. We have Sun Pharma for Winlevi, our acne drug. We have Takeda for Lialda. We have Bausch Health for Uceris and Ferring for Cortiment in the rest of the world. Uceris and Cortiment are the same drug with two different brand names, depending on territory. We have Medtronic for GI Genius. And we have Medtronic also for Eleview with the exception of Canada, where we have Pharmascience. And to continue with the other products, we have RedHill Pharma for Aemcolo and Dr. Falk for Relafalk. Again, Aemcolo and Relafalk are the same drug with different brand names, depending on the partner. We have Alfasigma for Lumeblue in Europe, Russia and Mexico. We have China Medical System Holdings for Lumeblue in China. And we have Acacia Pharma for Byfavo. Let's go through the 2021 key events and product update. Also, 2021, and notwithstanding all the difficulties that every one of us has experienced, has been a very important year for Cosmo with a lot of achievement. And just to list them, not in order of importance but in chronological order, we have started with the announcement of the successful outcome of the Phase II proof-of-concept clinical trial of Rifamycin 600-milligram for the treatment of IBS. We have announced the licensing of the European rights plus other countries, including Russia and Mexico, for Lumeblue to Alfasigma. Most importantly, we have announced the FDA approval of GI Genius, our artificial intelligence device, and the outcome of the DETECT study that shows that when you do colonoscopy with the assistance of GI Genius, you reduce the missed polyp rate by over 50%. We have signed the license and supply agreement between Cassiopea and Sun Pharmaceutical for Winlevi in the U.S. and Canada. We've launched Winlevi in the U.S. in November 2021. And finally, during the year-end, we've launched and we have successfully closed the public exchange offer to acquire Cassiopea. Before we get into the products, let me just delve a little bit more into Cosmo as a business model. This slide is telling, in a nutshell, what we actually do. It's important that investors understand that we don't sell our own products. We don't have a commercial infrastructure. We don't have a commercial organization. So we're not bearing the cost of the commercial organization. And conversely, we are not recording, in terms of sales, the same sales that you would otherwise have if we'd be selling the products directly. Therefore, the EUR 60.9 million that you see in 2020 and the EUR 65.1 million that you see in 2021, they all come from different revenue sources. They come from milestones, they come from royalties, they come from manufacturing revenues. They don't come from direct sales. So our revenue base is much smaller than that of a company that sells its own product but so is our cost base. The advantage that we have here, and you can see this explained in visual terms by this slide, is that when the revenues increase, our cost base does not increase accordingly but increase in much lesser terms. So you can see that we had EUR 61 million revenues in 2020 and EUR 13 million EBITDA with an incidence of EBITDA over revenues of 21.2%. But then when we increased the revenues of only EUR 5 million, moving from EUR 61 million to EUR 65.1 million, then we have recorded in this year, 2021, EUR 18.5 million in the EBITDA, which is a 28.4% of the revenues. So a 5% increase in the revenues has translated into a nearly EUR 6 million increase in the EBITDA. We'll come to the guidance later on. But as we are assuming that our revenues will increase in 2022 sensibly for the reasons that I will explain, you will also see the EBITDA increase in an uncorrelated way. We're actually expecting the EBITDA, if we will reach our guidance in terms of revenues, to be somewhere between 38% and 40% of the revenues. And again, you will then see a significant shift from this impact of the EBITDA to a much higher impact of the EBITDA. People may think that what we call our legacy products are kind of lost and forgotten. Well, this is really not the case because they continue to perform well. And again, you have to read these revenues, keeping in mind that these revenues are, in an ordinary pharmaceutical company, would basically be margin already. If you think of the revenue that comes from the manufacturing of Lialda and you consider that the API is provided directly by our partner, what you see here is basically the cost that we're bearing for the manufacturing is actually personnel cost and the cost of the equipment. So it's a very significantly small cost base in respect of the overall revenue that's generated. Up to now, we have delivered 3.3 billion tablets. And the graph shows you that this continues to grow, and it grows steadily. And this has generated EUR 27.8 million revenue in 2021. And the same actually holds true also for Uceris/Cortiment. You see the graph showing how the total of cumulative tablets constantly increases. Tablets being delivered already is more than 80 million. Revenue is EUR 7.3 million. But you should expect this to continue to grow over time. With the exception of the U.S., where revenue is basically flat, Ferring is doing a tremendous work, tremendous good work in the rest of the world. We have moved most recently last year to a different model because patents have expired, so now we don't receive a royalty anymore. But our royalty has been incorporated in the price of the single tablet. And this is a franchise that is consistently growing. Just to give you an update, a specific update on this position. The agreement that we have with Ferring provides for Ferring to pay off certain commercial milestones once certain commercial thresholds in terms of sales have been reached. And we are expecting overall of these thresholds to be reached in the course of 2022, which will be definitely impactful on the overall volumes of revenues. Moreover, we have terminated a successful trial in Japan for the registration of Cortiment in Japan. We're in the process with our partner to file for the registration there. And if things go as were planned, we are expecting Cortiment to be approved in Japan hopefully within the first half of next year. And why is this important? It is important because you might not know that Japan is the second world market for IBD, second only to the U.S. We expect that Cortiment will be able to perform exceptionally well in this market. Now why is it so? Let me just remind you because all of this is connected. Everybody knows that the steroid for the treatment of ulcerative colitis is very efficacious, but it comes with very bad side effect. As a unique selling point, our budesonide formulation devoids the drug of any side effect because of the way it is delivered. And let's move now to the new products. Let's start with Winlevi. Winlevi is the first new mechanism of action in acne launched in 40 years' time, so big innovation. Some of you might recall the words that Diana Harbort used to say during the early times of Cassiopea. This is the first-ever topical anti-androgen for the treatment of acne. And Diana Harbort, coming from Medicis, stated that a topical anti-androgen was the holy grail for the treatment of acne that everybody was looking for. And this is then shouldn't be surprising for you that because of the novelty and because of the feature, there has been a player such as Sun Pharma that wanted to in-license the product for U.S. and Canada and paid Cassiopea a whopping $45 million upfront payment, will pay high double-digit royalty and will pay $190 million in commercial milestones. This is a drug that has a tremendous potential. Because if you look at the acne market, the acne market is a big market. Just -- let's talk just about the U.S. You have 50 million sufferers in the U.S. You have 24 million prescriptions. You have a 70% prescription that's [indiscernible] in the dermatology office. But most important of all, the U.S. market only for prescription drug for acne is $5 billion. So this is the market where we're playing now. It's a $5 billion market for prescription drugs, which is currently almost entirely covered by generics. So just bear in mind what kind of role a new product with a new mechanism of action, which is the first-ever topical anti-androgen, can play in this field. And then it will look to you, not surprising at all, that Sun wanted to licensed this in. And this is so true that if you look at the TRx prescription uptake, this has been so rapid that in this specific moment in time, Winlevi is the most successful acne launched at least in the last 15 years. This graph shows you the trajectory of Winlevi between beginning of November and end of February. It is the black line. Compare it with the other products in the market in terms of the TRx, and you can see that the performance is stunning. These are all of the [indiscernible] coming from IQVIA. I want to tell you another thing, which is not put into this slide. As of the present moment, Sun had already reached out to more 7,000 dermatologists as the unique prescribers of Winlevi, meaning that in the U.S., out of the population of 10,000 dermatologists that are the top prescribers of the drug, 7,000 of them have already written at least one prescription of Winlevi. And this number of dermatologists prescribing Winlevi increases by 40/50 a week. Keep in mind, this is something that we've said in the past, but I will repeat it, that Sun Pharma is the second prescriber in the U.S. in dermatology. So no surprise that with their excellent organization, they're performing so well. Now let's move to GI Genius. GI Genius, we like the title of slide, leading the artificial intelligence race in GI. This is the first system marketed that uses artificial intelligence and the most sophisticated hardware and software to detect lesions during a colonoscopy. We have just very recently published the stunning results of the DETECT study. There has been a 52.2% decrease in the missed rate of polyps. 52.2% is an amazing figure because this basically means that when you use GI Genius, you find 50% more lesion than you would otherwise miss. And missing rate is the cause of interval cancer. If you can reduce the adenoma missed rate, you will end up eradicating colorectal cancer. So this result should not be undervalued. And they will also serve as benchmark when there will be, in the future, other competitors in the market. Keep in mind that we are setting the path, and we are becoming a benchmark. So whoever will want to follow up in our footprints will have to deliver performances that will have to be at least equal to the performances that we have delivered so far. Medtronic, our worldwide partner, is doing a tremendous job. They have an amazing and consistent task force that is fully dedicated to the promotion of Medtronic in a relentless fashion. Medtronic is being brought into all hospitals, is being brought into all ambulatory surgical centers. Medtronic has started an extensive marketing campaign, which is currently underway. And they have even moved for -- from traditional scientific and professional publication to mainstream media in interviews of KOLs and experts in the field being published everywhere. But currently, marketing activities is at its [indiscernible] because this month, March, in the U.S. is the month for the colorectal cancer prevention. So the means that they are deploying are simply amazing. I would like to ask the operator to start showing the first video. This is just an example of what Medtronic is doing in terms of promoting the product. Operator, please start the video. [Presentation]

Thank you. I think this was a very telling as an example of many efforts that are being deployed. Now I would like to show you another very short video. This is a clip of an interview that was aired on mainstream media and an all-major U.S. media outlet. It's an interview which was given by Dr. Doug Rex. Dr. Doug Rex, Professor of Gastroenterology at Indiana University, is one of the most prominent endoscopists in the U.S., and I would say probably one of the most prominent endoscopists in the world. And this is just a fraction, a short clip of his 8-minute interview. And I would welcome everyone of you if you're interested to take a look at the full interview and -- which is available on YouTube, which is very telling. So operator, please start the second video. [Presentation]

I hope that everyone has understood precisely what he has said. He said, "There are polyps that GI Genius shows me that I wouldn't otherwise see." And this has one of the highest, if not the highest, lesion detection rate in the world. So if he finds a support in using GI Genius, you can just imagine what this is going to mean for the normal endoscopists. This is why if you ask me what's going to happen in 10 years, I'm going to tell you without the faintest doubt that all colonoscopies will be artificial intelligence-assisted. This is inevitable. It might not necessarily be assisted by GI Genius, but they will have some sort of artificial intelligence assisting the endoscopists in performing the examination. Now how quicker this is going to happen in respect of the 10 years, I'm not able to tell you. Is it going to be a year from now? Is it going to be 5? I don't know. But I can bet, and I'll be happy to bet a lot, that in 10 years, this is going to be recognized as the standard of care. Now with this in mind, let's look at what the market looks like. The world market is now more than 60 million annual colonoscopies. And I mentioned the world market because Medtronic has the worldwide rights to GI Genius. The 60 million, as Doug Rex would say, to begin with because you should expect this number to increase and not this number to go down. And in the U.S. only right now have more than 19 million annual colonoscopies. The U.S. market potential alone is at least $1 billion again to begin with, so this is huge. And what are we doing here? Well, Medtronic has already ordered 3,000 devices subsequent to the interest shown by the market. As of the end of the year, we have -- sorry, as of today, we have delivered 1,062 devices for the U.S. market. We have delivered 458 devices on the EU market. Just keep in mind that size-wise, the European market is probably, in terms of number of colonoscopies, 1/2 of the U.S. market, so it's interesting to see how the numbers are basically aligned. And the franchise is expanding. We have hundreds of hospitals that currently are hosting GI Genius. And we are having top U.S. hospitals starting to use GI Genius and installing it. And I just wanted to put here nine examples just to give you a sense of what's happening here, where you have MD Anderson in Texas. You have Stanford University in California. You have the New York University. You have the RUSH University in Illinois. You have the Indiana University, where Dr. Doug Rex teaches. You have the U.S. Veterans in Virginia. You have the Hospital Corporation of America. Pennsylvania. You have the Thomas Jefferson University Hospital in Pennsylvania. You have the HOAG Medical in California. Really, some of the top U.S. hospitals have already installed GI Genius. And as you can imagine, also the race is going to start really quick there because hospitals that don't have GI Genius will have to think on why they don't have it when others do. A quick update on the other products because there's still a lot that we have to go over. But first, before entering into this, let me point out something, which is probably the most important message that has to go through with this presentation. We started with the first two products. The first two products are products that have been successful in Lialda, more than Uceris so far, but in a very small market, in a niche market, which is of the IBD, a few million patients in the whole world. Now with Winlevi on one side and GI Genius on the other side, Cosmo is finally entering into huge markets, big, big markets. And these are worldwide markets. So it's not just regional, it's not just country -- country-wise. This is worldwide. Cosmo, for the first time, is entering huge markets with very innovative product. We're not entering these markets with me-too products. We're entering markets with the cutting-edge innovation: in dermatology, first topical anti-androgen; endoscopy, first AI-assisted device for the detection of the lesion. It is important that investors recognize and identify this shift. And this shift is actually following up with the third in line. The third product in line is Breezula, which will begin, as I will tell you, Phase III soon. And that is the market of androgenetic alopecia. And I just let you think whether you believe that the market for alopecia is only smaller, if not much, much bigger than the colonoscopy market or the acne market. So just quickly on the other product. I really don't have much to say here. In respect of Lumeblue, well, we've signed the agreement for the Chinese rights and the agreement for the EU rights. And we're progressing discussions with the FDA, we have -- for the second Phase III trial that will occur in due course, depending on the answer that we receive. In respect of Aemcolo, we are finalizing with our partners discussions to start the Phase III in IBS-D. The two investigator-initiated trials...

Sorry, this is the operator. Mr. Della Chà, can you please stay in front of your laptop as the audio gets lost when you move.

Sure, excuse me. As I was saying, the two investigator-initiated studies ongoing in the U.S. have already reached half of the recruitment. Those were the one in hepatic -- minimal hepatic encephalopathy and small intestine bacterial overgrowth. The third one in uncomplicated diverticulitis has not yet started. We have experienced in all of these trials major delay due to the pandemic. And I hope and I'm sure that we will be able to recover this time lost in due course. The development pipeline is very rich. And this just give you an idea of the area of the opportunity that Cosmo is offering. We have Breezula for androgenetic alopecia. GI Genius is being developed currently for several other additional features. I'm not going to mention here which one. But just to give you an example, automatic reporting that will relieve the doctor from the task of having to sit down and write a report. This is just an example. And I would like to -- the audience to understand is that GI Genius actually is a platform. And you should see the subsequent features to be added on the platform as if you would add application on your iPhone. Methylene Blue, I told you. Aemcolo, I told you. Then two other projects that I will brief in a little bit of a much more detail in a short while: one is our oral androgen receptor antagonist against solid tumors, which is about to start Phase I now in May 2022; and brand-new product that we're presenting as an example on how we are replenishing our development pipeline, CB-01-33, for the treatment of bile acid diarrhea. More in a second. Breezula, as I mentioned, very, very large opportunity, at least 2 billion people -- males are estimated to be affected by androgenetic alopecia, and 50 million of this, at least just in the U.S. You have a very, very telling photograph of a patient that has been treated with Breezula. See the photograph at the baseline and see the photograph at month 6. I don't have to comment about the photograph. The Phase III program is about to start in the second half of '22 as quick as possible. It's going to be a few months. We're just in the process right now of finalizing the agreement with the centers that will host the trial. CB-03-10 is our oral -- and I'm marking oral in respect of intravenous treatment, oral treatment for solid tumors based on the library of compound that we own and that we have screening starting from cortexolone and its derivative. One of this compound has been successfully scouted for acne treatment and for alopecia treatment because it is CB-03-01, which is the active principal of both Winlevi and Breezula. The one that I'm talking about now is CB-03-10 for the treatment of solid tumors. We have finalized the agreements with some of the most highly reputed cancer center in the U.S. that will now start the trial soon. Just to mention briefly the University of California Irvine, the Yale Cancer Center in Connecticut, the University of Texas MD Anderson in Texas and the Barbara Ann Karmanos in Michigan. We have terminated the manufacturing of the GMP clinical batches. Release is expected to occur in these days. And trial will hopefully begin in May 2022. A very short note on CB-01-33 for the treatment of bile acid diarrhea. This is a diarrhea which is caused by the malabsorption of bile acid, which is dispersed through the colon because it is not reabsorbed by the body as it should. It is impacting 25% to 33% of patients that have chronic diarrhea, is under-diagnosed, and we believe it is a very, very sizable market. Most important I would like the audience to understand that the development of this drug is just the natural consequence of the know-how that has been accumulated during these years. We know how to do this stuff. We know how to deliver into the colon. It's a seriously undertreated disease, whose treatment is really within our cores. And we're currently in the process of the formulation. And more information will follow in due course. Now I'm going to pass the word to Niall for a brief explanation of where we stand in terms of financial review. And then I'll be back with you in terms of key priorities and outlook. Thanks. And Niall, up to you.

Thank you, Alex. So in FY '21, we did -- our revenues were EUR 65.1 million. That's an increase of 6.9%. We maintained a very lean cost base throughout the year. And our net operating expenses remained steady on the previous year at EUR 54 million. We -- EBITDA, therefore, increased by 42.7% to EUR 18.5 million. Operating profit increased by 60.9%, up to EUR 11.1 million. And our profit after tax was EUR 21.7 million versus a loss of EUR 7.9 million in the previous year. This includes our share of Cassiopea's profit up to the acquisition date, which occurred in December. Our net cash inflow from operations was EUR 12.6 million versus an inflow of EUR 13 million for the previous year. And at the end of the year, we held cash and fund investments of EUR 222.2 million compared to EUR 212.9 million in the previous year. So this slide just illustrates the improvement on the profit metrics over all the lines, operating profit, EBITDA and profit after tax over the last 3 years. And this slide illustrates the detail behind the revenue by product. So as Alex mentioned earlier, our legacy products continue to deliver. And now we're starting to see the new products to generate revenue. The next 3 slides are a summary of our income statement, our statement of financial position and our cash flow. So at the end of 2021, we had total assets of EUR 805.6 million, total liabilities of EUR 292 million and total equity of EUR 512.7 million. In relation to the cash flow, as mentioned, our net -- we had a net inflow from our operating activities of EUR 12.6 million. And our overall net cash flow for the year was EUR 9.3 million. So as we said, we closed cash and cash equivalents and fund investments of EUR 222.2 million at the end of the year. So I'll hand back to Alex now for the 2022 priorities.

Thank you very much, Niall. The priorities for this year are actually very straightforward, as you can see from the slide. Given the fact that our two new products are entrusted with most reliable partners, what we have to do, first of all, is ensure that GI Genius performs in the U.S. markets by providing Medtronic with all the necessary supply and support and the same we'll have to do in respect of Winlevi, providing all necessary support and supply to Sun to exploit the opportunity presented by the U.S. market. As said, we plan to initiate the Phase III studies in androgenetic alopecia in males in second half 2022. And we also plan to begin in May 2022 our Phase I study for our drug against advanced refractory solid tumors. Let's go to the outlook. Well, on the premises that we have explained and what we expect in 2022 to happen is the following. We are expecting our legacy product to do at least what they have done in 2021. We see no reason why they should perform less. We expect them to perform more. But at the very least, they will perform as they have performed. We're expecting a significant increase coming from the new products. We have, as I said, entrusted the best partner as possible in this respect. And therefore, I think it's pretty reasonable for us to expect a significant increase to product revenues. This is what is allowing us to project an expectations in terms of total revenues between EUR 90 million and EUR 100 million and a corresponding operating profit between EUR 20 million and EUR 25 million. As mentioned before, in terms of EBITDA, we're projecting an EBITDA in 2022, it should be, assuming that these revenue figures are reached, between 38% and 40% of the revenues. So I think very significant profitability going forward. I thank you very much. We thank you very much. I thank the -- all the employees of Cosmo whose hard work has made this possible. And we're happy to answer to any question you might have.

[Operator Instructions] Our first question comes from the telephone. And it's from Lucy Codrington with Jefferies.

I guess it's just given how effective GI Genius is, is there a risk that, that could then start to remove the need for Lumeblue? And do you -- how much -- obviously, I know GI Genius was developed from the original Lumeblue studies. But will there need to be additional studies of the two of them together or anything like that? I'm just wondering, are you actually, in creating such a successful product, kind of cannibalizing the part of your market?

Thank you very much for the very good question. Well, first of all, we don't know yet what the FDA is going to say in respect of our proposed new protocols. So we'll tackle the issue when we will have a final answer over there. No, the answer is no, I don't think there's going to be a risk of cannibalization. I think that the two -- for the reason of basically how the drug works in respect of the device, the device has got the same performance of a very super trained human eye. And if you can, as a matter of principle, increase the performance of the human eye, you're going to increase the performance of artificial intelligence as well. So we don't see the risk of the two things being cannibalized. It's a decision that we will take in due course. Now we will see how this will be picked up by the market. We have all the time to decide. Current answer to you question is no, we don't see a cannibalization risk. Probably, there was also second part of the question that I am not sure I might have captured completely.

No, that covered it.

The next question comes from the line of Paul Verbraeken with Research Partners.

I was wondering about Aemcolo. I mean, I understand that in 2021, revenues will be limited by corona, but I was wondering what are you assuming for 2022 regarding travel worldwide and its effect on Aemcolo.

Thanks, Paul. We are assuming that the prospect should be much, much better in 2022, of course, if there is no such a thing as a nuclear war happening or whatever. Because from that particular perspective, things look a little bit gloomy. Yes, so travel should resume. But actually, we're also hoping that people will start to see that it's not maybe just traveler diarrhea that you have to address with something like Aemcolo. You can address also other pathologies where Xifaxan is currently being employed. It is actually up to the physician to decide whether to use one drug or the other. But the advantage of Aemcolo is that where you have to take 3 tablets of Xifaxan, even assuming that they perform equally, you just have to take 2 tablets of Aemcolo. So we do have certain advantages that I hope will be soon perceived by market, and we will see the sales finally starting because it's a drug that definitely deserves to perform. Just to be clear with you, Paul, our outlook does not take into account any significant contribution coming from Aemcolo.

Okay. And then two financial questions, if I may. First, I noticed that SG&A in the first half was around EUR 7 million, in the second half, around EUR 3 million. So I was wondering, are there exceptional items in there? Or what's going to be the recurring level?

Thanks, Paul. That I think is better described within the body of the annual report. There has been a reassessment on the position of several stock options that were based on certain performance indicator that was not just the market but performance indicator in respect of certain products. And given the fact that, that has not occurred, the current IFRS rules allowed us to write them off, which is what we did. And this is the reason why you see the subsequent cut in the relevant costs.

Okay. So I guess, the level of the first half should -- we should look at the recurring level.

Well, the recurring level being that of the second half actually. Well, not exactly but balanced over the years, you would see going forward a significant decrease in use of cost.

Okay. And last one, I was wondering, Byfavo, you restructured the licensing agreement. Cosmo is now not really a partner or a party in this agreement anymore. Should we pencil in any future revenue still from Byfavo? Or are you totally out of this project?

No, we have a significant portion of commercial milestones that we are entitled to [indiscernible]. Now if I'm not mistaken, it's something in the vicinity of EUR 130 million over time. And we believe that, well, if not all of them, quite a significant portion of them are attainable because we think Byfavo is a drug with tremendous potential. So yes, we do expect a contribution from there. Because of the agreement that we reached with Acacia, we're not entitled to a royalty that goes to PAION, but we are entitled to commercial milestones that come to us.

[Operator Instructions] The next question comes from the telephone. And it's from Bob Pooler with ValuationLAB.

Again, congratulations on the excellent 2021 and also the positive outlook for this year. First, do you see now the colonoscopy market rebounding? Because that, of course, with COVID, has impacted also revenues in the past 2 years. Do you see signs of that now rebounding?

Yes, we do, absolutely. It is expected to go back to the pre-COVID level in 2023.

Okay. And then on Lumeblue...

There's probably a...

Excuse me?

Okay. No, sorry, I was just going to say that there's probably a backlog there that will hardly be recovered, probably people that have not been screened will just continue not to be screened. But it's just the estimate that we have from the market, 2023 will be again equal to 2019.

Okay. So for instance, in the U.S., that would be then roughly 90 million colonoscopies.

Yes.

Okay. Just on Lumeblue, what is actually this still ongoing issue with the FDA? And do you expect to start the Phase III trial this year? And what would be your hunch of the U.S. launch? When would that happen?

Again, I cannot comment because this process with the FDA has been extraordinarily long. And basically, the FDA, because of COVID, they had either completely stopped or significantly slowed all the interaction in respect of protocols for new trials. So we have seen that not one of the single deadline have been respected in the process. So I really cannot make a prediction there. The disagreement with the FDA came from the fact that they were asking basically to run the trial in a fashion that was making it simply impossible for us to run. Because they were suggesting that we use whatever kind of bubble wrap was available, leaving the single site the choice of choosing the bubble wrap. This is not possible because it would introduce a level of randomness, as you can imagine, in the trial that makes it simply not manageable. So let's see whether we come to a reasonable conclusion there.

Okay. Just on Winlevi, do you have plans to introduce that also in the rest of the world?

Yes. And because, as you can imagine, in the aftermath of the exceptionally good reception from the U.S. market, we are now receiving a lot of contacts from companies that would like to have in Europe and China, other jurisdictions. And therefore, with the help of Diana, who is now the Head of our Dermatology division, we are in pending negotiation with several potential partners in many different jurisdictions.

Okay. And then on the U.S., probably with the introduction, there's quite an amount of rebates going on just on the introduction. But do you expect that those rebates will go down because of the high demand for the product?

I cannot really comment to that because this is something that is managed 100% by Sun and we don't have a say. What I can say for sure is that it's reasonable to assume that they will continue with a very aggressive policy in order to conquer as quick as possible a significant market share. And in order to conquer a significant market share, as a licensee, you have to accept that you will have a gross to net which will be higher than you would otherwise expect. This is, frankly, all planned out and planned out very carefully. But of course, this is the key...

But in your projections for this year on the total revenues, do you expect also contribution from Winlevi as well?

Yes, we do expect contribution from Winlevi, yes, both in terms of royalties and manufacturing, yes.

Royalties and manufacturing.

Especially because if you see the uptake, and I don't know whether you have access to IQVIA data, but at the end of February, and this is steadily growing in March as well, if I'm not mistaken, we already had 97,000 TRxs. So this is a very impressive number because keep in mind, I'm addressing this to the audience as a whole, this still has not been a normal period or a normal year. It's not that we're back to normal like we are in 2019. So this is a performance that's been done in a difficult environment, okay? In many states, you can't access the doctor office. There was limited access to hospitals and so on. So I think that this performance has to be appreciated also in the context of a more difficult or more unfriendly environment.

No, I agree. I think Diana and her team, also with the market introduction -- market launch, has covered so many lives that now you see actually it's a very -- yes, easy -- it's never easy, but you see the amount of prescriptions really going on that, so there's no barrier on, let's say, the reimbursement of the pricing there.

No, it's never -- just to add, maybe just add a little bit of a color there and have the audience better understand, I don't think that anybody other than Sun would have been able to do exactly what was done because they have deployed such a substantial sales force and such a substantial means that I don't think that anyone trying to do that on a stand-alone basis would have been able to put the same commercial offer and effort on the table. So once you develop a product, once you are in the development stage, you believe that it's difficult to develop the project. But then once the drug is approved, you immediately realize that the most difficult part is sell it. And it's not that really anyone can sell it like anyone else. You need a strong organization. You need an established organization. You need an organization that when you have the rep knocking at the door, they're happy to open the door. And so not something that anybody could have done. And not by chance, they are the second prescriber in the dermatology drug market. That's because they know what they're doing.

Good to hear they're unlocking the value for you in the U.S. there.

Totally.

Just on two other products, pipeline projects of Cassiopea, CB-06-01 and CB-06-02. Do you have development plans for them? So that's the oral antibiotic for acne and the genital warts. Or is it too soon?

No, we're in the process of looking on other ways to reformulate the antibiotic. We are way more skeptical now about the genital warts opportunity because the fact is that, in the meantime, the oral -- the vaccination programs against HPV has driven very impressive results. And the pool of patients is consistently and constantly being reduced by this and just limited to older people. We're kind of seeing the commercial opportunity vanishing there. So I think it's very highly possible that we will discontinue the program.

Okay. Then on CB-03-10, the oral cancer anti-androgen there, how far do you want to develop before you seek a partner for that project?

We're going to immediately start to look for a partner. Our plan is to -- well, the Phase I that we'll be conducting is actually a Phase I/II because it's also dose ranging. And the aim is to gain very early efficacy and moreover activity signs. So our plan is to start looking for a partner, and we have already identified a potential few because we want to out-license that. In due course, you're not going to see us do a Phase IIb or Phase III in oncology because we have very, very limited expertise there, and we don't want to go in uncharted waters.

Okay, clear. And then final question, just you have proposed to pay dividends again on the sustainable profits that you're making now. Do you see a potential maybe in the future also a share buyback program?

Well, this is something that we have questioned a lot over time. We have the feeling that share buyback in terms of an organized share buyback is not very efficient. We believe that share buyback should be done more on an opportunistic approach within the limits that are set for purchases on the market. And in fact, in that respect, we are constantly purchasing our own shares within the limits that are allowed. So you should not expect us to go on a full-scale preannounced buyback. But you should expect us to start to be consistent with the dividend policy, assuming clearly that we do meet revenue targets and profit targets. This is our plan, to be consistent with dividend distribution. And we would like the market to understand that we will be committed to that if we will reach our targets in terms of revenues and results.

Maybe I'll squeeze in one final one. You -- in the past, you were talking about an R&D Day. Now you also have CB-01-33 for bile acid diarrhea. And so do you expect also to have an R&D Day one of these days or in this year?

Yes. It would be nice to be able to do it within this year. We would like to advance at least, call it, several projects to a point where we can explain better what we're doing, which would mean that by the time that we announce it, we also have the appropriate IP protection in place. Maybe we'll just organize an event in Zurich to explain where we are and present the performance of the products maybe close to year-end.

There are no more questions on the telephone. We now go to the questions coming from the webcast. We have one question from Mr. Manuel Bottinelli with AMG Fondsverwaltung AG. SG&A costs went down from EUR 18.6 million in 2020 to EUR 10.5 million in 2021. Which measures helped to reduce those costs? And what is a reasonable level for 2022?

Well, we had to pay indemnities to people that have left the company plus there was the ease of component that I was describing before. And this is why you have seen that change.

[Operator Instructions] Gentlemen, we have no more questions at this time. Back to you for any closing remarks.

I thank all participants for joining us. And again, I thank all the employees of Cosmo for having made -- reach out to these results possible. So thank you, and waiting for talking with you for the next update. We'll stay in touch. Thank you. Have a good day.