Vivesto AB (VIVE.ST) Earnings Call Transcript & Summary

Okay. Well, thank you so much. Sorry about this delay here. We've had some technical challenges, but hopefully, everything will work here soon. Anyway, this morning, we announced our Q2 2022 results, which we will be taking you through in this presentation. As usual, we'll run through the highlights and the financials and then take any questions at the end of the presentation. Next slide, please. Yes. Here are some important legal and forward-looking statements that you should be aware of. And next slide, please. Today, I'll be presenting to you together with our acting CFO, Maiorana, but I would like to start by introducing myself, and Robert will also give a brief presentation of himself. And as you may know, I joined as acting CEO in late July, and I have some fairly long background in the pharma industry. I spent more than 20 years in various executive positions in R&D at companies like Hoffman-LaRoche, Eli Lilly, AstraZeneca, Orion in Finland and 20 years in various positions in the pharma industry, and I joined here in late July as acting CEO. And with that, I would like to hand over to Robert, and let him present himself as well.

Yes, my name is Robert Maiorana, and I joined Vivesto almost 2 years ago as the acting CEO at the time, and been working as the finance manager until just recently when I took on the position as acting CFO, again. And I have a long history within the banking and financing in the same type of position. And it's a pleasure working with Vivesto.

Okay. Well, thank you so much. Next slide, please. So first, let me start by covering some operational updates during the second quarter of this year. As you may be aware of, in April, we appointed Daniel Tesfa as Chief Medical Officer, and Daniel, he has an extensive experience in clinical development and precision oncology over the last 20 years, most recently at SOBI, but also from Bayer, Roche and the Karolinska Institutet. And I'm happy to tell you that Daniel is settling in really well and is already making a very positive impact. In the same month, we also signed an agreement with a leading U.S.-based contract research organization, Visikol Inc., to help us evaluate anticancer drug formulation, using, among other things, our proprietary drug delivery platforms. We look forward to updating you on the progress of that later this year. At our Annual General Meeting in May, Hege Hellström and Peter Zonabend were reelected to the Board. And Pål Ryfors and Roger Tell were elected as new Board members. Anders Härfstrand, Andrea Buscaglia and Birgit Stattin Norinder declined reelection. Peter Zonabend, he was elected as Chairman of the Board. In June of this year, Vivesto's Board of Directors agreed with the company's CEO, Francois Martelet, to mutually terminate his employment. And at the end of June, Robert, as you heard, was appointed acting CFO. We've also had quite a bit of news pause period end. In late July, as I told you, I was appointed acting CEO. We also announced that following the Russian invasion of Ukraine, we have wound down our activities in Russia. This means that the distribution activities for Paclical in Russia and the Commonwealth of Independent States have been paused until further notice. And most recently, we noted the great news of the launch of Apealea in Germany by Inceptua, but more on this a little later in the presentation. Next slide, please. Before I provide an in-depth update on the business, let's take a step back. As you know, Vivesto is on a journey of transformation. And over the last 2 years, we've been focusing on building a solid platform to support future growth. We've built our internal capabilities to enable us to specialize in oncology development, and we've also accelerated business development and, as you know, we in-licensed Cantrixil last year. We have secured our financial position with our rights issue and have no debt. We reduced business risk and operating expenditures by settling legacy issues inherited from our predecessors. And we've also rightsized the company, and thereby, reducing our operating expenditure. We have a new Chairman in place, and we are recruiting a permanent CEO and CFO to guide Vivesto on the next stage of its development. We, together with our partner, Elevar, in the U.S. and its commercial partners, support the development and commercial launch of Apealea and are driving the development of our clinical development program. Next slide, please. There are 2 strengths to our business model. First, oncology research and development, which is built around a wholly-owned development stage assets like Cantrixil and docetaxel micellar. These will start to drive value as the progress through clinical development. Second, maximizing our existing assets, particularly Apealea, where our commercial partners anticipate that revenues will begin to flow in our direction in 2023, generating cash for reinvestment. We're also focusing on the underlying science of our proprietary drug development technologies to optimize their potential in cancer and in other areas through partnerships. We continue to explore our options such as partnering to commercialize our animal health oncology assets. Next slide, please. So we are initiating our string of pearls strategy from a strong base, a promising oncology platform ready for further expansion. Apealea is already approved in Europe for adults with first relapse of platinum-sensitive epithelial ovarian cancer, primary peritoneal cancer and fallopian tube cancer. Our commercial partner, Inceptua, launched Apealea in Germany in August, and commercialization in the U.K. is progressing. Inceptua have secured a maximum list price for Apealea with the Department of Health and Social Care. A reminder that Apealea can currently be prescribed in a private market setting in the U.K., and Inceptua are currently engaged with NHS, National Health Service, to secure reimbursement for Apealea. Elevar is also progressing the development of Apealea in the U.S. We are also getting ready for a new Cantrixil thrive. A Phase Ib study of docetaxel micellar for advanced prostate cancer is underway with our Swiss partner, SAKK, and they are recruiting well, and we hope to get results later this year. And we're planning to initiate preclinical studies with the new formulation of Cantrixil. Next slide, please. Cantrixil is the first of our string of pearl assets being in-licensed from Kazia in Australia last year. As you may know, it's a tubulin-binding small molecule with a potent cytotoxicity against ovarian cancer stem cells and ovarian somatic cancer cells, which are both resistant to standard chemotherapies, which is why it has an orphan drug designation in the U.S. Encouraging Phase I study or data were presented at the AACR Conference in early 2021, and subsequently published in the journal Cancers. The Phase II study is being planned for the U.S. and Europe. The incidence of ovarian cancer is, as you may know, continuing to grow. In 2021, it was estimated that there were 314,000 new cases ovarian cancer worldwide and 214,000 (sic) [ 207,000 ] deaths. The global ovarian cancer market is expected to grow at accumulated annual growth rate of 19.3% from 2021 until 2025. Next slide, please. Okay. Now we have ambitious plans for Cantrixil over the next year as we prepare to go into the next clinical trial for advanced ovarian cancer. These include continuing interactions with our expert Scientific Advisory Board made up of key opinion leaders from Europe, Australia and the U.S. for guidance on the trial design. We also plan to hold talks with regulators to discuss endpoints and appropriate data for filing. These are early interactions with the regulators are vital and should help derisk the program. As you also may know, Cantrixil is a complex drug to produce. Cantrixil excite us as we believe it may represent a pipeline and a product potential in other cancers as well. Slide #9, please. Another interesting in-house project is docetaxel micellar, which targets advanced prostate cancer. This is an intravenous formulation of the widely used drug -- cancer drug docetaxel, which is also known under the brand name Taxotere. By using our formulation platform, we eliminate the need for solubility enhancers, which potentially improves the side effect profile and eliminates the need for additional drugs for many patients. Our Swiss partner, SAKK, is running a Phase Ib study at 3 major hospitals in Switzerland with the aim of recruiting 18 chemotherapy-naive patients. We are also working on expanding the intellectual property around docetaxel micellar, and we're evaluating a formulation using our improved drug delivery platform, XR-18. I'm happy to say that the trial is progressing steadily, and we look forward to updating you as the trial progresses. Next slide, please. As I mentioned, we're also excited about the potential of our drug solubilization platforms. Now with regard to XR-18, our scientists have identified and synthesized the promising novel candidate for use in the platform. And this is already being tested in combination with a number of oncology compounds. We can't disclose any more information about it as at this stage for commercial reasons. During the quarter, we announced the signing of a research agreement with Visikol Inc. to evaluate the cellular effect of new and existing anticancer drug formulations developed using Vivesto's XR-17 and XR-18 technologies. And as a result of this research, we will be able to assess anticancer compounds formulated with our XR-17 and 18 drug delivery platforms. Next slide, please. As you may know, on August 15 post period, we were informed that Inceptua had launched Apealea in Germany, which is excellent news as we will receive royalties or revenues on sales from this. U.K. commercialization plans are also progressing. Inceptua has secured a maximum list price for Apealea with the Department of Health and Social Care, allowing private market access. Inceptua is engaged with NHS in U.K. to secure reimbursement. Other European markets are also being considered. Other European launches will be implemented on a country-by-country basis over the next couple of years. And we expect first royalties for Vivesto in 2023. And I will now hand over to Robert to cover the Q2 financials.

Thank you, Christer. And can we please have the next slide, Slide #12. So turning to our finances. Here are a few key numbers to give you a snapshot of our performance in the second quarter. Operating costs totaled SEK 29 million, which is a significant reduction compared to 1 year ago, which amounted to minus SEK 48 million. We reported a second quarter operating loss of minus SEK 36 million, again, a significant reduction from minus SEK 56 million in the second quarter 2021. Short-term investments and cash and cash equivalents amounted to SEK 189 million at the end of July. And the rights issue was fully completed in the second quarter, which raised SEK 151 million before issue expenses of SEK 16 million, thereby strengthening the equity by SEK 135 million, resulting in a very solid financial position with an equity asset ratio of 95% and with no debt. And I'll hand back to you, Christer.

Okay. Thank you so much. Slide #13, please. Well, as I mentioned earlier, over the last 2 years, Vivesto has been focused on building its capabilities to make it a more attractive partner for innovative assets. Now our core capabilities include product and clinical development, business development and regulatory affairs. Ultimately, we're aiming to build our pipeline with new late-stage oncology assets, which use different modes of actions to spread risk. And once they have completed the development process, we have the option to commercialize products through global collaboration, or in some cases, to undertake direct commercialization ourselves for certain niche products in Europe. Next slide, please. Okay. Well, in summary, we have the opportunity to create a Nordic oncology powerhouse, focused on cancers that are poorly served by existing treatments. We have the capabilities in place to build a diversified pipeline of programs by executing our string of product strategy through in-licensing and mergers and acquisitions. Now our ultimate aim is to develop an oncology pipeline with numerous mechanism of actions, creating multiple shots on goal. We've built a strong platform to attract innovative partners and also aim to attract new specialist institutional investors to help us grow the business. And many thanks for listening, and I would like to apologize for the somewhat chaotic display of the slides. Then hopefully, we'll be able to avoid that in the future. But I'll now be happy to, together with Robert here, to answer your questions. So please go ahead.

[Operator Instructions] The first question comes from the line of [ Tommy ], a private investor.

Hello, guys. Thank you for the presentation, and welcome to the company. It's been a lot of changes recently with a lot of changes in the Board and the management as well. So my first question would be regarding the U.K. launch, what are the time line before you expect to have it subsidized and reimbursed? And how confident are you that it will go all the way? Or is there any concern that you may not get the reimbursement?

Okay. Well, thank you very much for that question. As you know, this is being handled by Elevar and their partner, Inceptua. And we're not in a position really where we can answer that question. And I'm afraid I have to inform that this is a question for Inceptua primarily. But I can also add that we're cautiously optimistic.

Okay. But if you were not to get any reimbursement for any reason, I mean, how would that affect the sales in the market because it will have a huge impact on the potential sales, right?

Yes, absolutely. I mean we're speculating here, of course. As I pointed out, we are cautiously optimistic about the possibility. But reimbursement is, of course, vital for the revenues. I mean, otherwise, people have to essentially pay out of pocket or if they have a private insurances. And of course, that will reduce the opportunities quite dramatically. But as I pointed out, these questions need to be addressed to Inceptua.

And just to clarify, when you and Inceptua say that it's for a launch in Germany, that means including full reimbursement and subsidized, right?

Yes.

Okay. So there was from [indiscernible] on the report, you had some comments about it was a positive thing with the current situation and a strong financial position, and it could occur some great opportunities. But looking from an investor's perspective, it seems to me that even though the valuations have gone down, it could potentially be beneficial for acquisitions, the cash situation for Vivesto isn't really that great to make any major or large acquisitions at the moment. So how are you still concerned regarding that? And how would the financial -- how will you financially solve any acquisition opportunities?

Yes. Well, that's a very, very good question actually. And so we pointed out here, we have a significant pile of cash on hand. But on the other hand, I mean, we were all aware of what assets of the type we are looking for actually cost nowadays. Now with the current challenges on the financial market, it's reasonable to expect that the situation has somewhat improved in terms of cost. But we're still talking about -- I mean, for example, a new mechanism with a, let's say, positive proof of concept in oncology is the prices are still very, very high. But there are several ways where this actually can be done different partnering activities, partnering earlier assets and so on. But this is, of course, something that me and, well, the rest of the company were going to take a very close look at it at the moment. Of course, I see lots of challenges, but I also see lots of potential opportunities here. So let's see.

It would be interesting to follow.

Yes. I agree...

I'm talking about the financial situation, you had roughly SEK 190 million, I think, at the end of last quarter, probably around SEK 170 million at the moment. Last year, the company stated in the mid-summer, et cetera, that they had a very stable financial position and they were set for almost 18 months ago. And then in mid-January, they came with the news about the rights issue. And at the end of December, they had almost SEK 100 million in cash. And they must be planning the rights issue for almost at least a month, 1.5 months when the announcement came. So they probably started planning the rights issue north of SEK 100 million in cash. And basically, it seems to me Vivesto will reach SEK 100 million in cash in the next 6 months or so even with the minor royalties coming in from next year. So how long do you think you will sustain from the current tax situation?

Robert?

It's hard to say depending on how things develop. But I would say, for 1.5, 2 years with the present run rate.

Yes, and that's basically what the company said last year in the middle of last year, but yet still the rights issue came at the beginning of this year. That's why I was a little surprised and I felt like I needed to raise the question whether you see the need for another rights issue in the next 12 months.

No, we don't. And if you compare it to last year, we had a much higher negative cash flow. I mean last year, the cash flow was...

But this was the beginning of this year. It was the beginning of this year, you had SEK 100 million in cash, but you still made the rights issue.

Yes. I mean I think it was very well planned to make the rights issue considering what happened in the market during the spring here. So now we are very well -- we're in a strong financial position. What else can we say?

Okay. It's great to hear. And in last year, on the annual report, there was some concerns about the need for write-downs on public [indiscernible] specifically, and they said it was a high risk for partial or full write-down of the public [indiscernible] value on the balance sheet, and it's valued at almost SEK 110 million. And it's been repeatedly stated from the company over and over that they are looking into different opportunities. And since the company itself brought up the risk of partial or complete write-downs, what is your thoughts or opinion on that at the moment?

Well, the situation is basically the same, but we are looking into it more closely as we speak. But that's basically what I can say today.

So we could expect an update within the next 6 or 12 months on the matter at least?

That could be -- that could very well be the case, yes.

Okay. And I know you said, Chris, that you couldn't go into any details about the new APIs you're looking into with XR-18. Could you give us any sort of time frame when you think you will be able to inform the market?

Yes. Well, I don't want to promise too much here. We will -- what I can tell you is that we will try to progress it as fast as possible and provide an update on the right -- at the time when we have that information. But so far, it's too early for that, unfortunately.

Okay. And regarding Cantrixil, I think at least it's been postponed and delayed 3x from what was initially been communicated. And I think the last update, I saw it was estimated for a Phase II start at the end of next year. Is that still what you think is realistic?

Yes. Honestly, I mean, this is something I'm digging into together with my colleagues here right now. And I mean, I see challenges, of course, but I also see lots of great opportunities. And I would like to wait with answering that question.

Okay. And I know the company itself has stated that they're looking into the IV formulation because it's not ideal with the IP formulation or administration, I mean. What are the thoughts on that?

Well, that's also a very good question. As you know, IP administration of cancer drugs is not something that is routinely done in cancer clinics here. And of course, that represents a challenge. And whereas IV administration, that is routine, that's being done everywhere. And from that perspective, it's a clear advantage if it can be done in IV. So this is, of course, one of the questions that we are looking into right now, and we will come back to that at a later stage. But you're absolutely right here. IP is challenging from many aspects.

Okay. And it's been quite some time now since the company inform the market about the collaboration with the Karolinska Institutet. How is that process progressing?

Well, there, I'm happy to tell you that it's progressing well. And the results from this collaboration is sort of the basis for the work that we're now being -- that now is being done together with Visikol. So that has progressed well.

So is Visikol and Karolinska Institutet sort of working together or giving one another information? Or is it 2 separate collaboration?

Well, the way -- it usually works with collaborations of this type. When you start with an academic partner is that you get the basic information and ideas about the biology and whatever is going on there. And then when we start looking into, let's say, more compounds, for example, you need access to different types of technologies that academics usually aren't working with, and then you transfer it to a company, a commercial company that has that capability and capacity. I mean academic groups are not really designed for what I would call more high-throughput type of studies, but more this exploratory work, so to say, that's the whole idea essentially behind academic research.

Thank you for the clarification on that matter as well. In the last year annual report, in a small note, it stated that the royalties to Vivesto will be based on the sales from Elevar. But in the case of revenues coming from sublicensing from Elevar, so in this case, to Inceptua, the royalty to Vivesto will in fact not be based on the gross sales, but rather on Elevar's revenue. And I think this -- if this is me understanding it correctly, will have a significant impact on the revenue. And also, I think this is something that some of the analysts at Inceptua have missed, I've not seen them accounting for this in any of the reports I read. So am I understanding this correctly?

I don't fully understand what the question was specifically, but you're right, so to speak, that there is a change from Vivesto's sales going to Elevar, and then finally, some royalties and income is arriving at our profit and loss.

Yes. But the question was basically, let's say, for instance, if [indiscernible] work to have 15% royalty and Apealea would sell for SEK 100,000 and they will sell this to Inceptua, if I understood it correctly, they would not impact yet 15% of the SEK 100,000 sales. They would get 15% of whatever revenue Elevar has after Inceptua sales cost and profit giving the rest to Elevar.

I don't think I'm in a position to comment on the details on how much is going between [indiscernible]...

No, this is what was stated on -- I was just not sure if I understood it correctly or not. So the last year annual report stated that in the case of revenues coming from sublicensing to Elevar that Vivesto would instead be having their royalty based on the Elevar revenue, if I understood it correctly. But, okay, maybe we'll see what happens then.

Yes. I mean, [ Tommy ], maybe you can send me that and we can have a look at that separately. I need to have a look at that note to fully understand that.

I understand. I understand totally. Not a problem. So my last question would basically be about the Elevar. The Elevar deal and the Elevar impact on Vivesto and how important it is to Vivesto in the next 5 to 7 years before you will have a Phase II result from a study or any other substantial revenues from out-licensing or partnering after Phase II potentially. And it just seems to me and a lot of other investors that Elevar really hasn't delivered on any of the promises made, and they were also in the joint call early on in December 2020, where they made a lot of statements. And since that, Vivesto has been trying sort of to inform the market whenever they can and it has been nothing but delays and broken promises regarding partners in new geographical areas, the studies [indiscernible] of the Phase II, III, et cetera, that they were supposed to do for the U.S. market, the Taiba deal was signed 2 years ago. We haven't heard a word about that. You didn't bring it up in today's report basically. It doesn't look very good. What is the company's thoughts on the current situation with Elevar?

Yes. Well, I'm really sorry if you perceive it that way. And what I can tell is that we will -- our ambition is to be able to deliver more on our promises in the future. And this is, of course, something that we're looking into very carefully right now. And I'm afraid that this is the best answer I can give to you at the moment. But as was pointed out in the report here that was published earlier today, there have been some challenges of this type, and we will do our best to avoid that in the future.

Yes. Because I think in May this year, Vivesto made a presentation stating that the China partner were to be signed at the Q4 of this year or Q1 of next year. So that is communicated from Vivesto in May, just a couple of months ago. Is that something you can confirm or comment about?

No, we cannot really confirm that. And remember, we have a new Board. We have a new management team. So we will look into that. But we can't really comment on historical promises.

Okay. Because it was also stated that at the end of last year, it was stated that Elevar would potentially join in for some joint conference call or presentation early this year, and then early this year, they said probably after the summer we can do something together to inform the market about all the questions you may have, what the current situation is what.

Yes. As I pointed out, we will do our utmost to be more clear and well in the future in our communication.

Next question comes from the line of [ Per Anderson ], a private investor.

I have sort of a follow-up question on what you spoke about at the end. There's a lot of speculation going on that eventually Elevar will say that the FDA study will never happen. Can you confirm, if Elevar contractually obligated to perform an FDA study eventually? Or could they notify the market it will not happen?

No.

No. Robert?

I can't really comment on the contract with Elevar. So we'll have to wait and see.

So as far as the market is concerned, Elevar can postpone an FDA study indefinite?

I don't think, actually, I can comment on these details in the agreement with them.

Okay. When can we expect results from the SAKK study to be reported? As I understood it, the recruitment will be finished this year. But when can we expect the results to be announced?

Well, I can't promise you anything here. But with a tiny bit of luck, we will be able to provide more information at the end of this year. But it's not something that I can promise, but at least that is our ambition. Remember, this is a Phase Ib only.

So when the recruitment is finished, it's not a long time after that, that you can communicate some sort of result?

The recruitment is going really well. And what I told you here is our ambition, but it's certainly not a promise. But seeing the recruitment and how fast it's progressing that has been, well, it looks really good, actually.

Okay. And just if you could give a clarification on the question you got, will there be any form of joint press conference or phone conference that you can call in and ask questions to Elevar in the foreseeable future?

Nothing that's being planned to the best of my knowledge. No.

So you cannot give any hint whatsoever what will happen with communication from Elevar and the FDA study?

Unfortunately, not. No, at least not at the current stage.

Next question comes from the line of [ Frederick Morgan ], a private investors.

Can you hear me?

Loud and clear.

I was wondering about the depreciation and amortization of SEK 7 million. What is that referring to?

That is referring to Apealea.

Your stock of Apealea?

Yes, to the -- what's the word in English? To the...

You can take it in Swedish.

[Foreign Language]

All right. So that is IP property then?

Yes. Sort of, yes. So it's IP and capitalized development expenses.

All right. So this write-down is connected to the geographical news in Europe? Or why exactly are you taking this write-down now?

Or do you mean -- I mean we have depreciations that are ongoing every month.

All right. Of course.

And then we had the write-down of the assets relating to Russia. But that will be in July, and it's not part of the financials in the first half of 2022. So you have to separate those 2.

So it's not connected to any specific events this write-down? It's something that's going? No. All right...

No, it's not. I mean the depreciations are ongoing, and the write-down relating to Russia will be -- you'll see that in the third quarter, but we already communicated the amount SEK 44 million.

Yes, but that's another different thing.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Christer Nordstedt for closing remarks.

Okay. Well, thank you very much. I really appreciate lots of well-informed questions here. And of course, our ambition and our hope is that we will have more information coming in the future here regarding some of the things that we weren't able to answer today or at the current stage. So I really appreciate this opportunity to interact with our investors, and I look forward to further interactions of the same type. So thank you very much, and have a nice day.