Gubra A/S (PI3.F) Earnings Call Transcript & Summary

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Gubra Q2 2025 Earnings Release. [Operator Instructions] I would now like to turn the call over to Henrik Blou, CEO. Please go ahead.

Thank you very much. It's a pleasure for us to present the highlights from 2025 to you today. So with me here, I have Louise Dalboge, our Gubra's CSO; and Kristian Borbos, Gubra's CFO. At Gubra, we are experts in metabolic diseases and other diseases related to the human metabolism. We have a hybrid business model, where the core research engine that we have built, we use it to sell research services as a CRO and also to advance our own internal pipeline programs towards a Discovery & Partnerships. And we have a long history of growth. Today, we are approximately 275 colleagues here at Gubra. And in the service business, we are servicing 16 out of top 20 pharma companies in the world. So we have a very strong reputation within our niche. And the growth history is represented here. The blue part is the revenue stream from the service business. The pink part is revenue stream from the Discovery & Partnerships. So as you can see, these two arms of the business are providing revenue in different ways in the CRO service business, it's quite steady business, whereas in Discovery & Partnerships, it's more lumpy. And that is associated with the nature of deals that upfront and milestone payments come in as a more lumpy fashion than revenue from the CRO service. And again, as you can see here, a long history of growth. These figures goes until 2024. But if we include just the first half of 2025, it shows the order of magnitude of the revenue associated with the recent deal that was made on the Amylin program, the partnership with AbbVie. So it really puts things into perspective and that also shows that the first half of this year has been by far the most successful half year in the history of Gubra, when it comes to revenue. Key operational highlights. We were able to pay out a dividend of DKK 1 billion earlier this year, and that was a direct consequence of the agreement that was made on the Amylin program, a deal worth USD 2.2 billion deal, including an upfront of $350 million. And on top of all this, there are royalties. So a strong signal and something that we think shows the strength of the business model that we are able to channel back serious amounts of dividend to our shareholders. Also earlier this year, we presented very strong data. We believe in the GUBamy program, our Amylin program. It was from the MAD part of the Phase I study. It confirmed what we've seen previously in the SAD part, that the compound is well tolerated, a very long half-life, and we're also able to give a significant weight reduction. Our next in-line pipeline program, the UCN2 program for high-quality weight loss, healthy weight loss in this program is focused around showing prevention and restoration of loss lean body mass. And on top of that, there are other benefits. And we are preparing UCN2 for the program for start clinic in early 2026. Today, we have some more details on that program for you. In the CRO business, we have seen a slight decline in revenue versus the first half of 2024. We actually saw a growth in quarter 2 of 12% compared to quarter 2 last year. However, for the full half year, there's a slight decline, and that also led to recent change in our outlook for the full year for the, again, isolated CRO revenue. It's driven by some uncertainty in the important American market, where we still see a solid customer demand in the European market. And another recent news from Gubra is that, we've been through a planned succession process. I will step down as CEO of Gubra. And from September 8, it will be Markus Rohrwild taking over. Diving in on the Discovery & Partnerships, the D&P part of Gubra. All our internal programs are based on peptides, and we have a platform, the streaMLine platform, that we use to develop peptides for our internal programs. Using this platform, we are able to generate development candidates in a fast way. And in parallel, we can optimize for a range of important parameters when developing peptides as novel drugs. So a strong platform and using this, we have been able to build a significant pipeline over the years. And that is represented on this slide. The green ones are pipeline programs that are not yet partnered. So you can see the most advanced UCN2 program. Today, Louise will share some interesting data with you on muscle and also on cardiac. So again, a range of other programs here that are not partnered yet and also a range of already partnered programs. We have four ongoing collaborations with Boehringer Ingelheim. We have an ongoing collaboration with Amylyx, one with Hemab. And as previously mentioned, the new addition that collaboration with AbbVie on the Amylin program. So that was a quick run through. And now I'll pass over the word to you, Louise.

Thank you. So now let's dive into some of these programs, starting with the long-acting Amylin analogue, formerly known as islet-pam. And GUBamy is in development for weight management indication and could be positioned as both an alternative or an addition to incretin-based treatments. The key differentiating features of GUBamy has a balanced receptor profile, an Amylin and Calcitonin receptors, just like native Amylin. It has an exceptionally long half-life of 11 days. And GUBamy has been designed to be physical and chemical stable at neutral pH. This allows co-formulation with other anti-obesity agents. GUBamy is currently being tested in a Phase I multiple ascending dose study. From Part A, we announced strong interim clinical results in April. This part of the study consisted of two cohorts receiving once weekly treatment for 6 weeks of 1 or 2 milligram of GUBamy. The data confirmed the general picture from the SAD study with a high degree of consistency within cohorts. The study showed that GUBamy was well tolerated, adverse events being predominantly GI-related and mild, and consistent with data from the SAD study. GUBamy demonstrated a remarkable dose-dependent weight loss. Mean weight loss in the 2-milligram cohort was almost 8% compared to a mean weight gain of 2% in the placebo arm on day 43. The study also confirmed the long and favorable half-life of 11 days. So the second part of the study for testing higher doses during a longer treatment period is ongoing and progressing as planned. And we are delighted to see AbbVie expanding development options in this study. So overall, we are excited about the positive results, which further support development of GUBamy for weight management indication. So beyond Amylin, we're equally excited about a next-in-line internal obesity program focused on high-quality weight loss. This program built in a new mechanism, a long-acting UCN2 analogue designed to deliver a healthier, more sustainable weight loss outcome. This focus is critical, because the current weight loss strategies, lean mass typically accounts for 20% to 40% of the total weight loss. We believe time has come now to focus on the quality of the weight loss and not just the quantity as a key differentiating factor for the next generation of obesity treatments. We have designed a selective UCN2 analogue with a target profile of once weekly dosing in humans. UCN2 has potential to treat the multi-morbid obese patients by improving body composition, increasing lean muscle mass, reducing fat mass, while also addressing key obesity-related co-morbidities such as cardiovascular and kidney diseases as well as improving blood glucose. And today, we'll zoom in on the beneficial effects of UCN2 on muscle and cardiac function. Starting with muscle. As shown before in diet-induced obese rats. UCN2 improves body composition by increasing lean mass and reducing fat mass as shown on the graphs here in green. You can also appreciate that well-known agents such as semaglutide and cagrilintide lowers both lean and fat mass. So what is really exciting here is when we combine UCN2 with weight lowering agents such as semaglutide, we can completely prevent the lean mass loss typically caused by such treatments and drive the fat mass loss even further. So again, the ability of UCN2 to improve body composition is evident in this new study. This is illustrated by a neutral effect on body weight, an increase in lean mass and a reduction in fat mass. So looking at individual muscles, here looking at three different types, UCN2 increases muscle weight as shown on the top graphs. You can also see that UCN2 reduces the unwanted atopic fat distribution in muscle tissue. In addition, it shows -- as shown on this slide, it lowers blood glucose and plasma triglycerides with no effect on cholesterol. So overall, this highlights the potential of UCN2 to deliver an overall beneficial metabolic profile. In the scientific literature, UCN2 has consistently been shown to improve cardiac function. Here, we extend these findings using a long-acting UCN2 analogue in a rat model of chronic heart failure. In this model, chronic myocardial infarction is induced by permanent ligation of the left anterior descending artery. This creates an impact in the left ventricular wall. Sham-operated animals serve as a healthy control as shown here in gray on the graph to the right. One month after MI induction, when systemic impairment is well established, animals are treated with vehicle as shown in black, lower high-dose UCN2 as shown in green, or triple standard-of-care combination as shown in purple. Animals are treated for 8 weeks. Cardiac function is then assessed using echocardiography, which shows a marked reduction in ejection fraction and cardiac output in vehicle treated animals versus healthy sham controls. In this setting, the long-acting UCN2 analogue significantly improves ejection fraction and cardiac output, highlighting its ability to also improve cardiac function. So these compelling preclinical findings support UCN2 as a differentiated asset, combining high-quality weight loss with improvement in key obesity-related co-morbidities. Building on this strong foundation, we are now preparing UCN2 for clinical development. Primary objective is, of course, as always, safety and PK, and we expect to start the Phase I study early next year.

Thank you very much. Please then turn to a brief overview of the financials, starting with the Discovery & Partnerships business. And as Henrik said, the first half, including the second quarter has been phenomenal for Gubra. We received this upfront payment, which is very, very significant. So looking at the revenue from this business unit, we had DKK 2.4 billion compared to revenue of DKK 13 million the same period last year. So a very, very significant amount of revenue and earnings from this business unit. So -- and total cost roughly in line with what we expect, and I will come back to the outlook shortly, which is unchanged for the total adjusted cost we guide for this business segment. So overall, an enormous improvement compared to last year. Turning to the CRO business, just reminding what the business is. We are a highly specialized preclinical service provider. We cater to both small biotechs and the largest pharma companies in the world. And we serve 16 out of the top 20 pharma companies in the world in our highly ranked translatable animal models. I think the most important change here compared to what we've spoken about earlier is adding women's health to our service area. So this is a highly unserved area where we think we can play an important role in assisting our clients in developing compounds in this area. So you will hear more from this as we progress, a very interesting area and a new flagship area for Gubra. Taking the CRO business. And as Henrik said in the beginning, we had an improvement in the second quarter compared to the second quarter last year. But if we look at the first half in total, there's a small decline of 2% compared to the revenue in the same -- in the first half last year. So what we've seen in '25 is the U.S. market becoming a bit challenging. There's a lot of macroeconomic uncertainty in that region of the world, and we can also see funding opportunities for smaller biotechs, for example, not being as beneficial as it was last year. That includes both ordinary funding and grants to these type of companies. And that impacts their decision time lines for ordering studies at Gubra. I will come back to the outlook in a second. On the contrary, Europe is progressing well. We have some development there and especially the obesity space where we see strong growth. On the earnings side, whenever we have a slowdown in revenue, we also see that influencing our earnings. While they were up quarter-to-quarter compared to last year, we see a decline compared to the first half last year. So we have an EBIT margin of 25% in the second quarter, just in the lower end of our guidance we have provided earlier. We now take the outlook as a concluding comment. We -- yesterday, we were out flagging that we expect the revenue for our CRO business to be slightly below last year. And remember, last year was a record year. We've grown our CRO business massively during both '23 and '24 and really, really successful. And we expect to be just slightly below the level in '24. So a downward revision from a very high level in '24. And in the same manner, we also reduced our EBIT margin to around 20% compared to the previous assumption of 25% to 31%. Rounding off with the -- we're just reiterating the guidance for the D&P total adjusted cost of DKK 230 million to DKK 250 million that is unchanged. With that, we have concluded our presentation. And now operator, we open up for questions.

[Operator Instructions] Your first question comes from the line of Thomas Bowers with SEB.

A couple of questions from my table here. So first, diving a little bit into the CRO business. So I guess a recovery in Q2 was sort of expected from U.S. clients and did not materialize and the reasons for the guidance update here. So firstly, do you have any good understanding on the remainder of 2025, now only 4 months remaining of the year? So is there anything that can sort of have much deviation from where you are with the current outlook you have? And then second question, just on -- so you limited the number of orders going into 2025 to prioritize Discovery & Partnerships segment. Is it fair to assume that you, in principle, could have enough ex-U.S. European customers to secure 10% to 20% growth just in case the U.S. problem or whatever you call it, it persists into next year, 2026? And then thirdly, just to confirm, is this issue in the CO business, is it primarily lack of investor funding to small cap biotech companies? Or is this primarily biotechs missing out on U.S. government grants? I'm just trying to figure out here whether there will -- could potentially be a risk to companies outside the U.S. also with maybe a little bit less access to capital, making it a little bit difficult for them, maybe eventually to fund studies as well? And then just lastly, on the EBIT margin guidance. So -- so is there any difference in profit margins between U.S. and European customers? Because I guess, of course, this mostly reflect internal fixed costs, but you also delivered above 30% last year with close to similar revenue levels. So is there anything that I need to understand here? And then just a final one here, just on the pipeline. Are you able to give us any sort of time lines, indications on when we can expect next data update for GUBamy? So anything possible at obesity weeks on updates on the MAD cohorts? And also, I'm not sure whether you are allowed to give any indication on time lines from your partner on potentially the Phase II start at this point in time, assuming, of course, the MAD progresses as planned. I think I'll stop there.

Thank you very much. And we'll start from one end and then just to remind us if there are stuff that we are not addressing. So starting from the back with regards to the GUBamy program, it is being transferred to AbbVie and they are controlling the development going forward. So we are very delighted to see AbbVie expanding development options in the ongoing study. And I really think it shows the strength of having a player such as AbbVie on board. For specific information regarding time line and data, you would have to go to AbbVie. So zooming in, I guess, Kristian, you will be talking to the EBIT stuff and around. So that one, I won't take. So if we're talking to the market conditions currently. So the way we experience it is that it is isolated to U.S. customers. And what we see from our end is that there are prolonged decision time lines for these companies. And it appears that they are considering well before they invest a dollar more than they did previously and perhaps also have to prioritize between various pipeline programs, at least not pushing as hard on the programs they have, not exploring as much in preclinical studies. So this is giving these prolonged time lines. And it's probably a combination of several factors in the U.S. market. And I think there's an interplay of the funding situation, the grant situation and perhaps also other factors. And therefore, it's -- we've seen now for some time this year. And again, that's also the background for the update to the outlook that we gave recently. Looking forward, we expect things to normalize, and it's difficult to say exactly when. But we've been in the service business, CRO business for many years. We have seen in previous years, a sudden slowdown. And so far, we've always seen some kind of normalization after a while. We still have our midterm guidance for growth. We definitely expect that. And as mentioned, we see good development in other markets such as Europe and Asia, which is currently a small market for us. So it's not like we could just fill up with requests from European customers or Asian customers. If that was the case, we would do that. It requires work, marketing and so on to build that further. But that is, of course, some of the initiatives we are doing right now. We are focusing on developing the U.S. market, but also the markets that seems to be a little more well functioning these days. Kristian?

Yes. And if I would continue on the EBIT margin question, and that's a fair comment, Thomas. And one of the reasons that we lowered the EBIT margin is also we are building up new areas and not least the women's health. And that means adding competent colleagues and setting up models and preparing for selling these studies. So that we hope, of course, in coming quarters that will add revenue to our zero business. But we're building up the organization planning for success and not least the buildup of the area women's health. So that's probably one -- probably the main explanation why we see a slightly lower EBIT margin compared to what we saw last year with roughly the same amount of revenue.

Your next question comes from the line of Rajan Sharma with Goldman Sachs.

A couple on the pipeline. So just thinking ahead to the Phase I for the UCN2 asset, could you just kind of walk us through how you're thinking about trial design there? Are you expecting to include DEXA scan or MRI in that trial to monitor body composition? And would you use more than one GLP-1 partner? And then secondly, just on Amylin, it would be great to get your perspectives on Eli Lilly's elorlintide Phase I data, which were presented at ADA in June. I think there's an emerging view amongst investors that elorlintide set a bar for amylin now. So it would be interesting to understand, having seen the data, how confident you are in GUBamy's differentiation, and is there anything in particular that you'll be monitoring for in the Phase II data when that's available? And then just one on the CRO business. Could you just comment on the underlying trends amongst your large pharma customers in the U.S.? I presume they're insulated against some of the macro factors that you talked to that's impacting the smaller companies. But it would be helpful to understand if demand is still resilient amongst the large pharmas. And to what extent is the exchange rate a headwind in the U.S.?

Yes. So definitely. So starting with the pipeline questions regarding the UCN2 program. So we have not revealed much on our thoughts here on the clinical program. The ambition is to initiate the study early next year, and we're going for high-quality weight loss. And as I said before, the study will be a typical study looking at the safety and PK, but we will, of course, reveal more in time. So, maybe moving on to amylin and the elorlintide data. So in general, I would say that we refrain from commenting directly on the data from other companies. But I would say that for the broader class of amylin, the data appears strong. It appears that amylin can deliver clinically relevant weight loss and can be used as a standalone treatment as well as in combination with other incretins. GUBamy, by itself, has a differentiated profile. So we have a balanced receptor profile on the amylin and calcitonin receptors. Just like, as we said, amylin, we have a long half-life, which definitely also give us some advantages. Again, it's important to be careful when comparing early clinical trials. So we see huge potential in GUBamy.

Sorry. And I can follow up on the CRO part of the question. So if we see a trend in large U.S. clients and their behavior, that is -- there's not a real trend, I would say. It's -- the large pharma segment generally seems to be progressing with what they're doing. There will always be fluctuations, but I think that it's not like we see any kind of strong trend there. It's what you see is mostly related to other client segments such as academia and biotech.

Our next question comes from the line of [ Christine Fernandez with BLK. ]