MedinCell S.A. (MEDCL) Earnings Call Transcript & Summary

Hello, everybody. Welcome, the video conference for the half year results, sorry. Thank you for being with us tonight. Tonight with us, we have Christophe Douat, our CEO. Welcome, Christophe.

Hello.

We'll have Joël Richard...

Hello.

Our Chief Development Officer; and Jaime Arango, our CFO. Hello, Jaime.

Hello.

[Operator Instructions] As I told you, we have published today the press release and the half year report. They are available on our website, invest.medincell.com. So tonight, we will expect the physical distance session, so we can remove our mask, guys? Okay. It's been tough for everybody. Thank you. So I suggest that we start with you, Christophe, and with the last development of our portfolio of long-acting injectable products. So first, Christophe, what about the 3 LAI product antipsychotic that we developed with Teva? What about -- what happened in this semester?

Yes. Thank you, David. As you know, we've had great news on the Teva side with a major event this quarter with the completion of the pivotal efficacy study on November 24. So 2 months ahead of schedule.

Perfect. And what could be the next step for this program, Christophe?

So we expect the study readout in the first quarter of 2021, as Kåre Schultz, the CEO of Teva, mentioned during his earning call, I encourage you to look at the transcript. The next steps after that should be the application for marketing authorization and then approval of costs.

And at the same time, Teva is completing a safety study, Christophe?

Yes. Yes. Teva is completing a safety study as we know.

Okay. This is a product for schizophrenia. Christophe, can you remind us the main metrics of this market?

Yes. Schizophrenia, we've mentioned it before, is the largest market for long-acting injectables. It's a $5 billion market worldwide, growing significantly. In the U.S. alone, it's a $3 billion market, growing at a 15% CAGR.

And this is a very important product for us, I read.

Yes, David. It's important, of course, as it is the first product made with the BEPO technology that will hit the market, but also because it is the same technology, which is underlying in all our products. So it will automatically derisk all our pipe.

Thank you, Christophe. And what about the 2 other antipsychotic developed by Teva?

So the second product is a completing its Phase I, and it's expected to complete this Phase I in 2021. And the next step should be a Phase III, like mdc-IRM. And the third product is currently completing its preclinical studies and should hit the first in-human trials in 2021.

Thank you, Christophe. Now let's talk about the other product in clinical phase, mdc-CWM for management of post-surgery pain and inflammation. The Phase II ended last April. Our partner met the FDA this summer. Where we are now?

So indeed, our partner met the FDA in an end-of-Phase-II meeting as it is called. It is now working -- it has been working on optimizing the development plan. And our partner confirms that it will initiate several large-scale safety and efficacy studies in the coming months.

Thank you, Christophe. And last January, the company announced that this year, 3 products will be ready to enter regulatory development after the end of formulation activities. Are we on track?

Yes, we are on track. And I would really like to congratulate our teams. They've done an amazing job on those 3 programs. The first one, as you know, was our contraception product with the Gates Foundation. The formulation selection was announced in April, and the regulatory preclinical activities are in progress. The second one has, indeed, completed its formulation activities. We do have the lead formulation. That's our product in post-surgery pain in animal health. And the third one, which is a major program for the company, also significant for patients, it's our transplantation in long-acting injectable. And I can confirm that the formulation is about to be selected, and we will be -- we will communicate on it very soon.

Thank you, Christophe. And there is even one more program that can reach that point.

Yes. Yes. So not only did we achieve a final formulation on the first programs that were planned, but also on the new one, mdc-TTG, our COVID-19 program. The teams are finalizing the choice of a lead formulation, which would be ready to go into regulatory development. We started a safety study in September to simulate the continuous administration of ivermectin through daily dosing and not just single dosing. And we will be communicating soon and give an update on this study, which is going well.

Thank you, Christophe, for this overview on our...

Sorry, David. I probably should talk about the workshop. We have been talking to all or a lot of the scientists and clinicians worldwide that are working on ivermectin against COVID in many countries and to encourage them to share data, share information to speed research and increase awareness. We've decided to initiate and organize a workshop, a professional workshop. This workshop will be held next week on the 3 themes: mode of action, ivermectin as a treatment and ivermectin as a prophylactic.

So thank you very much, Christophe, for this overview on the portfolio and the last development. Now let's talk about financial results with you, Jaime. Jaime Arango, our CFO. Welcome, Jaime.

Thank you, David.

Jaime, so can you tell us what are the main takeaway of this half year in a financial point of view?

Indeed. There are 3 main points to keep in mind for this semester or this half year results. First is that we did a successful budgetary efforts in the beginning of the -- of this semester. And also, we did successful transactions, dilutive and nondilutive, to increase the cash visibility of the company. That goes until the summer of 2022, excluding the program mdc-TTG against the COVID. Second point is on the P&L. Our revenues are in line with our expectations, and the expenses are under control. We will talk about that later. And then the third one is thanks that -- to the investments that we made, our programs continue to advance and will be ready to go into preclinical studies, as mentioned by Christophe just now. So All these programs are crucial for MedinCell's future value.

Thank you, Jaime. The most important nondilutive transaction was the PGE, which is a state-guaranteed loan, okay? Can you explain what is it and what we have done?

Right. So in total, we have received EUR 13.7 million up until today. First, we negotiated and received the cash of EUR 11.5 million between May and June of this year of the state-guaranteed loans. What are this? These are loans that are very attractive for the companies. These are backed by the French government at 90%. They have very low interest rates and are really long term. So the full repayment can go up until 6 years of reimbursement. The banks that participated in there were the Banque Populaire du Sud, BNP Paribas and Caisse d'Épargne. And then after the EUR 11.9 million, we received an additional EUR 1.8 million from the BPI back in October. Of course, this is after the 30th of September. So this EUR 1.8 million are not including in our half year results.

Thank you, Jaime. Another major event was a capital increase. Can you give us more information about that?

Right. So back in June, we did this capital increase with -- in the form of a private placement. We raised EUR 15.6 million. It was a real success with an oversubscription of 40% and a very limited discount at 8%.

Thank you very much, Jaime. So our revenues for this period reached EUR 3.1 million. Can you give us more details?

Right. These revenues are exclusively coming from the service that we rendered to the programs that we're working with the Bill & Melinda Gates Foundation with Unitaid. And the difference of almost EUR 800,000 compared to the same period last year is because the previous year, we received the milestone that we didn't receive during this half year results. However, as Christophe mentioned, Teva programs are progressing well. And by the end of the fiscal year ending the 31st of March of 2021, we're expecting to receive milestone payments from the advancement of the 2 most advanced products, IRM and TJK.

Thank you, Jaime. Our operational expenses reached EUR 11.3 million. Can you comment?

Right. As I mentioned, the expenses are under control. With the actions that we took in the beginning of the year, they are lower by almost EUR 700,000 or minus 6%. The R&D expenses, they represent almost 70% of the total spending.

Okay. And what about our financial expenses? They are important during -- they were very important during the period.

Yes. During the first 6 months, they represent EUR 2.6 million. We had communicated about the renegotiation of the third branch with a European Investment Bank or EIB as we call them. And this is an exceptional transaction that created exceptional expenses due to the variable remuneration linked to these EIB loan that considers the cash received and to be received from the programs that are financed by the EIB.

Thank you, Jaime. Can you give us a few words about our cash consumption?

During the first 6 months, our operational cash consumption was of EUR 6.7 million compared to EUR 9.1 million in the same period last year. However, during this semester, we received a payment of EUR 3.2 million that correspond to the research tax credit. That's part of the French government instances to help innovative companies like MedinCell. So we received it in advance. Last year, during the first half, we only received EUR 2.5 million of this research tax credit in the second half, not in the first half.

Okay. And I think it's important to talk about the debt.

Right. So due to the transactions that we made on these PGE loans, the EUR 11.9 million, our debt increased to EUR 43 million compared to the EUR 32.7 million that we had at the end of March.

So thank you, Jaime. So what can be the conclusion about our financial results this half year?

Right. So by the end of September, thanks to the reactivity and the team's adaptability, MedinCell had enough cash to fulfill its strategic objectives and cover its cash needs until the summer of 2022, excluding our mdc-TTG program against the COVID.

Thank you very much, Jaime. Now I think it's time to make the Q&A session. We received a lot of questions before this conference. Joël, one question about the program of Teva IRM, okay? So we are waiting for the study readout in Q1 2021. If they are positive, will the application for market be filled immediately? How long does this [ pose in your tech ]? And finally, when will the project be on market, Joël?

Yes. Thank you for the question. So actually, everything is within the answer of Teva, as you know. They should complete the analysis of the results by Q1, as planned, and then file the product. The review should take typically 6 to 12 months. So actually, we are expecting the product to be in the market end of '21 or in the very early months of '22.

Thank you, Joël. As a reminder, Teva leads the program and pilot the development of the program. So it depends of what will Teva do. We mentioned an ongoing safety study for this program. Why this study? What is the goal of the study, Joël? When will it be completed? And will the marketing authorization depend on the completion of this study?

Thank you for the question. So this is a very classical safety study for chronic long-acting products. Actually, this is not essential for the filing of a product and for the review of the dossier by the agency. So we are not expecting this study to delay the launch of a product. It's expected to be closed anyway by end of '21, the latest and might be even faster.

Thank you very much. Jaime, can you tell us what will be the amounts of the next milestones of Teva?

Right. So we do not disclose the milestone amounts. However, they will be visible by the end of the fiscal year, if everything goes as we expect it to. However, let me clarify a little bit about the agreement that we have with Teva. So MedinCell will receive milestone payments during the life of the different projects. So the milestone payments per project can reach an amount that can go up to $122 million, split 1 part under the development milestones and another chunk upon reaching certain level of sales. So that's up to $122 million for each program, multiplied by 3 for the 3 programs, that's $366 million. And in addition to that, MedinCell will receive royalty payments mid- to high single digits, depending on the sales of Teva of the different programs and that from the first sales.

Thank you very much, Jaime. Christophe, we also received this question. Are other product developments considered with Teva?

This is an information I cannot disclose.

Of course. Thank you for this. Christophe or maybe Joël, why would the mdc-TJK program go directly to Phase III without going through Phase II? Joël?

Right. We think that actually TJK projects may have the same regulatory pathway as IRM going directly from Phase I to Phase III. And the reason behind this is actually that this product, TJK, is based on a formulation of an already known API, already commercialized and used clinically. So for this reason, actually, there's no need to prove its efficacy in a Phase II study. And so most likely, it should go to the Phase III directly.

That was also the pathway for IRM, I think.

This was this accelerated pathway that was used, taking into account that risperidone is already on the market and has been used for many years now.

Another question, Christophe. Do we know how much Teva has invest in the various ongoing programs?

I'm sorry, but it's not an information we can disclose as well, and plus, we don't even know it.

Thank you for this short answer one more time. The next question for you, Christophe. Will the products developed with Teva be available quickly in Europe and in the rest of the world?

So right now, Teva is focusing on the U.S. because it is the largest market in the world for pharmaceutical products. And I cannot disclose Teva's strategy for the rest of the world.

And next question for you, Christophe. Why did you choose to make long-acting products in a field where there are already a lot of products, schizophrenia, sorry?

Well, I think that Teva picked the right strategy. it's always better to go in the field where there's existing products, which means that patients, clinicians are used to use long-acting injectables. And of course, the key conditions is to come up with a best-in-class product. And of course, I think our product is best-in-class.

Thank you very much, Christophe. Jaime, I don't know if you can answer the next question. But how much revenue do you expect from sales of Teva products?

For the fiscal year, you mean?

For the coming fiscal years, I think. This year, you already answered?

Right.

But do you have a guidance, something like that?

No, we don't -- unfortunately, we don't provide any guidance. But as I mentioned, for this fiscal year, we're expecting some milestone payments coming from the most advanced products with Teva.

Thank you, Jaime. Joël, does MedinCell manufacture the products that will be distributed by Teva? And how you're going to succeed in moving to the industrial stage?

Right. So Actually, Teva produces the products that will go to the market. They have the industrial equipment. They have know-how. They have produced all the clinical supplies that were necessary for the clinical studies. And so the drug products is within their hands for manufacturing. Now as regards to the polymers, actually, we are producing the polymers at a GMP scale for our joint venture with Corbion, CMB in the U.S. And we are, at the present time, at the industrial scale and able to produce all the polymers that are necessary for products coming into the market.

Thank you very much. Christophe, another question. Can we explain the delay on mdc-CWM? As I remind you that the Phase II ended in April.

Yes, there is a delay, indeed. It should not be significant. Our partner is working on the optimization of the development plan as we speak.

And Joël, do we know how long should last the next development stage -- the next clinical study?

We keep this information confidential for the time being. It will be published on the site of FDA, clinicaltrials.gov, and so it will be available at this time.

Thank you very much. Christophe, a question about TTG program on COVID-19. Does this program still make sense with the vaccine that arrived?

Okay. So I will describe what our vaccine experts tell us because, of course, we are checking their opinion regularly. There's a lot of uncertainty on vaccines on the direction of efficacy, on how they will protect the population that are the most at risk, like really all people above 80; the accessibility in emerging markets. And so they think that in all scenarios, there will be room for a prophylactic treatment, which can be using a well-known drug and with little side effects.

Thank you very much. Jaime, 2 last questions for you. Do you think that MedinCell, with respect to the guidance for cash consumption, increased between 10% and 15% for the current fiscal year?

Right. So let's clarify, when we talk about the guidance, we were talking about the operational expense, not about the cash consumption. However, yes, we have provided this guidance of 10% to 15%. Given the forecast that we continuously do, we're expecting to finish the year slightly below 10% compared to the previous year, this excluding the program mdc-TTG.

Thank you. And the last question for you, Jaime. Are you considering new financing operations? What kind of operations? Dilutive or nondilutive?

Right. So as I have mentioned in previous calls, we are always looking into the different options that are in front of us. That may include also limited capital raises, capital increases. But we have to take into account the interest of MedinCell, the opportunity of doing so and also for the interest of us as that we are shareholders of the company.

Thank you, Jaime. Before leaving the floor to Christophe to conclude, I want to remind you that there will be a general assembly next week on the 15th, okay? Elisabeth Kogan is proposed to join the Board of MedinCell. We had a bit of conference to introduce Elisabeth Kogan last week. The said conference is available on replay. So you can still vote. You can use the electronic vote or download the ballot on the website, invest.medincell.com. This general assembly will be aired live and then available on replay. The connect -- the information to connect this general assembly will be released in the coming days. So this is the end. Christophe, if you will, to conclude?

Yes. Of course, this has been a special year. This will be a special year-end as well. And I would like to wish all of you, yourself, your friends, your families, your co-workers a great Christmas and good health as well. See you soon.

Thank you, Christophe. Thank you, Joël.

Thank you.

Thank you, Jaime, and thank you all, and happy new -- happy end of year, sorry, for everybody, and take care, as Christophe mentioned.

Thank you. Bye.

Bye.