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

Hello, everyone. Welcome to this video conference dedicated to the presentation of our half yearly results, meaning the period on April 1 to September 30, 2021. Today, we released 2 documents after the close of the stock market: firstly, a press release with a summary of our financials for this period; secondly, an extended reported that can download on our website. This conference will last 45 minutes maximum. You can send your question by using the chat module to the right of the screen. You can also like the questions, so that they are even higher priority. For this meeting, I'm in Paris with Christophe Douat, CEO of MedinCell. Hello, Christophe.

Hello, David. Hi to all.

And Jaime Arango, our Chief Financial Officer. Hello, Jaime.

Hello, David. Hello, everyone.

Joel Richard, our Chief Development Officer, is joining us live from our headquarters in Montpellier. Hello, Joel.

Hello, everybody.

So we will start with an update of our portfolio of products based on our long-acting injectable technology, BEPO. The main event is obviously the progress of our most advanced product, mdc-IRM, a program developed with Teva. We have 2 major announcements in the past months. First, the acceptance of the NDA, New Drug Application, which is the request for marketing authorization. It was accepted for review by the FDA on August.

Christophe, would you like to make a comment on why this is so significant for MedinCell?

Yes. Thank you, David. Yes, indeed, it is a fundamental event for the company. If we take into account the usual delays since the filing was accepted by the FDA in August, the approval should happen before summer 2022. Teva confirmed that commercialization should start in 2022 as well, of course, subject to the approval from the FDA. As a reminder, the antipsychotic long-acting injectables market has today a size of EUR 4 billion in 2021, EUR 7 billion worldwide -- EUR 4 billion in the states, sorry, and EUR 7 billion worldwide. Its growth average -- growth rate in the last 3 years has been 14% per year, 1-4, 14%. And there is still a lot of needs since only 160,000 patients are treated today with antipsychotic long-acting injectables in the States. We believe we have the ideal partner, a partner with which we have a very strong relationship, a relationship that started 7 years ago. Teva, our partner, is showing its dynamics, and its CEO, Kare Schultz, has not done a single analyst meeting in the last year without mentioning our product mdc-IRM. Beyond this, and we've communicated on them, the presentations by Teva at the Psychiatry Annual Congress November 1, where it was so very meaningful. Everything indicates that Teva is preparing all it needs to do for the potential approval in 2022.

Thank you, Christophe. So as you mentioned, the second major event was a presentation by Teva of 16 posters during Psych Congress at the end of October. Psych Congress is the largest American psychiatric conference. Maybe you can explain why this is so significant for MedinCell?

Yes. Well, not only Teva presented at the Congress, David, but it also presented 16 abstract, 16. Now this is, again, a testimony to the dynamics of Teva. And all the data that was presented confirms what we hoped to see at MedinCell. Our technology has allowed us and Teva to develop a product which should be a true game changer in the field of long-acting injectables antipsychotics. We have developed a product which is subcu and not intramuscular, which is injectable with a short needle, which is ready to use, easy to use, very flexible. All this -- on top of all these attributes, the data shows that the product has excellent efficacy and tolerability. All these results go beyond our hopes. It is a great product. Its potential is enormous, as you can understand. And I can tell you that our teams are extremely proud. There's a lot of excitement at MedinCell. And I will quote Kare Schultz, the President of Teva. And this should become the preferred treatment for patients.

Thank you, Christophe. We also received some information from our partners, Teva and AIC about our partnerships programs.

Yes. As usual, we've asked them to tell us which information they could share about the programs that they are financing and which they are developing. On the Teva side, we are awaiting news on the next steps for mdc-TJK and mdc-ANG, respectively, potential Phase III and potential Phase I. It will be in 2022. We don't have any more details that our partner wishes to share right now, for regulatory, strategic and competition reasons. On AIC and mdc-CWM, our partner confirms that they are ready to launch Phase III, but the interactions with the FDA continue, to finalize the protocol of a product which would be a first in its category. A lot is at stake. The objective is to maximize the chances to get the approval to go to market, but also to guarantee the commercial success of mdc-CWM.

Thank you, Christophe. Maybe a few words on our TTG COVID-19 program. We announced a few days ago that we received EUR 3 million loan from Bpifrance for the development of this product. Can you tell us where we stand on that?

Yes, the program is moving forward. We explained that the priority was to do an efficacy clinical trial that is very well structured to have a proof of efficacy that nobody can discuss, in prophylaxy, but also to optimize the development of our long-acting injectable. The preparation for this trial are very advanced. And we are planning that the trial will start in Europe as soon as January, in several European countries where vaccination rates are lower than they are in France. And the protocol of the trial will be described when the trial starts.

Thank you, Christophe. Is there anything else you want to highlight regarding our portfolio?

Yes. The other programs are moving ahead on plan, especially our project in contraception. I remind you that we received an envelope of $23 million from the Bill & Melinda Gates Foundation to move this program into clinicals. And most importantly, I really believe we are entering a period which I've been waiting for, for 10 years. We have completed a Phase III -- a successful Phase III. It's a major event in our industry. And it validates the technology, brings a lot of credibility to the company. And as we thought, discussions with partners are accelerating. We are prepared. News to come.

Thank you, Christophe. I turn to you, Jaime, now. Let's talk about our financial results. In a few words, Jaime, can you describe our situation at the end of the period on September 30.

Absolutely, David. At the end of September, we have a solid cash position of EUR 37.4 million, composed of EUR 34 million in cash and cash equivalents and EUR 3 million in nonregistered investments. Since September -- since the end of September, we have received EUR 3 million of the research tax credit from the year 2020. And perhaps you have also read that we have received EUR 3 million from Bpifrance to support the product mdc-TTG. And we have also received a partial payment of a grant that we received from the -- of the EUR 1 million that we received from this -- from the government in this scheme called Plan Relance.

Thank you, Jaime. Jaime, can you highlight what are [ a few of the ] highlights of the period in terms of revenue and expenses?

In terms of revenue, it grew by 30% to reach EUR 4.1 million. These EUR 4.1 million are split between EUR 1.6 million of the services that we provide to the Bill & Melinda Gates Foundation for the program WWM, with Unitaid for the program mdc-STM. And in addition to that, we also recorded EUR 2.5 million in the research tax credit. Regarding the operational expenses, they also grew, this time by 36% to reach EUR 15.3 million. However, let's put this growth into context. Let's put us back -- let's step back over 18 months ago when this pandemic started and there were a lot of uncertainties then, and we had to take measures in order to maximize the cash that we had then. So we had to put in place austerity measures, prioritizing the types of expenses. There were certain teams that were on partial activity. But since the end of last year, we're going full-fledged investing in our products, advancing them into the next stages. Therefore, this high growth. On the financial expenses, they decreased by 79% and [ which ] had EUR 544,000 last year. This decrease is explained because last year, we had to reevaluate the cost of the EIB loan regarding the variable remuneration. That was due to a renegotiation and an amendment that was signed with them in the mid of 2020.

Thank you very much, Jaime. Can you tell us if these numbers fit with what was anticipated? And can you tell us what is the expected evolution of our finances over the current semester?

Absolutely, we're in line with our expectations. By the end of March '22, our fiscal year ends in March next year, we should receive $3 million from Teva, thanks to mdc-TJK. [ We anticipate ] that it goes and it advances into Phase III, that we continue our collaboration with the Bill & Melinda Gates Foundation and Unitaid. Therefore, our top line is expected to be more or less at the same level as we finished last year at around EUR 12 million. In regards to expenses, we should have a more moderate growth than the first -- than the initial 6 months to finish them at around EUR 31 million or plus 15%.

Thank you, Jaime. Can you tell us when do we anticipate receiving the first revenue from Teva following a potential mdc-IRM commercialization?

Right. So today, with the 3 products that we have with Teva, we have, in this contract, we have 3 different types of revenues. We have milestones that [ go into ] development. We have commercial milestones that we will receive once the products attain a certain level of sales. And third, we have the royalties, medium to high single digit, and that from the first product that is sold on the market. Let's go back to the milestones for each product. The total milestones can reach up to $122 million and the maturity of these milestones are commercial ones. So if we combine the 3 products, the total amount of milestones that we can receive is $366 million. Now to give you an idea of the split between the development and the commercial milestones, let's take the example of mdc-IRM. Today -- to date, we have received over $10 million in development milestones. And the next one that we're expecting on development is on the marketing authorization that this product will get from the FDA. We're expecting $4 million. From then, over $100 million will be dedicated to the commercial milestones that we're expecting to receive in the coming years. Now the question is, do we have the confidence that we will receive the totality of these commercial milestones in the years to come? And our feeling is that today, yes, given the very positive results of the Phase III, as Christophe mentioned, should be the preferred product for patients, for health care professionals. We're convinced of the potential of this product. Now the royalties, they will start kicking in as of 2022 when the first product is commercialized. So from then on, each quarter we will be recording and receiving cash of these royalties, again, mid- to high single digit from the first sales. So this is very exciting. We are expecting to receive these royalties again next year, if there's the FDA approval, of course. But it is something that -- it's a new stage for the company, coming with regular increasing income, and we're preparing the company for that.

Thank you very much, Jaime. I think it was pretty clear. Christophe, last week, we announced that we secured EUR 1 million in the framework of France Relance to extend our lab capacity. Can you provide more details about the use of this grant?

Yes, definitely, David. We'll soon be moving to our new building extension. This will free up room to extend our current lab, and this is absolutely necessary to -- and to the growth of the company. As you know, the lab is where it happens at MedinCell. This is where the formulations are designed, tested and determined to go into regulatory development. So we had put the new lab on hold at the beginning of the pandemics. And this $1 million -- sorry, EUR 1 million will help us to start it and put it back on track.

Thank you very much, Christophe. A lot of people connected today, but only 1 question received. So [ answer the ] question. Christophe, I don't know if you can [ recall ] -- answer, sorry, how many sales reps with Teva have [ been tagging ] your product? And how does this compare to Indivior's [ per ] service?

Okay. Okay. Two great questions. Thank you. Unfortunately, Teva will not disclose how many sales forces they will bring to this program. I think we have enough clues to tell us that they will do as much as they can to get a successful launch based on the data, based on the comments from the CEO, [ which Kare were ] to see the President of a company announcing a product like this at every analyst meeting. We know that Teva has a great reputation to launch products. Their last launch, Austedo, has been a great success, bringing very significant additional revenue to the company. And so -- and this is the same sales force as the one that will sell our product, I believe. On the second question, Indivior and [ per ] service, okay? So Indivior actually did bring [ got ] the approval for the first subcu program. When I'm asked about this question, I usually show the needle that is needed to inject a product, gauge 18. And usually, I show it to people because they can sit from the other side of the room, and it's not very appealing. And their volumes of injections are quite high as well. So there's a lot of attributes that our product has that they don't have. And certainly not the quality of data that we have obtained in our Phase III, not only in terms of quality but also in terms of duration. I believe our clinical trial was the longest trial that has been done in long-acting injectables, and has shown many improvements that people don't see usually.

Thank you, Christophe. Another question, and I think that Joel can answer it, is LAI [indiscernible] being explored to treat osteoarthritis?

Osteoarthritis.

Thank you, Jaime, sorry. Joel?

Yes, this is a good question. I'm not sure we can really comment on this at the present time. Yes, this is, let's say, one of the opportunities that may need to be investigated further in the next months or years. But at this stage, I think we cannot really comment on this.

Thank you, Joel. So no more question. I think we reached the end of this video conference. Christophe, I can leave you the floor for conclusion.

Yes. Thank you very much for attending our conference. I wish all of you great holidays, Merry Christmas. And I hope all your families and yourself will stay safe, and we are looking forward for more news in the new year. 2022 should be an exciting year. Should be the year of approval of our first product, and it's extremely exciting for all of us at MedinCell.

Thank you very much. Thank you, Joel. Thank you, Jaime. Thank you Christophe.

Thank you, everyone.

Thank you.