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

Hello, I am David Heuze, Head of Communication at MedinCell. So welcome to this video conference, which follows the publication of the financial results for our '21/'22 fiscal year ending on March 31. So a press release is available on our website. So today, I am with Christophe Douat, CEO of MedinCell. Hello Christophe.

Hello David.

With us, Jaime Arango. Hello, Jaime.

Hello, David.

Joel Richard. Hello, Joel.

Hello, David.

And Richard Malamut, our new Chief Medical Officer, who joined us 2 months ago.

Bonjour David.

So as usual, if you have questions, you can share it with us by using the track module on the right of your screen. This conference will last 45 minutes maximum. And to start, I turn to you, Christophe, with one single question. So what were the main events for the past fiscal year?

Thank you, David. Well, we are getting closer to a very important milestone for the company, the approval of our first product, done -- developed by Teva. I remind you that Teva filed for an application for approval and market authorization last summer. In November, Teva showed the data of mdc-IRM at the Psychiatric Congress in Texas in the States. The data is spectacular. The CEO of Teva even describes it as phenomenal and Rich -- Richard will -- I was told not to call you Rich, sorry, Richard.

It's Rich to my friends, so you can call me Rich.

Okay, thank you. And this data gave us a direction to show that this product could have a very, very significant commercial potential. However, as you know, the regulatory process was extended by 8 to 10 months. The FDA requested some additional information. Teva has to resubmit the filing and anticipates an approval in the first half of 2023. All the lights are green with Teva. Something you don't know yet, but you may have seen on its website is that Teva has made public the fact that they would develop a new indication for mdc-IRM in neurosciences. Teva also authorized us to mention that we were actively discussing new collaborations outside of schizophrenia in new indications. In the last few months, they've been preparing for the Phase III of the second program we have with them, mdc-TJK. And we expect to go to Phase III in the next few months. Last but not least, our Canadian partner, AIC, is ready to launch its next clinical trial of mdc-CWM and Richard will tell us about this and the other clinical stage programs in a few minutes.

Thank you, Christophe. As you said, we will discuss this program with Richard later. But maybe you have something else to say about what happened last year.

Yes, everything else has moved very nicely. Of course, we -- a lot of our teams were busy supporting our partnered programs, Teva, AIC, especially on the polymer side. Three programs that are in preclinical should reach clinical stage in 2023, mdc-GRT, mdc-WWM and mdc-STM. The team is also preparing the pivotal trial of mdc-KPT in Animal Health. Our Phase II with [indiscernible] ivermectin, as part of the mdc-TTG program is going well, and we expect final data in Q4. Last fall, as we always do, we looked at different scenarios and in the case where mdc-IRM would experience a delay, we have decided to look for complementary non-dilutive financing. Jaime would give us some information. It's a great thing that we did because as we all know, the biotech and tech sectors have really suffered since January with an average of minus 30%. And so it's a great thing that we started to work on these non-dilutive options, which will bring fruit in the next few weeks. Last, we kept working in ESG initiatives. And one of the biggest initiative is that we created a ESG committee that depends from our conserver surveillance of Board of Directors, and that committee is now fully active.

Thank you. Thank you, Christophe. I take this opportunity to point out that our 2022 ESG report will be available in French and English in July. I think just now to move on to financial results with Jaime. The types of the figures are available on the press release we issued today. But Jaime, can you tell us more about the financial situation of MedinCell?

Absolutely, David. Hello, everyone. Well, let me start like most companies, we had to adapt to the pandemic so that we could resume normally all our activities. This resulted, of course, in an increase in our expenses. They reached EUR 32.2 million versus EUR 27.1 million in the year before. 3/4 of those expenses correspond to research and development activities. They made possible for us to advance our programs in preclinical with ambitious objectives for the next year, as Christophe just mentioned. We also launched during the past year, the clinical study to demonstrate the concept of our product mdc-TTG. As a reminder, in our portfolio, we have 2 programs that are supported by major foundations, which are mdc-WWM in contraception with the Bill & Melinda Gates Foundation. They gave us a grant that can reach up to $19 million. What is interesting about this program is that MedinCell keeps all commercial rights. The second program is mdc-STM for malaria, financed by Unitaid for an envelope of maximum $6.4 million, but this is exclusively a program for global health.

Thank you, Jaime. So we get some of our revenue from this program supported by the Gates Foundation and Unitaid?

Right. Our income from our ordinary activities reached EUR 8.3 million during the year versus EUR 11.8 million last year. Half of those revenues come from our collaborations and the service that we render to the Gates Foundation and Unitaid. The other half corresponds to the research tax credit that we can benefit in France that reached EUR 4.2 million. For the past financial year, we did not receive any development milestones from our partner Teva. However, let me remind you that at the closing of the 31st of March, 2021, we had received a milestone payment of $5 million for the positive results of the Phase III of mdc-IRM. As a reminder, we had anticipated a payment of milestone for the program, the second program with Teva, mdc-TJK going into Phase III that we were expecting in the beginning of the year. Now we're expecting that in the second half of this year. Our operating cash burn was of EUR 21.4 million at the end of March 2022. This is slightly higher than what we were expecting, and this is normal given the phasing that -- the new phasing that we have with mdc-TJK. I take also this opportunity to specify that for the current financial year, we anticipate a significant drop in our cash burn while maintaining strong momentum in our activities. In the next 28 months, we're expecting to reach several value-creating milestones for the products that are today in our portfolio.

Thank you. Thank you, Jaime. Let's talk now about our cash position. Can you tell us what it was at the end of the last fiscal year?

Right, so on March 31, 2022, we had EUR 27.2 million, composed of EUR 24.6 million in cash and cash equivalents and $2.6 million in non-risky financial assets. As of today, we have a very good financial visibility that takes us until September 2023. But the efforts that we have put in the past few months since last autumn are bearing fruit. We're working on 2 main levers. The first one is to restructure the current debt that we have with the European Investment Bank or the EIB, as I will call it in the future. I remind you that in 2018, we obtained a loan of EUR 20 million. Now on June 1, we reached a significant and an important first step in order to restructure this debt. What it means is that we did an amendment to the current loan and part of that amendment includes postponing by 6 months the payment of the first tranche to the EIB from June 2023 to December 2023 and also changing the variable remuneration that is due to the EIB. This change in the variable remuneration will generate financial expenses during the current fiscal year. But what is important with this amendment is that this first step is essential and paves the way for further discussions with the EIB, and I hope I can tell you more about that sooner, very, very soon. The second lever is to access additional non-dilutive financing, and we're very actively working on it. So I believe that you have understood that a capital increase is not being considered today. I should also point out that in our hypothesis for the cash visibility, we are not including revenues that could be obtained from new collaborations with new partners or new programs that could be added to the pipeline with our existing partners.

Thank you, Jaime. So where does it bring us in terms of cash visibility?

Well, my objective is quite simple, David. And that means that with these 2 levers, we are targeting to have a visibility until the end of 2024.

Thank you, Jaime. So the commercialization of our first product by Teva should be delayed by a few months following the CRL received by our partner. So what impact on the company finances?

Right, so first of all, we like to work on a scenario basis. We evaluate the different scenarios, but more important is that we act upon the different scenarios that reach upon us. So receiving the CRL was a considered scenario, however, of course not the preferred one. But in any case, I was being -- we were being cautious or conservative about the numbers. We're expecting mdc-IRM to be launched in the second half of this year. So with the information that we have from our partner, we're expecting then the product to be approved in the first half of 2023, which means a delay of those revenues of a few months. Now the commercial impact of this product remains very important. And let me remind you the terms of this collaboration with Teva. So each product can receive milestone payments in development and commercial milestones that can reach up to $122 million. Now we have 3 products with them. So that makes a total of maximum $366 million. The next milestone that we are expecting from mdc-IRM is of $4 million for the approval. And in addition to these milestones, we will be receiving royalties from the first product that is sold. So regular revenues, we're expecting that to start kicking in as of the first semester of 2023.

Thank you. Thank you, Jaime. So I suggest now we get a regulatory point of view with you, Richard. But before that, I just want to say that, Richard, you are a former member of our Medical Advisory Board and an observer of our Supervisory Board. And for 2 months now, you have joined the company as Chief Medical Officer. You are, look, based in the United States, where we conduct most of our regulatory and clinical activities. And I just want to remind everybody that you know perfectly our program with Teva because you oversaw the early clinical strategy of mdc-IRM as you were senior VP of Global Clinical Development for paying neuropsychiatry, oncology and neurotherapeutic entities, which means innovative product at Teva. So Richard, can you help us to understand clearly where we are with the ongoing regulatory review of mdc-IRM?

Sure, happy to do so, David. So just a quick reminder and to highlight some of the things Christophe mentioned about the long-acting injectable risperidone product, Teva filed the NDA in June of 2021 and made public the results of the Phase III efficacy study in November of 2021. And perhaps not surprising the statistical significance was reached on the primary endpoint of relapse rate. What was unexpected were some of the additional findings seen in the study that provides strong differentiation for the long-acting injectable risperidone product versus other long-acting injectable antipsychotics on the market. So the data was supposed to run for 6 months, that was the primary endpoint, but the study was to continue until a minimum number of relapses were recorded. And as the number of relapses was less than anticipated, the study went longer in duration, but the benefit was more patients ended up being treated for the full 2 years that was available to them. And so this study, for the first time, demonstrated efficacy on relapses and other endpoints over a 2-year period in a double-blind, placebo-controlled fashion compared to a much shorter time for marketed products. The other thing the study showed was a statistically significant difference on quality of life measurements. Very difficult to show in studies in all indications, but even more so in psychiatry and other CNS indications. Further, the study showed that after the run-in of risperidone, oral risperidone to control all the patients entering the study, the patients who were randomized to placebo had the expected worsening of relapse. But what was surprising was that the patients who received the long-acting injectable risperidone continue to improve on their scores and measures of schizophrenia. So as this product moves through the regulatory process and hopefully is approved, we see quite a bit of value for patients and for physicians who prescribe it. Now what was not desirable was the complete response letter that Teva received in April of 2022. And I think it's important to understand that a complete response letter is not the end. It's not the end of the program, it's part of the regulatory process in which the FDA identified issues that they had with the submission and the program and provide suggestions on how to address them. And so Teva has been working since they received the complete response letter to try to address the FDA concerns and are planning to meet with the FDA very soon to discuss their suggestions as to how to address the FDA concerns. This will be followed by a resubmission of the NDA. When that happens, it's 6 months from the resubmission date until the FDA renders their decision, hopefully, an approval. I should also mention that through communication with Teva and our own understanding that there were no concerns with MedinCell product, the formulation, the polymers or the manufacturing sites. We also know that through Teva that there are no plans to repeat any clinical studies, which certainly would provide a longer delay than what Teva is providing publicly. So Teva is enthusiastic about the MedinCell formulation, and this is evidenced by the fact that they're moving to an FDA meeting to discuss another antipsychotic, olanzapine, again, in a long-acting injectable formulation. Teva has completed a Phase I study with a long-acting injectable formulation of olanzapine, which showed no safety concerns and acceptable pharmacokinetics. They will be meeting with the FDA sometime during the third quarter of this year to discuss their proposed protocol and discuss the development requirements to move that product towards an NDA submission. And in a -- with risperidone hopefully on the market, a long-acting risperidone, the question might be why do we need another antipsychotic like olanzapine. And the answer is that while risperidone is the most prescribed antipsychotic for schizophrenia, olanzapine is often reserved for more severe symptoms and more severe cases of schizophrenia. So they will be quite complementary. And then the third thing that Christophe has mentioned is the new indication for long-acting injectable risperidone. What we can disclose is that it will be in the neuroscience area. We're not able to disclose additional information about a specific indication, but again displays Teva's confidence in the MedinCell formulation.

Thank you, Richard. And what about the other program with our partner AIC who will reach the next clinical stage soon?

Yes. So AIC is a company based in Toronto, Canada, who in collaboration with us is working to develop a formulation of celecoxib to be injected intra-articularly in the setting of knee replacement surgery. And the value there is that we know that pain relief is important in the first days after surgery and that if pain relief can continue for a minimum of 3 days, there's an impact on the knee for opioids beyond that. And we all know the impact and the problems with opioids when taken for longer than the few days after surgery. So further, AIC has conducted a Phase II study in which they demonstrated that a long -- that an intra-articular formulation of celecoxib demonstrated separation from standard of care, not only at 3 days, but also at 7 days and at 2 weeks. So a product that can demonstrate analgesic efficacy for more than a few days after surgery and as much as 2 weeks would be quite valuable to clinicians and lessen risk to patients. So study design for the next studies is quite critical to the success of any program. And AIC has had extensive discussions with the FDA and external experts in the field to discuss the design of the next protocol. And so AIC is planning to initiate a 150 patient safety and efficacy study in the third quarter of 2022. Results from that study will dictate next steps and additional studies on the path to submission of an NDA and hopefully, ultimate approval.

Thank you, Richard. So now I turn to you, Joel, you're the Chief Scientific Officer at MedinCell. We won't describe all activities of your team in the last past year. But maybe you can give us an update on the portfolio of programs at regulatory stage, preclinical stage, but also at formulation stage.

Yes, sure, David. So actually, all our teams are working at the present time to develop and advance our portfolio of products. And our goal is to be able to launch the clinical activities of free human health programs in 2023 as well as the pivotal studies of our first animal health program at the same time. I would like to remind you that actually for an animal health product, pivotal studies of the last development step before filing a new drug application. So we are progressing very well on this program. We have also launched during the past financial year, a Phase II study aimed at demonstrating the prophylactic efficacy of ivermectin against COVID-19 and its variants. And in addition, a 3-month formulation of our product is now ready to go to regulatory development, and we will wait the final analysis of this clinical study, probably in the fall, to decide on the next steps of the program. And then I would also like to mention that we have worked a lot on extending the capabilities of our technology to broaden the range of possibilities for new formulations. And the work carried out by the research teams is really outstanding. And in the coming months, we should see the concrete applications of this research coming to development, which is really fundamental for the future of the company.

Thank you. Thank you, Joel. So gentlemen, you stay with us because we received a few questions. Okay. The first one is about the program with AIC, and it's for you, Richard. So the question is, is the next clinical trial part of a Phase III if the results are good, what will be the goal of the additional trial? And when can we expect this product to be on market?

Well, so a lot to talk about there. So again, the FDA has moved away from calling studies Phase II or Phase III and prefer instead to look at the statistical plan of the study, the number of patients in the study. And so even a study that's called a Phase II can contribute to a submission and a study that's called a Phase III may not. So what's more important is what's in the study. And so this is a larger study than the Phase II study that was completed. It will include robust safety and efficacy endpoints. And then results from the study will really dictate what the next studies are, whether they're an additional efficacy study and to submission, whether additional work will need to be done. Development is a stepwise progress. And we use data and build on data from each successive study to determine next steps. And so to answer the final part of the question in trying to determine when this would be approved, well, a lot depends on the study that will start very soon. And I think once we have results from that study, we will be able to be a little more certain about what the next steps would be and then give you a little more definite in the way of time lines.

Thank you, Richard. Next question is for you, Jaime. Can you please outline your anticipated R&D spend this year? How much will be spent on clinical development versus other R&D spend?

Right, we do not disclose all this detail about the clinical and the other R&D spend. However, what I can tell you is that we are anticipating our expenses to go up between 10% and 15% this year. As I mentioned earlier, however, our cash burn for this year will be lower than the EUR 21 million that we reached at the end of March 2022 as we're expecting also further revenues, high increases in revenues coming in this fiscal year. And yes, the growth will be driven by the different activities in development mainly.

Thank you, Jaime. Next question for you, what are the non-dilutive financing options evaluated at the moment?

Yes, I'm terribly sorry, but I cannot disclose the different discussions that we are having today. Things are moving forward. And yes, we keep on moving very actively on that, and we remain positive about the outcomes, but I'm sorry, I cannot tell you more, our confidentiality.

We'll have to wait.

We will have to wait.

Okay. Thank you. Richard, next question for you, what has Teva delayed the start of the Phase III for the second program considering you had anticipated it early this year?

Well, some of that has to do with a little bit of a delay in the regulatory interactions and obtaining a meeting with the FDA. We know that the FDA, like many parts of the world, are under-resourced. And so that leads to delays in reviewing documents, granting meetings and so on. I don't think it reflects a lessening of Teva's enthusiasm about the program. I know that once the decision is made to assess whether a Phase III study should be conducted and an FDA meeting is decided to be requested, there would be a disincentive to delay on Teva's part to move that forward. So I believe that the reason for the delay is simply based on regulatory time lines.

So next question, still for you, what is the new time line for the filing and expected approval of mdc-IRM TV-46000 after receiving CRL in April 2022? You already said that, but maybe we can...

Yes, no, I'm happy to say again. So again, the fixed time line that we know about is a 6-month approval time from the day the FDA receives the resubmission to the day that they render their opinion. The variability is going to start with the meeting that Teva will have with the FDA shortly in which the FDA will confirm that Teva's proposals to address the concerns in the CRL can be met. Once that's confirmed, Teva will perform the work needed to address those concerns. The variability as to how long that will take will depend on the discussions with the FDA. And then that's followed by writing the relevant parts of the NDA and submitting. So I apologize, I can't give you an exact date or even month when it will be approved. I think once we know that the NDA has been resubmitted, we'll have a little more certainty around 6 months from there.

And the last question today. I don't know, maybe, Christophe, you will answer it. But back in 2017, MedinCell started collaboration with Sandoz to evaluate the use of BEPO technology in oncology. What happened since 2017? Is this research still ongoing?

Is this -- sorry?

This research?

Research partners.

Yes, with Sandoz.

No, it's not. At the time we're working on a drug, an active principle, which was extremely difficult to handle, and we had underestimated the complexity of funding that drug. And one promise actually I made to at the time the CEO of Sandoz U.S. Peter Goldschmidt was that it would never happen again. And we actually -- and he analyzed the fact that it was also Sandoz's responsibility to have chosen such a difficult API. But what we've done now is that every time we start and work on the new program, we evaluate all the risks, what we call technical assessment, in a specific unit of Joel's department. And within 6 months, we understand the risks, what needs to be done, can we reach a formulation and what needs to be done. And so every single program that we do today goes through that technical assessment. Actually, we just recently signed several feasibility studies that are going as we speak, in technical assessment. And every future program that we are discussing today, whether with Teva or a new partner will go to that step as well.

I think we reached the end, but Christophe, I leave you the floor for the conclusion.

Well, it's truly too bad. We cannot celebrate yet the approval. In Montpelier, we do that usually in what we call pilots on the beach, but we're going to have to wait a few more months. And I don't know if it's going to be a good idea in the winter, if it happens in the winter, but anyway, there is a delay, it's a delay. And as Richard, Jaime and Joel described it very well, the company keeps moving forward. The next 12 months should be instrumental will bring the -- should bring the company within a new dimension with the approval of mdc-IRM and the Phase III of TJK, TJK -- sorry, and the new clinical trial of CWM. So lots of things going on. I would really like to thank all our employees for really working hard to bring the company where it is. I would like to really thank all of you, individual shareholders, institutional shareholders, employees, former employees, for your support, and we will be talking to you soon.

Thank you. Thank you, Christophe. Thank you, Joel, Jaime. Thank you, everybody, for joining us today. See you soon.

Thank you.

Yes, bye.

Thank you, bye.