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

Hello, everyone. I am David Heuze, Head of Communication at MedinCell. And as you can imagine, I am very happy to be with you today. And with you, Christophe, the CEO of MedinCell with Jaime Arango, which is our UR -- our CFO, sorry, and live with us from the U.S. Richard Malamut -- Dr. Richard Malamut, our Chief Medical Officer. Hi, Richard?

Pleasure, David. Hello you, David.

One person is missing today is Helen, which is Head of Alliance at MedinCell. She leads the relation with Teva, but I see too much vote for Helen. And so she cannot be with us today, but [Foreign Language] Helen, as we say in French. So this conference is scheduled to last around 30 minutes, okay? And as usual, you can send us your questions by using the chat module on the right of the screen. So don't hesitate. Christophe, I believe I will have it. But today -- yesterday -- no, Friday, we announced that UZEDY that you can see just behind me was approved by FDA. So can you explain what is this news? And what are the consequence for MedinCell?

Yes. Very exciting times at MedinCell, very emotional moment. For the first time, our technology will be treating patients on a large scale in the United States. UZEDY is a true game changer, a product that should become a standard of care in schizophrenia. It has huge benefits. It is an indication where compliance is critical and long-acting injectables help with compliance. Schizophrenia has dire consequences when people do not comply with their treatments. Now of course, the challenge is to sell the product, and we believe we have the best partner to do that. And UZEDY is a strategic priority for Teva. We know that Teva has the right sales force to promote UZEDY. Richard will tell us a bit later on the product, Jaime on the financial potential. Indeed, royalties and potential milestones will arrive in the next few years and royalties as soon as the next few months. We're talking about dozens of millions. UZEDY validates our technology, the same [indiscernible] technology that is under all our future programs. MedinCell is now in the new era among the few companies that have reached this stage, and this is the beginning. Right behind UZEDY, we have 2 products in Phase III where we expect results in the next 18 months and a full pipeline right behind.

Thank you, Christophe. Christophe, do we have any news from our partner, Teva. Do you know what is the current mood, I would say?

Well, I think our friends at Teva are as excited as we are. There's lots of e-mails going back and forth. We have been working with Teva now for 9 years, of 9 years of efforts, tenacity to get this amazing product to patients. UZEDY is the lead program of what the CEO of Teva unveiled at his last earnings call on February 8 about building a schizophrenia franchise with long-acting injectables. and their sales force is in the starting blocks. The product should be ready to go for sale in the next few weeks. And it is the same sales force that has successfully ramped up AUSTEDO, the last blockbuster of Teva [ known ] to about a billion in just a few small years. So exciting times and really looking forward for UZEDY to be the success it deserves.

Thank you, Christophe. Richard. Richard you are our Chief Medical Officer. But you are also part of the Teva team that launched the product few years ago -- a few years ago. So I can imagine that it is a very emotional moment for you today, Richard.

Yes. It's very exciting to be here at the end. But back to the beginning, I had the opportunity when I was employed by Teva to be part of the team that created the partnership with MedinCell to develop long-acting formulations of risperidone and other antipsychotics. And as Head of Psychiatry at Teva, I led the planning around the Phase I study that established safety and confirmed adequate blood levels of UZEDY in humans and which was the first time that MedinCell polymers were injected into human subjects. Now I left Teva as the story of UZEDY was beginning, but I am thrilled to be back working at MedinCell as Chief Medical Officer at the successful end of the story when FDA approval was received at the end of last week. But I'm now very excited to see favorable outcomes for patients with schizophrenia, who will benefit from the use of UZEDY.

Sure. Richard, you're a specialist in central nervous system, CNS. Can you explain why long-acting injectable such as UZEDY can be -- can play, I would say, a major role for patients with schizophrenia?

Yes, of course. So patients with schizophrenia do respond well to oral antipsychotics when they take them regularly. However, as many as 80% of patients with schizophrenia are not compliant with their medications and suffer severe relapses, which require several weeks of hospitalization to regain control. And on discharge, they will again stop taking their medications, leading to relapse and a repeat of the cycle. A long-acting injectable risperidone such as UZEDY ensures compliance as it is injected by the health care provider rather than relying on patients taking their oral medication. And it is because of this benefit that there has been growth in the use of long-acting injectable antipsychotics by prescribing psychiatrists for their patients with schizophrenia.

Okay, Richard. Richard, can you tell us why UZEDY could become the treatment of choice for schizophrenia?

Yes. So there are many approved formulations of long-acting injectable risperidones, but UZEDY has 4 key features that can make it the preferred treatment. First, most existing formulations are given intramuscular, which leads to a higher level of pain for the patient. UZEDY will be administered subcutaneously by a smaller needle with much less pain on injection. Second, existing formulations often must be reconstituted in the psychiatrist office whereas UZEDY will be available in prefilled syringes, corresponding to 4 different oral risperidone doses for each of the monthly and every other monthly formulations. Third, UZEDY will have therapeutic blood levels within 24 hours of injection compared to many of the existing formulations that do not achieve therapeutic blood levels of risperidone on the first injection and require either oral risperidone supplementation for additional titrating injections. And lastly, UZEDY has a positive impact on patients' relapses and symptoms. The Phase III study conducted by Teva provided data that demonstrated other differentiating features from existing formulations of long-acting injectable risperidone, such as continued and statistically significant improvement in both relapse rate and schizophrenia symptom score beyond the 6-month primary endpoint in double-blind, randomized controlled analysis. There was also a statistically significant improvement in the schizophrenia, quality of life scale, which is of high value to people with schizophrenia, hoping to resume their normal daily activities.

Thank you. Thank you, Richard. Jaime, I come to you now. So the commercialization is going to start now in the U.S. Can you give us some details about the targeted market?

Yes, absolutely, David. Hello, everyone. So these market long-acting injectables, schizophrenia, it's a $4.4 billion market in the U.S. Back in 2022, it's a market that is growing double digit 12% on average during the past 5 years. So it's growing very, very rapidly. And furthermore, Richard Francis, Teva's CEO, he mentioned during the investor call last February that he targets this product to reach a 20% market share over time. What that means is that -- if I take those numbers is that with a very high market, strong market, over $4 billion, growing very rapidly. 20% market share, that means that we see this product as being a potential blockbuster, blockbuster meaning a product that reaches over $1 billion in sales annually.

And what does it mean in terms of revenue for MedinCell?

Right. So let me step back a little bit and just remind everybody about the deal that -- this partnership that we have with Teva. It's multiproduct. It's a platform deal that we have with them in which all the costs are covered by Teva. Teva is in charge of developing the products and ensuring the commercialization. In exchange, MedinCell, we receive -- we can receive up to $122 million in milestone payments, development and commercial plus there's going to be some royalties or percentage of sales that we will receive mid- to high single digits. Now in the short term, what it means is that with this approval, and actually we just -- we issued already the invoice to Teva of $4 million cash that we should receive in the coming weeks. And then we can wait for the commercial milestones to be reached upon the next 3 years. That is a total of $105 million. It's not immediately, but in the next coming years as Teva reaches a certain level of sales.

Okay. Sorry. And what consequences -- no, I would say what is on the cash visibility of the company to date?

Yes. Just before talking about the -- that cash visibility. So you understand the teams are ready. The sales reps are ready. Marketing is already ongoing. The market share will be gained gradually. For that, I mentioned the milestones, the commercial milestones that we will receive. But on a quarterly basis, we will start receiving royalties as percentage of sales. I mentioned mid- to high single digit. I cannot give you contractually the details, but somewhere between 5% and 9%. We take the average, then we're not going to be that far off. But what it means is that we will start then receiving these royalties as of the next quarter if -- as Teva starts the commercialization. Now in terms of cash visibility, yes, this approval confirms the cash visibility that we have been communicating constantly during the past few months, and that is that the visibility brings us at least until the end of Q1 2024. We will receive the $4 million from Teva, this milestone, plus the approval then allows us to withdraw the third tranche of the loan that we have with the European Investment Bank that we -- of EUR 10 million that we signed back in November 2022, plus there might be some other opportunities to increase the visibility as some potential licensing deals could come over. But I will let Christophe talk about that later on.

So this is a new era for MedinCell, the start of the new era. Financially speaking, what does it mean new era for MedinCell?

Yes, absolutely. It's a new era. Why is that? It's because the company changed its profile. Now we are a commercial company. We have the first product on the market. The perception of risk will be reduced. We're not only on the research and development, but now 2 products in Phase III, but now 1 product being commercialized, it's great. And in the future, the creation, the value creation will come from the different products as they advance in the pipeline. I mentioned the 2 in Phase III, but also there are some other products in the pipeline that will generate value for the company in the future.

Thank you, Jaime. We have questions for you, but I will ask you later. Christophe, before we answer the questions we received, same question, new era, what does it mean from your point of view for MedinCell?

Well, first, as I said at the beginning, our technology is going to treat its first patient on a large scale. This is our mission. The DNA of the company is to treat patients. We'll get our first commercial revenue, like Jaime explained very well. UZEDY is also a validation of the technology, the same technology that is under all our products. Everything is going to accelerate. We are ready. We have a great amazing team, a team that has shown its resilience this last few months. The team where every single person is a shareholder aligned with all our investors. And I'm waiting, of course, for the next approvals.