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

Hello, everyone. Thank you for joining MedinCell's Annual Results Call for the fiscal year ended March 31, 2026. Our press release and presentation are available on our website. Before we start, I invite you to refer to Slide 2 for important information regarding forward-looking statements. Joining me today are Christophe Douat, our CEO. Hi, Christophe.

Hello, everyone.

And Stephane Postic, our CFO. Hi, Stephane.

Hello, everyone.

And with that, I can now leave the floor to you, Christophe, to start the presentation. Christophe?

Thank you, David. Let me start with MedinCell's trajectory. Our shift to growth strategy is built around 3 engines of growth, all powered by MedinCell's innovation. The first is risperidone LAI with UZEDY successfully marketed in the U.S. since 2023 by our partner, Teva. The second is olanzapine LAI and the third is AbbVie #1 together with our broader pipeline and innovation platform. What is important here is that these are not isolated assets. There are 3 complementary engines supporting both near-term execution and long-term value creation. As you may recall, 1 year ago, when I introduced our shift to growth strategy, I said that the coming 2 years would be the most transformative in MedinCell's history. One year later, I can confirm that we are exactly in the middle of that transformation. In fiscal year '25, '26, we delivered strong execution across all our growth engines. We saw continued ramp-up of UZEDY, which is driving royalty growth. Olanzapine LAI progressed toward its expected U.S. launch in the fourth quarter of 2026. And on the third engine, we advanced our first IV program towards the clinic while continuing to expand our pipeline and further strengthen our innovation platform. So this was a year of broad execution, not just progress on 1 product but progress across the company. Starting with UZEDY, momentum continued to build during the year. Net sales by Teva reached $215 million compared with $141 million in the prior fiscal year, while royalties increased to $10.9 million from $7.1 million. At the same time, prescriptions in the U.S. continued to trend upward and the product benefited from an FDA label expansion into bipolar 1 disorder for the 1-month formulation in October 2025. So the key message is simple. UZEDY is gaining traction, and that traction is translating into growing revenues for MedinCell. Beyond the pure numbers, UZEDY provides an important proof point for our business model. It combines innovation for MedinCell, enabling differentiated products with strong commercial execution from our partner. These differentiating features such as ease of use, flexible dosing, rapid onset are directly driven by our technology. At the same time, our partner demonstrates strong commercial execution. Teva's initial 2026 guidance is $250 million to $280 million with $63 million already delivered in the first quarter of the year. So what UZEDY shows is that differentiated long-acting products, combined with strong commercial execution can deliver meaningful market adoption. And this gives us confidence as we prepare for the upcoming olanzapine LAI launch, which is built on the same combination, innovation and execution. Turning now to olanzapine LAI. The regulatory path is clearly defined. In the U.S., the new drug application was submitted in December 2025 and accepted by the FDA in February 2026. In Europe, the market authorization application was -- sorry, has been submitted this year. We are expecting U.S. launch in the fourth quarter of 2026, subject, of course, to regulatory approval. So we are now entering the final phase before what could be a major inflection point for the company. The opportunity of olanzapine LAI is driven by a clear unmet medical need. Olanzapine is one of the most widely used oral antipsychotics, both in the U.S. and in Europe. It is often prescribed for the most severe and refractory patients, typically, those who would benefit the most from a long-acting treatment option. And yet today, there is no practical LAI options available. Let me show you this slide again. On the left, you have Johnson & Johnson; Risperidone on the right, Eli Lilly and olanzapine, both follow the same life cycle strategy with LAIs. Johnson & Johnson was highly successful, building a $4.8 billion franchise, Eli Lilly failed commercially. UZEDY is targeting Johnson & Johnson's franchise. But look on the right, there is no large multibillion green box. Eli Lilly failed commercially. FDA imposed a 3-hour wait after injection. And MedinCell give Teva the keys to grab this potential. This is where differentiation becomes critical. Existing olanzapine LAIs are constrained by PDSS-related monitoring requirements. PDSS is an overdose like reaction that can happen at each administration if the injection is made into the vein by mistake. With MedinCell's subcu formulation, more than 4,000 injections have been performed across clinical studies with no PDSS observed. This is supported by in vitro data showing a controlled release profile even in plasma, in contrast to the rapid release observed with intramuscular existing formulations. Plus, there is only 10- to 20-micron wide blood vessels in the subcu space when they can reach 1 to 2 centimeters in the muscle. This could significantly expand the use of olanzapine in long-acting injectable form. Beyond UZEDY and olanzapine, we are building our third growth engine. This includes developing a portfolio of long-acting injectables, mainly with blockbuster potential. We are continuing to expand our technology platform and leveraging partnerships to scale development and commercialization. So we are not just building around 2 products, we are building a broader engine for sustainable growth. And this third engine is already supported by concrete progress. With AbbVie, our first program is progressing toward clinical development with CMC work expected to complete this year, supporting a clinical start in 2027 by our partner. For mdc-CWM in post-TKR pain, Phase III preparation is ongoing with initiation still expected in 2026. More broadly, we now have 15 active programs at formulation stage across internal and partnered assets with increasingly focused on high-value indications. So this is a pipeline that is both broad and actively advancing. Underlying all this is the continued expansion of our innovation platform. As highlighted during our recent R&D Day, our capabilities now extend across a broader range of molecules from small molecules to increasingly complex peptides. This expansion enables us to address more opportunities and support the growth of our pipeline and future partnerships. So overall, we have strong execution on UZEDY, a clear path toward olanzapine launch and the growing third engine driven by our pipeline and platform. With that, let me now turn to the financials, Stephane.

Thank you, Christophe. So as already mentioned by Christophe, we are really entering into a new era, and that's specifically true in terms of business model as we are now scaling a portfolio of innovative products generating royalties. Let me highlight 3 key messages here that illustrate this change. First, we are generating strong and regular revenues, which includes a massive growth in UZEDY royalties. This will continue to drive the expansion of our recurring revenue base and to support our path to operating profitability. Second, we see a strategic voluntary increase in the operating expenses to support future growth and value creation. And third, we have a much stronger balance sheet with EUR 85 million of cash available that provides clear long-term financial visibility. Now starting with UZEDY. We all see that [indiscernible] UZEDY strengths are really exciting. We continue to see the strong commercial momentum reflected in sustained growth in net sales reported by Teva. They reach $250 million during our fiscal year from April 1, '25 to March 31, '26. This translated into a very significant increase in royalties up 54% in U.S. dollars and slightly lower once converted in euros, but still a very nice increase of 42%, reaching EUR 9.3 million. I'd like also to remind everyone that we really see a regular acceleration in UZEDY sales. Q1 '26 net sales reached $63 million, up 62% compared to last year. Q1 '26 was the strongest quarter ever for UZEDY, confirming strong underlying demand and continued adoption by doctors and patients. Ahead of olanzapine launch, UZEDY remains the short-term key driver of our expanding royalty base. Now moving to the revenue dynamics. Total income for the period was EUR 24.3 million, slightly lower compared to the EUR 27.7 million posted last year. Why that? There is some variability coming mainly from the milestone payments. In fiscal year '25, '26, we did not get any milestones versus a EUR 4.8 million milestone linked to olanzapine Phase III result the year before. Milestones are triggered by one-off events, and they happen in certain [indiscernible] years, not in others. Of course, they are valuable when they occur, but they are not the best way to read the underlying trajectory of the business. What is most important and relevant is illustrated on this slide. We are clearly switching into a more royalty-driven revenue model. Royalty income continues to increase as a share of the total revenue, reaching 38% this year versus 22% last year. When excluding the milestone effect, the underlying revenue increased from EUR 22.9 million to EUR 24.3 million, reflecting the continued progress in our core business. Even more striking when you look back at the revenue evolution over a longer period, you can clearly see that our revenues, excluding milestones have been multiplied by 3 over the last 2 years. Now a couple of additional words on the revenue -- of the revenue items. So AbbVie collaboration is progressing well and as planned. As Christophe said, we are now getting closer to the IND. And the revenue recognition, which is based on the received upfront reflects the activities performed during the fiscal year and represented EUR 6.4 million last year. Among the R&D partnerships. You find also the early-stage collaboration revenues. They nearly doubled last year to EUR 1.6 million, and they cover 8 partner-funded programs. That's very promising because it means as many potential future opportunities for licensing deals with pharma or large biotech companies. And finally, one comment on the research tax credit contribution, which has also doubled year-on-year. This is actually a nice transition to the next slide and the continued R&D effort that I will comment on in a minute. Moving to the operating expenses that have increased to EUR 45 million compared to EUR 38.5 million last year. This reflects a deliberate and disciplined increase in the expenses to support our future growth. So we'll start with R&D. First, a comment on R&D instead of talking of operating expenses, I would rather call them investment because a big portion of them is there to create value in the long term. R&D remains the largest component of our expenses, representing around 60% of the total. We shared more information on our innovation strategy during the recent R&D Day. Accelerating innovation is at the heart of MedinCell strategy. We have 2 core priorities in terms of R&D, the product pipeline and the technological platforms behind them, advancing our pipeline to generate high-value data is really key to our business model. It enables us to engage with partners under attractive economic condition. We currently have 15th program in formulation, 7 internal, 8 already partner funded. For all of them, the aim is to generate high-value data to support future licensing discussion, like we did in the past with AbbVie where we started to work on one of their assets before the deal execution. And secondly, we are continuing investing to strengthen our technology platform to BEPO, BEPO Star and other future generation. And this is mandatory if we want to expand our capabilities to formulate more and more molecules. Beyond the R&D, business development expenses have also increased. It's reflecting our willingness to intensify partnership activity and to expand globally. And finally, G&A are increasing to support the scaling of the company, mainly with personnel-related costs and also expenses relating to IT and cybersecurity infrastructure. On the next slide, you have the income statement. So MedinCell is really today at an inflection point. Christophe has been telling our investors repeatedly that the current years are the most transformative ones, and they are. We anticipated that fiscal year '25, '26 would be a transition year from a financial perspective because of the absence of any milestone and some variability in the R&D revenues. We end up with an operating loss, representing EUR 20.8 million. Below this line, the financial result is a loss of EUR 10.6 million, including a EUR 5.4 million of noncash impact related to the EIB warrant revaluation. You know that we have successfully negotiated with the EIB waiver on the put option in March '26. So this cash -- noncash impact should disappear in September '26 once we get the final approval at the general meeting on the revised terms for these warrants. And this will definitely ease the reading of our accounts when it will be done. Total annual net loss was EUR 31.3 million. And again, as a conclusion, I'd like to say that this loss reflects a deliberate acceleration. We are building scientific, technological and partnership assets that will drive future revenue growth and value creation. Next slide is on the balance sheet, and I guess it speaks by itself. We continue strengthening our balance sheet to support our growth strategy. We ended the period with EUR 80.8 million in cash and financial deposits and more than that, our cash position net of debt is also positive for the second year in a row at EUR 15.3 million. This really highlights that we are gaining the financial flexibility needed to support our growth strategy. Now let me conclude with the growth outlook for the next years. So we are really building a clear multi-engine model. First, UZEDY is already generating and scaling royalties. The current sales expectation for '26 are close to $300 million. If you compare the sales figure to other existing products on the market, UZEDY is already on track to become a blockbuster by the beginning of the 2030s meaning tens of millions in royalties for MedinCell by then. Second, olanzapine LAI should be approved in the coming months in the U.S. and then in the EU. This will trigger nice milestone payments and even more important, first royalties are expected as early as Q4 '26. Given the strong expected demand and the current competitive landscape, we anticipate that revenues could become meaningful from the second half of '27 with a faster ramp than for UZEDY. And third, we are building a broader pipeline and more partnerships, including AbbVie and others. So all exciting things ahead and that's it for me. So Christophe, back to you for a word of conclusion.

Thank you, Stephane. To conclude, I will repeat what I said earlier. One year ago, when I introduced our shift to growth strategy, I said that the coming 2 years will be the most transformative of MedinCell's history. One year later, I confirm that we are exactly in the middle of that transformation. Thank you.

Thank you, Christophe, and thank you, Stephane. We can now open the call for questions. And with the first question, coming from Ram Selvaraju of Wainwright.

I cannot hear you. But I wanted to ask 3 quick questions. Firstly, I wanted to know if it would be possible for you to comment on the guidance that Teva has historically been providing regarding UZEDY, which clearly appears very conservative. And if you expect this pattern to continue, not just with UZEDY in the future, but also once olanzapine LAI arrives on the market. And also, if you could give us any granularity regarding how rapidly you expect Teva to be able to make olanzapine LAI available in the United States? Secondly, I was wondering if you could clarify business development expenses delineated in one of the slides that Stephane showed, what do these consist of precisely? And then lastly, I was wondering if you could comment on the level of exposure to foreign exchange fluctuations and the degree to which you might be able to hedge against these in the future, especially given the possibility of future depreciation and the value of the U.S. dollar versus the euro and/or if there are any specific provisions made in the agreement between MedinCell and Teva to take account of this potential eventuality?

So maybe I'll answer the first two questions. And then Stephane, you can answer the others. So it is Teva's policy to be very conservative on guidances. The first year of UZEDY, the initial guidance was $80 million. They ended up at $120 million. On year 2, it was initial guidance of $160 million and ended up at $191 million. So we expect them to keep being conservative. That's Richard Francis strategy. On the next question, when do we expect olanzapine LAI to be available? Teva said clearly that they would launch right away upon approval.

Right. And to answer your question on the BD expenses, they cover personnel costs for our business development and market insight people. So we've built up a very nice team. And as I say, the will of the company is to expand globally. So we have now people all around the world looking for additional partnerships and opportunities. And on the second question regarding the exposure to USD fluctuation. It's only versus USD that we have a small difficulty. No other currency at the moment. So indeed, all the royalties are labeled in USD. The best way to hedge against that is to repay as much as we can in USD. So I'm trying now to sign agreement with suppliers that are also issued in USD. Apart from that, it's a bit difficult because indeed, a good portion of our expenses are in euro.

Next question comes from Shan Hama of Jefferies.

I've got three, if I may. So firstly, I know in the release, it states that for the AbbVie first candidate, the initiation of clinical development will be in 2027. So to be clear, we'll know the candidate in 2027, not in 2026. And then secondly, I saw a bit on the potential delayed initiation of the 6-month contraceptive program due to change in the regulatory pathway. Could you expand on what those changes are, please? And then finally, of course, it's very sad to hear that Richard has retired. Obviously, we wish him the best. Obviously, he was very valuable to the company in his role, given he's previously been at Teva within the psychiatry team. So just wondering what sort of candidates are you looking for? And are you looking internally and externally?

Thanks, Shan. So yes, the AbbVie #1 program should start clinical in '27, and we expect AbbVie to disclose the name of the underlying drug at that time. So as we said, there is a change in the expected regulatory path for WWM. And we do not comment on that. On the third point, as you noticed, Richard, which has been my [ companion on the road ], as I say, in France for many years is retiring, but still consulting for us, especially in the psychiatry field. And we are getting very close to get a new CMO on board which is -- actually, it should be a woman who will be adding a lot of value to MedinCell with all the core competencies that we need in -- especially in preclinical and opportunity in notification.

Next question comes from Michael DiFiore of Evercore.

Congrats on the continued progress. Two questions for me. Number one, you've spoken about becoming more selective and generating more data internally before partnering. So today, is the challenge primarily finding technically feasible opportunities or finding opportunities that are large enough to justify the level of investment and economics you are now targeting? That's question number one. Number two is that at the R&D Day, you showed progress with larger peptides, GLP-1 type molecules and highly soluble compounds. So as you look at the platform today, what remains the biggest technical challenge you're still trying to solve and what would solving it unlock in terms of new partnership opportunities or addressable markets?

Thanks a lot, Mike. So on the first question, yes, so about half of our formulation early-stage pipeline is made out by internal programs that we have identified like with AbbVie #1. We look at the pipelines of big pharma, large biotechs. And then we evaluate the potential as LAI and look at technical feasibility on a paper based. And if we think it's positive, as we explained during the R&D Day, then we move into early formulation and with the objective to trigger licensing. And some of those programs are quite exciting and have significant potential as long-acting injectables. So on the second question, the biggest challenge in the formulation. So I should remind that BEPO and BEPO Star are -- their sweet spot is small hydrophilic molecules and we definitely have the best technology in the world for those molecules, which are mostly -- all of the molecules in psychiatry are small hydrophobic molecules. And we are making some very nice inroads into more hydrophilic molecules and the large hydrophilic is definitely 1 objective that we have, obviously, GLP-1s fall into that category. And the second direction in which we want to expand our technology is higher doses. When you inject a depot under the skin, you are limited by the volume. Usually, we inject at most 1.5 ml. And then you have to take out the volume by the pharmaceutical solvent, the polymers and so what is left is the volume for the API. And so in some cases, we are limited by the dose as well. So as we said, there is innovation in the lab ongoing, as I speak, innovation, which is, I think, generating the most excitement I've seen at MedinCell in the last 15 years. So there's things we need to confirm in the next few months, but we definitely will use that as the next generation. We just need to define the scope -- confirm the scope.

Next question comes from Marc Goodman of Leerink.

So with olanzapine LAI coming into the franchise alongside UZEDY, can you help us think about how you'd segment the 2 products commercially. Specifically, what patient profile do you expect new to LAI patients to opt for an olanzapine LAI versus risperidone-based like UZEDY and then to what degree do you expect switches from UZEDY to olanzapine LAI? And then secondly, on the AbbVie collaboration, should we think about the 2027 clinical start as a single lead candidate moving forward first and then the rest of the collaboration programs progressing stepwise behind it or multiple candidates moving forward in parallel today.

Yes. The first question is a very good question. Both compounds, risperidone and olanzapine are not in competition. They are complementary. Risperidone is a standard treatment in first intention. Olanzapine is for the most severe and refractory patients and there is no overlap or very little overlap between both, which made Teva say that with both products, they could cover 80% of patients. On the second question, so AbbVie #1 should start its Phase I in 2027. As a reminder, the agreement with AbbVie allows AbbVie to do 5 more programs with the same financial metrics. But I cannot comment on the status of discussions with AbbVie on the other programs.

And next question is Nicolas Pauillac of Kepler Cheuvreux.

Maybe just three questions from my end, too. Just first to come back on a previous question about the kind of gap there is between Teva's guidance on the potential of the 2 drugs? And what you kind of imply like the blockbuster potential for it, UZEDY for instance, when you look at the consensus on Teva today, I think it's sitting around [ 506 million ] of sales for UZEDY. So what is making you so much more confident that you can almost double what the market is seeking today in terms of sales for this asset? And also for the world franchise, I think Teva has been pretty vocal about this EUR 1.5 billion to EUR 2 billion cumulated sales on that. So just trying to understand why -- what is making you so much more confident than what Teva has guided for in the past and has kind of consistently guided for. So that's my first question, just to come back on what was asked before. And then just much more easier question, let's say, on the OpEx, any guidance on how things evolve into next year? And then kind of linked to this AbbVie disclosure, when we think about modeling, should we put some upfront into this fiscal year, so '26, '27 or will it be rather, let's say, smarter to put it next year? That would be the three.

Okay. Thanks a lot, Nicolas. So on the first question on UZEDY. So as I said earlier, Teva's strategy and its CEO, in particular, is to always underestimate guidances to always provide good news to the markets. What we know now after 3 years of commercialization, as Stephane said earlier today, is that it follows the same curve as some LAI in psychiatry, which have reached the $1 billion mark. And the third point I would say is, I think UZEDY was underestimated by analysts, by Teva's analysts at first because it was one product among many others. At Teva, UZEDY has Johnson & Johnson across the street with all its power. And not many analysts try to understand the differentiation of UZEDY, which is an amazing product, the ideal LAI, it ticks all the boxes and the -- its profile, combined with Teva's execution, is showing that it can take a dent from the $3.5 million out of the $4.8 million from the U.S. part of the Johnson & Johnson franchise. So there is room to go. Olanzapine, similar scheme, although in olanzapine, I think, was better understood by analysts because here there is no competition. It's an open road in front of olanzapine. We think that those guidances will be updated as the ramp-up goes. The initial guidance of UZEDY was extremely low at first. Here, we have a product that has no competition with the most used oral antipsychotic as the underlying drug and -- for patients that are the most severe that need the long-acting injectable the most. Here, we also have a benchmark. We know that Johnson & Johnson is doing EUR 4.8 billion with risperidone LAIs. We know, as we said earlier, that olanzapine is used more than risperidone. So in theory, of course, in theory, Teva could exceed what Johnson & Johnson is doing today on risperidone. So time will tell. It will depend on execution. But we know that Teva has done great execution on UZEDY in the U.S. that they are getting aggressively worldwide, fighting into Europe and conducting some trials in China as well.

So right. The second question you had, Nicolas, was on the OpEx for next year. So I'm not going to comment or give any figure for next year. But what I can say is that everyone has to bear in mind that 2 things that first, a good portion of our R&D expenses are covered by our partners. So we have many collaborations with AbbVie, with the Gates and with also some undisclosed partners for now that cover the R&D fees. And the second thing I'd like to reemphasize on is the fact that we have clearly this willingness to build this portfolio of programs. It is the way that we are going to create value on the long term. So definitely, the OpEx will reflect this strategy of going to the next stage. And lastly, you had a question on AbbVie and if we should expect another upfront for the coming year or when it should come. So I'll just state again what Christophe said a couple of minutes ago, we cannot comment on the next AbbVie program.

Thank you, Stephane. So this concludes the Q&A session. Christophe, last word?

Yes. We are really excited at MedinCell. We're in the middle of what should be the most transformative years of MedinCell's history. UZEDY is growing significantly. Olanzapine is about to be approved. The countdown has started. It's a matter of months. And the cell engine is accelerating both on its pipeline and the technology progress. So very, very, very exciting times for us at MedinCell.

Thank you, Christophe. Thank you, Stephane, and thank you all for joining us and for your continued interest in MedinCell. So a replay will be available shortly on our website just right after this meeting, and we look forward to speaking with you again soon. Thank you. Goodbye.