Nanoform Finland Oyj (4YL.F) Earnings Call Transcript & Summary

Welcome to the conference call. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead.

Good afternoon all, and a warm welcome to Nanoform's Second Quarter 2025 Report Presentation. My name is Henri von Haartman, and I'm your Director of Investor Relations. Today, our CEO, Edward Haeggstrom; CFO, Albert Haeggstrom; Chief Commercial Officer, Christian Jones; and Chief Development Officer, Peter Hanninen, will present to you. This presentation is webcasted through Investor Caller, and there is also the possibility to call in and listen by phone. The presentation slides that are shown throughout the webcast can also be found on our web page in the Investors section. After the presentation, we will hold a Q&A and it's possible to ask questions by calling in. We will today start with an introduction and then key business highlights, then financials, then commercial performance, and we will conclude with our product kernels. With these words, our CEO, Founder, Professor Edward Haeggstrom, please go ahead.

Thank you, Henri, and welcome also on my behalf. Next slide, please. And one more, please. So I think we want to start by saying that we have made much progress on multiple fronts during this Q2. Nanoform strategy basically has three boxes. We think that all pharmaceutical ingredients should be STARMAP-ped first in order to figure out which ones are suitable for our technologies. We work with customers and partners to enable novel and existing molecules to become new and improved medicines. So customers and partners take part in what we do. In parallel, we show a conservative industry, the power of nanoforming, and we do this by creating up to a dozen product kernels. These are molecules where we show that we can nanoform them, and we show that they potentially will work well in the biology where they are intended for. Next, please. Here, you can see that we work with originators, and we also work with these development and commercial partners, as I stated on the previous slide. Our first targeted drug on the market, we placed at 2027, 2028. Next, please. We have four technology platforms, one for small molecules, one for large molecules, one for nanoformulation and one based on AI. Today, we're going to talk about all four. Next, please. Our business model in a simplistic way, our partners usually own the API. We nanoform it. And basically, the way we get paid is either as a service fee, as a [ front ] manufacturing fee, as royalties. And we are going to talk about all of this also today. Next, please. Let me spend a little bit time on this slide. So here, we can see six parts. The first is about nanoenzalutamide. We have now, for the second time, put nanoenzalutamide into humans. This was on volunteers in the fasted state. It's clear that we and our partners see this as a great progress towards putting our first medicine on the market. We have seen a number -- growth in the number of signed projects and revenue, and we have been able to keep our costs in pace and even reduce them. This has improved our cash flow. Already now, customers have paid more than they did last year at this time point of the year. The discussions and work around our product kernels continue, both with existing and prospective partners. We have actually signed the first license and supply agreement, and this was in Germany. Fimea inspection date is set, and we are right now preparing for them to come on. This is to obtain authorization to sell medicines onto the market. For 2025, all near-term business targets are on track. Next, please. This is where I hand over to Albert with the numbers. Thank you.

Thank you, Edward. We are seeing growth in -- basically everywhere. The growth might -- of course, we would expect it or hope for it to be even faster. But despite the tough situation in the CDMO market and generally among many pharma companies, we are clearly seeing growth and the growing interest in our technology. So if you look to the left, you can see that here, you have since we IPO-ed the first half of the year and numbers of proposals sent. We don't send the proposals where we don't believe in a high probability of success, and they have grown again this year up to 45. On the right-hand side, you can see the rolling 12 months signed projects, number of projects. And also here, you can see that we have reached a new high, more than 30 projects signed in the last 12 months. If you look at the revenues, they have also grown 23% in the first half compared to last year. And we also see growth in the other income. Other income can be -- includes also milestone payments from clients. They are, however, not booked as -- in full amount when they are received, but they will be booked over the coming quarters. And that's why also the cash flow is actually better than indicated by the P&L. But also here, we see growth. And this is one slide I would like to talk a little bit more about related to what I just said. So previous years and previous year, you can see to the left, the customer payments and the revenue have gone quite hand-in-hand. So last year, we received EUR 2.7 million from clients and the revenues booked were EUR 2.8 million; however, this year, we see clearly faster pace in the payments from clients, while the revenue will come with a lag. There are many reasons for that. But one is, of course, that you get some payments upfront. If you sign a lot of projects, you get more payments. But also, as I said, so if we get milestone payments and so forth, then we get more money from the clients without recognizing it immediately. For us, it's -- and for me as a CFO, it's very important that we focus on cash flow. And therefore, I'm happy to see that the payments grow faster than the revenue. The revenues will follow. And here, you can see the cash burn to the left. We have continued to make progress, there have been improvements. We have been able to lower the costs a little bit, and we have been able to increase the income, both from clients, but also, of course, we have got some money from Business Finland. And that means that all in all, our annualized cash burn was now below EUR 15 million, if you take it from the last quarter when it was EUR 3.7 million. And that means that we still continue to have a runway of more than 2 years. We had EUR 33 million in cash at the end of the quarter. This is a slide we showed for the first time in the first quarter report, the update on dealmaking around our product kernels. Nanoenzalutamide, the new thing here is, as Edward mentioned, the license and supply agreement signed for Germany. The other discussions are continuing. We have not made any changes to the financial potential we projected for the project. So it's unchanged. Then we have nanoencorafenib. The discussions are continuing there, and we expect to see the signatures in the near future. And then we have nanoapalutamide where the term sheet negotiations on all three areas continue. And then my final slide, near-term business targets for '25. They are all on track. We will -- we expect to sign several license, supply agreements on several product kernels during '25. The first one is already signed. We are now starting to get results from the pivotal bioequivalence clinical study. We are -- we have had a good start to the year with 13 new projects signed in the first half, which was much more than last year. And we see the cash flow continues to improve during this year versus last year. And with that, I hand over to Christian on commercial.

Thank you, Albert. Very happy to discuss today our commercial progress for the first half of the year. We've seen a significant growth in customers and projects in what is a very tough CDMO environment currently in the pharma market. We've had 6 new customers and 13 new projects in H1. I would add to this that whilst our small molecule business has grown, we've also seen a significant interest from major pharma and midsized to small biotechs in our biologics platform. This has been spurred by many different reasons. One is because one of our major pharma partners, Takeda, has presented on our technology a couple of times now last year in Berlin in the DDF conference, and that was on the high concentration monoclonal antibody subcu injections that we're able to achieve. And then this year also at the same conference, but on inhalation. And I'll talk about that a little bit more as we go to the next slide. So we've also had great progress on our nanotrastuzumab single subcu injection data that was presented again at DDF in Berlin. And -- as Edward and Albert alluded to, we've had progress made on our deal signings for nanoenzalutamide with the first LSA signed in Germany and multiple term sheets agreed and multiple term sheets in negotiation. Nanoencorafenib and Nanoapalutamide progressing very well, too. Adding to this, I would also say that we've expanded our customer base by exploring Asia and by working with an excellent partner, CBC. And that relationship started at the end of last year. And we've now been able to bring on several projects already signed from Japan. And given the market and considerations as we are currently, having a diversity in our geographical customer base is a smart thing to do. I'll just talk about Takeda and the relationship that we have. We first announced the partnership in June 2024, and that was when Takeda presented on high concentration subcu delivery of their plasma-derived therapy, being able to achieve concentrations as much as 400 milligrams per milliliter with acceptable injection force and viscosity and being able to keep the materials stable, which is something that's very difficult to do with dry particles. And then in August of the same year, we had -- we actually announced a collaboration, a formal collaboration on their plasma-derived therapies. And in June of this year, we were able to come out again and talk about Takeda wanting to present at the Drug Delivery and Formulation Summit in Berlin on respiratory delivery of the A1AT protein. This is the alpha-1 antitrypsin protein that's part of the plasma within the human blood serum and by being able to deliver this to the lungs. Now current technologies such as spray drying, only 50% fine particle fraction was being able to be delivered into the lungs of the drug that's emitted from the inhaler, only 50%. With our technology, we enabled 95% lung delivery. Now additional to this and quite a critical takeaway from this data is the ability to have local effectiveness of the protein in the lungs. If a patient was to receive this therapy as they do now, they have regular IV infusions. Most of that material is systemically absorbed and the exposure is systemic and not local and only a very, very small percentage actually gets to the lung. By delivering the active to the lungs, 95% of the drug delivered to the lungs was actually had exposure in the lung and only 5% went systemically. So this is a really significant value driver for treatment of this therapy. And what does that mean? It means that you're able to use less drug to deliver the dose to a patient. It means that patients don't have to go into hospital for IV infusions. They can have respiratory delivery. And ultimately, it means improved patient convenience, probably efficacy and also better outcomes and a premium product for the plasma-derived therapy space. So building on that, Takeda in September and October of this year will be presenting at the DDF USA conference and also at the PODD conference in Boston towards the end of October, where I will be doing a joint presentation with Takeda on both the high concentration subcu delivery and also the respiratory delivery. So having customers talk about you is great. To be honest, it's one of the best things that you can ask for in this space. And it's also great when customers come and visit us. And as you can see here, this is just a few snapshots, not all of the customers that we've had on site in the first half of this year. We've had European partners. We've had Japanese partners. We've had South Korean partners visit us, and we've also had partners from the U.S. visit us. And as you can see, bottom right, we've also had Jefferies from New York and Stockholm visiting us. Top right is Dr. Andreas Liebminger from Takeda presenting on Nanoform and the value it can deliver. And in the center is myself and my U.S. team presenting at DCAT in New York in March. It's been a very active first half to the year, and the second half will be just as active as we move into what is commonly the conference season. Now I'll hand over to Peter to talk a little bit more about the products that we have in development.

Thank you, Christian, and welcome to all on the call on my behalf as well. So to start first on the strategy around our product kernels. In order for us to further accelerate the adoption of our technology offering by the industry, we've initiated internally the development of a number of nanoparticle-enabled reformulations. And this is to show in practice to the industry what our technology can enable for their products across a range of delivery routes and for both small and large molecules alike. Each of these have also the possibility to become a commercially attractive partnering opportunity for us in their own right. We are very, very pleased with the progress of our projects across the board. And in particular, with the recent update from our partners in the OnConcept Consortium on the results from the fasted arm of the clinical study of nanoenzalutamide, we're taking clear steps towards having Nanoform products reach patients. These preliminary results indicate that nanoenzalutamide in fasted study subjects showed matching plasma concentration in terms of the area under the curve compared to the reference product and slightly low peak plasma concentration. Nanoform and OnConcept Consortium's initial assessment is that these results are supportive for Nanoenzalutamide to progress to the market. While the clinical study will progress towards the fed arm of the study, we'll, of course, continue assessing the results together with the consortium, our commercialization partners and the relevant authorities. I think importantly, for Nanoform, these new clinical results strengthen our understanding of how the nanoforming technology performs in human biology and its potential to deliver patient-centric therapies. The indication from the study that by using nanoforming, it's possible to reduce high initial plasma concentrations while still achieving similar bioavailability as amorphous solid dispersion is noteworthy as it can be a benefit for many products in development. We also continue to progress well with our Nanoapalutamide project towards GMP and the first human study as well as in parallel with a number of the partnering discussions. This work was accelerated by the positive decision from Business Finland to support the project with a significant R&D loan. This EUR 5 million loan covers up to 50% of the cost associated with the clinical development program through to the pivotal bioequivalency study. As a reminder, amorphous solid dispersions or ASDs, as they are commonly known, is really the technology that has enabled a past generation of poly soluble drugs. ASD-based medicines is a group of approximately 50 products on the market, selling for an estimated $50 billion annually and with hundreds of products estimated to be in development currently. One of the drawbacks with ASDs is the low drug load, which leads to a high pill burden. And this is an area we can effectively address with our nanocrystalline formulations as shown on this slide. We remain very excited about our offering for biologics and as my colleagues on the call have said, the substantial interest this gets from our customers. Subcutaneous delivery provides evident benefits for patients and health care systems, but has been a difficult thing to enable for biologics. We are now one of the few companies and technologies in the world that can enable this for higher dose biological products through high concentration suspensions. In June, as Christian told, our colleagues showcased at the DDF Summit, in Berlin, our recent data on nanotrastuzumab, a high concentration formulation of Trastuzumab. The presentation was very well received, and we showed that nanoforming enables concentrations at more than 500 milligrams per milliliter with acceptable injection forces using a standard syringe. This enables hyaluronidase-free subcutaneous delivery in a single 2-milliliter syringe. And now I will turn back over to Henri.

Thank you, Peter. On Slide 24, you can see where we are meeting the pharma industry and the investor community. Here's a selection of events. If you are at any of these and want to meet us, just to let us know. I will start the Q&A session now.

[Operator Instructions] The next question comes from Christopher from SEB.

Christopher Uhde at SEB. I think I'd like to start on Nanoenzalutamide. I guess it's formally possible that the peak -- the lower peak could be pharmacodynamically important. So with the lower Cmax, might you need a non-inferiority efficacy trial to secure approval? That's my first question.

Christopher, thanks for your question. And the short answer is might, yes. Peter, do you want to give some more flavor?

Yes. Thanks. Happy to provide some thoughts on that. I think that would be highly, highly unlikely in this case. However, due to the fact that the therapeutic window for the concentration for the specific product is so much higher than the Cmax on the single dose and also due to the fact that, as I said, we were showed matching area under the curve as the ASD-based formulation. So I think even though we mentioned that there might be a sort of tweaking of the regulatory strategy, I think there is no expectation that there would be that type of a drastic change to what the clinical program would look like. And at least in the discussions with our partners, that's not something that anyone has seemed to be a sort of a relevant sort of concern, if you will put it like that.

Great. Very helpful. And then secondly, I guess there are 2 ways to ask this, and I'll ask it in the simple way first. So if you were to do it again, would it be possible to -- or let's say, easily -- easy enough to redesign the formulation using just the tools that you did to avoid that lower Cmax? And I guess the more important question behind it is when plotting your strategy for the other kernels, how do the data play into your formulation design or trial design considerations?

Christopher, thank you very much. This is, of course, an important one. And to me, it's clear that we have in our nanoformulation toolbox the tools necessary to improve even further. It's also clear that within our partners, there are people with deep understanding of these assets. And of course, that could also be very helpful in a redo, if you want. It is also clear that we have done three human studies so far, one on piroxicam and two on Nanoenzalutamide. And for each of these studies, especially on the nanoformulation domain, we'll learn more and more about how our technologies work in human biology. So the short answer to your question is, if we were to redo it, there is a certain probability that we could get improved results. Then the question is what does improved actually mean? To me, improved means we need to get this to the market and what we have is already good enough for that. Peter, do you want to put something extra on this?

No, I think that summarizes it well. And I think for us, the key takeaway here is that our partners in the consortium who are very experienced, we're happy with the results. And I think we should be happy for that reason as well and see a clear path sort of forward for the product.

Okay. Great. Then just on, I guess, the financials. So gross margin, 98% looks pretty darn good for, I think, any company. Is this what we should be expecting from now on?

Albert, please.

Yes. So you remember that we reached the 90% target already a few years back, but then because we had to do a lot of the GMP-related QC work outside our company before we got the license from Fimea. And therefore, the gross margin fell. But now we had -- and then we had the GMP campaign, meaning that we were still sort of using partially internal and partially external resources. But this was the first quarter where we had sort of nothing distorting it. But I would say that 98% is perhaps a little bit higher than what we are believing is sustainable, but we have the target of being above 90%. And of course, we are happy with 98%, but above 90% is what we are sort of targeting.

Okay. Great. And then I guess some -- well, when you did the IPO, you had some long-term targets. Those were 2025. And I guess, are we -- are you going to release some long-term targets again at some point in the near future? And I guess, if so, what might those look like? Or how would you think about what the target?

We like to be in our targets, and we are going to continue to be so. Albert, do you want to put some flavor to how and when?

Yes. What we have said is that we are planning to hold a CMD during this year -- Capital Markets Day during this year, and then we would release the targets for 2030 during that CMD. That's still the case.

Okay. And I mean, would it be likely -- I mean, financial targets or operational kind of KPI type targets?

Albert?

I think you could assume that it would be both because as we have said that we are now getting more and more info related to product kernels and launches. And also, we are seeing more and we understand much more than 5 years ago. And it's natural then that we can start to have financial targets as well.

The next question comes from Christian Glennie from Stifel.

I guess a follow-up on the pivotal study data or the first arm so far. I don't know how hot off the press that data is, but maybe any insights you can share in terms of how that's been received? You talked about, obviously, the consortium being happy. But in terms of the partnerships, obviously, those ones that are under discussion and/or even the one that -- the Germany partner that you have, what's the sort of feedback to that data, if possible?

So here, I want to go a little bit careful as a trained scientist. These are preliminary readouts, so we want to be a little bit careful to speak more when we have the final and stamp readouts. It is clear that people read our PRs. And at least my understanding is that we have gotten positive comments of the ones that have reached out to us. Peter, do you have anything else on this?

Yes. So these are quite hot off the press, so to say. So I would put it like this that we have not heard anything negative at least from our partners. Maybe as a sort of finish understatement.

Okay. And then in terms of the -- so the proposals sent out a step-up there in the first half. Any a bit more insight if we can around maybe the mix of those proposals, whether it's sort of -- is there a significant proportion around biologics? And also, presumably, this is -- these are people who requested your proposals. So that shows an encouraging trend maybe versus what you're saying more generally about sort of tough CDMO and/or funding environment and therefore, demand for CDMO services. So just a little bit more about sort of mix in that and then also what it says about demand.