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 Third Quarter 2025 Report Presentation. My name is Henri von Haartman, and I'm your Director of Investor Relations. Today, our CEO, Edward Haeggstrom; Chief Quality Officer, Johanna Kause; CFO, Albert Haeggstrom; Chief Commercial Officer, Christian Jones; and Chief Development Officer, Peter Hanninen, will present to you. This presentation is webcasted through investor call, and there is also the possibility to call in and listen by phone. The slides shown here are also to 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 a short introduction, then key business highlights, then financials, then commercial performance, and we conclude with our product kernels. With these words, our CEO, Founder, Professor Edward Haeggstrom, please go ahead.

Henri, thank you, and welcome also on my behalf. Next slide, please. So what you see here is a commercially licensed manufacturing factory. This is the big thing for today. We got a license to serve European plus other markets with a total headcount of [ 500 million ]. Next slide, please. I here want to repeat a little bit and rehearse our strategy. First of all, all active pharmaceutical ingredients should be Starmapped. This gives a way to look at where we can make a difference. We work with customers and partners to enable novel and existing molecules to become new and improved medicines. In parallel to that, we show a conservative industry, the power of nanoforming, and we do that by creating up to a dozen of product kernels. Today, we are going to talk a lot about Nanoenzalutamide, we're going to talk a lot about product kernels, and we are also going to talk a little bit about the biologic case of Elektrofi. Next slide, please. Here, basically, we work with originators, and these customers are global large pharma, midsized and specialty pharma and biotechs. Together with them, we try to bring nano improved drugs to the market. The product kernels is an API that we have nanoformed, which allows for a commercial relevant offering. Here, we work with development partners. They can be originators or they can be super generic and high-value medicine companies. Then we work with commercial partners. These can be the same as the development partners or different. And here, as soon as possible, we try to get our first nano of improved drug on the market in order to show the power of our tech platforms. Next, please. We have 4 different technology platforms; one for small molecules, one for large molecules, one for nano-formulation and then STARMAP for AI. On the small molecule side, improved bioavailability and high drug load are the things that are driving the commercial cases. On the large molecule side, it's the high drug load and long-acting delivery that are driving now the commercial cases. On the formulation side, it's clear that highly differentiated novel formulations and unique drug delivery opportunities is what drives the commercial opportunities forward. Next slide, please. Nothing has changed in our simplified value chain. We have our clients, they own the API usually. We nanoform it, and then we either get paid for showing that it can be done for making material under GMP or now together with our partners for moving the kernels forward. Next, please. This is a time line. Long time ago, we invented and discovered the CESS process. We did in 2020, the first GMP campaign for -- in a clinical setting. And now we finally obtained the authorization to sell nanoformed API onto the European market. And of course, now the target is to get as soon as possible the first nanoformed medicine onto the European market. Next, please. Here, I want to walk you through the key business highlights. The manufacturing license is apparently and clearly the most important achievement right now. It is not insignificant that Nancoencorafenib as one of the kernels has now gotten funding, and we have signed a licensing and development agreement that was signed with A.forall, which is part of Riverside and together with IMGA. This is a fund and later on, you will hear more of the details. There is also a new kernel, which is being introduced now, which is a nano-formulated combination of olaparib and temozolomide. And this here is now announced in a partnership together with Revio Therapeutics. This is a boutique player with people with a long history in the industry and with serious financial backing. We also right now are introducing the first target for the 2026 is to continue our path towards cash flow positivity. The target is a cash burn below EUR 10 million. For 2025, all our near-term targets are on track. And welcome to Helsinki on December 16 for a Capital Markets Day. And here, we will show the new 2030 midterm targets, and we will also discuss around them. Next slide, please. This is where I hand over to our quality boss, Chief Quality Officer, Johanna Kause. Please.

Thank you, Edward. Hello, everybody. I need to start this slide off by saying that for me, today is a great day, and I believe that this is a great day also for European patients and patients across the globe. We were granted the commercial GMP manufacturing license that we've been working very hard in the past years to achieve. What this means is that we are now authorized to produce and take care of the quality control for Nanoform small molecule APIs. This means that we will be able to manufacture APIs for products with a marketing authorization in Europe, focusing on Europe, but also in other geographies across the globe. So this has been a really, really big thing for us and I believe also for -- in the wider scale because it's not really every day that a new technology gets this far. The next step now that we have achieved this is that we will continue to work on the launch of the Nanoenzalutamide product. So what we've been doing in parallel with preparing for this commercial license is that we've been creating our first active substance master file. So this is a documentation that will become part of the marketing authorization application for Nanoenzalutamide. The marketing authorization application procedure will, of course, be handled or managed in collaboration with our partners in the consortium, but we are a vital part of that. And also, meanwhile, we are, of course, working towards ensuring improving security of supply throughout the whole supply chain for Nanoenzalutamide. Next slide, please. Okay. With this slide, I will hand over to our CFO, Albert Haeggstrom.

Thank you, Johanna. If we go to the -- this one, you can see here that on the left-hand side, we have really seen a jump in proposals sent during this year. And there are many reasons for that, but the main reasons are that after 4 years of really being in the doldrum of the industry, it's clear that now the investors and -- but also the generics companies are starting to move because they see that the technologies we offer can bring something really valuable to the industry. The signings are still being hampered by the fact that the funding situation for biotechs is not what it used to be, but also because of the fact that large pharma and major pharma are now focusing a lot on cost cutting and reducing their personnel rather than on the early stage of the pipeline. What is clear is that the early stage of the pipelines in the pharma industry has grown thinner and thinner during the last years because all the focus have been on late-stage assets. But we believe that, that is now starting to come to an end. It can't get any darker. So that means that we believe that this is also one of the reasons that we see that the proposal sent is going up. At some point, everybody needs to replenish their early-stage pipeline, and that's what we believe here. So we look with optimism towards next year. On the right-hand side, you can see that despite the tough market situation, we have been able to maintain a rather flattish number of projects signed during the last 4 years. And of course, proposals should be indicative of -- or a leading indicator for what's coming next year. If you look at the revenue and other operating income, you see a similar situation there. But however, here, you can already see that this year has been better. And of course, if you look at the following slide, which is the customer payments versus revenues recognized, you can even see it more clearly. So last year, they were going hand-in-hand, but now it's clear that customer payments have been growing faster than revenues recognized. And this is because when you sign an agreement, you get the upfront payment, and we have also started to get the first small milestone payments. And this then when the work is done later on, is recognized as revenue. So even if the top line hasn't shown it yet, the customer payments have been growing very nicely this year. And this is, of course, very important for cash flow. We are running the company based on cash flow and not based on revenues recognized. And this is where you can see that the quarterly cash burn trend has been -- the annualized cash burn trend has continued to go in a very good direction. And compared, for example, third quarter this year, EUR 3.9 million versus EUR 5.3 million last year. And now we've been at an annualized rate of roughly minus EUR 15 million. Now we come out with the new target for 2026, which is a cash burn of below EUR 10 million for the full year. And this can be compared with the cash we had at hand at the end of third quarter, which was almost EUR 30 million. So we feel we have a strong balance sheet, and we feel that the trend is definitely the right one. Questions related, where will this come? This will come from several different factors, improved top line customer payments, but also we can see that we had been building the factory. We have been doing the big investments. We have built done some parts the automation and all these factors will mean that we will also see a continued trend with lower costs going forward. So higher income and lower cost is a good combo to get a much better cash flow. If we then look at the near-term targets, as Edward said, they're all on track for this year. Some of them we have already achieved, and we are very happy with that. And then as I said, the first business target for '26 has been announced, and that is cash burn below EUR 10 million, and that can be compared to the EUR 30 million we have in cash at the moment. We will be coming with a few more business targets when we report the full year report. And with that, I hand over to Christian and Peter from the commercial side. Thank you.

Thank you, Albert. Let's move forward. So the highlights that I'd like to talk to you today are the commercial manufacturing license. What does that mean? It effectively means that we have a very strong trajectory to take our partners' products to the market. It provides confidence to the innovative pharma companies and biotechs that we serve that we have a clear path to market. And it also enables the product kernels that we're developing to proceed forward with the time lines that we have associated with them. Great progress so far on our product kernels, in particular, enzalutamide is moving forward with steam. We're currently in our pivotal bioequivalent study. We're very much looking forward to getting the results soon on that. We have some fantastic news on encorafenib and on a product development with Revio Therapeutics for glioblastoma. We'll talk more about that later in the following slides. We've also seen a very strong market pull for our biologics technology. It's been considerable. And I think it's partly in due because small molecules have been around for a long time. There are lots of technologies to try and address the challenges, whereas biologics is a very new area, and there are very few technologies that can really add value into the drug delivery space. Nanoform's technology is being seen as one of those that can play a key role in driving the biologics market forward. That's been complemented by the great work that we've done with Takeda and the ability for Takeda and Nanoform to co-present on our results at multiple conferences. And we've been able to cover case studies for high concentration subcutaneous injection. This is a very hot area at the moment and also the delivery of biologics to the lungs, an area where we see a lot of advantages for our technology versus other approaches. For -- up until the end of the third quarter, we had 16 customer projects. Looking at previous years, that's no mean feat in what is this year a very tough CDMO market. We have seen other peers in the CDMO space, some of the leading CDMOs in the world who have commented that they have a very dry pipeline in this space for early development assets. We've also -- not only have we been growing our customer base in Europe and the U.S., we've also expanded into Asia as well with great relationships established in both Japan and South Korea, key markets, but also key markets from an innovation perspective, and we look forward to further growing the business in that territory. I'm going to hand over to Peter to talk us through the next couple of slides.

Thank you, Christian, and welcome to all on the call on my behalf as well. I want to start again with a reminder on the strategy around our product kernels. In order for us to further accelerate the adoption of technology offering by the industry, we have initiated this internal development of a number of nanoparticle-enabled reformulations. And this is to show to the industry what our technology can enable for their products across a range of delivery routes and for both small and large molecules. And each of these also with the possibility to become a commercially attractive partnering opportunity for us in itself. And we are very pleased with how the strategy is playing out now and what we have achieved in a relatively short time period. Importantly, we've also been able to attract experienced partners to support the execution of multiple of these projects already. And the closing of the out-licensing development and commercialization agreement and an investment into Nancoencorafenib by A.forall and IMGA was a major milestone for the progression of this product kernels to the clinic. This investment is expected to be sufficient to finance the clinical development of Nancoencorafenib up until the commercialization and the future out-licensing either an attractive patient-centric lifestyle management opportunity or as a value-added generic medicine. And the company that was founded together with IMGA and A.forall, BRAFMed will pay Nanoform service fees, low single million development milestones and up to mid-single-digit tiered trial going forward as well. Nanoform's fully diluted ownership in BRAFMed is expected to be around 40% to 50%, whereas today it stands at 71%. In the quarter, we also announced another kernel, the co-development with radiotherapeutics of what we call, GLIORA, a locally administered long-acting thermo-responsive hydrogel, for the treatment of high-grade glioma. GLIORA is a nano-formulated combination of olaparib, which is currently marketed by AstraZeneca as Lynparza and temozolomide, which is currently marketed as a Temodar and was originally developed by Merck & Company. We are very happy to partner with Revio Therapeutics on this project. They're a boutique of really seasoned industry veterans with their own platform to identify repurposing opportunities and backed by strong private investors. And this provides us with a highly synergistic partner to our enabling formulation technologies. And this is what we can see already in this first example with GLIORA. This program is expected to be in the clinic by the second half of 2026. And we expect that this could be eligible for orphan designation and accelerated approval and therefore, subject to successful co-development and commercialization could be already commercially available by '29-'30 time frame. If we look at the overall pipeline of our kernels, I think we can safely say that we continue to progress this project across the board. My colleagues on the call already spoke at length on the importance of the commercial manufacturing license generally and specifically as a milestone for launching Nanoenzalutamide in the future. And I think this is really something that cannot be understated. We're also actively preparing to start manufacturing of the first GMP batches of Nanoenzalutamide, supported by the EUR 5 million R&D loan from Business Finland. And we're also seeing continued and growing interest to partner on that asset as well. We look forward to the opportunity to tell you more of the undisclosed kernels as well in the future, of course. I would say as an overall reflection, being able to attract seasoned specialist health care investors to invest in our strategy to use Nanoform's technology to develop this nanoparticle-enabled reformulation is important on many levels. It both helps validate the strategy, but it also amplifies the message around the technology and supports the commercialization of these assets. These partners will also be able to provide experience and expertise in regulatory, clinical and market access questions that will directly support the successful execution of the product. And I would say it also allows us to continue to cast a wide net and work on a broad range of APIs, delivery routes and therapy areas and underscores the broad applicability of our particle technologies. Christian, I think, already touched on the recent industry news on Halozyme's acquisition of Elektrofi. But a few words on that still from my perspective as well before I turn it over to Christian. I think subcutaneous delivery will be a big part of the future due to the obvious advantages of our IP. For higher dose products, the only meaningful technology to date for Halozyme's uronid approach, and they've been able to create a highly successful business model around that. And as you know, Nanoform has been one of the few companies globally that has pioneered the development of ultra-high concentration suspensions for subcutaneous delivery together with companies like Elektrofi. Halozyme's acquisition of Elektrofi for up to $900 million with $750 million upfront in cash is a strong endorsement for this approach generally. And we believe this will continue to be an extremely interesting space as the first products using this approach and clinic. And we're confident that our platform that was designed with scalability and robustness and patient-centric administration in mind will be highly competitive as this new market for higher subcutaneous delivery of biologics is form. And with that, I turn it over to Christian for his reflections.

Thank you, Peter. I think just to add to that, we've seen a significantly increased interest around our biologics platform and in particular, the high concentration subcutaneous delivery by many major pharma and leading biotechs globally as a function, possibly driven by the news around Elektrofi, but also by the continued presentations that we give publicly around our technology. We have developments ongoing in this space to prove the value of the technology in biology, and we look forward to being able to talk about those results in the coming months. This is a platform which when we've had visitors to our manufacturing facility in Helsinki, visitors from the U.S., from Europe and elsewhere, they have been highly impressed with Nanoform's ability to scale our technology. This is something which they see as a potential advantage amongst the competition and the robustness, the high yields that we can get from our technology and the ability to scale to a commercial manufacturing scale. They've seen what we have done with the small molecule technology. They've seen the engineering powerhouse that we have within Nanoform, and they've seen our ability already to demonstrate significant scale with this manufacturing technology has provided them with great confidence that Nanoform's technology really stands out within the competitive field in the ability to deliver these drugs potentially in the future to the market. So a super exciting place to be, one that we are highly engaged in and one that we hope to be able to make more announcements shortly on. If I move forward, news from the pharma market. So we've been very active this year, particularly in the last couple of months. This is the sort of the largest conference season for the pharma industry. We had presentations at PODD in Boston, where I presented alongside Takeda on our news on 2 areas, high concentration bio and lung delivery of biologics. There is a significant interest here, as I've mentioned already. Other news, we were at BioEurope in Vienna and at CPHI in Frankfurt just a couple of weeks ago. Major CDMO peers, and I mentioned it earlier, have confirmed low project numbers in small molecule early development outsourcing. So it very much aligns with what we're seeing. We have the highest number of proposals ever issued on an annual basis, but there are delays in decision-making. So we hope that, that will come to the fore very soon and some of those proposals will start to land and we'll have a big uptick in the number of projects signed as we move forward in the coming months. But it's -- the industry is in flux. Major pharma are -- they have a lot of headcount reduction going on at the moment. In addition to that, a lot of the factors that affected the pharmaceutical landscape 2 to 3 years ago in terms of VC investors pausing funding on very early-stage projects with their biotech companies and focusing on late-stage assets. That has created a sort of a deficit in the preclinical landscape. And so I think that's also a contributing factor. But despite that, Nanoform had active conversations with many, many companies and people see a great value in our technology. So we're very much looking forward to this uptick, which we expect to come shortly. In addition, the biosimilar landscape has seen some changes recently. So just over a month ago, there was a change in the regulatory approval pathway for biosimilars. And this has now increased the interest in the space for biosimilar developers because it is now faster and cheaper to take these products to market. Previously, it was a huge hurdle to launch a biosimilar, EUR 120 million to EUR 150 million if you had an oncology product are not unusual numbers compared with EUR 5 million to EUR 10 million in the small molecule space for generics. Now biosimilars are looking at somewhere between EUR 30 million to EUR 50 million in terms of development costs. So it's brought in a much greater interest into this space. So it would be very interesting to see how that plays out, particularly with technologies that we have in-house, and they might be of interest. As I mentioned also on my opening slide, we have expanded our market presence, fantastic relationships established with CBC, a company with over 100 years of history in Japan, one of the leading distributors in Japan. And we have been able to create a very strong presence in the territory at major pharmaceutical conferences at very specific formulation events. And we are starting to see the fruits of that labor pay forward with lots of projects and interest coming. And in Korea, we have also seen significant interest. Just last week, we had a business meeting in Korea, where we visited many companies. And it's clear that Korea is a country that is focused on innovation, focused on biologics innovation and also has a strong interest in the product kernel space of which we occupy. So with that, I will now end the commercial session, and thank you for your time.

Thank you, Christian. This is Henri, IR speaking. So December 16, we will arrange our Capital Markets Day in Helsinki. Everybody is most welcome there. There's limited seats. So tomorrow, we will PR the invite, and there will be instructions in that PR how to sign up. And if you have any questions, the easy way to reach us and easy way to remember is [email protected]. I will now start the Q&A session. One moment, please.

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