Nanoform Finland Oyj (NANOFH) Earnings Call Transcript & Summary

Good afternoon all and a warm welcome to Nanoform's Fourth Quarter and Full Year 2024 Report Presentation. My name is Henri von Haartman and I'm your Director of Investor Relations. Today our CEO, Edward Haeggstrom; CFO, Albert Haeggstrom; CCO, Christian Jones; and CDO, Peter Hanninen will present to you. This presentation is webcasted through Inderes and there is also the possibility to call in and listen by phone. The presentation slides are shown throughout the webcast here and you can also find them on the Investors section on the webpage. 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 to Nanoform, including key business highlights. Then we move on to financials and we conclude with commercial. With these words, our CEO, Founder, Professor Edward Haeggstrom, please go ahead.

Thank you very much, Henri, and welcome also on my behalf. Next slide please. So our key strategy, which we have been executing for the last 5 years is really that all APIs, the active pharmaceutical ingredients out there, should be Starmapped. This allows us to see where the technology platform works. We work together with customers and partners to enable novel and existing molecules to become new and improved medicines. You will hear about commercial partners and development partners today. In parallel, we show a conservative industry the power of Nanoforming. We create up to a dozen of product kernels. Today we will talk specifically about 3 of them, enzalutamide, nanoapalutamide and nanoencorafenib. Next slide please. Here you can see that we work on the product kernels, we do RFD to see how to make them better. We then seek development partners and together with them we take this kernel forward. After that, we seek out commercial partners and together with these partners we take the kernel towards the market and maybe also onto the market. The first targeted drug on the market would be according to our plans in 2027. Our customers that we work with are global large pharma, mid-size and specialty pharma, and biotechs. We work with originators, and we work with value-added companies. Our mission is to take more drugs, more medicines to the market. Next slide please. Here you can see a slide depicting 4 technology platforms of ours. On the small molecule side, CESS. On the large molecules, the biotechnology. On the formulation side, the nanoformulation platforms and then on the AI side the STARMAP. Next. I'm going to spend a little bit time on this slide, so please bear with me. This is really what we have gotten done last year. In the first box, you can see that we had a record number of new customer projects signed. This is the POC, the first cylinder in the Nanoform engine. We had a lot of deal making discussions around our product kernels and these intensified. We expect to sign deals on the first 3 product kernels in the coming weeks and months. These would be nanoenzalutamide, nanoapalutamide and nanoencorafenib. This is cylinder #3 in our Nanoform engine. Manufacturing of GMP material for pivotal studies and registration batches in project nanoenzalutamide continued in a 3-shift pattern and the pivotal studies started early in Q2 2025. The first readout is expected in the same quarter. This is cylinder 2 for manufacturing of GMP material and I'm very, very happy that our 3-shift pattern has gone both from a quality and production economics point of view as we planned. The fourth box talks about nanoenzalutamide. We expect nanoenzalutamide to be the first Nanoform medicine to reach the market. We have a planned launch in 2027 in the U.S. and 2028 in the EU. We expect this to be an income driver for Nanoform already in the upcoming years. Much of my time goes towards planning and preparing for this product launch. Number 5, we expect some of our ongoing customer projects to enter the clinic in the upcoming quarters and years and this is of course cylinder #2 and also partly cylinder #3 in the Nano format. Six, growth will be fueled by a growing number of projects from development, exclusivity and milestone payments and later on from commercialization fees and royalties. During the last few months, we have been having a lot of negotiations on the [ mosaics ] that pertains to these various deals. Number 7, our company midterm business targets for 2030 is to be announced during 2025 in conjunction with the Capital Markets Day and Albert will talk a little bit about that. Next slide. I like to be real and this is real. Here you can see what we have manufactured and shipped to our partner. This is nanoenzalutamide and you can see the size of it and the amount of it. With this I hand over to CFO Albert.

Thank you Edward. If we then go into the numbers a little bit, here you can see the number of projects signed to the left per quarter and to the right on a rolling 12 months. And you can see that we had a very strong end to the last year. So the early part of the year was very slow in signings and then we had a very strong, so we actually signed 20 new projects in only 6 months' time which is clearly a new record. The positive thing was that meant that we knew -- hit a new high for the rolling 12 months, which is a good thing of course. If you then look at the same thing, but you don't look at it on a quarterly basis, but you look at it on a yearly basis. Here you can see an interesting trend that both on proposal sent and on projects signed we have every year had the same or higher number. So we haven't had a down year in either proposal sent and project signed. And I think this is a strong testament to the technologies and the people and organization of Nanoform. So despite the fact that in '22 and '23 the markets were shaken by the fact that interest rates rose a lot, all kinds of macro issues in Europe and other places, we still have had this positive trend every single year. It hasn't felt like that all the time, especially when you look at the revenues that can fluctuate much more depending on IFRS and depending on whether we work a lot on early stages of a project, or later stage or how many hours. But when you look at it annually, you can see that every single year since we went public has been a higher year, or flat -- same or higher year. And I'm very happy about that. If we then go to revenue. Last quarter was of course, year-on-year, very positive, because we had a low number last year. But also on an annual level, you'll see that we grew the revenue by 8% in 2024. We didn't hit a new high. But the reason for that is roughly that many of the projects we signed, as I said, were in the latter part of the year. And of course the revenues from that will come later. One other way of looking at how many projects do we do and what is the activity we are doing. And that is by looking here to the left on number of projects generating revenue. And here we significantly took a new level. So we had actually 43 projects last year that contributed to revenue. However, again, many of them were signed late in the latter part of the year and therefore the impact on the revenue was not that much, but it shows the underlying amount of projects. So we have been able to attract more clients, more projects and we expect growth in top line to follow from that also. If we then look at operating free cash flow, or actually we look at the real cost -- cash flow lot internally, but operating free cash flow is a good measure of that. We saw a small improvement last year. It was not as large as we hoped for. But this year we will work a lot on improving the cash flow, and the cash burn. And we will be able to do that on basically 3 fronts. So the cost should not go up. Potentially they can even go down a little bit, let's see. But we are targeting or planning for not increasing the costs. Then we plan to increase the revenue, but we also plan to start to get other operating income milestones, or signing fees or so. And all these 3 should mean that in the coming year, we should see improved free cash flow and improvement should be clearly bigger than what we saw this year. On the right-hand side, you can see the quarterly free cash flows. So how did we do compared to our targets? We hit 2 of the targets even though it was with a small margin, the third one to sign one or several license commercial supply deals. We now say that we expect to sign deals on our first 3 product kernels in the coming weeks and months. In the previous report, we talked about coming months and quarters. Now we say coming weeks and months. And the reason for that is that some of the discussion has gone very far and so a few ones should be coming in the weeks and then rest in the coming months for the 3 products that are mentioned in the report. If we then go to business target -- near-term business target 2025, we have 4. First one, the potentially most important one, is to sign several licensed commercial supply agreements on several product kernels during 2025. That should start to happen already in the coming weeks. We plan to do the first pivotal bioequivalence clinical study with a Nanoform medicine that is of course nanoenzalutamide. And that should both start and we should get the first readouts in the second quarter of this year. We plan to sign an increased number of non-GMP and GMP projects this year versus last year. And we target to improve the free cash flow in 2025 versus 2024. And of course in order for us to become self-sustainable, the improvement should be bigger than it was last year. But this is the official target. And then finally, previously in the IPO, we had the 2025 midterm target. Now we decided not to have both a midterm target and a near-term 2025 target. So now we will come out with new midterm business target 2030 and that is to be announced during this year in conjunction with the Capital Markets Day. Our early indications are that we should -- we will try to have it roughly around our 5-year anniversary at the stock exchange, meaning in June before midsummer. But we will come back with the exact date. By that time, we should also be able to disclose more on the deal side, meaning that we can have a meaningful discussion around the coming 5 years and what they would look like, with product launches, with milestones and payments and how that impacts the P&L and the cash flow in the coming years. With that I give over to Christian and Peter. Please.

Thank you, Albert. And welcome to the commercial slides for this presentation. So I'd like to look back at 2024 and cover the highlights first. As Albert and Edward mentioned, we had a new annual record in customer project intake. We had 10 new customers including one new major pharma. We're now at 11 of the top 20 pharma companies that we work with. We had a record number of customers returning with new projects and we had significant traction with originators on Nanoform's product kernels. There was also a strong interest in the biologics technology seen by a significant market demand around the value that this technology can deliver for high concentration biologics and inhaled delivery. And we have several exclusivity discussions that have been initiated around this technology. Last year saw us enter Japan. We expanded our market presence from Europe and the U.S. into the Japanese markets and we established a strong momentum through a sales partnership with CBC Japan as a distributor for Nanoform. We made significant investment in our commercial organization and we also included many C level approaches to major pharma and to other organizations. Two new members joined our team, one in the U.S. and one in Germany in Europe and we added several C level consultants as well. Last year, we saw many customers and partners visit our manufacturing facility in Helsinki. The ones that we can mention are AstraZeneca. We had also the ex-Chairman of Janssen and an ex Senior Executive of Pfizer visit as well as PolPharma and CBC Japan. And we're building momentum in our pipeline as seen with a new record in CPHI meetings. I'm going to hand over now to Peter, to talk a little bit about our product kernels and the exciting work we're doing there from a commercial development perspective.

Thank you, Christian, and welcome to all on the call also on my behalf. To start on the strategy around our product kernels, in order for us to further accelerate the adoption of our technology offering by the industry, as we've told before, we have initiated internal development of a number of nanoparticle-enabled reformulations of marketed products. 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. Each of these have also the possibility to become a commercially attractive partnering opportunity for us and this is of course what we are already seeing. For each of these opportunities after the initial preclinical development stage, to establish the concept, we aim to partner these for both the development stage and ultimately for commercialization of the product of course. These deals, which were referenced earlier as well for the more, further progressed products, may take many forms depending on the product development stage, our chosen partnering strategy for that opportunity and so forth. For the development stage, in the typical case we expect revenues from the services and access to the technology we provide as well as development milestones. Later in the commercialization stage in addition to payment for supply of material, we would also expect royalties or a profit share as well as potential commercialization milestones. The most advanced of our projects to-date are nanoenzalutamide and nanoapalutamide and to this group of nanocrystalline alternatives to ASDs we have today also added nanoencorafenib, which we have not named before. For nanoenzalutamide as told before, we look forward to the pivotal trial that is now planned to start early second quarter, with the first preliminary readout still in Q2 as well. We are currently finalizing the manufacturing of the registrational batches for this. We have also progressed well with our nanoapalutamide project and are both proceeding towards the GMP manufacturing and first human PK study as well as in parallel with a number of the partnering discussions. Based on our earlier experience with nanoenzalutamide and nanoapalutamide, we are excited with the work we are undertaking and the results to-date on nanoencorafenib including the first in vivo study results we have received. Encorafenib is a great medicine that unfortunately is currently a daily dose of up to 6 very big capsules and we target to reduce this to one single tablet, which we believe will provide patients a clear benefit. As a reminder, amorphous solid dispersions or ASDs as they are commonly known, is really the technology that has enabled a past generation of poorly 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 estimated to be in development as well. Our nanocrystalline formulation platform, as evidenced by our nanoenzalutamide, nanoapalutamide and nanoencorafenib programs, enable significantly higher drug loads in the product, as compared to the ASD based formulation. For the patient, this means smaller pills and a reduced pill burden and we believe our technology can here provide an attractive alternative for both the originators and value-added medicine companies and this is also what we are seeing in practice of course in the interest to partner on these assets. I will now turn it back over, Christian, to you. Thank you.

Thank you, Peter. I'd just like to highlight the commercial team that we have here and all of the territory in which we cover. We are very widely spread. We have good coverage in both the U.S., also in Europe and now increasingly into Asia with partners in Japan. This slide also highlights the experience within the commercial team with some of the companies that our team have worked in previously. So a very strong team, one that I am incredibly proud of and we're having some excellent conversations with customers at all parts of the value chain, from early stage, preclinical through to clinical and even into life cycle management with small biotechs and major pharma companies too. The next slide just highlights what we achieved last year. This was covered briefly by Albert earlier, but we have now 52 customers that we have worked with and we've worked with 96 projects. So 8 new in Q4 last year. So a growing number of customers and projects. And that customer mix, as I mentioned earlier is 11 major pharma, we've got 2 co-developments, we have 3 collaborations and we've got 39 midsized and specialty pharma and biotech companies that we work with. And you can see some of the logos for the selection of partners that we're able to publicly disclose. Just looking back, last year we had many customer visits. You can see here several of those. We have Dr. Ajit Shetty, former Chairman of Janssen and Dr. Mak Jawadekar, former Pfizer Global R&D executive, visiting Nanoform in Helsinki on the bottom left. Then to the right, you have AstraZeneca visiting Nanoform and to the top right you have PolPharma who visited us recently. And then also, 2 conferences where we were recently presented at, so PODD in Boston. This is one of the premier conferences, global conferences around drug delivery. And we were privileged to take such a center stage within this conference and to really be at the forefront of the discussions around high concentration monoclonal antibodies. And I was there chairing a session with Takeda and GSK and other companies. And Nanoform really is in the conversation around how we can make better medicines for patients. It is helping to steer some of that conversation with our pharma partners. And bottom right, that's actually taken from this week, when I was in India at the beginning of this week at the BioAsia conference. Again talking on how we can deliver promising and new innovations to patients together with other panelists from Novartis and J&J and other organizations hosted by Deloitte. If we move forward, we have a very active year ahead of us. Many events on the calendar, both a mixture of finance events and also the industry, pharmaceutical industry events that we will be attending. And I encourage you to meet with us at these events and also encourage you to reach out if you have any questions. But as we move to questions, that's the next slide. So thank you very much for your time, and look forward to answering your questions. Thank you.

[Operator Instructions] The next question comes from Christian Glennie from Stifel.

I guess 3 please. And probably all around the kernels and the strategy there. I guess firstly as you've now got 3, you've listed obviously the brand there, the originator, what's been the reception generally? Presumably there's been sort of follow-up discussions and/or interest from -- on the originator side. What's been this sort of reception generally to ultimately what you're doing, what you're seeking to achieve with the drug load and the dosing benefits here? How has that been taken on the other side of the table as it were?

Thanks, Christian. And briefly, I would say that [indiscernible] closely following what we do. They are in control of the timing, of course and relative to our strategy, we always give them the opportunity to work with us. Christian, would you like to add something to this discussion?

I would say that when we came out with nanoenzalutamide, this was the first product where we could show the value of our technology in the marketplace. When people looked at that, well, maybe it was just luck. And then we came out with a second product, nanoapalutamide and I think the industry and our pharma partners started to get more interested. And now we've come out with a third product showing the utility of our technology as a platform to add value for life cycle management, but not only life cycle management, but also to enable pharma companies to launch their products as single tablets from day one. The industry is getting quite excited about that. So you can imagine we're having quite a positive reception from innovative pharma companies right now.

And then maybe then thinking -- obviously it was just over a year ago, I think, obviously we knew about Project Blockbuster and then it was disclosed as nanoenzalutamide sort of early January of last year. And then you're sort of approaching partnerships for that now. But then on the more recent ones, whether it's EPO or [ Incuref ], it seems like there's potentially an acceleration of the time lines, at least in terms of then moving forward in terms of development partners and/or other partners around those assets. So I guess is there a learning that you're -- from the original process with nanoenzalutamide that then you -- is able to then accelerate things on the sort of development side and partnership side for the other kernels in the pipeline?

So I think the short answer is yes and I think the reasons are several. First of all, we are getting more known in the industry. Secondly, the fact that we have [ put out ] of these blockbusters make it easier for people to feel safe and secure to talk to us and also to engage in meaningful conversations. And then thirdly, of course, as we mature all our data, all our abilities are passed over, which again makes it easier to engage in meaningful conversation with us. Taking this together means that we foresee that probably we will be able to increase the pace. Christian?

I would agree. I think we started off with enzalutamide. It's a partnership. I think that's something important to remember that we've developed this product in a partnership with the ONConcept consortium. We have development time lines associated with hitting certain goals before we reach out and strike commercial deals around the product. The other products are products that we are developing ourselves and taking them to a certain point. So we have should we say more flexibility in how we can maybe could reach out earlier and try to strike deals around these products.

And then on the -- I guess maybe just thinking about the cost of development on the kernels, has anything changed there particularly that's maybe related to the previous question about acceleration. And then thinking about this, obviously typically the potential that if you can take it a little bit further, maybe yourselves through the initial sort of early stage, preclinic -- or sorry, early stage clinical proof-of-concept that you can retain, obviously comes with a greater cost, but then you potentially retain a bit more of the value when it comes to those partnership deals. Yes, just how you're thinking about that in terms of absolute cost of these projects, but then maybe taking them a little bit further to retain a bit more of the value?

Albert, would you like to take this?

Yes. So Christian, can you please mute? It's quite strong, the background noise.

I'll go on mute now, yes.

I think it's like this that we are getting much -- a lot of bang for the buck. So when you compare us developing these kernels and you compare it to biotechs or other people, there's an enormous difference, because we have the organization. We have the skill, we have the technology and we are doing this on the side of what we are serving the other clients on the POC and non-GMP projects. So this is a very cost-efficient way of developing these kernels. It's true that you can take them further and potentially get more value, but as we own the tech, we don't need to do that because we don't -- it's enough for us to get let's say a single digit mid royalty in the long run. We are not products company per se. What we are doing is we are creating lots of kernels in order for the major pharma and the whole pharma industry to realize that nanoforming is a platform technology that should be widely used. So I don't think you should expect us to put lots of money into going deeper and longer into development. We want to partner up early on with many companies on many products. And as these projects don't cost a lot, it's the smart way to do. And then you will always find bigger pockets and bigger pharma or bigger generic companies who are interested in coming in later to help launch it in a commercial deal. So don't expect the costs to go up just because we are doing more kernels. We can be very efficient on that.

The next question comes from Sami Sarkamies from Danske Bank.

I have several questions starting from the pivotal study. Can you share a bit more details on how many patients will be enrolled relative to the previous study, what the study length will be and how much it will cost and what will be your share of the cost?

So the question was on the pivotal study and the share is according to what we have stated about the consortium, where everyone takes their part both in costs and in revenues. Peter, do you have the numbers for the enrollments?

Yes, sure. So our share of the cost are 25%, as said before, as it's an equal share in the consortium of 4 partners. This will be a quite standard bioequivalency -- pivotal bioequivalency study, with both fed and fasted in healthy volunteers and for both the EU and the U.S. to start with. I don't have the exact number of healthy volunteers to provide, but this probably answered most of your questions.

Yes, but what about the total study length that you mentioned, some interim readout in the second quarter, but when will the study be finalized?

Towards the second half of the year.

Okay. And what about the total cost for the study?

I think we have not sort of shared that unless we're working with the consortium. But as Albert said, I think the expectation is that this should not add sort of a substantial cost. And I know, Albert, will be able to comment on that more in detail?

Yes. So this is not very expensive. So if the total cost is maximum a few million, then that means that our share is clearly below EUR 1 million.

Okay. And then moving on to deal making. There was already an earlier question related to kind of originator reception, but just wondering, you're seeing potential for the first deals in the coming months. Could this include originator deals, or are we talking about other players?

As we have said, we are always first talking to originators because of our IP and tech background. We think they have earned the right to the first call. We are also well aware that they know much more than we, both about the assets and the markets. Then it's hard to have a crystal ball to say who signs first. I would presume that as we come out in the Capital Markets Day, everybody will get the answer to that question.

Okay. And then thinking about the nanoenzalutamide kernel, would you say that you're still on track for U.S. launch in '27 assuming that the partnering deals get done over the next couple of months?

Yes.

Okay. And then I have a couple of questions related to manufacturing. Could you update us with situation related to GMP lines 2 and 3, please?

Yes. So if we start with GMP-1, that's where we have now done the material for the pivotal study. That's the line that would hold the clinical license. This year, we will apply for a commercial license. This will probably be for GMP-1. And then we will apply for a clinical license for GMP-2 and 3. This is basically the GMP status for the ones.

Okay. And then you said that you've been working 3 shifts to produce the registration batch for the pivotal study. When do you expect to have finalized manufacturing of the registration batch?

So as we said, the clinical study starts in Q2. So within the next 3, 4 weeks it should be done.

The whole 100 kilos?

Yes.

Okay. So in the second quarter you will not anymore be manufacturing for the restoration batch?

No, they need to have the materials to make pills for it. And then when all the pills are done, some of them will be dosed to patients and some will be put on the shelves, because of the requirements to show that we can produce approximately 10% of what is first presumed to go onto the market.

Okay. And then just wondering on what the investment needs will be on the biologics side, you probably need also GMP line for that as well. When do you see that need and what's your estimate on the investment cost?

Albert, would you like to take the investment question?

Yes. So here we have said that we are discussing with partners, potential partners and the idea there is that we will do the investments with a partner. And the idea there is that we can bring the technology, but the partner of course, can bring the cash that is stored, yes.

Okay. So that's probably not something for the near-term then?

It can be in the near-term, but the idea here is that it will not be a big cost or cash outlay for us.

[Operator Instructions] There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you, operator. On behalf of Nanoform, I would like to thank all participants for today. And if you have any more questions, then just reach out to us. We wish everybody a great Thursday afternoon and evening. Thank you and goodbye.