Nanoform Finland Oyj (NANOFH) 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 First 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 CDO, 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 the website 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 introduction and 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.

Thank you, Henri, and welcome also on my behalf. Next slide, please. And next. I want to start with this. This is a bag full of enzalutamide. So for the registration batches, we have made hundreds of thousands of pills. This is nanoenzalutamide, 160 milligram. Other people can't really do it. And I like this kind of very, very concrete things. Next slide, please. So about our key strategy. Basically, we propose that all pharmaceutical ingredients should be Starmapped. That gives them an opportunity to come into the nanoforming domain. We work with customers and partners to enable novel and existing molecules to become new and improved medicines. We show by doing this a conservative industry, the power of nanoforming. Right now, we are talking a lot about product kernels. This is our way of showing that we can actually place new medicines, improved medicines on the market. Next, please. Here, you can see that we work both with originators and with generics companies. What's important to us is that we work with global large pharma, with midsized and specialty pharma and with biotechs. The product kernels we talk a lot about will entail development partners and commercial partners. It's important that already in 2027, we may have our first product on the market. This is for us to show that we are a partner that one can work with in a comfortable way. Next, please. Nanoform has 4 proprietary platforms, one for small molecules, one for large molecules, one for formulation or nanoformulation and one for AI. The AI lets us pick the best candidates and set the knobs. The small and large molecules are the 2 large parts of the pharma industry. And here, we talk a lot about high drug concentration and high drug loads and the commercial options that give various entities in the industry. The nanoformulation is the way with which we go from small to something that actually helps the patient. This is very important right now. Next, please. I want to dwell on this slide a little bit. This really talks to what we have done during the first quarter. So there will be a lot of talks about the licenses and the supply agreements. We start to see a mosaic emerging in the industry. When all is said and done, this really shows that there is a clear and perceived commercial value that the CESS process provides. The same can also be said for our biologics process. There is a growth in new customers and new products, and Christian will talk more about the details of that. I'm very proud to talk about 100-kilo nanoenzalutamide nanoformed for the registrational batches and the pivotal clinical studies. Of course, we are all exciting and waiting for the readout from that. A new patent was granted in the United States for cPENs. This is a way for us to control amorphicity and crystallinity of the assets that we produce. Peter will talk more about this with you today. We have been working a lot, and we continue to work on cost leadership. I believe strongly that when you provide a new cool technology, if it is also the cost leader, it becomes a very, very strong position for us and the partners we work with. As said, we expect nanoenzalutamide to be the first Nanoform medicine to reach the market with a planned launch in 2027, 2028, U.S. and EU. Albert will talk to you a little bit about the midterm targets, and then he will talk to you a little bit about the Capital Markets Day. So Q1 has been strong for us, both on the deal front, on the cost leadership work and also on our service on the PoC projects. Next slide, please. This is where I hand over to Albert. Thank you.

Thank you, Edward. If we then go to financials. So as Edward said, we have had a very strong start to the year. Remember, our core business is to work with our partners' assets. And then in addition to that, we have the product kernels where we show the industry the power of our nanoforming. It's a way of making the industry move faster towards nanoforming. But our key business, our core business is the assets of our partners. And here, you can see that year-to-date, meaning January to May, we have signed 10 plus 1 deals, and that is clearly more than last year's 3 plus 1. And that means that on the right-hand side, you can see the rolling 12 months. We are actually now for the first time, above [ 30 ] on the rolling 12 months, way past the previous peak a few years back when the market was very different and the funding situation was very different. We are very happy about this that despite the bear market in the biotech sector, we are able to grow and grow quite fast. So now we are already above [ 30 ] on an annualized basis or rolling 12 months basis of new projects coming to us. When we then look at the revenue, we also see a new high there. When you look at the first quarter, you can see that something new has come up, and that is the other operating income. You can also see it on the rolling 12 months. And that is when we are now starting to move into a situation also where we get other kinds of income, not just for working projects, but we also start to get exclusivity fees and all kinds of fees where we don't necessarily have -- do the work now, but it's for previous work where we have created kernel so we have created IP value. And this can, in the coming quarters and years also be milestones. The situation is still such that we are a little bit looking into how they will, in the long run, be booked. But now we are starting to book them in the other operating income where we previously only had booked some grants from Business Finland. But we are very excited about the fact that we are now starting to get these exclusivity fees also and other operating income. And as you can see, we are clearly past now the previous peak in the fourth quarter of 2022. This also means that because we are getting income both from revenues, but also from other income, and that is cash in, the cash burn is clearly diminishing. And you can see that in the first quarter, our cash burn was EUR 4.4 million versus EUR 6.2 million last year, the same quarter and for example, EUR 8 million in the first quarter of '22. And that means that annualized to the right-hand side, EUR 17.7 million, and that can be compared to our cash balance, which is more than EUR 37 million, and we also don't have any debt. So we are thinking of it like this that we clearly have more than 2 years of runway even with today's burn rate, and we expect the burn rate to go down basically in the trend that we have seen already, might be even faster if we get bigger milestones. But we believe that we have a very strong balance sheet, and we are -- we have ample of cash to fund ourselves until we are cash flow positive. And so I can just say as an example that year-to-date, we have clearly had more cash paid to us by clients than we have booked revenue, and this is something that we are sort of expecting potentially to continue now when we start to get these exclusivity fees and upcoming milestones. So we are in a strong position. Then potentially my most interesting slide, many investors have, of course, asked us about when do you talk more about the deals and when can you talk about and when do you announce them. And now we are going out for the first time with a little bit of numbers, and we are also showing you what kind of very broad work we have been doing. So we have got estimates for roughly 40 markets where our potential partners have given us estimates for how much could nanoenzalutamide the demand be for it. We have talked with dozens and dozens of companies in this -- in different countries. And we are now happy to inform you that on the 4 core markets of Germany, France, Japan and the U.S., we already have the term sheets agreed. Several other markets, we are -- have continued already for some time to talk about or negotiate the term sheets. And then we have many, many countries where we have already initiated discussions. Based on what we have seen so far and what we have agreed upon so far, we now are comfortable to say that the total financial potential for the nanoenzalutamide project. And this is, of course, for Nanoform and our own concept partners, Nanoform owns 25% of the project. We see potential development milestones from now till launch of EUR 10 million plus, potential sales milestone after launch of EUR 25 million plus. Certain regions or certain countries have -- we have a profit share even post launch. And all in all, when you look at this, the estimates we are given is that nanoenzalutamide is planned to have market shares of between 10% to 30%. And this would indicate potentially more than 1,000 kilo peak demand annually. And this is, of course, a very significant part of the total market today when you look at the originator product Xtandi. One factor that also varies between the countries is that the supply price between the markets and whether we have a profit share or not varies. But we are very proud of the deal mosaic around this everybody in the team in Nanoform and in the own concept have done tremendous job. Many of our partners in the industry have done lots of work on it, thought about it, and we are very proud of where we have come already now. Then if you go to the other kernels, we started by informing you about the nanoenzalutamide, then came nanoapalutamide. There Nanoform owns 100% of the project, and we are in term sheet negotiations with many potential partners, both in Europe, both regionally or whole of Europe, U.S. and globally. And we will inform you more than -- more after we have term sheets agreed or deals signed. Of course, we have learned a lot from the nanoenzalutamide project, and that we can utilize in nanoapalutamide. Many of the partners are naturally might be even the same companies we are talking to. And then the final product kernel that we have talked publicly about, nanoencorafenib. And there, we today came out and said that we have now term sheets agreed with 2 specialist investors. They will invest EUR 3 million to EUR 5 million in the development of the kernel. This investment will finance the clinical development up to commercialization of the kernel. And Nanoform will not put in money into this, but we will put the kernel into the new company that is to be established and the pre-money valuation of that kernel has been set at EUR 5 million. And in addition to that, Nanoform can receive the normal sort of low single-digit million milestones and up to mid-single-digit percentage royalties. After the dilution of these in full investments, let's say, if we go to the upper end, Nanoform will own between 40% and 50% of the project. And here, the idea is that after this work is done, the company, BRAFMed, the idea is to find commercialization partners just like with nanoenzalutamide to take it further and to the market. But we are very proud of the fact that we informed the market about this kernel in the previous quarterly report, and now we are already in a situation where we can talk about the next step. So all in all, product kernels are -- the interest is very big, and we are very proud of what we have achieved so far, but this is only the beginning. If we then go to near-term business targets for '25, they are all on track, as you can imagine. And with that, I'll turn over to Christian, please.

Thank you, Albert. Now I'll take you through the commercial progress that we've made year-to-date. So I think the overarching message is that the global pharma industry sees significant value in both our small molecule technology and our biologics technology. In the small molecule space, it's all around improving the bioavailability and creating a single pill or a smaller tablet strategy. And that, of course, can be -- support pharma companies to launch their products as single pills or single tablets to provide patient benefit, but ultimately also to provide competitive differentiation and an enhanced patent and IP capability for those companies. And of course, in the large pharma space, increasing the drug load, which could enable products that are currently on the market as IV infusions to be delivered as subcutaneous injections. It can also mean, again, the patient benefit, but also the competitive differentiation for many of the large pharma and key biotech companies that are developing proteins, peptides, monoclonal antibodies. We've seen a real uplift in the number of projects signed. So far year-to-date, we've signed 11, and we'll take you through some of the details shortly and increased the number of customers. And that being said, we've also added another major pharma company to our list of the top 20. We're now working with 12 of the top 20 pharma companies, and we're delighted to support their projects as they develop new and exciting drugs for patients. And Takeda continues to positively represent Nanoform and the value that we're creating. And if you will recall, last year, Takeda presented at the DDF conference, Drug Delivery & Formulation conference in Berlin, and that was on high concentration biologics. This year, in approximately 2 weeks' time, they will be presenting on Nanoform's technology in the biologics space for respiratory delivery of the A1AT protein. We've also had delighted to receive another grant from the Bill & Melinda Gates Foundation to work on multiple projects. And as we've expanded our footprint and our reach globally, we signed an exclusive sales distribution agreement with our partner, CBC, for the Japanese market. So they are actively selling our services and product development in Japan, and that's been a very successful partnership so far. So as we look at the number of customers, we're now at 56. 3 new in Q1 and 4 year-to-date and the number of projects, 4 in Q1 and 11 year-to-date. I think given the market conditions, the economy, et cetera, I'm very proud to see the growth -- the continued growth on the commercial front with Nanoform. And the last slide that I will present today just shows you the mix that we have of our pharma and biotech partners. Some key names there that really see the value in what Nanoform is doing, in what we're hoping to provide value for patients. And I think it's exemplified by some of the product developments and the product kernels that we have spent the last year or 2 developing. And Peter will take you through now some of those developments. But ultimately, the sooner that Nanoform can take products onto the market, it will build and accelerate the confidence with major innovator pharma to adopt Nanoform's technology for their potential launch strategies for their new molecules and blockbuster drugs. With that, I'll hand over to Peter.

Thank you, and welcome to all on the call on my behalf as well. So to follow on to what Christian was saying and on our strategy around these product kernels, this is really in order for us to further accelerate the adoption of our technology offering by the industry that we have initiated these internal developments. This is also to show in practice to the industry what our technology can enable for their product across a range of delivery routes and for both small and large molecules. And then each of these, of course, also has the possibility to become in itself a commercially attractive partnering opportunity for us. And this is, of course, what we are already seeing as well and most recently with the announcement around nanoencorafenib, a development we publicly announced only some 3 months back, and we are very proud to welcome these 2 specialist investors who want to partner with us to provide a more patient-centric and sustainable version of this important cancer drug to patients. For nanoenzalutamide, we look forward to the pivotal trial that is starting early Q2 as communicated. And we just completed the manufacturing of the registrational batches for this and are very happy with this milestone for Nanoform as a company as well. We also continue to progress well with our nanoapalutamide project, as mentioned, towards GMP and a first human pharmacokinetic study as well as in parallel with a number of partnering discussions, as Albert mentioned. We also recently added, as you can see on the slide, another biologic development into our pipeline, which is a NanoGLP-1 that we are exploring for inhaled delivery. Next slide, please. And there we go. So 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 today, selling for an estimated $50 billion annually with hundreds estimated to be in development. One of the drawbacks with ASDs is the low drug load leading to a high pill burden. This is an area which we can effectively address with our nanocrystalline formulations as shown on this slide. We were also pleased to recently receive, as Edward mentioned, a granted patent in the United States for the formulation platform that we use for our nanoenzalutamide, nanoapalutamide and nanoencorafenib programs and which together with the nanoparticles that we manufacture with CESS enables the significantly higher drug load in the product as compared to the ASD-based formulations. Next slide, Henri. And this is a slide that I'm personally very excited about. We believe that the future for biologics is in subcutaneous delivery due to the evident benefits for both patients and health care systems. And we are one of the few companies and technologies in the world that can enable this for higher dose biological products through high concentration suspensions. We have demonstrated the ability to reach 400 to 500 milligrams per milliliter concentrations with acceptable injection forces using a standard syringe, as you can see on the slide. The growing customer interest towards this technology speaks to our customers sharing our view on the importance of moving from IV to subcutaneous delivery, and we will be very, very excited about see where this takes us in the near future. But with that, I will now turn back over to Henri.

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

Can you hear me right?

Yes.

Maybe starting on nanoenzalutamide and the partnerships there. I guess the -- I guess as you see it, the sort of -- it sounds like you've got multiple potential partners here in multiple different markets. Is there a benefit to that sort of strategy over maybe going with a sort of bigger regional player that maybe simplifies, obviously, the negotiations and things like that. But yes, just some thoughts about and how you're sort of managing, obviously, what is quite an active sort of BD program you've got here? That's the first question.

Thanks for the question. And I think there are 2 answers to it. First of all, it's a little bit legacy the way our sort of work started that became then the first kernel. That has resulted in countries sort of being dealt with on a country-by-country basis. I also think it's part of us sort of figuring out, okay, what's the difference between going country by country and going more globally. As you correctly alluded to the good part with going country by country is that you can locally optimize. The bad part with going country to country is that you need to manage a larger portfolio. As you can see from apalutamide, nanoapalutamide and nanoencorafenib, it may be that we, moving forward, we will have fewer single countries. Maybe Peter or Albert wants to add something.

I could add that this is also about the resources. So because we have the resources of the 3 partners in the own concept consortium, it makes it easier to go country by country and really pick the best one for each country. And we are really proud of the partners we have chosen for the single countries. We really believe that they are the best ones. When we go Nanoform only, for example, with apalutamide. it is probably logical that we might search for bigger areas with fewer partners. But let's see how it turns out. And -- but we are very happy with the mosaic, and it, of course, helps us that we have 3 partners who have been doing this for 50-plus years.

Maybe I could just add something there as well, Albert. All products are different and all products require a different sales strategy. And sometimes it's good to have in-country specialists that have the relationships with the prescribers and the doctors and the physicians and the key opinion leaders. So certain countries benefit from having a more focused approach there obviously is benefit also to having larger partnerships with more of a blanket approach sometimes for deals. But for nanoenzalutamide, it made sense to do it in this way.

That's helpful. Maybe would I be able to draw you on thinking about sort of peak revenue or peak sales potential here as you're calling out that sort of market shares that might look at sort of 1,000 kg plus of ingredient or product at peak demand. What might that translate to in terms of revenues to Nanoform, presumably -- and that's aside from royalties or profit shares, I guess?

Albert, would you like to take this?

So great question, and we are not yet giving you numbers for that. But you can, of course, think of it from a blanket point of view that the big markets, what is expected of the pricing of the generic versus the originator. And that, of course, depends on whether it's a duopoly market if the formulation patent holds or if it's not. And then, of course, it will depend on what is the pricing in the local market. But all in all, I would say that it's very clear that nanoenzalutamide already can be a very significant revenue generator and profit generator to all the partners, including Nanoform. And also for the ones that are distributing it locally. So everybody sees the potential and therefore, the numbers that we mentioned now are quite significant already.

Then last question, and I'll get back in the queue. In terms of biologics, it feels like that's something that is probably more along the lines of a large pharma originator type negotiation or partnerships. I guess, just a bit more on what's the sort of commercial -- initially development and then commercialization strategy around the biologics piece. And do you -- are there any of the big pharma contracts that you currently have, have already related to a biologics project?

Christian, you had a lot of questions there. Let's see if I remember all of them. First of all, it's clear that biologics has a significant market pull. It's also clear that the high concentration propositions that we have both on biologics and the small molecules have a very good reception. Thirdly, Nanoform gets attention of the originators, both on the biologics and on the small molecule side. I think it has been faster to get strong attention on the biologics side, but it's there on both sides. Then you had a fourth question, which I didn't pick up.

Major pharma contract.

Yes. Existing partnerships. So we have seen in several locations that something that has started from a small molecule work, collaboration, partnership has then evolved into something which is also on the biologics side. And Christian, maybe you can help me out. Have we seen it also the other way where we started biologics and then went into small molecule?

Less so that way. But I think if I understand correctly, Christian, your question was, are we engaged with major pharma on the high concentration biologics. Is that correct?

Yes. And I guess, I think we know about Takeda. I guess, yes, the question is, are there others?

There are. There certainly are others, yes.

[Operator Instructions]

So Christian Glennie, do you have some more questions? If you have, please present them?

Okay. Yes, I guess the -- what else is needed on nanoenzalutamide in terms of the pivotal trial then? You've done your -- manufacture the product, the batch. What else needs to happen? Have you contracted CROs? Presumably, there's -- ideally, you would need some partnerships in place maybe to help either fund the trial or inform the design of that trial? I'm just trying to understand what things need to happen given it's sort of -- we're only really a month away from the end of the quarter, right? So just a bit more sense of where you're at on that planning.

Sure. So there are 3 things that needs to be put in place. One is, of course, to have a CRO who plans the trial and execute the trial. Then you need to have the medicines and that's, of course, where Bluepharma comes in from the on consortium. And then at some point, post that trial, you need to compile the dossier that you need for filing for market permits to put it out there. These are the 3 main components. And here, of course, the fact that we are working with the on consortium who are very experienced in doing these things and running these things helps us a lot in this endeavor. Anybody wants to add something?

I would just say that we have the relevant CROs all ready and looking forward to receiving the materials for the clinical trials.

Can I ask, is it -- is the study likely to involve U.S. sites and therefore, also where you're at in terms of discussions with the FDA about the design of this trial?

Yes. We're not providing information to the trial design or the operation of the trial at this stage, but we understand all the necessary obligations that are required for -- to take this product to market in the U.S. and indeed in other countries as well.

And I think, Christian Glennie, that we have earlier already reported that we have been in communications with FDA. So part of your answer -- the answer to your question is yes.

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. If you have any more questions, just reach out to us at any time. And we wish everybody a great Tuesday afternoon and evening. Thank you, and goodbye.