Oncopeptides AB (publ) (ONCO) Earnings Call Transcript & Summary

Welcome to the Oncopeptides Q4 report for 2019. [Operator Instructions] Today, I'm pleased to present the CEO, Jakob Lindberg; and the CFO, Anders Martin-Löf. Please begin the meeting.

Thank you very much. Warm welcome, everyone, to our Q4 report for 2019. As you all know, as a biotech company, sometimes the Q4 reports or the quarterly reports can be rather same in information since we rarely report clinical data on these -- in these reports, and that is also the case today. We will present a brief overview of where we are. A little bit about the data that was presented in December. And finally, of course, the financials, where we stand as well as the news flow in the coming year. And then we will allow for questions and answers before finishing the call. Thank you. Please turn to Slide #3. Thank you. Recent highlights. In summary, we are on track with all the activities that we are pursuing. The light chain amyloidosis study, as you might be aware, the study outside -- the first study in an indication outside of multiple myeloma, has been initiated, but we still had few screen failures on the patient side, a bit unlucky, and the first patient should be dosed any moment now. When it comes to the Phase III study, OCEAN, as you know, we have said that it will be the last patient in, in that study will come end of Q1 2020, and we are on track for that. It could potentially be a few days into April. But basically, we are on track with the recruitment plan as presented last year when we updated that one. The LIGHTHOUSE study, we have had a slight delay, I would argue. As you know, we waited to get all the papers ready for the drug supply of that study with J&J & Johnson (sic) [ Johnson & Johnson ] in December and once the ink had dried and all that paperwork where we could then start the work to actually initiate the study. We thought we would be done by end of Q1. It will most likely be a bit into Q2, but nothing major, but the study will start more or less according to plan as well. As to the submission for HORIZON, we are targeting the end of Q2 2020, just like we said when we updated everything after the pre-NDA meeting that we had with the FDA on December 3. Just a little bit of recap then what we presented in December. So we presented updated data on HORIZON, the study for the accelerated approval submission. And as you know, it had a 29% overall response rate and 24% in triple-class refractory myeloma patients, which is the target population for the submission. This is a very good result, and we will come back to that. We also presented combination data where with our drug melflufen together with daratumumab, where we actually had 14.3 months in median progression-free survival, which, once again, given the context with single to double class refractory patients, the combination should be somewhere looking at historical controls between 7.5 and 11.5 months. So 14.3% is a very good result. Going back to the pre-NDA meeting that we had with the FDA on December 3, we had a small update to our submission plans there since the FDA wanted us to include all 157 patients. That means that the database cut for the submission will be January 14, and we are currently cleaning all the data and preparing all that information. I will come back to the news flow regarding that because that will most likely introduce a new news item during the spring, but -- since that is the full study that we're going to sit on the results on within short. And of course, the application will be submitted end of Q2 2020. We also recruited in December, our U.S. President, Joseph Horvat, and he has been hard at work to create the commercial organization and the infrastructure so that we are ready to launch this drug on U.S. soil at the end of the year. Next slide, please. Slide #4. Most of you are probably familiar with this slide. And as noted, we are in the middle of the program now of all the 4 trials here in myeloma. We will then also initiate the LIGHTHOUSE trial in combination with daratumumab. Since it's not ongoing yet, it's not on this slide. We also have several other small trials in myeloma, actually that we will report on during the spring, especially an early access program in the U.S., which is sort of a pre-submission program, given the medical need in this patient population that will be initiated during the year in the U.S. I mentioned most of these studies on the general update so we can go straight to Slide #5. Thank you. Slide #5, it actually describes the label strategy that we have for myeloma. So first, you see the orange boxes. This is basically the target patient population for the HORIZON study and the accelerated approval, and hence, our initial label in the U.S. So the label will focus on triple-class refractory patients, as depicted in the first box, roughly 20,000 patient population in the U.S. on an annual basis. And then, as we have mentioned before, we have really good data in myeloma patients with metastatic disease, so-called extramedullary disease patients. We don't know exactly what can be and cannot or will not be included in the label regarding this, but we hope to have some type of text. But we don't know how the FDA will respond to this, but that would actually expand the patient population quite significantly compared to just the triple-class refractory patient population alone on a stand-alone basis. So this would be an upside scenario. And of course, we won't really know until late this year, if we can include some language regarding this patient group or not. Then we have 2 sets of studies that will expand the label in 2 steps. First, we have the OCEAN trial where we report the study results end of the summer this year. And that's at least the plan, and that will allow us to treat patients that are single to double class refractory patients to an earlier patient population that currently is treated with one drug plus/minus steroid. We would address that patient population based on a positive OCEAN outcome, and that is also the label extension we would get. Then we have the LIGHTHOUSE trial that would expand this label even further by allowing single and double class refractory patients to now be treated with melflufen plus daratumumab, so a combination agent. So as you can see, we have a pretty aggressive strategy in making sure that we capture all relevant segments of patients with relapsed/refractory multiple myeloma. And of course, all of this will then roll out during roughly a 20, 40, 30-month period if you include the LIGHTHOUSE result. That, of course, will come the last. But both HORIZON and OCEAN will come in this year in terms of results and will be rolled out as labels than roughly within -- in terms of HORIZON at the end of the year is the plan at a market authorization date. And for OCEAN, it will be late 2020. Going to the next slide, please. Slide #6. So these were the results that we presented at the American Society of Hematology meeting in Orlando. And as mentioned early on, we had a response rate of 29% in the overall population, that is the bar to the far left. In the middle group, the triple-class refractory patients, we had a response rate or an ORR of 24%. And in patients with metastatic disease, that is extramedullary disease, we had a response rate of 24%. So first of all, the 24% in triple-class refractory is really good, and it was a clear improvement from early reported data from us. And then the fact that we uphold this response rate in extramedullary disease patients is actually unique. So this is a really good result, but once again we will try from a regulatory point of view to translate this into label language, but we need to wait and see how much of this we can get there. Next slide, please, Slide #7. So how does our data compare? On this slide, you have 3 columns. You have melflufen from 93 patients to the far left. You have selinexor data, that is a drug from Karyopharm with 122 patients. And then you have belantamab, that is the drug from GlaxoSmithKline, an anti-BCMA antibody, with 97 patients. So there are a lot of numbers on this slide. But if we start by looking at the first line, that is the amount of tumor burden reduction seen in these patients, you can see that the numbers are 24%/37%; 25%/39%; 31%/34%. Basically, this drives more or less reduce the tumor burden in the same way in this patient group. It's the same amount of tumor burden reduction, which is the objective measure you look at to understand how much you push back the tumor to try to treat the patient. So they are similar. Now if you look at the second line, that is the line that says mDOR or median durational response. Here, there is -- here the drugs start to diverge from each other. We reported a 7.5 months median duration of response. This is what I would argue is a standard result in multiple myeloma, i.e., it's very good. You should be between 6 and 8 months, 7.5 is in the higher end. This is in line with other drugs, such as daratumumab, pomalidomide, et cetera, in less ill patients. So 7.5 is a really solid number. Selinexor, however, had a bit of a durability issue with 4.4 months. So this is less good. And then belantamab, that is GlaxoSmithKline antibody-drug conjugate didn't report this number, but showed the curve and it seemingly cuts between 7 and 8 months. So at this point, in the comparison, melflufen and belantamab looks very equal in terms of tumor burden reduction and the durability of that tumor burden reduction, while selinexor has slightly worse durability. Now from an efficacy point of view, there is a clear differentiation, but the anti-BCMA agent and melflufen look similar. But then when you look at non-hematologic toxicity, however, there is a difference. This is now looking at the grade 3, grade 4 non-hematologic toxicity occurring in more than 5% of patients. That is the standard FDA cut, and this is the bottom box. All these 3 drugs are good drugs when it comes to the infection rate. You see pneumonia for melflufen 8.4%, pneumonia 8.9% for selinexor, 6.3% for belantamab and there are other infectious diseases that also might come in here. But basically, they're all good. They're all in the low spectrum because myeloma patients do get infections. So they're all good here. This is nothing remarkable. That is high single-digit or low double-digit numbers. However, if you go beyond that, you will notice that melflufen after the background noise of infections is empty in this box. While selinexor, unfortunately, have a rather long list of metabolic-like side effects, this is a real quality of life issue for these patients. It is the only option out there. So as a patient, you obviously want to try it because the alternative is that, but this is a tricky one to give and to maintain the dose with based on the side effect profile, and that is an Achilles heel. Belantamab, you see the first line, keratopathy, blurred vision. There are -- there's another pure blurred vision line that actually comes in at roughly 4% below this. So below the 5% cut as well. And if the safety reporting is done properly, this should be added to the 27.4% to almost then the 32% blurred vision in total. And here, it's important to understand what blurred vision grade 3 means. Grade 3 means you have problem with macro movements such as navigating the room, brushing your teeth, eating food, very basic daily tasks that require motor function, Grade 4 means blind. This also means, of course, that grade 2 is pretty serious as well. Grade 2 means you can't read and write, you can't drive the car and you can't watch the tele properly. So the fact that almost 1/3 of the patients have grade 3, grade 4 blurred vision, it's a real concern. And the duration of these -- for a lot of patients, it's short, but for a subset of patients, that is a significant number, these actually last for a long time or might not even have resolution before death occurs. So this is a really tricky one. So at this stage, looking at these data sets, we firmly believe that we actually have the best safety and efficacy in combination of the 3 drugs in this segment. And that is also, of course, something that we will present to the FDA, and we have presented to the FDA in our dialogue with them. So net, net we feel that we are in a very good position with this data set. And then, of course, we will fully report for all 157 patients later this spring, and I will come back to that. Next slide, please, Slide #8. So we talked about the combination trial LIGHTHOUSE, to expand the label so that single and double class refractory myeloma patients can be treated with melflufen combination. This is a fully randomized trial pivotal and can also act as a confirmatory trial on a stand-alone basis as well, just like the OCEAN trial for the accelerated approval. We will -- the planning is full steam ahead, and we will initiate this during the spring. Next slide, please. We are also now initiating -- we have initiated, sorry, the light chain amyloidosis trial. This is our new indication. So this is not myeloma. And just to make it simple, this is actually not the cancer. This means that the antibodies that the body produce, they misfold and they precipitate. They fall out and form particular matter in the blood. This is a pretty sticky matter. It's hard to say exactly how you would describe it. I would probably describe it as highly viscous honey or something like that, but very small. And since that flows around then in the bloodstream, it ends up where the blood goes. That means it ends up in the liver, in the heart, in the spleen. Every organ with blood flow, it will stick to the walls of that. And what normally gets these patients is that you get almost like stalactite-like structures on the inside of the heart. And as you can see on the survival data in the third paragraph on this slide, the median overall survival is very poor for these patients. The only treatment option we have is to kill off normal functioning B cells to lower antibody production and hence, lower the amount of precipitation occurring in these patients. That is why anti-myeloma drugs that, of course, attack the B cells are basically the standard of care here and also why we then look at the efficacy of melflufen in these patients. We presented preclinical data at ASH that were highly, highly promising, very different than what is seen with other alkylating agents, which highlights that this is really a different drug as well to the surprise of many investigators regarding that. So we feel fairly confident that we will be able to produce good results in this study. Next slide, please, Slide #10. And here, I leave the word to Anders, the CFO. Thank you.

Thank you, Jakob. As you can see on this slide, the operating loss for the year increased to SEK 739 million from SEK 411 million the year before. And for the fourth quarter, the operating loss was SEK 244 million, that's more than double the loss in 2018, that was SK 111.9 million. And of course, as you see, this is mostly driven by increased R&D costs where we went from SEK 313.7 million to SEK 548.3 million, primarily driven then by the larger clinical trials. The OCEAN trial is our biggest trial, and we spent roughly SEK 211.8 million of that, almost -- well, not adapting from the year before, but up from SEK 132 million. HORIZON, there is more than a doubling from the year before, we went from SEK 28.5 million to SEK 70.9 million. That's because this trial has become much bigger than originally anticipated, as it has become a pivotal trial for us. So we have had significant extra cost for that, but I think that's very good investment since it will give us accelerated approval if everything goes well. We also increased the cost significantly in the ANCHOR trial. You can also see that the marketing and sales costs went from SEK 51.1 million to SEK 127.4 million for the full year. Of the SEK 127 million, roughly half of that in the fourth quarter. For the fourth quarter, sales and marketing was SEK 56.2 million for this year, up from SEK 16 million last year. So it's a significant increase. We're now up and running full speed preparing for the commercialization later this year. Cash flow was negative SEK 690 million for the year. That's also a huge increase -- or big increase from SEK 333.7 million. For the fourth quarter, the negative cash flow was SEK 216.9 million. So burn rate is roughly SEK 72 million per month currency. And net cash position was SEK 926 million for the end of the year. There was a significant increase, of course, because of the 2 directed share issues that were performed during the year. I think that's it for the numbers. So I'll leave the word back to Jakob.

Thank you, Anders. Next slide, please, Slide #11. So it is a very intense year for us in terms of news flow. We will go through it quarter-by-quarter. So now in quarter 1, we will have the first patient in, in the amyloidosis trial. We will have last patient in OCEAN, and we will have a first patient in LIGHTHOUSE. Potentially, LIGHTHOUSE will be a little bit later, as I mentioned before, but we are fundamentally on track. In quarter 2, we will then have last patient in, in the study BRIDGE. We didn't mention that today. But as you know, most drugs in myeloma have a problem with patients with renal impairment that occurs in roughly 1/3 of the patients. So it's a big problem to actually treat this effectively and we seemingly have much less of an issue with poor renal function, and we're going to show that in the study to get us a good label as possible. We're going to have the last patient in, in quarter 2 in that study. The next one, new data and update at EHA. So we haven't fully decided exactly what to present at EHA, but we will obviously be present and present a lot of data. And the big one is actually what -- when and how do we present the final data set from the HORIZON trial. As I stated before, on January 14, we locked -- that's the data we have locked date. We haven't been doing database clean right now. We have decided that when we actually have that data mid-spring here, we will present that either as a press release or as a journal article in addition to something at EHA. We will come back to that, but that information is really key since that underpins the whole submission to the FDA, and we need to say something. So that is actually news item that will be coming out mid-spring. On top of that, we will also then have the NDA submission to the FDA at the end of the second quarter. Once again, just that's upcoming here 4.5 months are really intense from a news flow point of view. Then in quarter 3, we will report the top line results from the OCEAN trial. Once again, there are -- there's a little bit of uncertainty around that front. The uncertainty is actually how much database -- how long time the database clean takes once we can lock the data as well as exactly when we can lock the data because it's driven by when patients get progressive events in the trial. So when enough patients have progression, we can cut it and start to do the database clean. So after the last patient in here, in quarter 1, we basically have to wait for a certain amount of progressions to occur, then we can start the database lock process with the database clean. So this is a bit of a fluidic target, but this is our best guess right now based on the numbers that we have been running. We have also last patient in an ANCHOR, that is the trial where we combined with bortezomib. We already have had the last patient in the daratumumab arm, but we are still recruiting to the bortezomib arm. Then in the fourth quarter, potential accelerated approval in the U.S. Once again, there is some uncertainty here. This is based on the fact that the average time from submission to approval in oncology in the last 2 years has been 5.5 months, meaning that it should occur in quarter 4, according to that, but there is obviously some standard deviation around that. And of course, with the approval also comes the launch in the U.S. at the same time. So very intense 2020 for us with plenty of milestones and news flow items. We are happy to take on any questions you might have at this point. So next slide, Slide #12. Thank you.

[Operator Instructions] Our first question comes from the line of Lucy Codrington of Jefferies.

Just a couple for me. I was wondering if you could give us some guidance on -- rough guidance on cash burn for 2020? Or how we might think about cash burn relative to 4Q going forward? Secondly, just you mentioned about being unlucky in the screening failures for the amyloidosis trial. Could you give us any more detail as to what -- is there a common denominator as to why the patients are failing the screening? And then finally, if you could just give us an update as to what stage you are in terms of the commercial preparation for ahead of potential approval around the end of the year?

Absolutely. We'll start with the first question, which is the cash burn, Anders?

Yes. So we have previously guided that we will run out of cash in Q4 of this year. We still maintain that. And when that happens sort of the cash-out date depends a little bit on the activities that we perform during the year. So currently, we don't give any more detailed forecast on that. We stick to our Q4 time line.

Thank you, Anders. And just as a comment to that. So that, of course, includes then a lot of the launch costs in terms of promotion material, et cetera. That's a significant amount of money plus scaling up the commercial organization before launch as well. But going to your second question regarding amyloidosis, so you are indeed right. There is a common denominator, and that is actually an inclusion criteria that we are currently amending because it was unnecessarily strict. And to what extent that was a mistake to make it that strict or not, this is up to interpretation, but we are currently amending it because we don't see that as necessary. And now when we look at the patients that come in, we are just lowering the requirements regarding that parameter. It's -- so we expect a much, much lower screen failure rate going forward once that amendment has been put in place. So that has been resolved at the moment. As to the commercial plans, it's a very good question. So we are currently expanding the U.S. organization at almost doubling of the organization on a quarterly basis, which is, of course, a significant growth. We have 2 offices, 1 in Boston, 1 in San Francisco. I would argue that the most hardest task for us is not to find people. There are plenty of talented people around that wants to work with us. It's actually to form the team and get it to work as one team, including the processes and controls in the background. We are currently implementing all the relevant IT systems from a quality and compliance point of view. We are building up the safety desk. We have a full pharmacovigilance function in Stockholm. So all of this is actually on plan, and we have, of course, an internal ready date that is way ahead of the actual estimated launch date of the drug. We are doing mock inspections, et cetera, just for the pre-approval FDA inspection that absolutely will come in the second half of this year. So plenty of activities, and we feel that we are in a good spot.

Our next question comes from the line of Boris Peaker of Cowen & Company.

So the first one, I was just curious, have you discussed extramedullary disease inclusion in the label with the FDA. Specifically, I'm curious if the agency gave you any comments? The second question is just curious in the HORIZON study. I believe that most patients failed 2 image, 2 proteasome inhibitors in addition to daratumumab. And I'm just curious, how does this 5-drug failure patient differ from the triple-class refractory definition? And lastly, on amyloidosis. I'm just curious what we should kind of expect in the study kind of with the line in the sand is for response or any other outcome?

Thank you. So the first question is the FDA never comment on the exact label. So what we have done, though, is that we have presented the label that we look for. And we are not aiming right now to get EMD in the indication of use statement. But we have included extramedullary disease patients as a subgroup. So it has the same -- it's equivalent to the triple-class refractory group in every efficacy and safety table throughout the draft submission. And we have presented that to the FDA, and they didn't react on that. Now the only thing you can draw from that, from a conclusion point of view, is they had a golden opportunity to shoot it down, and they didn't do it. That doesn't mean they will accept it in the end, but it meant we sort of gave it to them on the plate, and they didn't shoot it down, which was, I think, a very positive moment in terms of how regulatory interactions goes because their job is basically to say no to lot of things. But ultimately, we won't know until we have actually filed the submission and heard their responses to that. And as to -- you're absolutely right. The vast majority of HORIZON patients had failed 2 image, 2 proteasome inhibitors plus at the minimum daratumumab. We also have a lot of BCMA failures and other experimental therapy failures in that study. Now when you have to fail 2 proteasome inhibitors, the majority of them have received then carfilzomib. Carfilzomib, as you know, this is a technical discussion, requires the patient to not have any cardiovascular comorbidities. So when you actually demand that the patient has gotten carfilzomib, you get a better patient population because the patients with cardiovascular comorbidities are those patients who had performed the worst. It's a bit counterintuitive, but you basically enrich your patients for patient group that will perform better in your study than otherwise because when you don't have that requirement, you will get all the patients with cardiovascular comorbidities included. As to your third one, we haven't prepared that, but we will prepare a slide where we say exactly the endpoints, et cetera, for amyloidosis, so we can present it to you in terms of the endpoint, what our expectation is and the exact study design. I just don't want to take that freestyle on this call, but I think that's a very good feedback, and we'll take that in Boris.

Our next question comes from the line of Viktor Sundberg of ABG Sundal Collier.

So my first one is on the OCEAN study. I think you have answered this on the previous call, but could you just confirm the median time from lenalidomide treatment to pomalidomide, in the pomalidomide arm and OCEAN study? Then also I have a follow-on question.

. So the -- I should be careful to say the median time, but the -- it's -- the majority of the patients or at very close to the majority of, I don't want to say the exact median now because, obviously, we don't look at all the data yet. Is actually less than 60 days. But then we also allow patients up to 18 months, which is in line with the data where the lenalidomide resistance actually hits through and makes pomalidomide less efficacious. And as you know, in the clinical practice, pomalidomide is used straight after lenalidomide failure. So it's not -- it's basically in line with the standard clinical practice.

Yes, but are you closer to the 18 months or like closer to straight after? Could you give any comment on...