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

Good afternoon, and good morning to everyone joining us. It's a somber day here at Oncopeptides. Today, we talk about the withdrawal of PEPAXTO from the U.S. market and the refocus of the company back to a research and development organization. On Slide 2, we list our disclaimers and look for you to consult our filings for more detailed information. Slide 3. I'm joined on the call today by a couple of other executives, Dr. Jakob Lindberg, our Chief Scientific Officer; and Dr. Klaas Bakker, our Chief Medical Officer, who will be available to help during the Q&A period. Next slide. So the key takeaway messages from the press release that we sent out just a short time ago is that we've reached agreement with the FDA to withdraw PEPAXTO from the U.S. market. So we're in the process of working closely with the agency regarding patients that are currently on the drug, both clinically and commercially, to ensure an appropriate transition and/or continuation of therapy. So this decision was reached in advance of the ODAC meeting and intensified discussions with the agency that have occurred over the past couple of weeks. And the bottom line is the Phase III OCEAN will not meet the criteria of serving as a confirmatory study for our accelerated approval of PEPAXTO based on the HORIZON study. And this is driven primarily by, as indicated in the FDA safety communication, the overall survival hazard ratio of 1.1 in that intent-to-treat population. Furthermore, with the landscape and regulatory hurdles, other challenges regarding dose and other issues have surfaced that make it challenging. So as it relates to subgroup data -- I mean, the science and the data continues to be what it is. We look back on the excitement that was generated at the IMW meeting and our excitement of the data as interacted with health care professionals. But it's looked at differently from a regulatory perspective. We respect that and appreciate that. So it was deemed to be hypothesis-generating by the agency, but the findings would need to be confirmed in a new Phase III study. And also based on another project ongoing at the FDA project OPTIMISMM. There's an initiative ongoing led by Dr. [ Pasdor ] of moving towards getting companies to better define dose and in a case where both our HORIZON and OCEAN trial, there were a lot of dose reductions and missed cycles. The view was that a dose-finding study would need to precede a Phase III study. That would make our program very difficult in the time frame for return to market challenging with PEPAXTO. So the clinical program is currently still on hold. We do believe that there will be a path based on discussions for nontransplanted patients. Again, we continue to be encouraged by that data as does the health care community, who is aware of it. There will be, as outlined in the press release, some immediate implications regarding our business units in the U.S. and the building business unit in Europe and a return of the company to be a Swedish-based R&D company. We will continue through our regulatory team to go through the process with the EMA, which right now, we are working through approval based on the HORIZON data. That remains pending, and we do expect opinions on that approval that will happen early in -- or in the second quarter of 2022. With that, I'm going to turn it over to Jakob Lindberg to get into some more depth regarding the core regulatory questions specific to the OCEAN data. So thank you, Jakob.

Thank you, Marty. So Slide #5. Thank you. So this is, of course, a simplification of the process that we have been through. But we hope that, that will help bring clarity to what and why this is happening today. So the OCEAN data showed superior Progression Free Survival, which was the primary endpoint, but with an overall survival result moving in the opposite direction. When this happens, it indicates that there is most likely a safety signal, in this case in the melflufen arm. This safety signal we identified as a detrimental survival compared to pomalidomide in patients with prior stem cell transplant. And at this stage, we are fundamentally not disagreeing with each other, at least not from our point of view, with the regulators. And Marty wrote about this on the last slide as well. However, this poses a very important question when this science should be translated into a regulatory endpoint. The first question is, is the safety signal sufficiently characterized to allow OCEAN to act as a confirmatory study, hence, also including label expansion? We have understood, even though, of course, we thought that it would, but it doesn't. And we can discuss interaction values and interactions between subgroups, the biological possibility and all that, but it ultimately doesn't matter when the decision has been made. This is not an easy decision. This is a judgment call, and the judgment call did not go our way. When this has been concluded, question #2 comes up, and that is, is the OCEAN safety signal sufficiently characterized to support the current later-line indication based on the HORIZON population? This is a different question. There are factors saying that one can probably take this safety signal and make it less -- have less of an impact in this population because of later lines. The safety signal is in relationship with pomalidomide. And this population is mostly post-pomalidomide use. However, we deeply respect the regulator here and understand why they take the safety signal seriously, saying there is a safety signal in stem cell-transplanted patients. So if you then were to apply this to the current indication, only 30% of patients in the HORIZON trial had no prior transplant. That would leave roughly 45 patients in the total study or roughly 30 patients in the label population, which is simply not the sufficiently large patient population to support the current label. While this is an oversimplification, we hope that it offers the main core analytical objects that led to the point where we are today. Marty, I believe Slide 6 is yours. Thank you.

Thanks, Jakob. And yes. So on Slide 6, we see the headline refocus back, as mentioned before, to a Swedish-based R&D company. So that is underway. We do have -- are encouraged, obviously, by the data that's been generated in a Phase III setting, comparative data on the value of a proprietary peptide-drug conjugate platform and next-generation drug candidates that we currently have. So OPD5 was in the clinic. We have other backup compounds. We believe second generations as it relates to melflufen, and our attention begins to focus on those opportunities. We will be undergoing an intensive strategic discussion and prioritization of some of the initiatives that can bring and generate near-term value inflection for investors and other stakeholders. So stay tuned on that. Immediately, the organization will be scaled down to increase that cash runway. As mentioned earlier in the call, the specific areas of business around the commercial business units being closed down and then our attention to the Stockholm-based organization and pending the activities that are prioritized. The footprint in Stockholm will be sized accordingly. Next slide. So in terms of the next steps, we are implementing immediately these cost reduction measures, closing down the business units. As mentioned, we are reassessing the opportunities and strategic direction of the company and expect that more information would come by prior to the end of the year. We have moved back the Q3 webcast a couple of weeks. The new date now is November 24, providing us a little bit more time to get our arms around this new information and provide then the results for the third quarter. And also, we will be working through examination of different financing alternatives for the company moving forward. So with that, Simon, I think we'll turn it over to you to help us with the Q&A.

[Operator Instructions]. Our first question comes from Patrik Ling from DNB Markets.

A couple of questions actually. So first of all, can you repeat a little bit what you said about what will happen with the ongoing, even though they are halted right now, clinical trials?

Yes. Thanks, Patrik, and I'll ask Klaas to comment on the ongoing clinical trials.

Yes. Unfortunately, I cannot give a definitive answer there. We are working through that with the FDA to see if and in what form these studies can continue. But unfortunately, I can't give you a definitive direction today. So those studies all remain on clinical hold for now. And when we get new information, we will, of course, bring that news forward.

And in the case that the clinical hold will become permanent, given the safety signal that is -- that you talk about, what happens in that case? How do you go about to terminate ongoing clinical trials?

Right. If you need to terminate ongoing clinical trials, there are a lot of steps involved there. But what you always want, and I think that is one of the core things that we also agreed with the FDA, is that patients who do benefit from this drug at this time, whether it's in a commercial setting or whether it's in a clinical trial setting, should be allowed to continue on the drug. So patients will not be forced to come off drug either in a clinical study or in a commercial setting. How we need to wind down studies, if we need to do that, it's something that we will also come back later, should that be necessary.

Okay. When it comes to scaling back the operations, as you talked about, could you give us a rough number on how many persons that will be affected by this? And how many do you see will remain in the company after you refocus the company?

Thanks, Patrik. I think we'll be able to get back to you with more specifics over the next couple of weeks. But obviously, it's -- we made it pretty clear as it relates to the U.S. business unit, which probably comprises half the company. The footprint in Europe is a little bit smaller. We were, as mentioned, fiscally responsibly increasing that organization, so not as big of an impact. And it really depends from a Stockholm perspective on the prioritization of the program. So we will have those details for you on the Q3 call.

So just remind me, I mean, in connection with the full year report, you said that you were 280 persons in the company. So how many are you today?

Can you repeat the number before?

Yes. You said in connection with the -- in the annual report, you mentioned that you are 280 persons in the company. So if U.S. makes up half of the business, are we talking about 150 persons there approximately?

Yes. It's a little less than that, but that's the approximate number that comprises the current footprint.

And the European [indiscernible] organization today?

In terms of numbers, it's -- off the top of my head, I don't know, but it's less than 20.

The next question comes from Boris Peaker from Cowen and Company, LLC.

My first question is on the commercial side. So you mentioned the commercial units are being closed down in Europe as well as the U.S. So can you comment what will happen if you get an approval in Europe next year then?

Yes. Good question, Boris. And I think at this point, again, strategic alternatives and us thinking about the strategy of the company going forward, I don't have a definitive answer. We'd be open to all options at that point in time regarding maybe a European partnership, a rebuild on our own. But we think it's just most prudent at this point to reduce that footprint as well and primarily focus the efforts on R&D.

Got it. And speaking of R&D., so you mentioned clinical studies are obviously on a hold in myeloma. Does the hold expand to some of the other indications we're exploring in melflufen like AML and DLBCL?

I'll let Klaas Bakker entertain that one.

No. Formally, that is not applied to studies that were to be planned. With these studies, we're also not in a stage yet where that would be happening. Needless to say that given the current circumstances in multiple myeloma with melphalan flufenamide, we would also be very careful there and need a substantial conversation with the regulatory bodies to pursue that option.

Got it. Just lastly, can you comment what is OPD5, OPS2? I'm not sure if a lot of investors are familiar with that.

I'll ask Jakob to take that one.

So OPD5 is actually a compound that is a deuterium analog of melflufen, so with a patent life until 2039. And we will come back with the exact plans around this. The next molecule that you mentioned is also an alkylating peptide-drug conjugate, but with a fairly enhanced profile in terms of how fast it releases the alkylator. So I would argue that from a clinical point of view, OPD5 is more or less a complete analog to melflufen from an efficacy and safety point of view, but with a longer patent life. We -- as Marty mentioned, we will do a large strategic retake in the coming few weeks. And of course, as soon as that plan is ready, we will communicate that to the market.

[Operator Instructions]. Our next question comes from Patrik Ling from DNB Markets.

Yes. Just a follow-up on the refocusing of the [indiscernible] organization. I mean, how long would you say -- I mean, if you give notice to people already today, maybe, how long will it take before you are actually starting to see any cost savings from that?

Well, I think the cost savings will come -- will begin to come immediately just in terms of the types of programs that [ one ] is investing in from a promotional perspective. In terms of actually withdrawing the product from the market, I think it could take a couple of 2 to 3 months in order for that to happen. But I would say that the cost savings are pretty much right away.

[Operator Instructions]. Our next question is from Adam Karlsson from ABG.

My question is whether there was any conversations with the FDA around a scenario where melflufen could potentially be -- well, could potentially continue in clinical development? What would that pathway to being reintroduced into the market or gaining approval and some kind of setting look like? Is there anything that you can clarify around what the FDA were suggesting or proposing as a potential way forward if such a route was ever to be considered?

Yes. Thank you, Adam. And I'll turn that one to Klaas Bakker.

Yes. So thanks for your question first. And while I can't go into the specific details of the conversations that we've been having with the FDA, I can say that we have worked through various scenarios in a collaborative spirit. I think going back to what Jakob said, where there is consensus, I would say, on the data and what the data show, it is just, at this point, from a regulatory perspective, very difficult, if not invisible, in the case of multiple myeloma to put the study results in a regulatory framework, so to say. Jakob already pointed out that if you were to apply the safety signal from OCEAN on the HORIZON population, you would end up with not enough patients to have an approval ongoing. On the clinical hold -- and I'm sorry that I cannot give more details there because that's what your question also refers to and on how to move on with melflufen in clinical studies. We have not finalized those discussions yet. And as such, I'm unable to comment on that.

Our next question comes from Lucy Codrington from Jefferies.

Just a quick one. You mentioned about the dose concerns that the FDA had. Has this been raised before? Or was this entirely new in terms of them wanting an additional study?

Yes. I'll turn that question to Klaas.

Dose has always been a topic of conversation, I would say, and I say in conversation because not of discussion. And it's not as straightforward as to say that the FDA is not agreeing or that we are disagreeing with the dose. I think this is all about dose optimization. And I think to Marty's point -- and maybe, Marty, you can come back to that, that would require a significant effort, also a monetary effort, from a clinical perspective to do the right studies there to optimize dosing on top of an eventual confirmatory study. And that part was considered to be too steep by the company, hence the development of today. Marty?

Yes. So that's a really, really good point. So in terms of the FDA and their interest in fine-tuning and improving the dose, we certainly understand that interest. Initiating a trial like that would take -- would add a couple of years prior to initiation of a Phase III trial. So the combination of those 2 from a resource perspective and a time perspective begin to eat into the patent exclusivity on PEPAXTO and hence, as Jakob kind of described [ PDC3 ] as an -- OPDC3 as an example, is a next-generation compound that's designed to build upon what we've learned from our preclinical and clinical experience with melflufen. And in that case, having a wider IP focus, the business case is much better given those questions and the requirement on dose finding to consider that as an option. But hey, look, we're going to step back, as mentioned, and do a complete strategic review of the opportunities in front of us, and we'll report back on some of those decisions at our Q3 call.

We have a follow-up question from Patrik Ling, DNB markets.

Last one for me. Will there still be an ODAC meeting next Thursday?

Patrik, there will not be an ODAC meeting next week. So that is no longer in the path. Good question.

We have no further questions. And now I'll hand back to our speakers.

Okay. Thank you, Simon, and thanks to everyone for your continued following of the Oncopeptides story. I think the next few weeks are going to be very meaningful as we think about the reprioritization and refocus of the company. We're obviously disappointed. Disappointed for our employees, disappointed for our shareholders and disappointed for the patients, the patients that we've been helping in clinical trials and as a commercialized drug. I want to thank all of our employees for their contributions over the years and the business units and their commitment to bringing this product to patients. I think that our view is the drug was -- commercially was on the path to being quite successful, and we're encouraged by the uptake and support that we've gotten in the health care professional community, but certainly respect the interactions with the key regulatory body that intensified over the past couple of weeks, leading ultimately to our Board of Directors making a decision today to withdraw the product from the market. So thank you again, and we look forward to the next opportunity to talk. Bye now.