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

Good day, and welcome to the Oncopeptides Third Quarter 2022 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Jakob Lindberg, CEO. Please go ahead.

Thank you. Warm welcome to the third quarter 2022 webcast for Oncopeptides. My name is Jakob Lindberg. Before we start, let's jump to Slide #2. Here, you can see today's speakers, it's myself, with also Sofia Heigis, Chief Commercial Officer; and Annika Muskantor, Chief Financial Officer. On Slide #3, you will see the regular disclaimers. There's nothing special in here. If you want to read this carefully. It is available also on our website. On Slide #4, you see an overview of today's presentation, where I will give a general update regarding the company as well as the clinical and regulatory update. Sofia Heigis will give a commercial update given our ongoing launch in Europe, especially the German market. Annika Muskantor will give a financial update. And then towards the end, we will all be here available for Q&A as well as some closing remarks held by me. So let's just stay a little bit on Slide #5 before going into the presentation. I would just like to look back at the year behind us, almost 12 months ago to the day, we, as a company, were in a very, very difficult spot. We had just had to withdraw from the U.S. markets. And frankly speaking, we were in a very, very bad situation. Since then, we have successfully reshaped the organization from a cost point of view in a very painful but also very successful process. We received a full European approval. To some extent, I think, to a surprise to some of you given the events with the American regulatory authorities. It was a very clean approval, full approval, no post-marketing commitments or requirements. After that, we successfully financed the company at good terms for the shareholders. And we have now started to launch in Europe and of course, we also have an ongoing discussion with the U.S. authorities. I would just like to state that despite the immense setback that the withdrawal from the U.S. market represents it has actually been a very successful year to turn around the company and where we are today. And we are looking forward to have a much more forward-looking discussion from now on. Going then to Slide #6. Some of this I've already mentioned. We received a full marketing authorization for Pepaxti, which is the brand name in Europe for melflufen by the European Commission. We are in the process of submitting -- it has not been submitted yet. The type 2 variation in Europe based on the OCEAN dataset. We also had a surprising readout of the LIGHTHOUSE data, which was the prematurely closed Phase III trial comparing melflufen plus daratumumab with daratumumab. And despite the low patient numbers, it showed significance on basically all endpoints. We have continued an FDA dialogue post the Oncology Division Advisory Committee meeting held in October. We have also started the commercialization of Pepaxti, where Germany is the first launch country in Europe. We also received a grant regarding our NK-cell engager platform, which is a biologics platform with an antibody mimetic multi-specific construct that engages NK cells to then also kill tumor cells from the Sweden's innovation agency that sort of proves the innovation that is in our pipeline as well. And as mentioned, we successfully conducted a direct share issue of approximately $41 million during the summer. We also had a -- we get an authorization to issue new shares, and this is just a precaution to enhance flexibility to not be in a situation where we have to call an extra general meeting in case of any potential deal that cuts our way. So with that, I would like to go to Slide #7 to briefly just talk about the LIGHTHOUSE trial. As mentioned, this was a surprising result to some extent, not that it was positive, but that it reached nominal statistical significance. So this was originally planned to be 240 patients randomized 2:1 where patients would either receive melflufen plus dexamethasone plus daratumumab and in the control arm, they would get the approved regimen of daratumumab with dexamethasone support. That's a lower amount of dexamethasone than in the experimental arm. And the primary endpoint was progression-free survival. The secondary endpoints was response rate and overall survival. This was halted due to the FDA safety warning last summer when only 54 patients have been randomized in the trial. And as previously disclosed, the results were surprisingly good with this small amount of patients speaking about the additional efficacy added by melflufen. So let's go to Slide #8. Here, you see all for the 54 patients, the progression-free survival curves. And you can see that there is a very clear separation of these curves to the benefit of the melflufen plus daratumumab arm. And you can see that the p value despite the small numbers is 0.0032, which is an extremely good result. If we go to the survival curves on Slide #9, you can see that they also look very, very good. And you can see that there are only two deaths in the melflufen plus daratumumab arm, while there are four deaths in the daratumumab only arm, and they are all early. The reason why the curve dives like that is because it's just the last patient that dies. So there is no patient with follow-up after that. That is why it looks a bit funny. But you can see here, it has a ratio of 0.47, clearly indicating a survival advantage of melflufen plus daratumumab arm, but it does not, of course, with these small numbers, reach statistical significance and the nominal value. As you also know, the European Commission or rather the European Medicines Agency, sorry, they saw that there was only one group of patients that really benefited from melflufen treatment. They did not see any detriment or problems in the other group, but there was one group that benefited. Looking at that specific group on Slide #10, you can see also that LIGHTHOUSE really confirm this. Here, you see the PFS for the recommended population verified by the European Medicines Agency. And if you actually look at these numbers and compare with the other PFS curve, you realize the entire benefit is here. There is no detriment in the other group. But this is where the benefit is sort of validating the recommended population that EMA identified together with us. And you can see that the p value here, despite the small number of patients is 0.0005. If we then look at survival, it becomes even more surprisingly positive. You actually see that in this small group of patients, there is actually statistically significant survival advantage in the identified population by EMA and us in this with melflufen plus daratumumab over the approved variant of daratumumab. And to those that have claimed that it's not okay to just look at daratumumab in the comparator arm, roughly 1/3 of all anti-CD38 use in market right now in Europe and the U.S. is daratumumab single agent. So this is a widely used regimen out there. So this is clearly an interesting and important result from a clinical point of view with clinical relevance. If we then look what this means on Slide #12, I have mentioned many of these points already. This is actually the second Phase III trial to confirm the clinical benefit of melflufen, OCEAN being the first. Fully acknowledging that there is some ruckus on the other side of the [indiscernible] regarding that results. In addition, it confirms the population identified by EMA. And I think this is maybe the most important [indiscernible] that this offers a prospective data set that confirms the population with benefit. And furthermore, it also says that there's no detriment in the other population. There's just a lack of benefit, which is exactly enough conclusions. In other way, personally, I think that EMA did a fantastic job in the analysis of this -- of our OCEAN trial. Going to Slide #13. And as already mentioned Pepaxti was approved in Europe in the recommended population that we have just discussed across the EU plus countries that recognize EMA as a regulatory authority, which includes, for example, the economic area countries, Iceland, Liechtenstein and Norway. This approval is based on the Phase II study of HORIZON, but it's also utilizing the Phase III study OCEAN. That is why it was a full approval and not a conditional approval. There were no post-marketing commitments, and they saw a highly positive benefit risk profile in the indicated patient population. Going to Slide #14, you see the exact text of the label, which is that these are patients that are relapsed refractory multiple myeloma patients with at least three prior lines of therapy and whose disease is refractory to at least one proteasome inhibitor, one immunomodulatory agent and 1 anti-CD38 monoclonal antibody. If a patient has had a prior autologous stem cell transplantation, the time to progression post that transplant should be at least three years. This is the key for the recommended population. This is basically then that we are approved for patients with triple-class refractory disease to use more commonly used lavage. If you look at the efficacy results in the indicated European Union population, you saw for these triple-class refractory patients and a response rate of 29%, a duration of response of eight months and the time to response of two months. You can see the decimals and the confidence intervals on the slide. They also concluded that the overall survival result in the Phase III OCEAN study constitute a case of true survival heterogeneity when comparing melflufen and pomalidomide, which has been our scientific stance from the beginning, and they also then verbalize this in the indications taken. Here comes to detail that many miss. The reason why this is in the indication statement is nowhere else is because EMA saw this as fundamental differences in benefit risk. If they would have seen a safety signal or a potential detriment to the other patients. This would have been in the warning and precaution section or the contraindications section of the label. The fact that this is in the indication statement is because they didn't see that. They saw fundamental benefit risk differences between the two drugs in OCEAN, namely melflufen and pomalidomide. Just to highlight the population then that sort of the action. Just to reiterate, this has been published, but just to show to that you understand. This has not been published, I realize now, sorry. So go to Slide 16. This is the progression-free survival curve in the population identified by the European Medicines Agency. And you can see a doubling of the progression-free survival with a median of 9.3 months over 4.6, a head-to-head against an active comparator with a p-value of 0.0001. This is a really good result. And you can also see on Slide #17 that you see clear and continued separation of the overall survival curves on the population level, but of course, that we have talked about before, you still see separation by age where these curves separate more and more the older the patient is, and this has to do with pomalidomide, where pomalidomide has a lower and lower benefit with increasing patient age. And this was the interaction that we also talked about at the ODAC, this is not known. This is not part of the current label information of pomalidomide, and it's a critical piece of information to understand the OCEAN trial. These two curves represent the foundation of the planned type 2 variation in Europe. Going to Slide #18. In summary, regarding the OCEAN trial, EMA then confirms that there is no toxicological safety signals in the trial. There is, however, true heterogeneity of benefit risk between these two drugs, melflufen and pomalidomide. And that results in but for patients with a prior ASCT time between transplantation and disease progression should be at least three years, not because they are hurt by melflufen just because it's limited benefit and [ pom ] is a better alternative or other medicines are a better alternative. And this means that the non-transplanted also an older patient population, which represents the largest group of RRMM and patients in total, the median age of patients being treated out there right now is 74, particularly benefits from Pepaxti. Going to Slide #19. Of course, this has resulted -- we have an early access program across Europe, and we have currently 74 patients approved with two patients that discontinued. And this -- here we follow basically the recommended population based on the OCEAN trial for who can get access to early access program. And we just want to show you these numbers to show that there is interest out there and that the drug is being utilized to treat patients. On Slide #20, I don't want to comment too much. But as you know, we had an ODAC that was surprisingly competitive and was also surprising to us. I feel that we have a good dialogue with the FDA. That does not mean that we agreed. But we have a good scientific exchange, and we'll see what happens next in the U.S. And I don't want to promise. I can't promise anything, but as soon as we have a firm decision by the FDA about what the next step is. Then, of course, we will have to disclose that, and we will disclose it as fast as we can to the market, and we will continue this discussion with them. At the time, if the decision would be negative, we will also confirm to what extent we are willing to fight this. We believe that we are right from a scientific point of view, and this is not just about us as a company, it's about patients because the identified interaction for pomalidomide is critical for them, not only from the perspective of melflufen, but also from the perspective of pomalidomide and other image. And we have an ethical obligation to not just give up that. In light of this, there was some very interesting developments this week. So looking at Slide #21. This is a slide that we showed at the Oncology Division Advisory Committee meeting. And we showed studies that all represents blue copies or carbon copies of each other, where OCEAN was the first that we negotiated with the FDA in 2016, a head-to-head comparison with pomalidomide plus low dose dexamethasone, the most used treatment regimen in RRMM. And then Takeda did a copycat of OCEAN in a Phase II trial with their proteasome inhibitor ixazomib plus low-dose dex. And here, you see that the PFS results are very similar. The OS result is significantly higher for the proteasome inhibitor of 1.43 and you see the same age heterogeneity that we did in OCEAN, but even worse, with 1.6 for the younger patients and 0.87 for the older. The point of this is, like we have said all the time, the heterogeneity is not driven by melflufen, it's driven by pomalidomide. The dissociation between PFS and OS is not driven by melflufen, it's driven by pomalidomide. DREAMM3 is the third copycat. Top line results were reported Monday. We don't have the age subgroup data yet for OS. We expect that to be published within some future. That is probably around the ASH time frame in December. But of course, we expect that to show exactly the same heterogeneity now with an anti-BCMA agent and hopefully put to rest the topic, whether the heterogeneity was driven by melflufen or pomalidomide from a scientific point of view. Being right, it's not the same thing as having the right to get right in the end. So we'll see how that goes. But scientifically, that would be, from my point of view and the nail in the coffin regarding that topic. Going to Slide #22. Our NK engager project, we have disclosed a few details about this. This is a pipeline project. We call them the SPiKEs, and it's actually an antibody mimetic platform, a pure biologics construct that is multivalent, that is it can build bind to multiple targets. And given the size it has superior bio distribution as well as that we can reach targets with very small epitope surfaces such as BCMA. We got the grant from the Sweden Innovation Agency, and this sort of demonstrates we were really at the top of the innovations list here with this construct. And we are participants in the Eurostar program, where the Department of Cancer Immunology at Oslo University, Pharmatest Services in Turku, and Oncopeptides together with the Royal Institute of Technology here in Stockholm. And we hope to conduct all the toxicology studies next year, and hopefully, we can be doing first-in-man studies in 2024. With that, I want to leave the word over to Sofia Heigis to give a commercial update given the ongoing launch in Europe.

Thank you, Jakob Lindberg. If we can move to Slide 24, please. We are excited to have a commercial launch ongoing in Europe. And the first market out, as mentioned by Jakob, is Germany. Germany is the largest multiple myeloma market across Europe with a prevalence of 59,000 patients. 9,200 patients are newly diagnosed each year, and if we look at our current indicative population with older people being triple-class refractory with three prior lines of therapy and then in our recommended target population that is that they did not have a transplant or succeeded on their transplant, we're concluding a population of 2,500 patients. This gives us a great potential to make a difference for patients in Germany. Slide 25, please. The German market is not only the largest market, it also enables early patient access. So once you have submitted the reimbursement dossier, you can start to sell your drug while the data is being assessed and while you're negotiating the price. Despite the -- the journey we have been on, we managed to develop a dossier that we submitted on the 1st of October this year. This means that we are now able to sell in Germany to the price of EUR 5,450 per vial, which is concluding an average price of EUR 10,900 per cycle a month. It's important to say that this price is valid for the first year and will then be subject to negotiations with the National Association of Statutory Health Insurance Funds. The high unmet need and the benefit we can make the patients triggered us to prioritize Germany and start to initiate the process of launching. Slide 26, please. We are a lean organization, and that has four steps to think differently on how to launch. We are launching with our own team with a very focused model. The team has an in-depth experience having launched everything from IMiD to CAR-T within the myeloma space. That, of course, comes with excellent knowledge and understanding of the market, how to launch in multiple myeloma, but also a network that -- of trusted relations that we can engage, partner and collaborate with. We are working with a very focused account activation model, and I will touch upon how we're doing that a bit more in a short while. The essence is that we know the accounts where we can make the biggest difference, and we are complementing a great focus there with a broad awareness plan because we do believe it's important that all hematologists that treat patients that are within our target population in Germany are aware of Pepaxti and learn how and when to use Pepaxti. We are building the team to broaden the outreach across Germany, and that will be ongoing for the coming quarters. And it's also important to say that now once we have a price in Germany, we are also providing entry into Austria and Switzerland. And with all the learnings and experience we will gain in Germany, we will pave the way for commercialization across Europe. Slide 27, please. If we double-click on how we work with account activation, which, you all know, is a key to a successful launch. Within hematology and oncology, it's not a matter of working with one stakeholder, it's the full account that needs to be engaged with many different stakeholders. To do that, you need to have different competencies. You may need promotional efforts, you definitely need medical and scientific communications. You need to support in-house to prepare, administer and manage the patients. There are logistics to handle and you, of course, also need to show the value of your drug. If we look into how most companies work with account activation and look towards the left of this slide. The traditional model commonly means that you hire multiple roles to cover all of these competencies. That gives you a broad approach, and it's in particular, needed if you have very promotional sensitive indication. This means that you have several persons to share the stakeholder contacts and if you do promotion, which is needed in promotional sensitive indications, you need at least one sales force and one medical force. Of course, amongst a higher degree of face-to-face access to stakeholders and the fields teams are always, of course, both supported but also complemented by marketing and market access. To show you the differences of what we are doing to the left you have our more focused model, to the right, sorry. We have decided to have a limited number of roles with focus on the key competencies for Pepaxti. We have a targeted and scientific-driven approach to meet the high unmet need that we will see in rare disease and particularly in incurable disease, such as multiple myeloma. This means that there is one primary stakeholder contact with trusted relations, in our case, that allows very effective execution. This model also enables more virtual interactions and it facilitates customer access as we only have one person trying to reach the account from the company. We complement our model with marketing and market access, again, to ensure that we can showcase the value but also to give every single hematology in Germany seeing these patients the opportunity to learn about Pepaxti. Slide 28, please. If we take a step away from Germany and look into Europe, we have made a road map, and we will continuously informing you on the progress. Our objective is given. We are here to maximize the value for patients and all the shareholders by ensuring patients access to melflufen, and we have a great opportunity to do so in Europe with the European approval. I've already touched upon the German launch and furthermore touched upon that we're working with hospital in the individual patient base in, for example, Austria and Switzerland. What we have done in addition is that we have initiated the market access preparations in the high-potential countries. Market access is a local exercise at the different payer bodies and authorities operate fairly differently across Europe. The timeline for market access varies between 12 to 24 months approximately. Thus, there are many synergies to be use, and you can drive effectiveness by starting to focus on these countries, develop the necessary tools that you can then use to initiate general market access across Europe. And that is the approach that we are taking. Slide 29, please. Finally, the multiple myeloma market in Europe is growing. It's incurable disease, there is an unmet medical need for convenience, efficacious and tolerable options and that need is high. Hematologists easily adopt new therapy and that is due to that we, of course, do everything to prolong the life of their patients and ensuring that they have a good quality of life as possible. Our target population that is commonly older people, more saying, given that they are in later lines, is growing due to the advancement of innovative treatments in earlier lines. This means that we have a great opportunity to make a difference for these patients. If we look at the European market to the right, we have an annual incidence currently of approximately 40,000 patients. Looking towards the type 2 variation and should we get an OCEAN indication approved based on the date that Jakob just showed, we are looking towards the target population of 17,000 patients across Europe. Granted that the price negotiations in the different countries will reflect the degree of innovation of the drug as well as the clinical benefit to the patient, we see an annual market potential between SEK 1.5 billion to SEK 2.0 billion. And by that, I would like to hand over to our CFO, Annika Muskantor.

Thank you, Sofia. If I could ask you to turn to Slide 31, please. If I may just give you a quick recap of the timeline and go back to Q3 of last year, that quarter reflected a situation in which the company was a fully integrated biotech company with a significant presence in the U.S. It was not until the end of October of last year, i.e. Q4 that the company voluntarily withdrew the Pepaxto from the U.S. market and restructured operations. Hence, nonrecurring restructuring costs did not have any material impact on operating costs in Q3 of 2021. So with that said, we can see here that the decisive measures initiated at the end of last year lowered cost significantly. The operating loss decreased from a negative SEK 338.9 million to negative SEK 88.9 million. As you know, now if you were to compare net profit for Q3 this year with Q3 of last year, you will note that last year, this reflected the reversal of deferred tax assets that arose on temporary differences in the group during the year. The largest decrease in operating costs compared to the same quarter last year is, as can be expected in marketing and sales, that decreased from SEK 148 million to SEK 18 million. The comp last year included extensive commercialization activities, while the cost for the quarter that just ended reflects the first market -- European market entry with the new focus model that Sofia just presented. G&A has also decreased from SEK 53 million to SEK 23 million, hence not as much as some of the other areas, given that certain administrative resources are the required to support ongoing operations. I can just conclude that we are still running a tight ship that is very conscious of spend. R&D also decreased from SEK 150 million to SEK 50 million -- the R&D expenditures support our preclinical pipeline development. R&D expenditure reached minimum during Q2, but as communicated in conjunction with the capital raise in July, Oncopeptides will continue to develop our new drug candidates and expand into new indications, which is why you see a slight increase in R&D spend during the third quarter, if you were to look back at R&D spend in the second quarter of this year. At the end of the period, the company had 40 employees plus a two specialists to provide a council on an hourly basis, which is a significant reduction from the 321 last year. Cash flow from operating activities amounted to a negative SEK 70.8 million to be compared to a negative SEK 336.5 million for the corresponding period last year. And to tie into that, EIB loan is under renegotiation to update tranches definitions in order for us to align the company needs with the current regulatory situation. So with that, if I can ask you to turn to the year-to-date data on the next slide. Operating losses decreased to SEK 248.8 million, which is to be compared to a loss of SEK 1,031.1 million for the comparable period last year. Cash flow from operating activities decreased from a negative SEK 1,069.9 million to SEK 342.9 million. In the beginning of this year, the company announced that it was aiming to extend cash run rate and bring costs down to an absolute minimum. During Q2, we did meet that target announced at the beginning of the year, and the company continues to operate to ensure high impact while remaining cost conscious. If I can ask you to turn to the next slide, which will be Slide 33. The company conducted a successful capital raise that was closed on July 14. The proceeds of SEK 435.6 million to about $41 million, that take up concluded earlier before transaction costs, will be used to allow us to act from a position of strength to execute on our strategy to initiate commercialization in Europe as announced, held for marketing authorization earlier lines, which the efforts to build on our pipeline to secure the next generation of drugs established for total in the U.S. ahead of a possible agreement with the FDA. And with that, I'd like to turn to the next slide, Slide 34. To recap on September 23, the EGM authorized the Board of Directors to decide on issuance of new shares since the authorization given on the AGM resulted in a direct share issue announced in July. The purpose of this is, as mentioned earlier, to increase the financial flexibility for the company and allow for the Board to consider financing options to capture opportunities. I believe we already touched on the EIB. So with that, I will hand over back to Jakob.

Thank you, Annika. Let's go, and just before the Q&A, conclude a little bit about the milestones ahead in the near term on Slide #36. Of course, we will keep you updated on the progress regarding the commercial launch in Germany. I think it's very important to note, and I mentioned this during the interview earlier today that normally, it takes two full quarters to evaluate exactly where you are. And given that we are launching a bit into the fourth quarter this year, in all honesty, you basically need the two first quarters of 2023 to fully evaluate exactly where we're heading in the German market with Pepaxti. We will, of course, keep you updated along the way. But the core piece here early on is account activation, as it's called, what Sofia mentioned earlier. And that doesn't show up as revenue. That is about educating the physicians and the different stakeholders about the drug, which patients should be treated, the value of it, and where it fits in the treatment algorithms, and then once we have established that, get the right patients on treatment. So we will, of course, keep you updated along the way. But it's not like it magically will come a lot of numbers early next year that we can tell you a lot of things. It's much more the qualitative statements that are important at that stage. We are, of course, continuing, and we will keep you updated on the type 2 variation submission to the European Medicines Agency based on the OCEAN data. And we will also present data at upcoming conferences, especially preclinical data at the American Society of Hematology meeting now in December. The FDA is not here, and the FDA is not here because it's unclear to me exactly what the timeline is. But as soon as we know, we will let you know. With that, I leave the floor open to questions-and-answers. Thank you very much.

[Operator Instructions] With no questions at this time, we will conclude our question-and-answer session. I'd like to turn the conference back over to Jakob Lindberg for any closing remarks.

Thank you very much. If any questions should arise, do not hesitate to contact us. I thank you for listening into this quarterly webcast. I also thank you for staying put as shareholders. This has been a very tough year for all of us. I hope we convey that we think that we are in a position of strength again. Of course, a big question mark, what happens in the U.S. But nevertheless, this is a significant European opportunity, and we are really looking forward to providing this product to those patients that need it. With that, thank you very much, and see you next time. Bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.