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

Welcome to Oncopeptides' Q1 Report for 2023. [Operator Instructions] Now I will hand the conference over to CEO, Monica Shaw; and CFO, Holger Lembrer. Please go ahead.

Good morning, everybody. I'm delighted to welcome you to our Q1 webcast. This is our usual disclaimer slide. And today, what we'd like to cover is our Q1 highlights, the progression of the commercialization of Pepaxti, our next steps as a company and our financials for the quarter. So looking at our Q1 highlights, I started as CEO on the 4th of January, and Holger started as CFO on January 18. We continue to be rewarded for our innovation with a research grant from the Sweden Innovation Agency to explore our PDC platform further beyond hematology, in solid tumors. And we continue our scientific engagement with publication of LIGHTHOUSE, ANCHOR data and OCEAN quality of life. After the period, we are pleased to note that we were able to issue warrants to utilize our first loan tranche from the EIB which prolongs our cash runway. Looking at Oncopeptides as a company, these are the value drivers which were some of the reasons that I joined Oncopeptides as a company. Pepaxti now is a proven concept of our PDC platform. This is a product that has a clear place in a growing market of multiple myeloma and a differentiated product profile versus our competitors. We have a strong leadership team, which is purpose-led and diversified to bring depth of experience in multiple myeloma and launch to drive this product further. We also have a promising pipeline being able to build on our PDC platform, but also with more innovation coming through from our SPiKE NK-cell enhancers. Our aim, our vision and ambition for patients is to have treatment without compromise, treatment that prolongs life, but not to the detriment of quality of life. And we look to underpin this with a financially disciplined company, making sure we target our cash resources where they generate the most value for the business. Looking at our leadership team, we have a small leadership team but with a depth of experience and expertise that allows us to successfully launch in a space such as multiple myeloma. We have clear commercial excellence, with myself, with 15 years of launches; Sofia, our Chief Commercial Officer; and Holger, our Chief Financial Officer. But we remain rooted in our science, and I'm pleased that Jakob continues as our Chief Scientific Officer, ably supported by Eva, our Chief Operating Officer. If we look at our experience, we have credentials that allow us to combine scientific discipline with commercial expertise. We have both strong medical but also scientific experience. And what is important in this area, deep hematology launch experience and a health care professional network that allows us to reach our target customers. In the field, we have a hybrid science and business mindset that allows us to make the most of the small, focused team that we have. We have a depth of launch experience, with over 24 products launched across our leadership team. We are a diverse team with diverse experience across different backgrounds, utilizing our experience in both big pharma but also small company in rare disease. We have a focus on inclusion, with multiple companies being represented and a strong gender balance. We continue to have a scientific focus that is rooted in the multiple myeloma market. This is the second most common hematological disorder and continues to be an unmet need for patients. As I've talked about before, my father passed away 10 years now from multiple myeloma, and I know that Pepaxti is a product that he would have wanted to take due to his differentiated profile. There are new therapies coming through, but the focus of CAR-Ts and BiTEs is better suited for younger and healthier patients given the logistics and given the side effect challenges that these products bring. The treatment of multiple myeloma is a marathon, not a sprint. These are patients whose treatment options, as they progress through each relapse, diminish. And we know that these patients also experience treatment fatigue. Imagine going through this journey and having each time, after each treatment, the necessity to go into hospitals to engage with intensive treatment that take you away from your friends and family. By the time that patients reach their later life with family, it's important for them to have a product that really allows them to have efficacy but not at their detriment of quality of life. And this is what our multiple myeloma patients deserve, a product that is accessible and affordable in a space where there is currently limited treatment options, and options that have been used are often exhausted. This is also what we hear from our KOLs and these are some of the top customers who are looking to partner with us because they see that unmet need continuing, whether it's because patients with multiple myeloma in the more advanced setting are often not fit and suffer from side effects, whether they've already had so many treatments that they need something that doesn't impact their quality of life, but underpinning it all that they still want to have disease control and a meaningful extension of their life, where possible. And this is what we believe we offer with Pepaxti. The unique mechanism of action based on our PDC platform allows us to reach this trinity of efficacy, safety and quality of life. We are able to bring meaningful benefit to patients with triple-class refractory multiple myeloma. This is an opportunity for patients who have been through a number of therapies to switch to a new mode of action that allows them a new efficacy in patients who have been heavily treated. Compared to our competitors, we have a strong safety profile that is of adverse event, that are manageable by hematologists and are not a detriment to patients. We have shown also over time that treatment with Pepaxti allows us to sustain or improve our quality of life. And this is underpinned by our clinical development program through HORIZON, OCEAN and LIGHTHOUSE, demonstrating data that supports Pepaxti in this patient population. Within our label population as confirmed by our label with EMA, we have a progression-free survival of 9.3 months. This compares very favorably with our competitors in this line of therapy. So Pepaxti is at the foundation of our company, but we also believe that we have a differentiated go-to-market approach. We have very specifically targeted our country rollout to maximize our profitability. Starting with Germany, where we are able to go to market early and discuss pricing as we go, we are now understanding our pricing reimbursement approach across Europe and ensure that we are targeting the countries where we can enjoy maximum potential with pricing reimbursement and an efficient cost base. Our strategy in the field has been to have a focused field force that has a strong mix of science and business background. And we are already seeing the benefits of this approach in Germany, with our customers being eager to engage on the science, but with our field force being able to engage and understand how to translate this into patients. We have taken a deliberate approach to centralize where we can to optimize costs. So our internal resources are centralized around marketing, medical and market access, but utilizing local market access agencies to ensure that we have the correct payer discussions where needed. We have a strong value proposition for Pepaxti. When we talk about some of the competitors that are on the market, we are at a competitive cost and offer an affordable treatment solution for patients in this line of multiple myeloma. Lastly, we are looking to optimize through a mix of self-commercialization and distributor model to select our investment profile, make sure that we protect our margins and optimize our P&L that provides us the future of a profitable business. So how do we see the future of Pepaxti roll out? We have already launched in Germany. We are starting to acquire both the breadth and depth of prescribing and advocacy that we are looking for. We have a couple of examples now of clinics where we've had access that we are able to get people to try Pepaxti, and once people have that clinical experience, they start to use. What I find very encouraging is that where we are able to get access and engage with customers, we hear a willingness to prescribe. We hear that people agree with our assessment that there is an unmet need in this elderly population looking for efficacy, safety and maintenance of their quality of life, and they believe that the data that they see with Pepaxti addresses this. We will continue to negotiate our price with the German payer authorities, and we believe this should be finalized by quarter 2 -- quarter 4. Our Type II variation is in progress. We have had good discussions with EMA and the outcome is due later this year in quarter 3. We are initiating our expansion into new markets, starting our pricing and reimbursement discussions with a clear value proposition. And we are encouraging, where we can, early access programs to allow patients to access the treatment and doctors to get early experience with our products. We are exploring distributor options in parts of Europe and already have an agreement with Ariti in Greece. This came about actually because we had investigators from Greece as part of our clinical studies, and there has been a strong pull from them, having used the products already, to be able to have the product for their patients in the future in Greece. So we were able to start this partnership option already. We will explore partnership options in both China and Japan that we know are potential significant markets for this product. When we look forward, our goal is to have Pepaxti launched in the majority of European countries by 2026. And when we look at our financials, we believe that will allow us to become a profitable business after 3 years. As well as engaging within Germany, we have had strong activity across Europe to increase our scientific trust and conviction with Pepaxti. It's important that we continue to engage on the science, and we have issued data this year in combination with LIGHTHOUSE and ANCHOR, but also, importantly, given our positioning, for OCEAN quality of life. We have increased our presence on the ground at multiple congresses, both in Germany and across Europe, to reestablish our presence in this area and allow us to engage with our customers, not only in Germany but across Europe in preparation for future launches. While Pepaxti is, of course, our flagship, we continue to progress our pipeline powered by 2 platforms. Our PDC platform, of course, is proven with Pepaxti, but we have the ability to impact not only multiple myeloma but beyond. This platform allows us to exploit the difference between healthy and cancer cells to target the cancer cells specifically. This potentially improves patient quality of life through less side effects. And with this platform, we are also able to build up a number of potential follow-up molecules that can expand within hematology but also beyond into solid tumors, such as glioblastoma, mesothelioma and triple negative breast cancer. We have already received a research grant from Sweden's innovation society to explore this PDC platform further in this area, and we're excited to continue these collaborations. We then have a further innovation with our SPiKE platform. This is a natural killer cell engaging immunotherapy. Natural killer cells are becoming an increasingly interesting target to avoid cytokine release syndrome associated with T-cell activating immunotherapies. For us, the SPiKE platform enables us to engage not only with natural killer cells, but also using an affibody platform, develop a small molecule that allows us to target the receptor more closely, and also, potentially, offer a larger, more cost-effective manufacturing progress. So we are excited to progress both of these platforms. I will now hand over to Holger for the financials.

Thank you, Monica. And good morning, all of you, also from my side. Please next slide, Monica. Starting with the financial summary of the first quarter. Sales ended at SEK 1.1 million, up from SEK 0.6 million in the last quarter, and this sales is all related to Germany. COGS was around at minus 0.0, giving us a gross margin of SEK 1.1 million. Operating expenses decreased from SEK 99.1 million in Q1 last year to SEK 75.3 million in this quarter. EBIT for the quarter was minus SEK 72.7 million, down from last year's minus EUR 98.9 million. Net financial items for the quarter was SEK 0.5 million due to interest and revaluation of our currency accounts. Looking into operating expenses, we see a decrease from last quarter with 26%. This is mainly an effect of SEK 23 million in refunds we have received from completed clinical studies that is resulting in a lower R&D cost in the quarter. Sales and marketing expense is continuing to increase as our commercial activities in Europe is now ramping up in the quarter. Since we are continuing to onboard people in the coming quarters, these costs will continue to increase slightly quarter-by-quarter in line with our commercialization plan. General and administration costs decreased compared to last year, mainly due to savings on the consultant side. Cash flow from operating expenses was minus SEK 89 million in the quarter. Looking into our liquidity, we ended the quarter with a good cash level of SEK 254 million compared to SEK 194 million last year. Depending on how sales are developing in the coming quarters, our current cash might last until end of the year. However, to ensure we have sufficient liquidity for the coming 12 months, we have decided to utilize the first tranche from European Investment Bank of EUR 10 million, with expected payment during May. When it comes to capital raise in general, we, as many other biotech companies in the start-up phase, is continuously evaluating options that is on the market. Likely, we will need some kind of equity raise in the future to bridge until we have a positive result and is cash positive, which we are targeting for 2026. With that, I'm leaving it back to you, Monica.

Thank you, Holger. So we are doing all we can to reach the market opportunity by being financially disciplined, as you heard. We believe, looking at the market potential, that we have the ability to be cash positive by 2026 with a targeted European launch plan. We have clear, aligned goals for 2023 that center around strong financial discipline, launch success in Germany, geographic expansion, both in Europe and through partnerships beyond progressing our pipeline, and a foundation of people and culture. I joined Oncopeptides in January because I strongly believe this is a company with clear foundations. For me, Pepaxti is a clearly differentiated product with a clear positioning for patients who are looking for efficacy without having to sacrifice their quality of life. We have an innovative pipeline that allows us to expand not only within multiple myeloma but beyond, and we have a positive cash discipline that allows us to see a future as a profitable company. And with that, I will open for questions.

[Operator Instructions] The next question comes from Luísa Morgado from Van Lanschot Kempen.

Yes. So this is Luísa dialing in for Suzanne. I have a few questions to ask you. But first, I wonder if you could maybe elaborate a bit more on how is the launch going in Germany, but also when can we expect updates on which countries -- additional countries will you do launches next? And then also, I would like to ask regarding the peptide drug conjugate platform, what are you looking to do here with this platform? Do you already have any more specific plans, let's say, for product candidates?

Sure. Let me address those in turn. So the Germany launch is going according to plan. So we know that in this space of multiple myeloma, if we look at our competitors in terms of launch trajectory, the early launch months are always gradual because HCPs customers will always use these products in later lines of therapy where there are fewer patients and less cycles of treatment. And so what you see from competitor analogs is that that's where HCPs start using the product. And as they gain more comfort, they start to use it in earlier lines of therapy. What I'm really pleased about is that when we do engage, when we have access to customers and we present the data and the product profile, what we hear consistently is that they do recognize that there is an unmet need. So while clearly everybody is interested in CAR-T and BiTEs, all of these products are targeting a particular type of patient: young, fit and able to be resilient to the side effects that come with it. And there is really this underserved patient population, which is the older patient population who are fatigued with treatment. They've been through a number of treatments already, and they're looking for some things that, of course, gives them that efficacy that maintains their quality of life. And then when they hear the product profile of Pepaxti, they are very clear that this is a product that has value for them in the market. So while the launch will be gradual, the product profile is being extremely well received, and I think that's the most important indicator for me at this point in time. In terms of which countries we will launch in next, we are engaging in pricing and reimbursement discussions, and we're starting that activity now in a number of countries. Of course, as you know, each of the markets is slightly different in terms of how they approach pricing and reimbursement negotiations. So we are still working on that currently, and we'll share more information later on in the year. Our PDC platform has a variety of potentials. So we've done some preclinical work in a number of indications. And what we're looking to do now is to really match up where we see the highest probability of scientific success, but also where we see the highest likelihood of commercial success and then formulate a strategy for that moving forward.

Very clear. Also, if I could just add a few more questions. Do you have -- will you provide in the future any annual sales guidance? And besides that, what can we expect in terms of sales for Pepaxti for the next quarter or so, for the remainder of this year, let's say?

So as I mentioned, these launch uptakes are always gradual. So we will not be, of course, providing guidance just yet. I think as we've communicated previously, we see a potential market of SEK 1.5 billion to SEK 2 billion. And with what we have been working on the last few months, we see that as attainable and with a clearly profitable business case and a path to profitability in the future, which I think makes us very excited for the business.