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

Welcome to the Oncopeptides Q2 Earnings Call. [Operator Instructions] Now I will hand the conference over to CEO, Sofia Heigis; and CFO, Henrik Bergentoft. Please go ahead.

Welcome to this presentation of our report for the second quarter of 2024. This is our standard disclaimer. With me, I have Henrik Bergentoft, who will give a financial update. I will then come back to an update of our European commercialization process and our next step value drivers. But first, starting off with some key highlights. I am happy to announce that the revenue for the second quarter increased from SEK 5.1 million last quarter to SEK 8.2 million, the second quarter. This is an increase of 60% compared to the first quarter. As June was our best month on record, I expect this trajectory to continue into Q3 and beyond. Pepaxti has now been available in Spain since May 1 and during the same month, we announced the first sale of the drug. The early interest in Pepaxti from Spanish doctors confirms that the positive clinical experience from our clinical trials is supporting the understanding of how Pepaxti can help patients, and I look forward to see sales pick up once we have fully secured regional access, the second half of this year. We have progressed our market access efforts in France by submitting a dossier and in parallel, the market access work continues in other markets. I will get back to European plan and more details in a short while. During the second quarter, we announced that the first drug candidate based on the company's unique Small Polypeptide based innate Killer Engagers, the SPiKE platform, has been selected as well as the inclusion of the first patient in our German real-world study aimed at generating important data in Germany, which will support the understanding of how real-world patients are treated and what difference Pepaxti can make for these patients. Finally, I want to mention that we recently expanded our WODA alliance partnership by signing an agreement with Veld Pharma GmbH for named patient sales in Africa. We focus on South Africa. I will talk a bit more about that soon. But before that, let us focus on the financials. Germany is our first launch market, a major contributor to the first year growth in sales of Pepaxti. This graph shows the growth up until end of Q2. To increase sales with double-digit percentages quarter-over-quarter, starting at low levels, do require hard work, but is what we all expect. To continue over time is, however, not given in a good market like the multiple myeloma market, not least in Germany where physicians have access to all drugs either through commercial drug or through clinical trials. Sales data that we buy confirms that some of our competitors are struggling to grow at all, which makes our growth encouraging and is clearly based on that we are focused on a different patient population with a different product bringing value to patients. We still have a long way to go to profitability in 2026, but I'm happy to remain on track. We continue to focus on penetrating the scattered German market where key to success is to generate a positive clinical experience, which we have been doing and are focused on continuing doing. We do not only get positive feedback from physicians but the fact that close to 70% of patients are getting a second cycle demonstrates the value of Pepaxti. And in addition, a number of patients going on three cycles or more have doubled between the 2 quarters. Regarding customers, we are encouraged to see that we have a good mix of new customers ordering as well as old customers coming back. It's also important to note that we have doubled the number of vials ordered by university hospital in the second quarter versus the first quarter. This is a sign of the increased KOL support that we need in Germany as KOLs do need experience to be able to recommend capacity to office-based physicians. We have a large and promising market in Spain where we have now recruited a full team, and we are working to secure regional access. I'm happy to share that we are tracking according to our plans. Pepaxti is well positioned in the patient population that is dominating the real world, and that is the elderly and more difficult to treat patients. And due to this, this is -- it's an important milestone for us to have the first patient recruited in our very first study focused on our indicated population. HARBOUR is the name of the real-world study in Germany that will soon get a sister study, [ LAGOON ], in Spain as we aim to capture the real-world experience in all large markets. To support our journey to become profitable in 2026, we, of course, do need to add sales for more markets, and I will get back to our progress in detail in a short while. With that, I would like to hand over to Henrik for a financial update.

Thank you so much, Sofia. So starting off with an overview of the profit and loss statement for the second quarter compared to the same period last year. Firstly, I want to highlight with regards to sales that last year includes reversal of a return reserve where underlying sales for the second quarter 2023 amounted to SEK 1.9 million compared to the SEK 8.2 million for the second quarter of 2024. That said, I want to point your attention to both total underlying sales and total cost, both metrics pointing in the right direct, meaning that we are showing a significant underlying sales increase compared to last year and also the prior quarter 1. And we are doing so with cost control, demonstrated by the fact that we see a lower total cost compared to last year. In summary, this quarter very well summarizes our strategic plan of sales growth with cost control. Moving to the next slide, we take a closer look at our operating expenses. Our research and development cost amounted to SEK 28 million compared to the SEK 38 million last year. Currently, there are no clinical studies ongoing where the Phase III study OCEAN was completed during the third quarter of 2023. Also, during the third quarter of 2023, refunds of SEK 44 million were received regarding final settlements for completed studies, which positively affected the cost. Corresponding refunds will not occur during 2024. Our marketing and sales cost increased to SEK 36 million compared to SEK 33 million for the quarter last year. The increased cost relates to our ongoing commercialization activities in Europe, which Sofia will describe further in more detail in the presentation. Our administrative costs demonstrate our cost control ambitions showing a decrease from last year, SEK 19 million to SEK 16 million this quarter. And if we move on to the next slide, we will take a look at our liquidity position. So our cash position at the end of the second quarter was SEK 383 million compared to SEK 178 million by the end of 2023 and SEK 105 million at the end of the first quarter this year. I want to highlight that our cash position includes a positive timing effect of in and outgoing VAT payments of SEK 105 million with a corresponding negative effect in the coming third quarter. The rights issue was completed by May, and that net after right issue cost, infused SEK 270 million to our liquidity position. And as Sofia said, our current liquidity position is estimated to last until we reach cash flow positive by the end of 2026. And by that, I hand back to you, yes, Sofia.

Thank you, Henrik. I will now provide an update on our European commercialization followed by an update of our next step value drivers, meaning our geographic expansion for Pepaxti to the rest of the world and our pipeline progress. We do have many new shareholders following our rights issue, which is why I wish to repeat some of the basic facts about the European commercialization case. It's based on that Oncopeptides has a fully approved drug for a treatment of an incurable disease that provides an expanding market opportunity valued at SEK 1.5 billion. Our focus right now is growing sales in the markets where we have secured market access and adding diversity to our revenue stream by unlocking new markets and finding partnerships for our geographic expansion. These efforts are now fully financed for us to reach our profitability goal by the end of 2026. A short reminder of our business model, which is designed to allow for maximum cost effectiveness, providing higher returns due to high margins and low cost of sold goods. Now let's take a look at our launch progress in Europe. Our ambition remains to launch as fast as possible with a price reflecting our innovation, providing patient and shareholder value. In our profitability plan, we have counted on sales from Germany, Austria, Spain, Italy, Netherlands and some in the Nordics. These are the different steps in the market access process. And let me remind you of -- that the timelines for the revenue and negotiation phases are country-specific and at large controlled by payers. Our last quarterly update was held relatively recently and due to our belated Q1 report and since then, we have seen holiday periods in Europe, we have continued our dialogue with payers on Ireland, Norway and in Italy. We have one major development to report, which is that we have submitted a value dossier in France, which is currently being reviewed by the payer. This review will conclude the cost effectiveness and benefit assessment and take approximately 6 months. France is in our third launch phase due to how difficult it is to gain a reasonable price in France. But given the size and potential of the market and given the support and feedback we have gained from key experts on the unmet need for our medicine, we will do all we can to give French patients access to Pepaxti. As France is not part of our profitability plan, unlocking France ahead of 2026 would be an upside. In addition to Germany and Spain, the largest markets where we are currently selling, we also do see sales in Greece and Austria, which is following the logic of other markets. KOL support and positive clinical experience is generating demand. The multiple myeloma treatment landscape is rapidly evolving. In particular, more immunotherapies are being launched with focus on earlier lines of treatment, which is starting to get crowded. Just recently, one big pharma company announced that they are shutting down the development of their bispecific for multiple myeloma, and this is a sign of that the competition in this space is fierce. Unmet medical need in later lines for other mode of actions, however, remains due to immune exhaustion, which increased -- with increased treatment success in earlier lines, the patient population in the later line is growing. And Pepaxti, with its different mode of action, can take a strong position and make a big difference for these patients. Before we move to question and answers, I would also like to talk about our next step value drivers, and we have some exciting developments, both on our partnership side as well as pipeline progress. As I mentioned in the introduction, we have just recently signed an agreement with WODA alliance partner covering Africa. This is a partner that is an expert on named patient sales in rare disease and very well connected within the country of multiple myeloma. Our partnership with Veld Pharma GmbH, we have the potential to request -- to on-request sell Pepaxti in entire sub-Saharan Africa, but the focus and potential is in South Africa. We are working with named patient sales partnerships for a couple of reasons. First, we can expect to reach patients and see sales from between 6 to 12 months, may sound long, but it's far shorter than if we would go for regulatory approval and regular market access. Second, the nature of named patient sales will tell us if it's worthwhile to invest in further commercialization. And we can pressure test the market through these partnerships without jeopardizing our focus from our core revenue stream, which is Europe. In markets where we rather believe in a good return of investment to immediately go for regulatory approval, we are exploring other types of partnerships. And during the second quarter, we have advanced our discussion with partners and regulators in additional markets with focus on Japan, China and South Korea, which we believe remains the most promising. And we hope to be able to share news on progress in some of those in the near future. Let me spend some time on our pipeline. As you know, we have two technology platforms, the SPiKE platform and the PDC platform. During the second quarter, we selected our first candidate drug, OPSP1, from the SPiKE platform, which I wish to focus on now. Before I speak more about our construct, let's have a brief look at how natural killer cell engagement can be different from T-cell therapy. Immunotherapy means that we are utilizing the immune system to fight cancer, and T-cell therapy is clinically proven and launched across many different tumor types known to be very effective, but with the challenging risk of severe side effects that needs to be carefully monitored and managed. To put it simple, this is due to two powerful T-cell activation. NK cell therapy is not yet clinically proven and natural killer cells are part of the immune system that is less easy to activate, which is also why there are mixed opinions if NK cell engagement will work as a therapeutic approach. What everyone agrees to that if we manage to develop a drug with similar antitumor activity, this is -- that is just effective as T-cell therapy, that medicine will most likely be best tolerated and easier to manage, which would be a huge patient and medical system benefit. The SPiKE platform in OPSP1 has unique property of being a small construct as it's built on the antibody technology. As you can see on this slide, it's a fraction of an antibody size-wise. So why is that good? Well, we get the short distance between the SPiKE binding interface and their targets, which put the natural killer cell in close contact with the tumor cell. This should be an advantage over antibodies as proximity is avidity, which translates into activity. Furthermore, it allows better tissue distribution, benefiting solid tumor applicability, which has been seen to be a barrier with NK cells. We also see large tissue distribution, which again, is an advantage over antibodies. And this enables pharmacokinetic properties that allows the immune systems to rest, counteracting immune exhaustion that is common and problematic with T-cell therapy. We have today shown efficacy in the preclinical setting, and having chosen our first candidate drive, we will now continue to progress our efforts in the preclinic with OPSP1 towards clinic. When we will be able to take the step into the clinic depends on a few factors, including the time it takes to finish the preclinical work, including tox studies and further chemistry manufacturing and control work on OPSP1. In addition, we need to secure financing for the first clinical study, which is not part of our current financial plan, and we are looking into different options, including partnerships. This is a prioritized area for us, and we will keep you informed as our plans are advancing. We are truly excited to progress our pipeline for the future. Our major focus as an organization here and now is however our European commercialization of Pepaxti, which will drive us towards becoming a profitable company towards the end of 2026. And with that, I would like to say thank you to everyone for listening and hand over to the moderator for any questions.

[Operator Instructions] The next question comes from Richard Ramanius from Redeye.

I have a few questions. Let's start with the sales growth, which was obviously quite good at 60%. Is that due to pent-up demand from the flu season since you had flat sales growth between Q4 and Q1? So could that be some patients who waited?

It's difficult to speculate on exactly where it comes from. But if we look at the overall market that we could see declined slightly in Q1 as we reported when we then stayed flat. We can see that we are growing more than the overall market in the second quarter. So I would argue it is a true positive trend.

And I would assume that the large majority of that is from Germany?

Yes. Correct.

Could you say something about -- since you treated a few patients now, how many cycles are typically given to a patient?

So it's -- if we go back to the basics around our treatment, so everyone understands the logic, Pepaxti is given once a month. And the average number of treatment cycles is around 4 to 5 in our clinical studies. As we have been fairly shortly on the market, looking at the uptake in Germany, it's too early to give an average on all patients. But the number I mentioned in the webcast just now, I just want -- would like to repeat. What we do see that is encouraging is that around 70% of all patients are continuing to second cycle. So what does that mean? Well, that means that the patients and the physicians believe that they should continue on treatment, and that it's not immediately a failed treatment, which can definitely happen in such a severe and ill patient population. So that, we believe, is encouraging. If we look at the trend between the 2 quarters, we can see that we have doubled the number of patients that are continuing on three cycles or more. And what I can share is that one of our very early patients have responded very well and is continuing now on assumed 15th cycle. So just as in our clinical trials, there is a wide span. And I think it's too early to give an overall average given that we have, so to say, started to treat many patients only during this quarter, and they have not had the chance to see through the full treatment.

Yes. Okay. And which do you think would be the next market to be activated up, Spain? Would that be Italy?

So as I showed in our market access plan, we have a few countries that we are discussing with payers currently. And that is then to your point, Italy, Ireland, Norway, Netherlands. And again, I would like to emphasize that it's not us controlling the timelines, but it's largely the payers controlling the timelines. So I would like to refrain from commenting on that. But it is basically those markets that we are counting on launching in our profitability plan.

Okay. Last question for you then I have some economic or financial questions. When will OPSP1 be ready for a clinical trial?

Yes. So just as I said, OPSP1 is -- still have some preclinical work to be done, both in terms of top studies as well as CMC work. And looking at that plan, it's always difficult to say exactly when you can enter a clinic. But I think it's fair to say that if we would move with speed on that plan, you can see clinic within a couple of years. Having said that, and I would like to emphasize that in our current financial plan, we have not included any clinical trials, and that is why we are also looking into different opportunities on how to finance such a trial. So we would like to come back with more specifics later on to that question when we have a more clear plan.

That's it. Great. Then to the financial questions. You predicted to be cash flow neutral or to make a profit by the end of 2026, and your current cash position should support that. Is that with or without the EIB tranches?

Excluding any additional EIB tranches. So any of that would come on top of our current liquidity plan.

Okay. And this is my last question. I noticed you had a quite large increase in noncurrent assets of around SEK 500 million, which was also the same increase more or less in equity. What's that? Is that deferred tax liability?

I think you're referring to the parent company balance sheet because that's where you see the increase. And that restructuring of our patent portfolio that we have done internally. So basically, moving our patent portfolio from the parent company to a fully owned subsidiary on an arms-length basis. So that's something -- that's a transaction that only affects the parent company and doesn't affect the group's financial position or profit and loss segments by any means.

The next question comes from Patrik Ling from DNB Markets.

Just a follow-up on the last one there. I mean, Henrik, you mentioned the SEK 105 million in positive cash flow effect from this patents move. Just so I understand it correctly, we should expect a negative SEK 105 million in Q3 on the group cash flow?

Yes. That is correct, yes.

So with that, I mean, with the cash of SEK 383 million that you had at the end of the quarter, if you adjust for that, that you know will be coming in Q3, the adjusted cash at the end of Q2 will be SEK 278 million?

That is correct.

Okay. Good. Just wanted to make sure. Then a question to Sofia. I mean you talked about June being the best month for the company and that you see acceleration and so on. I mean, could you give us a little bit of a flavor of how large the differences between April and May and June has been and what we should see is sort of a 60% quarter-over-quarter growth? Is that realistic, for example, for Q3 as well? Or could it even be more?

So I hesitate to comment on monthly sales and compare the different months due to the simple fact that Pepaxti is administered once a month. And with the severe patient population, you can also see delays. That's why I think it's more sound to look at the quarters and to compare the different quarters. But obviously, it is so, with repetitive treatment when you onboard new patients given that we see, I would say, such good clinical experience where the large majority of patients are continuing every month when we step up, and you're right that I said that June is the best month on record so far, we, of course, see an acceleration for the next quarter. The magnitude of the growth on a quarterly basis, I don't want to comment on, but we do see a clear positive trend in the activity in field. We get more and more KOLs support, just as I said, that we even unlock university hospitals in Germany, which is difficult. It's a sign of that the KOLS, who actually do have a lot of different options, including clinical trials for their patients, really want to gain the experience to be able to recommend the treatment to the office space setting. And this is what we have been working really, really hard for. When we started off in Germany, it was a bit of a blank paper as we have been discussing. So all signs from Germany are positive. And then obviously, looking into the future, we will also have Spain as a stronger addition in the coming quarters based on the interest we see there.

And when you think about the markets where you will sell the product during the second half of this year, are there any of the additional markets that you mentioned to the previous -- on one of the previous questions that could potentially be added to the sales mix during the second half of this year? Or is it primarily Germany and Spain that we should focus on?

It always takes -- even when you have negotiated the price, it always takes a couple of months to get the sales going. So it will be primarily Germany, Spain and then, of course, Austria and Greece. But having said that, back to my previous message, it's payers controlling the timeline. We are progressing. We're having intense discussions. And it's not impossible that we could onboard another market already this year. But we should count on more market supporting with significance more during 2025.

Okay. Great. And then last question, Henrik, you talked about sales growth with cost control. I mean when we look at the operating spend level that you had in Q2, is that a good proxy for how it will look going forward? Or should we expect, for example, sales and marketing spend to continue to increase and R&D may be as well given the activities that you have on the SPiKE platform?

Well, thanks for that question. If I comment it separately, you should expect that R&D costs will be more or less on the same level, but again, pointing out that in Q3, the comparison numbers for last year will include this major reversal. So reported numbers will look like a big increase, but underlying, we will be more or less in line. Sales and marketing costs will continue to, I would say, moderately increase to support our commercialization activities. And with regards to our administrative costs, you can expect us to be more or less in line where we are as of today.

[Operator Instructions] The next question comes from Suzanne van Voorthuizen from VLK.

This is Suzanne. It is good to see the uptick in Pepaxti sales but allow me to start off with a clarifying question regarding your peak sales guidance. Maybe I missed it in the earlier update, but did the previous range of SEK 1.5 billion to SEK 2 billion change suddenly to now at least SEK 1.5 billion? And if that's the case, why is this change? And secondly, your profitability guidance includes a SEK 400 million sales level. So it gives an idea of the operating expenses in 2026, but what additional investments do you expect are needed in terms of sales and marketing and R&D to be able to reach your peak sales guidance? And maybe I have a follow-up thereafter.

Thank you so much, Suzanne. So let me start with a question on the market potential. And I'm sorry if I was not clear, there is no change to the market potential. It stays at SEK 1.5 billion for the European market. When it comes to the profitability guidance, you are, of course, right that it then reflects the cost base. If we comment on, and if I kind of repeat what Henrik said, as we unlock more countries, we will, of course, add the local resources needed to those countries. We are, however, operating with a model where we do have all the synergetic resources hired in Stockholm into the headquarter. And there, we have a very good foundation set already. So from sales and marketing, it's primarily the kind of launch activity costs as well as the building of the teams in then markets such as Italy, that will cost because we already have the few FTEs needed in Nordics and Netherlands. So that's on sales and marketing side. On the R&D side. The R&D cost, we should kind of -- maybe it's good to clarify that under the line of R&D, we, of course have pure R&D, where we are progressing with the preclinical work for OPSP1, as we said, the SPiKE platform. And in addition, we have what one can argue is R&D resources supporting the commercialization in Europe such as regulatory, pharmacovigilance, quality, all of those resource that you need to have to keep your license to operate is also under R&D. And that cost base will not increase.

Got it. Perfect. And then my follow-up relates to the U.S. I appreciate your focus on European commercialization but I do wonder on the U.S. After the last news update that the FDA confirms the decision to withdraw, it was mentioned that Oncopeptides would assess the decision. Can you elaborate here what is there to assess and what options you will be considering as a next step, if any?

So when it comes to the U.S., as we have been communicating before, looking at the market, we do believe there is an unmet need for PDC. We also do believe that -- or what we are assessing to your point is which of our PDCs that would be suitable for that market and how we would go about to develop the PDC for the U.S. market, which most likely would happen in partnership but we have left kind of no options are untouched, and we have not decided yet exactly how to go about. But this is a discussion that is ongoing between the management and the Board when we are looking at our pipeline assets and how we're going to secure value from the pipeline.

There are no more questions at this time. So I hand the conference back to the speakers for written questions and any closing comments.

We have 1 or 2 written questions. One, I think you covered on the conference, but maybe add a couple of more words. How is Asia going?

So as I mentioned on the call, we are discussing to enter partnerships for Japan, China and South Korea currently. And we are, of course, looking at different options, but primarily focused on licensing deals. We have a dialogue with regulatory authorities, primarily in Japan. And the short answer is that we are progressing well, I would argue. And we will, of course, keep the market posted should we have any specific milestones hit as part of that process.

Another question received over e-mail. Your view on the ownership following the rights issue and the changes that occurred over the summer.

Yes. Thank you. So we have a strong ownership with Healthcap that was supportive during the rights issue as well as Redmile. Industrifonden who's been owner for a long time in Oncopeptides, they have a quite different focus as they are more focused on early startup biotechs in the preclinical phase, and that is why they refrain from investing in the rights issue, but they still supported the process throughout. Industrifonden has then decided to sell their shares in Oncopeptides, but we do believe we have large qualitative owners that are highly supportive and engaged and are also happy for, of course, all the new investors and owners that decided to join us during the rights issue. So we believe we do have a solid ownership from our perspective.

And the question also included the rationale from Industrifonden, why they would exit?

Yes. So Industrifonden, and what they told us is that they are more focused on early startups in the preclinical phase and are rarely active or investing in listed companies such as Oncopeptides. So Oncopeptides is basically based on our development of the company, no longer a good fit to their strategy of investments.

And I think last, but not least, there was an article published in Blood Cancer Journal that has -- and a question around that was our view on it. So I think maybe a couple of words on what article the question's referring to and also then shortly on our view on it.

Yes. So there is review article authored by, I think, a quite prominent group of myeloma experts that was published in Blood Cancer Journal. The title of that article is progression-free survival as a surrogate endpoint in myeloma clinical trials: an evolving paradigm. And to put it short, I think it's a solid analysis of the data in multiple myeloma, the clinical trials. I mean myeloma is a very heterogeneous disease. And then it requires also that the studies are designed with that in mind as well as analyzed and interpreted by both, of course, regulatory authorities, companies and payers with that lens on. So to conclude, I mean, I think it's a very interesting well written article. I'm happy to see that this group of experts are basically concluding the same type of analysis that we did when we analyzed the OCEAN trial. And I think it's an interesting discussion and debate because at the end of the day, we all want the same thing. We want to ensure that patients get effective and safe medicines and that, of course, subgroup of patients can be considered when that is accurate to do so.

That's the questions we have. So any final remarks?

No. I would like to thank everyone for listening again. I would like to thank everyone for the questions. And we are, as always here, should you have any questions post the call. So please feel free to contact David. And then I would like to wish you all a nice day.