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

Welcome to Oncopeptides' Q4 Earnings Call for 2024. [Operator Instructions] Now I will hand the conference over to CEO Sofia Heigis and CFO Henrik Bergentoft. Please go ahead.

Hi, everyone, and welcome to this presentation of our year-end report of 2024. This is our standard disclaimer. I am Sofia Heigis, CEO of Oncopeptides. And with me, I have Henrik Bergentoft, who will give the financial update later. First, I will go through some of the key highlights of the fourth quarter and the beginning of 2025. Revenue in Q4 was SEK 9.9 million. And while we are still not at the level of sales where we would want to be, we are encouraged by 35% increase of European sales in Q4 versus Q3. The cash position was SEK 179 million by the end of the year, and we remain on track for cash flow positivity towards the end of 2026. The promising start we saw in Spain continued into Q4, and we have now secured regional access to ensure we can deliver on our financial projections for Spain in 2025. Germany was the major contributing market to our reported growth. We have seen a strong increase in momentum during the last few weeks of Q4 and in the beginning of 2025, which support our confidence in that we have reached a new level of sales that support further acceleration this year. During Q4, we reached an agreement with Italian Medicines Agency, AIFA, regarding pricing and reimbursement in Italy, paving the way for the formal approval that we received in January. We are now fully focused on unlocking regional access and expect sales during the first half of the year. Outside of the European market, I'm excited to share that we are advancing in Japan. We have taken some important steps, including both an alignment with the Japanese regulator on a path forward as well as moving into advanced stage of negotiations with a partner regarding a licensing deal. A deal for the Japanese market carries significant potential for Oncopeptides in terms of financial impact. Looking to the events after the period. We have announced the publication of strong real-world experience on melflufen from the U.S. market. Additionally, we had an exploratory discussion with the FDA on our pipeline molecule OPD5. I will come back to all of these topics in a short while. Now let me hand over to Henrik for a financial update.

Thank you so much, Sofia. And starting off with an overview of the profit and loss statement for the fourth quarter and full year compared to same period last year. Sales for the full year of 2024 amounted to SEK 31.6 million compared to underlying SEK 10.9 million in 2023, excluding effects of a reversal of a return reserve in the U.S. Total operating expenses for the full year amounted to SEK 319 million, to be compared with underlying SEK 338 million last year, adjusting for refund related to closed clinical studies in 2023 of SEK 43 million. So in summary, Oncopeptides has invested heavily in building a commercial organization in Europe, primarily in Germany, Spain and Italy, that has and will generate sales growth but in total with a lower cost base, signaling that the company is completely focused on sales growth in combination with cost efficiency. Now moving to the next slide as we take a closer look at our operating expenses. Marketing and sales costs amounted to SEK 43 million in the quarter compared to SEK 33 million (sic) [ SEK 34.8 million ] last year. Behind the increased costs is the ongoing commercialization activities in Europe, which Sofia will describe in more detail further in the presentation. Administrative costs for the quarter amounted to SEK 8 million compared to SEK 16 million last year, a decrease that is a direct function of the cost focus initiated in the later part of 2024. Research and development costs amounted to SEK 43 million in the quarter, an increase compared to last year's SEK 33 million. No clinical studies are currently ongoing, but in the quarter, some investments have been made in the preclinical portfolio, including securing important patents. In addition, we had a mandatory EMA regulatory inspection during Q4, driving some one-off costs. Hence, the Q4 cost level of research and development is not to be perceived as the run rate going into 2025. So let's move to the next slide, for our liquidity position. So our cash position at the end of the year amounted to SEK 179 million. And this cash position is in accordance with our internal plans to take us to cash flow positive in 2026. Of course, that is contingent on that we meet our plans on sales growth and conclude additional business development partnerships, as a minimum. So with that, I conclude the financial section and hand over back to you again, Sofia.

Thank you, Henrik. I will now talk a bit about our European commercialization in general, followed by more details on Germany and Italy. As a reminder. Our key markets are Germany; including Austria, Spain and Italy. These countries will be able to take us to profitability by the end of 2026. This graph shows our sales trajectory in revenue quarter-over-quarter since Q1 2023 up until Q4 of 2024. Should the trend continue in the pace we saw in Q4, we are on track to become profitable by the end of 2026. Further growth will be based on that we now have managed to secure 85% of regional access in Spain, which in fact is all we need to capture the major potential of Spain; a clear step-up in Germany based on the positive clinical experience in key accounts, supporting prescriber breadth and depth; and the addition of Italy to our revenue stream. Our European commercialization case is based on that we have a fully approved drug for treatment of an incurable disease. That provides an expanding market opportunity valued at SEK 1.5 billion. As a reminder: While our focus is on reaching profitability through our key markets, we are continuing to work with payers to gain access in more markets to be able to address the full market potential. I wish to remind you that the market access processes are different in time and effort between the different European markets. And in our next phase of markets, it is longer and more complicated than the first phases. Looking at the road map. One such example is France, where we recently received the decision by the HAS regarding Pepaxti, advising against reimbursement in France. We do respect the outcome, which was expected based on assessments and time to market for other drugs in France. We, however, do have KOLs supporting the unmet need for Pepaxti. And we do -- seeing that we can make a difference for patients also in France, which is why we will continue to engage with HAS and health care stakeholders to find a pathway ensuring patients do gain access to Pepaxti and we can start to sell. As a reminder: France is not part of our goal to become profitable in 2026. Italy, on the other hand, is. And we are thrilled that we have now secured national access in all our key markets and full regional access as we need in Spain. Regarding Italy. The reimbursement decision was the key milestone of Q4, followed by the price publication in January, which allow us to move on to regional access. As a reminder: Italy is a strong market, has strong clinical experience, which we do expect to support the launch. In terms of the size of the market, Italy is larger than Spain and smaller than Germany, but again, once we have unlocked the region, we expect more rapid uptake than in Germany, this given the high unmet need demonstrated by the number of patients in the early access program and the positive clinical experience gained not only during the EAP but also during the clinical development program where we had 79 Italian patients included. As a next step, we are now then in the process to ensuring regional access. And to the right, you can see the map of Italy with the 20 regions we are currently working on. The time lines to unlock regional access varies from 2 months up to more than 12 months for some of the smaller regions. As previously communicated, we do expect to see first sales during the first half of 2025. Moving to Germany. It is a scattered market with our target population of 2,500 patients being treated by 2,000 prescribers. Generating a positive clinical experience in key accounts to drive volumes not only through our own team members but, in addition, through peer-to-peer recommendations is key to succeed in Germany. This map illustrates the population density of 65-year-old people in Germany, and the orange bubbles represents Pepaxti sales across the country. We are encouraged that the feedback on our product is, so far, overall positive. And in 2024, we did get the sales dynamic confirmed by seeing acceleration in territories, both smaller and larger sites, once we had unlocked the key accounts. This trend has continued. And the step-up in Q4 was based on simultaneous increase in prescriber depth and breadth, which in turn will ensure future demand. I'm happy to share that we have activated one of the most difficult yet important accounts in Germany during the fourth quarter. And this means that we today have 10 out of 12 key accounts in Germany with positive clinical experience recommending Pepaxti. We are, of course, working hard to unlock the 2 last. We saw a 30% increase in number of prescribers in Q4 versus Q3, and we are also seeing that the duration of therapy is gradually increasing in Germany. This indicates even better patient selection and therapy management which is based on a better understanding of Pepaxti due to gained clinical experience. Longer duration of therapy will naturally further support our growth. Moving to our next step value drivers. We continue to see exciting opportunities outside of Europe. Particular, this quarter, we have progress in both our pipeline and the rest of the world opportunities. Let me start with progress in Japan. In 2024, we took several steps. We consulted with the Japanese medicines agency PMDA to get clarity on the regulatory path for Japan. During this consultation, we have ensured that we and the regulator agreed on a high unmet need for our drug and the regulatory pathway forward. This means we now have regulatory alignment and clarity on what it will take to get an approval for Pepaxti in Japan. In addition, we held several advisory boards with KOLs that confirms the high unmet need for Pepaxti. This confirmation from both regulators and KOLs has in turn triggered interest from several potential partners. We are currently in advanced negotiations with one specific partner. And as already mentioned, a deal for the Japanese market carries significant potential for Oncopeptides both in terms of financial impact -- but it also demonstrates the high unmet need for Pepaxti. Regarding our current partnerships. Our South Korean partner SCBIO have filed documents for Pepaxti to the regulatory authority for a preliminary review earlier than expected. And we anticipate clarity regarding next steps during the first half of 2025. We expect first sales in other markets where we have partnerships through the World Orphan Drug Alliance during the first half of the year. As for our pipeline, we have over the winter been engaging in exploratory discussions with U.S. FDA regarding our molecule OPD5. OPD5 is a follow-on molecule to Pepaxti with a potential improved risk-benefit profile and longer patent protection. The feedback received was positive and in line with our expectations. And we are currently working on outlining a clinical development path based on the advice from the FDA. While there is a long way from here to commercialization, we are confident that OPD5 is an asset with true potential to get us back to the important U.S. market in the future, as the unmet need for PDCs remains. This was confirmed by U.S. key opinion leaders in an advisory board that we held during the fourth quarter. To note is that, just this week, an article suggesting strong real-world efficacy and safety data for Pepaxti written by researchers at Dana-Farber Cancer Institute in Boston Harvard was published in the European Journal of Haematology. This article demonstrates strong real-world experience with melflufen in the U.S. And the authors conclude a high unmet need for new mode of actions complementing immunotherapy. The data is encouraging and confirm our view from Europe, that melflufen can really make a difference to patients also in the real-world setting, which consists of more elderly and frail patients than in clinical trials. Regarding the rest of our pipeline and particular in the SPiKE platform, we are proceeding with preclinical work. And in addition, we are currently focused on assessing the scientific rationale and business opportunity for SPiKEs in autoimmune diseases. This is a market with high unmet need for new treatment approaches and innovative medicines in multiple diseases and indications. 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 had some questions. Let's start with one about sales. Could you describe the relative sales contributions from Spain and Japan in Q4 and also how you see them developing in 2025?

I assume you mean the sales in Spain and Germany. Correct?

Yes, yes. And well, if you could comment on Italy, that would be useful as well.

Yes. So just as I said, if we look at the fourth quarter: Germany really leveled up towards the end of the quarter and had the greatest contribution to sales. When it comes to Spain, we have seen an encouraging start, as we have said, but given that we in parallel have started to sell and securing regional access -- and it's first -- at the end of last year, we managed to get 85% of the regional access. Of course, the volume is less than Germany, so the relative -- the relation between the two is that Germany is dominating. However, looking at the time from launch, Spain is very encouraging.

Okay, can you say something about the market potential in Japan?

So Japan is a large market, as you may know. It's a population of 125 million people. If we compare that to European market, I would say that Germany is the closest one, with 80 million people. And this is given that Japan has a lower incidence of multiple myeloma than the -- so the Japanese population has a lower incidence of multiple myeloma than the European population. This is, however, increasing. And it's also an elderly population, but if I am going to make some kind of comparison, I would compare the Japanese market, in terms of number of patients, with the German market in Europe.

Okay, I guess you can't give any details about how a potential licensing agreement might look like in terms of upfront and royalties.

So as said, we are in advanced negotiations and I can't comment on the details. What I can say is that this is naturally a deal that is leaning on the foundation on that we had regulatory advice. We have aligned on the regulatory pathway. And the KOLs are supporting the and welcoming the entrance of Pepaxti to Japan. And all these factors matters when you make a deal. So if we compare this to when we made the deal in South Korea: We had the KOL support, but there was no regulatory understanding or alignment. So that was much earlier deal. And I will say that this is then one step further because we have done the regulatory homework here. And as I said during the call, it will carry significant financial impact for Oncopeptides.

Yes, I understand. How long do you estimate your cash position will last? And do you expect to use the loan arrangement with the EIB?

Thank you, Richard. It's Henrik here, and I'll be happy to answer that question. No, as stated, our cash position is estimated to take us to cash flow positivity by 2026. And that is, of course, continued -- that we continues our sales uptake of Pepaxti and that we also conclude additional business development opportunities. So that's the core plan, but of course, every good plan needs to have backup plans -- and where the EIB loan certainly is one of those backup plans, but core plan is that our own business will take us to cash flow positivity.

One last question, if you'd like to comment. There have been some articles about lenalidomide and that they want to stop using it in Denmark. Do you have any comments on that? And do you think that is relevant for Pepaxti?

Well, I think it's important to comment that this is, of course, not related Pepaxti, but it's related the drug class that we had as a comparison in our Phase III study even though it's we compared Pepaxti to pomalidomide. And as you know, we have made a lot of analyses of the OCEAN trial. And in those analyses, we looked also beyond Pepaxti to fully understand the results, as we had to understand the comparator arm fully. The decision in Denmark is made by the Medicinrådet, which is a guiding body for reimbursement and payment. And so they provide medical guidance on what the regions in Denmark should be using, and their analysis is based on real-world data from Denmark. And even though that analysis is made on lenalidomide, it basically aligns with the analysis that we have made for the full IMiD group. So that is just to frame what this is all about. Then when it comes to Pepaxti, I would say that this is a decision that is made completely independent of us and it's not related the comparator drug of our study. And it's not related Pepaxti. So from our perspective, we, of course, welcome that data is analyzed and that different authorities are taking decisions that support patients to get the right treatments, but I don't see any immediate impact on Oncopeptides based on this decision.

The next question comes from Patrik Ling from DNB Markets.

A couple of questions, if I may. First, maybe a question for Henrik. When it comes to the R&D spend, you talked about R&D coming up in the quarter. And there were some one-off-ish costs related to the EMA inspection. Maybe you can help us sort out a little bit what is -- how much those costs were in the fourth quarter, how much you actually spend on -- and how much you actually spend on the preclinical side.

Yes. Thanks for that question. And I will say that, if you look at R&D spending in the third quarter, that is what you could put in your model for 2025. So the difference between Q3 and Q4 is really made up of those items that you just mentioned.

Okay, great, great. And then also, on sales and marketing, where we see a step-up here. And I suppose it's you building out your organization. And is Q4 a good proxy, or should we expect it to increase from this level? Or are there any initial start-up costs for building the organization that we should be mindful about?

I think, if you zoom out and look at total operating expenses, you should expect that 2025 will not be an increase compared to 2024, if you take the full picture, so to speak, but in that, of course, we -- as I just mentioned, with R&D, that is expected to go down during 2025. And what will go up slightly is the sales and marketing costs because, as you mentioned yourself, we're still building the organization, albeit we are very much in the end of that building.

Okay, great. Then I actually entered the call a little bit late, so maybe I missed that when you were talking, Sofia, but you said that the markets where you're in right now, which I suppose is Spain, Germany, Italy, Austria and Switzerland, are the markets that are needed to take you to cash flow positivity. Was that correct?

Yes, that's correct. So with those markets where we are currently [ selling ] and where we have secured market access, we can reach our profitability goal towards the end of 2026.

But how should I look at that statement in relationship to what you write about 12 months of going concern; and Henrik's comments about a deal in Japan, that, that is very important for your ability to reach cash flow positivity?

Yes. I mean cash flow positivity is connected to the sales range that we have supplied and that it relates to Pepaxti in Europe, but outside of that, we also need to conclude additional partnership deals, yes, if that is clear enough.

Okay, okay. Great, good. That was all from me.

[Operator Instructions] There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

So in addition to the spoken questions, there has been a few written questions, mostly have been covered by the verbal questions. One part of a question, asking for an update on Norway.

Yes. So when it comes to Norway -- and thank you for the question. We are still in negotiation with Norwegian payer. I think it's well known. And if you follow the debate in Norway, you will see that it's difficult to get reimbursement in Norway, based on the process they're having and their way of negotiating, but we are in that process currently. And we will, of course, update the market if we should conclude anything.

Great. And last question from the written questions. "When you say significant impact for Oncopeptides financially in regards to Japan, I want to know if that's related to the company's SEK 400 million yearly sales in the end of 2026." So just to understand the substance of significance.

So when it comes to our profitability goal and when we have been talking about sales, just like Henrik just mentioned, we are then referring to European sales, so we don't anticipate or expect that we would start to sell in Japan before the end of 2026. Having said that, a deal is, of course, connected with different milestone payments such as an upfront payment. And just as Henrik mentioned, it will be important for us to, up until that time point, secure partnerships. And Japan is one of the examples and where we are most advanced to be able to do so, but I would also like to reiterate, as you're asking about the substance of the -- significance, that for Oncopeptides, a Japanese deal, and I mean you can look at the different hematology deals that has been made in Japan in the last year, comes with significance for us also on the financial -- from a financial viewpoint.

That's all the written questions there is. Any last, concluding remarks?

So once more, thank you for joining. And thank you for the questions that you have posed. 2025 is the Oncopeptides 25th anniversary. And I am optimistic about that it's also going to be one of the most exciting years in its existence due to all the topics that we have mentioned today, so for now we will continue to work hard to reach our goals and be able to update you on progress. And I wish that all of you have a good day and rest of the week.