Pharma Mar, S.A. (PHM) Earnings Call Transcript & Summary

Greetings. Welcome to the PharmaMar conference call in relation to license agreement for lurbinectedin signed between PharmaMar and Jazz Pharmaceuticals. [Operator Instructions] Please note, this conference is being recorded. At this time, I will now turn the conference over to your host, José Luis Moreno. José, you may now begin.

Okay. Thank you, Rob, and good morning to everyone. I'd like to welcome all of you to our PharmaMar conference call in relation to the recently signed license agreement for lurbinectedin in the U.S. with Jazz Pharmaceuticals. With me today are Mr. Pascal Besman, our U.S. COO, who will give you an overview of our program in small cell lung cancer with lurbinectedin and the regulatory process; and also Luis Mora, our Managing Director, who will give some details about the partnering process and will also speak about the strategy of PharmaMar going forward. And following our prepared remarks today, we'll open the lines for questions. And very briefly and before we start, I'll just mention that today's conference call might include some forward-looking statements regarding future events or future financial and operating performance of the company. Such forward-looking statements are only predictions based on our current expectations, and actual results might vary from those projected. We disclaim any obligation to update any information provided herein, and we refer to our safe harbor statement on our corporate presentation, which is available in our website. That said, as you all know, on December 19, PharmaMar and Jazz Pharmaceuticals announced an exclusive U.S. license agreement for lurbinectedin. And as indicated in our communication to the market back on December 19, the main terms of this agreement stated that PharmaMar will receive an upfront payment of $200 million, up to $800 million in potential milestone payments. Out of this $800 million, $250 million will be paid upon the achievement of accelerated or full regulatory approval of lurbinectedin by the FDA within certain time lines. And PharmaMar is also eligible to receive up to $550 million in potential commercial milestone payments. All these income that I just mentioned might further increase if all our indications are approved with lurbinectedin. Also, under this agreement, PharmaMar retains production rights of lurbi and will supply this product to Jazz Pharmaceuticals. And the -- just to mention for clarification, the upfront payment will be booked in 2020, this year, once we receive the clearance under the Hart-Scott-Rodino Act. And this summary being made, let me turn it over to Pascal Besman now.

Thank you, José Luis, and my greetings to everyone as well. I thought it would be helpful to give some historical context of how the partnering discussions ended up happening because there were quite a few little twists of fate along the way. So just going back a few years, when we started the ATLANTIS randomized trial based on our discussions with FDA at that point, it was agreed that we would expand our monotherapy cohort up to about 100 patients and that, that would support the randomized trial with the monotherapy activity. As time went forward, we get to ASCO 2018 where we had the first interim look of the first 60-odd patients of that monotherapy cohort, which showed very striking activity that, frankly, surprised us as well. And as we noodled through that, it was decided later that year to have an end of Phase II meeting with FDA to discuss the possibility of an accelerated approval pathway for the monotherapy. And that meeting took place with FDA in December of 2018 where, essentially, the FDA agreed that it was possible that the data, when finalized, could support an accelerated approval filing, and they gave us a few things that they wanted us to come back with. As we led into that meeting, we had had some preliminary partnering discussions with a number of entities with various countries, various flavors. And as you can imagine, all of those put their discussions and thoughts on hold awaiting those FDA minutes to see where we stood. As it happens, the FDA minutes clearly said that there was a possibility and presaged a future FDA meeting, and so those partnering discussions remained on ice as everyone said we'll wait to see those meetings because you would be chopping a year off the time lines if it's a yes, so it changes the dynamics and the financials very dramatically. So we then ended up having this pre-NDA meeting with FDA in August of last year. And at that meeting, it was decided that we would file off the full 105 patients that were presented at ASCO last year. And at that point, we were able to really turn the light switch on for all those partnering discussions and try to drive this to a short-term fruition given the accelerated approval had taken a year off the time lines and a number of months off the review process as well. So that I thought would be helpful just to give you the context of how we ended up here. And we did run a thorough process. Then I'll hand it over now over to Luis, who can describe that process and how we came to the conclusion that we are very happy with partnering with Jazz Pharmaceuticals. Luis?

Yes. Thank you, Pascal. So good morning. Well, the process of the -- for the -- achieve this success deal was very interesting. You remember the company, PharmaMar, announced last year. We were thinking about several options, so we move along to the American market or we move to the co-promotion model from the beginning. But at the end of the day, we decided to move to the American market through the full license. In this process, we received several options. Fortunately, we have the capacity to select for us what is the best option, and the best option was Jazz Pharmaceuticals. Why Jazz Pharmaceuticals? Well, part of the economics is already disclosed in our press release. Jazz Pharmaceuticals demonstrate very commitment with our drug. As far as you know, small cell lung cancer is a high medical need, and we think that Jazz is the right company to approach to the patients, to the doctors and to maximize the value of the product in this market. Jazz Pharmaceuticals demonstrate the high capabilities, high skills in the management team. And in the several meetings we had with the company, with Jazz Pharmaceuticals and with the other companies, but Jazz Pharmaceuticals demonstrate to us the capability to build lurbi franchise in U.S.A. And we ensure for both parties, we work together in order to maximize the product in this market. The process will be a typical process in the license in those lines as follows. You can see in the press release the structure of the license is not different with the other license in the market. But putting for lurbinectedin and for PharmaMar is important because it bring to the all the investors of the company the real value of the product for this market. And now for PharmaMar, this deal and this approach to the American market will impact in our P&L in the several years. But bringing the opportunity to accelerate for PharmaMar many problems with many assets we have in our pipeline, the preclinical phase in order to accelerate this process and to build a very robust and very interesting pipeline. In fact, we expect that in not more than 2 years, 2 or 3 new candidates will start the new clinical trials. And now we're in discussion to the opportunity to incorporate outside assets in our business, in our pipeline. Then in summary, we consider this very important deal with Jazz, and Jazz is the right partner for the product. Thank you.

Okay. This has been behind our transaction explanation to what we announced on 19th of December, and then we'll open now the time for questions.

[Operator Instructions] Our first question is from the line of Jason Gerberry with Bank of America.

I guess just a couple from me. Can you talk a little bit about the PDUFA file -- or I guess the PDUFA date and the filing? And are you anticipating you'd get an indication for relapsed small cell lung inclusive of both second and third line? Or do you think that it would be specified to patients with 2 prior lines of therapy based on the support of study? And can you just clarify -- I know that the $250 million regulatory milestone, it says payable on accelerated or full. So if you get accelerated, is the payment effective? Or do you need full approvals? If you can clarify on that front. And then I'm less familiar with the story, so if you can clarify the duration of patent term extension you're thinking you'll get off of the composition which, to my understanding, expires in 2024?

Well, the regulatory process is ongoing. We applied for accelerated approval. Not only accelerated approval, we applied for priority review, as far as you know, with cancer and its orphan status. Then accordingly, the rules from the FDA after the submission is about 8 months, a maximum PDUFA date. Obviously, they can extend. But in the last 2 years, if you analyze last year, 2 years, before the priority review granted, they achieved the FDA opinion before the PDUFA date. Then accordingly, the rules with the FDA and the data we submitted [indiscernible], theoretically, the PDUFA date will be in August this year, okay? But it could be earlier or after, okay? Regarding the label we submit for [indiscernible] first line I think will work to resistant and sensitive patient, even localized disease or extensive disease, it doesn't matter, okay? This is what we will include in the discussion with label. But as far as you know, all of you, at the end of the day, will be FDA review issue on decision like the other drugs. Regarding the milestones, we disclosed in the press release up to $250 million if we achieved the -- some type of approval. We don't disclose more details of these milestones. Regarding the IP, sorry, the IP, as far as you know, it's orphan. Then the orphan drug from the approval, if we achieve the approval in 2020, this year, it was granted 7 years of data protection. Apart from that, the compositional marker will expire in 2024, but we'll have the possibility to expand 5 years more until 2029.

Our next question is from the line of Christian Glennie with Stifel.

Christian, if you're talking, you're on mute.

Can you hear me now?

Yes. We do now.

Okay. Sorry about that. Congratulations on the deal. Just looking ahead to what's in play here in terms of -- for the rest of this year, particularly on the timing of the ATLANTIS data and the potential implications of that vis-à-vis an FDA review. Firstly, just on the ATLANTIS data, on the timing, what's the expectation of data there and how you and/or you think the FDA will be viewing the potential read across from the outcome of that study versus the ongoing review?

Pascal?

Thanks, Christian. So the ATLANTIS at this point, we would say, is likely that we would have the data in mid-year. We don't have any more specificity at this point, which, given what Luis just said previously, probably brings the data during review or around review. It's certainly possible during review. You have to bear in mind that this is not exactly a self-trial. FDA is aware of the trial, was aware of the trial when we met them in the pre-NDA meeting and the end of Phase II meeting. And essentially, the decision to encourage and let us file for accelerated approval decoupled with 2 trials by which FDA is basically saying that the accelerated approval from the monotherapy stands on its own. Now clearly, FDA is always going to want to be comfortable with all subsequent data sets. However, if they envisage that they were going to have to do a thorough review of ATLANTIS, it clearly doesn't mesh with the time lines of accelerated approval. And so our understanding in that, which is in the minutes, is that by decoupling the trials, they will certainly look at the data, make sure that the adverse event profiles do not present anything new and unexpected. But to a large extent, they will not do a full review of that data regardless of exactly when it comes. Now if the ATLANTIS trial can serve to convert the accelerated approval to full approval, that, obviously, would be a review issue and will come at a later point. And if it cannot, the presumption is that we would have to do a confirmatory trial, which would be lurbinectedin versus topotecan head-to-head.

Okay. And then on the -- could you talk a little bit about the opportunity in the second line given the sort of slightly changing dynamic in first line? Obviously, some new I-O combos there -- combinations. TECENTRIQ, obviously, IMFINZI coming, albeit that KEYTRUDA looks like it's probably fallen over this week in the first line. What's the sort of pull-through into the second line? Is there potential recycling between I-O options in first line before moving on to second line? How do you characterize that second line opportunity?

Well, now our submission to the FDA, as I explained before, is for the lack of second line, not the first line. You say the first line now is approve atezolizumab plus chemo, is approved durvalumab plus chemo, and now probably pembro is coming. In parallel, we started some IAS trials combination with some I-O. It's not any plan today to move forward. We are focused now for the approval in second line. The regulatory process in these 3 small trials, the combination with I-O is the proof-of-concept of the mechanism of action not overlapping toxicity and they work. That's it for today.

Next question is from the line of Esther Rajavelu with Oppenheimer.

Can you walk us through the manufacturing process here and the potential for commercial supply and how you think about costs associated with manufacturing?

Yes. And in the agreement, and it was disclosed in the press release, we will sell the active ingredient to Jazz Pharmaceuticals, okay? And then the Jazz Pharmaceuticals will commercialize and put [ a realization ] process. The production process for lurbinectedin [indiscernible] is a very efficient process. We have sufficient raw materials, suppliers, et cetera, in order to be sure there's not any, any issue about the commercial supply. The cost for the drug is not disclosed, obviously, but is high costly efficient.

So as I understand it, and forgive me if I'm misunderstanding this, but this -- there is a process for actual raw material collection that involves natural resources. So how long -- can you help us understand that and help us understand how long from that process to a finished product?

It's a synthetic process. It's not a natural process. No, no, fortunately.

So in terms of commercial…

Yes. Sorry, in order to expand more my explanation, we start with the fermentation process, and then we have [ 1 8 ] synthesis steps to arrive for the active ingredients. Then this is well known, the process. In fact, we've built many, many batches in the last 5 years and is GMP, FDA approved. The starting materials was approved by the FDA several years ago, then this -- but this is all synthetic process, okay?

Got you. And the U.S. market and the EU market will be supplied from the same production facilities?

Two facilities, yes. You take in account is milligrams, okay? One cycle is 3.2 milligrams by the square meter, okay? Then we don't need tons. Then we have for both suppliers sufficient capacity for -- only use about 50% of the capacity, okay, when we achieve the big sales worldwide.

Our next question is from the line of Samir Devani with Rx Securities.

Let me add my congrats to the deal, some great terms on that. I just wanted to ask about potentially the commercial relevance of ATLANTIS. Assuming that you get approval -- accelerated approval as a monotherapy, what will a positive readout on ATLANTIS mean commercially for the sales of the drug, in your view?

So in U.S.A., the -- as far as you know, it's a single agent. But it's true, in Europe, we met with the authorities. The ATLANTIS is finished in order because we have 2 possibilities, a single agent or a combination. The commercial point of view and for the key opinion leaders in Europe and for the patients is much, much better the single agent for many things. For secondary effects, single agent. Accordingly, the preliminary Phase I, Phase II, the combination, it's much better, the single agent. The second one is easier for the patients, the administration, because it's not a combination, always is easier. And the commercial point of view, obviously, is much better because it's cheaper for the market access and easier to have a single agent than a combination. In any case, if at the end of the day in Europe, the final approval there will be the combination, okay, with the commercial point of view in the combination is 2 milligrams by the square meter, instead 3.2 milligrams per square meter. But what is included in the planned fee is when the combination stop for any reason because the patient can't receive more dose is included, they can continue single agent at the full dose 3.2 milligrams, okay? Then today, it's too early to see what will be the real impact. But in principle, we will see in Europe what will be the potential approval. In the rest of the world, not only in U.S.A. but we have the partners in Australia, we have the partners in the other parts of the world, they try to approve in the single agent.

Our next question is from the line of [ Bill Strelley with Amarin Capital ].

Congrats. Just had a quick question on the KOLs. Where do you guys see lurbi standing in terms of the mind share of where the KOLs in the U.S. are currently thinking?

Pascal?

Thanks for the question, [ Bill ]. So we have spent the last 2 to 2.5 years actively and aggressively engaging with the American thoracic oncologists, specifically those who see and treat quite a lot of small cell lung cancer, such that we have really a very strong network now of those who helped us with how we position, how we treat and things such as that. To give you a sense of the level of the reach and the network that we developed, shortly after ASCO, we engaged with that network to ask some basic questions about a U.S. expanded access program. And out of sending 110-odd questionnaires, we received back more or less 60 of them, which is really an unheard of response and is really more a testimony to the drug than the wonderful way that I worded the survey. And from that, we got tremendous feedback. And that expanded access program that we have used those feedback from these KOLs is going to manifest itself, we expect, in the very near future with a U.S. expanded access program that will allow the treating physicians all over the country, as it'll be a national IRB, to get their hands on the drug and use it on their patients who have run out of options. So we feel very good about the level of penetration, the share of mind and voice of lurbinectedin with the U.S. KOLs.

The next question is from the line of Jason Gerberry with Bank of America.

Just wanted to confirm, so will you guys incur all of the remaining R&D spend? I assume Jazz, obviously, will incur the remaining selling and marketing commitments but just wanted to confirm that you guys will incur the ongoing -- all the remaining R&D costs. And then just a question about the small cell lung market. Just trying to get a sense of the proportion of new cases that you think right now are currently progressing into second and third line, respectively. And any color you can provide on where you think current duration of therapy is, thus, if a new therapy comes along, like you guys, what we could sort of model in, in terms of like duration of therapy if we are to assume an improvement there.

Well, regarding the R&D for the lurbinectedin in the small cell lung cancer remains very, very small amount. As far as you know, the basket trial has already finished, and the ATLANTIS trials will have the readout data in the middle of the year. Then 90% of the cost of the ATLANTIS trial is already booked, okay? Then I don't know if the FDA will be some requirement, but in any case, it's not a big amount. Then this is a PharmaMar commitment. Independently of the license or not, we are committed with lurbinectedin, so it's included in our plans. The second part...

Pascal, you might take the second part of the question?

Yes, sure. So if you look at our website and look at the slide deck, there's a slide in there we put to help with this question, but I'll go through it now as well. Small cell numbers are a little bit squishy in so far as they are not done separately from lung cancer. And so you end up getting a percentage of lung. Most people say in the U.S. and in Western Europe, it's somewhere in the 13%, 16% of total. So you end up with about 35,000 new frontline patients in small cell, of which the 90% or so get treated. Obviously, when you're -- and those who are extensive stage are all getting treated platinum-etoposide, which has very high response rate. So the only ones you wouldn't treat are those who refuse treatment or are just dire prognosis. The statistics that we use for second line are around 60%, and those come from various sources. You can look at how many were treated in the atezo frontline trial, how many were treated in the CASPIAN trial of the statistics. And that number is likely to be going up as a result of I-O in frontline because I-O in frontline, in theory, is giving patients in the maintenance setting a little bit of a holiday from the chemo and delivering, hopefully, the second line a healthier patient that can tolerate more therapy. And then in terms of the duration of therapy that you asked, so in frontline, both atezo and CASPIAN had 12 months OS. And the PFS in both cases was -- I don't remember exactly but probably 7-ish months, 7 or 8 months. In all likelihood, you wouldn't dose through progression in those settings. In the second line, our duration of therapy was 5.3 months. We would expect in that setting, given the dearth of viable options, that some doctors would dose through progression because it's -- of course, you can progress and have your CR become a PR, but the drug may still be doing something better than nothing with the next best alternate. Thanks for the question.

The next question is a follow-up from the line of Christian Glennie with Stifel.

Just to clarify in terms of the scenarios here on -- so we're clear in terms of ATLANTIS. Obviously, a positive readout there. It looks like that's fairly straightforward. That would, obviously, provide options presumably in combo and mono use in the market, potentially. It provides the confirmatory trial that the FDA would be seeking anyway. But in terms of a negative outcome from that, you said that it would -- the confirmatory is still -- obviously, would still be -- the mono reviewed in its own merits. But a confirmatory trial versus topo, what -- is the thinking that they would have to then show superiority to topo? And is it really just a factor of the dosing that you got a higher dose in the mono versus the slightly lower dose in dox that would be the key differentiator here from your perspective?

It's too early to say in all the cases if, in any case the FDA require our confirmatory trial, always the trial is agreed with FDA. Then depends of the label is granted, depends of the result of the trial, et cetera, et cetera. Then now is too early, if it's needed, what will be the potential confirmatory trial, if it's conditional approval because it's not -- we don't know if it will be conditional approval or full approval or it is a conditional approval plus a confirmatory trial. But always the potential confirmatory trial is agreed with the FDA based in the conditional approval granted. Then now it's too early. In any case, it's a review issue.

Okay. And then just to clarify, I know you said about further ongoing R&D costs for small cell, obviously, minimal there. But presumably, the other potential indications and in terms of the agreement, that would be for PharmaMar to fund those other indications, but albeit that then Jazz would have further milestones to pay.

Yes. Well, this is -- obviously, lurbinectedin show a good activity in other tumor types. Now we are under evaluation, not only with our activity we consider is very good but the market opportunity for this because we have the other assets in the pipeline to invest the money in order to accelerate this process. In any case, in the end of the day, we decide to move forward for the other indication, obviously, Jazz is our partner only for American territory, not outside America. And accordingly, the agreement is opportunity to participate both companies in these potential new indications.

At this time, I will turn the floor back to our team for any further comments.

All right. Just to thank you all for connecting today to our call. And we're very excited, as you've seen, with this deal and really, really enthusiastic about our partner Jazz and very eager to start working together. This is going to be very, very good for both companies. And as mentioned today, we're also very excited about the future of the company and what this means in terms of new opportunities that we have ahead of us. Finally, just let us remind you that our management team will be available for investor meetings in San Francisco next week. We'll be there. And we have a few remaining open slots. So [ Charles ] is managing our schedule, so you should -- if you'd like to request a meeting, I'll suggest you contact [ Charles ]. And again, thank you very much for connecting today to the call, and we'll see you in the next occasion.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.