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

Hello, everyone, and welcome to the PharmaMar First Half Results 2021 Conference Call. My name is Davy, and I will be coordinating this call. [Operator Instructions] I will now hand over to your host, José Luis Moreno, Head of Capital Markets from PharmaMar, to begin. So José, please go ahead.

Thank you, Davy, and good morning to everyone. I'd like to welcome to all of you to first half '21 results conference call. On the call with me today are MarÃa Luisa de Francia, our Chief Financial Officer; Luis Mora, Managing Director of PharmaMar; and Pascal Besman, Chief Operating Officer of PharmaMar in the U.S. As usually, following our prepared remarks today, we will open the line for questions. I'd like to remind you that today's conference call may include forward-looking statements regarding future events or the 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 obligations to update any information provided herein, and we refer you to our safe harbor statement on our corporate presentation, which is available on our website together with the press release of our results we released yesterday. As for the results. I would have to say that our recurring business continued growing at a very nice rate, in fact, 53% up during the first half of this year compared to last year. And this has been mainly driven by the oncology business. As for royalties of Zepzelca coming from Jazz sales in the U.S., the information we provided in our report for the second quarter is an estimate since information about the amount of Jazz sales of Zepzelca was not available at the date of the publication of our results. So Jazz will release their results next week, and we will hear what the actual sales of lurbinectedin in the second quarter were in the U.S. It is also important to highlight that during this first half of the year, we have started 2 Phase III trials: NEPTUNO, one of them, which is recruiting for COVID treatment with aplitidaxine; and the Phase III trial of Sylentis with tivanisiran, which is currently recruiting for dry eyes associated with Sjögren's Syndrome. We also expect to start 2 new Phase III trials in oncology, both of them in both with lurbinectedin before the year-end, one in small cell lung cancer and another one in mesothelioma. Now to go over the results with further details, I'll turn over to MarÃa Luisa. MarÃa Luisa, please.

Thank you, José Luis. Good morning, and thank you all for joining this earnings conference call. I will refer to the 3 most significant items of the financial statements, such as revenues, results and cash flow, including cash position, which will give us a clear idea of the company's financial situation. First, with regards to revenues, I would like to highlight that recurring revenue, which comprises our own sales and royalty earnings received from our partners, has increased by 53% to EUR 82.4 million in June 2021 compared to EUR 54 million last year. In this regard, we would like to point out the good performance of lurbinectedin in Europe under the temporary authorization of use program that has seen revenue increased 169%, up to EUR 15.9 million in June 2021. With respect to APS sales, it has increased to EUR 7.5 million from EUR 2.6 million in June 2020. Yondelis net sales in Europe remained stable compared to the same period last year. However, I would like to draw attention to gross sales, which has increased by 2.3%. Royalties received from our partners amounted to EUR 17.4 million, including EUR 16 million from Jazz Pharmaceuticals. However, please note that the second quarter 2021 amount is an internal estimate. Nonrecurrent revenues are those from our partners agreement, upfront and milestone. Whereas in the first half of 2020, we recorded EUR 115 million of this nonrecurring revenues mainly from Jazz, at June 2021, we have recorded EUR 16 million. R&D expenses increased by 19% compared to June 2020 to EUR 28.9 million as a result of the preparation and activation of new Phase III trials in oncology, virology and ophthalmology. Operating expenses were reduced by 4.7%, especially in commercial and corporate expenses. All of the above led to a net profit for the period of EUR 43 million compared with EUR 113 million for the same period of the previous year. Comparing between years, we have, of course, to take into account that last year, we had the effect of the upfront payment from Jazz and the milestone for the lurbinectedin accelerated approval. In the first half of the year, the company's operations have generated positive operating cash flow of EUR 13.3 million. At June 13, our total debt amounts to EUR 53 million, and total net cash, EUR 164.3 million, similarly to loans at the end of December 2020. To summarize, recurring revenues keep their growing trend. R&D investment increases along with trial activity. Compared to 2020, net income is impacted by the recording of the Jazz Pharma revenue. We have generated operating cash flows, and we maintain a net cash position that allow us to address all ongoing projects without stress. We do not expect significant changes in this trend in the second half of the year, with the exception perhaps of an uptick in R&D as the 2 oncology Phase III start. And now, I pass the microphone to Luis Mora.

Thank you, MarÃa Luisa. Good morning. Well, in terms of the Yondelis, as MarÃa Luisa said before, the sales of Yondelis is going as well in this quarter. We increased the units, and we maintained our market share. Now we consider Yondelis as a standard of care in soft tissue sarcoma in the second line. It's important to remember and remarkable the activity we do in the rest of the world. You remember in the end of '19, we recovered from Janssen the rights for several countries in the rest of the world. And now, in many of these countries, the market authorization of [ hold and transfer ] is ongoing. Is almost 50% of this market authorization of [ hold and transfer ] is already done, and we expect that these revenues come in this quarter -- started to come from these partners, even increase in the following quarters. It's important, too, the approval in Australia, which never has before approved Yondelis for Soft Tissue Sarcoma, our partners in Australia, [ achieved approval ], and they now are in the process of full market access. Like Australia, in other emerging countries, like Brazil and other countries, we expect several approvals in the next quarters. And this is a business we expect to increase in following years. Regarding, Zepzelca, the compassionate use program is going very well. It's on registration. The drug works. Is well perceived by the doctors and it covers a huge medical need for this terrible disease. In fact, we met with the FDA for the clinical trial, pivotal trial, confirmatory trial. We will [ see that in United States ] and in Europe for approval. The meetings was very well, and we maintained our authority to start this trial in the second half of this year. Regarding the other important trial, mesothelioma, the same. The same done as [indiscernible], we maintain our plan to conduct this trial in the second half of this year. The first patient in [indiscernible]. In other parts of the world, the countries under all this programs, like Australia, Canada, Israel, et cetera, where [ mesothelioma ] was submitted. The process is ongoing. It's well underway, and we expect that in several months to announce some good news. This is our expectations. Regarding P14, the clinical trials that we announced in the last quarter, we maintained -- is already all prepared to start these 2 Phase II trials with P14 in the second half of this year. And Aplidin, plitidepsin, you remember, we started a Phase III trial in COVID-19. We finalized several months ago the Phase I/II. We achieved the recommended dose, and the secondary endpoint was efficacy. We achieved both. The NEPTUNO trial is the name of this pivotal trial. It was started, even the recruitment phase, in several countries, like Portugal, Spain, France, Greece, et cetera. And South America, too. We expect to finalize before the end of the year, the equipment and the initial data in the first quarter next year. Until now, there's not any relevant news about this trial because it is ongoing. And this is the most important fact regarding the products. So now, Pascal will be in detail in some of them.

Thank you, Luis. As Luis said a minute ago, we recently met with the FDA, and we do plan to initiate our confirmatory relapsed small cell lung cancer trial in the next few months with first patient in this year. This is expected to be a 3-arm trial of lurbinectedin mono versus the combination of lurbinectedin irinotecan versus physician's choice of topotecan at the full approved dose for irinotecan. The trial is expected to also serve as registrational for other jurisdictions. This trial is PharmaMar's exclusive responsibility as per our agreement with Jazz. And to preempt all of you, no, it's not time to discuss more details today. Speaking to small cell lung cancer, Jazz and Roche announced earlier in the previous quarter, in Q2, they plan to run a global first-line maintenance trial of Tecentriq plus/minus lurbinectedin, and this trial would certainly successfully help lurbi move upstream, which implies more patients for longer. As for the mesothelioma indication, Luis just mentioned as well that the trial was a little bit behind. However, we still hope to start this trial this year as well. The trial is planned to be a combination of lurbi and a checkpoint inhibitor in the relapsed setting. Again, once it's finalized, we will be able to discuss it in greater detail. We have 4 lurbinectedin presentations at IASLC or World Lung virtually in Denver, September 8 to 14, where the abstract titles will be released August 9 and the abstracts themselves a week later. However, don't look for ATLANTIS because it's been chosen as a presidential presentation at the plenary session on September 9, and those abstracts will not be released prior to the day in question. And as it's a presentation at the plenary, there will not be anything in the abstract. While the trial did not meet its primary endpoint, we're excited that it has been chosen since, while the efficacy was not sufficient to meet the primary endpoint, this is an opportunity to showcase that the safety is proving to be a real differentiator as a new therapeutic option in relapsed small cell. This validation is testimony to the lurbinectedin value proposition, so we're very pleased with the presentation slot. And lastly, in business development, we exceeded goal of ours for the year. We are currently active in 6 discussions all for solid tumors in the EU, and we hope to be able to close something this year. However, as I want to remind every time we have one of these calls, it takes two to tango, and so we can't say anything until we [indiscernible]. With that, let me turn the microphone back to José Luis to conclude and introduce your questions.

Thank you. Thank you, Pascal. And with this, we have finished our remarks today. So Davy, we would like to open the line for questions. So we are glad to take a question from the audience.

[Operator Instructions] Our first question comes from Joseph Hedden from Rx Securities.

I've got a few, so perhaps a [ lot of time. ] The first one on the confirmatory trial. I appreciate you're not going to say anything more at this time. But I just wanted to probe into the rationale you'll be including irinotecan in the third arm. Is this because you're excited about the results that you saw from the [ basket ] trial or because there's a cohort of physicians prescribing irinotecan on the target? So anything you could say there? And then also, how far has the FDA signed off on that design? Or if you've got discussions yet to come?

Okay. So I think you asked why irinotecan is in the control line. And no, I'll answer what we did want after. But the reason it's in the control arm is, although it is not approved, it is in the NCCN guideline, and its market share is greater than topotecan's in the setting. Furthermore, the fact is that topotecan in the clinical trial setting introduced its inherent bias by basically recommending doctors only recruit very fit and healthy patients, notwithstanding the small cell lung cancer, because anything other than a very fit patient can't tolerate topo. And so we want the control line to be 50-50-ish between the 2. It will be stratified. And this way, we'll get a more real-world experience, which we think will be -- optimize our chances of success. That what you wanted -- is that the question that I answered? The question you asked?

Yes. Sure. Yes, that was good. And then the second one...

Let me just answer that one, too.

Yes, sure. Yes, yes.

Our teams met with FDA recently. We believe we have agreements. We're going to push forward with that, and when the trial starts, we'll let you know.

Great. So second one, just on the lurbinectedin compassionate use sales in Europe, that's a slight tick down in the quarter-on-quarter. If you could just talk more about what might be driving that?

Well, this is all dependent on the quarter, but we observed that's stable now in the last 2 quarters -- the stable demand. You can see in the 95% of the compassionate use is only in France. The compassionate use rule is to use the drug when the approved therapies are exhausted. Then this use of lurbinectedin in France is in third line, okay? Then this is depending on the patient. That is with the patients. Taking account under COVID-19 period, the diagnostics for cancer lost about 10% of the patients in diagnostics. Then not always quarter-by-quarter is the same. And in third line, small cell lung cancer is not a lot population. With this growth, even in third line, many patients receive more than 4 cycles. And this is very important because usually, the expectancy of life of these patients in third line [ is maybe ] no more than 3 months. Now lurbinectedin contributes because it's not [indiscernible] 4 cycles. It's impossible to that. But this is the considerations you need to take into account.

Okay. So is it possible that you -- because most of the sales are coming from France, have you -- could you now have treated a bolus of patients, and that means that sales are lower in subsequent quarters going forward?

No. We don't know every quarter because this special program is not a cohort. It's patient by patient, is authorized by French authorities, okay? Then it's difficult to know how many patients will be treated. Not only quarter by quarter, on a monthly basis here.

Okay. Sure. Sure, that make sense. And then lastly, I just wanted to delve into the business development discussions. You mentioned -- Pascal's discussions in solid tumors. Is there anything more you can say about the stage of assets, legal commercial deals or some pipeline. And then potentially deal values, what could you guys look to give away in an upfront payment for instance?

All right. Thanks, Joe. Well, let's see what I can do to help you. We've been -- we've done a screen starting with over 100 assets and triaged it down to about 10, primarily solid tumors. And from those, 6 are active, some commercial, some about to be -- some earlier stage requiring developmental work. We're actively negotiating on 3 right now. Some talks are recent. Some are more advanced. And we are continuing to hope we can bring something to a close this year. So I hope that helps as far as I can divulge without getting in trouble with someone sitting next to me.

Our next question comes from Christian Glennie from Stifel.

On Zepzelca and the royalties, U.S. royalties, just trying to get a bit more of a sense from how you're positioning this. Obviously, we don't have the Jazz number yet. That is coming out next week. So is the math you put -- basically, an implied EUR 8 million in second quarter would be flat in the first quarter. Is that just a placeholder because you had EUR 8 million in the first quarter? Or is that sort of based on what you expect ultimately Jazz, here reporting a sort of flat revenue number in the second quarter? If it's flat -- is it -- what do you think -- would that then be the third flat quarter for the product in the U.S. and what might be going on there?

Well, [ basically ], we don't know how much is the sales. I couldn't actually even say. This is our best estimation. This is the information we have. You say in 3, 4 days, Jazz will disclose with the real number. But currently, the agreement is very clear timing to send us the numbers we will have, but we need to close the balance sheet and the P&L. And with the information we have, we can do the best estimation, but we don't know the real number.

Yes. Okay. It's just that the impression in the guidance that you seem to be giving the market is that you're expecting flat revenues?

No, no, no. We don't expect nothing. We expected what they do, but [ I repeat it's -- ] in the accounting rules and the information you have, you need to do the best estimation, but we have had -- even in monthly basis, we don't have the numbers. We have quarterly basis. And we don't have today. Then we would expect that is based on our best estimation, that's all the information we have. We don't have more information to you to disclose, sorry.

And similar, Christian, in terms of the color, we'll get that from Jazz on Tuesday, the trends they're seeing.

Yes. Okay, okay. Fair enough. Interesting. And then on -- I know you're not -- don't sort of draw too much further detail in terms of the confirmatory trial. I guess the other ones, can you comment in terms of the potential time lines and end points?

We'll do that once we are -- have finalized with the trial, Christian. We'll do that then, which hopefully, as I said, if we're going to start the trial with our first patients in this year, you probably only have a couple of months to wait for that at the outset.

Yes. That probably is a side we never commented before, but was presented the preliminary data in the World Congress Lung Cancer, I think, from [ 2 days ago ]. The combination with an active [indiscernible], which I remember was only the result of 30 patients. This cohort is ongoing. Now we have more than 59 patients in total. We expected to complete the single-arm trial until we arrive to 100 patients, okay? And this will help the patient -- you remember, in the first 30 patients, the response rate was higher than 55%. I know the barriers because it's not a randomized trial, but the PFS was higher than 8 months. The overall survival was not reached because the patients are still alive fortunately. And we will finalize this line in combination with irinotecan with around 100 to 120 patients, probably not in U.S.A., but in other areas, which I would say, where it's not submitted. [ Obviously, ] we will approach in order to show the data and it's probably an opportunity for the drug in other jurisdictions where the dossier is never submitted.

Okay. Sorry. So just to clarify then. Times of release, [ just help us out ] you're going to take a 100-patient-odd trial. What's the time line on that data, sorry?

[ Timing ] on data of the irinotecan-lurbi combination getting up to 100 is probably next year.

At the end of next year.

Yes. Okay. And then sorry, I missed just the comment on the ATLANTIS data in terms of the conference and when that conference is, sorry?

If IASLC, also known as World Lung, the conference is September 8 to 14 virtually in Denver. ATLANTIS is a presidential presentation at the plenary session 2 on September 9 at 2 in the afternoon, Madrid time, 6 something in the morning, Denver time. So that's where it's being presented.

Okay. So finally, on the confirmatory trial. Is this -- you've obviously been in discussion with FDA, but what about EMA on the trial design?

Well, we said is that we think that this trial will serve both.

Our next question comes from Alvaro Lenze from Alantra.

Most of them have already been answered, but I just wanted to know whether you could provide some color on what the potential opportunity is in mesothelioma if you finally get the orphan drug and start Phase III clinical trials. And also, moving on to the time line, a follow-up on the previous question on the approval from the EMA on small cell lung cancer of [ Zepzelca ]. I understand that the Phase III clinical trial would be valid also for the EMA, but what would be the regulatory timing of that once the trial were completed? Because I understand that this -- for the FDA would be just to give you the full approval. I don't know how lengthy the process with EMA would be. And also on Diagnostics, sales, of course, are falling due to due to the lower contribution from COVID testings, but still it looks to be somewhat below 2019 levels, even though you have some new products. So I don't know whether you can comment on what should we expect going into second half of the year.

Regarding your 2 first questions, the orphan drug for epithelioid mesothelioma is very interesting because in Europe, you have more data protection exclusivity in the market. The second one, in some countries, you have the best market access, less [indiscernible], and other minor advantage like in less taxes in the regulatory process. But the most important one is the more years protection in the market and the market access pathway in several countries, okay? Regarding the time line, we don't disclose the time lines now for the regulatory submissions, future regulatory submissions. The confirmatory trial of -- [ the pivotal ] trial for Europe when we will start the trial, we will announce the estimation timing. But if you hear my statement, I said before, there is an opportunity in other areas outside U.S.A. and the countries under all this program with the combination ongoing, lurbinectedin and irinotecan. Like similar data than the first 30 patients, we will approach to the authorities in order to accelerate the drug to the market, okay? Regarding [ Diagnostics sales, ] MarÃa Luisa?

Yes. Yes, yes. Regarding Diagnostics sales, you're right, are slightly below 2019, still because the activity in non-COVID diagnostic in the hospital, et cetera, it's still recovering and it's not at the same level that in 2019. It's not 100% yet. We expect that in next quarters, it will increase, reaching the levels pre-COVID.

Okay. And a follow-up, if I may, coming back to mesothelioma. Maybe you can run us through what is the target population size? What is maybe the potential -- the current market size of the second line in mesothelioma of the reference product? What the market opportunity could that be from the -- yes?

According to the database we have today, the incidence of mesothelioma in Europe is very different in different countries, depending on asbestos and other things. It's about 20% higher than soft tissue sarcoma, okay? But taking account, we don't know how many cycles that will be the [ size ] of the trial, the clinical benefit achieved in this trial. The one thing is the size of the market, the other thing is [ the ongoing ] treatment for these patients and the other one is that will be the result of the trial. But if you -- the question is the size is about 20% higher than soft tissue sarcoma.

We have no further questions, so I'll hand back over to Jose for closing remarks.

Thank you. Thank you, Davy. Thank you very much for your help today. And before we finish, let me add that as a closing remark, Zepzelca has generated over $200 million of revenues in its first year in the market in the U.S., which is -- it has a special merit given that it has been achieved during the difficult situation created by the pandemia. Similarly, Yondelis, and as Luis pointed out before, despite of being in the market for 30 years, it has held its market share and its own size like in last year. These commercial successes have helped, not only to make the company profitable, but also has contributed to having the company fully funded to carry out all of its development plans that we have ahead of us. So just finally, let me just say, we remain committed to helping patients with serious diseases as to improve their outcomes. And we would like to thank you all participants for joining us in our conference call today. And for those who would like to meet with the management, we will be participating in the forthcoming Citi, Wells Fargo, Morgan Stanley and Wainwright Healthcare Conferences, all of them taking place between the first and second weeks of September. So we're going to have a pretty busy September. We hope to see you there, and thank you for joining the call today. And we wish you enjoy your summer break. Thank you.

Thank you all for joining today's call. You may now disconnect your lines, and have a lovely day.