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

Hello all, and a warm welcome to the PharmaMar First Half 2022 Results Presentation. My name is Lydia, and I will be your operator today. [Operator Instructions] It's my pleasure to now hand you over to our host, José Luis Moreno, Director of Capital Markets and Investor Relations. Please go ahead when you're ready.

Thank you, Lydia, and good morning to everyone. I'd like to welcome to all of you to our first half '22 results conference call. On the call with me today are Mr. Luis Mora, Managing Director of PharmaMar; María Luisa de Francia, our Chief Financial Officer; and Pascal Besman, our Chief Operating Officer of PharmaMar in U.S. Following our prepared remarks today, we will open the line for questions. Also, the presentation we're using today for our call is available on our website together with the press release of the results we released yesterday. As you have seen in our results, the first half showed the continuous growth of our recent recurring business, as we've seen in previous years. And this growth is mainly coming from our oncology business which is our core business. It is important to highlight also the fact that we're generating cash, EUR 35 million in operating cash flow, which enhances our solid cash position of over EUR 250 million. With this solid balance sheet, we can finance our strategic plan internally, which, as we said, has 3 main parts, which are -- what we're currently working on. First, further developments with lurbinectedin which includes the LAGOON trial is currently recruiting. Also, we plan another trial -- Phase III trial to start Yondelis and [indiscernible] The second part is further developments with the rest of our molecules, basically [indiscernible] and other molecules that we expect to get in. And the third part is the corporate development, which is basically -- most of our efforts are to in-license a drug that we could include in our sales force. But let me turn over to María Luisa now so we can start with financial. María Luisa?

Thank you, José Luis. Good morning, and thank you all for joining this first half results call. The cumulative financial data for the first half of the year saw a 5% increase in recurring revenues compared to the first half of the previous year, as you can see in this Slide #6. With regard to sales in oncology segment, with a strong hold remain unchanged compared to June 2021, 3 things should be mentioned. First, net sales of Yondelis declined slightly, about 2%, although gross sales grew by nearly 6%. Second, early access sales of Yondelis in Europe declined as a result of a new law in France, regulating the prices of drug offered under the temporary authorization for use system now called Authorization [Foreign Language]. This new law entails significant discounts for [indiscernible]. In the first half of the year, these discounts for Zepzelca amounted to approximately 30% of the total revenues received in these 6 months. And third, these declines were offset by increased sales of Yondelis raw material to our partners in the new license territories other than U.S. and Japan. As for the other part of recurring revenues, royalties, the first half of 2022 showed an increase of 24% to EUR 21.5 million, EUR 1.6 million are from our royalties from Yondelis and EUR 19.9 million are royalties received from Jazz Pharmaceutical for [indiscernible]. As you know, royalties for each quarter are calculated according to PharmaMar internal estimates. We had to lower first quarter estimates after knowing the actual figures. Therefore, the second quarter estimates represent a growth of about 8% in relation with first quarter. On the expenses side, the main thing to note is the 39% increase in R&D expenses, up to EUR 40.3 million as a result of our efforts focused on the advances of our trials in Phase III, which Luis Mora will now explain in more detail. Other operating expenses have also increased, reflecting mainly the coming back to normal commercial activities after finishing lockdowns. Therefore, EBITDA for the first half was 21% lower than in the same period last year mainly due to the higher R&D expenses. The same can be said on the -- of the net results, which amounted to EUR 34.9 million compared to EUR 43 million at June 2021. However, operating cash flow generated EUR 55.2 million in the first half of the year, even taking into account the EUR 40 million mentioned that we have spent on R&D in this period. This positive cash flow generation has been helped by the milestone payment received from Jazz for the fulfillment of our commercial milestone for an amount of EUR 22.4 million accrued -- received in the first quarter 2021. We will now make a brief mention of PharmaMar's cash and debt as of June 2022. Group net cash, current and noncurrent amounted to EUR 210.5 million, being net total debt EUR 41 million. So total cash is EUR 251 million. To conclude, I would like to highlight the consistency of the financial statements with previous quarter, the generation of operating cash flows even with growing R&D expenditure with the consequent maintenance of cash leverage and the reduction of debt. And now I pass to Luis Mora.

Thank you, María Luisa. I want to highlight the pipeline in PharmaMar and to -- is that where this increased expenditure in R&D is made in all the areas, even in oncology, biology and RNA interference. In fact, in oncology, I want to highlight that pivotal trials are Ecubectedin is conducted the Phase II trial in monotherapy in different tumor types in Basket trial and in other tumor like soft tissue sarcoma, prostate cancer and solid tumor. Regarding Zepzelca in depth, I want to update some regulatory and clinical aspects. Regarding the regulatory, the shares for approval, marketing authorization, was higher in different countries. PharmaMar filed in U.K. and Switzerland and our partner in South America as [indiscernible] filed with Roche in Brazil, Mexico, Argentina, Colombia. We expected between December '22 and first quarter of '23, the resolution of this process, and we hope the drug finally is approved to launch the product early next year in these different countries. In other countries like Canada, Singapore, UAE, Australia, Qatar, where the drug was approved are in market access process. It's difficult now in the market access to fix it some data, but we have started next year to generate sales in these different countries, and PharmaMar will receive the royalties. Regarding the early access program, Maria Luisa explained the situation in France. In France, the volume of patients treated is increased. That is very good for us, and demonstrate a huge medical need and the Zepzelca is well received by the physicians. In China, we are now [indiscernible] as well our partner Luye Pharma Group, was approved in the early access program, in particular area South West in China for early access. Other countries like Asia or U.K. are ongoing in the same early access program, were treated in the last 2 years about 2,800 patients in compassionate use. Regarding clinical update, LAGOON trial is recruiting after several months of logistic problems now with recruiting is approved in several countries is open in several hospitals in USA and Europe. IMforte trial, fertilized maintenance therapy in small cell lung cancer is conducted by our partner, Jazz Pharmaceutical in agreement with Roche is well under way, and is ongoing. And finally, the other pivotal trial Mesothelioma will remain -- all of you is in combination with an activation implant monotherapy. We are ongoing negotiation with the big pharma. We will support this trial with the monotherapy, and we remain to expect that trial will start before the end of the year. The other 2 new drugs -- we'll finalize all the preclinical tests, all the dose are already submitted, and we expected to start the clinical trial before the end of the year. Regarding RNA in dry eye disease associated with the Sojgren syndrome, that the people on trial, activities are ongoing underway we expected to finalize the equipment in first quarter next year. And the other pivot trial for safety these trials are needed for a potential submission in the future is ongoing too. Finally, regarding in virology area, NEPTUNO trial SARS-CoV-2 are ongoing is slowly than our expectations. As we announced at the end of June, we have more than 210 patients included, then it's ongoing and recruiting. And we plan interesting trial Phase II trial for immunosuppressant patients. We expect it to start at the end of the year. And here, we are a very huge medical need. We presented [indiscernible] in [ One Congress ] a prospective trial in patients with incompatibilities and demonstrate encouraging results in -- for these patients. Now I pass Pascal Besman.

Thank you, Luis. I'm going to highlight for you a few recent and upcoming publications and presentations that I think deserve some attention. Starting with this e-publication that came out this month, I believe, in the European Journal of Cancer by the Erasmus Group in Rotterdam, and interesting because this is the first real-world data of lurbinectedin, and it comes from the named patient programs in both small cell and mesothelioma about 50-50 in those patients. And in these patients, we could see that about in the small cell cohort, 70-plus percent were resistant refractory. And when we compare that or when the opus more to the point, compare that to topotecan, we see a 16% response rate, bearing in mind. These are all third line and beyond compared to topo of 17% in only the sensitive patients. So really that's stark difference in these very difficult-to-treat patients. And more to the point is why perhaps it's worth reading this publication in addition is that there is a lot of work being done here to show the evidence -- further evidence of the synergy in combination with IO through monocytes. So a recommended good summer read on the beach for you. Following that up, in about 10 days, we're going to see -- back one please. We're going to see the World Lung Conference on lung cancer in Vienna, which a few of us will be attending from PharmaMar, and have a number of KOL meetings with. And this will be actually the real-world data that we will see on lurbinectedin. And this is -- one of the authors of this is interestingly the Chairman of the NCCN guidelines. And the interesting thing is actually to just have a look at the abstract compared to the real-world data because the abstract has a cutoff of October '21, and this is April 2022 is what we'll see at the conference. So you'll get to see a time continue. And why? I think that, that is important is because to remind you when lurbi was first launched in the United States, they were a bolus of third and fourth line patients. And by the time we got around to 2022, those who have wouldn't been able to be worked off. And so you'll be able to see the movement in the average number of cycles over that period of time. So recommends that one. Moving on to our ISTs, I wanted to highlight 3 of them that are of interest and worthy of following. And there's a combination with radiation, which is interesting because there's been quite a bit of talk, and even some data generated with Yondelis in combination with radiation. And so this is the first trial of an IFC being done in combination for lurbi, and there's a trial in progress poster at world lung from Emory on that one. Secondly, Luis referred to this earlier, the French ATU as it used to be called now called something different, but I don't remember, is amalgamating their data of the 2,000-plus patients that they have had into a publication as an IST called PHARMACLIN, which we hope to have that published around year-end of this year. And all of this is going to be a really robust real-world data package between the studies I mentioned earlier, and this, which no doubt will help us in future regulatory discussions. And the last IST I wanted to mention of interest is this NCI Mayo study of durvalumab plus or minus lurbi or topo in relapsed small cell, which is enrolling. Lastly, I wanted to update you briefly on our business development activities, which continue. We are involved in multiple transactions with multiple companies over multiple assets and continue to work hard to bring those to closure. And if and when we do, we'll be happy to report that. And with that, I'll turn the microphone back to Jose Luis. Thank you.

Thank you, Pascal. And with this, we will finish our prepared remarks for today. So Lydia, if you like to open the line for questions, please?

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

Just the first one on the Phase III trial of trabectedin. I noticed there that the number of centers has been increased. Could you just give us an idea of how many patients have been treated and what the time line to data for that is?

We don't update, Joe, on lining and updates during the trial. The number of centers has been increased because there was a little bit of a COVID impact, and so we're trying to boost that with a few more centers being recruited. But we -- as a policy, we don't give updates on recruitment during trials.

Okay. And then a very similar question on LAGOON. I won't ask about specific numbers. But the logistical issues that you mentioned there, are they also a COVID-related problem? And are you looking at opening additional centers to keep the study on track? Or are we expecting at this point, it should be delayed a bit?

Well, the logistics problem are solved. The logistics problem was particularly the control arm drug available in the market. And the packaging for the clinical trials is always a different packaging than the commercial drugs for the control arm, and it was a special shortage in the market for this type of packaging. And remember, it's conducted by the CRO, not by PharmaMar. Then this was sold -- and now the trial is approved in several countries. We have opened several hospitals in U.S.A. and Europe and this will increase across the year.

Our next question comes from Christian Glennie of Stifel.

First one on -- I just want to clarify what you were saying on the royalties for Zepzelca in the U.S. It seems to be implying that you basically recalculated the Q1 numbers. So I just wonder if you could provide the actual royalties that you're now booking in Q1 and Q2 for Zepzelca in the U.S., please?

Yes. Okay. Okay. Our estimation regarding first quarter in Zepzelca royalty -- when -- was bigger than the than the final that we -- when we know the actual numbers. So we have to correct it, about EUR 500,000. And so we have corrected in the second quarter. And the estimation made for this second quarter is 8%, it's higher than the first quarter.

Sorry. So just to clarify, you're saying -- so you reported in Q1 EUR 10.2 million at that point in time for....

Yes. We have to decrease that figure exactly around -- exactly.

Okay. So you're EUR 19.9 million in Q2. EUR 10.2 million in the second quarter effectively is your estimate.

When -- about 8%, probably instead of 5%, hardly 6% -- more or less by 6%.

It's 8% more.

Yes, yes. 8% more.

Okay. Okay. I mean I know we'll get Jazz numbers next week, I think. But just -- I mean do you have any comment in terms of what might be going on in terms of Zepzelca, it's sort of flattening to slightly declining quarter-on-quarter. Would you have any comments to make there? The implication at least from these numbers are EUR 65 million Q4 last year, EUR 59 million was the report for Q1 this year. And then this will probably come out at sort of high 50 -- mid- to high 50s slight that down again?

Yes. Christian, I think I'll let Jazz speak for themselves next week, and then you can connect the dot and decide what trends are happening or what not. I'll just repeat a comment that we've said before, which was lurbinectedin came out of approval very, very strongly during COVID for various good reasons. And Jazz did a very good job of collecting the leading KOL marketplace, getting the rest of the market. The larger community is more blocking and tackling in onesies and twosies and will require an effort. But I'll let you ask them the question as to how they will do that. And hopefully, that will fulfill you.

Yes. No, Pascal, that's useful. And then on the new discounts being offered in France for the early access program there. I mean unless I've got the numbers right, it implies quite a significant discount there now, I guess, for you to put through at about over 75%. Is that about right? And is that the new sort of base level for pricing? Or could there be further discounting to come?

Now is to -- the 2 [ disappear]. Remember before was a 2 cohort nominated. This is appear and now with 2 modalities or access compassion except that separate cost is activated 2 years prior any submission to [indiscernible] and before you have access compassionate. This access compassion according to the new law, at different level of discounts depend on the level of sales and number of patients treated. Our actual sales in the first half of the year, the discount is about 30%, 32%. This could be increased in the future, depending on the level of sales economy the low. Now it's not easy to plan what is the maximum level this time we can achieve depend on the level of use of the drug in this success concession. Taking account the LAGOON trial, we incorporate different centers in France than some patients instead to move to this access compassion and move to the clinical trial. But in any case, I can answer at this question because the head of the level of sales we can achieve.

Okay. And then finally, if I may, on the NEPTUNO, the clinical trial, just to clarify and confirm time lines here. I think you said had you recruited 210 patients into the trial so far? And a reminder what's worth taking and the potential timing to data then?

No. I don't know. We announced -- I say we announced at the end of June was already enrolled 210 patients in the shareholders' meeting, which announced this figure. Now it's difficult to have data because the bane of the evolution of the pandemia and the number of hospitalized patients, accordingly the protocol. We amended the protocol, 2 months ago was approved by the different authorities in different countries, and other 2 are more flexible in the enrollment. Accordingly, the evolution of the pandemia under a new variant of the virus. Then COVID will help to increase the enrollment in this trial.

[Operator Instructions] Our next question comes from Alvaro Lenze of Alantra.

Just if you could provide us some update on Yondelis because I think that the performance has been -- is it still resisting quite well. So when could we expect potential competition in prices or volumes. And then if you could provide some update on the timing for the sylentis clinical trials? Maybe I missed that on the presentation, but if you could please repeat in case I missed that.

Thank you for these questions. Regarding Yondelis, we are very excited about the volumes of Yondelis sales. In fact, the big part of our team is the sales force team. And one important publication was presented last year in ESGO, and finally was published in last, was the [indiscernible] trail was an IIS trial, the combination Yondelis was [indiscernible] in first-line soft tissue sarcoma. This helps a lot to even increase the volume of sales. On the other hand, is the public information, the pressure of different countries, South European countries in different discounts this continue to reduce the sales about 2% in the first half. But we expect that throughout the year, maintaining this level of volumes of sales until the end of the year. Then Yondelis, we maintain our EBITDA increase slightly our market share in second line soft tissue sarcoma, about 31%, and we are the leader of the market now is in a standard of care and it's important and remarkable the success and the new launch that Yondelis in different countries around the world or the new partners. This is in the figures. The important increase that our raw material sales in these partners in different areas around the globe. Regarding Sylentis, I explained before, we expected this efficacy trial, Phase III trial, finalized the equipment in the first quarter of next year, okay? We are still prepare all the documentations to start very soon after this trial, the second pivotal trial for efficacy. I want to remark, for this type of disease is necessary 2 pivotal trials for efficacy and one pivotal trial for safety. The first pivotal trial of efficacy and safety are well underway or ongoing.

We have no further questions on the conference line. So we'll now move over to questions from the webcast.

Thank you, Lydia. We have some questions from the webcast. So now I'll read, or I'll translate some of them. So the first one, we have a question about if we plan to repurchase shares as we've done before or repurchase shares instead of our dividend policy? We did a repurchase plan in 2020. We've already implemented in issued time. We do not plan to repurchase more shares. So our cash, as we've mentioned in previous meetings now is for our investment in R&D. We committed to our plans that we've mentioned, and we do not plan to do another program in the short term. And moreover, even in the dividend policy, we've always said that dividend policy depends very much on the R&D, which is our priority. So we'll decide on the dividend amount on a yearly basis of the board. We'll recommend the dividend to the Annual Shareholders Meeting depending on the investment in R&D. So a question about some of our molecules. Let me translate. One in regard of Yondelis, how do we think to plan after the study of doxorubicin with trabectedin? Do we plan to ask for a commercialization license? Another one in regard to lurbinectedin. They ask if the new changes of criteria have helped to make it easy recruitment, and how we are going to manage all these new trials with this mentioned about immunosuppressed patients? And finally, the same shareholder asked about lurbinectedin, if there is any advance in conversations in Japan?

Yes. Thank you Jose Luis. Well, I explained before in the combination study of -- plus trabectedin was a very good study. In fact, it's the best results in the history in this subtype of sarcoma -- regarding the submitted. Commercialization is not needed. Yondelis has approved, as far as you know, in soft tissue sarcoma, and the new potential submission don't automatically impact in the patent protection or exclusivity data. Then part -- our sales force show this results of all the physicians. And this is one of the main -- important part to increase the volume of sales of Yondelis. Regarding lurbinectedin, I explained, we submit an amendment of the protocol in order to have a more flexible to exit the patients for this trial. Regarding the immunosuppressed patients. We treated about more 60, 63 patients in immunosuppressed, that the results were very good. We plan and already designed to start this new trial in immunosuppressed. And regarding the new partners for different areas, where Zepzelca is licensed in many countries, is already waiting for Russia and Japan. For Russia, obviously, now is very difficult to contact, to close any deals. But regarding Japan, we have several opportunities and when we will arrive on some agreement, we will announce. In Japan, we performed the Phase I trial for Zepzelca, in single agents. We arrived at a single dose than European or Americas that this is very good and for the future partners in order to be clear, the years the future data of Zepzelca for potential development in Japan.

Thank you. We have another question, says, I'll let you know what the exact number of patients treated with have Zepzelca the U.S., and in the second quarter in 2022. What is your expectations for the second part of the year?

This is a question for Jazz.

Let us remind you that Jazz will hold its conference call on the third of August next week. We have another question about -- if you can provide an indication of our R&D cost for '22 and '23?

Well, no, the first half of the year, you see is an increase. We have several pivotal plans ongoing and the other pivotal plan is planning. And then we will announce that the investment in R&D. What is important to remark is with our actual cash. We have sufficient resource to finance the future development for this drug.

Yes. I have another question in regard to our strategy. This is a question we had before, and this is in regard about our plans to lease in the U.S. As we've mentioned in other quarters. We have now basically concentrated on all these strategies that we explained. We have so many things going on now, and that's where we focus now to get all these things moving. So at the moment, in the short term, we're not considering listing the company in the U.S., although -- because we focus basically not our plans. Let's see if we have any more questions. We're receiving questions. Let me remind you, we're receiving questions that they're not related to the results or the strategy. So those, we can answer offline. Let me see if there are any more questions. So in regards to the results today, this is all the questions we have. So Lydia, that will be all for today. Let me just have a closing remark. Thank you, Lydia, for your help, and thank you very much to all of you who have connected today. Let me just finish by saying that we're very happy with this good financial results, which, of course, allow us to concentrate in all our development plans in order to follow a pathway to continue growing. I would like to thank all participants for joining the conference call. And for those of you who would like to meet with the management, we'll be participating in the forthcoming Wells Fargo Healthcare Conference in Boston in September. And also in September, we'll be at the Morgan Stanley Healthcare Conference in New York. Our team will also be present at the World Lung in August in Vienna, and also [indiscernible] in September. We hope to see you there. And I wish you all a good summer. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines.