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

Apologies about this trouble with our lines. And as I was saying before I give the floor to María Luisa de Francia, let me just do a quick introduction. As I was saying that one of our main headlines for this year in regards to financials is the increase in our investment in R&D. And in Oncology, we're making the significant strides in advancing our development, particularly with LAGOON, the confirmatory Phase III trial of lurbinectedin in small cell lung cancer. And the recruitment of patients for this trial is progressing successfully. And we're also making substantial progress with the preparatory activities for initiating two additional Phase III trials with lurbinectedin, one in leiomyosarcoma and one in mesothelioma. Moreover, we are unwavering in our commitment to invest in the development of our early stage trials. Our dedication stands to Phase I clinical trials with ecubectedin with PM534 and the PM54 for the treatment of solid tumors. These efforts showcase our belief in the potential of all these molecules. And we're wholly devoted to our ongoing R&D investment to foster continued growth in the years to come. I mean, regarding our revenues, the arrivals of generics of YONDELIS, trabectedin, in the European market as anticipated has had an impact on our P&L. And however, we have proactively factored these into our strategic plan. And we're well prepared and with sufficient cash and financing to navigate this situation smoothly. So we remain confident in our investment plan. And additionally, we're getting closer to the date when we'll have valuable data for the ongoing Phase III trials with ZEPZELCA, which is an exciting prospect for the future. Now as I said, I'll pass the floor to María Luisa, who will provide you with more comprehensive insights into the financial results.

Thank you, José Luis. Good morning, and thank you all for joining this conference call on first half 2023 financial results. I will start by reviewing the evolution of revenues in the first half of the year. Total group revenues amounted to EUR 80.2 million, 21% lower than in the same period of the previous year. In relation to recurring revenues, sales plus royalties received from our partners, there are three things to note. First, the decline in YONDELIS sales as a result of the arrival of trabectedin generic products on the market. These were 60% lower in the first half 2023 than in the same period of 2022. Generic trabectedin hit the market in October 2022. Second thing is a nearly 90% increase in sales of lurbinectedin under the autorisation d'accès compassionnel program in France. This increase is due to the positive recalculation made in the 2022 rebate once we received from the French health authorities the settlement in relation to such rebates. No further adjustments are expected for the rest of the year. The amount recorded at June 2023 was EUR 21 million compared to EUR 11.2 million at June 2022. And finally, royalties received from Jazz Pharmaceuticals are 6% higher than in the previous year, confirming the good performance of our partners. As I always mentioned, last quarter, the second quarter, is an estimate made by PharmaMar. On the expenditure side, the most noteworthy is the increase in R&D expenditure, which is up 16% to EUR 46.6 million. This increase is mainly due to the Phase III trials currently underway plus preparatory work for those trials that will start soon as Luis Mora will explain later. Other operating expenses, commercial, general, administrative, corporation, on the whole remained at the same level as in the previous period, slightly higher due principally to the annual contribution to the PharmaMar Foundation. All of the above, increased R&D expenditure, lower YONDELIS sales and the recalculation of lurbinectedin rebates, together with the profit tax, which included the amount received from the -- for the monetization of R&D deductions, leads to our results for the period of EUR 6.4 million. I will say it's highlighting the net cash position as of June 2023 that amounts to EUR 162.5 million after deducting the EUR 39.8 million of total financial debt. As José Luis Moreno mentioned before, we have a solid balance sheet to continue with our business plan. And now I pass the microphone to Luis Mora.

Thank you, María Luisa. Hello, good morning. Regarding YONDELIS, in Europe, sales continued as expected with the pressure on price drivers from the entry of generics in the last quarter of '22. The different sales in values is much rather than the difference in volume. So in the first half, we are maintaining a good market share with YONDELIS in soft tissue sarcoma. In the U.S.A., it should be noted that YONDELIS plus doxorubicin has been included in the NCCN guidelines for leiomyosarcoma in first-line treatment. In the rest of the world, YONDELIS is commercialized by our partners, continue as expected. Regarding ZEPZELCA in U.S.A., continues to grow and therefore in royalties [indiscernible] is a second-line treatment standard. In Switzerland, where we have already announced its approval, we expected to finish the market access process in September and for ZEPZELCA to be included in the reimbursement list. Regarding the different regulatory processes underway in other countries with ZEPZELCA, we presently announced that our partner, Luye Pharmaceuticals, submitted their registration this year. And we await the decision of the authorities to start the marketing in 2024. The large number of small cell lung cancer patients in China should be highlighted, around 120,000 new cases per year, which should give an idea of ZEPZELCA potential in that country. With ZEPZELCA, we have an extensive clinical program as José Luis mentioned before. Highlighting the LAGOON trial, it is a pivotal trial that will serve as a confirmatory trial for U.S.A. and as a registrational trial in Europe. Recruitment is progressing as planned with more than 120 hospitals recruited both in America and Europe. We have two other pivotal trials planned. And we are currently in the protocol advice process with the EMA and the FDA, on second line mesothelioma, combining with ZEPZELCA plus I-O; and the other, in the first line leiomyosarcoma, combining ZEPZELCA plus low-dose doxorubicin. Regarding the situation of ZEPZELCA in Japan, we are in contact with some companies for a potential future license. As we have already commented in the other meetings, we have an early access program in some European countries with more than 3,000 patients treated, which gives an idea the good reception of ZEPZELCA by the doctors and the need for new treatments for this disease. Regarding other products, ecubectedin P14 continues in Phase II as well as in combination with irinotecan and with I-O. The last two compounds that we include in our pipeline, P534 and P54, are in Phase I in solid tumors. Sylentis, a group company dedicated to development of products based in RNA interference technology, has already completed the recruitment of Phase III of safety. And we expect the results in the end of this year. The other Phase III of activity is underway. And we expect to have the results in the first half '24. If these trials were positive, we will launch another Phase III, since in ophthalmology, two phases of activity are needed. If the first Phase III of activity were positive, we will start a licensing process. And now I pass to Pascal.

Thank you, Luis. Good morning, good afternoon to all. I'll go over some Q2 [ first half ] highlights and a few things that are coming in the near future in three areas: clinical trials, business development and KOL engagement. Firstly, on clinical trials. We have an expanded cohort of a combination trial of lurbinectedin and irinotecan in relapsed small cell lung cancer, which has now reached the target full enrollment of 100 this week. We expect to, therefore, have top line data around year-end, although to remind everyone, it is event-driven. In addition to this, we have an IST in relapsed small cell lung cancer with the combination of lurbinectedin and pembrolizumab, which has been chosen for a mini-oral presentation at ESMO. And this will provide further evidence of the synergistic benefits seen in small cell with immune checkpoint inhibitors and lurbinectedin. Regarding business developments, we are continuing with our quest. Prices do remain high. And there is lots of competition. However, in the area that we are most interested in, I would mention that in the last 2 years, other than a couple of M&A transactions that we saw, we have been aware or involved in almost every other asset. And so we will continue to maintain our efforts and hopefully bring them to closure. My third point, regarding key opinion leader engagement, continues in 2023. And so far, we've engaged with over 75 of these oncologists, especially at both sponsored events and other medical meetings. To give you a little bit of color of the sponsored events where we have been active, there have been those in Las Palmas in the Canary Islands; the Santa Monica Targeted Therapies Meeting, which we co-sponsored with Jazz; there is a lung cancer meeting in Rome we sponsored; the Swiss oncology meeting group; OncoViews' small cell lung cancer event; and a meeting in Lille, France called iMig regarding mesothelioma. In addition, we have been active at the ELCC meeting in Copenhagen; the Memorial Sloan Kettering small cell event in April in New York City; and of course, ASCO. In Q3, we will have the event called World Lung or IASLC, which is in Singapore, where we already have a number of meetings set up, some of those being first, some subsequent, so we look forward to that. And later this year, ESMO in our hometown of Madrid. So hopefully, that gives you a roundup of what I said. And I'll hand the microphone back to José Luis.

Okay. Thank you, Pascal. And with this, we conclude our speech today, and we open the line to questions. Lara, please?

[Operator Instructions] And the first question comes from Ami Fadia from [ Needham ].

Can you talk a little bit about some of the pushes and pulls in the revenue report? I understand that there was adjustment out of France for last year's revenues. But if you could give us a sense of the underlying demand, volume in other countries?

Regarding the first question, that is the recalculation of the rebate for the year 2022 regarding the authorization of d'accès compassionnel in France, we overestimated rebates that we calculate on 2022. So after receiving from the French health authorities the settlement of the rebates corresponding to that exercise to that fiscal year, we have to recalculate the rebates we did in 2022. And we have corrected it this year in 2023. This is the reason of the adjustment.

And regarding the demand for the other countries in the early access programs, not all the countries in Europe is permitted this type of reimbursement for early access. In some countries like Austria, this program is ongoing and is only in Austria and in France. The other countries, we received a lot of orders, a lot from the physicians, i.e., from [indiscernible], from Italy, Spain. But now from -- ZEPZELCA is approved in Switzerland, we expect it in September to include it in reimbursement list. And the other potential program could be open for foreign medicine import if there's huge medical need. Then we expect it from September some increase in this modality of reimbursement for compassionate use.

And in your prepared remarks, you had sort of indicated that now you estimate that at EUR 21 million, it was EUR 11 million. So it seems like about EUR 10 million sort of benefit in the quarter for this adjustment. So if you remove the adjustment, the underlying revenue is about EUR 5.4 million. Is that the best way to think about it and that might be the run rate? And as you've kind of laid out, there might be growth for September as uptake in [indiscernible]?

Yes, exactly.

Okay, great. Maybe I have maybe two other questions. The API revenues in the quarter were particularly high. Any color you can provide around the trends there? And maybe the third question is around the U.S. royalties. I understand that, that's sort of more of an estimate. It seems to be sequentially flat with first quarter. Perhaps you could sort of talk to some of the trends there and if there's something more kind of one-time to consider there. And what conclusion should we make for the growth for the remainder of the year?

Regarding API sales, it's not linear in the year. It depends on the partners, the level of stocks, et cetera, et cetera. From July to December, we have a lot of orders from our partners. And you will see in the end of the year, if you compare with the first part of the year, an important increase in this setting, okay? Regarding the royalties, well, I think that the amount we accounted for this quarter is very accurate. But in any case, it's an estimation. Then we need to expect the adjusted final figures. But we don't expect a big adjustment in this case.

The next question comes from Alvaro Lenze from Alantra Equities.

I wanted to know with the revision that you have done to the French compassionate use sales, whether this new discount level, so to speak, is to remain stable and if -- and in that case, what is the normal run rate of sales that we could expect from ZEPZELCA in Europe until the product is approved on a quarterly basis?

I'd say it's not a fixed figure or fixed percentage, depends on the level of sales and the number of patients are treated. You can see the law in France was released in July '21, it's public information, okay? Then depend on the level of sales, you have to apply 1% to them or other and it's increasing. It's a progressive one, okay? Then it's difficult to answer exactly your question because it depends on the level of sales in the future. But we don't expect that small adjustment in the future, okay? This 2022 was an exceptional year for the first full year application of the law. And the French authorities finally sent us the amount. And for that, the accounting point of view will revert what we're doing in 2022. But we don't expect more adjustment, okay?

The next question comes from Joseph Hedden from Rx Securities.

I've got a couple. Firstly, we're seeing some shortages of chemotherapy drugs in the U.S. at the moment. And some of those are platinum drugs. So I was just wondering if Jazz has communicated to you or what your thoughts are on potential impact on the first-line trial of ZEPZELCA, any full timeline slippage? We know that, that's going to be fully enrolled this year, otherwise. And then secondly, just on the BD front, you mentioned about the opportunities that are around Europe. And you've seen kind of most of those. Is it now just a case of waiting for or trying to get more reasonable-looking term sheets? Or are there other factors that you think those products are maybe not slightly the best fit? Or is it all financial at this point?

Okay. Regarding the first question, this platinum shortage is American source is for U.S.A. The government, the American authorities announced that the provisional authorizations to import platinum from India. Then we don't receive any communication, the impact of this platinum shortage in the clinical trials, okay? And then all remains as before this temporary shortage, platinum American source. Regarding the licensing in process, as Pascal mentioned before, with our activities, we are actively searching the market. We have been in conversations with several companies. And we analyzed carefully the drugs. Obviously, this is an agreement, it's a process. In this process, we are the buyers. Then we conduct extensive due diligence and is ongoing some processes in this setting. The last question, sorry?

You've mentioned the imports from China.

India, it's India.