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

Thank you for joining. I would like to welcome you all to the Pharma Full Year Results 2023 Conference Call. My name is Brika, and I will be your moderator for today's call. [Operator Instructions]. And now I would like to pass the conference over to your host, Jose Luis Moreno, Vice President of Investor Relations of Pharma to begin. Sir, please go ahead when you're ready.

Thank you. Thank you, Brika, and good morning to everyone. I'd like to welcome to all of you to our full year '23 results conference call. On the call with me today are Maria Luisa de Francia, Chief Financial Officer; Luis Mora, Managing Director of Pharma Mar; and Pascal Besman, Vice President of Strategic Development. . Following our prepared remarks today, we'll open the line for questions. As always, I would 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 obligation 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 and the report of the results we released yesterday. In '23, our commitment to R&D investment has been evident. In Oncology, we're conducting late-stage trials like LAGOON, and the trial to go to first-line in leiomyosarcoma with ZEPZELCA, are also actively engaged in early-stage clinical trials for ecubectedin for PM534 and PM54. So these trials underscore our strong belief in the potential of these molecules. We're pleased to report that sales from ZEPZELCA continued to grow last year. And by year-end, we had already received approval for the drug in 16 different countries. This includes the commercial launch in Switzerland. We maintain a solid balance sheet and strong cash position even after distributing dividends and factoring in all the funds allocated for the acquisition of company treasury shares which we completed in January. With that, I'll now pass the floor to Maria Luisa, who will provide you with a more comprehensive overview of our financial results. Maria Luisa?

Thank you, Jose Luis. Good morning, and thank you all for joining us in the Pharma Mar 2023 Results Call. I will give a deep review of the financial and income statement for the year ended. Starting with revenues, as you have seen from our financial statements, the introduction of generic version of YONDELIS in Europe had a significant impact on the company's revenues last year. . This largely explains the 19% difference in total revenue when compared with 2022. The impact of generic version of YONDELIS has been partially offset by an increase in royalties from ZEPZELCA sales in the U.S. as well as by the growth of ZEPZELCA revenues in Europe. ZEPZELCA accounts for 70% of total revenues of the group, which, as you may know, come from 4 different sources: royalties, distribution under early access program; license agreements; and sales of active product ingredient. Putting numbers to the sources, royalties on that pharmaceutical sales in the U.S. amounts to EUR 48.4 million. Distribution in some European countries under the early access program amounts to EUR 29.7 million. Deferred revenues from the Jazz license agreement and other [ minus ] remain amount to EUR 24.2 million and sales of active product ingredient to our partners amounts to EUR 7.9 million. On the other hand, YONDELIS accounted for 29% of total revenues coming from the same sources, direct sales in Europe, EUR 26.1 million, royalties and sales of active product ingredient to our partners for EUR 10.8 million, and finally, EUR 9.4 million received from a commercial milestone under the Janssen license agreement. As for R&D expenses, they amount to EUR 99.3 million as of December 2023, 19% higher than in the previous year as a result of the evolution of the group's pipeline as Luis Mora will explain later. Given the projects currently underway, this volume of R&D expense is not expected to change significantly in 2024. All other operating expense may remain fairly stable between the 2 periods, taking into account that in 2022, they include some amounts corresponding to the diagnostic liquidation process, which do not take place in 2023. Thus, mainly as a result of the decrease in YONDELIS sales and the increase in R&D expenditure, the group's EBITDA amounted to EUR 2.1 million, EUR 55. 4 million in 2022. I will finish by highlighting that the net cash position as of December 2023 amount to a total of EUR 128.8 million after deducting EUR 39.9 million of total financial debt. At this point, we should mention the CapEx investment in the period about EUR 16 million, mainly due to the oligonucleotide manufacturing planting progress that Luis Mora will explain in a minute. We should also mention the share buyback program to which we have allocated 13 million since it launch until the end of December. This program has concluded in January 2024. As Jose Luis Moreno mentioned before, we have a solid balance to continue with our programs and business plan. And now I'll pass it back to phone to Luis Mora.

Thank you, Maria Luisa. In 2023, the YONDELIS sales in Europe has been conditioned by the entry of generics into the market, given rise to a significant price adjustment. The [ sale ] of which has been a sales figure in Europe of EUR 26 million, representing a difference of 60% compared to those on 2022, which was [ depleted ] the figure of EUR 64 million. However, in the USA and Japan, our partner sales have grown by close to 20%. The publication of the results of the clinical trial of the combination of YONDELIS plus doxorubicin in the first line of treatment for leiomyosarcoma at ESMO 2023, has had a positive impact on sales in those countries. . Likewise, in 2023, we will save a milestone of $10 million as a result of achieving a commercial milestone of the YONDELIS license contract in the U.S.A. Regarding ZEPZELCA, the sales of our partners Jazz have continued to grow, consolidating ZEPZELCA a standard treatment for small cell lung cancer in the second line of treatment in the U.S.A. During 2023, ZEPZELCA [ resize ] marketing approval in 8 countries and regulatory evaluation continues in various territories. In China, the valuation of the [indiscernible] and according to our partner, Luye Pharmaceuticals, the opinion of the authorities is expected this year 2024. At the end of 2023, we obtained data from the Phase I expansion trial of the combination of lurbinectedin plus irinotecan. This trial include -- this arm of the trial include 103 patients, refractory, persistent and sensitive patients for the second line of treatment, and taking the patient population under the criteria, inclusion of the LAGOON trial, I can tell you that it confirms the synergy of the 2 compounds and reinforce the idea of including that combination in the pivotal trial LAGOON. The data for this trial will be presented at the medical conferences. The LAGOON trial, a pivotal trial and registrational trial for the second line in small cell lung cancer, continuous [ equipment ] as planned with more than 180 hospitals open, and we expect to complete the [indiscernible] by the end of this year or early next year. ZEPZELCA, IMforte trial for the first-line maintenance for small cell lung cancer according to the sponsor has already completed enrollment and the top line data is expected at the end of this year or beginning of the next year. Issue also be noted that in 2023, the SaLuDo trial began, is a Phase II/III trial of ZEPZELCA for doxorubicin in the first-line treatment in patients with leiomyosarcoma. Today, where we opened 13 centers and during '24, we will stand for more than 50 centers around the world. The compassionate use program has continued in 2023. Since the beginning in 2019, more than 3,700 patients has already been treated. In 2023, the patients treated at a small cell lung cancer in this compassionate use program as we close to 900 patients growing by 5% compared to 2022. This reflects good acceptance of ZEPZELCA and it is covering a medical need. The launch of the product in Switzerland is being very positive. The reimbursement was obtained in September 2023, and it is meeting the planet [indiscernible]. Ecubectedin continues its development in both Phase II and Phase I in combination with irinotecan and immunotherapy in different tumor types. P54 and P534 are in Phase I of clinical development, and we hope to complete this Phase I this year 2024. Regarding biology, we have announced that we have stopped the Nereida clinical trial, Phase II in immunosuppressed patients due the low recruitment ratio that drivers from the evolution of the pandemic. Therefore, the investment in the [indiscernible] area where we substantially reduced it in 2024 and beyond. As for Sylentis, which we already announced at the results of the PIVO 1 trial, it has been decided to stop the [indiscernible] project. The other product SYL1801 Phase II of Macular Degeneration trial continues as planned. As we already announced, the construction for the new oligonucleotide production plan continues and we expected commissioning this plan during 2024. And now Mr. Luis.

Thank you, Luis. And with this, we conclude our speech today. and we open the line for questions. Brika?

[Operator Instructions] We have the first question on the phone line from Joseph Hedden of Rx Securities.

Firstly, on your ZEPZELCA royalty estimate of equate to EUR 12.9 million for Q4, given [ Chad ] reported USD 74 million sales in Q4 last night, is this estimate -- do you think of this low now? Is there -- can we expect any kind of adjustment in the Q1 results? And if so, what would that adjustment be?

No, no, there's no need any adjustment. This is a final figure.

Okay. So that implies that you've not hit a second royalty tier in your -- under your deal with Jazz. Is that right?

In terms of royalties, we not disclose what we hit out the different levels of royalty tiers. So we -- as we said, there is not going to be any adjustment. So the final figure is what we've seen in this quarter.

Okay. And then on R&D -- I may have missed this because my line cut at that moment. But the R&D expenses in Q4 obviously took quite a jump, and we know that you're in the midst of a couple of pivotal trials now. Is Q4 -- can we see that as a run rate going into this year? Or things going to stabilize around EUR 100 million today.

Yes. In terms of R&D in oncology, we'll have same trials going on in terms of LAGOON and the trend in leiomyosarcoma, so we could expect in Oncology, similar stuff. Bear in mind that leiomyosarcoma will be full year this year versus last year. We started in the last quarter, if I remember correctly. And the early-stage trials that Luis was referring to also will be going on in -- through this year. So from that perspective, we do not expect big changes in Oncology compared last year to this year. In other areas, as Luis pointed out, it's going to be a very important reduction, of course, in investment in antivirals. And we're not going to continue with our plans with [indiscernible] also. So all that it was expected to invest in [indiscernible] it's not going to happen this year. So Oncology is going to keep pretty much the same. The other 2 areas is going to be an important reduction. But as you know, [ agile ], we not giving guidance on any of our figures.

[Operator Instructions] And we now have Ami Fadia of Needham.

I think that we've gotten a lot of questions from investors, given that we're coming very close to the readout of the trial in first line that's being run by your partner. Perhaps if you could take a moment and maybe remind listeners around maybe the design of the trial and also from your perspective, what is -- what are some of the pieces of evidence outside of that trial that give you confidence in this trial succeeding? And just with regards to the second-line trial that you're running, maybe give us a sense of your latest outlook in terms of when we might get the results from that trial if you're comfortable giving that? And also talk about your strategy in Europe as you get ready from readouts from both these trials? And then how pricing there could look like relative to the U.S.?

I'll take the first part regarding Europe. I'll pass it to Luis. So your first question was about the first-line maintenance trial. And what gives us confidence there, I think, and I can point to really 4 pieces of data that we've generated in the past. Back in SITC 2021, there was 26 patients in the combination of atezo plus [indiscernible] be in second line. which led to a response rate and duration of response that was significantly greater than the sum of the 2 products. So that was in pure second-line patients with no prior IO. The second piece of evidence comes from the Basket" trial, where we had 8 patients with prior IO, and 5 of the 8 did better in second line than they did on their IO in frontline, which to us indicates something is going on synergistically given the long half-life of the IO. The third piece of evidence comes from the ATLANTIS trial where we had about 60 patients who had prior IO. And in the patients who had prior IO, their PFS was 50% greater than in the patients who had not had prior IO. And the fourth piece of evidence with -- at ESMO last year where a second-line combination trial with pembrolizumab presented by [ Antonio Kaes ], showed basically variation on the same theme that these 2 drugs together are generating a greater ORR and VOR and other parameters than in the some of the parts. So given all this, this was a logical trial for clinicians to be excited about, and we're excited ourselves to get the results. I think that, that was your first question. If I left something out, you can come back after Luis explains to you our European strategies for both LAGOON and European filing, and you can give it a try and see if you'll tell you when that trial will read out. But if I was a betting this.

The strategy in Europe, I mean, it's still clear that [indiscernible] out of the [indiscernible] trial, we will have in hand the data come from the IMforte trial, and the strategies is, the trial is positive. Obviously, we will [indiscernible] the dossier in Europe in the first-line maintenance therapy. . Regarding the commercial strategy, as far as you know, we have a commercial infrastructure in Europe, we have subsidiaries, of course, medical affair or market access, all this color. Of course, in Europe, we plan to launch -- the first launch will be if the [indiscernible] trial is positive and the authorities will approve the drug in the first-line [ minus ] therapy. After that, we expected to obtain the LAGOON trial. If the LAGOON is positive, then we will submit for the second-line treatment. The idea is to keep the patient the opportunity to keep -- been active in from the first line until second and third-line [ number ]. In any moment of the treatment, the patient will have the opportunity to take lurbinectedin because we hope this is a very clinical benefit for the patients, for the small cell lung cancer.

Maybe if I could ask a follow-up with regards to the IMforte trial. On an absolute basis, how much of a change would you want to see on the primary end point?

Roche and Jazz have not shared the statistical plan, and therefore, we're not either because we don't know it, no. .

[Operator Instructions]

All right. Brika, we have some briefing questions that we -- some of them we received ahead of the call. So some of them have already been addressed during the call. There are some others were probably not mentioned or worth repeating. Like we have questions about, is there any ongoing -- or is there any news about licensing, mean potential license agreements in Japan. Luis, I don't know if you could say something about that.

Yes. Well, for lurbinectedin is the unique big market remain without partnering now. We have conversations with several companies. They are interested in this territory, for we've been active in. And we will start some process for license and we achieve [ to implement ], we will announce.

Okay. Thank you. All the questions in terms of guidance, we said we now do these guidances. And also, again, just to make clear, we have received further questions about the amount of milestones and when they are triggered, as you all know, this has not been disclosed. And finally, someone asked about the news flows expected for [ lease it ]. We've also addressed these. But as a summary, we can say that we expect to present result of the Phase II trial, lurbinectedin [indiscernible] in one of the major conferences where we've submitted it to. Also, we -- Luis mentioned that we expect to complete recruitment of the LAGOON trial this year as some -- as well as some of the Phase I trials that we have with the molecules, so also finished recruitment of some of them also this year. It has been said and mentioned yesterday, our partner in the call. We anticipate top line PFS readout of the IMforte trial by the end of this year or early next. And about the construction plan, we also have some questions about the oligonucleotide plant, the reconstruction, Luis also mentioned that we expect to finish and have operated the first phase that plant during this year. So that will be like to wrap up with questions. I'd like to thank Brika for your assistance today. And just to summarize the call, to mention that the financial highlight of this year revolves around the increase in R&D investment and the growth of royalties generated from ZEPZELCA sales as well as the growth of revenues is generated in Europe. We are also making a significant process in our ongoing clinical trials and approaching the end of the ongoing Phase III trials with ZEPZELCA and small cell lung cancer. And despite all the challenges of last year, we remain profitable, and we anticipate our investment efforts will yield relevant news flow in the short term, as highlighted by the team during today's call. And with this, we finish our call today. I would like to thank you all for joining us and wish you all too the weekend well. Thank you.

Thank you all for joining. I can confirm that does conclude today's conference call with Pharma. You may now disconnect your lines, and please enjoy the rest of your day.