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

Hello, everyone, and welcome to today's Pharma Mar's H1 results presentation. My name is Drew, and I'll be your operator today. [Operator Instructions] I will now turn the call over to Jose Luis Moreno, Director of Capital Markets and Investor Relations, to begin. Please go ahead.

Thank you, Drew, and good morning to everyone. I would like to welcome to all of you to our first half '24 results conference call. On the call with me today are María Luisa de Francia, Chief Financial Officer; Luis Mora, Managing Director of Pharma Mar; and Pascal Besman, Senior Vice President of Strategic Development. Following our prepared remarks today, we'll open the line for questions. And I would like you to remind you that today's conference call may include forward-looking statements regarding future events or the future financial and operating performance of our 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 a safe harbor statement on our corporate presentation, which is available on our web page together with the press release and the report of the results we released yesterday. Well, during the first half of '24, revenues were significantly driven by ZEPZELCA. And we're pleased to report that revenues from ZEPZELCA continue to grow at a robust pace. Revenues from royalties also increased with a notable contribution from ZEPZELCA royalties from the U.S., which grew by 15%. API sales saw a remarkable growth during the first 6 months, reflecting strong commercial activity preparation by our partners. It is important to note that API revenue does not typically follow a linear growth pattern and fluctuate based on our partner stock management. Our R&D investment remained strong during the first half of the year, largely due to the acceleration of LAGOON trial recruitment, as Luis will explain in a minute. We maintain a solid balance sheet with debt reduced to its lower level in many years and a strong cash position even after distributing dividends and allocating portion of the fund to the acquisition of shares to share buyback, which we expect to complete in September. After these highlights, I'll now pass the floor to Maria Luisa, who will provide you with a more comprehensive overview of our financials. Maria Luisa?

Thank you, Jose Luis. Good morning, and thank you all for joining us in the Pharma Mar First Half 2024 Results Call. We are going to check now briefly some group's financial statements and results as of June 2024. It is important to note that this second quarter of the year has been consistent with the previous one and in line with expectations. Revenues reached EUR 80.8 million, 1% higher than in the same period of 2023, mainly due to growth in royalty receipts from our partners at 16% especially Jazz Pharmaceutical as well as the sales of active product ingredient also to our partners. This growth depends on the stock management practices of our partners, as Jose Luis mentioned earlier. Together, these 2 items account for 52% of total revenues and compensate for the decline in YONDELIS sales. ZEPZELCA revenues in Europe under the compassionate use or early access program have also performed well. If we eliminate the effect of the adjustment made in 2023 for the excess of provisions from previous year, they would show an increase of 16%. YONDELIS sales are performing as expected in the third year of generic coming to market. On the expenses front, the evolution in the first half of the year was also as expected. R&D increased 10%, up to EUR 51.3 million due to the progress in the [value's] clinical trial underway. This represents 63% of total revenues. The rest of operating expenses [showed] in total, a slight increase of 2% including expenses related to the oligonucleotide production plant of approximately EUR 2 million. Financial results: EUR 2.5 million, together with the positive income tax of EUR 5 million due to the monetization of R&D deductions led to a net result of EUR 3.5 million for the first half of the year. The change in cash as of June compared to December 2023 shows firstly that the operating activities have financed themselves. The difference in cash between this to date, December '23 and June '24, has been applied as follows: approximately EUR 9 million has been applied to the investment in the new oligonucleotide manufacturing plant and EUR 20 million has been applied to the distribution of dividend, share buyback program, and loan repayment. After this cash consumption, the group has current and noncurrent cash and equivalents of approximately EUR 140 million, and a total financial debt of EUR 36 million. As Jose Luis mentioned before, we have a solid balance sheet to continue with our business plan. And now I pass the floor to Luis Mora.

Thank you, Maria. As my colleague has already commented, we are very -- we are in a very interesting moment. In a few months, there will be a lot of news and we hope that it will be transformational for Pharma Mar. [ The take ] already represents an important part of our income, it already represents a standard of second-line payment in U.S.A. and it is reflected in the significant growth of royalties, 15% compared with the same period to 23%. The LAGOON pivotal Phase III trial as a second-line treatment for small cell lung cancer has accelerated patient recruitment. This is a 3-arm trial compared with lurbinectedin as monotherapy or in combination with irinotecan against the investigator choice of irinotecan or trabectedin. We expected the recruitment to end by the end of '24. If the outcome is positive, this will serve for a submission dossier in the European Union and confirmatory trial in the United States. Also, our Phase II/III SaLuDo trial for first-line leiomyosarcoma is recruiting better than expected. If this continues, the recruitment will be completed by the end of '25. The recruitment concluded for the Phase III trial that our partner, Jazz Pharmaceutical, is conducting with Hoffmann-La Roche using ZEPZELCA in combination with atezolizumab for first-line maintenance treatment of small cell lung cancer. This trial, which is sponsored by Hoffmann-La Roche and co-financed by Jazz will make sure the operation-free survival and overall survival in combination with atezolizumab compared with atezolizumab a single agent. Regarding the timing of this trial IMforte, we are getting that what our partner Jazz and Roche have communicated so far, which is that PFS data is expected to read out by the end '24 or early '25. Jazz and Roche will be the ones to update in this regard. If the data are clinically relevant, we plan to submit the registration dossier to the European Union in the spring '25. Regarding regulatory aspects, perhaps the most important thing is in the second half of the year will be the approval of ZEPZELCA in China. According to our partner in that territory, Luye Pharmaceuticals, the authority's opinions could be issued in any time from the beginning of September. As you know, we launched ZEPZELCA in Switzerland in September '23, and we can say that it is already positioning itself as a standard of second-line treatment. Early use is also growing significantly, especially in France, will grow, as Maria Luisa mentioned before, around 16% compared to 23%. With this, we hope to treat around 900 patients this year in France alone under this modality of access to the drug. Regarding YONDELIS, despite the entry of generics in the European market, we have increased unit sales, maintaining our market share. Outside European Union, our partner has increased sales of YONDELIS which is reflected in the significant increase in our sales of raw materials. Also, in U.S.A., YONDELIS has experienced significant growth, increasing the value [indiscernible] we received from our partner. This increase is due to the inclusion in the treatment guidelines of YONDELIS plus doxorubicin as frontline of leiomyosarcoma. The other 3 products that we currently have in clinical development, P14 is in Phase II and is continuing its development in solid tumors, P54 and P534, which are also in Phase I in solid tumors continue to escalate dose, and we are already seeing significant activity and very good safety, which make us very excited about the future of these new drugs. We expect to complete the first Phase I trial at the end of the year or early next year. As I have said in the coming months, there will be important news, both for patients and for Pharma Mar. Now thank you very much. Now Pascal will comment related to relevant developments we have presented at medical conferences.

Thank you, Luis. Hello, everyone. Wanted to focus on data that was presented this year at ASCO, which was really very compelling within its limitations with lots of KOL interest and in fact, there's a newly released video this week discussing this data on oncology tube with [ Dr. Sands ] from Harvard. And this data is to do with the combination of lurbinectedin and irinotecan in relapsed small cell lung cancer. Few years ago, we saw preclinical data of the synergy between topoisomerase 1 inhibitor and lurbinectedin and presented the first 21 of the 100-patient cohort at World Lung 2020, which was in 2021, with encouraging results. This cohort has now matured. The context of this data within the LAGOON framework should not be lost. Arm B of LAGOON has the potential to serve in a confirmatory capacity for FDA and a registrational one for EMA. As such, within an OS endpoint, we need to see what the odds are for success. We've stated in the past that the control arm is modeled for 8 months, and we are seeking a hazard ratio of 0.8 with 90% power so a delta of 25% or 2 months should do it. Let's look at the data here that we presented and specifically focus on the like-to-like comparison of it, eliminating the refractory patients who are also eliminated from LAGOON. And then what I'll do is I'll compare that cohort to our basket trial, which got us approved the basis of our approval and the dinutuximab distinct study that was published in 2022. And I'll focus on looking at the ORR, the PFS and OS. Firstly, in ORR, this cohort of 74 patients with a chemotherapy-free interval greater than 30 days, so an ORR of the combination of 53% compared to our basket study monotherapy of 35 and irinotecan in the dinutuximab study of 19%. Moving on to PFS. The combination, 5 months, the basket trial monotherapy 3.5 months and irinotecan monotherapy 3 months. And finally, with overall survival, 12.7 months versus monotherapy 9.3 and the distinct study 6.9 months. So quite startling improvements in data reading across trials with all of the caveats here in looking at these various parameters of efficacy and in conclusion, if we can generate data anywhere near this overall survival benefit of 12.7 months in LAGOON Arm B, it is likely to generate a compelling hazard ratio and a clinically meaningful benefit risk profile for small cell lung cancer patients in the future. So we wanted to focus on that and make sure people are understanding the context of it, and I'll let Jose Luis take it from here.

Thank you, Pascal. And with this, we conclude our speech today, and we'll open the floor for questions. Drew?

[Operator Instructions] Our first question today comes from Ami Fadia from Needham.

Maybe my first question is just a follow-up to what Pascal just discussed. With sort of the strong overall survival data that you talked about from the 74 patients. Can you highlight if there's any reason why the LAGOON data would not turn out this way? Just trying to say that there was [ advocate ] in trying to sort of really understand the data here. And also if you could comment on the timing of when we might be able to expect the data to mature once the enrollment is completed. And then I have one or two other questions.

Sure. Thanks, Ami. So to your first question, what would be difference between the data we presented now and LAGOON with a different trial. So obviously there's always going to be differences. In terms of the eligibility criteria, they're really rather similar with a chemotherapy-free interval of 30 days, and no active brain mets. So those are very similar. But in terms of what could be really different when we think about it is that in the LAGOON study, 70% of the patients who have had prior IO, which is a positive prognostic factor for patients in relapsed small cell lung cancer. So that could improve the numbers even further still. And of course, we are modeling the control arm that some of those patients would have had IO as well. It's just that there's no known synergy between the topoisomerase inhibitors and IO whereas there is with lurbinectedin. So net-net, this is certainly not going to be identical to the results we get. It never is. However, it's a compelling and encouraging efficacy in the identical population. I'll let you continue Ami, with your follow-up questions. In terms of when will we follow up on this data, I have no idea. I think that this is a [ finalized ] study at this point. And so the next thing would probably be a publication. But I don't think that we have yet discussed that internally.

Okay. Great. You guys highlighted the sort of the increase in the API sales this quarter and also mentioned that if not in linear curve with regards to how API revenues come in, it sounds like this might be driven by some purchases by your partners ahead of the first-line data, IMforte that's expected to come in. So my question is, should we anticipate that the API revenues could be a little bit higher over the next couple of quarters? Could you give us some visibility around that?

Thank you for your question. The increased sales of raw materials driven by the increase of sales of YONDELIS for our partners around the world. They stock in this part of the year because the forecast they sense is YONDELIS continues to grow. In the second half of the year, we don't expect the same figure for this, but we expected to finalize the year with more -- significantly more sales than 2023. Regarding U.S.A., these are royalties we collected from our partner, [ Janssen ], in U.S.A. Yes, the increase of royalties is because YONDELIS was included in NCCN guidelines, first-line treatment in combination with doxo for leiomyosarcoma. Then our partner is [ Janssen ] in U.S.A. and the sales grow very well than the royalties grow.

Got it. I'll just ask one quick last question. If you could help us understand the opportunity for ZEPZELCA in China? And maybe just remind us of your economics around that.

We do not disclose this because first of all, we don't have the approval yet. But what is good news is that our partner announced several days ago, the process in China when the drug is not Chinese, it's an import drug then even if we achieve the accelerated approval in China when the drug is an import drug is a different timings than you can see in Europe or U.S.A. But the good news is they are very close to finalize all the price for this dossier and from early September, we expected the opinion, we hope will be positive, and we prepare our stock to sell them. They start the commercialization drug in China. In China, the big population, the incidence of small cell lung cancer is higher than Europe. Then it's about 3, 4x the incidence of small cell lung cancer. But as you know the pricing of drugs in China is completely different than Europe.

Our next question comes from Guilherme Sampaio from CaixaBank.

So the first one is regarding the continuous shortage that has boosted your revenues over the past quarters in the U.S., if you're seeing any signs of a slowdown here. The second question is regarding the also licensing deal in Japan over the next quarter where you are short on that? And the third, what are your expectations regarding the atezo-lurbi trial data, [indiscernible] trial, not IMforte that could be out, I don't know, by September, if you can confirm that as well, this will be great.