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

Welcome, everyone, and thank you for joining the PharmaMar H1 2026 Results Presentation. My name is Yapel, and I will be coordinating your call today. I will now hand over to your host, Jose Luis Moreno, Head of Capital Markets and Investor Relations. Please go ahead.

Thank you, Gabi, and good morning, everyone. Thank you for joining us today for Pharoma's First Half Earnings Conference Call. On the call with me today are Maria Luisa Alstantia, Chief Financial Officer; Luis Mora, Managing Director of PharmaMar; and Pascal Besman, our Chief Strategic Officer. And as we always do, after our comments, we'll open the floor to your questions. And before we begin, please note that certain statements made during this call might constitute forward-looking statements. And these statements are based on our current expectations, and actual results might differ materially from those projected. So our full safe harbor statement is available in the corporate presentation on our website together with the press release and the results reported that we issued yesterday. We undertake no obligation to update these statements, except as required by the applicable law. Well, I have to say that we're very e about the growth of our recurring business in the first 6 months of the year, particularly given that this growth was achieved even before the commercial sales of Zepzelca began in Europe. So as you know, Zepzelca was only approved in Europe in June, and we began commercial launch in Germany and Austria in July as the first 2 countries that we're starting to commercialize in Europe other than Switzerland, of course, as you know. So we believe these results clearly demonstrate, a, the underlying strength of our business; and two, the quality of the revenue growth that we're delivering. I will particularly highlight the strong growth in royalties, especially those from Zepzelca in the U.S. which increased by more than 50%. So this is reflecting the strong commercial traction of the product following its launch in the first-line maintenance setting. But beyond the financial results, this has also been a particularly important period for the company, for PharmaMar. We are -- as we like to say, we are in the middle of our transformative period this time. I mean the approvals of Zepzelca in the U.S. in October in first line in October last year and in Europe in June this year, first-line maintenance are major milestones for us to not only mark a significant advance for patients by providing an important new treatment option, but also considerably expand the commercial opportunity of epzelca. In particular, the launch in Europe opens a new source of growth that we expect will boost our recurring revenues. So this revenue growth, together with the stronger cash generation will help us to accelerate the development of our other pipeline assets and in-license new assets as we will see now with one of our goals being to have at least one registrational trial underway by the end of '28 or '29. So with that, I will hand over to Maria Luisa, who will walk you through the financials in more detail, and then Luis will provide an update on our development plans.

Thank you, José Luis, and thank you all for joining our earnings call for the first half of 2026. To understand the difference in results between the first half of 2026 and the first half of 2025, it is important to consider 2 significant items recognized in 2025. First, EUR 20.7 million of nonrecurring revenues corresponding to the recognition of the upfront payment received upon signing the license agreement with Merck. -- and second, EUR 14.7 million recognized under the heading other gains, losses net corresponding to the grant awarded to Cellentis. These 2 items largely explain the difference in EBITDA between June 2026, EUR 3.5 million and June 2025, EUR 25.1 million. However, the first half of 2026 showed a strong performance in recurring revenues. So net sales from Zepzelca increased by 23%, offsetting the decline in sales. In addition, royalty income increased by 46% overall, driving by a 50% increase in Zepzelca royalties and a 30% increase in Yondelis royalties. This strong growth in recurring revenue has substantially mitigated the impact of the nonrecurring revenues in prior year. As a result, total revenues reached EUR 92.5 million in the first half of 2026 compared to EUR 95 million in the same period of 2025. just 3% lower. Looking ahead to the second half of the year, recurring revenues will be boosted by the start of commercial sales in the European Union, where marketing began on 1st July in some member states. Similarly, we expect to see sales continue to rise in other territories where Zepzelca has also been approved, meaning that royalties will also increase. On the cost side, R&D expenses remained broadly in line with previous year, while selling and marketing expenses increased in preparation for the European launch of a -- to conclude on the subject of expenses, I would like to point out that, as mentioned earlier, the EUR 15 million Cellentis grant was recorded in 2025 under the heading other gains, losses net. As a result, 83% increase in operating expenses between the 2 periods has been reported. Excluding the impact of the grant in both periods, the increase in operating expenses would have been by approximately 11%. Let me conclude with 2 additional points that I believe are particularly relevant. First, the company generated positive operating cash flow of EUR 11.9 million during the period. And second, net cash amounted to EUR 126.4 million at the end of June 2026, representing a 4% increase compared with 31st December 2025. At the same time, debt was reduced to EUR 43 million, 8% lower than at year-end 2025. And I will now hand over to Luis Mora.

Thank you, Maria Luisa. As the approval of Zepzelca for first-line lung cancer will be transformational for the company. multiply our revenue in the coming years, allowing us to accelerate development in our pipeline and incorporate new assets. This first quarter revenues from Jazz are expected second quarter revenue. In Europe, where we launched in Germany and Austria in July, initial adoption has exceeded our expectations. In fact, the rapid adoption in both the U.S.A. and Europe should not be surprising for us as both Atezo and Lurvy are well known to physicians with clinical data in small cell lung cancer for more than 6 years as well as the expanded access program we have managed in different and across different European countries. You can see the exceptional compassionate use results this quarter as an indicator of the physician enthusiasm. We have already submitted pricing and reimbursement dossiers in many European countries, where we expect that within a year, any European patients will have access to this innovative treatment. The SALUO trial is fully enrolled and the data will be available in the first half of 2027. This is an indication with fewer patients than small cell lung cancer. However, if we obtain the results we expected and which we saw in the [indiscernible], the number of cycles could be double compared to small cell lung cancer. Therefore, it is a good additional indication in area where we have a 20 years presence, knowing all the key opinion leaders and have established a good patient partnerships. We can expect a rapid and significant adoption, especially since the standard of care has not changed substantially in the last 4 years. Furthermore, if approved in Europe, we will obtain an additional year of market exclusivity, then we move from 10 to 11 year market exclusivity. Regarding the pipeline with P54, we have already enrolled 120 patients in solid tumor trials to date. And the first clinical trial data will be presented at the poster at ESMO for the first Phase I dose range cohorts. We expect to begin a trial later this year in the last quarter with centers in the Europe and U.S.A., investigating different doses and dosing regimens, indications and combination to accelerate development, and we expect it to be in one or more registrational trials in 2028. The main indications for now are liposarcoma, mesothelioma, small cell lung cancer and melanoma. Regarding PM-534, we already dosed more than 60 patients with various doses and infusion regimens are observing encouraging things in head and neck, esophagus lung and sarcomas. We expect to have the first clinical data to share in 2027. And now Pascal will address you some items about business development progress.

Thank you, Luis. Good day to all on the call. Regarding business developments, the increasing cash flow and revenues, which Pepe, Maria Luisa and Luis referred to are going to allow us to prosecute a much deeper BDL strategy. We're going to continue to look for our late-stage assets to layer into our European commercial infrastructure. However, in addition, we will also be looking to complement our R&D efforts by looking at pipeline assets that fit into solid tumors. That doesn't mean we're going to do a deal at any price. We are going to retain our discipline to something that makes sense, delivering a positive return on investment for our shareholders. But currently, just to give you a little taste, we are engaged in a conversation with a company for a very synergistic late-stage asset in solid tumors for Europe. And we're also engaged in a number of pipeline assets to layer in usually for EU only, but we would look at rest of world. The modalities we are considering include small molecules, antibody drug conjugates, monoclonal antibodies. And of course, we are looking actively with multiple potential partners in China. Of course, I'm not going to offer you any comments on timing or probability or other things because my crystal ball doesn't work. However, I would assure you that we do have serious intent and the balance sheet to support the strategy so as to close a deal or deals in the near future. With that, let me pass the microphone back to Pepe.

Thank you, Pascal. And well, with this, we conclude our speech today, and we open the floor to questions. Kabi?

Our first question today is from [indiscernible]. We will now move on to -- the next question is from Ami Fadia from Needham.

Congrats on a nice quarter. My first question is if you could provide some color on how we should expect the ramp in Europe to be over the next year? I believe it was mentioned that you expect most of the pricing negotiations to come through over the course of the next year. And then so if you could give us some color on that, it would be helpful. And maybe as you're doing that, give us a sense on how you think that the market in Europe is going to look at Lurvy versus competition from Tara, how that may be different in Europe compared to the U.S.? And then I've got 1 or 2 other questions.

Right. This is going to be a question that's going to address Luis. But before we continue to let you know, I don't know if there's been some cut on the line. So I don't know if there's been any questions prior to that one. please. If there has been, please -- when we finish this one, we'll take that question. And apologies about that. We had some issues with the line. So Luis, will you take the question about the ramp-up and what we can expect about the sales in Europe?

Well, we never send guidance about that, but I can explain to you. The market access of enrollment is already addressed in practically the 80%, 90% of the European market. we expect that is a rapid adoption by the physicians like Germany and Austria, we observe and to grow very fast. But you can understand not all the countries are the same. We expect that in a year, have at least 95% of the European market already approved for reimbursement. Regarding the different -- the most important countries if we speak about the important countries by the size of the market is Spain, France, Italy and Spain. We expect to have full reimbursement for these countries in spring next year in order to grow faster in 80% of the market. The other smaller markets like Belgium, Portugal, Greece Croatia, et cetera, the timing for market access are completely different, okay? But we expected a rapid adoption. In fact, what our internal assumption is to have an important market share in Europe in the last quarter of '27.

Could you also address how you see the competitive landscape in Europe being different compared to the U.S., especially in the context of To?

In Europe today, the most important competitors we have, some are already reimbursed 2 Chinese products but they are approved in all the indications, induction and maintenance, atezolizumab and cprolimab. And this is the 2 competitors now. But we don't observe in these 2 products until today, the many big impact in the use by the physicians in this setting. I want to remind you the label we achieved is maintenance therapy, okay? And maintenance therapy is not especially in this setting, the unique drugs approved today is a combination rbinectedin plus atezolizumab. Regarding the other potential competitor, taflatamab, we don't expect that until even if the trial is positive and achieved the reimbursement in different countries u in Europe until '28 in the second half of '28.

That's helpful. Can you comment on the potential trajectory of the sales and marketing expenses? We've seen a slight step-up in the level of spending in the first half of the year. Could the second half reflect the same level? Or do you expect that to step up a little bit more?

We expected no. In fact, we expect a little less in the second half than the first half, taking account in the first half. We attend many meetings, ASCO, et cetera. All the team for the sales force and medical affairs across the Europe was already joined in the first half. You're seeing this is increased expenses to achieve these new enrollments. But we don't expect that -- we expect a lower in the second half. ESMO, European congresses in Madrid, okay? That is less expensive for us.

That makes sense. And any comment on R&D expenses? Is it likely to remain at the same level as the first half?

Yes. In the second half, we expected in the same level in the first half. Even if the pivotal trial, SAUDO trial and LA trial was already finished or finished enrollment, you see the expenses continues in the following months because many patients are still under treatment, and we can't close the trial. And this ambitious new platform trial with PF54 to increase the number of trials with PM534 will increase in the last quarter of this year. Then what we expect that is a similar figures in the second half than the first half regarding R&D.

Got it. Just the last question for me. I appreciate the comments on the business development pursuit. -- maybe you can comment on how large of a size of transactions you'd be willing to do as you consider a late-stage or in-market asset for Europe?

Yes. Ann, we're not looking for what most people would call a blockbuster because our niche is niche assets. And so we expect that our current balance sheet would allow us to use an upfront payment up to, let's say, $100 million without any stress. Of course, with an earlier-stage asset, you tend to have a much lower upfront and more milestone payments down the road. So we're probably looking at drugs that would have peak sales of $300 million or less.

Our next question is from Kandi from BTIG.

Congratulations team. My apologies, I had a few technical difficulties. So if I missed any of Amy's questions, please just skip them. Maybe 3 questions for me. I was impressed by the EU compassionate use revenue growth kind of primarily driven by France. Kind of once you have formal reimbursement secured, how do you expect compassionate use revenues to transition to formal sales? -- maybe in terms of Saludo and the LMS opportunity, how should we think of that end market in comparison to first-line maintenance? I'll pause there.

Okay. Regarding -- thank you for your question. Regarding the compassionate use, this incredible increase in sales in France are because the French authorities is open in the compassionate use program in the first-line treatment after the EMA approved. Then obviously, the physicians is a huge medical need, that are very good, and they adopted this first-line maintenance therapy in France. This is the reason why we grew about 40% regarding last year. But by law when the drug is approved in Europe, in France, you close the compassionate use and move and the new figure is accès précoce. This access will start we expected in October -- September, October, the compassionate use will be finished, then will not a window for the patient. The patient will continue on the treatment, but close compassionate use, open the accès précoce. In summary, the accès précoce is the same compassionate use, but it's a different figures by law in France. And this accès précoce, the companies will be maintained until you have a pricing and reimbursement official one in France. Regarding the SALUO trial, the lomosarcoma first line, is seeing a huge opportunity for the patients and for the company. I will remember the SALUO trial combined in first-line Zepelca plus doxorubicin in 2 arms, high dose and low dose. If we compare this trial and this a combo with trabectedin, now it is in the NCCN guidelines. This was a trial conducted in France by Patricia Pautier. The jump in PFS from 6 months to very close to 12 months. 12 months represent about 15 cycles, 14, 15 cycles treatment. I want to remark Zepzelca in second line was approved in U.S.A. in many countries and the cycle was 4. In first-line maintenance, the man of cycles is 7. Then if the SALUO trial showed a similar figure than travectedin, we expected about 12 to 14 cycles. then -- and this is very -- is about 3x -- more than 3x than the second line non-small cell lung cancer are double than first line. Then even if the potential number of patients in Europe every year is 4,500 patients with LEO U.S.A. about 2,000, 2,500. But if you see the number of cycles, this indication is very important for the future revenues. Any more questions?