Poxel S.A. (POXEL) Earnings Call Transcript & Summary

Hello, everyone. Welcome to this webinar focused on the royalty monetization agreement based on TWYMEEG sales with OrbiMed. Before giving the floor to Thomas Kuhn, Fanny Bosa, VP Finance and Administration; and Tejdeep Bawa, VP Business Development, I remind you that you have the possibility to ask questions through the Question button on the bottom of your screen. Thomas, the floor is yours.

Thank you, Nicolas. Hello, everyone, and welcome to this webinar. I'm very pleased to present you indeed the transaction that we've just announced. So just in terms of agenda, I'll start really showing the general overview of the structure of the transaction involving, of course, OrbiMed with whom we have monetized our royalties, but also the debt restructuring with IPF Partners and our banks related to a specific loan that we've contracted with them in the context of the pandemic in 2020. Then we're going to more focus on the agreement we made with OrbiMed to monetize the portion of TWYMEEG Royalties. Fanny will then present you the loan agreement amendments that we contracted with our creditors, IPF Partners and the PGE banks. And then for the last part of the call, we'll get back to the development strategy of the company on the hill of this transaction. And as part of this, Tejdeep will present you our business development initiatives because there are many things ongoing in parallel there. We will finally conclude before going to the Q&A session. And as Nicolas mentioned, please feel free to raise any question in the chat. And of course, we'll answer any of these questions. So first, this is our disclaimer. All right. So starting with the channel overview of the agreements with OrbiMed and with IPF Partners and the PGE banks there. So just to summarize what we did. So as you've seen in the PR, we have agreed on a onetime cash payment of USD 50 million in the form of bond issuance from OrbiMed. For those who are not familiar with OrbiMed, they are really one of the key lead investor -- investment fund based in New York. They are heavily invested in the life science sector and extremely well-known investors. We are very pleased with the collaborating with them there. So in return of this onetime cash payments of $50 million, OrbiMed has obtained all the royalties from Poxel that we will receive from Sumitomo, thanks to the commercialization of TWYMEEG in Japan, up to a total amount of $100 million. And so when OrbiMed would have received this $100 million, so 2x the investments, then Poxel will regain the rights to the royalty payments. And as you will hear in a minute, part of it will then potentially serve the debt reimbursement with IPF Partners if the debt has not been fully repaid by them. The use of the proceeds, as I said, will be to reduce the debt to our IPF Partners and the PGE Bank, Fanny will get back to this, and also support our strategic plan. And as you know, we are very much involved in developing new assets in rare disease. So this is our goal. So some of the activities will be resumed in parallel of pursuing partnering discussions that we have on our product and Tejdeep will get back on this in a minute. So as I said, one of the proceeds from this transaction is really to serve the debt repayment. So in parallel of this agreement, we have also restructured our debt with IPF and our banks there. So what we've agreed is really to repay EUR 23.7 million to IPF to significantly reduce the debt because it's now of roughly EUR 12.3 million with them. And also having as part of the proceed EUR 2.8 million payments to our PGE loan. And so the debt being reduced to EUR 3 million with them. As part of this transaction, we have granted different securities to both OrbiMed and IPF. And so we have established 3 Trust securities for which -- in which we have transferred our assets. And the Trust number 1 really relates to Imeglimin in Japan. So it is for assets have been transferred in the form of IP agreements and cash flows and receivables there. Same for Trust 2, but however, which relates to Imeglimin in the rest of the world. So all other countries but Japan and similarly the same type of assets have been transferred in the forms of IP and future partnership. And Trust 3 is the transfer of the other rights mainly focused on PXL770 and PXL065 assets to the benefit of IPF solely for the Trust 2. So going to, in detail, focusing on the agreement with OrbiMed. So, as communicated, Poxel has received a gross upfront payment, a onetime payment of $50 million. Actually, there are 2 components of this $50 million; $42.5 million net, which has been paid by OrbiMed and $7.5 million, which has been put in the reserve account in the deposit there. The deposits, how does it work? So $7.5 million has been placed in this deposit accounts. And what is key, of course, for OrbiMed to be fully repaid is to collect the royalties on the net sales from Sumitomo. So currently, as some of you know, if you followed Poxel, so Poxel is entitled between 8% to 18% of royalties from Sumitomo on the compensation of TWYMEEG. Currently, given the sales of the product in Japan, Poxel is entitled to 8% royalties and the full 8% actually repaid to Merck because Merck is entitled to a flat 8% royalties throughout the commercialization of the product in Japan. Once we will reach a specific threshold, the royalties will go to 10%. And so this milestone will be achieved when the sales of TWYMEEG will reach JPY 5 billion net sales Japanese yen in Japan, so roughly EUR 31 million. And based on the Sumitomo forecast, that is now partner forecast, we believe that we could achieve the sales threshold at the end of the year in 2024. So in the meantime, from the deposit accounts, $1.25 million will be added to this deposit and pay back to OrbiMed until we reach this JPY 5 billion Japanese yen net sales coming out from Sumitomo. So that OrbiMed will start collecting the royalties and all the payment from Sumitomo. And then at that time, we, Poxel, will benefit from the rest of the deposits. I'll get back to this in a minute. So as I said, in exchange of these proceeds, OrbiMed is entitled to receive the payments from Sumitomo, both the royalties on the net sales which, as you have understood, can go between 8% to 18% with the first 8% going to Merck and the rest going to Poxel and now OrbiMed, as well as sales-based payments. So we have multiple sales based payment for a total up to EUR 200 million and some of them, of course, will serve to fully repay OrbiMed. The next one, as I said, will be when the product will hit JPY 5 billion; at that point of time, Poxel and OrbiMed will be entitled to 10% of that, so JPY 500 million, so EUR 3.1 million as a first sales based payment there. In addition to the proceeds from the partnership with Sumitomo in Japan, OrbiMed will also be entitled to a portion of the proceeds for future potential partnership in Asian countries other than Japan while as part of the transaction or in parallel of the transaction, we have agreed with Sumitomo that we will regain the rights in Southeast Asian countries, Sumitomo focusing on the commercialization of the product in Japan. And so in these territories, for which Sumitomo formerly had the rights to, OrbiMed is entitled to a portion of the proceeds in case of future partnerships. Then once OrbiMed would have received 2x the investment, so USD 100 million, then Poxel will regain the full rights to the product. So then we will be entitled to the royalties coming from Japan to the remaining sales based payment coming from Japan, from our partner Sumitomo, and we'll also get the proceeds from future partnership there. And as you know, and Fanny get back to this, a portion of this will actually serve the IPF debt repayments there. So you have the overall structure here. USD 50 million; USD 42.5 million immediately, a deposit of USD 7.5 million. The remaining will get to Poxel. And as you have understood, we believe that we could get USD 5 million from these deposits as soon as the product will have hit JPY 5 billion net sales in Japan, and then OrbiMed will start collecting royalties and sales based payments up to an amount of USD 100 million. So that's really the general structure of the deal with OrbiMed. As I said, 2 kinds of proceeds or used proceed, 1, to restructure our debt with both IPF Partners and our banks for PGE loans there. 2, to support our strategy in the rare disease area. So for the former, for the debt repayment, we could set different loan agreement with IPF Partners as well as with PGE Bank. And Fanny, do you want to present that, please?

Yes. Hello, everyone. Thank you, Thomas. So, as Thomas said, as part of the transaction with OrbiMed, we could significantly reduce the debt with our main lender, so IPF and the PGE banks and restructure the terms of those debts. So let's start with IPF. So first, from the USD 50 million proceeds from OrbiMed, we could repay an amount of EUR 23.7 million to IPF to reduce the debt. So we could fully repay the Tranche A and the Tranche B of the loan. And so reducing the Tranche C to an amount of EUR 12.3 million. So as it relates to the terms now of this remaining Tranche C, so first of all, we have agreed no cash interest which is a very important point for the company as no debt service will be repaid from the own resources on the cash of the company. And the PIK interest will be set at 27% and will be reduced in case of Imeglimin partnership to 25%. The exit fees that were already agreed in our previous restructuring remained at EUR 4.1 million. Now in terms of repayment terms, so we have 2 main way of repaying the debt. So first and the shortest one, I would say, would be from the deposit that Thomas just presented before, the USD 7.5 million deposit that we have in a reserve account. So when we will get back the remaining deposit when OrbiMed will start to receive the royalties. So again, we plan to receive around $5 million at the beginning of 2025. So the full deposit that we will get back will go back to IPF as a reimbursement of the debt. Then we will reimburse IPF with 75% of the royalties from TWYMEEG after OrbiMed will be fully repaid. And in that -- before that or before giving 75% of the royalty to IPF, we could have other sources of repayment. So first, we will allocate 75% of future potential royalties from future partnerships with Imeglimin to the reimbursement of the debt. And 50% of any drawdowns under the structure finance facility with IRIS will be also allocated to the reimbursement of the IPF debt. So we have many mechanisms that have been put in place and that have been agreed to really reduce significantly the debt over time. A few additional points that are really worth to mention on this debt restructuring. First, we could get rid of most of the financial covenants. So only 1 financial covenant will remain in the terms of this restructuring, which is minimum cash position that we need to maintain at all times at a level of EUR 500,000. Other than that, no other financial covenants will apply. We also agreed on the nonrecourse debt once IPF will have been reimbursed for an amount of EUR 2.7 million. So as I just stated, we expect that this amount and more than this amount will be reimbursed early 2025, meaning that we expect as of early 2025, that the IPF debt will be no recourse against Poxel, meaning that if proceeds from Imeglimin from other future partnerships are not enough to fully reimburse the debt, then IPF cannot add any recourse against the company. And last point on this restructuring with IPF is the additional Tranche D that is available for the company. So as I was saying, our goal is really to reduce significantly the debt of the company. So our first intention is not to draw down any Tranche D. But this is still a mechanism that is very important for the company, both for our partners, so OrbiMed, IPF, because it will secure the long-term viability of the company. If the cash position goes beyond EUR 1 million.

Below.

Yes, sorry, below EUR 1 million. We will be able to draw down some tranches of this Tranche D. So at a maximum of EUR 6.2 million, that we can arrange this drawdown in several Tranches if needed. So this will ensure as I was saying, the long-term viability of the company. So this is a tool that is helpful to secure OrbiMed, IPF, but also to secure the company to ensure the company to benefit from the royalties when the lenders will be fully repaid. So now going to the amendment of the PGE loan with the bank. So again, from the USD 50 million received from OrbiMed, we could repay EUR 2.8 million to the PGE bank, so leaving this debt to a level of EUR 3 million. So this remaining balance will be repaid from the closing up until 2026 on quarterly and linear quarterly or monthly depending on the bank's linear maturities. And the interest rates and the conditions, the economic conditions, will be similar to the -- to what we currently have with the banks. Okay. So now I am handing it over to Thomas.

Thanks Fanny. So part of the proceeds, as Fanny explained, serve really the debt reimbursement, and you've seen that a significant portion of our debt now has been fully repaid. The rest we serve in executing our strategy. So in terms of execution of the strategy, as you know, one very important aspect for us is really going to continue the development in the -- of our product for rare metabolic diseases. And specifically, with PXL770 and PXL065. So one -- the first approach, that's really we want to continue working on the development of PXL770 as in kidney disease, ADPKD, which is this polycystic kidney disease which is one of the leading cause of kidney impairment there. And we believe PXL770 has demonstrated very interesting preclinical proof-of-concept data. We know that the product is also safe in human. So the goal will be to start proof-of-concept trial there. And of course, this is subject to additional financing or partnership discussion. All this is ongoing, but we believe this is a key aspect for us going forward. In parallel, PXL770 has also been extremely well investigated in another disease, neurometabolic rare disease, which is called adrenoleukodystrophy, ALD and specifically the adult form of the ALD adrenomyeloneuropathy for which, again, we have very interesting preclinical data and for which really would like to start proof-of-concept trial there. And again, similarly, we have discussions for partnership as well as for financing about these opportunities. For PXL065, as you know, we demonstrated the benefit of the product really for NASH in a dedicated Phase II, and we have ongoing partnership discussion, and we can get back to this later. But in parallel, we also explore the potential of the product for some rare disease, one of it being ALD as well similarly to PXL770 with the goal basically to select either one or the other, basically to move into this indication. And more recently, we have also investigated the potential of PXL065 or more broadly, the -- our deuterated platform for other rare disease where -- for which we have an ongoing preclinical study. And so the goal is definitely with the possibility to continue supporting this strategy, continue supporting the partnership discussion we have on all these assets there because in parallel of this transaction around monetization, we have several advanced discussions. The goal for us being to either partnering the asset or develop internally these assets there. So all this is ongoing. And of course, as soon as we have more visibility on one or the other path there, we will get back to the market. So that's the first aspect. Moving forward, our rare disease pipeline with specifically PXL770 and PXL065. The similar aspect, which is going to be key for Poxel is, of course, to continue leveraging Imeglimin. We have a very successful collaboration with Sumitomo Pharma for Japan. As part of the agreement with them, we have now regained the rights for the countries for which Sumitomo had the right, except Japan. So in basically other Southeast Asian countries, including China, for which we have advanced discussion and the goal will be to leverage all these not only actually in these countries in Southeast Asia for which we just re-underwrite, but also continuing the discussion that we have in the other territories, and we have communicated on some of them, including India or Middle East or North Africa there. But maybe, Tejdeep, you want to give a bit more insight to the audience about this.

Sure. Happy to do that. So maybe first, turning to the return of the rights from Sumitomo Pharma. As Thomas mentioned, given the ongoing focus by Sumitomo Pharma to market TWYMEEG in Japan and to ensure the adequate resources to support commercialization. Sumitomo decided to return the rights of the Imeglimin of all countries, except Japan, under the Sumitomo-Poxel license agreement. This, as Thomas also mentioned, constitute several Asian countries, including China, which obviously remains a large type 2 diabetes opportunity for Imeglimin. . Importantly, as we agreed with Sumitomo, Poxel and any potential new partner will have the ability to leverage both clinical and nonclinical data generated in Japan by Sumitomo. This also includes the recent Phase IV post-marketing data announced back in August regarding type 2 diabetes patients with renal impairment. As a reminder, Sumitomo plans to conduct regulatory discussions in Japan, to revise the package insert for TWYMEEG by fiscal year 2024 for type 2 diabetes patients with moderate, severe and end-stage renal impairment. As a result of this revised license agreement with Sumitomo Pharma, Poxel will continue to focus on finding potential partners across the different regions of the world ex Japan to enable further development and commercialization of Imeglimin. Our focus has been on regions specifically where there could be an ability to leverage and bridge to the existing Japanese PMDA approval by Sumitomo. This could also enable to reduce both development and regulatory time lines for a potential new partner. In addition, as we mentioned previously, we're considering regions with large type 2 diabetes population. So for example, China, India and MENA, which is the Middle East and North Africa region, where Imeglimin could have an impact as a new mechanism of action for treating type 2 diabetes population. That covers our ongoing effort to partner in these territories ex Japan. Obviously, these discussions are ongoing. Some are in more advanced phase than the other, and we will continue to provide an update as these discussions progress further.

Thank you very much, Tejdeep. So I hope we've given you the overview of really the transaction and the restructuring that we've successfully completed and announced this morning as well as you know the strategic direction of the company. But just really to summarize everything as a conclusion before moving to the Q&A session, so really, the key pillars of our strategy will be 1, to really continue our partnership activities led by Tejdeep there. . Of course, number 1 is we need to continue this very successful partnership with Sumitomo in Japan. There is a very nice sales trajectory on the back of really excellent work really from our partner, Sumitomo in Japan. There are a lot of activities over there. And Tejdeep mentioned one of them is this key population of the diabetic patient with chronic kidney disease. All this, we believe, will further increase really the opportunity in Japan and really support the sales dynamic in Japan. And of course, we'll continue supporting Sumitomo in those different activities. Two, as mentioned, we will also continue our partnering discussion for specific territories where, one, we could leverage at most really the -- all the data that we've generated and that supported the Japan NDA because in some countries such as Southeast Asian countries, but also other countries, this could be well leveraged there with the need to perform only a very limited plan to go to marketing approval in these territories. And so we are, of course, focusing on these territories as Tejdeep mentioned there, with the goal, of course, to conclude partnership in these territories. The second point is, of course, to continue our strategic focus in developing new products for rare metabolic diseases, specifically focusing on PXL770 and PXL065. We have quickly showed you our strategic focus for PXL770 on the this kidney disease, ADPKD, this polycystic kidney disease as well as this neurometabolic disease adrenoleukodystrophy for PXL065 in parallel of continuing some discussion on NASH for partnership. We are also exploring the potential of the product and more broadly for our TZD platform around rare metabolic indications starting with ALD as well as other indications. Of course, that's the third important pillar of the company. The goal is to further strengthen our cash runway. Thanks to this transaction with OrbiMed, the cash runaway has been extended up until end of 2025. But as you have understood, it's really allowed us to resume the full activities and specifically the clinical proof-of-concept trials that we want to perform really for both PXL770 and PXL065. The goal will be to strengthen our financing through partnership, investor discussion or any other opportunities there. So that's our strategic road map there. I think this transaction with OrbiMed is a very good first step to achieving and really delivering on this road map and of course, we'll keep you posted on our progress on all these initiatives. So with that, I think that, that closes the discussion. Thanks, Fanny. Thanks Tejdeep. And we can now open up the Q&A session. And please, if you have any question, please include them in the chat, and Nicolas will share these questions with us. Nicolas. So thank you very much, everyone. Thank you again for your support, and let's open the Q&A session, Nicolas, if you want?

Thank you, Fanny. Thank you, Thomas. Thank you, Tejdeep. So before starting with the Q&A session, I remind you that you have the possibility to raise all your question through the Question tab on the bottom right of your screen. So the first question we have is about the manufacturing of the pills. Where do you plan to manufacture the pills in Europe, in Asia?

So I believe that the question is around Imeglimin and maybe I can tell, well for PXL770 and PXL065. So for Imeglimin for TWYMEEG, so as part of the agreement with Sumitomo, we have done a debt transfer to Sumitomo. Also Sumitomo is responsible for the supply of the product for Japan. And they are -- they have their own capabilities there, and so they are working on them. By the way, they've continuously work on increasing the capacity and I think they are at a point now where basically they have really expanded. They have the capacity there and able really to support the strong growth that we've seen from TWYMEEG sales in Japan. For the other territories, well, as you have understood, the goal will be to establish partnerships. So this would be, of course, discussed with the different partners. Just as a reminder, we also during the development of the product, including for the Phase III in Japan, we worked with our own suppliers. We have different suppliers all around the world; in Europe, in Asia, and so we could do this. And as it relates to PXL770 and PXL065, again, we are working with our own CDMO. Tejdeep, do you want to add anything on this aspect?