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

Good evening, everyone -- sorry. Welcome to this webinar focused on the presentation of Poxel's 2023 full year results. Before leaving the floor to Thomas Kuhn, CEO; Fanny Bosa, VP, Finance and Administration; and Tejdeep Bawa, VP Business Development, [Operator Instructions] Thomas, the floor is yours.

Thank you, Nicolas. Hello, everyone, and good afternoon and good evening. Thank you very much for attending the call. So we have several topics basically to cover today. So first, we'll start with the presentation of our full year 2023 financial results that have been just approved, and so Fanny will present that. We will then switch to and update you on the commercial dynamic for our lead product in diabetes, TWYMEEG, in Japan, which is then a good segue to, again, present you following what we did last Monday, the recent agreement we concluded with OrbiMed to monetize a portion of the TWYMEEG royalties. And then given that the proceed of this transaction, mainly has been used for 2 aspects: repayment of the loan agreement with IPF Partner and PGE banks, so Fanny will present that to you. And together with Tejdeep, we will also present you the second use of the proceeds to really continue the development of the company, including our metabolic rare disease pipeline and also sustaining partnership discussions that are ongoing there. So -- and then with that, we'll conclude and switch to the Q&A session. So first, our disclaimer, which is pretty usual. And then Fanny, maybe you want to start presenting the full year financial 2023.

Yes. Thank you, Thomas, and good afternoon, everyone. So before reviewing the financials for the full year 2023, I would like to remind you that the financial statements do not include the accounting impact of the post closing event on September 30 and linked to the royalty monetization transaction with OrbiMed. This transaction will have an impact on the cash position and the indebtedness of the company as of the closing date, and those impacts would be reflected in the 2024 financial statements. So let's start with the revenues. The revenue for the full year 2023 reflects JPY 300 million, which corresponds to EUR 2 million of royalty revenue from Sumitomo Pharma, which represents the 8% of the TWYMEEG net sales in Japan. So as you know, as part of the Merck Serono licensing agreement, Poxel had to pay Merck Serono a fixed 8% royalties based on the net sales of Imeglimin independent on the level of sales, and this is what is reflected here in the cost of sales line. In the full year 2023, the R&D expenses amounted to EUR 4.4 million, decreasing in comparison with 2022, reflecting the cost savings of the company. As presented in the company's half-yearly financial results in 2023 is added to those R&D expenses, the impairment of the PXL065 for EUR 16.6 million. This impairment translates the company's need to obtain additional financing to pursue development plan in MASH or ALD, its current market capitalization and the macroeconomic context in which it operates. However, we consider that the potential of PXL065 in its targeted indications remain unchanged and very promising, and we will reassess this position at -- during the next close -- full year closing. So the tax credit, so the French CIR resulted in an income of EUR 0.6 million in 2023, sorry, as compared to EUR 1.5 million in 2022. The general administrative expenses totaled EUR 8.4 million in 2023 as compared to EUR 9.4 million in 2022. The financial loss amounted to EUR 6.3 million in 2023 as compared to a loss of EUR 9.5 million in 2022. So in 2023, it primarily really reflects the interest rate -- the interest debt we have to pay for the company indebtedness and especially to IPF. And as a reminder, the financial loss in 2022 included the exit fees for the IPF debt that will be paid at the end of this indebtedness line. So the net result for the financial period ending in 2023 was a net loss of EUR 35.1 million as compared to a net loss of EUR 31.4 million in 2022. Let's now move to the assets of the company. So the intangible assets amounted to EUR 10,000 at the end of December 2023. And as I was saying earlier, it primarily reflects the impairment for the entire value of the PXL065. The decrease in property, plant and equipment to about EUR 1,000 mostly reflects the depreciation to anticipate the end of the leases and the write-off of fittings and equipment as part of the cost savings plan realized at the end of 2023. The cash and cash equivalents amounted to EUR 2.3 million at the end of 2023 as compared to EUR 13.1 million at the end of 2022. This change in cash, down by EUR 10.7 million, reflects the cash burn from the operations, partially offset by the IRIS financing. Let's now move to the liabilities of the company. So the total shareholders' equity amounted to minus EUR 49.1 million at the end of 2023 compared to minus EUR 18.2 million at the end of 2022, and it mostly reflects the 2023 net loss, which is partially offset by the capital increase linked to the IRIS conversion. The total liabilities, so the noncurrent and the current financial liabilities, amounted to EUR 47.5 million in 2023 compared to EUR 44.2 million at the end of 2022. So in 2023, the financial liabilities mostly reflect the EUR 34 million debt to IPF, the EUR 5.8 million debt to the PGE banks and the EUR 6.8 million to IRIS financing related to its non-converted demand at the end of December 2023. So as a reminder, all these -- all of these financial liabilities has been decreased following the transaction with OrbiMed. Finally, so let's have a look at the cash flow statement. So the cash burn -- as I was saying, the cash burn from the operating activities amounted roughly to EUR 14 million for the full year 2023 as compared to EUR 21.8 million for the full year 2022, again, reflecting the cost saving plan of the company. The cash flow from the financing activities amounted to EUR 3.2 million at the end of December, mostly representing the IRIS equity-linked financing for EUR 6.3 million and partially offset by all the interest related to the IPF debt. So as a result, the cash position of the company at the end of 2023 was EUR 2.3 million. Now at this date and following the nondiluting financing agreement with OrbiMed and according to Poxel's current forecast, which includes the company's cash position estimated at the end of August 2024 at EUR 2.9 million, the net upfront of $42.5 million from the monetization of the royalties, the partial redemption of the IPF bond loan and the PGE loans for a total of EUR 26.5 million, the full residual drawdown of the equity-linked financing facility put in place with IRIS and the anticipated business plan, including a very strict control of our operation, the company expects that its resources would be sufficient to finance its operation until the end of 2025. Thank you for the attention, and I will now hand over to Thomas Kuhn.

Thank you very much, Fanny. So before going to really the OrbiMed transaction that Fanny referred to a couple of times, we first would like to give you an update about the commercialization of our lead assets in diabetes, TWYMEEG, in Japan with our partner, Sumitomo. So as you know, we have a very successful partnership really with Sumitomo Pharma with clearly one of the leader in Japan really for type 2 diabetes. And thanks to this leadership position, we are seeing currently very strong growth trajectory, and I will give you further detail in a minute. Just to remind you, we signed a collaboration agreement back in 2017. And now that the product is commercialized, Poxel is entitled to 2 type of revenues: one, the royalties, so escalating royalties on the net sales between 8% to 18%. We are currently receiving 8%, and this 8% actually paid back to Merck. And Merck is entitled to a flat 8% royalties; second, sales-based payments and -- which can total up to EUR 200 million that basically we can -- in a couple of installments that basically Poxel can be entitled to, depending on certain sales threshold. I'll get back to this in a minute. So currently, the sales trajectory, as I said, is really growing very extremely well, thanks, of course, to the very significant effort from Sumitomo and thanks, we believe, to a very thoughtful commercial strategy. The current positioning of the treatment is really being prescribed as an add-on treatment to oral antidiabetics and specifically to DPP4 inhibitors. DPP4 inhibitors, this is the leading class in Japan. Most of the diabetic patients in Japan are treated with the DPP4 inhibitors. And we've seen in Phase III and in other experiments that adding the 2 products, so adding TWYMEEG on top of DPP4 inhibitors, can lead to a very sustained efficacy and very good safety, so which is, of course, very important for the patients. What we're seeing as well is really that TWYMEEG is prescribed as -- in combination with oral antidiabetic and specifically more and more with SGLT2 inhibitors, which is a more recent class compared to the DPP4 inhibitors, that is more and more prescribed in Japan. Three, and this is for the future, the goal will be to leverage the results that we have obtained, that Sumitomo has obtained from a dedicated trial at -- for which we announced topline results during the summer in August this year from a trial in which TWYMEEG was tested for efficacy and safety in diabetic patients also suffering from a well-known comorbidity for diabetes, so which is the renal impairment. And so different renal impairment grade were tested, moderate, severe and end-stage there. And this trial, as you know, and as communicated in our press release, confirm really the good profile for TWYMEEG there, which is now why Sumitomo is currently conducting discussion with the PMDA, the regulatory authorities in Japan, to revise the package insert for TWYMEEG in patients with renal impairment moderate, severe and end-stage, given that we currently have some restrictions. More to come on this, and of course, this will be a further opportunity for Sumitomo. So based on this, as I mentioned before, we have seen a strong growth trajectory so that Sumitomo forecast for the 2024 -- for 2024 is of JPY 11.3 billion, so roughly EUR 70 million or $70 million are there. Based on this forecast for 2024, so of course, we expect TWYMEEG net sales in Japan to surpass a first threshold of JPY 5 billion, so roughly EUR 30.6 million, but it could also reach JPY 10 billion net sales, so EUR 61 million, so that Poxel for 2024, could be entitled to 10% or even 12% royalties on net sales, depending if we reach the second threshold, plus 2 sales -- 1 or 2 sales-based payments: the first one of JPY 500 million, so roughly EUR 3 million if we reach this first threshold of JPY 5 billion net sales; and JPY 1 billion if we reach the second threshold there. We get back to this because, of course, these revenues, based on the transaction we've recently concluded with OrbiMed, will, of course, serve the repayment of government transaction. Two additional points to really support the good growth trajectory. So there is -- Sumitomo is working and increasing its supply capacity. And so no problem is anticipated mid and long term to really support this growth trajectory. And finally, the product is currently protected by several patents. We have a broad patent estate protecting the product with the last patents extending protection up to 2036, including the 5-year patent term expansion that were granted to some patents following the commercialization of the product. So that's the situation in Japan. And so based on this situation, which as you've seen, is really promising and again, I recall that this is really the first year of the commercialization of the product, that could -- that has very much help us really to settle an agreement with OrbiMed to monetize a portion of our royalties. There are several components on this transaction that was announced Monday this week, and I'd like to get back to some of the elements, giving you, first, the full picture and then, with -- finally, we're going to elaborate on the different pieces of this transaction. First one, of course, we concluded this transaction with OrbiMed, for which we obtained a onetime cash payment of USD 50 million. And in return, OrbiMed, obtained the royalties on TWYMEEG from the sales of TWYMEEG in Japan by Sumitomo, up to a total of $100 million. Once this $100 million will be achieved, once OrbiMed have received the $100 million, Poxel will regain the rights to the royalty payment, and then we'll benefit from the royalties and the sales-based payments there, which, and we'll get back to this, will further serve the debt repayments, yes. For the use of proceeds, there are basically 2 types of proceed: one, as I mentioned, first, reducing significantly the debts that we had towards IPF Partner and PGE banks. Fanny will elaborate on this in a minute; and secondly, of course, supporting our plan, and specifically our plan in the rare disease area, while, currently, we are pursuing partnership discussion for our products on -- for rare disease indications there. So Fanny will elaborate on the debt repayment, but really the high-level message is that we could significantly reduce the debt, thanks to a payment of EUR 23.7 million to IPF and EUR 2.8 million to the PGE banks there. So -- which is, of course, very important for the company, and the goal will be to further deleverage the company debts there. Last, these agreements were also very important for us and for OrbiMed and IPF Partner. And so that, we did establish some trust to really transfer some of the assets linked to the product to really secure the transaction. Three trusts have been implemented: one, related with Imeglimin in Japan, for which several assets, including IP, receivables and so forth, have been transferred; Trust 2 relates to Imeglimin for the rest of the world, so outside Japan; and Trust 3 really has been established for the benefit of Poxel and IPF to really secure other IP rights, including 770 and 065. So going to the first piece of the transaction, so which is the royalty monetization agreement with OrbiMed. As mentioned, we have agreed on a gross upfront payment of USD 50 million. Actually, there are 2 pieces in there: first, $42.5 million net payment, which has been made from OrbiMed basically to Poxel; and second, USD 7.5 million which has been placed into a deposit account. What is it for, this deposit accounts? As you have understood, currently, Poxel do not benefit from royalties of sales-based payments because the 8% that we receive from Sumitomo actually is fully transferred to Merck. Once we will reach the JPY 5 billion net sales, then Poxel will be entitled to 10% royalties, 8% to Merck, 2% to Poxel, and to the sales-based payments of JPY 500 million. Up until we reach this threshold of JPY 5 billion net sales, we have agreed with OrbiMed that from this $7.5 million, USD 1.25 million will pay back OrbiMed each quarter until we'll reach this threshold. To make it simple, given the Sumitomo forecast for 2024, we believe that we will reach this JPY 5 billion net sales threshold at the end of the year, on 2024. So OrbiMed will start receiving the first royalties and sales-based payment early next year, which means that there will be 2 quarters between the time of the closing and the time when OrbiMed will receive the first royalties. So from this $7.5 million, $2.5 million will be paid back to OrbiMed so that the deposit will have $5 million, and this $5 million, once we hit the JPY 5 billion threshold, will then be paid to Poxel. In exchange of this transaction, so the $42.5 million net deposit -- sorry, the $42.5 net upfront, plus the remaining amount of the deposit, which we anticipate to be of $5 million, so $47.5 million in total, OrbiMed will collect the proceeds from the partnership we had with Sumitomo. As I said, they will receive all the royalties and the sales-based payments on the net sales of the commercialization of the sales of TWYMEEG in Japan, up until we reach the amount of $100 million. One additional pieces on this, in parallel of the agreement with OrbiMed, we regained the rights to some territories in Southeast Asia. Sumitomo wanted to really focus the -- in Japan. So if in case of future partnership in these territories, such as in China or Korea or other Southeast Asian countries, a portion of the proceeds entitled to Poxel will actually serve this $100 million repayment. Actually, $12.5 million will be entitled to OrbiMed. Again, at the end, the expiration of the agreement and the bonds will be concluded once OrbiMed have received $100 million, whatever the source of payment, royalties from Sumitomo, sales-based payments or other partnership there. And then we will fully regain the full rights to the royalties, sales-based payments and the full right to other partnership. So that's the transaction. That's the overall transaction that we have that we believe is very interesting for the company. And as I mentioned earlier, proceeds have been used for 2 main points there: one, debt repayment; two, sustaining and strengthening our strategic focus in metabolic disease. So before going there, I'd like to hand over to Fanny who will present to you the key element of the debt repayments. Fanny?

Yes. Thank you. So indeed, we had -- we used the -- an upfront of the proceeds to lower the debt of the company. So first, to lower the debt that we had with IPF for an amount of EUR 23.7 million, leaving the debt to an amount of EUR 12.3 million at the closing of the transaction, so a significant decrease of this line. In parallel, we restructured all the terms and conditions of this remaining amount. So first of all, we agreed with -- on no cash interest, which is a very important point for the company as it prevents the company of paying debt service from its own resources. The capitalized interest, the PIK interest will go to 27% and could decrease to 25% in case of additional Imeglimin partnership. We also have kept the exit fee that was already agreed in the previous agreement for an amount of EUR 4.1 million. Now as it relates to the reimbursement mechanism, so we agreed on several types of reimbursement to ensure the quickest reimbursement of this debt. So first of all, the -- we have a short-term mechanism from the deposit that Thomas was talking about earlier from the OrbiMed deposit for an amount of $7.5 million. That should end up to $5 million for Poxel at the end -- at the beginning of 2025. So this deposit amount, the remaining of the deposit amount, will be allocated at 100% to the reimbursement of the debt. Then we will have a reimbursement of the debt through the royalties, the TWYMEEG royalties, once OrbiMed will be fully reimbursed. Indeed, when OrbiMed will be fully reimbursed, 100% of the revenue will go back to Poxel, and we will allocate 75% of those revenues to the reimbursement of the debt. Between this, we can leverage 2 additional mechanism, reimbursement mechanism, to lower the debt. First of all, if we conclude a new partnership on Imeglimin for -- in the rest of the world, 75% of the cash flows received by the company would go to the reimbursement of the debt. And we also have agreed to allocate 50% of the IRIS drawdown to the reimbursement of the debt. So all of those mechanisms have been put in place to ensure -- to lower as quickly as possible the remaining debt that we have at closing. In addition, we have 2 other components that limit -- that lower the limitation of the debt. First of all, we have deleted all financial covenants that were previously in place apart from only one, so we must keep a cash position of EUR 500,000 -- at above EUR 500,000 at any time. Other than that, no other financial covenants. And one other mechanism is the nonrecourse debt once IPF will have received EUR 2.7 million of reimbursement. So as I was saying, we should expect this at the beginning of 2025 through the deposit. So once IPF will have a first EUR 2.7 million reimbursement, then there will be no recourse against the company, meaning that if the other source of reimbursement that I just talked about are not sufficient to fully reimburse the debt, then IPF cannot have any recourse against the company. And finally, there is an additional Tranche D that has been put available for Poxel to ensure the long-term viability of the company. So as I was saying, the first objective is really to lower this debt, so not to draw down this Tranche D. But this is still a mechanism that we could use in -- if we need to reinforce the cash of the company. And this is a mechanism that secure IPF and OrbiMed regarding the royalties that they are entitled to receive, but it secure also the company and ensure the company to recover the large portion of royalties that we will get after reimbursement of OrbiMed and IPF. Secondly, after the IPF restructuring, we also had another restructuring regarding the PGE banks, so the loan that were granted by the banks during the 2020 crisis with the COVID pandemic. So out of the $50 million from OrbiMed, we reimbursed EUR 2.8 million to those PGE banks, leaving the debt at a level of EUR 3 million. So this remaining balance will be reimbursed on a linear basis, on a quarterly or monthly basis, with a maturity at the end of 2026. And all the interest rates are -- will be similar to what we currently -- we are currently having in the frame of those loans. So thank you and will hand it over to Thomas now.

Thank you, Fanny, for this detailed explanation there. So 2 main proceeds there, the debt reimbursement, debt repayments that Fanny just covered and, of course, supporting the development strategy from Poxel. And so together with Tejdeep, we'd like to present to you the roadmap for the company for the future, following this successful transaction. One, of course, we will continue focusing on our rare disease asset, PXL770 and PXL065. We have, we believe, compelling opportunities, and the goal is really to continue developing these products. I'll get back to this in a minute. And following this, Tejdeep will also present you a roadmap in terms of partnership. In parallel of the transaction, as I mentioned, we regain the rights from Sumitomo for some countries from Southeast Asia, including China, and so that represents a great opportunity for future partnership for the products. So first, developing further our metabolic disease pipeline there. So as you know, we have 2 products, which really have great potential in -- for metabolic disease indications, the first one being PXL770, which is our own product for which we have 2 key indications, no, ADPKD, which is a kidney disease, autosomal dominant polycystic kidney disease, which is a rare kidney disease, affecting roughly 200,000 patients in the U.S. which is one of the leading causes for chronic kidney disease. And there is currently a big need for a new product. There is only one approved product with several issues, specifically related to its safety and tolerability profile there. 770 has demonstrated great potential in different clinical model there. We know that the product is safe in human because we've tested it in around maybe 200 patients there. And so the goal will be now to initiate a proof-of-concept trial to confirm the potential in these ADPKD patients. Another indication of interest for us is ALD, adrenoleukodystrophy, specifically AMN, the adrenomyeloneuropathy, so which is the adult form of adrenoleukodystrophy, which is a rare neurometabolic indication which affects 300,000 to 500,000 patients worldwide, so real rare disease for which you have no treatment, so a huge unmet need there. And again, same as for ADPKD, we've seen striking results in pre-clinical model, and the goal will be to confirm that in a dedicated proof-of-concept trial in the target population. Second indication -- second product, PXL065, which as you know, demonstrated very positive data in NASH, but in parallel, we're also exploring other indication for the product, but also for other products from this class of what we call deuterated TZD. And we believe it's also interesting in ALD, similarly to 770, with progress, the option to select the best product to pursue this indication. And we are also currently exploring additional rare disease indication, and we'll get back shortly to you with some details. So the goal is really to pursue the development of this and either alone, leveraging what we have as well as further cash infusion, really, in the company and also while in parallel, really pursuing a partnership discussion for both products. In parallel of that, then I hand over to Tejdeep. Of course, we'd like also to partner further Imeglimin following the successful partnership with Sumitomo. Tejdeep, do you want to weigh on this?

Sure. Thank you, Thomas. So just to give a little bit more context, as Thomas mentioned, we executed and Sumitomo returned the rights to all territories outside of Japan earlier this week. This was under the license agreement that we have with Sumitomo. Part of this was driven by Sumitomo's ongoing focus with TWYMEEG in Japan to commercialize the product. As you may remember, we received positive topline results from the Phase IV study in Japan in type 2 diabetes patients with renal impairment. And based on that, Sumitomo is conducting discussions with regulatory authorities with the expectation of revising the package insert in fiscal year 2024. So obviously, a lot going on for Sumitomo in Japan specifically, which is why they've decided to focus a lot of their resources and their efforts in that territory. Given that and that we received the rights back and as part of the agreement on those -- on the receival of those rights back, Poxel and any potential partner that we might work with has the ability to leverage the clinical as well as the nonclinical data that has been generated through our partnership with Sumitomo. And I'll touch on that on the next slide because that has significant implications in terms of how we think about our partnering strategy. So as you can see, our focus now, especially given the return of the rights remains on ensuring additional development for Imeglimin outside of Japan. We do have ongoing discussions at different stages, some more advanced than the others, across different regions where we feel we could develop and commercialize Imeglimin. Our focus has been, a, to be able to leverage the Japanese PMDA approval, which could enable to reduce both the development and the regulatory timelines, and so we're focusing on regions where this bridging strategy would be available. And then secondly, obviously, to maximize the overall potential of the product, identifying large regions with large type 2 diabetes population. So for example, China that we've mentioned previously, India, Middle East and South Korea. Also finally, given that the Phase IV data has recently been released, there is a significant overlap between the type 2 diabetes patients with chronic kidney disease. So just to give you a reference, in China specifically, there's about 1/3 of the patients or close to 1/3 of the patients who have an overlap between type 2 diabetes and CKD. So clearly, a large opportunity and the fact that Sumitomo has agreed for us, and as I said, any potential partner to be able to leverage that Phase IV data provides additional momentum and additional guidance to our discussions with potential partners as well. And we'll keep you updated as these discussions progress. Turn it over to Thomas.

Thank you very much, Tejdeep. So just to conclude. So you've seen that we have really a clear roadmap for the future, and of course, we'll continue updating you on our progress. While, of course, we want to continue the successful partnership with Sumitomo Japan, it's important for our partner for us as well and also for future partnership because the more we have a strong momentum on the product in Japan, the better it is for all the reasons that Tejdeep just mentioned basically. Two, of course, we will continue our regional partnering discussion in various territories and specifically in the Southeast Asian countries such as China but also other regions where we can fully leverage the marketing approval in Japan. Two, we will continue progressing our rare disease product now, starting with 770 and 065 there. And in parallel of discussing with potential partners, we also executing plans there. So that at the end of the discussion, we'll decide the next step for each of the products there. And three, of course, following this successful transaction with OrbiMed, which allow us really to extend our cash runway until end of 2025, we'll continue strengthening our financials, including and prioritizing, of course, potential partnership given as you've heard -- I mean, this is a significant objective for the company. So with that, that concludes really our presentation. And I -- well, first, thank you, everybody, for your attention, and I suggest maybe to move to the Q&A session. Nicolas, do you want to maybe take the question and -- so that we can answer this?

Thank you very much, Thomas. [Operator Instructions] So we have the first question about China. When do you expect real partnership in China for TWYMEEG?

Well, maybe Tejdeep, I will give you the floor. But just to set the scene, I think it's always very difficult to set any timeline there. As Tejdeep mentioned, we have a couple of really strong arguments there. But of course, as we know, in the life science industry, everything takes time, and we don't want to set specific timeline. But please, Tejdeep, weigh in on this.

Yes, Thomas. I think it's hard to give a specific timeline here. But what I would comment on is we do have an ongoing -- we have ongoing discussions and outreach to several companies in China at this point. As I also mentioned, the overlap and the data that we've received from the Phase IV and the ability of the product to work in the type 2 diabetes population with CKD is extremely advantageous in China, especially. As you can see, there's about 1/3 of the patients that have an overlap. And so we believe that this data will now also further increase the momentum in our discussions. But as I said, like it's hard to provide an exact timeline to when it can be finalized.

Thank you, Tejdeep. Thank you, Thomas. What about Europe and U.S. now that TWYMEEG is fine with insufficient kidney patient? It seems that TWYMEEG is a blockbuster in the making.