Saniona AB (publ) (SANION) Earnings Call Transcript & Summary

Good morning. This is the operator. Welcome and thank you for joining the Saniona Investor Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Jørgen Drejer, incoming Chairman of the Board. Please go ahead, sir.

Thank you. And good morning, everyone. So yesterday, Saniona sent out a public release on a second and last step in a major restructuring of the company. And the key message is shown in these bullets. So the main one, that's bullet number three, which says that we will close our U.S. operations and terminate the full U.S. team. And that's also why you'll hear 2 new voices at this webcast, although many of you may probably recognize both of us. So I'm Jørgen Drejer. I'm the Founder of Saniona. And I'm also Board member and will now step in as Interim Chair of the Board. The new CEO of Saniona, that will be Thomas Feldthus, also Co-founder of Saniona. I'm sure many of you will recall that Thomas and I have traveled together, for better and worse, through all Saniona's successes and challenges for the first 8 years of Saniona's history. So Thomas secured the first public listing of Saniona. He moved the listing to NASDAQ Main Market. He concluded a number of important business and financing deals and so on. He's been out of Saniona for a couple of years now while we were building the company from the U.S., but now he's back in full force to steer us back to the basics, to the core strengths of Saniona but also to steer us forward from here. I will let him give his perspective in a second, but first, I would like to give a little background. So 2 years ago, Saniona decided to take the company to the next level to build an organization in the U.S.; to finance and list the company in the U.S. and use this organization to move our most advanced asset, Tesomet, to final status of clinical development, registration, and ultimately commercialization. That was a bold move, but it also represented a major upside potential. But to make a long story short and as you have all seen, we very recently had to conclude that the current market -- in the current market it was not possible to finance our U.S. plan. I am very disappointed and sad that we ended up here, and I do understand the frustrations of our investors. I'm a Saniona investor myself and my investment definitely don't look good right now. So it is, of course, a major setback for Saniona. And this is the reason why we now take this drastic step to close our U.S. operations. We also plan to reduce our Board significantly, as you can see in the fourth bullet here. And we will position the company as a Scandinavian company again. Although this might seem as a step backwards to where we were a couple of years ago, and to a large extent it is, you should remember that we have progressed our assets very significantly over these years and thereby increase the values. The roots and the strong foundation of Saniona based on our leading ion channel team and programs, that is preserved. And that's even strengthened during the past couple of years. And I guess this is what has intrigued Thomas to come back and rebuild the company, but he can talk for himself and then give his perspective. So Thomas?

Thank you, Jørgen. For those of you who do not know me, I will give a few words about my background. So I worked at C level and at board level within the life science industry for more than 20 years. I'm co-founder of several biotech companies, including Saniona. I have been CFO for Saniona from 2012 to 2020. And during this period, I have listed the company at all the major Swedish stock exchanges, including NASDAQ Stockholm Main Market. I have significant experience with business development. In Saniona alone, Jørgen and I have made collaborations with big pharma companies such as Janssen, Pfizer and Boehringer Ingelheim; and with midsized companies such as Medix and Upsher-Smith. Jørgen and I have also formed many biotech companies as spin-outs from Saniona, including Ataxion which was later called Cadent and now sold to Novartis; the 2 Swedish-listed companies Scandion Oncology and Initiator Pharma; and finally the small joint venture within migraine, Cephagenix. After Saniona, I have worked as an investor and at board levels for several companies. I'm sitting in the board of 3 biotech companies and 1 medtech company and 1 cleantech company, and I'm Chairman for 2 of them. I decided to leave Saniona in March 2020 in relation to the implementation of Saniona's U.S. listing preparation and go-to-market strategy. It was not an easy decision, but at the end of the day, I concluded that it would be better for the company if I left Saniona. And the company onboarded a U.S.-based CFO prior to the U.S. listing. So where are we then today on Saniona? [ As ] Jørgen mentioned, during the last 2 years, Saniona has focused on becoming a fully integrated biopharmaceutical company based on lead asset Tesomet. This strategy implied U.S. corporate headquarters and with a U.S. NASDAQ listing. This strategy has failed. This has been painful for all of us as shareholders. It has been painful for employees and for Jørgen and me also as founders. [ Market cap ] is now about SEK 100 million, which is less than the quarterly burn rate. Everybody can see that this situation is not sustainable. And in this situation, Jørgen reached out to me. We had a long walk and a dinner where we discussed the situation and what [ positive ] could be done. At the end, Jørgen asked me whether I will step in as CEO. I said yes. I am a founder and a shareholder. I think it's worth turning this around. I know this company and its employees. It's still a fine company. So it has a fantastic pipeline and a lot of highly qualified and great people. This share price does not [ reflect ] the value of these assets. It's dictated by mistrust to management and a fear for bankruptcy, so the way forward is simple. We are going to reduce the burn rate to Scandinavian levels. We will focus on affordable, value-creating activities. And we are going to restore investor confidence. I said that we will focus on affordable, valuable -- value-creating activities. With this, I mean create value by developing programs which we can afford to develop internally. And we will create value by established partnerships on programs which we cannot afford to do internally. I will start as CEO on Friday. I don't know much more about the financial position than you have read in the press release. I -- my understanding is that we will have money into the next year, but I have many moving parts in relation to the closedown of the U.S. operation and also in relation to the close -- to the temporary hold of Tesomet, so this is with some uncertainties where we will be. I would need to go through the numbers. I will need to go through the programs and the plans, the agreements. I will need to speak with our employees, investors and our stakeholders before I can be more specific about this. An important part would be to capitalize value on [ not fundable ] programs. We have a long [ track record ] on successful deal-making in Saniona. When making deals in the past, Jørgen and I had different roles. Jørgen often took the lead on the initial selling, whereas I took the lead on deal structuring, deal-making, contract negotiation and closing. Scientists are selling to scientists. I'm a strong believer in that. Successful business development requires the involvement on both sciences and top management on the [indiscernible] side. Jørgen is now taking the lead at Board level and will be less involved in the day-to-day operation. However, he will be a working Chairman; and I'm sure that I will be able to draw on his capacity and connections. And equally important, I have a strong team behind me which can and will support me in the BD activities, including Karin Sandager, Palle Christophersen and Janus Larsen. Karin will take over from Jørgen as CSO. She's as -- both smart and clever and she has a strong management and interpersonal skills. Palle is heading the part of the research. He's an authority within ion channel research. He has a [ broad background ] knowledge and is a highly respected scientist. And then Janus, he is heading the development. He has a strong project management with significant experience in taking programs from the various research phases into preclinical and early clinical development. These guys have a deep knowledge of the programs. They have worked together with big pharma and biotech companies at both the operational level and in steering committees. They have been involved in business development. They have strong communication skills and can speak with everybody, from the [ lab bench ] to the top-level management. On the financing side, I will be supported by Anita Milland, who will take over as CFO. She is significantly experienced with financial reporting from listed companies, including Saniona and NeuroSearch. She's a strong organizer and represent the glue of Saniona, as she has done for several other biotech companies in the past. And then with this, I will bring it over to you, Jørgen.

Yes. And can I have the next slide, please? So this was a long story on where we are and where we are going. And this slide we've just brought up is talking about the potential in Saniona as we see it right now. So going forward, it will probably be Thomas who will present this slide, but since he will only start on Friday, I will take it today. So I emphasize the strong roots and our competencies and programs in the ion channel drug discovery and development. So we see a huge market potential in this class of drug, and we see very high interest from potential pharma partners. In the slide, we've tried to illustrate the breadth and depth in our early-stage programs based on our unique database of 20,000 proprietary ion channel modulators. And we have already selected 2 compounds and taking them forward from this platform. That's SAN903 and SAN711. And they've progressed very significantly over the past year, so SAN903 has now almost completed its preclinical development and getting ready to move into the clinic. And with SAN711, we are now completing the final parts of the [ 3-string ] Phase I study. Everything has gone well, and they both represent unique and potentially first-in-class treatments. So SAN903. That is for inflammatory disorders. It works just like a steroid to stop inflammation, but we expect it to have significantly less side effects than steroids and immunosuppressants. It also reduces fibrosis and scarring which is involved in many, if not most, of the chronic diseases. And the market potential indicated in this slide by analysts, it only covers one specific indication. That's idiopathic pulmonary fibrosis, which is an indication we could potentially develop ourselves, but if you consider broader indications developed with a potential partner, it could be at least 10x higher. SAN711, for treatment of pain, very effective, potentially as effective as morphine, but based on our preclinical data, it's without addictive potential; without sedation, so you don't follow sleep. And most importantly, it's without what we call tolerance development, which means that you don't lose the effect over time as you do with morphine. The market estimates from analysts that we give here, they are related to other drugs of this class of [ GABAA ] modulators. They're actually not used today in treatment of pain because they are [ unselective ], but if we look at the full pain market, it would of course be much more than 10x the indicated market size. And since these are larger indications, we are discussing with pharma companies about potentially partnering this asset. And that's also the case for Tesomet. We still see a very strong market potential for Tesomet. That has not declined. And since -- although that we, of course, have had to put our Phase II studies on hold due to financing limitation. We just need somebody to help us bring this forward. Can I have the next slide, please? Which is actually a slide on Tesomet developed for hypothalamic obesity and Prader-Willi syndrome. We did receive orphan drug status for both indications, and we have very promising data from early studies that it works in both of these indications. And I think we have shown these data several times in the past. So we now are looking for a partner, a dialogue with a range of companies on potential partnering Tesomet to get it back on track again. Now the next slide, please. So that is about SAN711. As I said, it's a first-in-class modulator of GABAA alpha 3 receptor. So there are no one else that has such a compound out there. The target indication is neuropathic disorders, including pain and itch. And we are, as I said, just about to complete our [ 3-string ] Phase I study with SAN711; and everything has gone well, as I already mentioned. So it has a unique profile as a highly selective modulator of GABAA alpha 3 in the spinal cord. And it's specifically designed to work in neuropathic disorders where spinal inhibition is dysfunctional. And next slide, please. So SAN903. I also mentioned that we see a huge potential when this will enter into the clinical studies. The compound indirectly and softly blocks activation of immune cells and fibroblasts. And we have strong animal data to support the effects in several acute and chronic inflammatory and fibrotic conditions, including as I mentioned idiopathic pulmonary fibrosis which is a terrible lung disease where you ultimately lose lung function, but we've also seen effect in a range of other inflammatory and fibrotic conditions, including inflammatory bowel disease, kidney diseases, so the potential could be huge in broader indications. Next slide, please. So SAN711 and SAN903 is only the tip of the iceberg, as we show here. And they have moved very significantly over the past year, as I mentioned, but we -- and we see very important milestones coming up just ahead of us, but there is a whole host of other early-stage opportunities which we've not talked much about in the past. And you will be hear much -- hearing much more about them in the months to come. Just next to SAN903, you will see the blue arrow SANXXX. And this is actually indicating the new candidate that we have said we would select later this year. Maybe I can already say now that it will be in the epilepsy field, and we look very much forward to be able to give you the full story soon. What -- we'll also soon share the content of the SANYYY program. It's an ion channel program with a huge interest in the pharma world and where we believe we have a very competitive program. I can also mention the programs -- the progress that we've made in the 2 partnered research programs. One is with Boehringer Ingelheim in schizophrenia, where we recently informed that this had been advanced to the full hit-to-lead program; and then our spin-out Cephagenix, which Thomas also mentioned, within migraine, which is advancing very nicely. We will also release more information on these programs soon. Some of you will also recall the 2 other partner programs in clinical phase, the ataxia program in Phase II which was acquired by Novartis and where we still have a very significant upside potential; and not least, the tesofensine program for obesity, where our partner Medix has filed for regulatory approval in Mexico and we are still waiting for the outcome. And we are also looking into other potential geographies. To the left in this slide, I have added additional opportunities from our ion channel pipeline. Some of them are actually very advanced. These include backups to the programs shown to the right but also the development candidate that we got back from Boehringer a couple of years ago. This compound, we will now position outside the rare disease space; and we see significant partnering potential here. And there are also some even earlier programs. So all in all, we have several drug discovery and clinical programs in the pipeline at different stages. We have already made several partnerships and spin-outs. And we are confident that we can continue to do so and also to deliver a continual stream of new drug candidates to fill Saniona's internal pipeline. And talking about the pipeline, I will leave it to Thomas to take the last slide and round it up.

Thank you, Jørgen. So we see it's a very rich pipeline regardless. Jørgen just mentioned we have many programs and many things which we can also sell -- for sale, but if you'll just look at, [ you can stay in ], the near-term early programs, then the early-stage pipeline is very interesting. This summer, Saniona will have a program ready for Phase II, a program ready for Phase I and a [ candidate ] which could be ready for IND-enabling studies. And then [ there's a last ] underneath, where the [ first program properly will ] enter into the same stage for IND-enabling studies within the 12 to 18 months. Looking 711: It could be a game changer in chronic pain -- neuropathic pain and in itching. The IP program -- IK program has a significant number of potential indications in inflammation and fibrosis. Both programs address rare diseases as well as common diseases. Earlier programs address epilepsy, migraine and so forth. These new concepts are very attractive and highly valuable and will secure solid growth over the coming years. The value and contribution of Tesomet will depend on the possible deal. Sometimes I'm still hesitating to say that we are going to sell this program now. It's highly valuable. And I am wondering whether we could develop it internally by an established clinical team in Denmark if the share price recovers quickly. I want to keep the door open now and see what I can learn by going through the numbers and speaking with investors and other stakeholders in the coming weeks. However, we are going to partner either Tesomet or SAN711. We can't afford to do both with the current financing. So this is where we are. Thanks...

Thank you very much. This completes the slides.

Okay, thank you very much, Thomas and Jørgen. Can you guys hear me?

Yes.

Yes.

Great. So we now are going to move into the Q&A session. [Operator Instructions] We do have a number of questions that have been submitted already, so we'll start to go through those.

So the first question is can you, if possible, expand a bit on the remaining cash runway following these major reductions. Can you give any more guidance on when you would start to see the effect of the impact on cash runway?

Thank you, Trista. I think I actually touched it a little bit in my presentation. I said that I actually do not know much more about the financial positions as the people have been able to read in the press release. However, my understanding is that there could be -- should be financing into the first half next year, but there are still many moving parts in relation to the closedown of the U.S. operation and also in relation to the hold of Tesomet. And I have not been able to verify those numbers; and need to go into it, yes, and also speak -- look at the plans, speak with the employees, investors and other stakeholders before I can and will be more specific about the next steps, [ yes ].

Well, maybe I could add to the question about when will you actually be able to see the effect. And that will be very soon because we will have a lot of the runoff taking right now very soon. And then from there on, we would be able to get back to the much lower burn, which we indicated would be maybe 75% lower than what we have today.

Okay, thank you. So we'll go ahead and move to the next question. Is the plan to also in the end out-license SAN903 and any future ion channel candidates at a relatively early stage? Or do you think you could keep some of these projects in house longer as the finances become more stable?

I can take a go on that one. So the plan is to actually keep 903. We think that is a very unique molecule and with a huge potential, and we think we could develop that compound ourselves. Of course, we are more opportunistic than we were in the past. And we might also talk to partners with that. I cannot exclude that. And we will, going forward, again as Thomas mentioned, try to out-license what's in the broader field and will not stay away from programs which has a broader indication potential, as we have done in the past, but we will definitely try to keep some of the goodies for ourselves and try to develop in house as finances become more stable.

Thank you, Jørgen. Okay, the next question. Now I don't know how much color you can give on this but not surprised to see people are very interested to know what a potential Tesomet deal could look like. Do you envision that there might be one deal for HO and one deal for PWS or one deal for both indications together? Do you envision separate deals for markets like Europe or Asia or the U.S. or a worldwide deal?

I can take that. As I mean, I don't think it's possible to [ outlines ] the program on -- by indications of this type. Geography is possible, but it's more -- I think this question is probably [indiscernible] and probably was a little bit about the deal structure and financing. And these deals will have, of course, an upfront element. And it could also be a mixture of, you can say, an upfront plus earnouts or upfronts plus royalties. And it doesn't really matter that much whether it's going to be a sale of the asset or it's going to be a licensing. You can do all these elements, anyway. So what we are looking for here is, of course, that we also get a significant [ part immediately] and whatever that means, yes.

Great. And perhaps related to that, do you think you -- I think you spoke to this a bit at the end, Thomas, but do you think that, if you had a bigger Swedish investor, you could still think about taking Tesomet all the way to market by yourself in -- maybe even just in one of the indications?

So again, we need to [indiscernible]. The current estimate is -- I think it's more than SEK 1.3 million to SEK 2 million [ per patient ]. And even [ for one in case, this is quite a ] sizable investment you need to do. This is just external cost. And therefore, at the current financing, it's not possible, for sure, but let's see what happens, [ all right ]?

Okay. There's another question related to Tesomet. Is any of the work that has been done to date on the Phase IIb trial going to be useful in the future, even in the due diligence process for partnering?

As we -- there is an open IND. It means that there is an agreement with FDA about how the next -- the study should look like. That is extremely valuable. And then there are 2 orphan drug classification for both -- and so there are orphan drug brand on both indications, and these are also valuable. So this program has been derisked over the last 2 years -- and particularly the fact that there is an open IND, the CMC is done and -- it's just to start it up. And we can be done quite quickly due to all the work which has been prepared by Saniona over the last 2 years. So it is indeed valuable. And there is a big package which people can look through for due diligence on this, yes.

Yes. We have made enormous progress over the past couple of years, having all the FDA interactions. Everything has been lined up with -- it -- the train has put -- been put on the tracks, so it will definitely ease the work for a potential partner to a large extent. And they should be hitting the ground running.

Okay, great. And I don't know if you can give any more color on this, but a couple of questions asking if we can give any kind of time line to when we might see a partnership on Tesomet or when Tesomet might be up and running again.

Yes. We know that partnerships, partnering takes time. And we have been active for about half a year. We have a lot of good connections and there are due diligence ongoing, but it can take a year easily. And it can also take 1.5 years, so I will not be more specific on the time line. If we knew that this was something we could do within the next couple of months, then we would not -- probably not have done this drastic step. It is uncertain how long time it will take. And of course, we will also go for the best possible deal.

Right, okay, great. And so moving over to one more. Here's another question on Tesomet. Let's go ahead and stick on Tesomet for a moment. Is there any reason why you haven't applied for fast track for HO and PWS? Or can you speak at all about any intentions to file for fast track?

Well, we didn't get all the way there. Of course, this will be up to the potential partner to push it on from here. Of course, we will be going for all the help that we can get from the FDA along the way and all the financial upsides that we can get out of that.

Okay, great. So moving to SAN711, do you think that SAN711 should be advanced against an orphan indication or a broader indication? I know in your -- in the presentation you mentioned that there seems to be great potential for both.

We have looked into many rare disease indications with SAN711. We've done market analysis and a lot of other analyses. So actually our current conclusion is that it is actually better suited for a broader indication. We see the market potential much, much bigger there. And since it is such a novel concept and could completely change the way pain is treated, we will mainly look into broader indications going forward. And that will be in partnerships, as I see it.

And great. And then staying on SAN711: Is there any update on the timing around that program and the data from the Phase I study?

Yes. It is more or less complete. Of course, there will be a you'll close the database and then you would have the analysis done. There is a very strict time line on how this is done from the very regulatory -- regulated environment. So it's running according to plans and it will be soon. Still we have an estimate, but this will be this half year.

Okay, great. And just another question on moving back into the Tesomet and the tesofensine realm. They'd like to know if there has been any update from Medix.

I have not heard a specific update from Medix. Of course, we are in contact with them once in a while, but they only tell them -- tell us what we -- what they want to tell us. But clearly they are in interactions with their regulatory authorities. It's called Cofepris in Mexico. And clearly it has been very, very difficult [ in general ], not only for us and for Medix, over the past couple of years because the -- with the new government that came in, there have been changes in the -- in this Cofepris several times. And now the COVID also came. And so I guess it's true what they say, that this just takes a lot more time, but what they have done is they have filed the file. And they got questions back. They've answered these questions and then we are just waiting to have a response to that, which could take months. I don't know, but that is the only thing we know.

Okay, thank you. Just a few more questions here. [Operator Instructions] Have you reached out to any of the present institutional investors? What is their view on this new plan for the company?

We are definitely reaching out to the institutional investors. So it's only a few hours since we sent out the press release. Of course, we have not been able to get into contact with many of them yet, but we have set up meetings with several of them. And so far, it's my impression that this is taking very well, that they now see a viable company and actually a very promising company, but of course, they need to have dedicated presentations and do their new homework because it is a completely new situation. But it's very important for us to have very close contact with the major investors.

Okay, great. And then one more question here. So why would a potential partner not just buy the whole company rather than potentially pay an upfront fee and sign a deal for Tesomet? I guess, do you think that's a possibility?

I can take that. Yes, it's a -- very good questions and it's pretty obvious. A -- it's actually not only partners we are going to talk with. It's there's many companies who can take a look at Saniona [ at this ] valuation. This is a very valuable company, and the current [ market cap ] does not in any way reflect the value of the assets in this company. So that is a risk. And we need to restore investor confidence in this company and so they -- we can get it back where it belongs. And [ on to that point this has reached ], there is a risk like this and also in our partner indeed.

Thank you, Thomas. Okay, well, I think that covers all of the questions that we've received online. I know this is big news. And like you said, Jørgen -- so sorry. We have -- here's another follow-up question wondering -- just a follow-up on the Tesomet partnering question, wondering: Would it be possible to partner -- to split up the geographies on Tesomet? Wanting to go a little bit more into that, like such as Asia or Europe. Or do you think that Tesomet would be partnered worldwide? Can you give any color on that?

Yes...

I can maybe -- I actually think a partner of Tesomet [ want to be in control ] of the development. And unless you haven't shown that the program will not be developed in the U.S., then no one is going to partner it in Asia, no. I don't think so. It's a lot likely. So U.S. is the key market for this program, and that is also the -- where the real value is. And as soon as you're on the market, you may or get -- you have -- into the final stage, it may be possible, but right now I don't think that anybody will say, "Okay, we will take it in Asia. And then we hope somebody is a developer in U.S." This is -- and then take your -- the value of such deal is not that interesting at this point.

Okay, thank you. That's helpful. And actually, another follow-up question now on Tesomet and partnering. Can you give any color on had there been any attempts to partner Tesomet prior to the pause? And how has the partnership strategy changed since the program was paused? Were you -- the interest in potentially selling or out-licensing, had that been something that was being explored prior? Or is that a new strategy?

Jørgen, you need to answer that question.

Yes, I can answer that. As I mentioned before, we have been looking into potential partnerships of Tesomet for several months now, but I will say it has been [ intensified ] quite radically over the past couple of weeks because now we are not just looking into, for instance, geographical partnerships as we talked about before or other co-development or whatever. Now we are looking into the -- all possibilities, including a full sell-off of the asset. So it has changed character a little over the past few weeks.

Okay, great. So I'll pause for a moment here, see if anything else comes in, but it looks like we actually were able to get through all the questions, so that's great. And I just want to remind folks: I know this is big news and it's new. And so if you think of more questions, you can certainly reach out to Saniona. Our contact information is on the website. And this week, we'll be switching the contact information from myself, Trista, over to Thomas, so you will still be able to get in touch with the company directly. And I know many of you already have Jørgen and Thomas's contact information, anyway, so feel free to reach out directly if you have more questions. In addition, we have 2 conference presentations this week, and so please go to our website. You can see the list of all the upcoming events that we'll be presenting at. So you can hear Jørgen and Thomas talk more about the story and how it is evolving if you log on to those presentations. And with that, is there anything else, Thomas or Jørgen, that you'd like to say before we sign off?

[ No. Very ] -- just to you, Trista. Thank you for a very organized conference and all the work you've done.

Thank you very much.

Yes, thank you, Trista. And also thank you to all the people who listened in today. There was quite a crowd, and I understand that. And I hope you got some answers at least. Thank you.

All right, well, thank you. Thank you, everyone, for joining us. And we will be in touch in the future.

Ladies and gentlemen, thank you for joining the webcast. It's now over. You may disconnect your devices.