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

Good afternoon, and welcome to Redeye. Today, we have the privilege of hosting Saniona's Q2 earnings presentation. And without further ado, I hand over the word to you, Thomas.

Good afternoon, and thank you for joining today's call. With me, I have CFO, Johnny Stilou. We look forward to walking you through our second quarter highlights and outlook. Before we begin, I remind you that today's presentation includes forward-looking statements, which involves risks and uncertainties. Actual results may differ materially, and I encourage you to review the disclaimer in detail, which you can find on our website. We will cover highlights from the quarter, provide an update on our pipeline and collaborations and then review financial performance. And after that, we will open up for Q&A. As mentioned, I will cover the strategic and pipeline updates, while Johnny will take you through the financials. So let's get started. Doesn't help here. Sorry about this. So during the second quarter, we negotiated an agreement with Jazz Pharmaceuticals regarding the potential transaction for SAN2355. And the agreement was closed in August. And under the deal, Saniona received $42.5 million up front, potential milestones of up to nearly $1 billion plus royalties. And I think that this validate our R&D and secures the future for SAN2355, and it provides the financial strength to accelerate our internal pipeline. At the beginning of the quarter, we completed the TO 4 financing, raising around [ SEK 115 ] million before issue costs. And this further bolstered our financial position and came on the top of the Acadia agreement signed in November. And we are using the proceed of these partnerships and the TO 4 financing to advance SAN2219, SAN2465 and our research program, AN2668 toward the clinic and through Phase II. Our partner Medix submitted a complete regulatory dossier for tesofensine in Mexico during the first quarter. Since then, Cofepris has requested additional information and held several follow-up interactions. While discussions are ongoing, the outcome and timing of a potential approval remain uncertain. During the quarter, we also acquired Saniona's headquarters to secure long-term operational stability. And while we initially considered a sale leaseback later this year with a very long leasehold, the Jazz agreement allows us now to postpone that transaction. This property is located in transforming districts, buildings are tiered down around me as we speak and the new residential area is going up. And this makes this site financially attractive for investors in this space. With the Acadia and Jazz upfront payments, the TO 4 financing and our solid cash balance, we are now in a strong position to independently advance several pipeline programs through Phase II clinical studies. Altogether, this has been a transformative quarter for Saniona, validating our science, securing 2 major partnerships, strengthening our finance position and enable us to advance our programs towards the clinics. With SAN2355 now in Jazz capable hands, our internal efforts are focused on the 3 core programs, which I mentioned before. Our goal is to take these programs independently into Phase II, supported by at least several of them by the nondilutive funding secured through Jazz, Acadia and our recent financing. SAN2219 and SAN2465 progressed through preclinical development during the second quarter. And both are designed with -- the studies are designed with the Phase I biomarker strategies to guide the dose selection and derisk the Phase II studies. And we expect to initiate those studies in 2 to 3 years, Phase II studies. We have also initiated preclinical development activities on the research program, AN2668. This means that if AN2668 is selected as a clinical candidate, it will be almost on the same time line. We are very much looking forward to reporting the progress on these programs during the autumn, where we expect to have the first batches for [ tox ready ] for GLP studies. On this slide, you'll see the scope of our 2 largest collaborations. With Acadia, we secured $28 million upfront with up to $582 million in potential milestones and royalties on SAN711, a program which we have taken through Phase I clinical studies. And then earlier this month, we closed the agreement with Jazz Pharmaceuticals requiring SAN2355. The deal includes $42.5 million upfront, $992.5 million in potential milestones plus royalties. The story and collaboration with Jazz is noteworthy as it was a preclinical asset, which was in early research a few years ago. We took this program into lead optimization in autumn 2022. We selected SAN2355 as a candidate drug at the end of '23 and moved it into initial preclinical development following our financing in spring 2024. Now we have out-licensed the program in August with $42.5 million in upfront. And I think that this adds to the legacy of Saniona's laboratories. The two deals are among the largest transaction completed by listed Swiss biotech in recent years, and it provides both validation of our science and resources to strengthen our pipeline. Importantly, in addition to the upfront payment, the two agreements include near-term milestones of $17.5 million. In total, we have secured $70.5 million in upfront cash and with near-term upside of $17.5 million, and this adds up to $88 million through partnerships within the last 10 months. And with this, I will take you forward to the financials, Johnny.

Yes, Thomas. And here on this slide, you can see that our financial results were in line with expectations. Net result for the quarter was realized with a loss of SEK 22 million compared to SEK 24 million last year. Importantly, in this quarter, the exercise of the TO 4 warrants generated net proceeds of SEK 111 million. We also converted a SEK 6 million loan from Fenja Capital into shares. Further, as Thomas mentioned, we acquired our headquarters for SEK 73 million. This acquisition secures long-term operational stability and provides a financially attractive real estate asset. As mentioned by Thomas, the premises are located in an area undergoing transformation into highly sought-after residential district, which positions the deal to be financially advantageous over time. On the next slide, you find an overview of our operating expenses for the past 8 quarters. Operating expenses were SEK 32 million in Q2 compared to SEK 24 million in Q1. The increase reflects higher research costs as we progress our internal pipeline. This is consistent with our strategy of investing in advancing our internal programs towards clinical trials. On the next slide, you can see that at the end of June, we held SEK 308 million in cash. This reflects the TO 4 warrant exercised and the USD 28 million upfront from Acadia we received by the end of last year. Further, it includes the purchase of our headquarters, I described before. If we include the upfront payment from the Jazz agreement closed in August, our cash position would be above SEK 700 million. This provides us with one of the strongest balance sheets among listed Swedish biotech companies. Together with expected near-term milestones, this gives us a robust financial foundation to independently progress our pipeline towards Phase II. With that, I will give the word back to Thomas for final remarks.

So to summarize, Q2 has been a pivotal quarter. We secured a transformative deal with Jazz, strengthened our financial position and advanced our internal pipeline. With two landmark collaborations and a strong balance sheet, Saniona is well financed to independently advance multiple assets over the next several years. And with that, we now would like to open the floor for questions. Thank you.

Thank you for that, Thomas and Johnny. So I have received a lot of questions from investors. And let me start with one regarding Tesomet and SAN903. These programs, you say, are partnered for -- or positioned for partnering. Is the primary aim to out-license these candidates before any clinical studies? Or how do you view this?

Yes. SAN903 is an inflammatory bowel disease position for this right now. And we don't think that this fits into our strategy within neuroscience and psychiatric diseases. So this is certainly good for partnerships. We are investing a little money in it right now in order to mature it. And we see as a potential for both spinout and potential licensing. And this is what we are working on right now. And the other one was Tesomet. Is that correct?

Yes.

Yes. So -- and this is for two rare eating disorders, and it has been in Phase I -- in Phase II clinical proof-of-concept studies. And we have concluded that this is too expensive for us to bring this forward even with our current balance sheet. So this is also available for partnering. There are open INDs in U.S. to continue the plans back in 2020, and we are also exploring these options.

Okay. And regarding the tesofensine approval process in Mexico, can you say anything about the additional request made by Cofepris?

This is difficult. I think -- I mean, the point, as I mentioned, was that Medix submitted a regulatory dossier in Q1. At the time, we had the reason to be very encouraged and we also mentioned that in our Q1 report, but also made the note that time lines rest with the regulatory agencies. And since then, there has been additional questions from the regulatory agencies. And right now, I would say that it's very hard to make any prediction about the outcome of these discussions while they are ongoing and the time line for potential registration of tesofensine. I think I would say that in this so-called prevention, there are questions which are obvious prior to an approval, such as a question about suggesting to changes in the text in the insert. But there are also questions which have been addressed by Medix and Cofepris before, which makes things a bit confusing. And this is why I am saying we -- actually we don't know anything. And these questions could be material. And why we -- since we haven't already been through this with Cofepris or Medix has been through this with Cofepris, then I'm saying, well, we have now been in this for 4, 5 years. We actually don't know anything, right? So this is the situation.

Okay. And if we stay on tesofensine, can you give some color on the patent situation and your plans beyond if or when that is approved in Mexico?

In other countries or what did you -- sorry, I didn't get -- understood the question completely.

Yes, both on the patent situation and also geographical [ action ].

Yes. So the compound patent has expired many years -- several years ago. And what we are primarily relying on in Mexico and South America is the data protection rules. And it is so that when you have a product which is first approved in a country, as a first approval specific molecule, as a medicine, then you can ask for data protection on your Phase III data and your Phase II data and so forth. And this data protection covers 5 years. And this means that no other companies can legally introduce tesofensine in those territories for 5 years. They cannot get the approval to do so legally. And so it's a kind of extension, which has made an agreement all over the world in Europe, it's actually 10 years, which ensure that medicines can be secure innovation and medicine similar to patent rules. And the reason why this has been introduced is that it can take very long time to get a product in the market. So this is the situation. In Mexico, we also have a formulation patent, which could provide additional protection over time. The same goes for the United States, by the way. And then we have 5, recently some use patents. The fate of those still up for -- is still in priority, yes.

And what opportunities do you see beyond Mexico when it comes to expanding?

Yes. I mean we have been looking particularly in South America because South America, the countries in Latin America, so it's also middle America. They use Mexico as a reference country. And we have been particularly looking at this market and have been -- the most important market is Brazil, probably about 40% of the entire area, followed by Mexico. And there, we have been in company, in contacts with more than 5 pharmaceutical companies about tesofensine. The further discussion is subject to the approval in Mexico. Other territories then there is South Korea, which has a large pharmaceutical industry and also are independently approving products. And based on our understanding, it may have opportunities in this area because in relation to following a bridge study from a Brazilian or you could say, European population in the Phase II and in the Mexican population in Phase III, and we need a bridge study to the Asian population. And then the market -- will potentially be approved there too. So these are the first two steps, yes.

And what are your thoughts of combining tesofensine with the GLP-1 analogs? Is this something you will investigate?

We are considering it, these kind of things. This is something we will be subject to speak, I think, [indiscernible] in this context, yes.

And would that be maybe in the preclinic or as a Phase I study because we have seen some major deals already with the preclinical candidates.

I don't see Saniona making such activities. It will be with partners, I think, as it is right now.

And speaking of your development platform, can you share some insight to your work of developing new candidates? And should we expect any new candidates within the coming 12 to 24 months?

I think 24 months is a good time frame, maybe 3 years -- 2 to 3 years. It is so that during this last 2, 3 years, we have made a big effort to make partnerships also in research. And until at least so far, most of our employees have been working on the research collaborations. We had during the period '22, '23 extra resources, about 7, 8 people who actually conducted this program on 2358, which led to the Jazz agreement. But those people have been since then occupied with Cephagenix over the last 6 months, with the Cephagenix collaborations. So it's a balance between available resources. I think that we will -- we are less interested in research collaboration now because we want to free them up for our internal programs. And as those become free, then we may start up new research programs, and they have -- our team has worked on several programs they want to step into quickly. And we are looking both on research programs, which could provide a candidate within the time frame you are mentioning here 2 to 3 years. And also -- so we have a balanced pipeline and then also longer-term programs.

Okay. And if we look at a longer time frame, how much more is there to squeeze out from the platform, so to speak? Have you just started scraping on the surface? Or have you already proceeded on the most promising leads or indications?

Our current -- our platform or...

Yes, your platform.

Assuming in ion channel, ion channel is a huge area. And ion channels are relevant in all biological processes. No cells can live without ion channels. And they control our feelings, our thoughts, our conviction and everything it controls, and it also controls our digestive systems and so on. So -- and we are a specialist in this field. You can see one of the programs in inflammatory diseases. So there is a huge opportunity to work on ion channels in all sorts of indications and we have lots of options ahead of us here.

Saniona has been in a position where we have had a lot of cash on hand before. How will you balance accelerating your clinical projects while staying lean?

Yes. That's a good question. And we are cautious in -- we are ramping up the organization now. We have added additional people now. You can see also that the burn rate was increasing this quarter, primarily because of the ramp-up of the organization. And basically, what we did in 2022 was to shut down our entire research and development organization because we didn't have any money to develop products. And now we are ramping it up again, but here in Europe in a slower pace than in 2020. And then it will progress. We will continue like that in the next couple of years. So you should expect that our burn rate will increase, but not to the previous level as you saw in the period 2020 to 2022. And it will -- also when you're putting programs into Phase II, these are -- and Phase I and Phase II enabling studies, this is expensive for sure. So -- and maybe also much more expensive than many shareholders really understand. And maybe we should use more time indicating this. We have a very strong financial position. We -- with all our forecast, including ramp-up, we think we are able to take 2 programs into -- through Phase II studies and proof of concept at least.

And speaking of a shareholder and your cash position, the current shareholder base is predominantly small private investors. Are you actively working on attracting institutional capital or professional investors? And how do you weigh this as you already have a lot of cash on hand and don't need money as of now?

Johnny, will you respond to that?

Certainly, yes, you are correct. We have a strong retail shareholder base, which has helped us throughout the years. So deep thank you for that. Having said that, you are indeed correct. It would be nice for us to have some bigger institutional/anchor investors in our books. And we will, as many of our biotech colleagues, we are continuously looking into this, and we will continue to look into ways of attracting institutional investors into our books. So this can be both in Scandinavia, but it can also be Europe or U.S.-based investors, which would be attractive for us to get into the books.

So would you say it's prioritized to attract any institutional investors' capital and [ seeding you ] with a larger cash than you have right now? Or will you be able to change your strategy maybe?

It is a focus area for us now to see if we are able to attract some institutional investors. If we are able to get some traction, then we will need to discuss with them the best way of getting them into our books. But it is early days for us. But with our recent success and our 2 major deals, we definitely see some traction in this area, which we will pursue.

And another question for you, Johnny. Can you elaborate on your decision to buy your headquarters? Was this something that you wanted to do for a longer time? Or did the opportunity occur to you?

Well, as such, we're not in the area of owning real estate. As mentioned, our current headquarter is located in an area, which has been allocated to a residential area. It is today an industrial area. And as Thomas mentioned, we do see buildings being drawn down around us because it will, over the next 10 to 15 years, become a residential area. As we're very happy and have invested quite a lot of money into these premises, we had the option of acquiring the premises, which we did to avoid being pushed out and needing to move to different premises with all the cost and disruption that, that would include. So we are very pleased that we have been able to acquire the premises. So in short, basically, this is a need we saw to buy the premises to stay here. Having said that, we actually also see it as a financial opportunity because the area will, over the next 10-plus years become a residential area. And all else equal, the price of the area will increase significantly. So we do see it also as a strong financial decision we have made at the same time.

All right. And moving back to a clinical question or a question on Jazz. Have you any idea of when Jazz anticipates to start clinical trials with 2355?

The time line and commitment to this rests with Jazz, and I have to refer to this. They are fully committed to this program and very enthusiastic to get on, and we are working on tech transfer at full speed. I had the Chief Medical Officer on the phone the other day and he expressed his full commitment and enthusiasm about being able to license this compound. And this is a company which has taken programs very fast through clinical trials in the past, and they're also very effective in commercialization of these assets. And they have a big footprint in epilepsy. They recently introduced a product a couple of years ago. They have now turned that into the sales and this product is reaching close to $1 billion -- will reach -- expected to reach $1 billion this year. So we are very comfortable with the collaboration with Jazz, but the time line kind of on starting, for instance, Phase I or Phase II clinical strategy, all this will rest with them.

And a question on your collaborations with Boehringer Ingelheim and AstronauTx. Are you still looking to free up resources from them?

We are still in full speed with Boehringer Ingelheim on research side. And we hope that we will -- this will end with candidate selection within the next 12 months. Boehringer Ingelheim is a very conservative company. They take their time to make the full certainty. So they -- when they have done it, then they are also ready to move forward. But I think that, that is at least our hope and a realistic hope. AstronauTx is probably research collaboration is coming to an end. So I don't think you will see big numbers coming in, in the coming quarters. They are now evaluating the results in various models, and we are waiting the outcome of that.

Okay. And a question here on SAN711 or ACP-711. When do you expect to see top line results from that study from Acadia?

That was -- it needs to get started. So -- and again, we also hear the time line rests with them. We have some stuff in our financial model, but I think this is premature to come with that, what we think. And again, when you're entering into those type of agreements with Jazz and Acadia who are both listed in the United States. One of the thing in these -- one of the provision in these agreements is that we cannot speak about time lines.

I understand. I read in Acadia's last quarterly report that they anticipate starting studies in 2026.

Yes. And that is what also they said when we entered into the collaboration, I think, shortly after, yes.

Right. Let me check if there are any additional questions. Maybe a broader question on milestones in licensing deals. If you could tell us about what we typically see on the development side. So when do milestones occur essentially from deals? What are they triggered by?

What they typically like. I mean research collaborations and early-stage collaborations are typically backloaded. And I would say that both SAN711, now ACP-711 is a Phase I asset, but that's also early. And then this goes also for SAN2355 with Jazz. In our case, we have managed to get -- allowed to be quite open compared to what you see in many places in the world. So we have, of course, set the upfront payment and total deal value. We also put it into development regulatory milestones and commercial milestones and even the next -- what the next milestone is worth. And all this has been published. So there, I think, people get a good flavor of what it means in at least the next 2, 3 years. And -- but again, typically what happens is that you -- in development milestone, you typically get a milestone when they initiate a clinical study. And when initiation, it typically happens when the first patient in that study has been diagnosed. And then it will be typically increased progressively as the study -- the compound goes through the clinical studies and are derisking in that process. And then you typically see milestones when they file for registration in the U.S., in Europe or in Japan. That's typically how license deals are structured.

And a question here on the focus. So previously, you positioned Saniona as an epilepsy-focused company. Now with SAN2355 licensed out, how should we view the core focus of the company going forward?

Yes. We have broadened it a bit recently. Also if you -- when we describe the company, so we are -- broadened it to neurological diseases and psychiatric diseases. And part of this is because we have 2465, which is positioned for major depressive disorders. And also the 2 epileptic programs we are talking about, so 2219 and our research program, AN2668, they have opportunities in epilepsy, but also in several other indications. And we may actually develop one of those assets for another indication. And it could be in anxiety, it could be in pain, it could be a lot of other things. These assets -- is expected to be effective in many other very large indications. You may recall also that SAN711, we have positioned that for epilepsy and absence seizures. And we still think that this is a very interesting option. And so does Acadia, but they decided to take it into -- to start with another indication and because it was a bigger market. So these mode of actions have certain effects in the brain, which suggest that they can be used in many indications, and it also has proven to be the case in animal studies.

A question here on Tesomet once again. If you had the funds, would you consider taking Tesomet through Phase IIb?

It's not put in -- you can say you're treating obesity in these patient population, hypothalamic obesity and Prader-Willi syndrome as a psychiatric disease or CNS disease. And in this context, you could argue that it is within our space. I think what we have learned from the last, from 2002 -- from 2020 to 2022 that it is a very complicated area. And I think you need to be very focused, have a very large group of people focused on developing those rare diseases. You need to be involved in patient organization, you need to develop these assets in more than 100 centers over the globe, and it will require a very dedicated effort. So it will mean a doubling of our people in clinical development. And I don't think that we have the funds available for this right now.

And as a final question, what is your long-term vision for Saniona? Where do you see the company in 10 years' time?

In 10 years' time, then the 2 collaborations we have now with Jazz and Acadia, these programs have probably reached the market, and we have a royalty income from there. Even our own 3 programs we have here now and progressing towards Phase I should have reached the market. It will be a complete different company at the time. And let's see what happens before. Maybe the company has been acquired long before that.

Sounds exciting. Thank you very much, Thomas and Johnny and thank you also to you guys watching.