Santhera Pharmaceuticals Holding AG (SANN.SW) Earnings Call Transcript & Summary

Good afternoon and good morning, everyone. Thank you for joining today's webcast. Let me start with first introducing our team that's on the call today. Joining me today is Laura Pfeifer-Rossi. She's a partner and equity research analyst from Octavian, a specialized Swiss equity research, brokerage and corporate finance advisory company. She'll be our moderator today for a part of this session. And from my team here at Santhera, we have Andrew Smith, our CFO; as well as Shabir Hasham, who's our global program lead for vamorolone and he's joining us from his home in London. As an eventful year comes to an end, we want to give you a snapshot of what -- where Santhera stands today and discuss our strategies, plans and goals going forward into 2022 and beyond. But first to start, I'd like to remind you of where Santhera stood in the late summer of 2020 last year. Our Phase III trial, called SIDEROS had failed and the lead platform for Duchenne muscular dystrophy was discontinued. We had no material pipeline but only a sublicense option for vamorolone, excluding Japan and Korea and only one indication, which was Duchenne muscular dystrophy. For this option, we had an exercise price of $30 million set in the contract, and our early-stage candidate lonodelestat was only in a Phase I trial. We also had $60 million of convertible debt, which was due in Q2 of '22, and we had no cash and no possibility to raise cash in the capital markets due to the pandemic and the imminent maturity of the short-term debt overhang that we had. We had a very high burn rate with over 120 employees and a number of prior commitments. And lastly, we didn't really -- didn't have a lot of cash to take the company forward. So in short, the company was in a critical state and existing shareholders were at high risk of losing their investments entirely. Today, a little more than a year later, the status is as follows: we have a new platform that was acquired with vamorolone including global rights this time in all indications and with no cash outflow. The vamorolone pivotal study was successfully completed and we held a positive pre-NDA meeting with a product launch in the U.S. expected in early 2023. We also successfully completed a Phase I study with lonodelestat in a post-marketing study with Raxone and we restructured the debt and the balance sheet, effectively reducing debt to less than $35 million of the original $60 million and have been able to postpone the maturity of that debt until August of 2024. On the cost side, we have significantly lowered our burn rate and have now a very nimble structure. And most importantly, we now have cash to take the company through the key inflection points into mid-2022. So let's look at these topics in more detail today, starting with the lead pipeline product, vamorolone, and we have a few slides prepared, and I would like my colleague, Shabir to take you through these slides next. And after that, we'll transition to Laura, who will moderate the Q&A session as well as take your questions, whether they're on -- through the webcast or over the phone at the very end. We don't have a hard stop today, so we'll take the time that we need to make sure that we can address any questions or concerns that you have. With that, Shabir, can I hand over to you, please?

Thank you, Dario. Good morning, good afternoon. Today, I'll present the top line results from the VISION-DMD study that we recently announced in our press release. But before I do so, I wanted to provide you with some context about why these data are so important. Corticosteroids have made a tremendous impact in the management of Duchenne over the last decade or so. And in combination with cardiac and respiratory support have extended the life of many patients with Duchenne. Their standard of care already included in international and national guidelines that universally recommend treatment initiation at or around the time of diagnosis in order to maximize benefit. Importantly, corticosteroids are independent of the underlying mutation and can even be used in combination with other mutation-specific therapies and also potentially with gene therapies in the future. Both controlled studies and natural history studies have consistently shown that the use of steroids delay the time to losing really important functions, such as the ability to stand, the ability to walk, the ability to self-feed or self-care and to breathe independently by 2 to 3 years. And so steroids are and will likely remain a very important treatment option for Duchenne for the foreseeable future. But their main limiting factor are the well-recognized toxicities, which prevents some parents from even starting or choosing to start with a steroid, but also often mean that physicians and parents are forced to stop treatment early. Anyone who's a parent will have -- will know what it feels like to make this very difficult decision when choosing a treatment in Duchenne. For a perceived benefit, you have to be prepared to really accept some or all of these side effects that I show you on the right-hand side. And this panel shows from a survey conducted, quite a large survey, the common reasons parents site for wanting to discontinue treatment. And you'll see that growth failure, behavioral changes, issues with bone, cushingoid, weight, excessive hair growth and cataracts are amongst the most frequently cited for reasons to discontinue early. I just want to remind you of the design of the study because it's important in terms of context of where the 48-week data fit in. The VISION-DMD study is a randomized double-blind placebo and active control study in 121 steroid-naive patients who were aged 4 to 7 years at entry. It's designed to really have 2 treatment periods, and that's important from both the regulatory, but also a commercial perspective in terms of where the data are coming from. In treatment period one, both EMA and FDA agreed that the primary analysis would be conducted for efficacy of vamorolone versus placebo at the 24-week time point. In addition, the EMA requested that they wanted to have longer-term information in terms of maintenance of treatment effect, including an external comparison to prednisone and long-term safety. And that comes from a combination of treatment period 1 and treatment period 2. In addition, treatment period 2 patients who are originally on prednisone or placebo switch over to both doses of vamorolone, and that gives us the ability to analyze and collect really important information on the tolerability, safety and effectiveness of switching from prednisone to vamorolone. Importantly, of the 121 subjects who were initially started the study, 114 continued into treatment period 2. So the data that we're about to show you in the top line actually are the 114 subjects throughout the whole 48-week treatment period. The outcome measures that are important for the first treatment period were the primary endpoint Time to Stand as well as very well recognized other functional outcome measures, the 6-minute Walk Test, the Time to Run/Walk, Time to Climb, North Star. And as I said, really, the primary objective for both FDA and EMA in terms of regulatory review is analysis versus placebo at week 24 for efficacy. We recently announced the completion of our clinical pre-NDA meeting with the FDA, in which the FDA confirmed that the efficacy and safety from the 24-week outcome of the VISION-DMD study was sufficient to file as a single pivotal study. During that meeting, we also agreed with the FDA on how to position the 48-week data as well as data from our open-label Phase IIa studies within the overall package. In addition to the regulatory strategy, the 48-week data also gives us additional information on the proposed dosing regime, the persistence of treatment effect beyond the 24-week time point, safety and effectiveness of switching from prednisone to vamorolone and longer-term safety, including differentiation. Now these are, of course, important both for the regulatory perspective, but also for the commercial perspective and how we wish to position the product going forward. And just for clarity, the EMA submission will be driven by the entire 48-week fleet set. In this slide, I'm showing you the functional outcome measured. But before I do that, I added this cartoon on the left. For those of you who are not familiar with Duchenne, it's a devastating condition of muscle weakness. And so sometimes I'm asked, is Time to Stand an important measure as a primary outcome measure? If you imagine as the disease progresses, these children have weaker muscles. And for them to get up, simply off the floor becomes a struggle. And so really, it's no surprise that both the FDA, but importantly, globally, patient advocacy groups all unanimously agreed that Time to Stand is an important outcome measure, especially at this age because it's the first measure to be lost. And therefore, anything we can do to show that there is an improvement or even stability in muscle function becomes both clinically, but also very important in terms of patient quality of life. In the panels on the right-hand side are the data for the entire 48-week period. In the dark red solid line is the vamorolone 6 milligrams per kilogram dose, in the dotted red line is vamorolone 2 milligrams per kilogram dose. You'll remember that we previously announced at the 24-week time point that there was a statistically significant difference between both doses of vamorolone and placebo. And in these data, if we look at the Time to Stand panel, which is on the top right, we see that with the vamorolone 6 milligrams per kilogram per dose, this treatment benefit is maintained to 48 weeks. You'll see that this is consistent across all of the outcome measures, which again adds to the robustness of the outcome but also in a sense the way the regulators may actually review the data. What you'll see with the 2 milligrams is that it was statistically significant at 24 weeks and then declines back to baseline towards week 48. But importantly, what I've also added in the gray line is the placebo. And this is, in effect, the same as an untreated population. So it gives you an idea of the natural history. You'll see that even the 2 milligrams per kilogram returned to baseline by week 48, and it represents still a benefit compared to those who are untreated, and therefore, is efficacious, but not as robust as a 6 milligrams per kilogram dose. In this slide, I wanted to just draw your attention to comparators versus prednisone. Now of course, prednisone is a standard of care. Whilst not important for -- or not the primary focus for the FDA and the regulatory review, it is, of course, important for us to be able to establish this product in the marketplace. Here, I show you a similar analysis of the 114 subjects from -- sorry, in those subjects who were either treated vamorolone. Again, in the red line, vamorolone 6 milligrams per kilogram dose for those who were initially on prednisone and then switched to vamorolone 6 milligrams per kilogram dose in the black line. And you'll see that there is actually no clinical or statistical difference in terms of Time to Stand over the 48-week period. And you'll see consistently with the other outcome measures that there is no clinically meaningful difference between prednisone switched to vamorolone and vamorolone continuously. And from this, we can conclude that actually switching from prednisone to vamorolone didn't result in a loss of efficacy. And this is of course very important information for both physicians and parents who could be considering vamorolone as an option if they are currently being treated with another corticosteroid. I'd like now to send our attention to safety analysis for these top line. In the panel on the left-hand side, you'll see 2 sets of graphs. The first is for period 1. And these are just replicating the results we saw at week 24 for the 4 arms, the gray in placebo; 2 in the dashed red; 6 in the solid red; and prednisone in black. And on the right-hand side, you'll see adverse events reported for those who started and continued on vamorolone from the beginning of the study and those who switched to vamorolone either dose in the second half of the study. And what you'll see is that over time, there is no accumulation of toxicity with continued use of vamorolone. And from that, what you can conclude is that there doesn't seem to be an issue with prolonged use of vamorolone. In general, vamorolone was safe and well tolerated. 93% of the 121 subjects that started the study completed the entire study. There were 3 serious adverse events reported in this period, but none were related to drug. And 2 subjects discontinued treatment for the reasons shown. The most common adverse events were upper respiratory tract infections, vomiting and cushingoid consistent with those that we've seen in the first period and in some ways expected in this young population other than those related to steroid use. When we start to analyze the data for differentiation, we looked at those that were reported for prednisone in the black bar in the panel at the bottom right-hand side, and for those on the pooled 2 and 6 dose throughout the study. And this really starts to inform us about where we would expect to see differences. And indeed, we see differences or fewer reports of adverse events with vamorolone compared to prednisone, but also importantly, specifically for those adverse events that are typically associated with corticosteroid use, we see a clinically meaningful difference, and I'll go into that in the next slide. Here, again, these are top line results and further analyses are going, but we're starting to see where we believe the safety profile of vamorolone will start to increase in terms of differentiation. We previously reported that behavioral problems were a reduction at 24 weeks. We see that continuing to reduce at 48 weeks. But importantly, what we're also seeing are indications that there will be differences in other safety parameters, and I'll explain that a little further as well. Importantly, one of the reasons cited for discontinuation of steroids was a problem with growth and what you're basically seeing with prednisone to deflazacort are children whilst they're young, it doesn't matter, but as they transition to become adolescents and adults. You have an 18-year-old young man in a wheelchair looking like a 10- or 12-year-old, having to shop in children's clothes shops. And obviously, this becomes very, very important as children become adults. Uniquely for vamorolone, we saw no inhibition of growth, either in the open-label long-term studies or in the 24-week period of the VISION-DMD study, and we continue to see no inhibition of growth at the 48-week time point. In the panel on the top left, you'll see both doses of vamorolone, again, in the solid red line as a 6-milligram dose, the dotted red line is a 2-milligram dose. And this is a z-score where being close to 0 is normal. And so what we're seeing here is a normal trajectory within the variability of growth for children. And so we conclude again over the 48-week period, there's no inhibition of growth. Conversely, if we look at the panel at the bottom you'll see with prednisone here in the black solid line or black dotted line, a negative trajectory of growth, i.e. it's stunting growth, which is what we know happens with prednisone. But importantly, when you switch to vamorolone here in the solid red line or the dotted red line for the 6 and 2 dose, we see a rescue or a recovery of growth. And this is an important factor, especially for those who are currently on steroids who to see that growth is becoming a problem for them. This is a unique attribute for vamorolone that by switching, we see this return to growth as long as the, of course, they're not adults where growth stops. Now importantly, the other question we often asked are, what is the impact of vamorolone in terms of weight? Now because our children are growing on vamorolone, one very important way to look at heightened weight is to use the BMI score, which is a measure of weight per unit height. And importantly, what we see here in the graph on the right-hand side, in the solid red line, is the 6-milligram dose from the start of the study and continued to week 48. And in the black line are those subjects who were on prednisone and switched to vamorolone that we see in the second half of the study that there's actually a stabilization of BMI on vamorolone. And this is important because it indicates that those who tolerate vamorolone within the first 6 months of studies actually continued and didn't experience any further problems. But importantly, those who potentially could have experienced issues with prednisone are likely to remain stable, at least within the data set that we have now. And again, this indicates that vamorolone is well tolerated and has been well tolerated. And indeed, we didn't see any reason for discontinuation because of weight gain. Therefore In summary, vamorolone has demonstrated efficacy at the 24-week time point. This was maintained at the 48-week time point with a much more durable effect for the 6-milligram dose, but importantly, the 2-milligram dose also showed some efficacy. There were no increase in adverse events reported with prolonged use of vamorolone for either dose. For the first time, we are able to now share data that showed that switching from prednisone to vamorolone did not result in a loss of efficacy over time with a 6-milligram dose, and that using vamorolone allowed boys to resume normal growth. They experienced fewer behavioral problems in addition to other side effects that were reported in lower frequencies that are typically associated with corticosteroid use. And of course, these data will be presented at medical congresses shortly. Vamorolone therefore, we believe, has demonstrated efficacy with a differentiated safety profile that really addresses some of the challenging decisions parents and physicians have to make about which steroid to use and represents for physicians an opportunity to try to maintain patients on treatment for longer while having the ability to try to manage these side effects either through the unique mechanism of action of vamorolone or the ability of vamorolone to be potentially dose titrated. And of course, we will be discussing that with regulators. That concludes my presentation. And therefore, I'd like to hand back to Laura.

Actually, I think I'll take it from here, Shabir. Thanks so much for that overview. And I'm sure you'll have a lot of questions coming from the audience and from Laura as well. So with this, Laura, I would pass on the moderated -- or the discussion to you to manage the moderated session of today.

And also, good afternoon, good morning to all of you. So we will now start with a moderated session. And first, I would like to address some questions related to the clinical and regulatory side and the commercial potential of vamorolone and then in the second part of the discussion, I would like to cover strategic questions and also the financial outlook for on there. So first, maybe on the development strategy. So following the positive pre-NDA meeting that you had with the FDA, what are the next steps? And specifically, why will you only start with the NDA filing in Q1 next year? And why will it be a rolling submission? So does this basically mean that some elements of the filing package are still missing?

Yes. So the -- let me address the second part of the question first. The submission is starting in Q1 as a rolling submission because by Q1 we'll have the clinical -- sorry, the preclinical file or dossier ready. In Q2, we will then have our -- the write-ups from all the clinical work, both the 24-week data point and the 48-week data point ready for submission. But we're also waiting for the CMC section of the filings. CMC for those that are not so familiar with pharmaceuticals, stands for chemistry manufacturing and controls. And the reason why we have to wait for that is that the process that we used for the product that was used in the clinical trials was quite an expensive manufacturing process. And we have now developed a much more efficient and cost-effective root of synthesis to manufacture the product, but the FDA also wants to see a certain shelf life on the product before they accept the filing. And in our case, that's 6 months. And so we need to manufacture the product with this new route of synthesis first and then put it on shelf life for 6 months before we can finish the submission. So the submission -- some of the files are being filed in Q1 and the final files are being filed in Q2 based on current plans. I want to here also emphasize the fact that we're expecting to get approval by the end of '22, very end of '22 next year. But that approval assumes that the FDA will designate our submission as a pediatric priority review. Pediatric priority review is a shorter review period that is typically given for pediatric drugs that have a high unmet medical need, which we think vamorolone clearly qualifies for. And if the designation of pediatric review is given by the FDA and the product eventually gets approved, it also qualifies for what's called a pediatric review voucher, which can be traded on the open market. These are typically worth anywhere from below $100 million apiece to a little bit over $100 million apiece. We would then split that pediatric review voucher with our partners, ReveraGen, Idorsia. And I can get back that later as a potential source of non-dilutive funding. But yes, it's a rolling review. And the reason why we are not submitting everything in Q1 is because we have to wait for the shelf life of the manufactured batches.

Okay. I mean is there a remaining risk that there could be another delay due to this manufacturing topics that have to be shown as well?

I mean there's always a risk that there are hiccups in the manufacturing process or in manufacturing of these batches. Right now, we don't foresee any of that, but I can't categorically say that there can't be a delay.

I think to add to that, Laura, this is Andrew. When you're manufacturing for clinical studies, the batches are much smaller. So it's not just -- it's a scaling up process as well. So that just takes time to make sure you got right, and all batches are very consistent, where there's a bit more tolerance perhaps in clinical batches.

Correct.

Okay. And then, I think it was mentioned, but is it true that it has been pre-agreed with the FDA that the approval can be granted based on a single pivotal study, which is the VISION-DMD in the U.S.

Correct. Yes. I'll pass it on to Shabir to maybe speak a little bit more about the interactions we've had with the FDA. But the pre-NDA meeting that we just announced a few weeks ago was specifically geared towards getting a clear answer from the FDA on the question, are the clinical data to date, the 24-week pivotal study data as well as our Phase IIa data is the safety and the efficacy that's shown in those studies sufficient for a single trial submission, a single trial with the caveat that we have the Phase IIa data to support that single trial data. And the answer from the FDA was a clear yes. Shabir, do you want to add anything to that?

Yes, sure, Dario. Thank you. So it's as Dario indicated, the feedback we had from the FDA was that safety and efficacy of the VISION-DMD was sufficient to proceed to filing. But we've also agreed with them that the open-label Phase IIa as well as the IIb study will be used for safety evaluation.

Okay. And this data is already available?

Yes. With the completion of the -- Phase IIa was completed and now we've completed the IIb.

And would you expect both doses to the 2-milligram and the 6-milligram to be approved?

Maybe I'll answer that first, Dario, and then if you have anything to add. So when we look at the data, of course, the 6-milligram per kilogram dose has the more durable response over time. So are proposal would be to start with the 6-milligram dose. The question then of whether there will be the ability to down titrate to the 2 for a short period of time or a prolonged period of time, this will be a discussion with the FDA. But looking at the 48-week data, both doses have shown efficacy. So we presume 6 will be the starting dose and then the potential for a dose titration in between 2 and 6.

Okay. And then maybe moving to Europe. Here, I think you expect approval later also filing maybe if you could just confirm the time lines? And then also you have a pre-agreement on the study design here with the regulator?

So let me start by just confirming the date that we currently plan to submit for EMA in Q2 of '22 and hence expect to get an approval somewhere at about 12 months later, which is the typical time line for EMA. With regards to the study design, I'll pass it on to Shabir to elaborate.

Yes. Thank you, Dario. So the VISION-DMD study was actually designed under joint scientific guidance with both the FDA and EU. So from that perspective, both were involved in the design of the study. We've had subsequent scientific advice meetings with the CHMP where we've discussed the data that they would need for the review, but also the methodology. And so we're in a very clear position that we will have with the 48-week data sufficient data to be able to proceed to filing. And that also includes, sorry, the open-label Phase IIa studies as well as support of.

Okay. Maybe then the next question is, please, can you share with us your expectations for the label for vamorolone? So for what patient groups and age groups do you think it will be indicated? And also how differentiated could the label be with respect to a safety profile?

I guess I'll take that, Shabir, and then I'll pass it on to you to complete if there's anything I didn't cover. The label is always an FDA review issue. So there's really -- there's no point in trying to speculate too much around the label at this point since we haven't submitted yet and haven't started the dialogue in earnest. But in the study, we studied 4- to 7-year-old boys. So clearly, that's the age group that would be logical to having the label. However, some of the boys that we've had in the Phase IIa study as well as some of the boys that are now -- have finished the Phase IIb study are already significantly older than 7 years, 4 to 7 years was just the inclusion criteria at the beginning of the study. And we also have many patients now in the early access program, where they continued after they finished the study, and they are also already in their double digits in terms of age. So it's possible to potentially get a broader age range, initially, but we think conservatively at an age range of 4 to 7 to start with. And with regards to differentiation, I would only make the point that -- what we've shown in our studies is that we're statistically no different from prednisone, which is together with deflazacort, the standard of care steroid in these boys. So we have similar efficacy to those drugs. But we have a significantly different safety profile with regards to side effects. As Shabir has already showed in one of his earlier slides, these kids and their parents suffered from dramatic side effects of the steroids. And it's the reason why many of these boys or their parents choose to take these boys off the drug or not even put them on the drug, even though they know that they would benefit from the drug. So it's a real issue, is the safety issue. So having a drug that has a similar efficacy but addresses all the safety concerns or not all the safety concerns, but at least many of the major safety concerns such as height, bone fragility, mood disorders, et cetera, it should be very attractively differentiated from the other drugs. Anybody who's a parent knows that raising a 4- to 7-year-old boy is not easy. Certainly, when they go to kindergarten or pre-kindergarten or start school. Imagine having that boy on steroids and having all these mood disorders and aggression, which they display towards teachers, towards their peers in school and towards their parents. If you can reduce this dramatically and at the same time, allow the boys to grow normally and potentially not have bone fractures and all the other side effects that go with steroids, I feel that, that is a very, very compelling differentiation proposition versus the existing drugs. Anything to add, Shabir?

Just to say that in the U.S., labels tend to be a little bit broader. And so we're hoping that for the FDA, of course, given other steroids such as EMFLAZA, we'll get a broader age range. Now the upper limit, of course, is a review issue. One thing to note is that all the children who were in any of the trials of vamorolone, whether that's the open label Phase IIa or the pivotal IIb went into an expanded access program. And so we have children who's been on vamorolone for 7 to 8 years, reaching now 14, 15 years of age. And so we have data available. We're also doing a lot of work on PK/PD modeling showing similar exposures at different age ranges. And so our intention is to try to get, obviously, a broader label as possible. In Europe, in addition to the pivotal study, we've already agreed to and are about to convince our pediatric investigational plan, which is looking at efficacy and safety of vamorolone in younger and older age groups. And of course, this will be part of the discussion with the EMA in terms of the final age in the label.

Okay. And then maybe this brings me to the commercial side. Please, could you share your ideas about the pricing strategy? So exactly what price is implied in your USD 500 million peak sales estimate for the U.S. and the main European markets? And also maybe just give a little bit your thoughts, what are the other key assumptions included in that estimate?

Sure. I guess I want to also make the point that today's investor call was more focused on the clinical trial and Santhera in general, including financing considerations. But we plan to have a commercially focused similar event, maybe in person if COVID allows in the new year, where we will focus more on the commercialization plans, pricing, et cetera and dive deeper into that. But for now, just to answer your question, Laura, we're assuming a price similar to the current leading product in the market, which is EMFLAZA or deflazacort or potentially a slight premium to deflazacort, which will depend on what label we get. That would suggest a price range of about $80,000 to $100,000 a year per a boy or a young man that's about 40 kilos. Keep in mind that this is dosed milligrams per kilo. So the larger the boy, the more -- the higher the dose. But if we assume an average boy of 40 kilos, that will be about 80,000 to 100,000 a year is what we're looking for in the U.S. In Europe, the assumption is lower. Typically, in Europe, the prices are 1/2 to 1/3 of what you have in the U.S. So in our own internal planning, we have used a $40,000 per year price point for the top 5 markets in Europe. Once the drug gets approved across Europe, also in the smaller markets over time, the price tends to erode. But in the top 5 markets, the average will be around $40,000 per patient. Obviously, we'll still have to conduct some further payer research to verify this, and it will depend on what label we get from the FDA. In terms of what patient groups we're looking at for that forecast and what the assumptions are, I would say it's a little bit complex to explain it over the phone without slides, and that's why we have this event later in 2022. But there's a number of subgroups, mainly age and patients who are either naive so they haven't had any steroids yet, and they're starting on vamorolone or there are patients who are switchers. So they have already started on one of the steroids and they're switched to vamorolone. They have different penetration assumptions. In general, if you look at the U.S. and the top 5 markets in Europe, there are about 20,000 to 25,000 boys or young men who suffer from Duchenne and it's split about 50-50. So it's about 12,000 -- 10,000 to 12,000 per continent, if you will. We assume at peak sales that we'll have about 8,000 of those boys on vamorolone. So about 4,000 in the U.S. and 4,000 in Europe. About 50% of all the boys or young men are -- or the prevalence is aged group 4 to 17. So half the patients are 4- to 17-year-old. And in that group, which is our initial target group, we expect that peak. So many years into the launch. At peak, we expect about 2/3 of those patients. So it's 2/3 of half the population, i.e., about 1/3 of the total prevalent population that we expect to have on medication of vamorolone at peak. So it's about 4,000 patients in Europe, 4,000 patients in the U.S. U.S. price point $80,000 to $100,000 a patient a year, European price point of $40,000 per patient per year.

Thank you, Dario, for these explanations. So how confident do you feel to really be able to effectively compete, especially against the cheap generics?

Well, I mean, the cheap generics were on the market when EMFLAZA launched. And EMFLAZA today, the -- or deflazacort as it's generically called, has about 50% of all the patients on steroids on deflazacort. So half the patients are on steroids, the other half are -- sorry, on prednisone and the other half of the boys on steroids are on deflazacort. So with a price point that I just mentioned, they have been able to establish themselves or penetrate that market quite significantly. And the way we look at it, I mean, they have -- we have similar efficacy to them, but we have a significantly better safety profile. The EMFLAZA safety profile is at least the company claims is better than prednisone. But when we look at it from our perspective, we see it as a marginal benefit and yet the market is willing to pay that price. So I think that when we come to market with our label and with our clinical profile, I don't see that there should be an issue to price it around EMFLAZA or a slight premium.

Okay. And do you think that a head-to-head comparison study, for example, against EMFLAZA would be helpful to strengthen your value proposition and differentiation versus the steroids? Is it something you are considering?

It's not something we're considering, and we have a good reason why. And it's because we have access to a data set from another study called FOR-DMD, which we are currently analyzing. I'll pass on to Shabir to give you a little bit more information about that because it's as close to head-to-head as it gets.

Thank you, Dario. So we've been in touch with the investor in Rochester, who led a study called the FOR-DMD study. And this study was designed at the same time that the VISION-DMD study or just slightly before the VISION-DMD study, was designed. And it was already then designed in a way to make the 2 studies as comparable as possible. So the FOR-DMD study is looking at prednisone, either daily or intermittent dosing and on deflazacort in the same population, young boys who are steroid naive, age 4 to 7 years old and was designed to have very similar efficacy and safety analyses. And the study was prospectively designed to have a follow-up period of between 3 to 5 years. And so it's a very important data set that allows us to do a matched comparison between vamorolone, prednisone and deflazacort. And we've actually got the data in-house now and are in the process of doing the analysis. And so really, we don't see the need for a formal head-to-head study given the FOR-DMD study is such a close design to the VISION-DMD study.

Okay. But then I understand, I guess, we have to understand that this will be used as kind of a marketing message, but it will not form part of the package that you file with the regulators.

Well, actually, so no, we've had an agreement with the CHMP and EMA on the use of the FOR-DMD study within the regulatory package. The FDA are also aware of this data set and have no objections to us actually using this data set within the regulatory filing. Where we hope that this may help us really is in some of the safety differentiation in terms of the safety labeling. We don't anticipate this to have a direct label consequence in terms of efficacy. But certainly, it may help in terms of where we want to take the safety label differentiation.

Okay. Understood. So how well do you think -- how well informed is the DMD patient and physician community already about vamorolone and its benefits?

I think they're quite well informed. I mean there's obviously work to do where you're never as penetrated as you want to be. But keep in mind that ReveraGen, who is the originator company for the drug, have been very close to the Duchenne community for a number of years. In fact, the company has been largely funded by charitable donations from the Duchenne community as well as the NHS -- NIH, sorry, in the U.S. And we, as a company, Santhera as well as ReveraGen have been presenting at a number of patient advocacy congresses as well as scientific congresses. And we at Santhera, have also had, for a number of years already, a full-time head count on the market in the U.S. who's only task is to liaise with the patient advocacy groups and the patient community and keep them informed about progress on our clinical pipeline. The founder of ReveraGen, Eric Hoffman, Professor Eric Hoffman, is a Duchenne researcher, well known to the community. In fact, he's the one who discovered the dystrophin gene and coined the term dystrophin, which is obviously the protein that's missing in these boys. So between ReveraGen and himself personally as well as us, we've been drumming this up for quite a while already. So I think we're quite well known and the market is eagerly waiting for this drug to be available to patients.

Okay. And maybe just a last question before we go to the commercial topic is on the topic of gene therapy. Do you believe that it could become maybe in the future, sometimes a game changer and make the steroid use obsolete or leads to less steroid use? Or is that included already in your planning?

Let me answer that very briefly, and then I'll pass on to Shabir. So the answer is no. That's my answer. But Shabir has a more eloquent longer explanation I'm sure.

Thank you, Dario. I'll try not to make it too long. Gene therapy, of course, is exciting as a technology and anything that can bring us closer to a potential cure is welcome, but I just don't think gene therapy as a technology is there yet for a couple of reasons. The first thing is that the gene therapy is not the full dystrophin gene. It's a shortened dystrophy gene or a microdystrophin. And so we're still likely to see inflammation of the muscle. And over time, that will also lead to disease progression. Secondly, one of the major challenges of gene therapy is redosing. Now if you're dosing a child, a young child of 15, 20 kilos who then will go into adolescence and adulthood, 50, 60, 70 kilos plus. And so basically, the gene therapy in the muscle will get washed out because stem cells are used up very early in the disease. And so you'll have muscle that isn't transfected or it doesn't have this new gene in it. And so I think over time, we'll start to see the disease progression again until they can solve redosing. But even so, because it's not a full-sized dystrophin, you're still going to have background inflammation. You're still going to have another process going on. And so we see steroids will be continued to be used even if they managed to solve some of the considerable challenges with gene therapy.

Okay. So then on the topic of your commercial launch plans in the U.S., could you please give us some more details when will you start scaling up your sales and marketing activities and how many reps will you need to hire in the U.S.?

Sure. So we've already started this work. I mean Santhera is not new to the U.S. market. We've had a U.S. office outside of Boston for a number of years already. But most of the people have been patient advocacy people, medical people, regulatory and clinical people. So not really the commercial team, but still a team there that has stayed close to community and to the key opinion leaders. We've just hired, a few weeks ago, we announced that we hired a Head of North America and President of North America and Stephanie Brown, who brings a tremendous amount of credibility and experience to the team. She has been, for a number of decades now, engaged in building and launching products in the specialty and rare and orphan space. And obviously, she is now tasked with building the prelaunch capabilities for vamorolone in the U.S. In terms of headcount, we have a project called 60 in 60, which essentially means we want to hire 60 people in the next 60 weeks or so. So eventually, when we get to a fully-fledged organization, we'll probably be around 70 people or so in the U.S. Of those 70 people, we're expecting about 1/4 of them to be reps. So you should expect about 15 to 18 reps. The exact territory alignments are being still worked on. About 1/4 of other field-based people such as payer support, the medical patient support functions that are going to be field based. And then the -- about half of that staff that we're hiring are going to be office-based staff who are going to be supporting the organization.

Okay. And in Europe, what is your strategy here?

In Europe, the current strategy is to launch ourselves in the top 5 European markets that used to be called EU-5, but now it's Europe-5 because U.K. is no longer EU. And so the plan is to do it ourselves in those markets, build our own organizations. In those markets, it's roughly going to be the same size as the U.S. organization in terms of headcount. And the first market where we're probably going to be launching is Germany and followed by the U.K. For the smaller European markets, whether it's Nordic, Benelux, Austria, Switzerland or the former Eastern European EU markets, we will be looking to partner with third parties. We don't think it makes sense for a small organization like ours to put down boots on the ground in all those smaller markets, it requires a certain infrastructure and critical structure to be successful. And the ground rule in pharmaceuticals is that the top 5 in Europe are typically 80% of the total revenue in Europe. So 20% only comes from the many smaller markets. But when you build an organization, you end up having as many problems and administrative work involved with managing that 20 % as you have with managing the 80%. And hence, for a smaller organization like ourselves, it makes a lot more sense to focus on the large markets and partner with somebody who already has that infrastructure on the ground for the smaller markets.

Okay. And can you already give an indication in terms of your operating cost base going forward, once you are commercial stage?

I'm looking at Andrew for that question.

I'll give you that. And also first some context. So our current run rates are around about the $45 million operating cost a year, and that's reduced from 60% or higher in prior years when we were marketing the Raxone and preparing for Puldysa launch. So we've reduced -- we look to increase adding the infrastructure in the U.S. that Dario just mentioned. It's sort of -- we would aim to around the $75 million and increasing slightly, really looking towards a breakeven level around the mid of $25 million.

Okay. Good. Maybe then this brings me just to the next topic, which is on the funding side. I think in your EGM invitation, you say that you have a current cash reach into mid '22, so beyond the U.S. filing of vamorolone. And I also understand that this covers the $15 million bond repayment in February as well as the $5 million milestone payable to ReveraGen upon filing. So to reach then after that, the next inflection point, how much capital do you need to raise and also by when?

Yes. Overall, it's around $100 million in total over the time period, if you remember, last summer, we mentioned around $150 million as a gross number, of which we've raised the $42 million, which leaves roughly $100 million. Now when that comes and how that comes is a matter of timing. The $50 million of that $100 million is a milestone that's due on approval of vamorolone by the FDA towards we expect around the end of '22. So it leaves another $50 million for operational and part of that build. That can come in time over a year. Also, we have various sources apart from the EGM. We have various sources in terms of licensing income, both from geography, China, Japan, other areas, and other indications through the year as well as rights for the Raxone LHON in the U.S. And towards the end of the year, should we have the PRV or pediatric review voucher or a share of that as Dario mentioned earlier. So the EGM is an important part of it. However, we should see a significant portion of that overall funding requirement come from non-equity elements. The share resolutions that we've put forward at the EGM during next week allow for a $20 million increase in ordinary capital. And combined with the related increases in conditional and authorized would allow around 55 million shares available. And we'd obviously hope to minimize the amount of further potential dilution. We look also at rights issues that can help protect dilution of existing holders that wish to participate. And so we do look at all those options very carefully to ensure that we obtain the best value for shareholders we can in the circumstances that we're faced with.

Okay. And then just on this non-dilutive funding topic. You mentioned specifically, I think the out-licensing of vamorolone in other markets, I think, such as Japan and China. Can you give an indication when such a deal could happen? I rather think it would be in '23 or is '22 already a feasible time frame? And also what amount one could expect or what range, potential range, out of such deals?

Well, as you can imagine, and as I've said before, we're not really giving a running commentary on our negotiations. All I can say is that we have discussions going on with both Chinese and Japanese potential partners. The Chinese discussions are more advanced than Japanese, as you would expect. In Japan, these negotiations typically take much longer than in China, where they're much more aggressive. In terms of timing, I would say China, for sure, would be at '22. Whether Japan fits into '22, I would say 50-50. I think I still hope that '22 would be a Japan deal as well. in terms of magnitude or size order of these deals, it depends on how it's structured, right? These deals typically have an upfront element, and they have a milestone element and then they have a royalty element. And depending on how you play the game and some partners or potential partners, they want to play the game with a big upfront and then lower cost downstream. Others are getting a lesser upfront and a much more aggressive milestone and royalty structure. And so you have to weigh all these pros and cons when you're looking at the partner also looking at their capabilities and particularly when it comes to regulatory capabilities to make sure that the drug gets approved in those markets, but also commercial capability. So there's a lot of variables that you need to look at. Typically, what I've seen for rare and orphan diseases as upfronts for both China and Japan are in the high single digits to mid-teens in upfronts. That's typically the order of magnitude, but that can be less if there's more milestones and more royalties and it can be more if there's less milestones and royalties. But that -- maybe that gives you an indication of what we're expecting.

Okay. And is there also a possibility that a part of the USD 50 million milestone, I think, which is due to ReveraGen and the Idorsia upon FDA approval could be paid in shares?

That's not foreseen in the contract. And I think that question is something you'd have to ask ReveraGen and Idorsia if they would like to have it in shares. But I would say this, I mean, there are, typically, when companies have a successful pivotal trial like we have had now, they start getting approached by companies that provide synthetic royalty financing because they see that the asset has been largely derisked. If they see that the clinical risk is gone and the regulatory risk is low, they approach these companies to provide royalty-type deals. And for those listeners who are not familiar with synthetic royalty. These are upfront payments in exchange for future milestones and royalties provided by these financing companies. We are currently in discussions with a few of them, still very early stage, but it is a possibility that we could potentially strike a deal where those milestones that are due to Idorsia and ReveraGen upon approval would be covered by a synthetic royalty financing, which would not be then dilutive to shareholders in terms of share dilution.

Okay. Thank you, Dario. So I think I'm now done with the part of the moderated session, and I would now like to invite the audience to ask more questions. So operator, please open the Q&A.

The first question comes from the line of Ram Selvaraju with H.C. Wainwright.

This is Boobalan dialing in for Ram Selvaraju. Can you hear me okay?

We can hear you fine.

So great presentation, great data. A few forward-looking questions from our end. So have you conducted any physician-focused survey to sort of help understand market expectations for vamorolone? If you have, can you share some high-level findings?

I'm not familiar with any. Shabir, are you familiar with any recent surveys that have been conducted?

No. So we should be doing some quite soon, but we haven't done formal surveys in that sense. We have done, of course, global scientific advisory boards, where we've asked physicians about how they see the product and its positioning and its value proposition. And again, it's very much along the lines of the themes of the presentation. I think there's general agreement that at the 6-milligram dose, there's equivalent efficacy. The 48-week data, of course, are important to show that the treatment effect is durable. But really, if you think about the market today between EMFLAZA and prednisone, there's marginal benefits, although it hasn't really been confirmed in efficacy, marginal changes in safety. But with vamorolone, we have some very clear differentiators. We certainly have the height advantage. We had seen significant reductions in several safety domains and expect that to increase over time, especially when we do our analysis versus the FOR-DMD study. The thing with Duchenne that's very important to appreciate is that the cost of a single Duchenne patient increases over time as they accumulate these weaknesses. The costs for disease management, you've got a multisystem organ involvement, so the multidisciplinary care team gets bigger. You've got loss of ambulation. You've got additional costs there. So anything that could be done really to reduce the cost of, for example, fractures, diabetes, cataracts, neuropsychological involvement can actually drive the value proposition going forward. And so really, we're very much aligned in terms of what the physician feedback is where we see the market access opportunities for vamorolone.

So with respect to payer discussions, have you reached out to payers or what is the latest in terms of your payer discussions? And did the pandemic in any way affect your efforts to engage payers?

So as you can imagine, it will be a little bit futile to engage payers at a point where you don't have pivotal clinical trial data yet. And we've only got that a few weeks ago. So now part of the fundraising is to conduct just that. I mean, to do the prelaunch activities in the U.S. is not just hiring people, but also projects for people to work on. And one of the top of our priority is obviously to hire market access competency into the company in the U.S. who will then conduct those payer research exercises as you alluded to. I think it's important to also manage expectations here. I mean, if you look at the recent launches in the U.S. last couple of years, the payers are putting up a number of hurdles for drugs called step edits, essentially forcing patients to be put on cheaper drugs and then evidencing through documentation that those cheaper drugs aren't working or having side effects before insurers or payers are willing to allow more expensive drugs to be used. It's just a way to keep costs down and to moderate the uptake of a new drug. And that's pretty much true for almost every drug in the U.S. today. So in that first year of launch, there will be some low-hanging fruit probably as with all drugs, but there will probably be an intense year of dealing with these kind of payer hurdles. And in order to overcome that, these payer discussions, payer research that we're going to be doing over the next year is going to be critical to make sure that we minimize that period of pushback, if you will, and show that by using vamorolone early, you actually, not only do they increase quality of life dramatically, but you also have the potential to reduce drugs that have to be prescribed to mitigate the side effects of other drugs. You're reducing costs related to surgeries and bone fractures. You're reducing cost related to psychiatric or mood disorders and so on. So the overall cost savings or benefits to the system in addition to the quality of life will be properly mapped out for those payer discussions.

And one final question from our end. So how quickly after approval should we expect meaningful revenue for vamorolone?

I'm looking at Andrew now. He's got a rough forecast but...

I mean, like any rare disease launch, should take some time to get off the ground and seeing that. But in terms of, it's a slow ramp during the first year really, and then you start to see that coming through a year after launch. I mean, we're not giving revenue guidance at this stage. We're just about to start putting a regulatory submission in.

Yes. Revenue guidance would come a bit later when we're either close to market or close to approval or on the market. Right now, we don't know what the label looks like. We don't know. We haven't done that payer research for pricing yet, et cetera. To give specific revenue guidance by year, I think, would be a little bit overambitious. What we have done is given the guidance on peak sales, which is north of $500 million between the U.S. and the top 5 markets in Europe, where 2/3 of that revenue is expected to come from the U.S. And earlier on this call, I kind of broke it down into which buckets that revenue comes from.

Yes. And I think also to add earlier on in the call, again, we were targeting a breakeven around mid of '25. So that can give you an indication of the levels.

Moderator, do we have any other question?

We have a question from the line of Bob Pooler with ValuationLAB.

Most of my questions have been asked, but I have a few. Just on the VISION-DMD trial, have patient groups given you feedback on the results there?

Shabir, would you want to?

Yes. Thanks for the question. Yes. Yes. So we, of course, we've been in touch with the patient groups. We've been having a relationship with them for a very long time, as you know, with Puldysa previously. So having shared some of these top line results with them, for them, the biggest challenges they face is the safety side, right? So when you have to make a decision about how much steroid to use at such a young age, a lot of parents are very, very anxious about the side effects. And so when we can tell them that there's no impact on height. There's no, certainly a significant reduction in terms of behavioral change, that's a huge relief to them, especially at a young age because this is really when these 2 side effects are the most prominent. The other thing to remember is, as children get older, parents are making decisions for young children. And then as children become adolescents and then become adults, their perception of what is acceptable or not changes. And so what we're hearing from parents is, if we can really reduce the impact of skin lesions, hair problems, growth, bone fragility, weight and cushingoid. But for them, as long as the efficacy is comparable, on par with prednisone or EMFLAZA, for them this represents a really valuable choice and one that they would take when they feel comfortable. And so the feedback really has been encouraging. They were also waiting, of course, for the 48-week data. And so we've had a very positive reaction from the patient advocacy groups.

Yes. In the U.S., the patient groups are very vocal. And also, we've seen in the past few years actually on the DMD approvals that it's been also quite political, where the patient groups have been playing a very important role and also influence the FDA. Do you expect also patient groups to lobby for U.S. approval of vamorolone?

I expect them to be supportive. I don't think that they need to lobby for the approval of vamorolone. I think our data speaks for itself. Where we will need them, I think, where they will be critically important is when we start having those discussions around access with payers and insurers and that pushback that I mentioned earlier. I think that's when the advocacy groups can become very helpful. Mindy, who is now our Head of Patient Access in the U.S. She's a mother of a Duchenne boy herself or he's already a young man. I think he's 17 or 18 years old. And she has been very active in that community for a very long time for obvious reasons and can navigate that very well.

And just on the pre-NDA meeting and the FDA, we've seen other DMD drugs have been approved on basically, well, not much sufficient data there also on all kinds of, yes, dystrophin and so which were questionable. How important do you think the pre-NDA meeting you had has derisked the approval risk for vamorolone?

I'll pass that to Shabir. He's been closer to it.

Yes. Yes. Thanks, Bob. So I think the fundamental difference between us and previous submissions is that we have hard endpoints, endpoints that have been validated in other trials. And of course, when we see the magnitude of difference versus placebo, they're extremely robust statistically. So in a sense, it's a very different scenario for the FDA compared to what they've had to go through. I think for us, of course, the fact that they've confirmed that the 24-week time point is sufficient for filing. And we know that the outcomes are strong, both in terms of safety and efficacy for us. It gives us encouragement that it will be a reasonably straightforward path. Of course, you kind of anticipate the unexpected. So I would say, for us, it's a very different situation than previous drugs that have gone forward to the FDA.

I fully agree. Just a couple of investors have asked me also, why are you going to market vamorolone in the U.S. and EU through own sales force and why not partner? You have then less expenses and so on.

Good question, Bob, and it's a question I've been answering many times because it's the one that obviously comes up. The answer is, in the scope of a launch, the Duchenne community is a very concentrated market. Every patient is diagnosed as opposed to other diseases where you have to first make sure that you do a lot of medical education so that patients can get diagnosed. These boys are all diagnosed. They're all treated in centers of excellence. There's about 150 centers of excellence in the U.S. and a similar number in Europe where all these boys get all the expert treatment that they need. So for a small company like ourselves to cover such a concentrated market with few centers of excellence, very few HCPs to deal with makes sense. If this was a bigger not so concentrated market with more call points, it would make it more expensive and more difficult for us to execute. It would also make it more risky for us to execute. Here, we have many, many years of very close collaboration with the Duchenne community. We were obviously very active with Puldysa in both U.S. and Europe prior to having vamorolone, and they know us very well. We have a very good reputation. We know where the patients are. We know who the HCPs are. And for us to launch it ourselves and keep the whole margin of the drug in-house just is a much better net present value for shareholders than partnering it out and letting somebody else promote the drug for us. That somebody else is also then promoting other drugs. They have an infrastructure in place, which we would have to build, I agree with that. But they also don't have it as their highest priority, which our organization would have. We would be obsessed with making it a success. In addition to that, I just want to mention that we are at the early stages of developing also additional indications for vamorolone in pediatric diseases. The oral solution, which is the current formulation is ideally designed for pediatric, rare and orphan pediatric diseases. And we already have an FDA approval for our Phase I study in Becker's muscular dystrophy, which we have applied for together with ReveraGen. And we're at the late stages of having discussions with clinical experts on the next indication, so stay tuned for that. But there are many indications that you can go for with vamorolone in pediatrics in particular. And I think the development path is pretty clear and straightforward there. The FDA has encouraged us to look at additional indications. And so this organization that we're building in both Europe and the U.S. will be one that's dedicated to multiple indications, pediatric, rare and orphan disease indications for vamorolone, not DMD only over time. It will take time to get there, but that's the thinking.

Yes. And plus, I think you have also a large switch opportunity there so with those on steroids, the DMD boys with a superior profile. That's a nice switch opportunity versus then trying to convince somebody, de novo patient to take on the steroid. So you have both of them, but I think switch could go rapid in that aspect as well.

I agree with you. And the 48-week data is really encouraging in that aspect because we showed that switching from a patient who had been on prednisone to vamorolone 6-milligram, they didn't lose any of the efficacy that they had, but they had a lot less side effects in that second 6 months. So that's a very compelling argument for switching, which we now have clinical data for.

And then my final question, and again, it's still puzzling is on your valuation. The current market cap of Santhera is a fraction of its peers when they were close to filing their DMD drugs. Again, my question is, what is the market missing?

Well, I think there's a number of reasons for the market cap. I think they're all independent of each other in a way. One is simply that Santhera has been a company that's been on the market for 14, 15 years now and disappointed many shareholders over the many, many years past with failed clinical trials and so on. So I think a number of shareholders have just turned their back to Santhera late last summer when the SIDEROS trial failed in Phase III. We also lost sell-side analysts who were covering the stock and the company, which would have helped in amplifying good news and stories. So I think that's one component. The other component is vamorolone itself has been quite unknown to the general community because it was developed by ReveraGen, which is a privately held company that wasn't really on the radar of investors, whether VCs or other types of investors. ReveraGen developed this with charitable money and donations and grants. And by the time we brought it in-house at Santhera, it really didn't have the publicity that a drug, which is in a pivotal Phase IIb study would normally have if it was a VC-backed company. There were no press releases issued. There was not a lot of noise around it. So only once, now this summer in June had the 6-month data of vamorolone did we have an opportunity to really drum it up and start telling the story around vamorolone. So it hasn't been really that long yet. I think it's a matter of time now. It's a function of time. I think we are getting more and more involved and engaged in telling that story and talking about the benefits of the drug. And with that, I think the awareness around the company will also increase, which will in turn translate into the share price. The final and maybe the most important impact, I think, is the fact that there has been a lot of dilution in the share price. We have issued a lot of shares over the last couple of years, and investors just don't like that dilution and they look at us and they see another CHF 100 million needs to be raised. That means more dilution. But what they don't hear or don't want to hear is that, that CHF 100 million or so is a gross number. It doesn't mean that we will dilute up to that number. It is a number that we need to raise until breakeven, but it will be offset by a number of nondilutive opportunities that we have discussed on the call from potential synthetic royalty deals, to the China deals, the Japan deal, to other geographies, to the North American rights for the Raxone LHON indication to get the sales milestones and potentially partnerships with lonodelestat and so on. Plus, one of the options that we have for the next round of fundraising is we are considering a potential rights issue to existing shareholders, which means that existing shareholders who want to participate in that rights issue would not be diluted. So we're doing everything we can to minimize the dilution going forward. And when we look at the dilution going backward, which some shareholders vocally have criticized, I want to remind everybody that we needed cash to keep operations running, to keep the company alive, so we needed to issue shares for that. We needed to issue shares to bring in the vamorolone asset. We didn't have any cash. And there was a $30 million option exercise price tag to the vamorolone asset. So we brought that asset in-house a little over a year ago with no cash but it cost shares. And then the third bucket to which we needed shares was to restructure the debt and the balance sheet. We had a CHF 60 million debt which was due in 2 months from now. And that debt prevented us from raising more money. Investors don't want to give money to a company that has a CHF 60 million outlay of debt coming up just around the corner. So we were forced to restructure that debt. And without cash, you really need to use shares to restructure the debt. So yes, there has been dilution but I would say that the alternative would have looked a lot worse.

I fully agree. If I look at it, you've increased also. On one hand, you have, of course, the dilution on that. But of course, you have to look at the money that you used of how much value you've created. And I think you've created quite a lot of value. If I look at your peers when they were just before, their market caps, so before they were filing was by far higher than where you are now. And you have a product that can be given to virtually many, many patients, whereas theirs were also very limited to a certain gene mutation. So in that respect, you've created a lot of value. And also, I think you've derisked a lot as well now with the VISION-DMD trial results now known. It seems like a good opportunity that investors relook the investment case because I think there's multiple upside here. Then my final one is maybe the presentation is looking out to 2022. In a year's time, where do you want to be?

In 2022, in a year's time?

At the end, yes. In a year's time from now?

I hope to be opening a couple of champagne bottles just before Christmas for an approval or at least be very, very close to that approval at that point in time. I hope to have a very strong U.S. team in place that is ready to launch. I hope to have had very, very good discussions already with payers and a clear understanding of the value proposition for the drug. And I hope to have a few more nondilutive deals done either for geography or indication or both. And I also hope to have really good Phase IIa data coming up for lonodelestat. I didn't mention it on the call, but we're starting late spring and summer, we're starting a Phase IIa placebo-controlled trial with lonodelestat in a subset of cystic fibrosis patients, those that are not CTFR patients. So it's a subset of about 20% of cystic fibrosis patients, and we have some strong support from the European cystic fibrosis community in executing on that trial. And so I hope that, that is all in place by Christmas next year.

Wish you all the luck and stay safe and healthy.

You too, Bob. Thanks for calling. I think we have a few questions from the chat room, right?

Yes. So we'll try and get through as many of them as we can. I don't know how we, yes, it is the first time that we've done these on chat questions, so we'll try and get through them.

All right. I will be reading them out for answering. The first question reads, do we know the impact of vamorolone on older boys, i.e., 14 plus?

Shabir? Want to answer that?

Yes. So we have limited data. As I mentioned, children who went into the IIa or IIb program rolled over into an expanded access program and have continued treatment. So I think we have a small number of children who are above 14 years of age. But importantly, what we've also been doing is a lot of PK/PD work modeling. Because what we know about vamorolone is that actually it is a very linear kinetic. And so we've been doing a lot of modeling based on the data we have, including the EAP data to show that actually you're in the effective range still in older children. The other important thing, of course, is that we've agreed with the European regulatory authority as part of our game plan to study into an older age population. And so we'll be commencing those studies. And so we hope not in the too far distant future we'll have a comprehensive data set in all the children.

Thanks, Shabir.

Thank you. The second question reads, is prednisone the current standard of care for the treatment of DMD patients or are there other corticosteroids that are being used? Why is the efficacy of vamorolone only tested versus prednisone in your study?

So I'll take the first part of that question and then I'll pass the second one, why only prednisone, wasn't a comparator in our study to Shabir. These Duchenne boys are all when they're diagnosed, they should be -- they're indicated, I should say, for glucocorticosteroids. There's essentially 2 types of steroids on the market now. There's prednisone which is generic. It's a 40-year-old drug. And then there's the deflazacort, which I mentioned earlier on the call under the brand name EMFLAZA, which is on the market. Between the 2 of them, it's roughly 50-50 in terms of patients. It's not like there's a long slew of different other drugs. These are the 2 main drugs for those boys that are on steroids. But again, many don't start steroids because of fear of side effects and many discontinue way too early. They would still benefit from the steroids, but they can't handle the side effects. And that's where the opportunity lies. Shabir, do you want to comment on why we only compare to prednisone?

Yes. So obviously, this was a decision by ReveraGen quite some years ago, but my understanding from Professor Hoffman was at the time the VISION-DMD study was designed, EMFLAZA wasn't approved and prednisone was the prominent steroid in terms of use in the U.S. But of course, subsequently with time, EMFLAZA has been approved, but probably too late for us to be able to do anything meaningful within the VISION-DMD study program.

Okay. We move to the next question. What are the negatives of vamorolone? I read in a study that vamorolone works like a light steroid with lower efficacy than other steroids. And this is the reason why the adverse side effects are mitigated.

I'll pass that one on to Shabir, but I don't think that there is a study that has actually said that it's a light steroid. I think that might be the competition that is telegraphing into the market. But I think the study that we have now concluded, the 48-week study showed that the efficacy is at least for the 6-milligram form is on par with prednisone. And I think there are a number of studies out there that show that prednisone in turn is on par in efficacy with EMFLAZA. So I think in terms of efficacy, they all seem to be in the exact same ballpark. But in terms of the safety profile, they're very differentiated. Shabir, do you want to say anything more?

Yes. This is a comment I get quite often, right? Is vamorolone a weaker steroid because you're dosing at higher doses than prednisone? I think we have to make a couple of things clear. The first thing is that when vamorolone was designed, it was really designed to be able to show or demonstrate equivalent efficacy but have a safety benefit. Vamorolone is a partial agonist. And therefore, it partially activates the glucocorticoid receptor. And that's important because it's that mechanism that gives us the safety benefit. We do dose at a higher level. So if you compare, we dose at 2 and 6 milligrams per kilogram compared to 0.75. So from a potency perspective, you could say prednisone is a little bit stronger, but that's irrelevant because the dose that we've demonstrated in the study gives equivalent efficacy to prednisone, as Dario made very clear. But it's the safety that's the real valuable thing to look at in this situation. We're offering benefits that neither prednisone and deflazacort can offer in terms of height. That's very clear, which bring much less in terms of adverse events probably compared to deflazacort as well as prednisone. But certainly within the studies, we have a clearer indication of where the advantages are versus prednisone behavior. And these are big issues with the other 2 drugs. And we know that with deflazacort, the height issue is even worse than prednisone as is the bone fractures, so with the skin changes, the cataract. So it's very, very important that we make very clear that the doses studied, we have equivalent efficacy. So this whole discussion about is a weaker steroid or not isn't relevant. But at those equivalent efficacious doses, we're showing a very clear and significant safety benefits.

Thanks, Shabir. I think we have a call on the line.

Yes. Operator, can you please take the phone question.

We have a phone question from Henrietta Rumberger with AWP.

I have 2, 3 questions, mostly clarification. So you mentioned yourself that 2020/'21 weren't the easiest time for Santhera. What was the feedback from investors? I mean, you said at some point that dilution was something not going down so well. But in general, have you got any feedback from them? And what was like, what came out under the bottom line? And then for clarification, could you please tell me once again. So in the U.S., you expect the annual price tag to be around USD 80,000 or was it USD 80,000 to USD 120,000. And with respect to the 60-60 program, that's 60 people within the next 60 weeks. And finally on the financial needs, so that CHF 100 million, until when do you need them? I mean, you said CHF 50 million probably next year and then the next CHF 50 million until '24, '25.

Sure. I'll take them in reverse order. That's how I can remember them. If I forget the first one, please remind me. The CHF 100 million or it's slightly higher than CHF 100 million, CHF 110 million, CHF 120 million is until breakeven until we start making our profit. So we expect that to be somewhere during 2025 time frame, so until then.

And that's Swiss francs?

That's swiss francs, correct. The price point for, the current planned price point is $80,000 to $100,000 per year per patient for a patient that is 40 kilos because it's milligrams per kilo dosing. So it will be less for a younger boy and it will be more for a heavier. But typically, the average is calculated at 40 kilos. So that's $80,000 to $100,000 is our current guidance on the basis of which we have made our forecast. Now that may change, obviously, because we still need to talk to payers and the competition may make moves before then and so on. So that's at least what we have communicated so far. The 60-60 is hiring 60 people in the next 60 weeks. Again, that's also more of an internal theme. It may end up being 52 in 60 weeks or it may be 62 in 70 weeks, but roughly what we are planning to do is to expand by 60 people. Feedback from investors, we have many, many investors. I think we have 6,000 to 7,000 registered investors and about as many nonregistered investors. So giving you a scientific sample would be impossible. I can only give you anecdotes. I have some investors that are very, very encouraged by what they see, have come into the stock more recently, are bullish about the future of the company, but we also have investors who are criticizing the dilution and are frustrated because they bought the share at a much higher price from where it is today and everything in between. So I can't really comment on investors. What I can say, though, is that given the volume in the trading of our stock, we have many new investors. When I joined the company back in, 2 years ago, we had an average volume of 20,000, 25,000 shares traded each day. Today, that's more than 10x that. And that means that a lot of new people have seen an interest in Santhera and have bought shares in Santhera. For everyone who buys a share, there has to be somebody who's selling a share, which means that a lot of new investors have come in to the stock and believe in the future of the company.

So one could say that the mood has changed with the news revealed?

It's hard for me to say if the mood has changed. I mean, the share price is the only barometer I have for the mood, right? And I'm still disappointed to see the share price where it is today given the turnaround, if you will, of what we've done here and the consistency of us delivering on every promise that we've made. Everything we've said we were going to do, we have been doing, and we're going to continue delivering like that. We have a very successful 6-month data point. We have a very successful 48-week data point. We have a successful pre-NDA meeting. The asset is very much derisked from a clinical and regulatory perspective. The market is there. It exists. It's not a new market that we need to build. There's a large unmet medical need in the market. There are potentially other indications for the drug coming. And there's lonodelestat in the pipeline, which we haven't discussed at all, which potentially has the same attractiveness to it as vamorolone with potential for multiple indications. So obviously, every CEO is a little bit biased about his company and everybody, every CEO says that his company is undervalued. But when I look at it as objectively as I possibly can, I'm disappointed that the share price is where it is and we haven't been able to convince more shareholders to come in to the stock. However, having said all of that, we will continue working on it, and we will continue communicating to shareholders and potential shareholders. We will continue having events like this, hopefully, also in person in the future, to provide more insight into the drug and the potential of the drug and what we plan to do. I think communication is going to be key here going forward.

Okay. Then we go back to webcast questions. Maybe one that just follows what Dario just said. Do you realize that your management of the Investor Relations has been very poor during the EGMs?

Well, a fair question, I guess. I mean, the EGMs that I have experienced have all been EGMs or AGMs during a pandemic, which makes it a little difficult to manage those investor relations. Ideally, obviously, we would have had physical annual shareholder meetings with presentations and with the possibility for a lot of face-to-face dialogue with shareholders and potential shareholders. However, I think this call is basically a week ahead of our EGM. And one of the reasons why we placed it on this date is so that we can provide an update to our shareholders on where we stand as a company and what we plan to do, and I think that should hopefully be seen as a good sign.

We will go back to vamorolone for the next question. If Santhera hasn't finished the necessary GMP production now, how can it submit in Q2 '22 if it needs to wait 6 months in order to demonstrate shelf life?

Sure. So we have 2 batches produced already and they are on shelf life, shelf life measurement, if you will. We're currently in the midst of producing a third batch. Whether the FDA will insist on 2 batches or 3 batches to approve a shelf life remains to be seen, but we are hopeful that the 2 batches that we have now, which will have more than 6 months of shelf life by the time we submit should be enough. But in case FDA insist on 3 batches, there may be a slight delay because we would have to wait for the third batch to then have 6 months of shelf life. Alternatively, we could launch with less shelf life potentially, but I would prefer to have 6 months of shelf life by the time we launch.

Thank you. Next question. When can we expect partnership for vamorolone in DMD in markets where Santhera won't stand alone?

That's something that we are just starting those discussions now. We have had incoming approaches from a number of companies that are interested in those rights. But as you can imagine, it takes some time for both companies to do their due diligence on each other, to get to know each other's capabilities and also to build the mutual trust that is needed for a long-term partnership like this. So it won't happen anytime soon. We are submitting in, as we mentioned earlier, in Q2 of next year, approval mid '23 at 12 months later. The first markets to launch will anyhow be the markets where we're doing it ourselves. So I expect the partnership to be signed during the next year for sure.

Thank you. To the next question, as far as I know, there are around CHF 40 million milestone payments outstanding from the Raxone out-licensing. Have you checked with Chiesi if there is a possibility of giving them a certain discount for an immediate payment?

We've had discussions with Chiesi and have obviously ongoing discussions with Chiesi. I can't comment on the specifics of those discussions. But Chiesi has told us that their run rate right now is such that unless they get France, the territory of France, which is the largest market in Europe, which is still managed by Santhera. Unless they get that territory included in their contract, the revenue that would trigger the first milestone payment is probably not going to take place by August of '22, which is the next potential milestone payment. Now with regards to France, the issue there is reimbursement. We are currently in negotiations with the French authorities on reimbursement in France. We hope to resolve those discussions during the next year, during 2022. We have some encouraging signals, but this is France after all and things may take longer than planned. By the time we then hopefully successfully conclude those reimbursement negotiations, Chiesi would probably then exercise their option and take over the territory of France. They don't want to exercise that option while those negotiations are going on and uncertain. And so once the French territory becomes part of the Chiesi contract, they would automatically trigger the first milestone payment based on their current run rate. So probably not in August '22 but very likely in August '23.

Thank you. And the next question is connected, and you actually already answered it. It reads, can you estimate when the first milestone payment from Chiesi might become due?

So the, as I mentioned, the August '22 is unlikely. It's probably going to be August '23. But I want to also remind those that are listening that we still retain the rights for the Raxone asset and LHON indication for North America. And this could also be a potential nondilutive upfront payment from an interested party for that territory. We intend to start those discussions with the FDA during '22, have pre-NDA meetings to discuss the availability of our dossier for Raxone in the U.S. Now that we have the post-marketing studies, LEROS, PAROS successfully concluded with great data, we feel we have a package to approach the FDA to have those discussions.

Thank you. The next question, how does Santhera engage in the fight against COVID?

Well, we're not currently engaged in any active research against COVID-19. In the past 1.5 years ago or so, we had when the pandemic started, we provided lonodelestat to a research group in the U.S., the Cold Spring Harbor Lab. The research that they did confirm the principal mode of action of the compound as a strong neutrophil elastase inhibitor but the expert group tested a specific hypothesis that they had in the context of COVID-19. And that context is different from the indication that we are pursuing ourselves, which is cystic fibrosis and other suppuratory diseases. So the evidence for that hypothesis that they had could not be established enough to convince their clinical experts to take it into a trial. So that program has been put on ice. And it was, as I mentioned, it was only a preclinical program that wasn't even initiated by us, but rather we were approached by Cold Spring Harbor Lab just to give them free product. Again, the drug showed that it works. The efficacy works as planned, but it wasn't efficacious against or in the context of COVID-19.

Okay. Next question, last June conference call, I noticed that you had only 121 patients in your Phase IIb study, and you did achieve statistical significance on most of your efficacy endpoints. However, the number of patients for the group steroids is small despite DMD being an orphan disease. Do you think you will need to conduct a bigger study with more patients in order to convince the FDA and the other regulatory authorities about the approvability of vamorolone? I think the answer can be short.

Yes. Yes. The answer has actually been given. We had a pre-NDA meeting with the FDA specifically to ask this question. And the FDA has confirmed that our clinical program to date is enough for, shows enough data for both safety and efficacy to suffice as a single pivotal trial filing. Do we take one more question maybe?

Yes. What is your current diluted share count? Did you draw funds under the latest Highbridge facility yet?

I'll pass that one on to Andrew.

So the shares issued are at 54 million, which are available on the SIX site. If I take all of the dilution that's underlying based on the instruments we have, the convertible bonds, loan facilities and so on, it could go up to around 70 million. Did we draw the Highbridge facility yet? On the recent facility, we have CHF 2 million of the CHF 10 million that's available to us. The next CHF 5 million is due now after we've or it's available should I say, after we've had the pre-NDA meeting. And we wait on that.

Thank you. Next question. Why Santhera expecting only CHF 100 million in additional financial needs before breakeven? If 2022 hiring for 75 U.S. sales reps have to start and then an equal number in Euro top 5 in 2022. This means CHF 50 million to CHF 60 million plus in expenses in '22 and CHF 100 million plus in '23.

So just a correction, we are not planning to hire 75 sales reps. We're planning to hire 15 to 18 sales reps. The total number of staff that we're planning to hire in the U.S. is about 60. And that can also be titrated over time. Currently, we're planning to hire those 60 in the next 60 weeks. Should cash force us to slow that down a bit, we could. Not all of those headcounts are necessary for the Day 1 of the launch. With regards to the breakeven, earlier on this call, we mentioned that we expect that to be in 2025, not in 2023. There's a lot of questions in the chat room. I don't think we have time to cover them all today, but let's take...

Let's try and pick the right topic, but I think...

A few of them have already been answered, but let's see if we can get some.

We've answered this around the share price.

Let's see if there's any other. Can you scroll down a little bit? Can you ask the question?

The next question. Regarding the current stock price, there was not much movement after the recent positive results. Do you have an idea who is selling at those levels? Existing investors like Highbridge for risk management reasons or how do you explain why people sell at those low levels after the result?

It's a good question. I think, again, we've spoken about the price earlier. And on the back of positive news, who is selling at these levels, I think, is again strange. We have seen some slight peak in short selling, particularly around the finance side. Some of the investors because of market conditions that came late into our financing process appear to have sold their position very soon after our financing, which is again disappointing that they perhaps did not fully appreciate the long-term potential here, but I've answered that question. Highbridge. I think Highbridge have been very supportive through the last 18 months or so as we've gone through a very difficult period as a company that Dario had said. They, if you look at what they do hold, their conversion prices and so on are well above current market price. So they have an interest in seeing the share price appreciate just as, very much aligned with other shareholders.

All right. We have a large number of additional questions, but we feel that a lot of them have already been answered. Maybe this one.

Maybe this one. Yes.

The next one. We own over 100,000 shares with an average price of CHF 2.50 per share. It seems that the recent positive news around vamorolone are not yet reflected in the share price. On the contrary, prices further declined even after the positive top line results. It seems to us that large investors want to accumulate more shares at a low price and that price is artificially kept low for those to be able to finance future commercialization. Can you explain where this is the case and when you would expect for the share price of the share to reflect the future potential and value of vamorolone?

So I mean, obviously, we can't really comment in detail on any of that, which partially is speculation. What we can say is that because of the higher volumes of trading in the days after our last financing round, well, first of all, let's go back to the good news we had in June where we had the 6-month pivotal trial data. The share price jumped about 50% and then plateaued and came back basically down to where it started. And I think that is a reflection of the fact that many of our investors maybe aren't quite familiar enough with the biotech space and valuations in biotech. And when they get a 50% jump in 1 day, they decide to get out without realizing that potentially there's a lot more upside in a stock like this. We have about 75% to 80% of our investor base right now is retail investors. So they're not professional biotech investors. And I think that might be a reflection of that. When we go back to the latest funding round. As Andrew mentioned, we had a time clock staring at us. We had the shares that were approved at the AGM were expiring on, I think it was the 13th of September or so. And we needed to close the financing before that date. Some of the investors that had shown an interest prior to participate in that round didn't have enough time to do their due diligence and didn't feel comfortable investing partially also because of the very negative investment atmosphere in biotech right now. The XBI index, which is an index of publicly traded biotech companies has dropped by 35% from Q1 of this year to Q4 of this year. So it's a difficult space to raise money. And many of the investors just weren't comfortable coming in to the stock. We did have new investors, however, that weren't names that we had come across before who were brought to us by the bank that was organizing the fundraising. And some of these investors may have been more opportunistic than what we had hoped and have sold stock or sold shares after they gained them because in the first couple of weeks only, we had about 12 million shares traded on the SIX, where the normal daily volume would be about 300,000 shares a day. So it seems that many of those new shareholders, not many, but some of them decided to get out of the stock relatively quickly, pushing the share price down rather than up, which was unfortunate. How it will continue from now on? I would pass it on to Andrew if he has any thoughts.

No, really. I think we've covered most of the topics there. But we hope that the market would start to appreciate the potential value.

Yes. I think we've come to a stop now. We're almost 2 hours in. We need to wrap up. I want to thank everybody for joining today and for your interest in Santhera. We believe we have a unique drug that addresses a very large unmet medical need, as I mentioned earlier, and has the potential of being a paradigm shift in the quality of life of many patient populations in boys with Duchenne muscular dystrophy in particular. We're convinced that the capital markets will come to appreciate our achievement which should ultimately be reflected in a higher market capitalization and even greater support from our investors. I would ask you to please stay tuned for updates throughout 2022 and our progress in this exciting journey. And thanks again for joining the call today and stay healthy throughout the holidays and beyond. Thanks, everybody. Bye.