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

Ladies and gentlemen, good morning or good afternoon. Welcome to the Santhera Pharmaceuticals. I'm Myra, the Chorus Call operator. [Operator Instructions] And the conference has been recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. This conference call may contain certain forward-looking statements based on current assumptions and forecasts made by Santhera Pharmaceuticals. Such statements involve certain risks, uncertainties and other factors which could cause the actual results, financial condition, performance or achievements of Santhera Pharmaceuticals to be materially different from those expressed or implied by such statements. These factors include those discussed in the comprehensive risk factor disclosure on the company's website at www.santera.com. Santhera disclaims any obligation to update any forward-looking statements. The conference may be downloaded on Santhera's website during the 2 weeks following the call. At this time, it's my pleasure to hand over to Mr. Dario Eklund, CEO. Please go ahead, sir.

Thank you, Myra. Good afternoon and good morning to those that are based in the U.S. listening in, and thanks for joining today's call on the occasion of the annual results of 2021 publication. I'm joined today by Andrew Smith, who is our CFO as well as by Dr. Shabir Hasham, who is our Chief Medical Officer. We will briefly review our last year's performance and then give you an outlook across various milestones and into 2023. I'd like to start by saying how pleased I am with the recent developments at Santhera and the prospects it has today. For a long time, we've weathered through many difficult times, and it seems that for the first time in many years, our path forward is clearly lined out. Over the past 1.5 years, we made progress on numerous fronts. We initiated the NDA submission with vamorolone in DMD to the U.S. FDA; we realigned our organization and started expanding its U.S. operations in view of near-term launch; we entered into the partnering agreements in China and implemented various measures to secure funding. Thanks to financing arrangements concluded just last week, which Andrew will highlight in more detail, the team can now devote its efforts towards advancing vamorolone towards market entry without the uncertainty of not knowing whether our cash would be sufficient to take us to the expected FDA approval. The next milestone will be the completion of the rolling NDA submission by the end of this month. And subject to being granted priority review, vamorolone could be brought to patients with DMD in the U.S. as early as in the first quarter of next year. For vamorolone, we anticipate to present compelling new data at forthcoming conferences. This data, which will be presented by academic collaborators, will highlight characteristics of vamorolone such as, for example, it's bone-sparing properties which will differentiate vamorolone compared to standard of care on the basis of safety and tolerability. This may potentially also apply to other indications, which will still have to be developed in which chronic use of steroids is standard practice and where our benefits on height and bone health can make a remarkable difference. These exciting presentations will hopefully shed more light on this most promising compound. As we are nearing the potential launch time, we are gearing up efforts to enhance the awareness of and interest in the vamorolone story, which we are convinced is a compelling proposition. I look forward to answering any of your questions in the Q&A session, and I'll hand over to Andrew now for an overview on the finances.

Thank you, Dario, and hello, everyone. A brief highlight of the financial results. Total revenue for the year was negative CHF 1.5 million, a reduction of CHF 16 million which reflected an CHF 11 million adjustment due to uncertainties around pricing and reimbursement for Raxone in France, together with the impact of supplier free goods to patients while negotiations are ongoing. We expect the recently announced positive results from the post-marketing study, LEROS, to significantly support these discussions, which adds further support to the use of Raxone in treating [ at home ]. Operating expenses decreased by 11% year-on-year to CHF 52 million. These included a CHF 6 million provision related to France reimbursement in addition to the amount recorded in revenue mentioned earlier, and also expenses reflect the refocus during the year on to vamorolone, continued development of lonodelestat as well as starting to establish a U.S.-based commercial team, in anticipation of vamorolone launch in early '23. Bottom line, the company recorded a net loss of CHF 55.5 million for the year compared to CHF 67.6 million in the same period last year. This also includes a total noncurrent provision of CHF 16.8 million related to the France pricing and reimbursement discussed earlier. We reported cash and cash equivalents of CHF 21.2 million as of the end of December 21 compared to CHF 12.4 million as of the end of December '20. The balance included CHF 14 million reserve to settle the convertible bond 1722, which matured in February '22. Recent financing has provided much needed short-term liquidity, expected to extend reach up to approval through an up to CHF 40 million facility. Given current challenging capital market conditions, it was important that such a facility was put in place to ensure funding available if other more attractive resources remained unavailable during the period to anticipated approval. In addition, we've negotiated a reduction in approval milestones of CHF 20 million by extending these to a sales-based milestone, which again helps the near-term liquidity situation. Combined, this provides approximately half the previously communicated cash requirement through to breakeven expected in late '24. The full year report for '21 with operational highlights and further details is now available on the company's website. And I'll pass back to Dario.

Thanks, Andrew. With this, we'll close the summary remarks, and we'll hand over to the operator for the Q&A session. Thank you.

[Operator Instructions] The first question is from Bob Pooler from ValuationLAB.

First of all, congratulations on the progress you made since last year. If I may, a few questions starting with vamorolone. First of all, could you explain a little bit the differentiation of vamorolone versus existing steroids? What is the major benefit of this versus the current standard of care? And then maybe also differentiate in short term, because I think you're seeing an impact already on short term versus also long-term effects. And I believe also the long-term effects, that's where you're going to have upcoming news in the scientific community. Is that correct?

Yes, Bob. Thanks for the call, for the question on the call. I think the question that you're asking is probably best placed with Shabir, who we have online here. So Shabir, do you want to take a shot at it?

Sure. Thanks for the question. So Bob, yes, we've completed the analysis now. And of course, we've indicated there's new data to be presented. But what we're seeing now is a very clear picture of our differentiation. Vamorolone, from the data we have indicates that actually we're bone sparing, right? So we know that growth stunting isn't impacted. We've looked at that in the short term and long term now, up to 2.5 years. We're not seeing any indication of growth stunting. But actually, a little bit more exciting is that we're seeing the trend that we didn't have a negative impact on bone biomarkers holding out now to 2.5 years. And next week at PPMD, we'll be actually presenting some new data looking at the prevalence of fracture and severity versus current standard of care. And I don't want to preempt that, but actually, it's very exciting. We're seeing a very clear signal that with vamorolone were bone sparing, which results in fewer and less severe fractures than the current standard of care, to the medium and long-term again analysis. In terms of some of the other areas of differentiation, generally, we're seeing that our side effect profile is less severe than prednisone, and that's from my internal comparisons. But we're also seeing that weight gain behavior is dose-dependent, which again gives us the ability for physicians to tailor treatment. We're hoping that, of course, that we've shown with 2 doses effect of 2 and 6, physicians will then have the ability to really tailor treatment to the individual. So if you take it collectively, vamorolone is unique in terms of it, it doesn't cause growth stunting. It seems to be bone sparing and I'll allow you to judge the data next week. But on top of that, because we have 2 doses, threefold apart, the 2 and 6, physicians really will have the ability to tailor treatment to the response of the individual. There are some data of course -- go ahead, please, Bob.

No, no. So basically, just on the dosing, they would start potentially done with the lower dosing. And then if there's no side effects, go up to the higher dosing? Would that be the sort of treatment paradigm?

So what we're recommending is you're starting at the 6, majority of the individuals. 6, we've shown clearly to be comparable to standard of care. So the dosing recommendation will be to start at the 6. And then if you need to down titrate, down titrate, but our data from the open-label long-term study shows that we're talking about maybe 20% of individuals who needed down titration. Either dose gives you the benefit in terms of no growth stunting and less in fact, on bone health, but that dose range gives you the advantage of trying to manage weight gain, cushing weight, which is, again, common with most steroid treatment.

Okay. And then just you announced the announcement this morning that you have the completion of the NDA submission is expected by the end of June. When do you expect to receive the important NDA acceptance of filing?

So that Bob would be typically 60 days after you complete your submission. So if we take 2 months from the end of June, we would expect that somewhere at the end of August.

Okay. And then on the EU MMA filing, that's planned for Q3. When do you expect roughly approval in the EU?

So in the EU, it will be -- in the U.S., as you probably know, we have a 6-month review period if we have a priority review starting with the acceptance of filing. And if it's a standard review, it will be 10 months. In Europe, the review is typically 12 months, and there may be potential clock stops along the way. So what we've guided towards is a second half of next year approval.

And then just -- you also mentioned that you're going to expand the commercial organization in the U.S. and EU this year. What are those plans?

So we've already started with that. We've hired the leadership team in the U.S. and are starting activities on all the items that have long lead times, mainly medical education, key open leader development, but also value and access work that is ongoing already. We're staging the hiring in a way that makes -- where we make sure that with the cash that we have, we have the critical functions manned early on. And then as we get closer to approval and launch, we will hire the remaining team. The last of the team will obviously be the field-based salespeople who will be identified and have basically contracts in hand, but they will be triggered by the approval itself. So after approval, we will bring them in-house for training and then launch a few weeks later properly. So we're not going to be having the full team on board until we have approval, and that's how we're staging it. I think once we have the acceptance of filing from the FDA, we will have derisked the submission yet another step. And I think after that end of August or maybe first days of September time point, we will then start scaling up more aggressively in the U.S. towards launch. In Europe, we will stage it also. In Europe, we're not going to be launching in all the countries at the same time. As you can imagine, we're quite dependent on the reimbursement status in the country to really put proper resources behind it. The first market to launch will be Germany, second would be U.K. and France. And then Italy and Spain will probably come a bit later. So the hiring will focus first on all the more general functions that will be shared between the European affiliates, so central medical functions, market access functions and so on, which we will start hiring soon. And then the country organizations will start hiring later in the year, starting with Germany.

Okay. And then just with the exception of the filing probably end of August, then do you expect with the product on more derisked that you would have also other regional license agreements or sooner?

It's potential. I mean we don't want to give you an update on every call -- or not you specifically, but in general, update on every call where we stand on these licensing arrangements or regional partnership arrangements. What I have said in the past is that we are having active negotiations with potential partners in Japan. Japan is much slower than China when it comes to doing deals like this. They also want to see the full filing and the acceptance of filing before they move on. So I don't think that we're going to have a deal in Japan until maybe the last quarter of this year at the earliest. And we're also now starting negotiations with partners with the smaller European markets. So the Nordics, the Austria, Switzerland and former Eastern European countries, et cetera, where we don't intend to commercialize ourselves, but we'll be commercializing through parts. So that's starting now as well.

Okay. And then just a final on Raxone. What is actually the main issue with the ongoing pricing reimbursement in France, and particularly in light of the positive LEROS Paris results supporting the long-term use of the drug? And also, when do you expect to see a successful conclusion of these pricing discussions? And then finally, if this is successful, would this lead to an adjustment of Raxone sales later this year, as you had an adjustment for last year because of the pricing issues?

Yes, I'll pass the last question on to Andrew, but I'll give you a little bit of background to the other listeners as well on the whole Raxone story in France because it's gone back a long time. So back in 2016, Santhera was denied the regular reimbursement for Raxone in France as the government there didn't see that the study data was strong enough to support reimbursement. And then 5 years later, last year in 2021, we resubmitted the Raxone pricing and reimbursement file with the newly obtained supportive data from the studies that you just mentioned, LEROS, which was a study for efficacy, and PAROS, which was a study for safety. Both of those studies had excellent results and confirmed the clinical profile that we had seen in earlier studies. So during this entire period and until August 2021, so from '16 to '21, Raxone was reimbursed under a temporary access scheme in France. It's called an ATU or post ATU, which granted the French LHON patients access to the treatment. But since Raxone was delisted from that ATU program in August 2021, for ethical reasons, we continue to provide Raxone free of charge to patients in France so that they could continue getting their treatment. And in January -- this year, in January, we then received a positive reimbursement recommendation from the French authorities, which we actually rated Raxone as a first-line therapy. I mean for those that are really into French reimbursement, we've got a moderate SMR and a category of 4 ASMR from them. And subsequent to that, the reimbursement file was then transferred to the CEPS, the CEPS, which is the pricing committee in France for final pricing negotiations. So now we are in those negotiations, and they will result in 2 things: One, we will get a reimbursed price for future sales of Raxone from these negotiations, but we will also get a reference price, which will be required for the calculation of any eventual claw back over the temporary access period. So any claw back for Raxone calculation is based on the difference between the price charged during the temporary access period, during that ATU period and the reference price that is finally been established. It's the delta between the old price and the new price, which will then define the claw back. And based on input from our French council, these negotiations may take up to 15 rounds. They may last for several months to over a year. So right now, as we speak, we're in round 3 with the CEPS. But we're making good progress with them and the discussions are in good spirits. So I'm not so worried about it. The CEPS, they understand our financial situation and they've shown a willingness to come to a mutually satisfactory solution on any eventual claw back, and also in the way the restitution payments could be made. These could be in kind, so we could provide any potential claw back in free goods. Or we could provide that from paid back from revenues that are generated under the new reimbursement price that we will get in France. So to your -- I think your second last question, when do we expect to settle this? I hope that we will sell it this year despite the fact that worst-case scenario could be up to 15 rounds. So it could take longer, but I think we'll have it done by the end of this year. And as you can see from the annual results, we've taken quite a conservative position on the potential accounting impact of any potential claw back, just so we have this in the books and kind of taken care of already. Andrew, do you want to answer this last question here?

Yes I mean on revenue later this year and it depends on what the final outcome is. I mean if there is a reference price set and we continue to supply product, then yes, there would be some revenue or potentially release of the provision that we have. Additionally, it could be that France is also transferred to Chiesi in line with the Chiesi licensing agreement, which again, future revenue would support the achievement of future milestones or add further support to that. So in one way or another, we do expect some future revenue, but it really very much depends on what that reference price or new reference price ends up being and any claw back and how it might be settled. So as Dario says, we've taken a position, which we think is a fairly conservative one right now to provide on a noncurrent basis. That is, we believe, going to be settled more in kind rather than in the cash. So that's at least putting the provision on our books right now.

Okay. And this revenue -- potential revenue that might flow in, that's not in your guidance for the funding period.

It's not.

[Operator Instructions] Your next question is from Boobalan Pachaiyappan from H.C. Wainwright.

So just to start a few questions from -- so just to start up. So you're planning to complete the rolling submission this month. So I'm just curious, what are the pending elements in the package that still needs to be done or it should be completed by end of this month?

So we've already submitted 2 trucks, proverbial trucks, if you will. The first truck of data was the preclinical package, which was -- which kicked off the rolling submission at the end of March. And then a few weeks back, we completed the CMC truck submission. And the remaining piece is now the clinical package, the CSR and the clinical package, which will go in by the end of the month, or maybe the first day of January, but -- sorry, July, so in the next 2 weeks.

Great. And secondly, you highlighted some of the commercial launch activities. So just curious, what's the size of full team you had in mind, assuming vamorolone is approved by FDA?

So the full team that we will have in place by the time we launch is in the magnitude of about 70 people. And of that team, about half of them are going to be field-based, either patient-advocacy facing, reimbursement facing, medical facing or sales-facing team members and the remainder will then be office-based.

Okay, got it. And in terms of driving vamorolone adoption, what kind of messaging is very important to drive the drug?

So I think the differentiation that Shabir spoke about earlier on the call is going to be key here. I mean the patient -- you have to put yourself in the shoes of a DMD parent or a patient where they have so many issues that they have to deal with. And one of the issues that they're dealing with is that even without steroids, these patients develop osteoporosis over time. The bone gets weaker because in order for the bone to remain strong, it needs mechanical stimulation. And with the weaker muscles that these patients have, the mechanical stimulation isn't there anymore. So they become more prone to fractures. Now the steroids that they're given to -- for the anti-inflammatory properties on the muscles, they make that situation much worse. So no pun intended, but they put that osteoporosis on steroids. And so many of the patients are not able to -- are not, first of all, willing to start on steroids because of the fears around the fractures over time, or because of the stunting of growth, which -- and the 2 are obviously interrelated. If you don't have healthy bone growth in a vertical direction, it's probably not healthy either in its architecture, which makes sense. And many patients then who are on steroids are taken off steroids when they start having these issues. Or -- and/or, I should say, during the period of when they're getting these steroids, they're given all kinds of other drugs to counteract the effects of steroids as it relates to bone health. They're given testosterone, they're given vitamin D, they're given bisphosphonates. And then all those drugs come with their own set of side effects. Bisphosphonate, for instance, these boys, many dentists refuse to treat them because they have osteonecrosis of the jaw as a side effect of the bisphosphonate that are given to them in order to counteract the osteoporosis that comes from the drug that is given to them in the form of a steroid. So if you can introduce a steroid into this market that has the same efficacy as the standard of care steroids today, but doesn't have any of the nasty side effects on bone health and also doesn't stunt the growth, plus other more benign side effects. For instance, when you look at mood and behavior, we have -- we have a lower frequency of mood and behavior issues and we have a lower intensity of mood and behavior issues seen in our clinical trial as well as compared to natural history. So it's a more benign profile. But the real differentiator is going to be the bone health component of this. And that's where I'm really, really excited about the profile that is emerging. Does that answer your question, Boobalan?

And switching gears a little bit. With respect to lonodelestat, which is going to be your next focus. So can you share some preliminary thoughts maybe with respect to trial design or the number of patients you need to demonstrate proof of concept? And how quickly you can show the proof of cost of data in Phase II trials?

So we have not yet disclosed the indication in which -- well, we have 2 indications which we're pursuing. One of them is the chronic indication of cystic fibrosis and another indication is acute, which we have not disclosed yet. And we also haven't disclosed the exact trial size of those patients. It's a Phase IIa study. But it's going to be a study where we will have proof of -- clinical proof of concept before the summer of next year.

Your next question is from Ruben [indiscernible] from [indiscernible].

It's also about lonodelestat and these 2 studies that shall start. How do you finance those studies? Is it possible that you are looking for partners to start them? And -- or yes, how should we think of that?

Both of the -- Hi Ruben, both of these studies are still relatively small studies, Phase IIa studies, which we intend currently to finance ourselves and take forward to a clinical proof of concept. We've seen in discussions with multiple potential pharma partners where we have had discussions with lonodelestat, which have been facilitated by people who have good connections in that space, that these pharma companies do want to see more clinical data than what we have right now. Respectively they would take it on, but then there would be really not very attractive financials for us to do so. So it makes a lot of sense for us to take it to the next level, show the clinical proof of concept in these 2 indications and then potentially partner them after that. I think for a company like Santhera, the size of Santhera, it would potentially make more sense to partner the chronic indications, because the chronic indications require a much larger footprint to commercialize successfully. The acute indications, which are mostly in ICUs, are something that requires a footprint much smaller and is much more affordable to launch ourselves. And the lonodelestat asset in itself, with the devices that go with it, would allow for a separation of these 2 markets, if you will. So you wouldn't have cannibalization if you partnered in the chronic indication with a pharma company, and then commercialize the acute indication yourself because the devices that are used for the acute care is very different from that used in chronic care. So also there is a potential down the line that we may partner in both acute and chronic, or just chronic. But for now, to answer your specific question, we want to take it forward ourselves to the next stage.

And can you give some sort of a price tag to those studies?

I don't think we have brought any guidance on that.

And it depends on, again, partly the indications and the study design, but we'll come back to you with that as those are finalized.

[Operator Instructions] We have a follow-up question from Bob Pooler from ValuationLAB.

Just 2 follow-ups. First of all, I think you mentioned just on the key message for vamorolone that currently, patients now on steroids, they start late or they don't start on steroids because of the development of osteoporosis, but also then because of osteoporosis, they start and earlier the treatment there. So do you expect actually to have a larger market share than the current steroids because you could potentially start earlier with vamorolone? And then if you don't have a fracture, also continue the treatment also longer than the current standard of therapies?

It's a good question, Bob. So we -- in our forecasting that we've done at peak sales, which would be towards the end of the decade, we're looking to have about a 40% share of patients on steroids, so patients on drug. And we expect about 60% of patients to be on the other 2 drugs that are in the market, one of which is already generic, which is prednisone. In terms of the market size, I believe that the market will grow due to the vamorolone introduction, not in terms -- not so much in terms of the patients because that's relatively stable. But because of the fact that the tolerability profile of vamorolone is so much better than the existing drugs that we -- we believe that not only will we be able to start patients earlier at a younger age over time, but patients will also typically take -- we expect them to be taking the drug longer than today because of the tolerability. In a typical case today, when the patient loses the ability to walk independently and end up in the wheelchair, the benefit risk of continuing to take steroids is seen as negative at that point. And many of the patients, because they can't tolerate the side effects, stop taking steroids when they end up in a wheelchair. That's typically at the age of 11, 12 or 13. But everybody knows that they would continue to benefit from taking steroids because they would -- it would still support the muscle strength in the upper limbs, in the arms, it would slow down the respiratory decline, it would slow down the decline in heart muscle. So they should be on steroids for as long as they possibly can. And we believe that with the vamorolone profile that we see today, many of these patients would continue taking steroids also after they end up in the wheelchair. And by doing so, we would expand the total market size of steroids -- patients on steroids in Duchenne.

Okay, clear. And then just one final...

Sorry, Bob, maybe I'll ask if Shabir has anything to add to that because Shabir is at the table here.

Thanks, Dario. So Bob, we've been speaking a lot to patient advocacy groups and to physicians to really understand where they see vamorolone being placed. One of the key efforts right now is to start treatment earlier, right? There's a recognition that obviously, this is an inflammatory-based disease, especially in the early stages, you want to really start steroids sooner than they currently are. Average age of diagnosis around 3 to 5, peak utilization at about 8. So it's telling you that there's some hesitancy in the market. Now in speaking to physicians, one of the key concerns they have about starting children on steroids earlier is that you start to arrest growth, right? Growth stunting. So right now, at the moment, you've got teenagers, adolescents who look like they're 10, 11, 12 in terms of stature. You can imagine if you're starting a 2-year-old child on the steroid very early, it's going to become a bigger problem. And you're starting them earlier, osteoporosis becomes an issue, right? At the moment, it's already a problem, but it will become a more amplified problem as soon as you start. So that's one area where certainly there is a value proposition for vamorolone in terms of newly diagnosed. The other area that we're seeing a lot of interest from the patient advocacy groups, but also from physicians are those who discontinued, right? They already have exposure to long-term steroids, they already have certain issues and there's a hesitancy to restart because of safety concerns. So that's another area where we feel vamorolone may be of value, bringing back patients who have discontinued or are considering to discontinue because for them, the benefit risk is different. In the older non-ambulant patient population, of course, osteoporosis is a key factor. These young men have been on steroids for such a long time, so anything that has less of a detrimental impact on skeletal health, bone may encourage them to restart or may encourage to continue for longer. And then, of course, you have those who are currently being treated, and then we know that this is a dynamic market. But after about 3, 4 years as those down titration and there's people trying to come off steroids because of concerns around safety. And one of the predominant features in this age group, again, is they're starting to have bone problems. And so we're seeing a very clear value proposition communicated to us by decision-makers, but also really importantly by parents and then those who are concerned about the current toxicity with steroids. So overall, we feel there is a very clear value proposition for vamorolone.

Yes. It sounds like you'll have, in that respect, quite a replacement and additionally new patients as well in that respect. Just one final question, if I may. It's just -- could you provide guidance on your operating expenses for this year?

Yes, Bob. As Dario mentioned earlier, partly dependent on the priority review or the process for the acceptance of filing is how aggressively we go at building the commercial organization in the U.S. preparing for launch. But in the region of 50 million to 60 million is where we'd expect.

[Operator Instructions] There are no more questions at this time.

Well, if there's no more questions, then I'll just say a few words before we wrap up this Q&A session. First of all, thanks to all of you for joining today and for your interest in Santhera. We believe that vamorolone will have a -- with vamorolone, we have a really, really attractive anti-inflammatory drug with a unique bone sparing profile, as you heard. And it has the potential to becoming a paradigm shift, changing lives of boys with [ Duchenne ], but also down the line in potentially other pediatric indications, rare and orphan disease indications. And our ambition is to make it available to patients as soon as possible. In addition to that, the financing that we'll -- that we have now will take us into the early next year and allows us to advance lonodelestat into Phase II. And I'd like to take this moment now to say a few words of thanks also to the investors who have believed in us. And I would also like to thank our employees for their passion and persistence throughout the past 2 years. It hasn't been easy. They've done a phenomenal job with a very small team. We've been advancing on many fronts and always been delivering on our promises since a couple of years back. So I hope that's recognized. So please stay tuned for updates on our progress in this exciting journey, and thanks again for everybody for joining today, and have a nice weekend.

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