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

Ladies and gentlemen, welcome to the Santhera Pharmaceuticals 2020 Financial Results and Corporate Update Conference Call. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. This conference call may contain certain forward-looking statements based on the 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 and achievement 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 of the company's website at www.sandera.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.

Thank you, Sandra. Good afternoon and good morning, everyone. Thanks for joining today's call, where we will share details from our 2022 full year performance and give you an outlook on upcoming milestones for the rest of 2023 before answering your questions. Here with me today are Andrew Smith, our CFO; and Dr. Shabir Hasham, who's our Chief Medical Officer. Let me start with an overview of what Santhera has achieved in 2022 and since the start of 2023. Accomplishing 3 parallel regulatory filings in the U.S. and Europe, that's the EU and the U.K., were standout achievements for the Santhera team and the results of many years of work and excellent study results. Our new drug application was accepted by the FDA in January this year. And a few days ago, we announced the successful completion of the mid-cycle review meeting with the FDA. Leading up to that, we had inspections at various sites, including our CMO, our contract manufacturing organization, select clinical trial sites as well as a joint EMA-FDA trial sponsor audit at ReveraGen. The FDA reaffirmed its earlier decision not to request an Advisory Committee Meeting. With an expected PDUFA date confirmed for October 26, 2023, and subject to approval, we anticipate vamorolone becoming available to patients in the U.S. in the final quarter of this year. In Europe, the marketing authorization application was accepted by the European Medicines Agency in October last year. The review process is on track with day 120 questions currently being answered. Subject to a positive recommendation by the CHMP, vamorolone could be made available in the first EU countries before the end of this year with a continued rollout throughout 2024. The MAA submission to the U.K. MHRA earlier this year adds to the regulatory filings, and we estimate a similar time lines as we estimate for the EU. We look forward to working closely with regulators for the further advancement of this treatment towards approval and availability to patients. Assuming everything proceeds to plan, vamorolone will be the first product ever to be approved for the treatment of DMD in both territories in the U.S. and in Europe. We are really excited about bringing vamorolone to patients as we believe that its differentiated profile with regards to bone health can potentially represent a valuable alternative to the standard of care in DMD and address high medical needs of patients. The current focus in treatment of DMD with steroids is on preserving muscle function at the cost of bones. Our mission is to focus on preserving better and healthier muscles and bones in addition to other benefits we believe makes vamorolone better suited for chronic use. Clinical observations published last year indicated vamorolone treatment which show, one, no deleterious effects on bone metabolism and the potential to reduce vertebral fractures; two, no depression of bone biomarkers and recovery of bone biomarkers were depressed -- that were depressed because of prednisone treatment after switching to vamorolone; three, fewer and less severe spinal fractures after long-term treatment with vamorolone compared to an external control study; and importantly, number four, no growth stunting in these children that are still growing. This is also the right time to thank ReveraGen and our many partners and supporters at the clinical trial sites in manufacturing and the supply chain as well as our partners in the patient advocacy community who have supported us on the path towards approval. No lesser thanks goes to our employees who worked tirelessly to get vamorolone to patients in need of better therapeutic options. We believe the rare disease space lends itself to a targeted and focused commercial approach. We've continued to build the relevant commercial functions in the U.S. and began building country-specific commercial activities in major European markets. We have secured funding that will provide us with liquidity through the October 2023 PDUFA date, but we'll need to raise additional funds to ensure successful market entries. In addition, we recently formed a dedicated Strategy Committee to evaluate all options for the company, and its primary focus is bringing vamorolone to patients as quickly and as effectively as possible and assessing the product's potential in additional indications. With regards to Raxone, we were pleased to finally have come to an agreement with the French authorities on the pricing and reimbursement there. This has allowed us to resume sales of Raxone in France and, at least as important, reopens potential avenues for the product. In this context, we will especially evaluate our options with regards to out-licensing remaining rights in North America and addressing the approvability in the U.S. With this, let me hand over to Andrew for comments on the financial results and our financing activities. Andrew, please?

Thank you, Dario, and hello, everyone. Today, as you saw, we released preliminary unaudited 2022 annual results with the full P&L balance sheet and cash flow statement and a comprehensive description of our business. The audit of the results will be completed in due course and will allow us to publish the full annual report by the end of May. I'll start with comments on the financial performance followed by a status update on our liquidity and financing activities. Let me first turn to the full year 2022 results with amounts referred to in Swiss francs unless otherwise stated. Revenue amounted to CHF 7.5 million. This is after deducting CHF 5.6 million related to the now-resolved reimbursement negotiations in France. You will recall that we have voluntary supplied Raxone to patients for free since August 2021, and we've done this out of the goodwill to patients who have no other therapeutic alternative. Since this month, April '23, sales have resumed following the French repricing and reimbursement authorities agreement. As of December 31, we have accrued a total of CHF 25 million in noncurrent liabilities that will be settled from future France Raxone revenue with 30% being repaid in mid-2024 and the balance in mid-'25. Also included in the top line revenue is CHF 11 million from out-licensing transactions largely reflecting an upfront payment from Sperogenix related to the vamorolone license in China. Operating expenses amounted to CHF 56 million compared to CHF 52 million last year. The current year included a CHF 6 million intangible impairment related to the paused lonodelestat program. Development expenses, excluding intangible impairment mentioned previously, were CHF 25 million compared to CHF 30 million in 2021 as costs focused on the regulatory phase. Marketing and sales in 2022 included CHF 2.3 million additional provision in respect to France reimbursement compared to CHF 6.1 million in 2021. Cost, excluding this, increased from CHF 3.2 million in '21 to CHF 8.5 million in 2022, reflecting the increased pre-commercialization activities in anticipation of vamorolone approval. G&A expenses rose by 14% from CHF 12.7 million to CHF 14.6 million primarily related to market readiness preparations for vamorolone in the U.S. The operating loss for the year of CHF 52 million includes CHF 14 million intangible impairment and additional France reimbursement provision, as discussed earlier, compared to a loss of CHF 57 million in '21, which also included CHF 14 million in provision for France reimbursement. Excluding these items, operating loss was CHF 38 million in 2022 compared to CHF 43 million in 2021. The net financial expense amounted to CHF 17.7 million compared to a net financial income of CHF 22.2 million last year. And the difference is in most part related to a nonrecurring gain on the 2017/22 Bond exchange occurring in '21. Overall, the company recorded a net loss of CHF 70.1 million compared to a net loss of CHF 55.5 million last year. Cash outflows from operating activities in 2022 decreased by 20% year-on-year and amounted to CHF 29.7 million compared to CHF 37.4 million in '21. In the same period, cash inflows from financing activities were CHF 13.9 million compared with CHF 46 million last year. In summary, this resulted in a decreased cash and cash equivalents by CHF 19.9 million from CHF 21.2 million at the start of the year to CHF 1.4 million at the end. With this, let me move on to liquidity and financing. Throughout the year and since, although liquidity continues to be limited, operational progress continues to be made. And however, as Dario mentioned, further liquidity will still be required in '23 to support the launch of vamorolone. The recent share swap with Idorsia combined with the recent financing of up to CHF 22 million with Highbridge helps provide us with liquidity through the October '23 PDUFA date and should allow us to progress vamorolone towards market entry. With the remaining available treasury shares, approved capital and in addition to other nonequity funding sources, we continue to seek and evaluate additional funding opportunities to support the launch of vamorolone. We will, of course, provide additional updates on this progress at the appropriate time. This concludes my summary of the detailed information published in our press release today, and I thank you for your attention. I'll now hand back to Dario. Dario, please.

Thanks, Andrew. So during much of the remainder of the year, we'll be working towards getting vamorolone approved and further preparing the ground for market entry, which includes generating additional awareness about the unmet need among health care professionals, gearing up patient support programs and increasing our dialogue with payers to support seamless market access activities upon launch. This we will do both in the U.S. and in Europe. And with this, I close on our summary remarks and hand over to the operator for the Q&A session.

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

Congratulations on the progress you've made particularly for vamorolone but also Raxone. First, starting with some question on vamorolone, if I may. How would you describe the feedback you received from the vamorolone reviews from the FDA and CHMP so far?

Thanks for the question, Bob, and thanks for your ongoing interest. I think that specific question I'd like to pass to Shabir because he's very close to the regulatory interactions on a day-to-day basis. Shabir, do you want to take that?

Yes, will do. Thanks, Dario. Thanks, Bob. Bob, I'm very happy with where we are with both the FDA and EMA at this stage of the review. As we communicated a few days ago, the FDA confirmed no significant issues at the mid-cycle meeting, which is great news, and I'm very pleased about that. The EMA day 120 responses are well on track for submission on time. And there was no request for new clinical data, so again, I'm very happy with that. So all in all, very confident that the review is progressing in a good direction for us.

The next question comes from Dan Akschuti from Pareto Securities.

Congrats on the progress that you made and just regarding your lead asset now, you will soon, hopefully, have it approved. Could you share some insights on the commercial strategy in the U.S. and also in Europe? And the second question would be with regards to financing, what's your estimate that you would need to get to profitability?

Sure. Thanks for the question. I'll take the first one on the commercial strategy, and then I'll pass it on to Andrew for the financing question. The commercial strategy is to launch ourselves in the U.S. and in the big 5 markets in Europe. And we've recently added Benelux, so it's basically the big 5 plus Benelux in Europe. And then find a partner for the smaller European markets as well as partnering for the larger markets in Asia and elsewhere. The largest market of these that -- where we're planning to commercialize ourselves is obviously the U.S., where we're already quite advanced in our preparations there. We have an office outside of Boston in Burlington with a team that is working on a lot of the longer-lead-time activities as it pertains to payer education, key opinion leader development, setting up patient advocacy and patient support programs. The U.S. organization will -- at peak will be about -- or at launch will be about 50 to 60 people. We expect about 1/3 of those to be field-based. The key account managers, the sales reps, if you will, will be probably in the mid-teens in terms of number. We'll have 5 to 6 MSLs, and then we'll have some field-based patient access support staff in the U.S. In Europe, we will have a staged rollout. This is mainly for market access purposes, pricing purposes, where we will start with our rollout in Germany, U.K. and France, probably Benelux also in that cluster. And then Italy and Spain will be activated a bit later just because the reimbursement negotiations in those markets take a little bit longer. The organization that we're building in Europe will be roughly the same size as the U.S. organization, so in the magnitude of 50 to 60 people. Of those, 40 to 50 will be based in the affiliates that we're having in these countries, and about 25 of those will be field-based MSLs, market access reps and key account managers. We'll have another 12 to 15 people in our European virtual service hub. And as I said, in Europe, we're going to be building this in a stage-wise fashion. So we won't be jumping to 60 people from one day to another. We'll start with Germany, U.K. and France. In terms of costs for this organization, because I think that will probably be a follow-up question, we're expecting the cost of the organization on the commercial side, so the U.S. organization as well as the European affiliates and this virtual hub, to be about CHF 35 million to CHF 40 million a year on a running basis. And of that, about 2/3 will be falling on the U.S. So I hope that answers your question.

It did.

The other question, Dan, was financing to profitability. We talked around breakeven. It's around the CHF 75 million, maybe slightly more, depending on timing and take-up of launch. And that also includes around a CHF 26 million milestone that is due on approval. And that -- yes, the cash flow that Andrew referred to also includes some income that we will have from our partnering in China, where there are some milestones due upon U.S. approval, upon Chinese filing and as well as upon Chinese approval.

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

Just a few questions more, starting on vamorolone. Do you expect earlier sales in France and the U.K. due to the early access programs that you want to start?

Yes. I mean, the answer is yes and no. I mean, the 2 access programs that we are currently initiating are in the U.K. and France. In the U.K., the so-called EAMS program won't generate any revenue, but it's important program -- it's an important program to allow early access to patients from these expert centers that we have there and to build on the data that we have. We'll be collecting data in these early access programs. The EAMS pre-submission meeting with the MHRA in the U.K. is now scheduled for the 12th of May, and so the first patient in this program we're expecting to have somewhere in the late summer. As it pertains to France, we will be able to generate revenue in the early access program in France. The price will then be reassessed when the final reimbursement price is agreed. So you're familiar with how we worked with Puldysa. So it's similar. The French AAP program submission is now already under evaluation by the HAS or the ANSM, which is the French health authorities. And we're expecting the first patient in the program this summer, hopefully before the French will disappear for their August summer vacation. But we'll do our best to get it started before that.

Yes. Okay. Then on your licensing agreement, how are you progressing for vamorolone outside your target EU markets which you mentioned, the smaller market in EU, for instance, and also for other large steroid indications? And to follow on that, what filing opportunities do you see for other portfolio assets?

So in all of these other markets, with the exception maybe of Japan, where we have been more active in partnering or partner seeking, we're still relatively in early discussions. I mean, we have had some first contact with companies who are interested in the European smaller market rights. We're also in discussions for some Middle Eastern markets. But really the focus is on Japan in the immediate future but eventually also other Asian markets outside of China and Japan, like Korea for instance. For other indications, we've had initial discussions with various parties as well as we've done a lot of internal evaluation and prioritization of potential indications, even done some early clinical trial designs for these indications. But I don't expect any deal with any third parties to materialize before we have our approval in the first indication, which is Duchenne, obviously. Once we have that first approval, I think it's -- these discussions with third parties are going to accelerate rather quickly. Sorry, was there another part to your -- was there something else to your question that I forgot to answer?

Maybe filing opportunities for other portfolio assets like -- well, just jumping on to Raxone, your plans for the U.S. market. Also, now with the pricing reimbursement included in France, do you consider also maybe selling your French products to Chiesi?

Oh, yes. Yes, so with regards to Raxone, obviously, that's an interesting dynamic in the market now because we were the only LHON drug approved in Europe and would have been the only LHON drug approved in the U.S. if we would have submitted earlier. The only competitor that we had on the horizon was a drug called Lumevoq, a gene therapy for LHON which has now been withdrawn from the regulatory authorities. So it doesn't look like it's going to be making it to market anytime soon, if at all. So the whole opportunity has become a lot more attractive certainly in France, which is the largest market in Europe. So now that we have the rights in France and we have a new approved reimbursement pricing, can start selling, then that market is actually quite lucrative. Obviously, we will see whether Chiesi is willing to take that on. That market responsibility obviously comes with also the obligation to cover the clawback payments that we have mentioned in earlier press releases. So they go hand-in-hand. But I'm particularly excited about the U.S. because, since last year, we now have Phase IV data from the 2 studies that we conducted after the product was approved in Europe. The first study was called LEROS, and the other one was called PAROS. So they were studies for efficacy and safety, respectively. And when I combine those 2 studies with the data that we already had to get European approval, I think there's a substantial package now to approach the FDA with this to see in a pre-NDA meeting whether this would be approvable in the U.S. And if so, we would have the orphan exclusivity for 7 years in the U.S. Now we -- the problem really and the only problem we have with that is just internal bandwidth. And given that we are now have just admitted to the EMA, to the FDA and the U.K., and we're getting questions from those authorities which we need to respond to, our team is just very stretched. And while we were preparing the pre-NDA meeting with the FDA, that's put on hold now. And as soon as we have a little bit more bandwidth with the current vamorolone submissions, we're going to reinitiate those discussions and get on the calendar of the FDA. And the intent then is to post the FDA feedback to then seek a partner in the U.S. This partner may then also be interested in the French rights, but that remains to be seen.

Okay. Okay. Then just back to vamorolone, how is Sperogenix progressing? When do you expect first proofs in the Greater China region? And will these also trigger milestones?

Yes, it's progressing well. Our interactions with the NMPA, which is the National Medical Products Administration, it was formerly called the CFDA, the Chinese FDA. They've started -- we've started to talk about them with the regulatory path, and we're on track there. This includes discussions about a bridging pharmacokinetic study in a Chinese population. If all goes well and with our partners, Sperogenix is very experienced in this space. We could be filing in 2024 with an approval in early 2025. And we still expect milestones, as I mentioned earlier, from that partnership. So the next milestone would be when we get the U.S. FDA approval. And the following milestones there would be one milestone on China filing with the NMPA. And the last milestone there would be -- the last regulatory milestone, I should say, would be the Chinese approval there. So between now and early 2025, hopefully, we'll see the progress and see those milestones as well.

Okay. And then just one final on Becker muscular dystrophy, the trial, how is that going? When do you expect results? And how much would this expand the market opportunities for vamorolone?

Shabir, do you want to take that?

Yes, I can take the first part. So the study is recruiting well, but we've got one site up and running in the U.S., and we're opening up another site in Italy as we planned. We expected last patient, last visit somewhere in August 2024, and so results soon after that. Dario, do you want to talk to the market opportunity or I can say a few words?

Yes, the market opportunity, we have some preliminary numbers here. Obviously, the BMD market is -- currently, the number of patients is smaller than the number of DMD patients. However, they're larger, they're older, so with a drug that is dosed milligrams per kilogram, the dose per patient is higher than it is on average in DMD. So the market opportunity, you can compare apples-and-apples in terms of number of patients. The other dynamic in the BMD market is that these patients currently aren't on any steroid, whereas in Duchenne, obviously, 60% of the population is taking 1 of the 2 market in steroids at any given time. In the BMD population, they're typically not on steroids. And the reason why they're not on steroids is because of the tolerability profile and the side effects of steroids. The BMD disease is slightly more benign than DMD. And the trade-offs, the benefit-risk consideration there with current steroids is that they don't want to be on steroids due to the issues that we've mentioned earlier, stunted growth, osteoporosis, bone fragility, mood and behavioral disorders, et cetera. So we see an opportunity there clearly for the vamorolone profile. And our rough internal estimation is that it would add about 50% to the market opportunity. So when you take the DMD total peak revenue, then BMD would add about 50% to that.

Okay. Good luck with the 3 filings for approval.

Thanks, Bob. Appreciate it.

[Operator Instructions] Gentlemen, there are no more questions from the phone.

Right. I guess I'll make some final remarks then before I close the session. Thanks, everybody, for joining today and your interest in Santhera. We believe that vamorolone -- with vamorolone , we have an anti-inflammatory drug with a unique bone-sparing profile. It has the potential of changing the lives of boys with DMD and down the line potentially in other pediatric indications. And our ambition is to make it available to patients as soon as possible. The remainder of this year will be truly exciting for Santhera as we approach the finish line of delivering a novel treatment to meet the needs of patients living with DMD. Thanks again for joining today, and I look forward to updating you all soon.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.