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

Ladies and gentlemen, welcome to the new financing conference call. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. This conference call may contain forward-looking statements based on the current assumption on the forecast 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 on the implied by such statements. These factors include those discussed on the comprehensive risk factor disclosure on the company's website at www.santhera.com. Santhera disclaim any obligation to update any forward-looking statements. The conference call may be downloaded on Santhera's website during the next 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, operator, and good afternoon, everybody, and good morning for those that are joining us from the U.S. today. We're going to have a different format today than normally. Normally, I would start with my prepared remarks, and Andrew would follow with his. And then we would take questions from the audience. We've decided to structure it slightly differently today where we have partnered up with Octavian, which is a Swiss equity broker. And we will have a moderated Q&A session, which is going to be chaired by Joris Zimmermann, who is an equity research analyst covering Santhera at Octavian. But before we move into that session and the subsequent Q&A for those that are on the line, we -- I just wanted to make a couple of unprepared remarks, so to speak, where I just summarize the -- basically summarize the last 24 hours. We announced yesterday morning before market opened that we had secured financing of up to CHF 69 million in two different packages, so to speak. The first one would be a royalty monetization or is the royalty monetization and the second is a term loan. And I just wanted to give you a little bit of background on those. And then we also had an Annual Shareholder Meeting yesterday, which had a very lively Q&A and kind of triggered our idea of having this structured -- or unstructured moderated Q&A session today to also answer any questions you may have about the -- either the financing itself that we've just announced or the business in general. So going back to the financing that was announced, let's start with the royalty monetization. Our partner there is a provider called R-Bridge. They are part of the larger CBC Group, which is the largest health care investor in Asia. They're based in Singapore. They have agreed to acquire with an upfront of $30 million and an $8 million subsequent payment tied to revenue thresholds, our royalties in the U.S. and China to 75%. That is the royalties -- the net royalties that would be due to Santhera from the sales of vamorolone or AGAMREE in the U.S. with Catalyst and with Sperogenix in China. 75% of that royalty would be reverting back to these investors until a certain cap has been reached. In the meantime, we would still get the 25% of the royalty payments from those two partners. And after the cap is reached, we would revert -- it would revert to us, getting the full 100% of those royalties again. So a total of USD 38 million, USD 30 million plus USD 8 million from that deal. The second deal that we did in parallel is with Highbridge Capital, which is part of the JPMorgan Group for CHF 35 million. That's a CHF 35 million upfront, and it's a pretty straightforward simple term loan, where for the first 24 months, over the next 2 years, we would only pay interest on that loan. Amortizations would start in the third year, so in 2027, with quarterly amortizations in the value of 15%, 1-5, per annum -- sorry, not per annum, 15% of total principal, I apologize, to be paid back per annum for that. The full maturity of that term loan would be at the end of the either fourth year, which would be in year 2028, where we're expecting to be significantly profitable. As part of the agreement with Highbridge Capital, we have also agreed that their private bonds, there's two components to those private bonds. But those private bonds would be resolved in the following manner. There is a private bond in the value of roughly CHF 7 million, which has a strike price of CHF 10. So it's more or less at the money. That we have agreed that, that would be postponed by 1 year. The maturity of that will be postponed by 1 year, which frees up liquidity for us if we otherwise would have had to pay that debt back. And the other piece of the private bond held with them, which is around CHF 4 million at a strike price of CHF 5 is well in the money, and Highbridge has agreed to convert that in the near future, as it would have otherwise happened in any case. So those were the two financing transactions that we did yesterday in parallel. Obviously, we'll be very happy to answer any more detailed questions or clarifications around that. But I would take this opportunity now to hand over the reins of the call to Joris Zimmermann, who will be moderating the Q&A. Joris?

Thank you, Dario. Thank you for setting the scene and already sharing some of the details of the funding deals that you've announced just recently. So now we will start with the moderated Q&A session, where we will discuss the rationale of the two funding deals and also what they mean for Santhera in more detail. And as mentioned before, we will then also open up for questions from the audience. And to kick it off, maybe we can start with the rationale behind the two deals. So the royalty monetization with R-Bridge and the new term loan with Highbridge. And Dario, Andrew, can you share with us why you decided to enter into those deals? Why you did it now and probably also why you preferred royalty monetization in that over, for example, equity-linked measures?

Andrew, do you want to take that or shall I?

Do you want to start?

I can start, yes. So I'll start with the last point that you made -- or on the last part of your question, which is why didn't we not do it with equity-linked measures. At this point in time, we believe that the company is significantly undervalued in terms of its stock price relative to where we should be based on fundamentals. And we didn't feel like it was in the best interest of shareholders, obviously, we are shareholders ourselves, to dilute the company with an equity investment at this point. At the same time, we are bullish ourselves. And so is the market, or at least investors are, about the prospects of AGAMREE, both in Europe and in the U.S. And therefore, we were able to attract very good terms for a royalty fine -- royalty monetization of part of the sales or the royalties that we would be getting from Catalyst in the U.S. Since the -- this was a competitive process and the partner that we went with, which is R-Bridge/CBC, happened to be a health care investor in Asia, knowing the Asian market very well and also being familiar with Sperogenix in China, we then decided to add some royalty component from China to the deal and packaged it that way. The terms are very attractive by any benchmark, so we're very happy about that piece. The other piece was the term loan, where we are very long partners with Highbridge. They have been a very, very reliable investor to us. Sometimes, the money has been very expensive, but it has been under very difficult circumstances where we didn't have much choice. And over the years, it's been dilutive. We are aware of that. But Highbridge has always behaved very well, has been a very good partner to us. And they were also part of a competitive process for this term loan and were able to offer us the best deal in terms of cost per capital. But in addition to that, we got a solution for the CHF 11 million of privately held bond that they have, which was kind of icing on the cake for us, if you will. Andrew, any further comments to that?

Yes. I think the mix is important here with a royalty and debt. The royalty effectively matching those territories that we've licensed out and our royalty income. So that's a netting of a stream, if you will, and debt funding of essentially our direct markets or the residual business where there are still -- at the early stages, we're just getting through the launch. So it landed itself to that. We also said previously that we would try to limit the shareholder dilution, which is what we've done through this process. So it gives us a good balance. It brings some diversity as well to the cap table with a new investor coming in as well.

I would also add there that the structure that we have with the term loan, where we only pay interest for the first two years, nicely matches up with our path to profitability. And we've communicated before that we plan to become profitable on a sustainable basis in the first half of '26. And if you look at the term loan terms, the first 24 months from now on are interest only, and the amortizations only start in year 3 with 15%, 1-5, of the principal. So that nicely lines up with our ability to also pay that back without any pain from our perspective.

Okay. I would assume royalty monetization is probably still a bit less familiar concept to many. And basically, as you explained, in exchange for funds, you pay 75% of the royalties you received for -- from the AGAMREE sales in U.S. and China to R-Bridge until a cap is reached. And this cap, it has not been disclosed, but can you probably give us still kind of an indication of the payback we should assume here? And in that context also, can you remind us of the royalty rates that your collaboration with the Catalyst and Sperogenix deals encompasses?

Yes. So I'll start with the first question on the cap. We have not disclosed the cap, but I can help your audience to picture this in their head a little bit. Typically, in the biotech industry, there are multiple factors that play into what that cap looks like in terms of multiples. Obviously, if you're preapproval, the multiple will be higher. If you're post approval, the risk of your multiple will be slightly lower. But if you're still a company way -- far away from profitability, which we are not, but a couple of years is still a period of time, the risk is considered higher than if you're a profitable company selling those royalties today, which also happens a lot. But to give you a range. Typically, these deals are in the 2 to 3x of the original principal in terms of payback cap. I've seen deals that go well beyond 3, but 2 to 3 is typically what you see, whether you're a profitable company or not. And I can confirm that we are at the lower end of that 2 to 3 range with our cap.

If I can add as well. The royalty piece has several elements to it. So we -- as you know, we have royalties payable through to ReveraGen and Idorsia. And what we have done is we sold the net. So Catalyst disclosed in their recent filings as well that there's a royalty payable to Santhera between 5% to 11%. And it's that part that we've sold 75% of. So some of that will still be retained by us. The remainder goes to R-Bridge as part of the funding. And a similar level applies in -- on China with Sperogenix also. So it's the 75% of the net cash that would have otherwise remained with Santhera that is going back.

So Joris, that answered your -- already the other question that you have, which was the royalty rate. So it starts at 5% for the first 2 years. And then it goes up to 7%, 9%, 11%, with increasing revenue in outer years. We have not disclosed the net revenues from Sperogenix, but they're roughly in that same ballpark.

Perfect. And maybe just on a very quick follow-up question on this deal. You mentioned it includes both U.S. and China sales. Do you have a rough idea of the split of these two regions? So how much will each region contribute to the royalties you pay back to R-Bridge?

That's something that is very difficult to estimate at this point because we really don't -- we're not able to extrapolate China sales at this point in time. We have, in China, just started -- paid early access program together with Sperogenix. There's a pilot program on the island of Hainan in Southern China. We are considering -- or have applied for an early access program also in Shanghai to expand that early access program. But we just started that a few weeks ago, so it's too early to say what the penetration or uptake from those early access programs could look like. And as I said on a previous call, we have submitted our regulatory approval package in China to the Chinese regulators. We have received priority review from them, and we expect to have an approval and the launch in -- a formal launch in China in the first quarter of next year, quarter 1 of '25. Once we have the product approved in China and we have more patient penetration data, we can start extrapolating and modeling what the ratio would be between Chinese royalties versus U.S. royalties, but that's not possible at this time. I just want to add though that China, obviously, every elementary school child knows that China is a large country with a lot of people. But just the proportions of the Duchenne patients that are there, the U.S. has somewhere in the range of 12,000 to 13,000 patients. The large 5 European markets have roughly the same amount of patients, 13 -- plus/minus 13,000 patients. In China, we're having 7-0, 70,000 patients. So given that the price will be lower in China, it could be as low as the 10th of the U.S., for instance, the volume will still be quite substantial in China. So it's not a market to be neglected, despite the lower price.

Well understood. Let's stay with the announced funding deals for just a little longer. You've also entered into that agreement with Highbridge for the new senior secured term loan of CHF 35 million. And the interest, as you've mentioned before, is based on 3-month SARON with a floor of 2%, plus an additional 7-- 9.75%, excuse me. That might sound rather expensive. So can you put this a bit into perspective for us?

Yes. I think in terms of our historical funding, that interest is a little bit lower or similar level. We've obviously also seen rise in interest rates more globally over the last year or so. In looking at benchmark where this is, it's the market rates.

Yes. Benchmarks for these types of loans, the margins are typically ranging between 6% and 12% on top of the interbank rate. So we're looking at 9.75% here. Now the range of 6% to 12% includes companies that are well funded, profitable, have hundreds of millions or billions of profits, and they would typically be at the lower end of that 6% to 12% margin rate. Our 9.75% falls nicely into the range of companies that are biotech companies close to approval or recently approved ones, which typically are from between 9% and 12% margin. And we've done the benchmarking on this. So the 9.75%, we think, is a very reasonable price for this loan, particularly given the structure of it where we don't amortize anything over the first 24 months and only pay interest. Getting that interest rate is actually not a bad deal.

Yes.

So my next question would be on the breakeven. And as you have already communicated with the full year '23 numbers, you reiterate that you will reach cash flow breakeven in the first half of 2026. With the announced deals, we understand that your royalty income will be reduced at least temporarily. At the same time, you have some additional costs to finance the new debt. Can you share your key assumptions as to why you still believe to reach cash flow breakeven in H1 '26? And in that context, maybe also comment on the expected cash burn for this year and the total cost base over the coming years.

Yes. This is Andrew again. Previously, when we talked about that on the annual results, we said that we had a cash gap -- funding gap of operational and bond of around 55 million plus/minus. This financing covers that gap plus a little bit more. Yes, there is -- there are some repayment elements to that, but the cash generated by the business through the early part of '26 should remain positive. In terms of the -- and the cash balance, it shouldn't require us to seek additional funding on the business as we currently forecasted. In terms of the long-range OpEx, again, we spoke about that previously, being a roundabout, the 50 million to 60 million long term, and that includes some R&D activities with new indication work, the expansion of the marketing to support all the launches and the infrastructure to support all around that. In terms of the guidance around the CHF 24 million, we'd see a similar level really in spend that we saw in '23. Remember in '23, we had marketing to support the U.S., which was then switched over to the license. And effectively, it's been substituted now in Europe. We also had R&D activity with extended regulatory and some extension studies and so on, which will -- effectively, that spend level will continue, but with additional long-term extension data. So our spend for '24 is reasonably consistent with items that were being dropped off, being supplemented by new activities coming in. We only really then start to see a growth in the expenditure in '25.

So just to clarify a little bit because that was maybe not so easy to understand. The base fully loaded cost that we have right now, if we assume that we had our entire commercial team on the ground in Spain, Italy, France, U.K. and Germany, which we don't have yet, but if we had the -- all the OpEx that we have today at headquarters as well as the fully funded commercial team without additional clinical trials for new indications, but with the clinical trials for the long-term extension, which is the GUARDIAN study that Shabir can speak more about in a second, that runway is about -- that run rate is about CHF 55 million to CHF 60 million a year. If we -- if and when we start developing additional indications, which we hope to communicate in Q4 of this year, these would be conducted together with Catalyst and co-shared in terms of costs with Catalyst. We're expecting those incremental costs to be between CHF 5 million and CHF 15 million a year. So if you take the CHF 50 million to CHF 60 million of base costs and you add CHF 5 million to CHF 15 million a year to that, you're coming into the plus/minus, an average of plus/minus CHF 70 million a year range. Now contrast that to the 2028 revenue forecast that we have communicated for our own Santhera commercialization countries only of CHF 150 million or more. This is the revenue we plan to generate in the Big 5, plus Austria, Switzerland and Benelux. The CHF 150 million revenue does not include revenues from our Europe -- smaller European partner countries that we will hopefully announce in the next weeks or maybe months. It does not include the milestone payments coming from licensing partners such as Catalysts, which could be up to CHF 105 million based on revenues. We also have milestone payments coming from Sperogenix, which would add to that. And we have not yet signed licensing or distribution partnerships for some of the larger markets outside of Europe, which would also flow into our bottom line, so to speak, because those would come with no additional cost or very little additional cost from our side. So you can start modeling the 2028 profitability based on that CHF 150 million revenue that we generate ourselves, plus the income coming from other areas that don't have costs coming with them and subtract the CHF 70 million or so per annum costs from that, then you start seeing what the profitability would look like in the 2028 time frame.

Okay. That was a very detailed response already, I think, partially answering some of my questions that I still had in mind. But I think it's also perfect leeway into the more commercial strategic priority. So what's your plan? You said according to the press release that you used the proceeds of the announced funding -- new funding to repay the CHF 13.5 million public convertible due in August, but then also to fund strategic priorities and operations. So in that regard, maybe you can also allude a bit to the key priorities that you have set for Santhera for this and then maybe also '25, '26 year. Where do you plan to invest those remaining proceeds and use the opportunity to update us a bit on the strategy and progress in the main geographies? And here, I think of the European big 5 markets where you plan to commercialize yourself, to my understanding, but also then the other, let's say, smaller European countries, what's your progress there? And then just other regions like Japan, for example, what your current priorities there would be?

Yes. So just to reiterate, we've said that we are going to be commercializing in the large 5 in Europe. We have decided to keep an organization called D-A-CH, so Germany, Austria, Switzerland as one. So those big 5 would include Austria and Switzerland. And then we will keep Benelux ourselves as well, which is a bit opportunistic, but we know our Chief Commercial Officer is based in Holland. He knows the Duchenne community there very well, and we have been present in Holland for a long time in the Duchenne community. So we said that's not worth partnering and giving away margin. For the rest of Europe, which is the Nordics, Eastern Europe -- or former Eastern Europe as well as Greece, Malta, Cyprus, Portugal and Ireland, we are now in late stages of discussions with distribution partners for those markets, and we'll announce that very soon. Those arrangements are typically structured in a way where, unlike licensing arrangements where you get a big upfront and then pay royalties and milestones, distribution arrangements are structured where the partner that you're distributing -- who's distributing your drug typically sells the drug in the market, reports their net sales, and then we charge them typically 50% to 70%, 5-0 to 7-0, depending on the contract structure and the cost sharing of that sale in the market. So that is a significant margin for us in those smaller markets that flows straight into our bottom line without much cost from our side. Of course, we have to support those partners with marketing assistance and market access, argumentation support and so on. But it's not a very substantial cost from our side, but a very lucrative contribution to our bottom line. Now looking outside of Europe, we are also in late-stage discussions with our Israeli distributor, and we have had a lot of incoming inquiries from markets all over the world, Australia, New Zealand, the Arabian Peninsula and GCC markets, Turkey, and very prominently also Latin America with Brazil as the largest market there. Brazil is actually quite interesting because it's a market with 200 million inhabitants. They have a centralized rare and orphan disease program. So you have centralized reimbursement. The local regulatory authority, Anvisa, is very sophisticated. They would typically review a file like ours in about 8 months after we've had our pre-NDA meeting with them. And we have a lot of partners from Brazil specifically who would like to take this drug forward in Brazil and Latin America, which could be quite interesting. Those arrangements in Latin America could be licensing arrangements, similar to Catalyst and Sperogenix, rather than the distribution agreement like we've seen in the smaller markets or we'll see in smaller markets in Europe. As it pertains to Japan, because I get this question a lot, I also got the question yesterday at the Annual Shareholder Meeting, Japan for rare and orphan disease drugs, despite being the third largest pharma market in the world, is not a very attractive market from a pricing point of view. The ability to get premium pricing similar to Europe or U.S. for rare and orphan disease drugs in Japan is very difficult. And so not only is Japan a market that is smaller than Brazil, if we compare it to Brazil, Japan is about 120 million habitants where Brazil is 200 million. The pricing in Japan would probably be much less attractive than it is in Brazil. And having said that, Japan, we still have the right of first negotiation with Catalyst, and Catalyst has not yet triggered that right of first negotiation. So we still are in discussions with Catalyst to see whether they want to have that right of first negotiation or whether they would allow us to approach Japanese partners directly ourselves.

If I can just add. Again, Joris, on the use of proceeds, so you're right in terms of the near-term settlement of bonds. The other piece is really to build the commercial and support the launches in all the areas Dario was talking about there. And then on the development side to, again, continue long term to further support the commercial proposition and to start getting into the new indications. So those are the key four areas, I would say, of the use of funds.

And just to make a comment, I guess, on the new indications. The new indications that we're looking at are pediatric indications. We have established safety and efficacy in pediatric populations. We believe that because of that, we would be able to take vamorolone or AGAMREE into a Phase IIb pivotal study in additional -- in an additional indication. And so from that perspective, the studies are not particularly long. They're not particularly large. And we hope -- still to be determined, but we hope that we would be able to run the study, file the data and get approval within a 5-year plan. So we would already have revenue coming from this additional indication before the end of the 5-year plan. I'm also -- I'm sitting with Shabir, by the way, who's our Chief Medical Officer. So if there's any questions you have on the studies or on the science, then he's here to answer those as well.

Yes, yes. I think it's a good opportunity. As you alluded to, there are two work streams, so to say. So one is to generate more additional data in DMD. And then there is, of course, exploration of potential new indications. My understanding here is that you're aligning with Catalyst, but there is not -- no additional use that you can share today, but we should look forward to, to the end of the year. But maybe you can share a bit more detail on the GUARDIAN study, Shabir, how that is progressing and what we can expect here?

Yes, yes. Thank you. So just before I touch on the GUARDIAN study, I just want to make a couple of remarks. So in Europe, you've got to remember that both prednisone and deflazacort are not promoted products. They're not generating any new data. They're not trying to capture new segments. What we're planning to do with the data that will be coming out, and there are several data readouts between now and the first half of next year, is to aggressively position and capture patient segments and expand within those segments. So it's not just the GUARDIAN study, but I will touch on that because that is strategically important. We have the 006 study, which is just in closeout now, which is looking at the use of vamorolone in younger and older patients compared to our label. Remember, we have a very broad label. We then have these kids going on to longer-term extension studies within this year. We have the GUARDIAN study. Now the GUARDIAN study is a long-term extension study. So if you think of all of the children who were in our Phase IIa, Phase IIb pivotal studies have carried on drug. The majority of these children have carried on drugs. And we have about 150 kids who've been on average on drug 6 to 7 years. So that takes us somewhere to the range -- upper range of about 10 to 12 years of age. And so what you'll see is this year, we will be covering age groups that were not initially in the pivotal study. We'll be generating and, of course, communicating that data very aggressively. The other thing to remember is that what we know of the differentiated profile of vamorolone now, we know that we have equivalent efficacy, of course. But in terms of safety, we've characterized very well the differences we have in lower rates of behavior on severity of behavioral problems. Of course, growth stunting, we've established there's no growth stunting. And we've shown an advantage on bone health in terms of bone metabolism and a possible reduction in the risk of fracture. The GUARDIAN study will establish a much broader safety profile. There are three mechanisms, pathways within vamorolone we're exploring. And each of these will end up, hopefully establishing within the GUARDIAN study, a much broader, differentiated profile. We're very excited because we're going to be looking at not just short-term adverse events. We're going to be looking at long-term adverse events, ones that are very, very debilitating. So fractures, diabetes, cataracts, glaucoma, delayed puberty, hypertension. And all of this data, of course, is already within the population of the GUARDIAN study. They've been on drug already 7 years. So that data will capture aggressively and quickly within probably the first half of next year and publish. So you'll see that, actually, there's quite a bit of activity still ongoing and news flow to be anticipated that will be directed towards not just positioning but aggressively capturing market share and even expanding into current segments where perhaps steroid use is underutilized.

Perfect. So basically, I have only one question left on my side, and then we can move on to the questions from the audience, I guess. So my last question is in terms of pricing and pricing negotiations in Europe, can you comment on the progress you're making and, I think, here, particularly of Germany, France and the U.K.? And if possible, could you give an indication of expected gross price in those markets?

So let's start with the expected -- well, the gross price that we have -- that is public and that has been submitted publicly is the price in Germany where we have already launched in mid-January. There, the price per bottle is EUR 5,500. But obviously, that's the gross price now prior to pricing negotiations in Germany. Just to remind everybody of the dynamics in Germany. Germany has a 2-step reimbursement process. You can put the product on the market at free pricing for the first year. During that year, there are two phases. The first phase is the medical evaluation of incremental medical value, which typically takes six months. And then there's a second half of the year where you're negotiating with the sick fund, the major sick fund in Germany. And exactly a year after you put the -- originally put the product on the market, so in our case, that will be January 15, 2025, you would then have a decision on the pricing. Now the free pricing for the first year is truly free for the first six months, so from 15th of January to 15th of July. The second is from 15th of July to 15th of January, the following year has a clawback. So if you price the drug too high, and the final price negotiation doesn't agree with that and has a lower price, then for the second six months, you would have to pay back the difference. We believe that with EUR 5,500, we're close to where we hope to be land with the Germans. In other markets, however -- and just one more word about Germany. We're going to be providing an update on our progress in Germany, the sales progress in Germany with our half year results, which will probably be in the early September time frame. But I can already confirm that the sales that we see in Germany today and the penetration is exceeding our expectations. It's going really well. Now moving to the U.K. In the U.K., we have been in negotiations with NICE and the NHS for a while now. We expect to go into final negotiations on price with the NHS soon. And I think those -- when I say soon, I think we'll start those discussions in the next weeks and hope to have an agreement by latest at the end of the summer, so that we could still launch AGAMREE in the U.K. for most of the second half of the year. In France, we just learned yesterday the disappointing news that the committee, the Transparence there had decided to give us a so-called ASMR V. We had hoped for an ASMR IV there, but an ASMR V means that the drug is still qualifying for reimbursement in France, but we still need to now start the actual pricing negotiations based on that determinant of ASMR V. We have been -- we have the impression, and we have been -- had the impression confirmed by our consultant experts in France that some of the driving force behind getting an ASMR V was the fact that we couldn't show a higher efficacy than existing standard of care, which we know we don't have. We have similar efficacy to prednisone. Our benefit is on the safety side of things. But the mandate -- or the dogma, I should say, that the French government has is that they're really willing to give an ASMR IV or higher only for drugs that have a clear efficacy benefit. They don't value safety the same way as maybe clinicians do -- or patients and parents do. The second reason is that we didn't have any clinical trial sites in France. France was unfortunately a country where we -- where there's no local experience with AGAMREE yet, and that probably hurt us a little bit in the overall negotiation. But I'm still bullish that we're going to get a price agreement in France, despite the ASMR V because during the negotiations and the hearings, the safety benefit was clearly acknowledged and understood. It's just that it's just not valued as much when they then give the final determinant on the ASMR IV or the ASMR V. So that's Germany, U.K. and France. In Spain and Italy, we have not yet submitted our reimbursement applications, but we have started a -- paid early access program in Spain and already have invoiced the first units. We expect that to increase and to be able to have revenues coming from Spain as well at a modest level between now and actually getting formal reimbursement approval in Spain.

Okay. Perfect. I think with that, we are at the end of the prepared Q&A part of the call. Thank you again, Dario, Andrew and Shabir for the interesting insights. And I would now hand it back to the Santhera team and the operator for any potential questions from the audience.

Thanks, Joris. Thanks for organizing this and for taking the time to have this event with us. Appreciate it.

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

First of all, congratulations on the financing deal. I think it's probably been a complex deal going forward. And getting that done also is still very difficult and challenged times for financing. Also, thank you for the moderation. It's quite extensive. So I don't have many questions there, but maybe just on the new indications that you're doing together with Catalyst. When do you expect maybe to come out with some more news on what kind of indications you're looking for?

Yes. So we're obviously working very closely with -- so thanks, Bob, for the question. So we're right in the middle of that work with Catalyst right now. So we're running Advisory Boards on both continents. We are having budget discussions. We are designing the study -- studies, having a lot of debate about inclusion, exclusion criteria and statistical analysis, plans, et cetera. So a lot of that work is being done now. We plan at both companies to take these to our Boards towards the end of August for presentation and approval. So right now, the only guidance I can give is that we plan to announce more details on these new indications, the time lines, the designs, et cetera, in Q4 of this year after we have those Board approvals.

Okay. And then just following on that also, the additional indication where you're looking at actually where AGAMREE might work is, of course, Becker muscular dystrophy. Any update on that side? And when we should get some information on the trial ongoing in the U.S.?

Sure. Thanks, Bob. So remember, this is a pivotal Phase II study being run by our partner, ReveraGen. So our understanding is that the recruitment is now almost finished. So we should anticipate first readout somewhere in quarter 1.

And I'll remind everybody that that's a Phase IIa study, right? It's a pilot study. It's not a regulatory submission study yet. So it will still require a Phase IIb pivotal after the Phase IIa.

Yes. But it could already -- if you have positive strong data there, it could potentially to off-label use, in particular in the U.S.

Well, let's see what the results are, Bob. But of course, if it's positive, there is a halo effect, yes.

Halo effect.

The next question comes from Jenna Denyes from UBS.

So this is Jenna Denyes, UBS Asset Management. I would like to echo Bob by sending my very sincere congratulations to the entire Santhera team. As you guys know I've been involved with the story for a few more years than just my time at UBS, and it's great to see you addressing the unmet need in this population. I also have to echo Bob in saying this is a really fun session. I really enjoyed it, and I agree it was very well moderated. Joris, very well done. I think I have two questions. I know it's quite as up to date in the French pricing classification degrees as maybe EUR. Could you explain me what the difference means in the classification you got? Does that automatically mean a lower price? Or does it just mean negotiations versus none or longer negotiations? Can you help us sort of frame that for those of us who are a bit less experienced in France?

Yes. So France has these categorizations of -- so Jenna, thanks for the question. So France has these categories, ASMR I through V. And beyond V, there's not to be reimbursed category. So ASMR V is not that great from that perspective. But having -- also let's put the whole thing into perspective. It's very rare that you get anything from I, II or III. Most drugs fall into the category of IV or V. We had hoped for a IV. A V was in the plans as well. It means that you can negotiate reimbursement. It means that it may be a little bit more difficult. If you have an ASMR IV, for instance, the reimbursement negotiations do not allow for a comparator to generics -- generic drugs or drugs that are used off-label in an indication, whereas when you have an ASMR V, they have the option of doing so. It doesn't mean that they have to. And if they recognize the safety benefits of vamorolone over prednisone, they can choose to not compare us to prednisone directly in terms of price. However, there is a risk of them doing so, and that's what worries me a little bit. But definitely, we are moving into pricing negotiations now. If those pricing negotiations do not pan out, if they -- if we are still very far away after these initial negotiations, we would probably wait for the GUARDIAN data that Shabir mentioned earlier, where we expect in the early part of next year to get a significant amount of long-term data on vamorolone use and where we are able to compare that use towards natural history cohorts to really show a significant long-term benefit. As Shabir mentioned, in our pivotal trials, which were relatively short, we were able to show that we didn't have any growth stunting, that we had normal bone turnover, and that we had less and less severe mood and behavioral disorders. But a lot of the downsides of using steroids long term come over time. Osteoporosis develops over time, glaucoma, diabetes, hypertension, cataracts as well as the delayed puberty that Shabir also spoke about. And those who can capture through this late long-term extension study where I think Shabir said, we have patients up to 7 years. I think he's been saying that for over a year now, so it's probably 8 years already. And we know that the first boys have already entered puberty at the normal age. So we're really bullish about our expectations from that dataset. So in the worst-case scenario that we are still far apart in France, we will probably pause those negotiations, wait for that dataset and then restart the negotiations with a much more compelling long-term dataset that has the maturity of those patients in it and then win that negotiation, so to speak. Shabir, anything to add?

So just one other aspect about the steroid use and the GUARDIAN. We know that after about three years, there's a significant proportion of down-titrated on prednisone deflazacort. We already know in our long-term data. Obviously, there's an open-label data, so we have some visibility that a vast majority of our boys are staying at a higher effective dose. So not only will there be a safety differential in there, there's going to be better tolerability. And we also, of course, look at efficacy measures. So generally, we will have a good amount of long-term benefit data should we have to use it. We'll use it anyway for commercial purposes, of course, but should we have to use it for...

Perfect. That's very helpful, guys. And I think, especially this week, given the readout from Pfizer last week, given the FDA decision that's pending, I think highlighting the quality of the data set that you have in this extremely difficult indication is something that shouldn't be underplayed, let alone a very creative complicated -- a little complicated, but quite effective funding gap solution. I know there's a few Swiss companies that will probably be envious of the cap you have negotiated on your royalties. But maybe now, trending away from the closure of your financial gap into the future, I know some of your estimates are a bit conservative in terms of revenues, in terms of ramp-up. Let's assume things go spectacularly well. What are we going to see you do with that money first? Could we see potentially earlier jump to adult indications? Are you going to stay pediatric for a while? And I agree with the strategy, and I understand it. But more, if we see you guys getting a bit more dynamic. What might that look like?

So I think that's a great question that we've also discussed at the executive team level and Board level recently. We're -- in the short term, we're very, very focused on vamorolone and the pediatric indications where we have the existing data. And Shabir can speak a little bit about the life cycle management of vamorolone itself. We have patent protection in Europe at least until 2035, in the U.S. until 2040. We have filed for additional patents. So the European patent life might actually be extended. And so there's plenty of time to capitalize on vamorolone and maximize the value of that asset, for sure. However, and now I'm reverting back to some of our Board discussions, we do not want to be the vamorolone-only company. We are a company dedicated to rare and orphan diseases, and we want to expand our pipeline with other assets. The plan right now is to focus on vamorolone and have the whole company obsessed with getting vamorolone maximized. But come 2025 next year and hopefully with a different market capitalization, we can start approaching various parties that are late-stage players in Europe who have maybe a single asset at the late stage, who don't have a commercial footprint in rare and orphan diseases like we do and either merge with them or acquire them. Having a better market capitalization would allow us to use our shares as currency for such transactions. The other -- the alternative aspect -- or the alternative path is to partner with a U.S. company. There are many U.S. companies that are at the late stages or the approval stages of rare and orphan assets that they want to launch themselves in the U.S. But when they look at the European landscape, they're a little bit intimidated by the number of health care systems, the number of languages, the number of reimbursement negotiations that need to be had, and they would rather partner with a European company that has that footprint. Very often, partnering with some of these larger pharma companies may sound sexy in a press release, but you become a niche product in a very big portfolio. And so companies our size are actually very attractive as potential partners for rare and orphan disease products. And we've seen that already with some of the early anecdotal discussions that we've had with the -- with U.S. companies, not negotiations per se. These are just hallway conversations at conferences. And so it could be either that. It could either be a licensing deal or a partnership with a U.S. company. Or it could be a similar transaction or even an acquisition of an asset in Europe. But we definitely are going to start looking out for that in 2025 and beyond to build our pipeline.

So the only other remarks I can make to that, as we're going forward with the pediatric indications to the regulators, we will be pre-discussing with the regulators, many of these pediatric conditions also are present in subsegments of adult conditions. So we want to pre-discuss with the regulators, although the focus will be to get approval of the pediatric plan, but we want to pre-discuss and be prealigned with the regulators to quickly expand to subsegments of adult indications within the same sort of therapy areas and beyond. So that's in our thoughts. We want to be aggressive. We want to be nimble and flexible. We also are building competencies to be able to bring in other assets, develop them quickly. So we have a range of options under discussion.

[Operator Instructions] We take now the follow-up from Mr. Bob Pooler from ValuationLAB.

Yes, in the press release, you say you secured up to CHF 69 million. But if you add up the two deals, they are up to CHF 38 million on the R-Bridge. And then Highbridge, it's CHF 35. That equals to 73%. So what's the difference? Is that maybe the private bond for manual convert?

The CHF 38, it does. And there's some transaction costs.

Gentlemen, so far, there no more questions from the phone. Back over to you for any closing remarks.

Thanks very much for your interest today. I think it's been a very productive hour that we've had here, and thank you for -- to Octavia for offering to organize a bit of a different format. I think it was very productive, but I also enjoyed the questions and the answers. And maybe we'll do this another time again. In the meantime, thank you for following Santhera and our journey, and look forward to speaking to all of you very soon. Thanks. Bye-bye.

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