Thor Medical ASA (TRMED) Earnings Call Transcript & Summary

Good morning, and welcome to this presentation of Thor Medical for second half of 2023 and the full year. My name is Alf Bjorseth, I'm CEO of Thor Medical. I'm here together with Brede Ellingsaeter, who is the CFO of the company. We also have Sindre Hassfjell here, who's our CTO, in case of questions later in the presentation. I would like to reemphasize that the goal of Thor Medical is to become a world-leading supplier of alpha emitters for cancer therapy. We are addressing a high-growth market for cancer therapy. And we have a goal to be innovative, emerging supplier of alpha emitter-based natural occurring thorium. That is our main goal, and that is our unique technology. We are in the process of setting up a pilot plant for quality production and processing in 2024. And we are prepared to evaluate an investment decision for industrial scale plant in 2025. And for start-up and production in 2027, and that will address a major profitable revenue opportunity. The highlights for the past half year is that we have signed 3 letter of intents with radiopharmaceutical companies for future supply of alpha emitters. That's the most important thing for us to make sure that we have customers lined up when we successfully have developed the technology for production. We have completed on pre-engineering and placed orders for long lead items for the pilot facility. And we have signed an agreement to transfer the Nordic Nanovector patents to NucliThera. I'm very happy to announce that we have expanded our team with experienced chemistry professionals, and we have also hired a new CEO from September 2024. We have reduced the burn rate, and we have currently about exceeding NOK 40 million available in cash at the end of 2023. Let me introduce the new CEO of the company. It's Mr. Jasper Kurth, and we are very, very happy that we have been able to attract such a competent person. He has spent his entire career in Bayer Pharmaceuticals this year. Let me just quickly remind us what the basis of the technology is. We are developing a radioactive compound, that can be hooked to a targeting molecule. And this targeting molecule will find cancer cells. And all cancer cells have a target protein on the outside, and this means that the cell will be hooked up to the targeting molecule, which has the radioactive compound connected to it. And the radioactive compound will radiate and kill the cancer cell. And we'll talk a little bit more about radiation later. This is important simply because cancer is a leading cause of death in the world, more than 10 million deaths per year. And this radio therapeutics based on this principle I just explained represent the fastest-growing cancer treatment options today. And we use this precision treatment using the alpha emitters will be the next-generation technology. The market is predicted to grow significantly in the coming years. It's already in hundreds of millions of U.S. dollars, but there are so many radiopharmaceutical companies and so many new therapies being developed for a large number of different cancer diseases. That creates a strong future demand for radioactive compounds. And this is targeted alpha therapy, and we are enabling this by developing the alpha-emitting radioisotopes. The most pronounced compound is probably Lead-212, which is made from Thorium-228. That's regarded as one -- at least one of the most promising alpha-emitting radioisotopes. Just to briefly say a little bit about the radiation, the 3 kinds of radioactive radiation, alpha, beta and gamma, and we are working with alpha. And that is characterized by being a large particle, which again means that there's a lot of energy. At the same time, the range is not very large, so it will kill the cancer cell, but very little of the healthy tissue around the cancer cell. And that is the unique properties of the alpha particle. There is a very strong scientific interest for Lead-212 in the scientific community globally. And if you look at the number of publications from the scientific literature, you see that there's an almost exponential growth in publications related to Lead-212 and to the alpha-emitting properties of this compound. And it attacks a lot of different indications, cancer indications, from prostate cancer to melanoma and so on and all the way to brain cancer. And this means that there is a lot of applications of these compounds. There's a lot of research and development going on, and there's a lot of clinical testing going on in all these areas, and that represents our market. Just to mention briefly where we are. We are starting with the natural thorium 232, and we have our own proprietary separation process that we can make Thorium-228. And that is the starting material in our marketing, and we can produce downstream from Thorium-228, both Radium-224 and Lead-212, which are products that are sought after by the pharmaceutical companies. So we think that we have a leading product in this value chain. It's a reliable and efficient process. We are particularly aware of producing in an environmental friendly way, and have full control of the radiation and the radiation safety and security. And we have a strong team, and we have good partners in this development. We are part of a value chain where we are taking natural thorium 232 into the hospitals and other proprietary process, will be an important part of this value chain. So then I would like to introduce Brede Ellingsæter, our CFO, who can talk about his topics in the financial segment.

Thank you very much, Alf, and good morning, everyone. We are currently building up a pilot facility at Herøya that will be the preparation for industrialization of Thor Medical. It is an ideal place for us to be because it also has the required infrastructure that we need and it is located in an area that has a very highly competent workforce with significant amount of industrial experience. The main purpose of the pilot will be to verify the production process and technology to see that we can actually scale this technology and that we are able to supply customer samples to verify that we meet the customers' requirements. It will also be very important in terms of learnings for when we will scale up the production. And we target that the pilot facility will be operational in the second half of the year, and we can deliver customer samples in that period. The pilot is a first milestone towards a final investment decision for an industrial scale plant. We will verify the process and technology. We will deliver customer samples. And leveraging that, we intend to convert the letters of intent that we have with customers into firm offtake agreements with customers. We will also be working to secure a reliable and good quality Thorium-232 that is our feedstock for production. We have 1 established supplier relationship today, and we are working with several more. We will also work to prepare an investment case in terms of site selection and pre-engineering, also known as a FEED study. That is a front-end engineering design. And once we are through these milestones, we will be ready to take an investment decision for a full-scale plant. This is a recipe that has been successful in the Scatec Innovation portfolio in the past, most recently, scaling the rare earth element company, REEtec that is also using a similar technology and is currently now building up an industrial scale plant also in Herøya. As Alf mentioned, we have signed 3 LOIs with potential customers. And the demand is approximately equivalent to the current plant production capacity of the first industrial scale plant of around 70 gigabecquerel Thorium-228. We also have additional indications from other customers that would far exceed the current plant capacity. And hence, we are now talking about a possible demand for 4 to 5x of the potential or at least currently planned production capacity of the industrial plant. We believe that our clear milestones, as we have described now, will be derisking the investment through verifying the technology in the pilot, securing customer qualification and offtake, reliable and good quality thorium supply, enabling a final investment decision and finally, establishing a full-scale production in a way that we can realize substantial shareholder value and reducing risk at the most efficient way. The overall goals for the first phase of the industrialization, we have the pilot facility now in 2024 to verify technology and deliver customer samples. We have a targeted FID, final investment decision, for an industrial scale plant in 2025 for a start of 2027. Currently estimated CapEx requirements using the planned volumes of 70 gigabecquerel is around NOK 500 million. But this is a number that is highly dependent on the customer demands. And looking at revenues, we are talking about revenues above NOK 400 million from such a plant with profitable and attractive margins. We will then, going forward, assess scaling with the market beyond this first phase of industrialization. Then looking into what it takes and the financial position of the company. We closed the year with more than NOK 40 million cash available. We have reduced the burn to approximately NOK 1.5 million per month. We have also applied for roughly NOK 10 million in soft funding, mainly related to the activities we are doing in the pilot. And we see now that there is limited capital requirements prior to an investment decision for a full-scale plant. It is mainly related to the pilot plant investments that we are doing now. And it is closely related to a FEED study or a less scoped pre-engineering. That being said, we are also evaluating based on customer feedback and the request for volumes sooner than what we have described here, a possible expansion of the pilot phase to fast track commercial volumes, and such a plan would impact the capital requirements for the company. With that, I give the word back to Alf to wrap things up.

Thank you, Brede. So again, I will mention that we have attracted very solid people in the company now. And we like specifically to mention that we have got a new Vice President for Environment, Health and Safety, which is extremely important in the business that we are going to do. Astrid Liland, who came from the Norwegian Radiation and Nuclear Safety Authority and has more than 20 years of experience in that area. So that's very important for us. And we, of course, has the -- our CTO, Sindre Hassfjell, who has been working with these topics for now about 10 years, and he's still engaged in Thor Medical in a strong way. So this is the best, yes, team that we could have at the present stage. And then we get, as I already mentioned, the new CEO in September. For the sake of completeness, I can inform you that I'm in a dialogue. So it's possible, but at least I have the intention to continue working with Thor Medical, but first of all, focusing on strategy and business development, customer relations, et cetera. So to sum up our presentation, we strongly believe that this is a major market opportunity. We have a unique and a verified and scalable technology to produce the alpha emitter, which is strongly sought after. We have a clear operational roadmap for the time being, and we have a clear financial roadmap. And fortunately, and that is the most important thing, we have a strong team, and we have supportive owners. Thank you very much. And then I leave over to you again, Brede, so you can look at the questions.

Thank you, Alf. We have received pre-submitted questions. From [indiscernible] on behalf of the [ Acciona Group ] that he represents. First question is related to technology. And here, we ask that Sindre support us to give a more detailed description of that, mainly related to Thor Medical's technology and in the context of other technologies. So please, Sindre.

Thank you, everyone. It's a pleasure to be here today. I can just, let's say, sum this up with saying that our technology is based on large-scale chromatography. That is, let's say, our basis, which have been tried out for many, many years. I have been working with this for also myself for many years. And it's -- the advantage with this technology is that it's scalable and it's durable and it's got a high reproducibility, which is all very important when we are constructing or aiming for a large-scale production in a plant. We have worked with this process for some years, and we have now a quite efficient process. We have a very high load on our separation columns. We are separating with very high efficiency. We are separating radium and thorium. That means that we are separating them with a very high degree of separation. And their separation factor is very high. It's about 1,000. And it's -- and we also -- we are also able to separate all other impurities in our system. So in that sense, we are quite confident in our technology in this sense. And then regarding the other, let's say, some competing company technologies. We have [indiscernible], they are based on a different approach. They are going to take out the radium from a thorium solution by a polyether compounds, macrocyclic polyether compounds. That's good. It's also a known technology. There's a company called Orano Med, and they have in their patent. They are based on separating out radium as a co-precipitate with barium sulfate, which is also very well known all the way back to Madame Curie. So this, in our opinion, these technologies, they are okay, but they have some downsides. So we are quite confident that our technology will -- are -- it's working very well and will be very competitive against its competitors. Might be okay for this -- we can come back to questions later perhaps.

I think it's also worth mentioning that [indiscernible] and their patent. Well, first of all, Thor Medical is very well aware of the patent that they have. Thor Medical has also stated in writing to [indiscernible] that we believe that the intellectual property that lies behind that patent belongs to Thor Medical because it was attained during a period where [ Dr. Drera ] worked on behalf of Thor Medical. Beyond that, we have done an assessment of freedom to operate towards that patent, and we have clearly concluded that the patent is not infringed in any way by Thor Medical's production process or technology. And based on that and the potential cost of doing a legal process in the U.S., we so far have concluded that we are best suited not to take further actions, but that can be reevaluated.

I think I would just like to add the one more thing is that I thought about -- or I said about the scalability. We kind of -- we know that our technology is scalable. That means it can go into industrial process. That's a quite important point. There's a lot of technologies that will work in lab scale. But the moment you are increasing the volumes and scale it up, there are numerous problems that can come up. So in that sense, I would again say that I'm confident our technology will handle this competition, and we have freedom to operate. Thank you.

Very good. Thank you. There was also a question around the investment decision and expected timing for that. I think we have summarized that quite well. And a question related to a FEED, but let me just summarize once more an investment decision is dependent on completing the milestones that we have addressed through the pilot phase, converting LOIs into customer offtakes and preparing an investment case that could include a FEED, a front-end engineering design study with a certain scope related to engineering, cost estimation, permitting process and so on. Such a FEED could, take depending on the scope, but up to 6 months. And we will evaluate when to start such a process in relation to where we are with the other milestones. But the target remains that we take a final investment decision in 2025. Then there was a question around the patent transfer to NucliThera. Well, I think, first, it's worth mentioning that the Nanovector patents and pipeline was clearly defined as not part of the company's mission statement anymore, as stated in the Annual General Meeting on the 28th of June. Hence, it is not part of the strategy of Thor Medical to pursue that with resources and capital anymore. Second, I think it's also worth reminding people that Nordic Nanovector has been trying to sell the pipeline and patents since the summer of 2022 without any significant luck in that process. The agreement that was reached with NucliThera gives the shareholders of Thor Medical an upside in terms of a profit sharing. If NucliThera succeeds in creating value, that most likely require a significant amount of resources and capital to develop these patents further. The confidentiality of the agreement is, as with most agreements, business sensitive, and it is not of the interest of NucliThera that these terms are public. And based on that, it is also something that Thor Medical respects. And the actual terms of the agreement is kept confidential. Okay. So that is the pre-submitted questions that we have. We cannot see that we have received any new questions. And then we thank everyone for listening in, and hope to see you next time.