Vivesto AB (VIVE.ST) Earnings Call Transcript & Summary

Hello, and welcome to the Oasmia Pharmaceutical Q3 Report 2019. With us today, we have Gunilla Öhman, Board member and moderator. [Operator Instructions] I will now hand you over to our speaker. Please go ahead.

Thank you very much, and warm welcome to our audiocast on the Q3 report. Our Q3 is from November 1 until January 31. And I'm Gunilla Öhman. I'm Board member and will be the moderator today. I would like to start by making an excuse for our last audiocast. There were technical problems for our supplier, but hopefully, those of you who had wanted to ask questions can do that today instead. I'm so happy to welcome François Martelet, our new CEO; and also Michael Winklerfelt, CFO, as speakers today. With us later on in the Q&A session, will also be our Chairman, Jörgen Olsson; and our Board member, Sven Rohmann, for your questions. So very welcome to start, François.

Thank you, Gunilla, and I'm now on Slide 4. So good morning, everyone. So first, I'm Martelet, new CEO of Oasmia. I've been starting on March 15. And as you could have seen, it has been a jump-start from my early days at work. So perhaps a few words about myself. I've been working with the pharma industry the last 18 years. I've been mostly in oncology and in commercialization but also responsible for clinical development at Novartis, launching the whole range of the products in oncology. Later on at Merck in the U.S., where the main task was to fill in the pipeline. And then CEO of a couple of smaller, quite small actually, biotech companies in the U.S., in the U.K. and in Denmark as well. I'm actually delighted to be back working in Sweden, where I lived a number of years ago. So one of the main reasons why Oasmia thrills me really is that we are quite unique in the biotech world. And why? Because we are -- and very few companies can say so, we are an integrated pharmaceutical company with research and development, production, marketing and sales capabilities. Also -- I mean I find our core technology platform, XR17, very interesting. And what it is? Well, it allows nano-sized particle formulation of APIs to be soluble in water. And we will continue to maximize the value of our core technology platform, XR17, by generating new oncology compounds. As you know -- I mean Oasmia is a listed company. And as a result of the deal with Elevar the other day, we now have a market cap close to SEK 4 billion. And this week, I'm glad to report that the share has been the most traded one on the NASDAQ Stockholm Stock Exchange. Let's move to the next slide, please, Slide #5. So what has happened during and after the quarter? So the EGM on November 6 of last year resolves to authorize the Board of Oasmia to carry out a right issue with preferential rights for Oasmia's shareholders. As you know, the share issue was carried out successfully and was ever subscribed. The right issue generated proceeds of approximately SEK 399 million before transaction costs. The launch preparations of Apealea has gained momentum during the first months of this year. And in February, Oasmia launched Apealea at 60 milligram in the Nordics. The first batch of the drug was shipped to distributors in this country. We, thereby, took the first step of our pan-European launch. Obviously, as we all know, we are facing difficult times, the outbreak of the COVID-19 and its impact on the medical community has significantly slowed down our activities with regard to our Nordic launch. And obviously, we are monitoring the situation closely. I was appointed as a new CEO in February and thereby replacing Dr. Sven Rohmann, who has been acting CEO during this crucial transition period, and Dr. Sven Rohmann will continue to play an important role in the company commercialization strategy going forward as he remains a Board member. Last, but not least, Oasmia and Elevar earlier this week signed off a global strategic partnership for the commercialization of Apealea. And I will go into more details of this very important step forward for, of course, our company. And that's -- if you could turn on Slide 6. So clearly, I mean, in these difficult times, we are delighted to have be able to sign off this deal. And this is the first major commercial partnership for Oasmia that demonstrate both its clinical and regulatory capabilities in getting this product approved in Europe and its commercial capabilities by successfully negotiating a global partnership with a U.S.-based company. So this is, by all standards, a great achievement. Perhaps a few words about Elevar. So this company has been founded in 2005. It's led by very experienced cancer drug specialists, and all have been working in oncology for a number of years. And Elevar is a wholly owned subsidiary of the South Korean conglomerate HLB. And HLB is the owner of a number of companies in various industries, but clearly, the primary focus of investment is in pharmaceuticals. HLB is listed on the KOSDAQ in South Korea. Elevar has about 37 employees, co-offices in Salt Lake City, in Utah and in San Francisco, California. Elevar is developing a compound called rivoceranib, the first API approved in gastric cancer in China, and obviously, Elevar intends to commercialize this compound worldwide with a number of different indications. We believe strongly that the profile of Elevar does match very well our profile in terms of size and focus. We have the European capabilities. We have the U.S. capabilities. And the 2 companies do have a very good and matching pipelines for global expansion together. The deal itself is quite straightforward, it's a global strategic partnership regarding the commercialization of Apealea on the worldwide scale. Elevar will be responsible for regulatory application processes in its territory, starting with the FDA in the U.S., and we will have to set up joint steering committee and joint development committees and work in teams to optimize the global launch. On the next slide, Slide #7 called partnership for global commercialization. So Elevar will commercialize Apealea in all global territories except some countries where Oasmia is already present. That means the Nordics, Baltics, Russia and some CIS countries. It is quite obvious that the U.S. will be a very important market for Apealea, where Elevar has a presence very focused in oncology. When it comes to Europe, Elevar has the right to sublicense Apealea to further strategic partners and distributors. And obviously, as Apealea is already approved in Europe, the 2 companies will be working together in order to find the best European partner for this significant market. Let's move on to Slide #8, financial terms of the agreement, and this slide summarizes quite well the financial terms of the agreement. That means that the total value of the deal is potentially up to USD 698 million consisting of 3 parts. First, we will receive a $20 million nonrefundable signing fee. Then secondly, we will be working together with Elevar, and the deal is a milestone-driven deal linked to achievements in regulatory, in other indications and we will be -- also receive stage milestones. And finally, this agreement consists of a double-digit royalty payments based on the global sales for Apealea. If you could turn to the Slide #9 now. So we really view this deal as a great partnership between the 2 companies because Oasmia will be able to commercialize its main product, Apealea, globally, and that product will give to Elevar access to a very exciting product for ovarian cancer patients. So clearly, it's a good match with care synergies. And on this slide, I wanted to sum up our key features of Oasmia. So as I said earlier, an important aspect is that we are an integrated pharmaceutical company. We have a track record from the regulatory standpoint, with Apealea approved in Europe. We have a unique core technology platform, XR17, and we have a targeted pipeline, not only in human oncology but also in animal health. Having said that, now let's move -- let's take over to Michael. He will go through a number of figures regarding the financial status of the company. Michael, it's over to you.

Thank you, François. So net sales for the quarter amounted to SEK 144,000 compared to SEK 1.427 million in the corresponding quarter last year. Let me point out that as we launched Apealea after the end of this quarter, there is no revenue from Apealea in these figures. And as we have mentioned before, launching Apealea is a marathon and not a sprint. And as François mentioned also earlier in this presentation, the situation we have now with the COVID-19 virus has been slowing down our launch activities. Operating income for the quarter was lower compared to the corresponding quarter previous year and amounted to a loss of SEK 57.708 million as compared to SEK 26.428 million in the corresponding quarter last year. This is mainly due to higher operating expenses this year. Operating expenses, including depreciation, amortization and impairments were higher than for the corresponding quarter the previous year and amounted to SEK 59 million. This increase is primarily attributable to increased cost for consulting the lawyers and other legal costs as well as increased staff costs. This all is due to some litigations and as well through substantial reinforcement of the company's management as we were preparing for the commercialization of Apealea. Our cost level during the quarter was affected by these activities in regards to launch of Apealea. Now with the deal with Elevar, the cost for market entrants will be an item where synergies will be found going forward. The number of employees at the end of the quarter was 62 as compared to 57 in the previous year. The net loss after tax was SEK 59.212 million equal to a loss per share of SEK 0.4. The group's cash at the end of the period amounted to SEK 304 million. Of course, that was affected positively by the SEK 328 million provided in liquidity through a rights issue during this third quarter. At the end of the period, the equity was SEK 723 million compared to SEK 399 million in the corresponding quarter last year. The equity assets ratio was at 82%. Thank you. Over to you again, François.

Thank you, Michael. So now we are on Slide #11. So to summarize, I mean, our key focus points going forward will be clearly, and above all, the execution of the partnership with Elevar. As I said earlier, we really view this deal as a major step forward for Oasmia, that is then to propel the company into the commercialization space. And we will be obviously working in very close collaboration with Elevar in order to maximize the value of this deal. Now it's also time to adjust, strengthen our level of internal capabilities in order to become a significant player on the European side in oncology. We will now review and work on a new business plan that will be matching our high expectations, and then it will be time to focus on the execution of it and in order to transform the company accordingly. We will be looking at strengthening this pipeline, this portfolio by licensing in new assets or acquiring other oncology assets in light with this ambition to become a significant player. We'll continue also to maximize the value of our core technology platform, XR17, by generating new oncology compound. And nowadays, I mean, as you know, the development of oncology is very much about combination of chemotherapy with immunotherapy and also targeted anticancer drugs. And our XR17 platform is really in a good position to be at the forefront of that development. On a final note, I mean, we are, obviously, monitoring quite closely the COVID-19 situation and its impact on the medical community, and I will be reporting to that on a regular basis. But on a more personal note and to close this first part of this Q3 report, my presentation, so I want to say that I will do my best to communicate in a transparent and ethical way with our shareholders, investors, new ones, existing ones and the medical community going forward. Thank you for listening to us for this presentation. Now time for questions.

Okay. So thank you. We will start with questions on the telephone. Operator?

[Operator Instructions] Our first question comes from line of [ Simon Yang ].

Okay. Perfect. So I have a couple of questions that I wanted to ask yesterday, but I can take them up today. So the first thing is that in the last conference call, Sven also promised that a number of agreements would be made around XR17. So the main focus has been XR17, I think, during the whole last year. And during the main conference in San Francisco this year in January, I saw that you only promoted XR17. So -- and by fact, I know that when you are at that conference in San Francisco, you are mainly there to talk with partners and mainly have booked appointments to talk with partners. So basically, I want to know are you in identification phase or in the making or which phase are you in? And are we maybe going to see the first XR17 licensing deal before the summer? Or could you talk about -- more about that strategy and plan?

François, do you like to start? And then maybe Sven comes after?

Yes. Thank you, Gunilla. Well, I mean, as I said earlier, we are in a process to identify new compounds that would generate new products down the road with new patents. This is exactly our core business. That, I certainly agree with you, and we will be continuing this strategy. Now perhaps, Sven, if you are on the line, if you could comment any further?

Happy to do so. I have to tell you, no, you are wrong. You have already seen yesterday the first XR17 deal. Apealea is an XR17 product. It's a combination of XR17 with a taxane. So it proves that all our thinking we have done around the XR17 technology platform has now been validated not only preclinically, clinically, regulatory with approval, but to the point that it has been third-party validated on a commercial terms as well. So this is the first big XR17 deal. And as François has pointed out, we are working on doing more deals, more compounds and so on. But as you know, the rule of this game is we can -- like you have seen with the Apealea deal, we can come up and tell you now we have a deal, those are the terms. But we cannot tell you what has happened in the time before. And I would have loved to tell you more about our way to get this deal done, the 9-month process for that and so on and so on. But it is not possible. So my apologies. You have to wait until we -- about the next deal to come. But with that, you know that XR17 has now been commercially validated. If that was not so obvious, I'm happy to make that clear by now with this statement here. This is our first XR17 deal, and I would say it's a nice deal to start with. And it has a lot of hopes and promises and so on for the next deal. But we will report when they are ready to report, and we do not report on any interim status.

Okay. So Simon, did you have more questions?

Yes. I have a couple more. So Sven, you earlier said also that we've been waiting for some info regarding Docecal. I think you told us that in -- during the winter last year. Can you describe why we can't get a plan for Docecal yet? Because Docecal, we got the studies for about a year ago, the results. Are you seeing -- because what I was thinking, are we going to team up with a partner to do the Phase III studies? Are you going to do them by yourself? Or do you have any plans that you can tell us about Docecal?

Yang, is that for? Okay. Sorry.

You can take, François or Sven.

Docecal would be the logical next in line after we have put Apealea into commercial partnership. So we have to review Docecal carefully. François, as you pointed out, is new with the company. Docecal is very important. So you have to give him the time that he can review Docecal in detail. There are ongoing activities that may be things to report in the near future, but this is future. So it is in the hands of François to decide when to give you an update about Docecal, and I would expect that this is something he will do when he feels that coming out with that is robust and can be put to the outside. Never forget, with any information about our clinical development. We do not only give you important -- maybe important information, but we always educate our competitors as well. So don't be surprised if we are quite reluctant to release detailed information. I hope for your understanding.

Yes, of course. Of course. And then one more question. You're speaking of becoming an important player with oncology. Are you playing on acquisition or buying any companies? Or like -- because it sounds like this was when I...

Yes. It's François here. I mean obviously -- I mean given the nature of this deal, I mean, and the cash consideration, we will be obviously looking at new assets in oncology in order to strengthen our pipeline but, at the same time, developing new compounds with our XR17 platform, as Sven said. So -- and we will be informing you, of course, in due time.

Okay. And about the cash and the milestones payment, do we count on getting some milestones -- more milestones payment this year? I saw the first step was regulatory approval.

Well, we are not allowed to disclose any specifics on that milestone payment. As -- which is a regular, usual standard practice in this business, as you know as well.

Okay. And the -- my last question. Are you, as the new CEO, allowed to buy stocks today? Or is the stock exchange rules preventing you to do so? This for you, François.

Well, yes, I mean, I can't comment on this one for obvious reasons. Thank you.

Do we have any more questions over the telephone?

We have one more question from the line of [ Ingmar Risari ], a private investor.

I just want to hear some more about how the cost is going to be -- who's going to own the cost for the FDA application when it comes to Apealea. Is that going to be taken by Elevar?

François?

Michael?

Yes, that is correct. It will be taken by Apealea -- by Elevar.

Can you also comment anything on how Apealea has been accepted by the market? The first time of the launch you had, how was it accepted? Can you comment on that?

Yes, it's François here. Well, basically the launch happened mid to late February. So it is too early to comment on that. And on top of it, I mean, we have to face the COVID-19 situation. So I will be able to report that at a later stage, yes.

I have a question also about the cash flow situation for Oasmia. Do you see any need in your strategy plan on how you're going to develop the company when it comes to bringing more cash into the company? Or is it -- does it look like the company is going to sustain on its own now?

We -- as you know, after this deal, we have a good financial position, and we will review our current cost base. And as of now, we don't have any further plans to talk about.

Okay. I have one more -- one last question. Well, I have 2 questions then. Can you comment anything on Russia about Apealea? Is it still status quo there?

Well, Russia is not the topic of this telecon, but -- and I will report the progress on Russia, again, at a later stage as well.

Yes. I know it's been a difficult area. Just wondering. One last thing, maybe this is -- has to do with -- maybe just Sven question. I'm not sure. Anyway, I'm just wondering, you don't have to comment on details, but just -- because I didn't understand it from the Wednesday discussion on XR17, and I haven't tried to get this into my mind. What are the stages a company needs to go through when they want to use the XR17 platform for expanding their patent and getting this technology into their medicine? What is the time frame for getting that whole -- from like starting to getting out in the market? What is the time frame? How long could that be for a company that wants to use this?

Sven, question?

That's a typical Sven question, yes. The first step we have to do as Oasmia is to check whether the API that comes from our collaborator, customer and so on can be made water-soluble by our formulation. If that is the case, then we are able to provide our customer with a new patent, and the patent usually has a run time of -- always have a run time of 20 years. And then it very much depends on what kind of API that is, what kind of physiological function it has and how it can be used. As you know, our XR17 technology platform is not limited to cancer drugs. It can be used with all indications. So it really depends API by API how long this process can take until it gets on to the market. So the usual generic way is that you do a safety part, then you have to prove the clinical efficacy, ask for market approval and then you are on the market depending on territory. Each territory has its own time line from that, and this will be, in our eyes, something that will either be a collaborative effort or be taken up by our customers who then will pay us milestone payments, royalties, as the product moves forward. All that in the industry, we are in the pharmaceutical industry, it can take years. But the initial step can be done quite quickly, again, depending on API. Do I answer that part of your question?

Yes, Sven.

So do we have more questions from the telephone?

[Operator Instructions] We have a question from the line of [ Tommy Olson ].

I have different question. I'm not too familiar with the pharmaceutical business, and I would appreciate if you guys could explain the supply chain and how it typically works from Apealea leaving Baxter. Does it then go to a distributor and safe in distribution center before it's sold to the hospitals? And do hospitals typically see this kind of drug in their inventory? Or do they buy them for each patient? And when is the Apealea, from Oasmia's perspective, considered sold? Is it when it leaves Baxter or when it's purchased from the hospitals? Or how does all of this work?

François, is that for you?

Yes. So we have a major supplier, as you know, Baxter. And basically, the supply, the compounded product, basically, we go to the hospitals, as you alluded to. And then there will be orders from the physicians or the prescriptions. So there is nothing particular with this kind of supply chain for Apealea. It's the classical supply chain that we are facing. And your other questions was related to the pricing. Well, I mean, the invoicing will be, obviously, from the hospital to us and back and forth. So this is where what we could register, what we could save basically. Any other -- yes?

Could you also comment on the royalties? Eventually, when you sell through Elevar and your European partner, will royalties become -- because I assume it takes some time to keep track on all the sales. So will the royalties be paid monthly, quarterly or annually?

Well, we're not allowed to disclose any specifics on this. What I can tell you is that it's a double-digit royalty scheme, which is quite favorable according to market standards. And this is what I can tell you at this stage.

Okay. Could you -- maybe this is for the CFO. Could you guys just comment something, it's hard to see in the report, just comment on this cost of the advisory boards, how much that is for the company?

Sorry. Could you repeat that question, please?

Yes. I was just interested to hear what the costs of the advisory boards are for the company. How does that work?

That's -- first of all, that's not -- it's a marginal cost. But also the cost as reported in the report, it's the level of detail that we will report. I will not comment further on that.

Then I have a couple of questions from the e-mail. So I'll start with a question from [ Richard Pashan ], who is asking what -- when is the realistic date for the immuno-oncology treatment to start using Apealea? François, would you like to start?

I think that's a good question, and that relates to the future of our XR17 platform technology. Well, as Sven alluded to -- well, actually went into a lot of details on this, which is good. We need to identify the proper API, and then we need to generate a patent. So there is a process, and then we need to have preclinical data and also the clinics. So that's going to take some -- a number of years. Now the one thing that we are -- we will be doing as a midsized company will be to find a partner to further speed up the development of our new compounds. I cannot give you any precise time frame. What I can tell you is that I will be reporting to you, as soon as I can, some preclinical data using, for instance, paclitaxel and other new exciting immunology compound.

Good. And then [ Richard Pashan ] also wondered if we have any indication of the bank producing an analysis of Oasmia, and this question was also posed by several others. And Jörgen, are you with us?

I'm here, Gunilla, and all the audience, thank you very much for the question. So far, we don't have any bank that and doesn't need coverage on Oasmia. But quite satisfactory when we launched the deal on Wednesday this week, there have been inbound calls from different parties in the financial sector, both domestically, internationally. And of course, we will try to gain interest from them as well. So we will work intensely with that as well. Just as a final remark, Oasmia did have a commissioned research from Oasmia, but which we then halted when -- sorry, sorry.

From Nordea.

Sorry, from Nordea, yes, but which we halted. And when the new Board came onboard because we thought it was irrelevant at that stage before we knew where we had to ask. But that could also be a track to take up because commissioned research, as you all know, has become a more and more and more common factor as a research alternative. So we will come back to that.

And also, there are some questions regarding more institutional investors. Have we seen any sign of interest from institutional investors?

Yes. Jörgen here again. Yes, we have. But also, I think, so far, it has been too early because we have not really produced anything of substance until this stage. I mean we have produced a cleanup news and so on. But now -- not at least with the recruitment of François and also, again, with the announcement, those calls have been starting to come in as well. So we do look forward to try to evaluate and strive for that as well.

Great. Then [ Andre Aguston ] have asked a couple of questions. Firstly, what happens with AdvaVet? Would you like to start there, François?

Yes. That's certainly a good question. Having been in the job for less than 2 weeks, so I hope you will forgive me if I can't give you any answer on this one. But this is certainly on my agenda, what to do with the animal health business, and I will address this at a later stage, in one of our next quarterly report conferences. But certainly, we will address that.

Okay. And he also asked when do we see a meeting with the FDA.

Yes. A meeting with the FDA has been scheduled by Oasmia. The Elevar team will now take over the -- from a process standpoint. I cannot be more specific than that. You know that we are facing the COVID-19. So in those times, nothing can be guaranteed. But be sure that we are on top of it. And it's a joint interest, both for Elevar and for Oasmia to move this pre-NDA meeting forward.

Okay. And then [ Philippe Couria ] asked -- from AstraZeneca, he asked the question when do you expect that the product Apealea will reach the market in Nordic countries, Europe, U.S., China, Japan?

Well, clearly, the Apealea has reached the market in the Nordic countries. They launched mid to late Feb of this year. In the U.S., it all depends, obviously, of the process, the FDA process that will be an approval down the road. And then the other countries, Japan, will depend on the work, on the regulatory work that Elevar will be doing. And I cannot comment and I don't have any specific time frame on that. I mean clearly, the goal is to, first, to find a partner for Apealea in Europe, first priority. At the same time or equal priority will be to register Apealea in the U.S., and then you have the other markets to address.

Okay. Then several questions have come in, among others, from [ Philippe Bizier ], and he asks when could we think to have -- or a projection of a positive cash flow in the company. Could we reveal that? Michael, what do you say?

That is too early to say at this point.

Okay. I think this is all the questions that I had in the e-mail. Are there more questions on the telephone?

We have a follow-up question from [ Ingmar Risari ].

This question might already been answered. But could you clarify on -- when I looked in the prospect before, you said you're going to need SEK 200 million for bringing Apealea forward in this launch. Is that not needed right now because of this collaboration with Elevar?

Sven, was it to you that said that before?

Yes. That was me saying that in the prospectus. That was under the assumption that Oasmia has to do the job by its own. Right now, we know we don't have to do the job by ourself. So there will be costs carried forward by Elevar. It doesn't mean that we do not stay engaged or that not promote the launch and do not move things forward. So we will drive our very best and help them to come up with sales as soon as possible and make sure that we participate on the royalties. So it's really a collaborative effort to get into that sales as fast as possible because we will profit from it, Elevar will profit from it. But it is very clear from the contract and from the understanding of Elevar, the global responsibility of thereby paying the large cost, marketing cost and so on is with Elevar in their territories.

Okay. Do we have any more questions from the telephone?

That was the last question.

Okay then. I would like to thank all of you speakers. And I would like to inform that our next quarterly report, which is our year-end report, will be published on the 18th of June, and we will come back with the telephone conference as well then. Thank you all.

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.