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

Welcome to the Oasmia Q1 Reports 2020-2021. With us today, we have CEO, Francois Martelet; and CFO, Michael Winklerfelt. [Operator Instructions] I will now hand over to our speakers. Please go ahead.

Thank you. So Francois Martelet, CEO of Oasmia. I'm on the first slide. So today, I will give you an update following the presentation of our Q1 results earlier this morning. And obviously, I look forward to your questions that you will have at the end of this presentation. So the forward-looking statement is on Slide 2. And on Slide 3, so here is the team basically leading the transformation of Oasmia. So we have recently added a lot of expertise to the company from the pharmaceutical and biotechnology sector with the appointment of Anders Harfstrand as Chairman of the company; and Birgit Stattin Norinder as a Board member, we have also on the Board Hege Hellstrom from our industry with a lot of experience as well. So the Board is an experienced board from the sector, and I'm currently upgrading the management team with highly talented and experienced people who have had a successful track record in developing and commercializing drugs in midsized companies and if possible, with a focus on oncology. From a management team standpoint, I'm pleased to report that Elin Trampe is an internal promotion to Chief Technical Officer. Dr. Reinhard Koenig has been working for us for a long time in the U.S. in a variety of roles and is now assuming a Chief Medical Officer role. Most recently, we have hired Peter Selin to the role of Chief Business Officer to support our M&A and licensing activities and to continue supporting the transformation of the company into a specialty pharma. And as you will see from the recent press release, we have just announced that Fredrik Jarrsten will join us down the road as our new CFO. So the Slide 4, just to let you know a little bit the background of our new CFO, Fredrik Jarrsten, he has about 25 years of experience across financial, the medical technology, life sciences sector in the Nordic region. And most recently, he's been the CFO and Deputy CEO at Karolinska Development. And Fredrik will join us as soon as possible. So the Slide 5 are the Q1 corporate highlights, summarizing what has been done during the quarter. So we have announced in May, the outcome of a strategic review to deliver long-term profitable growth as a specialty pharma company. As a result of this, we will discontinue commercial manufacturing. And implement cost reductions that will result in a saving of around SEK 100 million per year and leading to a monthly burn rate of the company below SEK 10 million per month. Apealea, we've been making substantial progress in preparing the Nordic launch despite the delays due to COVID-19, and I will come back to that. In July, our partner Elevar Therapeutics announced that the Tanner Pharma group will be implementing a Global Named Patient Program that is an expanded access program to provide access to Apealea in areas outside the U.S. Docetaxel micellar now, which is in our pipeline. So we have signed off an agreement with the Swiss Group for Clinical Cancer Research, called SAKK. So a Phase Ib trial to evaluate docetaxel micellar for the treatment of metastatic prostate cancer. And I think this is a significant achievement. At the same time, as I just said, we have been further strengthening the management and the Board at an AGM in May, Anders Harfstrand has been elected new Chairman of the Board; and Birgit Stattin Norinder as a new member of the Board; and Jorgen Olsson, former Chairman of the Board; and Gunilla Ohman former Board member stepped down from the same boat. And Peter Selin will be joining us as soon as possible as well as a Chief Business Officer, postperiod. Right. On Slide 6, let me now turn to Michael for the Q1 financial highlights.

Thank you, Francois, and thank you. This is -- will be my last quarterly call for this company. So I thank you for this. So if we look at the consolidated net sales, they were SEK 208,000 in the quarter. And this is, of course, a reflection of what we have discussed at length in the report of the headwinds we have faced in our launch activities due to the COVID-19 situation. We have an operating income of negative SEK 49 million. I can come back -- to what we've had is some -- as you know, we announced in the beginning of the quarter, the reorganization and our cost savings plans. These are, of course being implemented during the quarter, but it also leads to some increase in one-off costs such as restructuring costs. We have a net income after tax of SEK 53 million. And an earnings per share of negative -- net income after tax of negative SEK 53 million, I should say, and an earnings per share of negative SEK 0.12. Thank you.

Right. Thank you, Michael. So on Slide 7, I thought it would be useful to summarize what I have been achieving in the last 6 months since I joined the company. So first of all, from a strategic standpoint, we have extensively reviewed the strategy of the company, we're making -- working progress with Elevar, our partner to achieve the milestones that are part of the deal. At the same time, we are working on creating revenue opportunities for our Animal Health business and for XR17. But I will certainly communicate in due time the results of this. From a human resources perspective, that you know that we have significantly rightsized the company linked to the stop of the commercial manufacturing. At the same time, the management team has been significantly strengthened. Operationally, we have achieved this collaborative agreement with SAKK. Something important as well that is behind the scene, we are working on preclinical work with new API and dual encapsulation technology. We are in a process to assess it. That work is ongoing. And we will be expecting Elevar to implement the patient access program in Europe during the following weeks and months. Financially, the cost savings have been implemented, and the burn rate is now limited to around SEK 10 million per month. We have resolved large corporate liabilities with the U.S. transaction. And finally, an important point, which is the Investor Relations, we have increased transparency at the company level. You have -- you may have seen coverage by Rx Securities, other research companies will cover us, and I will be pleased to announce that in due time as well. So all in all, since I joined the company, I strongly believe we have laid out very solid foundations in order to build a specialty pharma company that is -- that will be down the road, cash flow positive. Slide 8. This is a reminder of our portfolio. So from a human health portfolio perspective, technology and Animal Health. So Elevar is now handling our Apealea and has got full responsibility for the commercialization of Apealea on a global scale with the exception of a few countries such as Nordics. From a technology platform standpoint, we are in a planning mode regarding docetaxel micellar in metastatic prostate cancer and as I said, just a minute ago, we are working with new API with XR19 as well. The Animal Health portfolio is under a strategic review and I understand that there are some expectations that we will be announcing news on this. It will take a bit of time. But it's important to know that Paccal Vet and Doxophos Vets, our assets that are covered, by the way, by our patent portfolio, the initial focus will be the U.S. market where we are evaluating potential collaboration or asset sales models in order to maximize shareholder value. And we certainly expect to reach the milestones of this early next year. On Slide 9, so you see Apealea. And Apealea will certainly play a critical role in our transformation as a company in order to move the company towards profitability. And I'm happy to report and to say that we are starting to realize the full commercial value of Apealea. You know that the standard of care in ovarian is carboplatin plus paclitaxel. However, for a number of patients that cannot tolerate solvent-based paclitaxel due to a number of side effects that are quite steeper, Apealea is the appropriate product for those patients. It's an IV injectable formulation using our XR17 platform, which facilitates the solubility of paclitaxel. And Apealea is the only non-Cremophor drug upload for use in second line, third line ovarian cancer in Europe. In the last quarter, we've made substantial progress preparing for the commercial launch of the Nordics despite COVID-19 and I will come back to that as well. And I just mentioned as well that the Tanner group will be implementing a Named Patient Program outside the U.S. On Slide 10, this is a reminder of our global partnership for Apealea. Quick reminder that we received SEK 20 million upfront payments in April of this year. The milestone payments with a potential close to USD 700 million. Depending on Elevar's achievements regarding the milestones. Those milestones are clinically linked to clinical development and regulatory approval. We have also a double-digit royalty on sales of Apealea. We retain the full control of the development of XR17 in other APIs than Apealea. And as I said, the Tanner agreement is a significant step forward in the full commercialization of Apealea. Now on Slide 19 (sic) [ Slide 11 ]. Whether we like it or not, the outbreak of the COVID-19 and its impact around the world has significantly accelerated during the first quarter of this financial year. And this pandemic has significantly entrave, heavily reduced access to healthcare providers, namely oncologists for us and obviously, this has had a pro forma negative impact on the marketing activities of the company. And I just wanted to say a few things about that. You know that the healthcare system, in particular, in the Nordics countries has been focusing almost exclusively on COVID-19. And nonemergency procedures were delayed. And therefore, the launch of Apealea in the Nordic states has been delayed. And we hope that within the next few weeks and months, access to those physicians will be possible through our medical scientific liaison officers. On Slide 12. So you may think that we have not done anything on the launch of the Nordics. But actually, this is not correct. We have worked pretty heavily on that. And we have been, my team and I, working very hard to ensure that we are fully prepared. For when the lockdown restrictions will be lifted, that commercial sales in the Nordic states can resume. And here, you can see the summary on the Slide 12 of our activities in Sweden, Denmark and Finland. We've been busy powering, training our sales team, developing medical materials, keeping visibility by attending virtual events and conferences and working on local pricing and launch strategies. We're also evaluating opportunities in Norway. In addition, I have to say that for Sweden, we've been in discussion with several Swedish cancer hospitals in order to set up a national clinical trial with Apealea. Slide 13 is about docetaxel micellar. And I want to take a moment to take a look at docetaxel micellar that will be developed for the treatment of prostate cancer. That you know it's a leading cause of cancer death in men worldwide. We also probably know that docetaxel is widely approved for a wide range of malignancies and is a mode of care for advanced prostate cancer. Taxotere, which is the brand name of docetaxel is a blockbuster drug or used to be with a big sales of around SEK 3 billion, 10 years ago. So docetaxel micellar will be using Oasmia proprietary solubility technology platform, XR17. And we are, as I said earlier, happy to report that we've been approached by the SAKK group in order to conclude this Phase I trial. On the Slide 14, shows the catalyst and the value drivers. So our key inflection points that I have summarized in 2 categories: more near-term and more midterm. So we are working well with our partner, Elevar, to deliver the milestones, and I have personally developed a good and significant relationship with the CEO of Elevar. We will be working with the docetaxel micellar. As I said, we will be evaluating strategically our Animal Health business. Also initiating collaboration with well-known academia and cooperative groups other than the one I just mentioned. And above all, we'll always have an eye on the market as we want to strengthen our pipeline by adding more assets in oncology and also down the road in specialty pharma. We are working at evaluating whether a dual encapsulation technology could work, not only in oncology, by the way, this is XR -- what we call XR19. So this is the whole strategy for the next 6 to 12 months. And I will say this is a new part of the new Oasmia. We are a leader in the organization that is really eager to succeed in the marketplace with all these goals in mind. The Slide 15 shows that we've been enhancing visibility with a number of reports that either will be out soon or are already out, like the Rx Securities. Edison will be coming. Very pleased to report that we are also working with a new website that will be live very soon. And also, I've been doing a lot of investor engagement work, including producing videos, holding seminars with Aktiespararna. And I hope that some of you have attended those. It is actually the first time that Oasmia is covered by these research notes. We have webinars, investor events, and that will be helping increasing with visibility and potentially broaden our institutional investor base. So to conclude this quarterly report presentation, I personally strongly believe, and I'm sure that you will join me in saying so as well that we have established solid foundations in order to build a profitable specialty pharma company. We have this ambition. This is certainly a shift in strategy for Oasmia. But we believe that we can succeed not only by maximizing the value of our current portfolio but also by looking around and potentially, acquire a company that will be fitting our pipeline. Above all, as we all know, in business life, the success depends on people, and I'm glad to report that we have a new CBO on board, as soon a new CFO as well and potentially, new C-level executives down the road. And it is, of course, extremely important to have been able to upgrade our capabilities from a broad level, from the management team level. So all in all, we are on track to continue and to finish the turnaround of Oasmia in order to make it great success. Thank you for your attention. Now let's open the floor to Q&A.

[Operator Instructions] Our first question comes from the line of Joseph Hedden of Rx Securities.

I've got a couple. Maybe if I go one at a time. So regarding launch in the Nordics for Apealea and obviously, the headwinds that we still face from COVID-19, you've provided some of the detail on what you've been able to achieve already. Is it the case that -- have any MSLs been able to get back into hospitals in any territories yet?

Thank you, Joseph. Yes. I mean we have a limited number of MSLs working in the Nordics. And yes, they are still in place and continue to work around medical information. And at the same time, we are working on securing pricing and launching strategies. But yes, I mean, the work is continuing behind the scene, absolutely.

Okay. Is there a target number of representatives that you have in mind to cover that region? And how far off that recruitment are you?

Well, we have one MSL per country as of today, basically.

Okay. Okay. Then maybe if I just talk about inventory because we see you continue to build this quarter. And now you've got SEK 30 million on the balance sheet. But given that COVID-19 is slowing things down a bit. If you -- what's your strategy going forward with managing the inventory levels?

Well, as you know, Joseph, that this is -- of course, this quarter ended in July, we're still in transition when it comes to Elevar. And you also know that in a supply chain like this, lead times are sometimes quite long. So we see, of course, there is sort of a lag effect here. Inventory will be coming down in future quarters as all responsibilities for commercialization, which includes also then, of course, commercial manufacturing is fully transitioned to Elevar.

Okay. And then maybe just one on XR19. Can you just describe how you approaching evaluating what 2 molecules might be combined in that first candidate?

Okay. So this is in the area of the preclinical work. So we have tested conceptually the dual encapsulation process and the results are initially positive. We are in a process to repeat those trials. And we believe that the best application will be outside oncology because as you know, in oncology, you have to -- you have a milligram per square meter kind of a rule that is not necessarily applicable in other therapeutic areas. So we believe that if the results of new trials will be positive, new testing will be positive in the lab, that we can apply this potential technology outside oncology.

[Operator Instructions] Our next question comes from John Priestner of Edison Investment Research.

I have a couple, so I'll ask them one at a time. So the first is that obviously, paclitaxel is broadly indicated across a number of cancers. I was just wondering if you could speak to the next indication that you're potentially looking to develop in the period. And maybe the potential of combinations as well?

Yes. And that's a good question, and thank you for asking this one. So as you know, this will be a joint work with our partner, Elevar. So we have established a joint development committee and also a joint steering committee in which we are reviewing those potential new indications with Elevar. I'm not yet -- we cannot disclose yet what will be the next indication, but be sure that we are working on this.

Okay. And you also said that the Named Patient Program with Tanner Pharma, will be looking to launch it. I was just wondering if you had any time lines on when you expect the first patient to actually receive treatment with Apealea.

Yes. So that will be done by the Tanner Pharma group within the next few weeks and months.

Okay. And my final question is just really around the -- your assessment of the restructuring process at the moment. And just wondering if you had any timelines on when you expect to reduce the monthly burn rate below SEK 10 million?

So the restructuring is continuing according to the plan. As you know, there's always a bit of a time lag, especially in Sweden, where -- because we're following all -- all the regulations in the labor laws here. Also, of course, shutting down -- shutting down commercial manufacturing has to be done in an orderly fashion. There's a lot of documentation and everything to be done. A lot of that will be done by the end of quarter 3. Now I'm talking about sort of calendar quarter 3, and we expect to fully reach our new burn rate during the Q4 of this year.

There are currently no further questions on the audio. I will now hand back to the speakers.

Thank you very much for attending this call. So I hope I was able to convey a sense of -- strong sense of optimism for Oasmia. We have -- I know that some of you are not terribly happy with the news. But we are continuously working on laying out the proper foundations, the turnaround of this company and this is what, I think, is the most important thing for Oasmia at the present time. Thank you very much for your attention, and speak to you soon.

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