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

Welcome to the Oasmia Pharmaceutical Q2 Report 2020. With us today, we have CEO, Francois Martelet. [Operator Instructions] I will now hand you over to your speaker. Please go ahead.

Thank you, and good morning, everyone. So delighted to present the Q2 results. And I will follow through the slide deck. So if we could move to Slide 2, forward-looking statements. Slide 3. So today, we have, together with me, we have Robert Maiorana, who is our acting Chief Financial Officer, but also our Financial Manager till Fredrik Järrsten will effectively join us. Right. So on Slide 4, I would like to go through high level -- the achievements during the quarter. So first of all, we believe that we've made significant progress with regard to Elevar enacting with Apealea. So there is this agreement that has been signed off for the commercialization of Apealea in the Middle East and North African regions. This is the Taiba deal. The first market will be Saudi Arabia. Then we have -- Elevar has implemented a global name patient program, mainly ex U.S., it's called the Tanner program. That means that on request the physicians can have access to Apealea. There is also, certainly, and I will come back to that, a clear path now for the regulatory submission in the U.S. for ovarian. And initial prescription, and I'm pleased to report that despite the COVID-19 situation, initial prescriptions have been recorded in Finland. And we will obviously continue to monitor these prescriptions. On another note, our cost control program that Robert will go through a bit later on is certainly enabling us to continue investment in XR-18, XR-19. That means our core technology platform, and the -- we're making some preparation for the clinical trial, the Phase Ib with docetaxel micellar. At the same time, we've been able to reinforce the IP protection during this quarter with regard to XR-17 and Apealea. And above all, we've been able to continue strengthening the recruitment of high-level executive at the management team level, but also below the management team level. So let's go now through the slide 5. I will give now the floor to Robert to comment on the Q2 financial highlights.

Thank you, Francois. And good morning, everyone. My name is as earlier mentioned, Robert Maiorana, and I am the acting CFO of Oasmia until Fredrik Järrsten is on board. I'm very pleased to announce that I will remain with Oasmia and take on a position as Financial Manager after Fredrik's arrival. I would also like to say that I'm -- that it's a pleasure to be here with you today and to provide an update on the second quarter results. First thing, I'd like to mention is that the sales figure is not part of the slides. Since our present sales are at a very low level, considering that Oasmia is an innovation company, however, we're in a transition, but today is still not yet an earnings stock. We are, as seen in the first bullet in a strong cash position with close to SEK 330 million in short-term investments and on our bank accounts. That is to be compared with SEK 29 million a year ago. And we are on the right track to reach our target with a burn rate closer to the range of SEK 10 million to SEK 12 million per month. And that will include all the investments that Francois earlier mentioned. We have had some severe one-off cost during this quarter. We were charged SEK 3.1 million in the fine from NASDAQ due to the previous boards of directors' breach of good stock market practices. This will, for your information, be added to our existing SEK 30 million claim on the previous board. We also made a SEK 3.4 write-down to -- due to a reduced need of our premises in Uppsala, following the earlier communicated reorganization and redundancies. And that leads us also to our employee expenses, which reached SEK 18.1 million compared to SEK 14.4 million a year ago. And this relates mainly to the staff redundancy. We were 59 employees at the beginning of the quarter and 49 at the end of this quarter. Well we have, as earlier communicated, begun to amortize capitalized development costs for Apealea [indiscernible] . This accounts for SEK 4.1 million compared to the quarter a year ago. So operating profit and loss is minus SEK 53.6 million compared to SEK 46.4 million a year ago, a difference of SEK 6.3 million. But as just explained, relating to what can be referred to as one-off cost plus the amortization. Net profit and loss after tax is minus SEK 53.5 million compared to SEK 18.3 million a year ago. This difference is explained by a positive tax difference of SEK 33 million recorded a year ago. Earnings per share, minus SEK 0.12 compared to minus SEK 0.6. And the last bullet is relating to the increase in our inventory with SEK 20.5 million compared to the beginning of April this year. This is partly explained by replacement of write-downs made in the first quarter and partly explained by Elevar inventory financed by them. The latter also explained part of the increase in our accrued expenses and deferred income during this quarter, a change of SEK 20.4 million from SEK 65.8 million to SEK 85.1 million. And I leave the word back to Francois.

Thank you, Robert. Let's now move to Slide 6. So as I said earlier, during the quarter, we've been able to strengthen the management team by adding key executives such as Fredrik Järrsten, Peter Selin as a CBO, Chief Business Officer; Robert in the finance managing capacity. But also, we've been able to attract and retain 2 senior scientists that will certainly help us to develop further our platform, our technology platform, XR-17 into XR-18 and 19 as well. And that's an important point for Oasmia. On the Slide 7, you see that our portfolio, I have already presented that slide, but I would like to remind the audience that we also are planning to add more compounds that would fit very nicely with our portfolio on the oncology side. So let's have a look a little bit into detail. So we have Apealea in ovarian cancer. Now in the U.S., there is a clear path towards approval, and I will come back to that -- to this a bit later. In Europe, as you know, we have an approval and the commercialization has started in the Middle East and North African region. The Tanner agreement provide access to physicians with Apealea on a demand basis. There will be -- the announcement of a partner in Europe is to be done relatively shortly, and that's an important move also towards the commercialization of Apealea. Docetaxel micellar in prostate cancer, the Phase Ib is foreseen and on track with the SAKK group. We know -- you know that we are working with a new API, and we will be disclosing the results of this investigation and preclinical relatively shortly. XR-19 combination is continuing to be assessed in various cancer, but also outside oncology, and we have our animal health portfolio. We have Paccal Vet and Doxophos Vet in Phase IIb. For those compounds, we are looking for a partner, mainly in the U.S. On Slide 8, this is the 4-pillar of the Oasmia strategy, as presented earlier, and that remained the same strategy for next year onwards. So first of all, the Pillar 1, which is the execution on the Apealea global partnership with Elevar. The Pillar 2 is the clinical development and partnering of our technology platforms. The Pillar 3 relates to the clinical development of docetaxel micellar, a new API and other compounds to be added on. And the Pillar 4 is our in and out-licensing strategy. Right. Let's move to the slide 9. So clearly, during the quarter, Elevar Therapeutics did make substantial progress with regard to Apealea. And let me emphasize perhaps the clear path that now has been disclosed with regard to the U.S. regulatory submission. And you know that Elevar has had a number of interactions with the FDA. You know that different regulators have different requirements with regard to study endpoints, for instance. And Elevar has decided to work on 2 additional studies in order to support the NDA filing. So one is a PK study, that will be initiated during the first half of 2021. Expected to take about 12 months. And the other study, which is a superiority study. It will be an efficacy study of Apealea in ovarian cancer. The goal here is really to strengthen the label in the U.S. and in Europe down the road. So it's really positive news as well. And I have to say that Elevar will be working with the GOG foundation, which is one of the best institutions in oncology in the U.S. to perform this study. On the same time, Elevar is, as we speak, exploring the potential of Apealea in other new indications that will be disclosed later on. Let's move to the Slide 10. On the Slide 10, we are addressing the pillar #2, which is the development of our new technologies. So with regard to XR-17, we have mandated a booting firm in order to drive strongly the partnering of XR-17. And in this way, we hope to achieve a partnering with this technology. XR-18, and I think this is the first time that I am introducing the concept of XR-18. So XR-18 will be the next-generation of XR-17 solubilizing platform. This -- that means that we will be working on a number of technical improvements and in order to also secure long-term IP protection of this technology platform. XR-19. So we are -- we continue to work with this dual encapsulation process of 2 APIs or 1 API and 1 excipient. And we've had some promising preclinical results that shows that XR-19 has the potential to deliver compounds in 1 single IV administration. Further studies, obviously, are underway in order to revalidate those initial results before we can fully disclose them to you. Let's move on Slide 10. That relates to the Pillar #3, which is mainly clinical development, and in this slide with docetaxel micellar. As I said earlier, we are perfectly on track to initiate the study during the first half of next year. And this study will be in metastatic prostate resistant cancer patients. And the clinical design will be disclosed at the right time once the -- we will have approval with the ethical committee. On the next slide, Slide #12. So we've been working internally with regard to the Animal Health portfolio and decided that we would like to give the mandate to an investment bank in order to drive the partnering of our Animal Health business. And we've been pleased to report that a specialist team of experts in this business will be coming from blue-chip companies in that sector, will be looking after this portfolio. And I also would like to remind you that this is a growing market, mainly in the U.S., with the expected sales in a couple of years from now, reaching close to USD 300 million for the cancer drug market in dogs. Okay. So on Slide 13, you see the 4 pillars. I have been going through the pillar, the Apealea pillar, the technology platform, pillar number 2, the 3, the clinical development. So we -- on the 4 -- so we continue to screen the market that was -- when I started with the company in the mid-March. We've been performing a number of due diligence. We've been assisted by external booting firm, and so we will be -- we hope to be able to share concretely our progress within a relatively short time frame in that area. So looking ahead on Slide 14, clearly, with Oasmia, there are a number of potential near-term and midterm value drivers. Such as the partnering of Apealea in Europe, the initiation of the docetaxel micellar clinical study, the partnering of Animal Health business, partnering with XR-17, the disclosure of the XR-19 proof of concept. The development of XR-18 and our M&A and in-licensing opportunities as we continue to have this end goal in mind to be -- to become a specialty pharma company with a focus on oncology. So having said that, I would like to open up to Q&A at this stage. Operator, the floor is yours.

[Operator Instructions] Our first question comes from the line of John Priestner from Edison.

I have 3, so I'll ask them one at a time. So following the update on FDA interactions and the requirement for additional trials in the U.S. When can we expect additional indications for Apealea to be announced and these trials to start?

Right. So this is in the hands of Elevar, as you know. And if you did listen to the conference call December 3. So clearly, the initiation of the study will be done in the first part of '21 and is expected to take up to 24 months. So -- and then the CEO of Elevar mentioned about 9 months, up to 12 months in order to wrap it for the submission. So we are talking about a couple of years from now.

Yes. So for additional indications though can we expect those to maybe be announced whilst these trials are ongoing or?

With regard to the new indication, we are working with Elevar on choosing the right one, and this will be disclosed later on. I cannot give you any precise time frame at this point in time. But it will be disclosed during '21.

Okay. And Apealea was launched in the Nordics earlier this year. And I was just wondering if you could provide some early insights into how it's been received by oncologists and maybe their thoughts?

Yes. So as I said, we've been pleased to record initial sales, initial prescriptions in Finland. There is interest in Sweden and Denmark. However, given the COVID-19 situation, that has not been easy to really promote the drug since -- basically, we launched, as you know, we launched in March, late February, beginning of March of this year. And clearly, we've been hit by the COVID-19 situation almost immediately, preventing us to have physical interactions with physicians which, of course, for a new product that didn't help. However, we are doing our best through other means in order to generate prescriptions in Sweden and Denmark.

That's great. And docetaxel has utility across a range of cancers. So I was just wondering if you could discuss any potential next indications you're looking to develop docetaxel micellar under potential time lines for this?

Well, provided that the initial Phase Ib study will be giving us positive results, we would be entering in prostate cancer, then we intend to continue that route in prostate through a Phase II.

And the next question comes from the line of Joseph Hedden from Rx Securities.

Yes, Hello?

Yes, we can hear you.

Okay. Yes, I just wanted to dive a bit deeper into the things you said in the release about the Nordic launch. The negative HTA assessment in Denmark. What was it that the agency found uncomfortable? Can you dig -- can you give us any more color on what the problem potentially is and how you might address it? I see you're talking about clinical data in there. Are we talking about new European study?

Well, with regard to Denmark, clearly, the regulators would ask for health economic data that we didn't perform at start of our European package. So that was the hurdle to overcome.

Okay. And then if that [indiscernible]...

Well, I mean, that does not prevent patients to prescribe Apealea, but it does prevent us to let's say, to promote widely Apealea in Denmark. Clearly, I mean, we are not anticipating large-scale prescriptions due to that.

Okay. And is there anything that you've identified that you can do in the short-term fix to get that reimbursement situation resolved?

Well, you -- we have addressed that to Elevar. Elevar Is also planning to have health economic data as part of the next package submission in the U.S. but short term, I mean, it takes some time to do a health economic data. I mean, so we will be counting of our partner in order to generate the appropriate set of data needed.

Okay, great. And then perhaps on Sweden, you talk about some positive feedback in a few centers. Are those particularly important centers for oncology in Sweden? And what steps do you foresee and left to -- to get to the first sales there?

Yes. So there is a positive interest. Obviously, given the improvement in the formulation, given a number of benefits of Apealea versus classic paclitaxel. Now the question is how to transform that into real prescriptions? And again, the lockdown of the -- most of the hospitals in Sweden does not help. And this is what we are against. Against, I mean, you understand that active promotion and active detailing would be needed in order to convince those physicians, and this is what we cannot do at the present time.

Okay. Okay. Great. And then perhaps one more on XR-17, the partnering, you've talked about hire -- bringing in consultants -- consultancy to help with that process. Can I just confirm, are you talking about partnering for other companies bringing their APIs to you for formulation improvement? Or you're talking about novel compounds coming out of your platform and opportunities for companies to license or both?

That's a good question. Well, mainly that we are exploring the opportunity to -- for other companies to use our platform. So whether we're talking about CDMO that would like to use our platform with their clients, where they have any new API or existing marketed API in order to see whether our platform can really help them to produce an improved formulation. So this is in that way that we are working with this consulting firm.

And the next question comes from the line of Ingaa Sari, who's a private investor.

Maybe I missed some of the start of this presentation, but I'm wondering a little bit about the XR-19. You have spoken of it as a very interesting new way of bringing 2 APIs into the same IV. But what is the time frame for bringing that to the market. Is that the same as doing it with XR-17 in an API? Or is it something that will go faster? Can you comment on that?

The line is pretty bad. I'm not sure that I really understood your question. Can you repeat it, please?

Yes, I can repeat it. Maybe you can hear me better now. I mean what's the XR-19, if I say it very shortly, what is -- one question I didn't say there before, is there a demand for it? And how long until that could reach the market? Is it the same kind of procedure as you have with XR-17? You need to test it clinically? Or how is it work -- how does it work? Can you explain that?

Okay. So XR-19 is a different way to look at our platform, our technology platform. So in a way that dual encapsulation is quite a new concept, and yes, it will have to follow through the same kind of sets like XR-17. What we know is that we need to really make sure that we can use clinically the outcome of such a platform. So let me tell you how does that work. In oncology, we are always working in milligram per square meter. And therefore, in a fixed combination, oncology may not be the best therapeutic area to work with XR-19. Maybe other therapeutic area that do not necessarily require dosage in milligram per square meter. So in some of the words, we're looking at either 1 API and an excipient that could we combine altogether or 2 API in a therapeutic area that does not require a dosage a square meter. But yes, I mean, further studies will be required. And from a time frame standpoint, that will be very similar to XR-17. There is no shortcut in this area.

Okay. Can you also comment on -- we heard before that there are some interest in the XR-17 platform. But can you comment any further on how is that interesting? Does any other company wants to use this? Can you comment on if they're interest in inducing it? Or are you just going out there trying to find someone that please use this, please buy it from us? Or how is that ongoing? Is it -- is there still an interest for the platform?

Yes, of course. I mean, we are facing with a lot of interest in the platform. But at the same time, we need to be quite structured internally. So that's the reason why we have mandated the firm in order to appropriately select the right kind of potential partners we could be working with.

Could the shareholders expect something to happen, happen during the XR-17 platform during next year? Could there be some announcements around it that maybe someone has taken an interest of it?

What I can comment to is that we are doing absolutely our best in order to work in this direction. I cannot give you any time frame. But certainly, as soon as we have some positive news in this area. We will communicate this to the market.

And some -- and one thing about the M&A as well. Is there anything -- any company or any API or anything you're looking at right now? Or is there something going on there?

Well, as I said earlier, we've been extensively looking at a number of companies and compounds in the Nordic area and outside the Nordic area. And we will be able to share with you as soon as we can, positive news in that area. The question is not to do a quick acquisition or licensing here the question is really to find the right compound, for instance, that would fit nicely our portfolio, that could be used with XR-17. So this is exactly what we are looking for. Quality is important and we need to follow.

I have a final question regarding the extended or the new study being done by Elevar on Apealea in the U.S. There, you spoke of how it can strengthen and enable to other markets. So it will be -- they're looking for superiority in that. But how will that strengthen the Oasmia in other markets? Will that just be happening automatically? Or do you need to like to find a new -- what you call it, you have to file again for the EMA and different kinds of organizations to have it -- be looking at again, to get that? Or it's just something that will happen.

Yes. So we will be submitting to the European authority and an extension of the labeling. So this is quite a common practice in the industry, and that strengthen certainly once approved, gives some further strength to the label of Apealea in Europe, enabling potentially further price increases or a change of category in the reimbursement in Europe. So that will be extremely positive.

The next question comes from the line of Pierre Anderson, use private investor.

My first question is for François. In June, you said that the upcoming value assessment of XR-19 should be expected this calendar year. What is the time frame as of now?

Well, you understand that it takes some months in order to do trials, okay? So what I can tell you is that, as I said to you today, we have promising preclinical results with XR-19 that has a potential to deliver compounds in one single IV administration. The question is around what can we disclose. So we need to continue to revalidate the trial for which we have got some positive results. And then we will let you know. So I -- again, I -- we prefer to communicate solidly on XR-19, once we have the results of the second round of investigations.

Okay. The hurdles you're facing in Denmark, is there a risk that the future partner of Elevar will face the similar problems in other European countries.

I don't expect so because each country has different regulations and requirements. I don't expect that it would be a similar situation in major Europe.

Okay. You mentioned that you are depending on Elevar's studies to overcome the hurdles in Denmark. Are you talking about the 12-month study or the 36-month study?

Good question. I was talking about the 36-month study, yes, the efficacy study. This is the priority study, yes.

Okay. The studies of Elevar that they are planning for the American market, will that help make a Apealea first-line treatment.

The design, as expressed by Elevar will be in platinum-resistant ovarian cancer, as a single agent or in combination with the Bevacizumab, which is Avastin as a trademark. As far as I know, it will not be in first-line platinum resistance, okay? It's the second line. And you had a question about Europe, I mean, whether that will be strengthened in Europe. Yes. Of course, I mean, the study is -- will be done in the U.S., but there will be also some European sensors, by the way. Do you want to go?

[Operator Instructions] We have one more question from the line of Ables Benjamin from -- who is a Private stockholder.

My question to François is that we now know that we have two studies, just like we know in America. But now with the partnership in -- with Elevar, can we expect milestone royalties in the upcoming year in 2021 in order to get in some money to the company.

Yes. So Elevar said recently that they are in relatively close to announce the partner in Europe. So that will be certainly generating sales through the partner. And therefore, you can expect some royalties out of this situation.

Okay. And...

And you have also the same in the Middle East and in some of the territories as well.

Okay. So with the 2 ongoing studies that Elevar is going to do now, do you affect that the burn rate of Oasmia will remain at this level? And we will have cash flow from the upcoming partners of Europe or the Middle East.

Well, these 2 studies will be sponsored by Elevar and fully sponsored by Elevar. The cash burner for Oasmia is, as Robert said, between SEK10 million and SEK 12 million a month. And including a number of trials that I mentioned in my presentation, and we expect to have a runway of more than 2.5 years in this setting, without counting the royalties and milestones coming out of the Elevar deal.

And we have one more question from Friedrich Hagen, who is a private investor.

I was wondering, are you still expecting Elevar to close your commercial deal in Europe, before the year end?

Well, I'm not the CEO of Elevar, but I know that at this December 3 call, he clearly are mentioned that was relatively close. So -- but the answer is yes.

And as there are no further questions, I will hand it back to the speakers for closing remarks.

Thank you very much for this conference call and thank you for your attention. And we look forward to 2021 with optimism and confidence. Thank you again and have a great day.

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