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

Welcome to the Oasmia Pharmaceutical Audiocast Teleconference Q2 2021. With us today, we have CEO, Francois R. Martelet; and CFO, Fredrik Jarrsten. [Operator Instructions] I will now hand over to Francois. Please go ahead.

Thank you very much, and good morning, everyone. It's a pleasure to provide you with an update on our Q2 and interim results, together with our CFO, Fredrik Jarrsten.

Good morning.

So Slide 2 is forward-looking statement, as I would not ask to read, obviously. Slide 3 is to the speaker slide. So now Slide 4. So this quarter was essentially a quarter of transition and build, as we continue to a greater level of internal capabilities, continue to make the best decisions with Elevar regarding Apealea in our own remaining territories, and above all, we've been heavily involved in M&A and licensing activities. Together with Elevar, we have agreed that the best partner for commercialization purposes in Europe is Inceptua, given the track record in the processor market in Europe. On the staffing side, it's extremely important to remain competitive should we want to become a leading oncology player. So to that end, I'm very pleased to report that Dr. Reinhard Koenig, who worked for us as a consultant for many years, has accepted the role of Chief Scientific Officer. We had also recruited 2 senior-level executives in Medical, a Head of Clinical Development, and a Head of Regulatory. All 3 positions are critical if you want to have enough expertise internally to be able to pick the right targets externally, and to develop them as well. The Board has appointed Andrea Buscaglia as an Independent Director. Andrea brings to the Board a lot of experience in the financing area that will be very useful down the roads. He's currently CFO of Medicines for Malaria Ventures. On the clinical side, we have achieved on-time the initiation of the SAKK study using docetaxel micellar in advanced prostate cancer. This study is currently recruiting in several Swiss centers. Believe it or not, given the COVID times this is a significant achievements. Cantrixil Phase I data have been reported in a renowned publication, which confirms the fact that we have picked a good target to be further developed from a clinical standpoint. So all in all, it was a very exciting quarter built fundamentally as you could see. And I will now hand it over to Fredrik to provide with the Q2 financial highlights. Fredrik, please?

Thank you, Francois. So next page, Page 5, if we look at the key figures for Q2. So this quarter sales, we had SEK 4.6 million. This is also H1 sales basically that relates to other income from sale of finished products from our inventory in preparation for Elevar's PK study. Now if compare sales in H1, 2020 last year, that was almost exclusively a result of the first milestone payment from Elevar, as you know, the upfront payment of USD20 million. So operating expenses amounted in the quarter to SEK 32 million, that confirming annualized cost saving achieved more than SEK 100 million since 2020. The operating loss for the quarter, minus SEK 56 million. Now that included a non-cash item of a write-down on inventory due to expired or soon to expired shelf lives on finished products of SEK 17.4 million. Now the major part of that write-down was related to finished product intended for the Nordic markets, where the COVID-19 pandemic has had a clear delaying impact on marketing activities. So if we adjust for this write-down, the operating loss was approximately SEK 39 million. The operating cash flow, roughly equivalent to cash burn in Q2, minus SEK 41 million in H1, that was minus SEK 75 million. Now that year-to-date translates to cash burn at around SEK 12 million per month. Now the target going forward is still set at a cash burn rate of SEK 10 million to SEK 12 million per month as we have previously indicated. And then cash balance, SEK 176 million at the end of the quarter. So at the current cash burn, I want to emphasize we have more than enough cash for current operations for the upcoming 12 months. But obviously, we are evaluating a number of business development projects, so we are also evaluating a number of financing options for those. And with that, I'll hand back to Francois.

Thank you, Fredrik. I'm now on Slide 6. So since I joined the company back to March 2020, we have achieved a lot in relation to the transformation process of Oasmia. The Management and the Board has been changed, bringing on Board senior-level executives from the sector, all of them with a good track record in our industry. The strategy has then be rearticulated and further communicated to the market. We now have a crystal clear strategy for the next 18 months or so, and the implementation of it is what I call Oasmia 2.0. First, we aim to expand the development pipeline through M&A in licensing, and we are heavily involved in various due-diligences of companies and compounds. Secondly, we are executing on the clinical development side of our pipeline, namely Cantrixil and Docetaxel micellar. Thirdly, we aim at leveraging our technology platforms through internal development and potentially out-licensing. Finally, we are maximizing the commercial potential of Apealea, which is now out-licensed to Elevar and Inceptua for Europe. I am perfectly aware that the full implementation of this strategy takes some time to deliver its results. But I'm confident that this is the strategy to move Oasmia 2.0 forward. Slide 7, today we are an emerging oncology company, and we are building a critical mass in our pipeline. On one side, we have an approved product in Europe, Apealea approved for adult patients with first relapse of platinum-sensitive epithelial ovarian cancer, primary peritoneal cancer. And we have a great commercialization deal with Elevar to make it happen in the U.S. as well. This is one leg, one fundamental level of our business. The other leg is Cantrixil and Docetaxel micellar. Cantrixil is also focused on ovarian cancer and the Phase II will be initiated next year. We will apply all our knowledge and expertise gained with Apealea in that indication to the development of Cantrixil. That's the reason, actually one of the reasons why we were picked by Kazia Therapeutics which is biotech company based in Australia. Docetaxel micellar Phase I for prostate cancer is well underway with SAKK. We are continuing, as I said earlier to work hard to add new candidates to this pipeline through in-licensing, focusing on oncology only. And finally, we have also 2 Animal Health oncology assets in Phase II that we are looking to potentially partner. Slide 8, please. Should we want to become a sustainable company in oncology, we need to have a solid portfolio of oncology assets that balance the risk of development as well. We are looking at in-licensing oncology product in preclinical up to late Phase III. We prefer oncology assets with Phase I validated Phase Ib in particular, in order to reduce the risk, we all companies are encountering during the clinical development process. We are not excluding preclinical compounds as well, but then we prefer to acquire or licensing in a platform with multiple options in terms of development. We also are not excluding to go to the market on our own to market those product as long as we are in a niche indication in hard-to-treat cancer. Slide 9, as we are bringing new drugs into our pipeline, we are actively improving and expanding the use of our delivery technologies. We have started research and development on XR-18. That is the next-generation technology, which we hope will have a greater versatility and potential. I'm actually happy to report that now we are progressing to feasibility studies based on the outcome of our recent R&D work. And we are excited about the prospect of XR-19 that is, we are in a process of establishing proof-of-concept to demonstrate the ability for dual encapsulation, enabling combination therapy to be delivered in a single IV administration. Internal studies are underway to identify possible indications and combinations as well. Feasibility studies have been completed on XR-19, and the next step will be to assess how and when we take this concept into development. We are also looking forward to the initial findings on our collaboration with Karolinska Institutet, which is exploring the full biological potential of our drug delivery platform. Those results will be communicated to you before the end of the year. Slide 10, please. Commercial rollout of Apealea by Elevar and its partner has been progressing over the recent months quite well. Elevar has commercial partnerships agreements in Europe, Middle East, and North African region, and discussion with potential partners are progressing in Asia and Latin America. Inceptua has acquired commercialization rights for Apealea in Europe, including the Nordics from Elevar and Apealea. Let me say a few words about Inceptua. It's a highly successful European pharmaceutical company founded in 1997, focused on rare diseases and specialty products, making it the ideal partner for Apealea. Inceptua is in the process of transferring all licenses and marketing approvals for Apealea in major markets including Germany and in the U.K. This will delay the full launch process across Europe and receipt of royalties. But both Elevar and Oasmia are confident that Inceptua has the right network, the right level of expertise and commitment to maximize the launch of Apealea in Europe. We can't give any forecast on the timing of sales and royalties at this present time, while the transfer is being completed. In the U.S., Elevar is progressing development for Apealea, and we look forward to updating you on the progress on that side as well. The Named Patient Program for Apealea is available through Tanner outside the U.S., where the product is not yet commercially available. And although this is not a company guidance, I have included into the slide it sales estimates here from 2 analysts that cover Oasmia to give you an indication of its potential. Slide 11, on Cantrixil. So Cantrixil is a tubulin-binding small molecule with potent cytotoxicity against CD 44+ ovarian cancer stem cells and ovarian somatic cancer cells CD 44+, both resistant to standard chemotherapies. As you remember, it was licensed in from Kazia in -- earlier in the year and is currently in development for advanced ovarian cancer. This Phase II study will be a global one in the U.S. and in Europe, and is planned for next year using Cantrixil current molecular structure. We've made significant and substantial progress towards these key studies, including well, first of all, on the clinical supply agreement side. We are in a process to appoint a scientific advisory Board of experts in ovarian cancer. And we will be initiating discussions and consultations with regulatory bodies, such as FDA and EMA in order to get not only a sense of our clinical design, but also an informal approval of the development program in order, obviously to -- not to design and to maximize the commercial potential down the road. Slide 12, today I can also tell you that we are looking at applying our proprietary formulation technology XR-17 and XR-18 to Cantrixil in order to enhance the compounds properties, including suitability. Cantrixil is the first API to be screened for formulation with XR-17, XR-18, and we look forward to updating you later this year on our progress. Slide 13, coming up behind Apealea and Cantrixil, we have Docetaxel micellar in development for advanced prostate cancer. We need to remind you that prostate cancer is the fifth leading cause of death in men worldwide. The incidence is increasing hugely and there is obviously a large unmet medical need for better treatment. You may know Docetaxel with the brand name of Taxotere, it's widely approved for a range of solid malignancies and is a standard treatment for advanced prostate cancer. Docetaxel micellar used XR-17 to enable IV administration of water-insoluble Docetaxel without the usual solubility enhancers. As you remember and as you know as well, we are working with the SAKK Group, the Swiss Group for clinical cancer research, and the Phase I the trial is underway. It is an open-label, multicenter, single-stage trial at major hospitals in Switzerland. It is currently recruiting 18 chemotherapy-naive patients with metastatic castration-resistant prostate cancers with adequate bone marrow, liver and renal function. The enrollment should be ended by the end of next year. I just want to remind all of you that SAKK is a very experienced partner. They coordinate around 50 clinical trials a year involving new cancer therapy. So we are quite pleased to work with such a reputed institution. Slide 14. As you may know, environmental, social and governance is a new corporate sustainability yardstick, we call that ESG. It is actually widely accepted that ESG performance can give biopharma companies a competitive advantage among their peers and is relevant to how successful a company will be in the future. We at Oasmia despite being a small company, are taking the matter very zealously. And we have embarked on articulating an ESG plan with the help of a consultant with an expert in this area. The plan is now ready, we have started to implement it. Key initiatives include implementation of a comprehensive code of conduct for all employees, clear policies and education in areas such as whistle-blowing, quality of treatment for all employees and partners, environmental responsibilities, safe handling of chemicals and waste in our lab in Uppsala and many more. There is always much more to do always in these important areas. Our focus for the rest of 2021 and 2022 includes the establishment of KPIs and targets, development and implementation of action plan, regularly poll to demonstrate progress, and highlight weaknesses and how to address them. Slide 15, please. So I wanted to show you this diagram that shows our ESG materiality metrics that will help to guide our priorities as well. And it was developed deflating feedback from our principal stakeholders, including patients, including analysts and shareholders as well that will help us to drive our activities in this critical area. In a nutshell important points are: business ethics, good governance, attracting retaining the right type of talent to the company, offer a safe and supportive work environment, and obviously also minimize our environmental footprint where we can. Slide 16. So looking ahead, there are multiple catalysts to drive near-term value over the next couple of years. This includes building on our core capabilities to deliver critical mass in oncology through continued M&A and in-licensing. Also advancing our pipeline, including Cantrixil, trial design, KOL recruitment, supply agreement for the Phase II, Docetaxel micellar, the completion of the Phase Ib by SAKK, optimizing the potential of Apealea, the commercial potential of Apealea, including partnering with -- by Elevar in other territories, further expanding our XR-17 technology platform, including combination therapy proof-of-concept, as I mentioned to you for XR-18 and XR-19, and finally divestment of partnering of our Animal Health assets. So next slide, please. So overall, it has been a quarter, another quarter of steady progress of builds towards really building an oncology company with a growth, competitive portfolio that is capable of delivering long-term sustainable growth. This is our overarching goal at Oasmia. Thank you for listening. And at this stage, we will be pleased to answer any questions you may have. Back to you, operator, please.

[Operator Instructions] Our first question is from Joseph Hedden of Rx Securities.

First one on Apealea, I appreciate you can't say anything about timings of the launch and have the partners, but in terms of the transfer of licenses, a deal has been signed for a little while now. So can you just give an expectation of how much longer you expect that transfer process to take?

Well, first of all, obviously, as you may understand, this is the hands of our partners. So I cannot give you any -- really any precise answer to that front. However, what I can tell you is that the MAH, Marketing Authorization Holder transfer is a time-consuming process. And I'm not expecting Elevar through Inceptua, to complete it before 6 months from now.

That's helpful. So that would mean you're not expecting the launch -- European launch process to start this year?

That's correct. Yes.

Okay. And perhaps moving on to Docetaxel Micellar. You're talking about near and midterm catalysts there. I just wondered if you could give us an idea on the timeline to recruitment, completion of that trial and potential top line readout.

Yes. So the recruitment of 18 patients should be ending by the end of next year. This is our estimated time frame given to us by SCRC, the Swiss Cancer Research Crew. Hopefully, it could be done earlier. I don't have any indication that this time line will be changed at this present time. And then obviously, the readout will be earlier 2023 as long as the enrollment will be ended end of '22.

And then just on business development efforts. You've mentioned you're looking across the spectrum, pre-clinical to Phase III. Can you say anything about the number of opportunities you're currently evaluating? And whether any of those are at later stages in discussion?

Yes. I mean, since I joined the company back 16 months ago, I mean, clearly, we have already been in full process, full due diligence of a number of companies. I cannot tell you the number, but it's in order of magnitude is more than 1 single hand. It's actually close to 10. It is important to find the right company for our business. And that should be a future. Overall, I'm looking at the whole amount of oncology, rising from CAR-T, down to oncology viruses, to antibodies, to vaccines, to small molecules. So this is the ambition. The ambition really is to create a leading oncology company by adding a number of assets that do cover the spectrum of how to treat cancer. So that's the goal.

Our next question is from [ Thomas Itam of RMS Gida ].

Yes. My question is, what is the latest regarding the clinical development of Apealea in the U.S.? And what is your estimate as when a U.S. launch could happen?

Well, you know that, again, this is a matter for Elevar to answer. What I can tell you is that we have -- we are obviously in regular contact with Elevar on the -- those 2 studies, the PK study and the Phase III. And Elevar will be -- and then later on us, we will be reporting the growth progress as soon as it is recruiting.

Okay. And to your best estimate with the current information you have as to when a launch in the U.S. could happen, when would that be?

Right. Usually, a Phase III study in this kind of indication takes about 2 to 3 years in terms of enrollment process. So then you can calculate yourself the kind of a time frame. But you understand that I'm hesitant to give you any precise time frame, because I'm not in control of the medical Department of Elevar. I mean the -- each step at one side. I mean, certainly, there is a full commitment of Elevar to perform both studies without any doubt. The COVID situation didn't help at all as well as the backlog at the FDA level regarding meeting them, and getting that kind of a blessing for the clinical design. So this is -- there will be some delay, but you can easily -- and I think that was complicated earlier -- actually, end of last year, particular time frame for the approval -- potential approval of Apealea in the U.S. But again, things have slightly changed in a way that due to COVID it is with regard to the hospital enrollments, it is a difficult situation now. And also, Elevar is also very much willing to get the blessing of the FDA before starting anything, and that has been delayed as well.

Okay. I understand. And when it comes to out-licensing your technical platform, has any interesting discussions emerged in that respect?

Yes. We are always in an interesting discussion, in fact with a potential partner. At the same time, we are trying to -- as I mentioned, with XR-18and XR-19, trying to progress with upgrading of our platform towards later stage of development. Now we are ensuring that phase, the feasibility studies have been reported to be positive. And we will be obviously updating you on any potential partner at the right time.

Our next question is from Klas Palin of Erik Penser Bank.

I'd like to start with -- you mentioned during the presentation that the sales during Q2 was related to the preparations of the PK study for Elevar. Should we expect you to provide material also for the -- in preparation of the Phase III trial?

Yes. I mean, again, as soon as -- this is a decision made by Elevar -- that will be made by Elevar. We can be reporting to the Street. So as soon as the execution of it will be done, that would be reported certainly.

Yes. But you do not have an agreement when it comes to delivering Apealea substance for the Phase II trial?

Well, we have a licensing agreement. So basically, that sets very clearly the terms of that trial. And -- but then it is licensing out. So ultimately, is responsible for the design and the execution of the study.

Yes. Okay. Great. And then a question about the write-up of your inventories that you are doing in this quarter. I mean, do you see risk of further write-off of your current inventories in the next 6 to 12 months?

Fredrik?

I mean, we do have to follow protocol, obviously. So we do act on the shelf life. The -- when the shelf life expires, that's obviously a need to act on our belt. But this was mainly related to the Nordic sales. And we have acted on that, so yes.

But there is no obvious season to believe that you need to do another write-off in the next quarters then?

Well, I mean, we -- obviously, again, following protocol. And if that happens, need to act. So I can't say more than that.

Our next question is from John Priestner of Edison Investment Research.

I have a couple, so I'll ask them individually. Is there any impact for a period from the appointment of the new CEO at Elevar?

Yes, it's a positive impact. Yes, we have a good relationship with Kate. She was the former CCO, Chief Commercial Officer at Elevar, and we have an excellent relationship with her, and she is absolutely committed to speeding up the process on the clinical development side.

Fantastic. I was wondering if you could provide some additional details around the kind of inventory write-down. Mainly, I was wondering if you could remind us of the current shelf life in the period and how this may potentially be extended by the XR-18 technology?

Frederik.

No, I mean, the shelf life, we -- I mean, we need to act as those are expiring. And looking at the inventory, this batch that we did do a write-down had passed that shelf life. I mean, very clearly, the pandemic situation did not allow us to launch -- I mean, the launch was put on hold. Let's be very clear on this. And that, unfortunately, had an impact on these concerns.

And I was wondering if you could comment on whether any patients have been treated through the main patient program with Tanner Pharma?

Well, this question is also for Elevar, but I think that the -- they are not reporting that Elevar, as we speak. And that -- yes, I mean, the answer is yes. And now I cannot give you the precise number because it is not reported on a regular basis. But there were patients. There were physicians that did ask for Apealea I guess.

That's great. You previously reported we kind of -- first sales in treatment to a patient with Apealea in Finland. Can you comment on whether there have been any kind of repeat sales there and the kind of feedback that you've got from clinicians and kind of thoughts on the product?

The marketing and sales rights have now been transferred to Inceptua, and to the Inceptua to follow up on this initial prescriptions. I don't have any update at this point in time.

Our next question is from [ Tommy Wilson ], a private investor.

I just briefly want to mention that I was disconnected twice on the call. So if I ask anything related to things that you already answered to previously, I apologize for that. So I want to ask you, because you had an interview earlier this summer, where you confirmed the delays in the Elevar studies and as well the Apealea launch in the EU, and that is a little more than a month ago. What have happened since in that short time span to now announce that the Q4 sales in the EU will not happen and that the Elevar studies may not start in Q3, as announced.

I don't think there is anything changing changed, and I don't think that what I said is anything different compared to what I said a month ago. I -- there is a delay in the launch of Apealea in Europe due to the reason that I mentioned, and a transfer mainly, sterilization process with the main supply agreement for Baxter, that is now in the hands of Elevar. It's quite a complex situation. You have Elevar, you have Inceptua into play, and Baxter. And then with related to the studies, the -- well, I mean, the PK study, the final preparation is there, okay? So the case will happen during H2 of this year.

Okay. You have also said now for quite a while that you are in -- like you also said today, you are in long discussions, ongoing discussions with partners or China and Latin America, and you're looking for a commercial partner there. But HLB says on their website and in their semi-annual report this week that they are -- that there is commercialization ongoing in Latin America. Can you say anything about that?

There is not a formal partner or commercialization partner in Latin America. There will be through Tanner some potential -- some prescription on the hard work and -- on a case-to-case basis. So this is probably what has been mentioned in the report that it's a little bit -- it's an extensive use of the word in commercialization, if you understand what I mean.

I understand. There were also some mentioning that they are looking to put rivoceranib in ovarian indication in combination with Apealea. What can you say about that?

I cannot say anything. This is in the area of internal discussion between Elevar and us as well. And when the final clinical design will be subject to -- be communicated to the market by Elevar and you will look on time absolutely.

Okay. Last summer, on most of the presentations Oasmia did, you were referring to the new API and XR-17 in progress and to be revealed soon. And when Cantrixil was eventually revealed 6 months later, and I asked, you said that was, in fact, not the API that you had referred to earlier. Is that new API and XR-17 is still a thing? Because I haven't heard anything about it for a long time.

Yes. You know that -- unfortunately, academic research does not necessarily give results very quickly. But having said that, we have decided internally that Cantrixil will be the API that will be tested with XR-17 platform. So that is our choice. And why do we do that? Because, obviously, we have the full right of Cantrixil and because it's easier for us. And also, because it makes a lot of sense from a business standpoint, to work on an IV formulation together with the original combination that we have that will be used into the Phase II trial. So this is there.

And what do you think the Phase II trial will cost? And how will that affect the burn rate once the study starts next year?

We certainly -- as Frederik did say, we certainly have enough cash to run the operations for the next 18 months or so. Now with -- we are in a planning process to build -- to factor that in, and looking also at a collective financing options as well. And we will update you whenever we have made some decision on this.

And my final question is, I may have missed that. But I think you or Oasmia stated before that they were applying an SBC for extended approval for the patent. Has there been any updates on that?

Well, this is totally in the hands of the IT department at Elevar. So I'm not aware of any recent news on that side, unfortunately.

Thank you. There are no further questions at this time. So I'll hand back over to our speakers.

Thank you. And thank you all for your interest in our quarterly report. As I said earlier, you should really see that as a quarter of transition, quarter of build. And yes, in companies like ours, this flow is a critical issue, but I also made the conscious decision to report really news when they are news, and not things that are not so important. So it's a quarter of transition, quarter of builds. And I thank you for your support, you, all our stakeholders, shareholders, analysts, investors, and we'll continue to stay in touch. Thank you for that. Have a great day.

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