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

[Foreign Language] Francois, very welcome, and the floor is yours.

Thank you, Klas and good afternoon to everyone. So I'm very pleased to be here, as usual, within Erik Penser to present the latest with regard to Oasmia, which is today the Rights Issue. As most of you know, I mean, we are a specialty pharma company focused on oncology. We have the luxury to have 1 product approved called Apealea, paclitaxel micellar, that is indicated for late-stage ovarian cancer patients. And we will be enjoying the launch of Apealea this year in U.K. and in Germany first, through our partner, Elevar/Inceptua. And obviously, we will be expecting royalties and milestones this year, which is certainly an important milestone for Oasmia. We do have also an emerging oncology portfolio consisting of 2 programs, Cantrixil and Docetaxel micellar, and I will speak about that a bit later on. The overarching strategy is to become a Nordic oncology powerhouse. And how do we achieve that? We achieve that through the implementation of a string of pearls strategy, that means adding compounds to our portfolio through either a global licensing-in and/or M&A basically. And then the first pearl of this string of pearls that we obviously would like to expand is Cantrixil that has been licensing in March of 2021, and for which we are working on the preparation of the Phase II, right. So as most of you know, we are a listed company in [ Stockholm ] with a market cap of around SEK 1 million with Arwidsro as our major shareholder, very supportive of our Rights Issue. I will come back to that as well, and Fredrik will comment on that later on, right? So creating a Nordic oncology powerhouse focused on hard-to-treat and late-stage cancer is certainly our, let's say, 5 years, 5 to 10 years goal on the horizon. How do we do this? Because obviously, a vision without a concrete plan is just a dream, and this is not what we want to do. We want to build a diversified pipeline on hard-to-treat end-stage cancer using different mechanism of actions and why different mechanism of actions? Because obviously, the attrition rate in our industry is, as you know, extremely high. So if you are licensing in or acquiring an antibody, small molecule, an oncology virus, a CAR-T, then obviously, through the development programs, you significantly decrease the risk of failure. And diversified because if you want to build a sustainable business in oncology, you need to have a number of compounds, not only 1 or 2. We don't want to be a one-trick pony as some of the companies in the sector are, right? Having said that, we have 2 lines of businesses. On one side, we have our oncology R&D. So this is consisting of Cantrixil, Docetaxel micellar and other compounds to come. So this is really the development part of our business, and we have the commercial line. The commercial line is mainly coming out of Apealea revenues through milestones and royalty with our partners. And also we are building and upgrading our technology platform, XR-17, moving to XR-18 in order to look for ways to potentially use this platform with other compounds. So that's the 2 lines of the businesses. And I mentioned here FarmaMondo, which is our partner for the commercialization of Apealea in Russia, for which we have signed off an agreement late last year. So we've been going through a transformation journey at Oasmia, since I joined the company. Clearly, we have strengthened the management team. We have strengthened the board. We've built capabilities to be more perceived as a more attractive partner. We've been accelerating business development. We've been performing a number of due diligences throughout the past 18 months, looking at companies, product, compounds to add to our portfolio. We've been reducing business risk and this is an important factor that we have inherited a number of legal issues over the -- when we joined the company. And this has been sorted out. So there is a totally clean plate now at Oasmia, explaining the reason why we are embarking on changing the name of the company. And I'll come back to that. And finally, Apealea launches in Europe, in Europe with Inceptua and put down the roads in Russia with FarmaMondo, and we certainly expect also Elevar to find other partners in other parts of the world such as China, right? So in 2 more details now. I mean, if you look at the progress made over the last year, clearly, Cantrixil licensing in March. Karolinska Institute Research agreement, that was also another milestone for our platform. We have the confirmatory Cantrixil data published in a major scientific publication called cancers. So therefore, we were very pleased with that to have, obviously, the confirmation that we picked the right target. Docetaxel micellar Phase Ib initiated with a famous SAKK Research Group in Switzerland. We have now 3 centers open. The studies consist of 18 patients to enroll. And we are on -- well, SAKK is actually relatively on track in order to enroll all the patients by the end of this year. And also additional agreement for Apealea. This is from FarmaMondo as I said it is a little bit earlier. And finally, the settlement of the legal issues that was certainly something that we were looking forward to address. So having said that, this is really the base upon which we can now build further Oasmia. A quick look at our capabilities. You see people -- and we are not a virtual company, and I want to insist of that because certainly, these are some implication on our burn rate. But however, if you don't have the level of internal capabilities, it's extremely hard and it's more difficult to develop your program further. You can always outsource. But at the end of the day, it's important to have in-house abilities in order to, again, to make the best possible choices with regard to clinical development of your programs. We have our CSO based in the U.S., for instance, with our ears and eyes in the U.S. And we have with Kai Wilkinson in Uppsala, our lab in a very -- with a good hands in terms of research capabilities for our technology platform, right ? So this is a snapshot of our portfolio. We have Apealea, as I said, the commercial launch this year. In the U.S., this is handled by Elevar. For competitive reasons, they do not want to disclose the setting, let's say, the clinical design. And at one point in time, that will be done, obviously, and I will be able to give you more information about that. But be sure that this is super high on the radar screen. Cantrixil intraperitoneal ovarian cancer, we are working on the preparation of the Phase II. Docetaxel micellar in prostate cancer and Cantrixil IV. So that's an interesting thing because we are -- we will be using our technology platform in order to perform preclinical studies that will potentially lead to a new formulation of Cantrixil. So a few words about -- many of you know that about our technology platform, solubilization enhancing. So the advantages of this solubilization process are mainly twofold. You don't need to give any premedication, no corticoids -- As we all know, corticoids do depress the immune system of cancer patients. So you want to avoid that. And two, you have -- you don't have any solvent with paclitaxel micellar for instance. And the chemo is the one that is usually producing a number of side effects when patients get paclitaxel. So this is a better formulation. This is really for patients that are not able to tolerate paclitaxel. I don't want to go into some details about the competitive situation. We are quite similar with Abraxane, but Abraxane is not approved in ovarian cancer, only in breast. And clearly, we have the level of ability using paclitaxel micellar to reduce the overall share time. So physicians can treat patients -- more patients within a 1 single day on an outpatient basis because of our formulation. A few words as well about the indication. We have approved in relapse ovarian cancer for Apealea. In Russia, it's approved in first line. And obviously, with Cantrixil, moving into Phase II down the road, we are certainly planning to have a design that is closer to second line or potentially first or probably second line in order to capture more patients, right ? Apealea commercialization plan. So here on this map, you see exactly the picture. So you have Inceptua responsible for the launch in Europe, in Russia FarmaMondo. Middle East, North Africa, Taiba and in the U.S. under development that will be Elevar. Important to know that if you look at the potential peak sales of this product, you have a little bit, let's say, USD 300 million at peak sales, including the U.S. So you can easily have some estimation for the potential of this product in Europe, although we don't give any indication, and these numbers are actually coming from a number of analyst reports. A few words about Inceptua because a private company, very well established in Europe, about 100 employees, turnover EUR 150 million around. And they will be planning to -- they are in a process to hire key account manager, medical scientific Liaison MSLs in order to launch in the U.K. and in Germany, followed by other countries as well in Europe? And why is it that case? Well, it is a sequential launch mainly for pricing and reimbursement reasons. We obviously would like to have a decent price in the most important market in Europe, first and foremost, right. So this is actually what is mentioned in here. And we are planning to get the first royalties and milestones to Oasmia during the second part of this year. So a few words about Docetaxel micellar, which is the same concept applied to docetaxel. The Phase Ib is well underway in Switzerland, and we expect the enrollment process to be ended this year by SAKK if everything goes well. We will be looking at what do we do next, and that will be part of our use of funds as well depending on the outcome of the trial. And we are thinking about evaluating our XR-18 platform technology with Docetaxel. This is part of our '22 objectives , right. String of pearls. So we will be focusing mainly from preclinical on to Phase II. We don't exclude to go and to perform a Phase III trial, but in some limited indications with a limited number of patients because clearly, we don't have the muscles nor the super capabilities in order to go onto a Phase III that is usually quite costly. But we don't exclude that. So our sweet spot is actually from Phase I into Phase II. So that's the kind of -- which corresponds, by the way, to many oncology companies in -- not only in Sweden but also in Europe. And then once we have good positive Phase II data, this is where we believe that we have created value for our shareholders. And then at that point in time, we can divest partner, let's say, realize the value of such data. So this is exactly what we are planning to do at Oasmia. Cantrixil is an interesting compound. This is a small molecule. And the interesting thing is that not only because the Phase Ib were confirmed and published later on, but because we have an orphan drug designation status from the FDA that means that potentially, we could have a fast track approval down the road. And this is extremely important for us when we design the clinical trial of Cantrixil. We have a strong patent protection that was, of course, is useful. And well, the next steps -- a few words, sorry, about the Phase I data because this is important that, really, this study did meet the endpoints, meaning objective response rate, disease control rate. Objective response rate at 19%. Disease control rate, 56%. These patients are extremely sick. They have had a number of lines of treatment and we are coming with an intraperitoneal administration at a fairly late stage. So again, the goal will be to design a clinical trial for the Phase II that addressed more earlier line of treatment. The other interesting thing for Cantrixil is that, well, you have certainly some sensitivity for the stem cells to other indication, namely in mesothelioma, bladder. And this is important because, I mean, providing that we have enough financing down the road, we could certainly view Cantrixil as a pipeline within a molecule. That means that we can develop some other indications as well. It's not only one quick fix. Okay. Next step for Cantrixil. We had a global advisory board late last year. We are planning to do others as well. We need to get some sort of validation from a clinical trial perspective by the authorities, FDA, EMA, MPA as well in order to continue. And I don't want to rush into that. It is extremely important that we have some kind of blessing by the authorities. And that takes some time, given the COVID situation. And then the other major piece is that the manufacturing of Cantrixil is not that relatively easy. It does imply a number of different manufacturers. You have the purification step at the very end, which is quite unique. And we are trying, as we speak, to secure very strongly the supply chain. Without a proper supply chain, you don't have any business. And without a proper clinical trial, the same. Okay. So this -- what is -- will happen during the whole of 2022? While expanding our platform technology, we have a project ongoing with Karolinska Institute in order to investigate further the platform with cellular systems in vitro. We hope to be able to release some news pretty soon on that one. And also, there will be other steps complementing, going further in order to not only better understand the platform technology, but how can we upgrade it. And that's, of course, very important in particular for Cantrixil IV formulation, Right? So at this point in time, I would like to give the floor to our CFO, Fredrik, that will give us some insight about the right issue and our finances.

So thank you. Happy to be here. This important day. So if we turn to our finances, we just wanted to highlight some key numbers, especially regarding our reduced cost and burn rates. So these numbers refer to the Q3 report where we concluded that operating costs for the quarter Q3 was SEK 26 million, which was a reduction since Q2. And then -- that also meant that the annualized cost savings is more than SEK 100 million since 2020. And you can see the -- on the right-hand side, that positive trend. Now regarding operating cash flow. In the quarter, that was SEK 27 million. That is a cash burn of SEK 9 million per month, which also was below our target estimate of SEK 10 million to SEK 12 million per month. So that led to a cash position at the end of the quarter, 30th of September, of approximately SEK 150 million. Now that highlights, obviously the need for additional financing, which is obviously one of the reasons for the announcement this morning on the Rights Issue. Now the Rights Issue, the background and rationale for the Rights Issue is basically that after the completion of the turnaround, we now have to strengthen our financial position in order to achieve all the objectives that we have set up. And the proceeds from the Rights Issue, we have gross proceeds of SEK 150 million -- SEK 151 million so that's not including issue costs. But those proceeds will be used to finance ongoing business activities as well as our clinical stage asset, Cantrixil and Docetaxel micellar, as Francois was talking about, and also financing the technological platform -- technology platform. And then on the rights Issue process. That is -- you can find that in the press release from this morning. But just briefly, so there's a term of 1 new share for every 5 existing shares to subscribe for -- at the price of SEK 1.68. That will give us net proceeds of approximately SEK 151 million. And this is secured to 100% through subscription commitments from the main shareholder are through as well as guarantee undertakings for the remaining part, 75% of the rights issue. And on the time lines, we will have an EGM on the 21st of February deciding on the provision for the rights issue. And then we will have the prospectus that will be public on the third of March, and the subscription period will run from eighth of March to the 22nd of March and to disclose the outcome of the rights issue on the 25th of March. So with that, Francois?

Thank you, Fredrik. So let's move now to our new identity, new brand name, perhaps a few words about the reasons. I mean, clearly, we have accomplished not only a turnaround, but on transformation process of the company, and as I said, a new management team, new board, change of the strategy and the -- finally the settlement of our inherited legal issues. All of this is 1 phase of Oasmia that is now behind us. And if you want to move ahead and to become a Nordic oncology powerhouse. We believe that Vivesto will be the right brand name to choose. Why Vivesto, So VIV in Spanish means life, esto means this, so this life and what a better word for an oncology company that is committed to improve the lives of patients than Vivesto. So that's the rationale. You could see an abstract human form with a crescent moon to express innovation above all life. So -- and this will be pending an approval at the next AGM on the 21st of February. And then moving forward, we will be Vivesto, right? So in terms of catalysts and short term and medium term, value drivers. So we have Apealea launches in Europe, clearly, further partnering by Elevar, notably in China. Initial revenues and royalties of the Apealea launch in Europe, that's first part 2, the Docetaxel micellar completion of the Phase Ib; and Cantrixil, full preparation, full state of readiness of -- for the Phase II. The technology platform. We continue to work with it. We continue to upgrade with Karolinska with our research team in Uppsala. And above all, we clearly need to make the string of pearls a reality. And although we have initiated that with Cantrixil, of course, you will tell me that the necklace will be a bit short. So we obviously -- and this will be in 2022, right? So this is what I wanted to tell you. It's -- we believe it's a great opportunity to create a powerhouse. I don't see that happening in the Nordic, at least not to my knowledge. We have the level of internal capabilities in place in order to do so to build a diversified pipeline, the string of pearls strategy, multiple shots on goals. So we are not only looking at small modules, for instance, we are looking at a wide range of mechanism of actions. We have a platform for innovative partners and high potential assets. So we become more attractive by itself. Since we have moved to this next step. And finally, we believe that there will be a time to attract institutional investors also from Europe. Thank you for your attention. And I'm ready to take the questions from Klas.

Great. You will have my questions first, and then we will have the questions from the audience that are online, but we probably have some questions that is more or less the same. But I would like to start off with the transaction, and you may be just going to describe the timing. Why is the right time to do the transaction right now?

Clearly, although it is not -- the biotech market is rather weak at the present time, we absolutely needed to strengthen our balance sheet, obviously. And there is not a bit of time than doing it now, basically.

Okay. Perfect. And the classical question, the money that you will get from this transaction, how far does it get you when it comes to your portfolio, right?

So we estimate like in every single biotech company, the money will last for 18 to 24 months. So that will allow us to complete Docetaxel micellar study, the Phase Ib, look for the next trial potentially that will allow us to initiate the Cantrixil study. Potentially look for interim results depending on the kind of a design in 24 months, continue to work with the upgrading of the XR-17/18. Yes. And of course, look for business development activities as well.

Okay. And Fredrik, you mentioned that the burn rate was down to SEK 9 million per month, and you're previously communicated that the goal was SEK 12 million. Should we expect this level to continue into 2022? And when excluding I mean, costs for manufacturing or something like that to prepare preparations for clinical trials.

No, I think we have -- as we said, we have completed a turnaround and that includes definitely the reduction of costs and the annualized cost saving of SEK 100 million is basically reaching the target of what we set up. So not promising anything, but I would say the SEK 10 million to SEK 12 million is definitely something that we can stand by and possibly even further below that, but...

Great. And I just also wonder a little bit about management, if you will participate in this rights issue?

Yes. So this is certainly something that we will do. Yes.

Great. Great. And I mean you have talked a lot about Cantrixil that's your assets, but Apealea in the U.S. is in the hands of Elevar. I understand that they are in control of the information that they will share to the market. But could you say anything how -- what is happening and how the plans look like?

Clearly, they want to maximize the kind of strategy from a clinical standpoint in order to get to an approval ASAP. For competitive reasons, they do not want to disclose that at the present time. But obviously, it will be done at one point.

Okay. Great. I turn to some of the questions. So I have other questions about -- from the audience then about just how things are progressing with FDA -- sort of an FDA pathway forward? But I guess you can't say anything.

I'm sorry.

They need to do further clinical trials to...

Yes, absolutely.

Clarified, of course. Also I have a question if you know about any plans for Latin America, for example, if Elevar is out there looking for finding partners in other parts of the world, and you already have found commercial partners?

Other part of the world, yes. And I know that China is on their radar screen.

Okay. So that's closer than Latin America...

I cannot say that was ...

Great. And we have a question about the Animal Health business is a bit I have forgot for a while. Could you say anything if you are about to reach a sort of a strategy going forward for that part of the business?

Yes, we certainly have a strategy in place, absolutely.

But I mean, are you still looking for trying to out-licensing the assets? Or if you will to find other solutions?

Yes. We are not an oncology company wanted to remain in Animal Health. That's for sure. This is a totally different kind of business compared to the human health business, as you know. And we have a strategy to -- that we are executing regarding the Animal Health business. And we will inform the market when the materialization of this will happen.

Great. And I have a couple of questions about this transaction as well. And is there any institutional investors that will participate? And if you could say anything about the underwriters of the rights issue more than your main shareholder?

Yes. So I mean, this is preferential rights issues, so is directed to the current shareholders. And the main shareholder, Arwidsro has committed subscription to subscribe in this rights issue. So otherwise than that, yes, we have a guarantee consortium of [ OSU ] well-known guarantors that we will include in the prospectus who they are. But that -- we were very happy with the outcome of that exercise. I mean completing a -- having a 100% secured rights issue.

Okay. Perfect. Then I have a question about your XR-17 platform and how you are -- I mean, going forward and trying to find perhaps out-licensing assets or use your technology from other assets?

Yes. The main thing with XR-17, which is the kind of current platform is IP, okay? So obviously, we need to continue working with a platform that would allow us to generate a proper IP. And that's what we are doing with XR-18 for internal research purposes mainly.

Great. And -- yes, we have questions about the Named patient program. Do you have any information to share?

This is handled by Elevar as well. And I cannot comment on that. As you know, Elevar is a privately held company and they do not want to disclose anything that relates to this kind of program, which is ex-U.S. and ex-Europe, which is a limited program basically.

Yes. Okay. You have a partner in the parts of the Middle East, at least. And do you have any other thing to update about the process?

Not really again.

Do you expect any kind of income from that part of your business in?

That partner is also a partner of Elevar. So then it's the same answer. And I will inform the market when I know what's going on from Elevar basically, but I don't have any update at this point in time on this.

Okay. We also have a question about what kind of opportunities you see to finance the company in the long term, I'm looking 3, 4 years ahead, do you see that you will need to do more rights issue? Or do you see other opportunities to get financing?

You want to take this one?

Well, I mean, obviously, you can't comment on concrete actions. But I mean being a biotech company, we're always looking at long-term financing alternatives. So -- and I mean that's a boring answer, but -- yes.

Yes. Yes. Have you -- I mean you have now Cantrixil, you have docetaxel micellar in your own hands. Have you started to do some business development for that? Or is it way too early to start doing that kind of actions?

It's never too early. It takes so much time anyway to conclude anything. So yes, we have been performing a number of due diligences, both for companies, private, public and all compounds, product, let's say. And again, the state of pearls strategy will be a reality or should be a reality in 2022.

And the string of pearls strategy. Could you comment perhaps -- I mean, you have done the transaction with Cantrixil. What -- I mean you mentioned some opportunities during the presentation, but if it's possible to give us further details how the climate out there makes it possible to do further transactions or and how attractive is it from your side in the private market compared to the public market?

Yes. So I would say we have internally kind of a luxury to have a few very good people that were able to pick this kind of opportunities that were not really obvious to anyone like unpolished diamond, like Cantrixil is. And we have obviously identified -- even more than that, other opportunities as well. We are looking at science, for us, science is very important. So we know that if you do that, if you're licensing in from 1b onwards, you reduce significantly your risk of failure during the development program, as you know, very well in Phase II and Phase III and this is our sweet spot. So I -- we preferably looking at compounds that have reached the Phase Ib showing some positive data. And this is what we are doing. If you look only at preclinical stage, of course, the risk is much higher. You never know what could happen. And then of course, if you were a Novartis like I used to work for before, you can permit yourself to have a broad pipeline. And if you ask for a company, you are obsessed with derisking it. You are obsessed with trying to make the best out of what you have, and therefore, trying to make the right choices. And it is so important to do so. But I have to say, I'm very proud to have a significant -- well, a few team members that are extremely clever and persistent and that can pick opportunities around the world, not only in Sweden but also elsewhere like Cantrixil. And this is one of the things that makes us more attractive as a company.

And the organization, are you satisfied with the setup for now? Or do you see a?

Yes, yes, we have reached a decent level of capabilities in-house. We don't plan to expand that much. I think it's always important to have all the functions like we have of -- like a pharmaceutical company, we are a pharma company, not a small size, but still, we have all the functions internally. And this is important. We are not a virtual company. So obviously, this has some consequences on the OpEx side. But as Fredrik said, we've been able to reduce that significantly. So it's a good balance. And when you are a team you are much stronger together and more able to do things rather than outsourcing everything. So that's -- but yes, so far, we have a good level of internal capabilities, yes.

And just going back to your string of pearls strategy. How important is it to have a strong balance sheet to be able to execute transactions?

Well, of course, it is very important. And this right issue will not be enough, obviously. And by the way, this is not geared towards any acquisition is as Fredrik said, for current operations. It is, of course, important. I will never embark on a Phase II or a Phase III without having some strong backing from the financial side, of course, not. We have to be ethical for to respect the patients as well and the clinical trials, yes, of course.

And also going back to the legal issue that was sold in the second half last year. Has there also been something that has stopped you from reaching an agreement with the prospects out there? Or is this more of a financial burden?

Well, I mean, this was certainly a burden and not only from a financial perspective, but also from a reputation perspective, credibility, affecting the company as such, and I'm very glad that this has been finalized, explaining also the timing of this right issue basically because we needed to sort this out before we could move ahead -- That was fairly obvious. Now we are totally clean plate.

Yes. So you now have a new name, financing, and you know more legal issue, and you could move on as a public company.

Yes.

Great. We have questions about Inceptua that is about to launch, Apealea in Europe. Have you heard anything about possible pricing for Apealea?

Well, that's I'm not also allowed to comment. I'm also controlled by Elevar on this. So but the fact that we are -- that they are launching first in Germany and in the U.K. means that you are looking for a relatively high price first in order to secure pricing and reimbursement in the other countries to come in Europe later on. So -- but I cannot comment on any specifics, sorry.

But should we still expect that a launch in Europe will be during Q1? Or is it H1?

Right. It will be H1 absolutely.

Perfect. Great. And I don't have any more questions and looking at the questions from the audience, we don't seem to have any others, at least not at to see that we don't have addressed. Now, I think that's all. And thank you so much.

Thank you, Klas. Thank you.

Thank you.