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

Ladies and gentlemen, welcome to the Oasmia Pharmaceutical Audiocast Teleconference Q4 2021. [Operator Instructions] Today, I'm pleased to present CEO, Francois Martelet; and CFO, Fredrik Jarrsten. Speakers, Please go ahead.

Thank you, and good morning, everyone. So I'm Francois Martelet working as CEO and I'm joined today with -- by our CFO, Fredrik Jarrsten, and thank you very much for joining us to review our Q4 and year-end results. We indeed look forward to getting your questions at the end of this presentation. Let's move to Slide 1, which is the forward-looking statement. But of course, we would but ask you that you read carefully, still important legal information. So Slide 2. I mean, certainly, we did a lot over the last year in the transformation process of the company. We have listed here key steps, and that includes where the design, the articulation, the implementation of a new strategy in order to become a Nordic oncology powerhouse in the long run. This strategy is very well differentiated from other companies in the same sector and rather unique in the Nordic area. Bringing in talented management and board members with strong industry expertise to support this new strategy has been the focus. In licensing, the promising late-stage program, Cantrixil from Kazia Therapeutics and announcing phase -- positive Phase I results at AACR in a peer-review journal of cancer is certainly an achievement. We've been also initiating a research collaboration with Sweden renowned Karolinska Institutet to explore further the full biological potential of our drug delivery platform. We've been starting a Phase Ib trial for docetaxel micellar in Switzerland. We've been settling outstanding legal issues inherited from the previous board and management, reducing, therefore, risk and freeing up to look forward rather than looking backwards. We've been initiating through our partners Elevar and Inceptua freelance activities on Apealea in a few major markets in Europe. And of course, most recently, we've made several important announcements that show our trajectory. One is progress with our next-generation XR-18 drug delivery platform; two, the right issue to help deliver our strategy and unlock the potential in our pipeline; three, and finally, a new company identity Vivesto that demonstrates our confidence in the future, it also marks a new step in the direction of the company. Slide 3. As you know, Apealea, of course, is our lead program for advanced ovarian cancer. It is partnered with Elevar, and Elevar has, in turn, sublicensed to global partners, including Inceptua in Europe. Our immediate focus is on Europe, where Inceptua is well advanced in the preparation of launching the product. As you can see from this slide, Inceptua is an experienced international specialty care and rare disease pharma company, focused on Europe and in the Middle East. They've got some more than 25 years of experience specializing in high unmet medical need pharmaceutical products. And that will give us a lot of confidence in the ability to optimize the launch and rollout of Apealea in Europe. I may also add that there are around 100 employees, and they have around EUR 150 million in sales last year. Next slide, please, Slide 4. Inceptua is, therefore, planning to launch Apealea in the one of the first 2 major largest European markets, the U.K. and Germany in the first half of this year. Following on, European markets for launch are under planning and evaluation. There is an important point that I would like to make here is that with any pharmaceutical drug market launch, Inceptua is following and rightly so, the launch sequence designed specifically for Apealea, taking into consideration the timing effects and the influence of pricing and reimbursement assessments, but also potential negotiations required with budget holders and health care systems and the impact of international price referencing. Because of this, anticipated launch timings in other markets may potentially change. Pricing decisions are the responsibility of Elevar and Inceptua as Inceptua is the marketing authorization holder. They have a clear go-to-market strategy in these key markets like patient access, publication planning and engagement with the medical community. You may understand that for competitive reasons, we cannot disclose more information on these launches. Slide 5. Another highlight for me in 2021 was the implementation of our sustainability agenda for the company. We are absolutely committed to building a sustainable company and business over the long run. As a board and management, we take our commitment to environmental and business sustainability, integrity and quality very seriously. Our goal and my goal in particular, is to excel in corporate governance. We've put in place a number of key initiatives to ensure that we meet and exceed best practices for our industry. Those key initiatives includes implementation of a comprehensive code of conduct for all employees, clear policies and education in areas such as whistleblowing, ensuring equality of treatment for all employees and partners. And even more importantly, managing our environmental responsibilities, including in areas such as safe handling of our chemicals and waste, careful energy usage among and many others, as you all know that we have a lab in Uppsala. Slide 6. Cantrixil is an important asset for us. A very key moment in 2021 was the presentation of the positive Phase Ib results at the American Association of Cancer Research Annual Meeting. And I can tell you that it is certainly a key achievement. The study met its primary endpoint, establishing clinical proof of concept. The data confirmed Cantrixil may induce ovarian cancer stem cell death and therefore, sensitize cancer cells to standard chemotherapy. As you can see here, there were promising objective response rate of 19% and a disease control rate of 56%. This is very encouraging. Why? Because those patients are usually extremely sick. And this is really an encouraging signal of efficacy seen with patients with platinum-refractory ovarian cancer. These data reinforce our confidence in Cantrixil as the first in-licensing of our string-of-pearls strategy. Slide 7, please. We have ambitious plans for Cantrixil over the next year as we prepare to go into Phase II. And the preparation include interaction with our experts of the Scientific Advisory Board, made of key opinion leaders from Europe, Australia and also the U.S. for guidance on the design of the next step, which means Phase II. We also plan to hold talks with regulators to discuss endpoints and appropriate data for filing. These interactions with the regulators are absolutely vital and will help to de-risk the program. Also Cantrixil is a complex drug to make, it does involve up to 3 manufacturers which is, of course, on the other hand, a high barrier for entry. We are currently working on finalizing the sourcing contract, manufacturing supplies for the Phase II clinical study as well as working on tech transfer and scale-up. Slide 8. Docetaxel micellar, which is another promising in-house project for the company, which targets this time, advanced prostate cancer. This is an intravenous formulation of a widely used cancer drug called Taxotere, that you may know another brand name of Taxotere itself. By using our XR-17 delivery technology, we eliminate the need for solubility enhancers, potentially improving the side effect profile and eliminating the need for additional drugs for many patients, such as steroids. Our Swiss partner, SAKK is running a Phase Ib study of 3 major hospitals in Switzerland with the aim of getting on board 18 chemotherapy live patients. The target of SAKK is to complete the trial by the end of 2022. We're also working on expanding the IP, docetaxel micellar and we are evaluating the formulation using our improved drug delivery platform, XR-18. Slide 9. A few more words about the status of the study. The cycle is progressing very well with the recruitment on track. We announced this week -- earlier this week that the first patient has now fully completed the study in this investigatory, initiated Phase Ib trial of docetaxel micellar and furthermore, the first of the 3 dosing groups in the trial has been successfully recruited and the first patients have started in the second dose group. SAKK is also aiming at accelerating the recruitment by adding more study sites in Switzerland and again, for a completion date by the end of this year. Let's move to Slide 10, XR-17 and XR-18. So last year, in 2021, we initiated a collaboration with Karolinska Institutet here in Stockholm to explore the biological interactions of XR-17 with cellular systems in vitro. Planning for the full research project has been completed now, and we look forward to working on the next steps in-house and with additional partners as well. With regard to XR-18, our scientists have identified a first of several promising novel formulation candidates for the platform. These formulations are intended to convey additional features and benefits to the platform and are already tested -- being tested in combination with a widely used oncology compounds. And I'm sure you will understand that we cannot disclose more information about this compound at this stage for commercial and development reasons. Now let's turn to Slide 11. Fredrik, please, the floor is yours.

Thank you, Francois. So yes, Page 11, some key numbers from Q4 report. We had net sales in the quarter of SEK 9.6 million. So that is mainly relating to drug products to Elevar from our inventory. So we have continued to decrease our inventory during the quarter. And at the end of the year, we now have inventory of SEK 9.8 million. Operating costs totaled SEK 31.4 million. So with that, we can conclude for the full year that we have cost savings amounting to SEK 110 million, which is well above the target we set out of achieving SEK 100 million in cost savings compared to 2020. So we're very pleased with that as well. Operating loss of minus SEK 2.1 million. Now that is a significant reduction since Q4 2020, where the loss was minus SEK 59 million. So that is due to reduced cost. But most of all, it's an effect of the onetime nonrecurring positive earnings effect from settlement of litigations. And that positive earnings effect was SEK 33 million. Operating cash flow, minus SEK 44.6 million. And if we adjust for the nonrecurring payments in relation to that settlement of SEK 25 million, the operating cash flow was minus SEK 19.6 million. Cash and cash equivalents at year-end SEK 97 million. Now if we look at the change in cash balance compared to Q3, and adjust for that nonrecurring payments of SEK 25 million, the so-called cash burn would be approximately SEK 9 million per month, which is then also below our target range of SEK 10 million to SEK 12 million. We're also happy to conclude that with the settlement, we have settled debt and in fact, we have no more borrowings, no more interest and debt as per 31st of December. So that implies that we have a net liability of minus SEK 97 million, which is the net cash position, obviously. With that, I can turn to the next page, Page 12. And we would like to again take the opportunity to talk about the rights issue at hand. So after having completed a turnaround, we now need to strengthen our financial position in order to enable us to achieve strategic objectives. So the Board decided on the 19th of January for the rights issue of approximately SEK 150 million, and that was approved by the EGM on the 21st of February. And the money will be used to finance our ongoing business activities as well as develop our 2 clinical-stage assets Cantrixil and docetaxel micellar and also finance the Oasmia technology platform further. We can then turn to Page 13, which is the terms of the rights issue and the process. And we have announced that for each new share -- for each share, you get subscription price and offering 1 new share for every 5 existing shares. And that is at subscription price of SEK 1.68, which gives us total proceeds of approximately SEK 151 million. Now this is also secured to 100% with a few guarantors and that we really consider a strength in this market. In terms of timelines, the prospectus will be launched next week on the 3rd of March, and subscription period will start on the 8th of March and go on to 22nd of March with making the final outcome of rights issue public on the 25th of March. And with that, I hand over to you again, Francois.

Thank you, Fredrik. Well, on Slide 14, I'm very pleased to disclose our new identity. So Vivesto -- Vivesto was chosen following a thorough process working with the brand instituting long run. Vivesto comes from Vivo, be alive in Spanish and encompass our commitment to helping patients meet better lives and hope for the future. This brand name Vivesto has done very well in market research with the physicians, patients and investors as well. The inspiration for the logo is an icon, as you could see from this slide, using an abstract human form with a crescent moon to express innovation and life. Vivesto reflects our optimism and confidence for the future, our commitment to improving survival and quality of life for patients with hard-to-treat and late-stage cancer through R&D and innovation. The full implementation of this brand name will be done when we will be closing the rights issue by the end of March as we didn't want to confuse our shareholders, investors because we are in the middle of the rights issue. Slide 15. We just would like to remember all of you that we have a very clear vision for the business. Our goal is to create a Nordic oncology powerhouse focused on hard-to-treat and late-stage cancer. As I said earlier, this vision is supported by our management team, our Board, and so many of you as well that I have been talking to in the past few weeks and months, investors, shareholders. Let's move to the Slide 16, the string of pearls strategy. Since I joined this company 2 years ago now, I have been focusing my efforts on building our proven capabilities to make us a more attractive partner for innovative assets. Our core capabilities do include product and clinical development, business development and regulatory affairs. Ultimately, we are aiming at building a new pipeline with late-stage oncology assets, starting from Phase I up to Phase III, using different modes of action to spread the risk and therefore, derisk the portfolio, which is usually an obsession of every single CEO in oncology R&D. Once we have completed the development process, we always have the option to commercialize the product through a collaboration or in some cases, to undertake direct commercialization ourselves for certain niche oncology products, mainly in Europe. Slide 17. So in summary, it's a very exciting time to be and to work at Oasmia. We have multiple upcoming catalysts to drive growth. We have the opportunity to create a Nordic oncology powerhouse focused on hard-to-treat cancer. We have the capabilities in place to build a diversified pipeline of program for both cancer by executing our string of pearls strategy through in-licensing and M&A. This ultimate goal to develop a pipeline with diversified mechanism of action, it is the goal -- the overarching goal is to create multiple shots on goal. And this is, I believe, the only way given my experience in the industry over the last 25 years to build a sustainable business in oncology. In the last 18 months, we have been creating a strong platform to attract innovative partners. In the very near future, we will also be looking at attracting international institutions, specialist investors to help supporting our growth. And this concludes our initial presentation. Many thanks for listening. We will now be pleased to answer any questions you have. Operator, I think it's back to you.

[Operator Instructions] Our first question comes from Sean Conroy, Edison.

First is just on the upcoming launch of Apealea in Europe and whether you can provide any more guidance on what discussions have been had around pricing and reimbursement with Germany and U.K. payers? Presumably, these are the last sort of major steps that are needed for Inceptua launches. And then just a follow on -- well, a different point of clarification. You've guided the rights issue will provide finance in general operations for 18 to 24 months. Does that factor in or exclude any plans for business development or M&A?

Okay. Thank you for your question. I will get -- I will answer the first one. We are not part of any pricing and discussions as of last year. This is in the hands of Inceptua. And for obvious reasons that I mentioned earlier in my presentation, it is important that the launch of U.K. and Germany will be first -- and for competitive reasons, I cannot disclose anything further, unfortunately, but be sure that we will be informing the market when the first patient will get Apealea in Europe. And for the rights issue, Fredrik, do you want to make any comments?

Yes. Thank you, Sean. It's obvious that the rights issue at hand and as we have also made clear, that is to finance our ongoing operations as well as the indications that we have. Now that means that any upcoming potential in activities or other transaction that will be looked upon as separate items that we need to look at financing alternatives for. So that is the answer.

[Operator Instructions] Our next question is from Joseph Hedden, Rx Securities.

First one on docetaxel micellar, quite a year on the progress there. I was just wondering if you could give us any kind of metrics that you deem to warrant a successful study. So other than safety, are you targeting any specific response rate in disease control rate, what would you consider a successful work?

Yes. This is an IIT. So it is not a regulatory study by itself. However, certainly, endpoints do include signals of efficacy and not only safety and tolerability, as you said but this is Phase Ib. So basically, we are working on establishing a sound clinical proof of concepts with this study.

Okay. And then perhaps, if I could ask you just on Apealea. Is there any update on Elevar's U.S. development plan or have you any kind of indication from them on the time line that they are looking to disclose what their plans for aftermarket U.S. might be?

Yes. So on Apealea in U.S., I mean, this is clearly in the hands of Elevar. Elevar will communicate at the right time, some progress with regard to the interaction with the FDA, with regard to the clinical design of the study that needs to be performed, but I cannot give you any precise comments on this one. What I can tell you is that this is certainly something which is very on the radar screen of Elevar.

And then just on Cantrixil. I realized that you're still looking to secure supply there. From your expectation that you might start a study by the end of this year.

Yes. So Cantrixil is -- have a different perspective from a manufacturing standpoint. It is not a straightforward process. So we need to include 3 manufacturers and some late-stage process in the manufacturing side of it includes synthesis, which is rather specific. So we are working on securing the manufacturing supply chain of Cantrixil first and foremost this year as well as designing a proper clinical study that would meet FDA and European standards. So end of this year is -- would not be the case. We will be ready, I would say that we are working on the state of full readiness of Cantrixil this year and started next year.

Okay. And then with that in mind, the proceeds from your recent summary, how far would you expect the phase to take you down the road with Cantrixil? Did they get presumably then if [indiscernible]?

Yes. I mean, as Fredrik said, I mean, this rights issue is absolutely geared towards our development of our emerging pipeline and namely Cantrixil and docetaxel micellar for the next 18 to 24 months. So we certainly will be able to initiate the study in this time frame.

[Operator Instructions] We have no further audio questions. Speakers, back to you.

Thank you, operator. So in a nutshell, I'm very pleased to kick off by the end of March, the name our new identity Vivesto, it's a new company with very sound fundamentals. We have no liability at all. We have an emerging pipeline that we want to further develop. We have this, I would say, quite unique string of pearls strategy that is in place, and we want to make it a reality in 2022. Thank you, investors. Thank you, shareholders, and we look forward to updating you at the next teleconference late April, if I remember correctly. Thank you very much. Have a great day.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for attending. You may now disconnect.