Xbrane Biopharma AB (publ) (XBRANE) Earnings Call Transcript & Summary

Thank you. So hello, everybody, and welcome to this call with the purpose of presenting the interim report for the second quarter of 2020 and give a little bit an overview of the highlights during the quarter. So of course, as for everybody, this quarter has been impacted for us by the ongoing corona pandemic. We took early appropriate measures, I would be saying, in order to limit the contamination amongst our staff and -- but still being able to keep the operations up and running at the pace we needed to, to push forward the development of our different biosimilar candidates. So essentially, all the people that are working in the lab have been working at the office while as we've been trying to have as many of the office workers or the people working from desk, let's say, to work from home. And I think this has been working out pretty well for us. And actually pretty amazed how much you can accomplish in a digital manner. I think this has been a great discovery for us as probably for many other companies. We were able, despite this environment, to close the partnership with Bausch + Lomb and also to conduct a directed share issue. Obviously, a lot of those interactions leading up to those events being done digitally. So I think we've been able to continue as planned despite the corona pandemic. The main impact for us as a company has been related really to the recruitment into the Xplore trial, which slowed down during the worst part of the pandemic, let's say, March to May, and they then picked up. We'll look in more into detail in the recruitment into Xplore in a short while. So I think that those are really the highlights for the quarter. The Bausch + Lomb partnership, the share issue, which we conducted when we also welcomed 2 new institutional investors into the ownership of Xbrane: TIN Fonder and Swedbank Robur Ny Teknik, and then get continued support from a lot of the existing shareholders. So very pleased for the support from new and existing shareholders and that we cherish you. And then also, we signed an agreement with Akademiska Hus for new facilities, we'll talk a little bit more about that as well. And I think that's great for the future development of the company really what's needed for us to push forward a broader portfolio of biosimilar candidates going forward. Susanna will be talking more about the financials, of course. But regarding the cash position, we came out of second quarter with SEK 232 million in cash position. Okay. Then on this page, we can look more into detail on the recruitment into Xplore. And this is something that's been requested by quite a few of our investors, so it's just to kind of provide a more detailed overview about how this has been looking over time. So mid-August, we had recruited 490 patients into Xplore, so that's roughly 85% of the targeted 580 patients. And you can see on this graph, the blue line, which is essentially the number of recruited patients into the trial; and the purple line, which is the activated clinics that have been participating in the trial. So you can see, as you will recall, we had a little bit slower start than anticipated, and that was mainly due to slower activation of sites than anticipated. But you can see that when we reached the target of 150 activated sites being recruiting into the trial, you can see that the recruitment really picked up. And if you look at the first quarter of this year, the period here, we've highlighted as the pre-COVID-19 period, we were recruiting some 15, 20 patients a week roughly. So that's the rate we were running at. And then, of course, there was an impact with regards to COVID-19 and a slowdown in the recruitment. But then, from May and onwards, we saw a pickup as there was a lower degree of contamination across the countries where we are recruiting patients, but also that restrictions, which were putting in place by different -- by the governments in these countries were kind of lifted. And then August was a little bit of a slower period, which was fully anticipated given the vacation impact in many of these countries where we're recruiting. So anyway, now we are at 490 patients. And when we look forward, we believe that we shall recruit somewhere between 10 to 20 patients a week coming into September and onwards. It's a little bit hard to say exactly, of course, as you can imagine. It's dependent upon the potential continued impact of COVID-19, and you've all seen the news, what is happening and the uncertainty around this. But in this period, May to July, when we saw a pickup, we were recruiting some 10 to 15 patients a week. And as I said before, before COVID-19, some 15 to 20. So I think it's reasonable to assume we will be in that range, if you will. So we're pretty confident that we will be able to close the recruitment in the trial. If we are at 15 patients a week, we will end by end of September. If it's a little bit lower than that, we will go into October. But latest by end of October, I believe we shall have finalized the recruitment and recruited the 580 patients into the trial. So that's really the way it looks like. And I'm pretty pleased that we actually are coming towards an end with regards to the recruitment and getting closer to being able to do the first interim readout and then proceed the filing. So with that said, let's move on to next page. So here is then the overall time line. So from the day we have the last patient into the trial, we estimate it will take 8 to 9 months before we can publish the top line data of trial. We're doing the interim report at -- readout at month 6. So 6 months after the last patient came into the trial we're doing the interim readout. And then it takes 2 to 3 months for the statistical analysis and everything for us to then be able to publish the top line data. And that is also the kind of interim readout, upon which we are going to submit the marketing authorization application both to EMA and FDA, and this is in accordance to agreements with both authorities, so we expect to be able to do that mid-2021. And then counting on a 12-month regulatory process, it takes us to mid-2022 for an expected approval of Xlucane. And that is also the timing for when the patent of the originated product, Lucentis, expires in Europe. So that's the overall time line for Xlucane. And if we move on, I know we spoke about this in the last call. I think it's important to stress again the partnership with Bausch + Lomb and really the strength in that when it comes to the North American part of Xlucane sales. We really believe that Bausch + Lomb is a perfect partner for us when it comes to, say, marketing of Xlucane. Kind of a 50-year-old company, specialized in eye products and pharmaceuticals for the ophthalmic segment. And really having the sales force in place already targeting the roughly 2,500 eye clinics in the U.S., which currently are prescribing Lucentis, and therefore, will be prescribing Xlucane in the future. And Bausch + Lomb being a really strong brand amongst eye clinics and in the ophthalmology segment. So I really do believe that Bausch + Lomb is the company best suited to really maximize the commercial potential out of Xlucane in North America, so I think we couldn't have had a better partner than them. And now maybe some of you saw that there were news coming out of Bausch + Lomb that in the beginning of August with their intentions to split up the company in 2 parts, both of them intend to be listed in the U.S., one being focused on the eye products and one being focused on the rest of their portfolio. And I think this, if anything, strengthens Bausch + Lomb as a partner for Xlucane. It provides more focus in the eye part of their business on specifically that portfolio and Xlucane being an even more important part when it comes to future growth of that entity. And also, it will increase the transparency around the expectations for the different important components in their portfolio and amongst them Xlucane being an important one. From the -- for the investor community, and there will be more kind of focus from analysts covering them on the growth element, including Xlucane. So I think this, if anything, is good for us and for Xlucane. So we're very happy with this partnership. And of course, now, together with STADA, working intimately to do all preparatory work for filing and then regulatory approval of Xlucane in the North America and then subsequent launch. And then also now we signed an agreement with Akademiska Hus with regards to new facilities for Xbrane. And they're going to be located in Campus Solna, which is close by Karolinska Institute. And with the large facilities, 2,000 square meters, and that's really good for us. We'll be able to establish a development lab for biosimilars, which encompass both equal E. coli drug [indiscernible] and also mammalian cell-based products. So we're going to have a biosimilar development lab really significantly higher capacity than what we have today. And that, of course, means that we can undertake development for broader portfolio, which we intend to start by the time we move into these new facilities, which is expected March next year. And this, of course, goes hand-in-hand with what we've been doing in the last couple of years to develop and strengthen our platform technology. And I think that's really doing well, and it looks almost surprisingly good. We've had the strength we've had since the inception of the company in the E. coli space and the Lemo technology, which provides a significantly higher yield than competitive systems when it comes to production of E. coli drug proteins. And that is a strength, of course, when it comes to Xlucane and ranibizumab since that is expressed in E. coli. But what we have been doing in the last couple of years is to expand into mammalian cell-based products. And already now, we have a couple of patent applications sent in with certain aspects in that field where we believe also we will have a yield advantage when it comes to that environment. So we're very happy with the development of that platform technology, and it's really what we have to do to now scale up and move to larger facilities to really leverage that platform and being able to broaden the portfolio of biosimilars with this great platform and bring it to the market. So we're very happy to take this step and more news to come, of course, on this topic as we move in and kind of start talk about which will be the new products we're going to add to the portfolio. Okay, with that said, I'm handing over to Susanna to go through the highlights when it comes to the financials.

Thank you, Martin. Let's move over to Page 8 and the update on the Q2 financials. On the left-hand side, we present total income quarter-by-quarter. And here, we have added both revenue and also other operational income. In Q2, we had total income of SEK 5.3 million, and that consists of part of the milestone from Bausch + Lomb and as well as exchange rate gains on receivables and payables. Looking at SG&A. To the right, we had total expenses of SEK 9.7 million in Q2, which is an increase by 23% from last year. The increase is related to expense growth in organization, but also related to transaction expenses. Let's move forward to Page 9. In the table to the -- on the left side, we have R&D expenses amounting to SEK 45.1 million in Q2. This is fairly in line with the previous quarter and also the same quarter last year. Due to the corona pandemic, there were lower activities, particularly in the recruitment in the Xplore study, and this lead into lower expenses than what would have been the case without corona. I should also mention that we have made a restatement of previous 7 quarters, and that relates to the timing of the start of prepayment for procurement of Lucentis for the Xplore trial, and this can be found in Appendix 1. The co-development with STADA is structured such as expense received prepayments for the development of Xlucane, which should cover 50% of the expenses. Part of the prepayment for Lucentis from STADA has however been recognized too early, and this has resulted in lower expenses in the P&L statement. We have corrected the figures for these periods, which have been explained in Appendix 1. This adjustment affects the results and thereby shareholders' equities and also current liability. Although, very important to [indiscernible] is that this is just a timing difference, and this will not affect the payments from STADA. And therefore, have no cash impact for Xbrane. All the prepayments from STADA are estimated to be recognized as revenue within 12 months. So if we look at the net results to the right, it amounted to minus SEK 53.4 million. The loss is fairly in line with previous quarter and which -- of which both the quarters have experienced lower R&D activities due to the outbreak of the corona pandemic. Let's move forward to Page 10. On the left-hand side, you can see the variation in operating cash flow quarter-by-quarter. And for Q2, the amount was positive SEK 15.8 million. For exchanges in trade and other receivables and payables, we usually have quite big fluctuations due to the reimbursement structures that we have with our partner STADA. And this was also the case this quarter. Looking at the cash balance to the right, we ended the quarter with a cash position of SEK 232.5 million. And the cash balance has increased since last quarter due to the equity issue of SEK 136 million after transaction costs. Let's move forward to Page 11. Looking at the summarized figure of the balance sheet in blue, you can see that it has increased to SEK 437.5 million compared to the balance sheet date of previous quarter. Starting off on the asset side. We had noncurrent assets of SEK 91.6 million, which is fairly in line with previous quarters. Current assets amounted to SEK 113.5 million in Q2, where SEK 86.6 million is prepayment primarily for the Xplore study, and SEK 21.2 million is receivable from out-licensing activities. The cash amounted to SEK 232.5 million, and the increase was due to the equity issue. Moving over to the other side of the balance sheet. We have shareholders' equity amounting to SEK 191.3 million, and also here, an increase is due to the equity issue. Noncurrent liabilities amounted to SEK 14 million and it's fairly in line with the previous quarters. Current liabilities amounted to SEK 232.1 million, and that includes deferred income and accrued expenses amounting to SEK 191.9 million, where SEK 130.6 million is deferred income from STADA. That was all on the financials. So back over to you, Martin.

Yes. And we try always to be as active as possible to meet with existing and new investors, and we participate in a couple of events during the spring, some of them which are up, taken on the video recording and also available on our web page. What we plan to do now during the fall, it is to participate now in the beginning of September in 2 events, the Pareto Healthcare Conference, which is 2nd and 3rd of September, and then LSX Nordic Congress, which is happening 1st to 4th of September. Now these -- both of these events are taking place digitally. But the presentations will be recorded and also presented on our web page. Then we plan to participate in the Jefferies Conference in London in November and the LSX Conference in connection with the Jefferies conference. We are going to participate in more capital markets days and so on and so forth, and we're trying to put the full schedule in place here, but we will also communicate with the market, let's say, a week in advance of planned capital market days. So I really hope to be able to meet actually as many of you as possible, provided that the circumstances allow. But otherwise, many of these events are likely to take place in a virtual setting. But then, to be able to meet as many as possible of you in a video context and audio context. Okay. I guess, that is all from us from the formal presentation. And then I guess we're going to shift over to the questions here.

Okay. So first question is, does Xbrane announce the primary 8-week endpoint results at the last patient in and tested after 8-week period immediately when the results have been evaluated? So the answer to that question is no. We're going to the first interim readout when last patient has reached month 6 in the treatment schedule. And then redoing an evaluation of primary endpoint, which, as rightly stated here, is at week 8. But we're doing the interim readout at month 6. Next question is the pace of recruitments has been approximately 31 to 32 patients per month for Xplore study. If this keeps constant, the study is fully recruited mid-November. Do you still see that it is realistic to get the study fully recruited before Q3 ends? So this thing, you might be right, if you look at the whole study. But really, one will have to look at really these different periods, which I'll try to highlight in that slide. The period in Q1 this year, when we had all the sites activated, we were running at 15 to 20 patients recruited per week. And then, as I said, in the pickup period after May to July, when we saw a pickup after the most severe COVID-19 impact, we were running at 10 to 15 patients recruited per week. So going forward, now when people are coming back and is -- came from the vacation, I do believe that we will be somewhere between 10 to 20 patients a week. It's a little bit hard to predict given the potential continued impact from COVID-19. But we already see this week that it's picking up towards these levels. And if it's, let's say, 15 a week, we will be done by end of September. If it's 10 a week, it was approaching end of October. If it's 20 a week, it will be even sooner, sometime in September. So that's probably that we can say here. So I'm pretty confident that we will be ending the recruitment by end of September or stretching into October, but latest by end of October. Okay. Last question we have here. Do you think Bausch + Lomb will be an owner in Xbrane in the future? Well, this is similar to a question which we've been getting a lot of times with regards to STADA's potential, let's say, ownership and/or acquisition of Xbrane, so it's very hard to speculate into this. I know as with Bausch + Lomb, as for STADA, they're more engaged in the sales and marketing of pharmaceuticals and focusing more on licensing in products than doing development from scratch themselves. But with that said, STADA is an owner today, and they've been very supportive from the equity investment side. And we will have to see now going forward, whether that interest also will appear from the Bausch + Lomb side. So that's probably what I can say as of now in that topic. Okay. [Operator Instructions] And one more question that came up here. Have you shaked the study results as blinded? And do you still see there should be not any unexpected when it comes to efficacy and safety? So what we do throughout the trial is to look at the blinded data with the main purpose of see if there's something which sticks out from a safety perspective. So if you were to see a higher level of adverse event than would be expected from normal usage of Lucentis, that would trigger a deeper evaluation of the data because it will be the case, it could be saw that from an ethical perspective, one would have to stop the trial, right? So we've been following the trial and the data from a blinded perspective in that context. And we have seen nothing when it comes to the safety parameters in the Xplore trial, which deviates from normal usage of Lucentis. The same is true when it comes to efficacy, but more from the perspective to see that it's not so that a higher percentage of the participants in the trial, let's say, severely deteriorate their vision because that will also be an important parameter that you -- could trigger a more detailed evaluation. And if that would be the case, from an ethical perspective, stopping the trial, right? And here, we haven't seen anything either that deviates from normal usage of Lucentis. So that probably provides some kind of a better picture on what we're doing from that perspective. Okay. There was one more question coming in here, a specific and interesting one. Can you tell us more about Xoncane? Which formulation will be pursued for the drug? And will there be bridging studies for approval? So Xoncane is a biosimilar candidate to the leukemia drug, Oncaspar, which is a pegylated asparaginase product. And what we do when we do a biosimilar development is at the outset, targeting the exact same formulation used by the originator. So that is what we're doing. We are working towards both pegylation, which is identical to the originate now being Oncaspar, and also formulation being identical to Oncaspar. And yes, there are also indications, there are different formulations. There is a judgment to be done with regards to development of all the formulations or the one who are selling most. So I don't know if this question alludes in that direction that there's a lifeline for which, of course, is the most interesting one. And when it comes to chemical studies for such a program, for sure, comparative clinical trials will be required as per the biosimilar guidelines. We haven't yet approached our Board this -- with regards to specifically that program and the clinical design, so I cannot be more specific than that at this point in time. Okay. Then there was one more question here. Can you talk a little bit about Spherotide? Are you looking to bring it through a Phase III clinical trial by yourselves? Or do you foresee a sale of Spherotide? So as we've been indicating last year or 2, we have seen really the need for focus in the company and put our limited resources into the programs which we believe have the strongest commercial potential going forward. And we prioritize clearly our biosimilar portfolio, which we developed here in Sweden with Xlucane, Xcimzane, a Cimzia biosimilar and the others. With Spherotide and our Italian subsidiary, we have said that we are not willing to invest more into that subsidiary in that program ourselves. We want to find a partner that either would be interested in acquiring the whole subsidiary, or in some kind of a core development or license arrangement, undertake the required financing for that program, in particular, the Phase III trial. So this is an ongoing process, and I think we mentioned also now in the Q2 report that we are now in discussion with a couple of companies that are interested to engage in such a way. And we will see where that leads and obviously, I'll come back to that topic as something hopeful matures during this year. Okay. So I see no more questions here in the webcast. And I -- therefore, I think we can conclude the call. I want to thank everybody for participating and also thank everybody for the questions. It's very helpful and makes it more fun when we get some questions to talk about. We will publish this audiocast, I think, on the web page and also do transcript, as we've done the last couple of quarters and put on the web page. So with that said, I call this call final. And thank you, everybody, for participating.