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

Ladies and gentlemen, thank you for standing by, and welcome to Xbrane Biopharma Q2 2021 Report. [Operator Instructions] I would now like to hand the conference over to your speaker today, Martin Åmark. Please go ahead, sir.

Thank you very much, and hello, everybody. Thanks for calling in. We are here to present the Q2 report of Xbrane Biopharma, and we go to page 3. So we're just going through some of the highlights of the second quarter of 2021. We can start with our Xlucane program, our biosimilar candidate to Lucentis. We were pleased to receive a positive top line data from the interim readout, which we did in the ongoing pivotal Phase III trial. And that then triggered a confirmation of our plan to submit the marketing authorization application to EMA, the European regulatory authority, and that will be done next month. It's practically finalized. We worked a lot with that document throughout the year, but intensively during the summer, and it will be submitted during the course of September. When it comes to the biologic license application to FDA in the U.S., it's now planned for the fourth quarter of this year. But we are going to have a meeting with the FDA in August, where that exact plan and the final date will be confirmed, the final date would be set. So it's all proceeding according to plan when it comes to filing of the product to the authorities. And then, of course, an important element for Xlucane is planning for launch of the product, provided that the product is approved, of course. And we are now finalizing the negotiation of supply agreements with our respective contract manufacturers to secure the capacity for production of the product during the first couple of years on the market. And we are looking forward to getting back on this topic during the course of this quarter, but we plan to sign those firm agreements in this quarter. So that's very important, of course. I think these are the highlights on Xlucane side. Then on Xcimzane, our Cimzia biosimilar candidate under development, I think it's progressing well as well. We are finalizing the process pilot scale now internally. Also here, we're on finalization of negotiation with the contract manufacturer for the scale up of the production and also producing clinical material. I think we'll close that agreement during the course of this quarter and then proceed with a scale up together with selected contract manufacturer to be able to take the next step in the development and also take the product into clinic. We are also, as we've been discussing before, in discussions with potential commercialization partners. We have the ambition to partner this program up at the preclinical stage, and we hope to be able to achieve that during the course of the coming 12 months. So that's an exciting element here, of course. So I think our Xcimzane program is also moving along nicely here. Looking at the broader pipeline, Xdivane, our Opdivo biosimilar candidate, we have an ongoing process development internally. And then we are also -- as we discussed in the Capital Markets Day held in May this year, we have the intention to select one new biosimilar candidate this year, and we are going through a selection process currently. But that, as discussed, are going to be targeting products with patent expiry 2028 and onwards. Then we conducted a directed share issue end of June, beginning of July. We raised approximately SEK 380 million and we're very thankful for the support from existing shareholders. And also, we welcome new shareholders to the company in connection with that share issue. Also, we are very happy to be certified as a Great Place to Work by the Great Place to Work Institute. And I think this kind of -- it's a testament that we have a good working atmosphere and a strong culture here at the company and that will come together nicely as a team here. So we're very pleased about that. Then looking ahead in the coming 12-month period with regard to milestones, of course, then the submission of marketing authorization application to EMA and FDA, as discussed for Xlucane important, very important. Some ongoing work to find some additional partners for some remaining territories, let's say, for sales and marketing of Xlucane, thinking about Latin America, China and Japan, so that's still ongoing. And I hope that we're going to be able to get back with something on this front during the course of the coming 12 months. Then on the Xcimzane program, as I said, starting the scale-up of this product together with a select contract manufacturer. And also our vision is to tie up commercialization partner for the program during the course of the next 12 months. So I think it's an exciting time ahead for us here. Okay, we move to the next slide. This is a little bit more in detail the time line for Xlucane. So the interim readout, which we presented the top line data of in end of June, that was based on 6-month data from all patients. And we are then continuing the Xplore trial. And last patient will have concluded the 12 months of treatment in November, and we will then have the full 12-month data in first quarter of next year. But we are submitting the marketing authorization application now to EMA on the basis of the interim readout, and then we're complementing the file with the full study data in the first quarter of next year. And yes, then it's a regulatory process of some 12 months or so. And we hope that we shall have the product approved during the second half of 2022. So shortly after the patent expiry in Europe of the originated product, which is in July 2022. And then provided that the product is approved, we can look forward to launch of the product sometime late 2022, by, of course, our 2 partners, STADA and Bausch + Lomb, respectively. So that's the high-level time line. If we move on to next page, was not intended to do this through in detail. We had a call when we announced the top line data from the interim readout in Xplore. But just from a high level, it was a positive readout. We met the primary end point, which is defined as the difference in the change in visual acuity at week 8 between Xlucane and the reference product Lucentis. And the 95% confidence interval around the difference needs to be confined within a defined equivalence margin of plus minus 3.5% letters, which was the case. So we met the primary end point that was very good. And then when it comes to secondary endpoints, we saw similar patterns of our biosimilar candidates, Xlucane versus original product. And no signals from the safety front or anything like that. So I think it was a positive readout, and we are moving forward towards submitting the marketing authorization application on the back of this interim readout and looking forward to the full data in Q1 next year. And so that's probably the highlights of the quarter. And with that said, I am leaving over to Anette for the more financially related update.

Thank you, Martin, and good morning, everyone. Let me just take a few moments to take you through the financials of the second quarter 2021. Starting with the total income amounting to SEK 3.6 million versus SEK 5.3 million in last year. And those of you familiar now with Xbrane, you would recognize that we accrued the first milestone payment from our licensing partner Bausch + Lomb that we received in Q2 2020, so a year ago. On the right, our expenses amounted to SEK 61 million, somewhat higher than last year. And this increase of SEK 6.3 million is totally explained by the increased R&D costs. We're now close to 85% of the total spend in Q2. Of course, as Martin mentioned, the major Xplore study is running full speed, but the spend is also a result of the increased activities related to the broader pipeline, e.g., Xcimzane and Xdivane. So the next slide, please. So the net result, meaning the summary of the 2 earlier diagrams amounted to a net loss of close to SEK 60 million or SEK 59.2 million versus SEK 53 million last year. Of course, this is then a result of the increased R&D expenditure that I just mentioned. Also, I would like to remind you that as good accounting practice, all R&D costs are up till now fully expensed and nothing is capitalized on the balance sheet as of Q2 2021. This practice though, may be subject to review during 2021 as we receive the positive data from the Xplore study, but we'll come on to that in future calls. The shareholder equity amounted to SEK 149.7 million, versus SEK 191.3 million in Q2 2020. And this might look odd, but this is after the successful direct share issue that we made in June, in which we raised SEK 380 million will be accounted for in the third quarter as the shares were registered and also the payment was received in early July. So that will have an impact, as you will see on the cash position as well on the next slide. So for operating cash flow, we ended negative for one of the reasons that I just mentioned, but also normal variations due to our re-invoicing mechanism that we have with our commercial partner, STADA. And again, as you can see, we ended the quarter with a cash position of SEK 129.3 million, not then accounted for the direct share issue of SEK 380 million before transaction costs that we received early July. So the impact of that will be seen in the third quarter, so in the next interim report. So that is all for the financial. Thank you very much for listening. And back to you, Martin.

Thank you. And we're also happy to announce that we are growing the team. We're now 60 employees. And I think we have had an easy time to recruit talented people, and we were growing to be able to meet our commitments and undertakings on the Xlucane program, but then also to be able to drive our product portfolio of biosimilar candidates. And I think we are growing the team in a good way. We are maintaining a very diverse team from a gender, ethnicity and experience perspective. And we are measuring the satisfaction with the team, and I think we have a very satisfied team. Generally speaking, we're using a measure here internally, which is called employee Net Promoter Score, where we now have a score of 42, which I think can be related to -- with a global average of some 6% or so. So I think it's very good. We're very happy about that. And I think that's also reflected in the outcome of this Great Place to Work Survey and the certification. Yes, this Great Place to Work certification. So we're very happy about being certified. And I think they mentioned this Trust Index, and I think became very high on that one. And of course, there are also some elements that we can take from that work and survey to continue to work on with the aspiration of really being the best workplace worldwide when it comes to pharmaceutical development. Okay. The capital markets events, we are going to present at the Pareto Conference coming up here in the beginning of September. We are going to be at the Kempen Conference in London in November. And we also want to participate in the virtual LSX Investial Showcase Conference in November. Probably we're going to add a couple of other events to this list as well, but it is what we for sure have in the planning. So we hope to be able to meet some of you on some of these events or in -- and on other instances throughout the rest of the year. So with that said, that, I guess, is the end of the formal presentation here, and we can move towards Q&A. And we'll go through the questions that we have here from the chat, and then we're going to move over to your potential questions coming from people who have called in.

Okay. So first question. Do you have any updates on Xlucane development and partner is the first question. Therefore, everybody on the call, Xlucane is our Oncaspar biosimilar candidate. And I do not have a particular update right now, but hope that we will be able to come back during the course of this year with an update. As we've said previously, this is a program where our intention has been clear to find a partner for this program who is willing to take it onwards and with limited remaining requirements from us, from an investment perspective. And we hope we shall be able to accomplish that and be able to communicate something around that during the course of the year. Next question. Could you leave a comment regarding your view on the FDA's first approval of an interchangeable insulin biosimilar? I understand this could be relevant for Xcimzane, but what difference is there from a development perspective? Yes. No, indeed, FDA has a guidance on interchangeability of biosimilars. And essentially, what has to be done is a switching study where you compare the pharmacokinetic patent of your biosimilar candidate versus the reference product during the course of, I think it is 4 switches between the products. And I think this becomes relevant from a commercialization perspective on products who are mainly sold via the retail channel. And it -- that makes sense, I guess, for an insulin biosimilar as has been done now. This is something we are looking into when it comes to our Xcimzane program. It's possible to define the Phase III trial in such a way that you conduct this switching study as part of the Phase III trial and then also go for interchangeability designation by the FDA. That will be the most natural way to do it. But we have made no decisions of that yet. And as I described earlier, our intention is to tie up the commercialization partner to this program preclinically, and we also expect that such a commercialization partner will provide meaningful insights into the salability of going for interchangeability designation or not. But it's good to see, of course, that this first interchangeable biosimilar has been approved by the FDA and paved the way for further interchangeable biosimilars in the U.S. Okay, next question. Can you update on Xlucane's registration readiness, i.e., mock inspections and also your supply chain CMOs you work with. What has and what has not been cleared already by EMA and FDA? Yes. So -- we have 3 main contract manufacturers, I can say, in the supply chain of Xlucane. It's our drug substance manufacturer BiotechPharma, located in Lithuania. Swissfillion, filling the substance into vials and peripheral syringes, located in Switzerland. And then PCI, doing the final packaging. And BiotechPharma is previously approved by the Lithuanian authorities and thereby by EMA, but not yet by FDA. Swissfillion is previously approved by both Swissmedic, which has a mutual recognition agreement with EMA and then also by FDA. PCI is previously approved by both MHRA and the U.K. site and FDA. So I think when it comes to this question, the main element, which we are working on is ensuring that our drug substance manufacturer BiotechPharma is prepared and ready for the preapproval inspection by the FDA, slightly to be triggered by our submission of the biologics license application to the FDA. And I think that work -- well, it has been ongoing for quite some time, and I think it progresses well. So we will probably be able to report back on that as it's getting closer with the potential preapproval inspection by the FDA. Okay, next question. What are your takes on the many changes in the U.S. for biosimilars? Just last month, the FDA approved the first interchangeable insulin biosimilar. Yes. And also in terms of your competitors, U.S. partner Coherus Biosciences, which embarked on a new journey as a drug developer within immuno-oncology. Yes. So we are very happy to see that the recently launched biosimilars in the U.S. has fared very well from a sales perspective. And I think Amgen's Avastin biosimilar is targeting USD 1 billion of sales actually being a blockbuster. So that's quite phenomenal to have a biosimilar as a blockbuster. And I think the situation now and the recent launches, both of Avastin and Herceptin biosimilars, more resembles the European experience, I think we had -- they had 40% volume market share by month 12, which is similar to what we've seen with the launches recently in Europe. So we're very happy to see this development in the U.S. For us. It has always been a question of time more than anything else when biosimilars really would get traction in the U.S. And we're happy to see that happening now. When it comes to -- when it comes to Coherus, we're noting that they are moving into novel drug development, we shouldn't comment so much on other companies in that sense. We're interested, of course, also in the immuno-oncology space since we're working on an Opdivo biosimilar. And I've said that before, actually, I'm more comfortable in developing a biosimilar to Opdivo than going into development of a novel PD-1 inhibitor. I think it's these products, in particular, the clinical journey is quite significant if you're going to get approval for all the different indications, and that's really benefits with doing a biosimilar in this space, because with one Phase III trial in one well-selected indication, you can get indication extrapolation in all the indications approved of the originated product. So I'm pretty happy actually we're going on the biosimilar track when it comes to the immuno-oncology space, and we're very much looking forward to the continued development of our own Opdivo biosimilar. Next question here. In what regions have licensing renegotiations for Xlucane progressed the most? Yes. And I guess that's referred to regions where we have communicated, we want to complement with additional partners, Latin America, Japan and China. I would be saying that currently, we are -- we, together with STADA, are most advanced is in the Latin American territory. And I hope that we shall be able to get back with something on that, but also in the other territories during the course of the coming 12 months. Okay. Moving on to the next question. With the recent directed share issue of SEK 380 million combined with the sale of Primm Pharma for approximately SEK 140 million, do you expect this cash position to be sufficient until Xlucane can bring in enough revenue? I'm not at all going to promise that. And...

The Primm is EUR 14 million, it's not SEK 140 million.

Yes. So the first on the Primm Pharma, we have, as you have noted, a nonbinding term sheet with a company called NewFaDem to divest Primm Pharma. And although the total proceed is EUR 14 million, roughly SEK 140 million, it's not nonbinding agreed upon as an immediate payment in that transaction. A part is an immediate payment, but then a part of that complete transaction sum on is milestone-based. But we can only focus on the SEK 380 million. I think the main thing here is this will take us all the way to Xlucane bringing in enough cash that we become cash flow positive is related to, one, that we are progressing on Xlucane according to plan with the regulatory approvals and launch, that's one critical thing, of course. And the other thing is that we are successful in doing a deal with a commercialization partner for our Xcimzane program and that, that deal is of such a structure that we get a meaningful payment and also meaningful financial support for the continued development, thinking mainly about the start of the clinical trials. If both those events come through, it could be so that we -- that this can bring us all the way to cash flow positive stage. But it's nothing that we can at all promise now because it inches upon these 2 events, which we are going to report back on during the course of, well, let's say, the coming 18 months when it comes to getting the approval in place for Xlucane and also getting to the product to market. Can you talk a bit about the Xoncane? Do you see any interest from potential partners who want to finance the project? Yes, we talked about this earlier. And it's nothing so much more to say. We are -- we hope that we should be able to come back during the course of the year with an update on that program. It's a smaller product, as many of you are aware. But still, there is some interest in such a program for specific companies engaged in that space. Okay. Opdivo is an approved drug in many class indications. What is the biosimilar regulatory pathway in this case? Does every indication need a separate clinical Phase III biosimilar request? I think I answered to this question earlier. Although we have not discussed this with the regulatory authorities yet, the general way that authorities look at this is that you do one Phase III trial in one indication and then get indication extrapolation to the other indications. And there's nothing that makes us believe that, that would not be the case for our Opdivo biosimilar. So that's clearly what we planned and believe that shall be the case. Last question, will Xlucane enter into clinical trials this year? So your answer to that question is no, it's not going to happen this year. And again, we'll have to come back and update on this program a little bit later during the course of the year. Okay. Excellent. Those were all the questions that we received over the chat here. So thank you all very much for those. I think we are going to hand over and see if there are any questions coming from people who have called in.