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

Good day, and thank you for standing by. Welcome to the Xbrane Biopharma Q3 2021 [Operator Instructions] Please be advised that today's conference is being recorded Friday, the October 29, 2021. [Operator Instructions] I would like to hand the conference over to the first speaker of the day, CEO, Martin Åmark. Please go ahead, sir.

Thank you very much. So my name is Martin. I'm the CEO of Xbrane Biopharma. And we will, myself and Anette, our CFO, present the Q3 results and provide a business update. There is a possibility to ask questions via the chat. So please do that throughout the call. And we will do our best to answer the questions towards the end of the presentation. Okay. So let's start with a brief update on highlighting the key activities and milestones during the third quarter. When it comes to the Xlucane program, as you all know, we reported positive top line data from the interim readout from our Phase III trial Xplore in end of June, which then triggered the submission of the marketing authorization application to EMA in September. The file was validated by EMA and the procedure officially started on September 30 and will then follow standard time lines. So that's a very significant milestone, of course, for the company. It was a significant job by the team here and also by our colleagues at STADA. So we're very happy and pleased of having accomplished this important milestone. We are then working towards submitting marketing authorization application also to FDA, targeting an approval also in the U.S. And we are working on that, and we will submit it sometime in the period, fourth quarter this year, first quarter next year. And we will communicate when we have submitted the file and then also when FDA has validated the file or registers the file based on them assessing the file to be complete for assessment. And that typically happens 30 days post submission. And then, of course, there's a lot of preparation for a potential launch of the product, provided that approval, of course. We are signing supply agreements with our respective contract manufacturers, and they are preparing to manufacture the launch volume of the product. So it's a lot of work ongoing on that front, but it's all exciting and very, very good and promising. So that's very good. Yes. And in connection to that, there's also work ongoing to try to tie up additional commercialization partners in territories where we believe that is needed. As you probably know and recall, Bausch + Lomb will commercialize the product in North America; STADA across Europe and Middle East, select Asian countries. But we are primarily together with STADA trying to tie up additional partners in territories like Latin America, Japan, a few other Asian countries. So hopefully, we will be able to get back on with regards to some news on that during the coming 12-month period or so. So that's a good development, I think, for Xbrane team. Then when it comes to our Xcimzane program, our Cimzia biosimilar candidate, we are now completing the closing -- the production process internally in what we call pilot scale, what we do here at our lab in Stockholm, Solna. We signed an agreement with a contract manufacturer, AGC Biologics. So we will, together with them, scale up the production process to commercial scale and then subsequently produce clinical material. And that will probably take place during the second half of next year, allowing us to be able to initiate clinical trial during 2023. That's the plan. And as we've been discussing previously, we have the ambitions to out-license the rights to this program to a suitable commercialization partner at the preclinical stage. And I think that, that process is going definitely in the right direction. I think there's a strong interest in this product. And as far as we can tell, it still is the only ongoing development program of biosimilar candidate to Cimzia globally, which I think also make this a stronger case, if you will, for out-licensing. So also on this one, I hope that we'll be able to come back and update you more concretely in the coming 12-month period. Now with regards to broader pipeline, we work on our Opdivo biosimilar candidate Xdivane. And we are also -- as we discussed in our Capital Markets Day in May this year, we have the ambition to start 1-year program on an annual basis, and we're now going through a selection process. And also that will only get back as soon as we have gone through that process and provide a portfolio update. Apart from that, it has been an active month now in October from an IP perspective. We had 6 new patents granted in October. And most importantly, 4 of them relate to broadening of our platform technology from E. coli into mammalian cells or CHO cells particularly. And these were inventions coming out of our Xdivane or Opdivo biosimilar candidate program. So I think this is very promising. We started that process some 2 years ago or so with a strong ambition to broaden the platform into CHO and -- with Opdivo biosimilar as the first development program. And I think this now proves that we've been able to broaden our technology into that space. So that's very promising and very encouraging. So that's the main highlights for the quarter. And looking ahead then, coming 12 months, what we have as key milestones and, as discussed, submission of marketing authorization application to the FDA for Xlucane and then trying to tie up a few additional partners in selected territories for Xlucane. And then together with AGC Biologics, scale up the production process of Xcimzane and then prepare for the start of clinical trials, which then could happen in 2023. And then tying up commercialization partner also for Xcimzane with eyes particularly on Europe and the U.S. and then start development of at least one new biosimilar candidate added to the portfolio. That's what we will try to accomplish during the coming 12 months. And here, it's a little bit more clarity, I guess, on the time line for Xlucane. So as I said, September submission of the file to EMA. We've been awaiting. And as you all recall, that's down on the basis of interim readout, and all patients have completed 6 months of treatment. But the study is continuing, and the last patient has fulfilled 12 months of treatment. So we get full data in the first quarter of next year. We're then going to complement the regulatory file to EMA and FDA with the full clinical data. And then submission to FDA sometime in the period Q4 this year, Q1 next year. And we can count on the regulatory process is of 12 months. That's what we in [ estimate ] in accordance with time -- the time lines and what we are going to try to accomplish, which then could lead to approval in the second half of next year and then allow for a subsequent launch. So that's the time line we're working towards. Yes. And then from an IP perspective, we're really now seeing the fruits from our, since I think roughly 2 years back, established IP department, where we are focusing more on harvesting all our different development programs from an IP perspective and trying to submit patent applications and all inventions that come out of our development programs. So 6 new patents granted during October, 4 of them related to broadening of the platform into expression of proteins in CHO cells. And as I said, this is very important and also because all of our new programs we're going to add to our portfolio are going to be biosimilars expressed in the CHO. So therefore, this broadening of the platform technology was very important to us. We have 14 pending patent applications, which we hope to be able to come back around during coming 12 months or so and then since before [ 2 ] approve patents. So all in all, now we have 8 approved patents in our portfolio, with 14 pending patent applications. And now from a team perspective, 54 employees as of end of Q3. And I think we have a very strong culture in the company and positive spirit. We measure this with a metric called Employee Net Promoter Score, and it has been increasing over time. And we're now at a rate of 47%. And as to put that in relation to something, I think the global average, as far as I recall it, 6%, the higher, the better. And 47% is actually very, very good. So we're very pleased about that. We're doing something right from building the team perspective and establishing a strong culture in the company. And I think we are recruiting experienced and competent people with long experience from pharmaceutical development and many of them also being PhD. So roughly 40% of our employees have PhD. So it's a high degree of scientific level, if you will, amongst our employees, which we're very happy about. So that's good. And when it comes to capital markets events, what we're going to participate in during the remainder of this year, we have the LSX conference, it's actually -- it's still a virtual one in November; [ Campaign ] conference, which is a physical one actually in London, second half of November. Then the Jefferies conference in London, physical and virtual actually. And then a couple of events together with Redeye. We're going to participate and present at their Life Science Day, which is the 11th of November. And then we're going to be participating in 2 afterwards in December 9 and 16th of December in London and Stockholm, respectively. So yes, there will be opportunities, hopefully, for you to hear us, particularly on these Redeye events. And with that, I probably will hand over to Anette to go through some of the financials.

Yes. So thank you, Martin. And before diving into the numbers, I just wanted to highlight a few things. But the first one is that one new accounting principle has been implemented as part of the Q3 report. And another one, implemented already in Q1, has been subjected to some further additional work during the quarter. So with that, starting with the first one. It's a new accounting principle implemented in Q3, having a direct impact on the P&L and also hence the net results for the quarter. And it's good news. It's the Xlucane work has met with the recognition criteria for capitalization, meaning that following the interim result that we received in late June, the remaining development risk has decreased, and hence, Xlucane is now considered an asset as of July 1 rather than just a cost on the P&L. That means that as of that date, all development costs will be added to the asset and not expensed over the P&L. For those of you who's been with us for a while, you would have noticed that up until this date [ and read it, all R&D ] charges has been expensed. So there's nothing on the balance sheet. But -- so Xlucane is actually the first one. And this will continue until we launch the product. And the value as of September 30 is close to SEK 27 million, SEK 26.9 million. And needless to say, this has been extremely positive as we have secured the way that Xlucane is now considered an asset, first thing. And also, that will protect also our balance sheet and more specifically equity moving forward. So the next one is, as I mentioned, it was implemented as of Q1 when we published that we -- our intention. We signed a letter of intention with -- regarding Primm Pharma. And then the reclassification was that we kept that as an asset held for sale, meaning that all balance sheet P&L items should be separated out of the normal business, so to speak. For the balance sheet, all of these changes were already implemented in Q1. And as of now, Q3, all effects have been implemented. This has no impact on the group level, but there were -- might be some minor effects on various line items for the quarter and also for the previous comparable quarters. So with that said, moving on to our cost, the cost development and for the quarter amounted to a total of SEK 45.3 million. And actually, that has been a decrease, obviously, the massive impact of the capitalization of Xlucane, which I'll come back to later. But even so, the R&D cost for the total company is still close to 80% of the total operating cost as of September 30. And as you would notice, the G&A costs, we are focusing to be sharp for all our G&A expenses, so they are much in line with the previous quarter. [ So the next scope ], if you're then comparing like-for-like with previous quarters, adding back kind of what we deemed as an intangible asset of the Xlucane capitalization effect, you would see that the total cost is actually like-for-like SEK 72.2 million and meaning that actually R&D is now stepping up to SEK 63 million, 88% of the total cost in the quarter. And so in addition to the capitalized cost for Xlucane, we also have some other R&D costs that are expensed, the SEK 36.5 million. And that includes all the regulatory work, establishment of supply chain for Xlucane, but also for the remaining portfolio for Xcimzane and also Xdivane and other exploratory work. On the next one, we wanted to also to share with you the impact of the capital raise we secured in June, but where all the payment happened in Q3. So you would remember that we raised more than SEK 380 million in June. And hence, that leads us with a fairly strong cash position in the quarter still of more than SEK 380 million. And so that was SEK 380 million and a net of SEK 356 million that actually strengthened our cash position. So with this, over to you, Martin, for the Q&A.

Thank you. Okay. So we have a couple of questions here coming in from the chat. So I'll read out the question, and we will do our best to answer. First question. When Xbrane can expect results from comparative quality studies to demonstrate biosimilarity? So yes, it depends on which product we're talking about here. That's, of course, already done when it comes to Xlucane. It's a crucial part of the whole package that goes to the regulatory authority. So that's, of course, done already for Xlucane. When it comes to Xcimzane is being done gradually, and we are doing that now based on our internal pilot scale production. And then we are going to update that based on commercial scale-produced batches in the second half of next year. But we will communicate upon having performed that step, let's say, at the pilot scale so that we can come back to in the second half of -- no, first half of next year. Yes. Okay. Good. Next question. Do you know about ranibizumab competitor's protein production platforms? How is it compared to LEMO? So we do not know exactly what technologies when it comes to cell lines and the gene constructs that -- our -- to ranibizumab biosimilar competitors are using. So we can't comment on that. And we have no direct comparison when it comes to yield compared to other ranibizumab biosimilars or the originator for that sake. However, we feel comfortable that we do have a competitive production cost based on the commercial partnerships that we've been able to do and know that production cost is a crucial element in the valuation process when these companies are in-licensing biosimilar candidates. So that's probably what we can say there. Next question. How strong protection do you get from approved patents from your point of view? Do you know technologies not claimed in the patents that could yield higher amount of protein and are used by the other companies? I think that we, as a company, amongst biosimilar developers generally speaking, are much more focused on technologies related to yield. We can scan the IP landscape and the IP activity and compare ourselves to other biosimilar developers. And this -- and we see that we have much higher activity when it comes to gene constructs and cell lines, which are the factors mainly impacting yield, while others maybe are more focused on devices, formulations and things like that. That's an area, of course, where we need to also over time be more active. But I do think that we have an edge when it comes to technologies impacting yield. And we are now trying to seek patent protection of everything, which is patentable. But of course, there is also technologies, which is publicly known, which then can be used to a different extent and in combination with know-how to further improve the yield. And again, we -- these are things we do not know when it comes to our competitors. We know what we do ourselves, and we feel comfortable with that. We are very competitive when it comes to yield and ultimately production cost. I think that Cimzia -- our Cimzia biosimilar, Xcimzane, is a great example of that, where I do believe that our ability to get high in the yield is the reason why we now are the only developer, as far as we can tell, going for that target since actually in genes, the production cost is very important to make that a commercially viable product. Okay. Good. Next question. Do you see there would be new products in wet AMD market in near future? New devices appear to previous versions that might affect the market shares. Yes, there are novel developments in this space. And I think the main kind of intent of novel developers is to increase the time between injections for the patients so that the patients have to come to eye clinic a few times during a year. We saw Beovu from Novartis come to market 2 years ago with a label where a subset of the patient population could be injected with 12 months compared to what's on the label for Eylea's 8 months and Lucentis' 4 months [ of those ] clinical use, probably used in a similar fashion as Eylea, every 8 week-- sorry, week, yes. Now we have a couple of more products in that category. There's one product from Roche in that category, for example. So it could be so that there come novel products time to, again, at least on the label throw longer time between injections. But then again, we will have to see if that translates to a different injection behavior in the clinical setting. And we also will have to see the pricing of those products. We are of the belief that if nothing comes to the market, which has a superior efficacy in terms of visual improvement compared to the established drugs, Lucentis and Eylea, then the majority of the market will be Lucentis biosimilars, and I mentioned also Eylea biosimilars, because they will be more cost efficient. And so far, we've seen nothing in the development pipeline, which seems to have a superior efficacy compared to Lucentis and Eylea. Okay. Next question. When can we expect more license deals for Xlucane in the market that -- in markets that are missing? So here I discussed a little bit earlier. I hope that we shall be able to come back and communicate around something in the coming 12-month period. So we are, together with STADA, working actively on this front. So we'll have to come back on that one. Next question. The report reiterates your previous assessment that Xcimzane is the only Cimzia biosimilar in development globally. Could you add some more flavor to that? What is this assessment based on? And how certain are you on this? Well, we track the landscape with regards to information that is public and they can -- we cannot see any public developments. Of course, what we can't outrule is ongoing development, which is not public. However, we have been discussing this product with many companies at conferences and so on and so forth, and we haven't become aware of any ongoing development program yet. So that's our basis. We cannot, of course, be 100% certain, but we feel very comfortable that, that is the case. Next question. Previously, you communicated that you would have a meeting in August, September with the FDA regarding the filing of market authorization. Can you comment on this meeting? Is the outcome what caused the potential time plan slip of the FDA market authorization submission to Q1 2022? So no -- yes, we had that meeting. And one question in that meeting was related to the timing from submission to FDA, the complementing the file with the full clinical data, a full 12-month data from all patients. And I think based on that discussion, we can submit the file in December. But there are also other work that needs to be completed in having the file ready. Therefore, we want to keep it open in time span between Q4 this year and Q1 next year when the filing could happen. And we'll communicate upon submission. So that's the background. Next question. Can you talk about Xoncane? Do you see any interest from potential partners who want to finance it? Yes. So some interest, but as many of you probably are aware, this is a biosimilar candidate to Oncaspar, which is a smaller product, USD 200 million or so of annual sales. So there's a limited set of companies out there that are interested in commercializing such a program. So some interest, but not in the magnitude of what we saw with Xlucane and what we see with Xcimzane. But still, we hope to be able to come back with something on this one. Are there any updates -- okay. Are there any updates on the Xoncane development and potential partners, one, Xoncane; and two, into clinical trials? Yes. Okay. So we'll have to get back. It's depend -- further development on that program is dependent on tying up with a partner. So that will be the trigger. So we'll have to come back on that one. Next question. A question on the emerging competitive landscape with Biogen and Samsung's biosimilar for Lucentis approved in the U.S., September 20 and also in light of the fact that they hold a license from Genentech and have a launch in June 2022 in the U.S. That appears to be roughly 6 to 9 months prior to your -- you possibly launching. Thoughts around Xlucane possibility -- possibly being the third entrant into this market, assuming Bioeq and Coherus approved on the FDA target date in August 2022 and what the brief history from U.S. biosimilars would guide us in terms of market shares in relation to [ timing the market ]. Please elaborate. Okay. You have a good question. No, that's true that IEM got approval in the U.S. and Europe and in that communication state of a potential launch in June and July 2022. And that could indeed be some 6 months ahead of a potential launch of Xlucane. I cannot comment on process of the Bioeq-Coherus product, but I do believe that we would be launching roughly at the same time as that one. Now when it comes to U.S., we believe that we have an edge when it comes to our commercialization partner. We believe that Bausch + Lomb is the best company to commercialize the Lucentis biosimilar amongst these 3 companies that potentially will be having an approved Lucentis biosimilar in their portfolio. Bausch + Lomb is the only company amongst the 3 who has the sales force established in the ophthalmology segment and has a portfolio targeting the retina clinics and the retina specialists. And we believe that, that is an edge, and they have a strong brand name in that segment. I believe that is an edge in terms of driving sales and market share of the product in the U.S. So that's probably what we believe is the main strength when it comes to Xlucane in the U.S. Okay. Next question. Can you comment on your cash position with regards to burn rate? Will it be enough to fund the business until Xlucane reaches the market? Or do you anticipate the need for further funding? Well, I think we discussed this also in the last call, and I think the answer is the same now. It depends on 2 main things. First of all, number one, that the time line is kept with regards to Xlucane reaching the market, so the regulatory time line and then subsequent launch; and number two, timing and nature of a potential deal with the commercialization partner for Xcimzane. So as you can imagine now, which is normally the case when we signed a deal with AGC Biologics, this also will lead to that. During next year, there's going to be an increased capital requirement from the Xcimzane program. And we are confident in being able to tie up a commercialization partner, but also the burn rate will depend on the nature of that deal. As you know, these deals can be front-loaded or back-loaded or somewhere in between. So that will dictate a lot. So that's probably what we can say here. And I think we need to get back on this one when we can comment a little bit more on those 2 current uncertainties, let's say. So yes, that was the list of questions. So with that said -- shall we see -- are there any questions that can come from people participating on voice? No. No one is calling.

No, questions.

Okay. Okay. Okay. So then that was all the questions. And as always, we are at your disposal. Should you have any further questions, don't hesitate to reach out to us via e-mail or phone. And with that, I think we can close this call. And thank you all for calling in and listening and asking questions.

Thank you. This concludes our conference today. Thank you all for participating. You may all disconnect. Have a good day, everyone, and stay safe.