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

Hello, everybody, and welcome to this webcast. It's with the reason of us introducing two new biosimilar candidates to our portfolio and initiate development of these two products. My name is Martin. I'm the CEO of Xbrane Biopharma, and I have with me Siavash, our COO and Head of our Biosimilar Program. So we want to spend some time now to discuss our new portfolio. And it will be a presentation of maybe 15, 20 minutes or so, and then we'll have a session of Q&A. Okay. Just starting with the recap from the Markets Day, which we held in May this year. [Technical Difficulty] quite some time to talk about the similar market than -- with regards to attractiveness in the market above all the strong growth, which is expected in this market coming years, on the back of multiple [Technical Difficulty] biological drugs and their patent protection and being opened [technical Difficulty] biosimilars. That said, one of the fastest-growing segments actually, in the pharmaceutical market, I believe it's a very good opportunity for us to tap into this market that opens up. We believe, we are now well positioned to address quite a few of these opportunities, which comes up pretty much to us having a strong team in place. 54 employees now and really having the competence required in us to take programs from the start to regulatory approval. I think, we are demonstrating that now with our lead program, Xlucane and Lucentis biosimilar. We have a strong platform technology, which we have spent quite some time to expand from E. coli to mammalian cells. And we believe that this platform technology gives us an edge, when it comes to [ yield ] in expression of proteins, which translated into competitive production cost. The new facility, which we started here in Solna, with an extended laboratory, with also the equipment required to conduct quite a few programs in parallel here. So we believe that we have, kind of, everything we need in place to accelerate the development of our portfolio. And we put forward an ambition on the Capital Markets Day, with regards to initiating at least one new biosimilar program per year and doing that in such a manner that we still shall be able to become cash flow positive towards the end of 2023 and beginning of 2024. On the back, of course, on expected income to be generated through our lead product then, Xlucane, and also relying on a business model, where we out-license or filed commercialization partner at a rather early stage in these development programs, preferably in, let's say, late preclinical stage, before we go into the clinic. So we can continue to do that. And I think, we've demonstrated with our Xlucane program that we can do that. So if we continue to do that with our upcoming programs, we believe we can reach the cash flow positive stage late 2023, beginning of 2024. So that's our ambition, and we stick with that ambition. We feel comfortable that we're going to be able to achieve it. And yes, this is just what I spoke a little bit about. I think, we now have the platform in place, with regards to the technology, team and facility, to accelerate the development of our product. I think, interesting on the platform technology side also, is that we've been very active on the IP front. We now have 9 approved patents and 13 pending patent applications. So it's not only that we have been active in expanding the platform and strengthening the platform but also in protecting the platform, from an IP perspective, which we're very pleased about. Okay. Then we spoke about target selection also at the Capital Markets Day and that we have a good target selection process in place, which we have been working with, for a couple of years, where we essentially look at the biological drugs, which lose the patent protection in 7 years or so. And that's just because we know it takes roughly 7 years for us to develop a biosimilar, from start to regulatory approval. And it is important to be able to come to market, roughly, by the time of patent expiry of the originator product. So that's, kind of, the first lens or first criteria that we put forward, when we're selecting new targets to go for, and of course, technical feasibility. So in a way, can we express this protein and can we get a competitive, given thereby production costs on the back of our platform technology, for this specific product? We know that our platform technology is better for some proteins than others. So it's about assessing if, we believe, we should have a meaningful competitive advantage, when it comes to cost, on one particular product. So that's another lens or criteria we look at. And we'd like to work with products, where there's a high unmet medical need due to high pricing and high cost of the drugs, limiting the accessibility. Then we believe we can do something meaningful for the patient population in question, in coming out with a biosimilar, priced at a lower level and then increasing accessibility. And then we want to work with progress, which have, or at least are expected a peak to have, about EUR 1 billion of annual sales. So that's, kind of, the main criteria that we look at, on selected products. And naturally speaking, then we are looking now at products with patent expiry between '28 and '30. And we've gone through the process in 2021, and we have now selected and decided to introduce biosimilar candidates to Darzalex and Keytruda in our portfolio. So we're now starting saline development on biosimilar candidates to these 2 products, and we're going to run them through our process development -- of our development process. Okay. And what -- this ever comes in combination with our [ Xcimzane ] program, our Opdivo biosimilar candidate, is really an oncology biosimilar portfolio in these 3 products. And so you probably know them, Opdivo, PD-1 inhibitor, developed by Keytruda, competing PD-1 inhibitor, commercialized by market. They're both revolutionary in treatment of different kinds of cancers, multiple cancer indications. They are approved for improvement ], so revolutionary products in treatment of many, many cancers and -- but very expensive. We're talking about annual treatment costs, which can go up to SEK 1 million a year. So very expensive treatments, which, of course, also limits accessibility and also in certain regions. I think, this is particularly true in the U.S. It can lead to a consult call, financial toxicity, with, essentially, patients surviving cancer but having to face the debt accumulated throughout the treatment and -- finance the treatment. And there's an elevated risk of ending up in total bankruptcy due to this. So there's a problem with the pricing and the cost of these products. And that's what we can address in developing and ultimately introducing more cost-efficient biosimilars to the market. Darzalex, the product used in treatment of another cancer, multiple myeloma. And also there, we have a problem with the treatment cost. We think that this forms a very attractive oncology portfolio for us to work on. And also, I think from an out-licensing perspective -- an opportunity for us to be able to actually now think more as finding a partner, from a licensing perspective, for a complete portfolio of products. And I think, that could be more effective way for us to be working. And of course -- and these are products, which can come to market towards the end of this decade. So we're looking a long time ahead now. And we also see changes in the biosimilar market underway. We have, on one hand, an increased precision over time, in analytical instruments and methods, when it comes to the methods we use to analyze and compare our biosimilar candidate, from structural perspective, versus the reference product. Increased precision in these methods leads to that -- you can, kind of, be more certain about that you have high similarity with regard to structure of the protein, that there's a limited residual left with regards to potential differences. And this actually, has led -- this in combination with that research has been done, looking at Phase III trials conducted for biosimilars. And the fact that most of them actually succeed or meet the primary endpoints, on the efficacy side, and also show no meaningful differences, on the safety end, and kind of put the question on what scientific value we're adding in these Phase III trials, which are rather extensive and costly, of course. And earlier this year, actually, MHRA in the U.K., the regulatory authority in the U.K., came out with an updated guideline with regards to biosimilars, where they open up for waiving the Phase III. So actually, opening up for approving biosimilars on the back of an extension, precise, competitive, analytical assessment, in combination with clinical PK/PD trial for cogenetic and pharcodynamic clinical trial, so more or less, what is done now as Phase I for biosimilar candidates. We've seen this in the U.K. now. And we expect that these updated guidelines could also be the case, going forward, for FDA. We'll see if it happens in this decade or not, but we believe it will happen, ultimately. We believe that this is the course of action for this industry. And we, ultimately, will be able to get approval of biosimilar on the back of competitive analytical assessment and more or less, a Phase I trial ] in combination with looking at some dynamic parameter. So what does that then mean? We think that we are well positioned in such a developing world. We believe that focusing on low production cost, on the back of platform technology, which gives an edge on the production cost, is the right thing to do. And we truly believe that we have an edge versus other developers, on this. And I think, we need to invest further into that. That shall be one of our core edges and one of our core competitive advantages. And I think, it plays very well in this developing world. And also, to continue to be fast and cost-efficient in the development. And what that means is, to lead the industry in being able to win Phase III trials for our upcoming programs. And that should be done on the back of world-leading analytical capabilities. And that's what we're building here in Solna, with regards to instrumentation but also with regards to team and competencies. We really need to invest at that because it will have very important consequences and impact on our development time lines and the costs required or investments required into these developments. And then we need to remain, of course, cost-conscious and agile and flexible, as we grow. I believe we are that today, we continue to be that -- focus on being cost-conscious in everything that we do. So I think we're well positioned, and we have the right competitive advantage for how we believe this world will develop from before. And then looking at our complete development portfolio. Of course, you're very well aware of our Xlucane program, our Lucentis biosimilar candidate, which is in the regulatory process versus EMA. And we're targeting Q1 next year for submission in the U.S., to FDA. And then, we're looking forward to approval towards the second half of next year, followed by the launch of the program through partners ], respectively. Then our [ Xcimzane ] program, our ] biosimilar candidate. As you saw, probably, that we partnered up with AGC Biologics for scale-up and subsequent manufacturing for clinical batches. So that's the process, which we're now going through, together with them. And we've also -- as we've been talking about for our -- trying to find a suitable commercialization partner for this program. I hope, we will be able to get back to you next year with an update and hopefully, some positive news on that. And I think this program is progressing according to plan. And it will be -- still a very exciting situation, I think, as far as we can tell, still we are the only biosimilar candidate under development and targeting things. And still, it's a product with close to EUR 2 billion of annual sales, so still a sizable progress. I think it's ] very interesting commercial opportunity. And then we have our oncology portfolio with our biosimilar candidates, Opdivo, Keytruda and Darzalex, respectively, which now are in more early-stage preclinical development, of course. But I think it's a very exciting portfolio to be going for, that come to market towards the end of the decade. And I think that it's a portfolio we could be thinking about, with regard to one deal, with one commercialization partner, who want to take this portfolio to market. And we will stick to our ambition to initiate at least one new biosimilar development program annually. Now this year, we started to -- we're going to commit to one. It's dependent a little bit on when we see the actual patent expiries of the different products we're interested in, when do we need to start at sometimes into -- comes to another year, maybe it becomes 0, but it should be at least an average 1 new program, on a timely basis. That's what we commit to. So I think that, kind of, ends the formal presentation and update, so to say. And I want to then open up for some questions.

[Operator Instructions] Our first question comes from the line of Mattias Häggblom of Handelsbanken.

So I had two. Curious to understand some of the recent-issued IP. Does that mean that you now have new tools at hand that serves better the development of [ nivolumab ] rather than [ pertozumab ] or why would you -- could you expand otherwise why you have 2 PD-1s in development? And then secondly, sort of tied to that. I'm curious to hear what you make of the fact that Coherus, a leading biosimilar company, has in-licensed a proprietary PD-1 antibody from China but has no biosimilar in development, to my knowledge?

Yes. I can take later part of that question, and maybe Siavash can take the first part. So the assessment is that we believe that the development of biosimilars to PD-1, is a more attractive proposition than developing a novel PD-1. We think, there's a huge advantage, in the concept of indication extrapolation, that we're going to do a clinical trial, demonstrating a covalence in one indication and then get approval across all the indications versus the investments needed actually to take a novel PD-1 to market and getting approval for all the respective indications that otherwise would be higher with the biosimilars. That's why we find it a more attractive proposition to be working on. And with regard to the IP front, I think we've done a lot, when it comes to expanding into mammalian. I think patents that got approved during the year, shows that -- maybe Siavash -- further...

Yes. I mean, we have seen from our experience -- so first of all, I mean, both nivolumab and [ pertuzumab ] or [ IgG4 ] antibodies, in terms of amino acid sequence and structure. And we have seen in our own past experience with [ nivo ] and IP that we have developed for that, [Technical Difficulty] applicable for [ palivizumab ]. And we have seen significant improvement in yields for [ nivo ]. And we believe that we can utilize this in the project and about competitive edge, in terms of that product.

Good. I had one follow-up. I'm curious to -- I read that there are more than 70 drug makers in China, working on PD-1. To what extent, does that come into the equation, when you think about going for another PD-1 in development? I would expect some of them have ambitions outside China, but just curious, how you tie that into the competitive landscape picture?

Well, we do believe at the end of the day, by the end of the decade or 2029 or so, still Opdivo and Keytruda will be the leading PD-1s on the market. And we believe that it will be a huge business opportunity for biosimilars on these two products. And I think that we are well positioned to be a leading player in that emerging biosimilar market, on the back of a low production cost. We do believe that production cost and price will be important, and that's where we want to focus, when it comes to our biosimilar development programs. And we are confident that we are going to be able to find a partner, who wants to take these products to market as well because they're just going to be so sizable products. And we know that many of the companies, which we are working with, are interested in this kind of products. So actually, we believe that this process will be so big, it will be such a big market to address, from a biosimilar perspective. And that's what we're focusing on.

Our next question comes from the line of Christoph [indiscernible].

Two questions, if I may. Firstly, given the two new biosimilar development programs you announced today, how should we look at R&D expenses in the short term, given you initiate or launch two at the same time? How should we look at that? Will that go up, in comparison to what you have shared at the -- this year?

No, I think that -- we run this program in a very cost-efficient manner in the first phase of the development. It's really at the stage where, frankly speaking, [ Xcimzane ] program is now where, really, the investment goes up. That's when we move into commercial and manufacturing side. And that's when it really goes up, from an investment perspective. Cell line development and pilot scale process development, we do internally in a very cost-efficient manner.

Yes. Okay. Clear. Then a bit out-of-a-box question and follow-up on that. Let's say that in whatever time regulatory parties decide to eliminate Phase III clinical trials for biosimilars, what would be the magnitude of cost savings in R&D expenses? As you stated, most of the part of the expense as of Phase III. What is the magnitude? It's significant, I suppose it's more than 50% now?

It is very...

That's the scenario.

Yes, it's very significant. I would probably say, up to 50%. I'll probably say that you would save between 30% to 50% of a given development budget of a biosimilar program, if you will be able to waive the Phase III.

And then another follow-up, if I may. Not on today's news, but I noted that you shared that you plan to submit BLA at FDA in Q1 2022. It sounds like a delay, compared to what has been communicated until today. What is the reason behind that?

Well, we communicated already in our Q3 report that we were to be submitting the BLA in Q4 this year to Q1 next year. And it's just due to the fact that we are working through the file. And there are certain aspects of the file, which need to be reworked for BLA, with a greater level of detail and so on. And it took a little bit longer time than we anticipated. But we're working on it, and we're going to be able to submit it in the first quarter of next year.

But do you expect, that could have a delay in -- do you still foresee, let's say, U.S. approval in H2 of next year?

Yes. Then the regulatory process can take, I think, anything from 8 to 12 months in the U.S. So we hope that we'll be to get it in place before the end of next year.

And our next question comes from the line of David Clement, who is a private investor.

Yes. So I recently noted that your peer, Alvotech, in Iceland, is getting listed in the U.S. And they have a somewhat similar pipeline to yours, at least in the number of targets. However, their valuation is something like 8 to 10x your valuation. And they also have in-house manufacturing capability. So my question is, how do you think about building up or acquiring this during the coming decade, as your pipeline grows?

No, it's a valid and interesting question. And of course, we want to focus on cost and having the lowest production cost. And we believe we have a platform technology, which provides high productivity, so to say, in an expansion of the [Technical Difficulty] progress. But also, the manufacturing side of the drug substance, is something which we are looking into, have to look into during the coming decade and how we shall view that, continue to work with the contract manufacturers like we're doing today or if there is a way for us to do that in a more cost-efficient manner. So we're undergoing such an evaluation. And we're looking at that question. No decision taken, but on the map, of course, and what we, naturally, have to be evaluating, given who we are, is should we have our own manufacturing. And if we would come to that conclusion, of course, to rooms of setting up something yourselves for acquiring. So it's something, of course -- it's not a strategic question for us to ask ourselves and the question we have asked ourselves but not come to the answer on.

[Operator Instructions] There are currently, no further questions on the phone lines. I'll hand the call back to our speakers.

Okay. Excellent. Then we want to thank everybody for calling in and listening, and thanks for all the questions. And then we can close on this call. And we'll -- you'll hear back from us in a new year with hopefully, more positive news.