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

Good day, and thank you for standing by. Welcome to today's Xbrane Biopharma presentation of year-end report 2021. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Martin Åmark. Thank you. Please go ahead, sir.

Thank you, and welcome, everybody, to this call for a presentation of our year-end report for 2021. My name is Martin. I'm the CEO of Xbrane. And I will just start by giving a brief overview of what we've been up to during 2021 from an operational perspective. And Anette, our CFO, who's with me here, will go through financial details of fourth quarter. And then I will end the call with talking a little bit about our focus for 2022. And I'll just start here with an overview of our portfolio of biosimilar candidates. As you all know, our leading biosimilar candidate is Xlucane, with the reference product, Lucentis, in the registration phase with EMA, and BLA soon to be submitted to FDA and partnered with STADA and Bausch + Lomb. And second product is we call Xcimzane, biosimilar candidate to Cimzia, which we recently partnered up with Biogen. And then we have a portfolio of 3 biosimilar candidates to Opdivo, Keytruda and Darzalex, respectively, that are in more early-stage development. And we're targeting to be able to bring these products to market by the time of the respective patent expiry of these reference products, which is from 2028 and onwards. And all in all, this portfolio addresses EUR 32 billion of annual sales of the respective reference products. So if we look back on 2021 and our accomplishments in relation to what we said we should do at the beginning of 2021 and what we managed to do, first, in relation to Xlucane. We reported top line data from the Phase III trial Xplore, both an interim readout in June, and then later, a full 12-month data a couple of weeks ago. We, together with STADA, submitted the marketing authorization application to EMA in September last year. And now, as I said, the BLA to be submitted to FDA in the U.S. is still pending. But we are going to submit it in the upcoming month, in March. Then there's been an ongoing process to try to complement our set of partners for commercialization of Xlucane in certain territories, primarily China, Latin America and Japan. And as most of you know, probably the full commercialization rights of Latin America and Japan belongs to STADA, while as for China, it belongs to Xbrane. So we're working on the China side, while STADA is leading the portfolio on the other regions. This is still pending for 2022, and we hope that we'll be able to get back with some updates on that during the year. Then when it comes to Xcimzane, our Cimzia biosimilar candidate, we signed an arrangement with AGC Biologics for a scale-up of our production process. And it's now an ongoing process to go through that work to scale up and produce a drug substance at a suitable scale for initiation of clinical trials. And also for the Xcimzane program, we signed a deal with Biogen as a development and commercialization partner for that program, which we're happy about and which we discussed in a previous webcast. We also said we would initiate at least 1 new biosimilar development program annually. And actually, last year, we initiated 2 biosimilar candidates to Darzalex and Keytruda. So I think, all in all, we managed to complete many of the targets and ambitions we had for the year. We're pleased and happy about that. Also, in our ongoing development of our products, we continuously developed our platform technology, and we developed the IP portfolio around our patent technology. We now have 10 approved patents and 15 pending patent applications. And so very pleased about the development during, I would say, the last 2 years with regards to IP protection of our platform technology. And particularly, 6 of the approved patents are related to different technologies with regard to protein expression in mammalian cells, and more specifically, CHO cells, which are the host cells that we are using for our oncology portfolio. So it's, of course, very important for the long-term future and also with attempt, of course, to get to a very competitive production costs of these respective products. And then we're also happy about our certification as a Great Place to Work, which we received midyear, roughly. And we're happy to see that we're perceived as an attractive employer within the life science community here in Sweden. And I think we have had an easy time to attract competent people to our organization. We're now close to 60 employees. And so roughly 40% having a PhD background, so a strong academic background and a long experience from pharmaceutical industry. So very happy about how we've been able to grow the team throughout the year as well. I think during 2021, we participated in a couple of Capital Markets Days. And now what we have scheduled for at least the first half of 2022 is to be participating in -- actually, today, the Erik Penser Health Care Day and an upcoming Capital Markets Day arranged by Kempen in April and also by ABG in May. So those are the main Capital Markets Day we're going to be participating in during the spring. So that's probably kind of briefly about 2021 from an operational perspective, and then I can hand over to Anette to go through some of the financial highlights.

So thank you very much, Martin. Good morning, everyone, and welcome to the finance section that's going to be very brief. My name is Anette Lindqvist. I'm the CFO of Xbrane. So starting off with some of the company expenses. And as you can see, the operating costs have decreased significantly during the fourth quarter of 2021. This is mainly driven by 3 things: the reclassification of the development cost for Xlucane amounting to close to SEK 23 million in the fourth quarter. Those of you who listened in on the quarter 3 call would remember the Xlucane met the criteria to be classified as an intangible asset as of July this year -- last year, sorry. The net R&D costs are also less costly than previous quarter as the remaining portfolio is now in a less costly stage. Third, we also see a drop in the G&A overall cost, mainly related to the move into the new premises that are now covered. And we also move into more of a steady state. However, comparing like-for-like, you would -- the total costs are still reduced with close to 10%. And expected outcome of Xplore, the clinical Phase III study, came to an end during the quarter. However, the gross R&D expenditure amount, 90% of our total cost in the quarter, includes the continued regulatory work and start preparations for supply chain processes. And I also would like to remember -- to mention that the total value related to Xlucane on the balance sheet is now almost 50% at the year-end -- so SEK 50 million at the year-end. And last, I'll start -- ending with some cash details. We ended the quarter with close to SEK 300 million in cash, somewhat less than anticipated as the payment from our co-development partner, STADA, was delayed to January. And last, you see some details on our equity position amounting to around about SEK 420 million at year-end, so significantly stronger than last year. And that concludes the finance section. So back to you, Martin.

Thank you. So if we look ahead here for 2022 and what our focus areas shall be for the year. To start with the Xlucane program, of course; then to submit the BLA to FDA for Xlucane, that's due in March; and then navigate through the regulatory process versus FDA and obtain marketing authorization from EMA, which we expect shall take place in the second half of this year. Then of course, we are preparing the supply chain and making sure to book the relevant capacities at our contract manufacturers in order to be able to start production, to launch volume post the patent expiry of the reference products, which is July this year. And of course, we're working closely with our 2 partners, STADA and Bausch + Lomb, for preparation of the subsequent launch of the product. So a lot of things ongoing, of course, when it comes to the Xlucane program. For Xcimzane, it's a process of scaling up the production process together with AGC. And then also, in parallel with that, preparation for initiation of clinical trials, which is really under Biogen's responsibility. But that's also, of course, an activity which will be started throughout during the year. When it comes to Xdivane, our Opdivo biosimilar candidate, we are working now in-house to establish the production process of the pilot case. The cell line development is completed, but we're now in the phase of establishing the production process. And we're working that -- on that during the year and hope to be able to lock that process during the year and then being able to demonstrate a little bit of comparability to the originator at pilot scale so that we can then follow to the next step in the development, which then will be to scale up the process with a selected contract manufacturer. When it comes to the newly initiated development programs on biosimilar candidates to Keytruda and Darzalex, we are in a cell line development stage, and we'll complete that during the year. And we're going to be able to initiate the process development work here internally as well during the year. So that's what we're going to focus on for 2022. And I think now we have a very strong platform technology. We are increasing the IP protection around the platform technology. The benefit with this technology is, as many of you know, yield, which is translated into lower production costs when it comes to drug substance. So that's really, we believe, being our edge in the biosimilar development space. We have a strong team in place. We have the competencies required, really, to take a program from initiation to regulatory approval. I think we now are demonstrating that with our lead program, Xlucane. And we're also set up to be able to run multiple programs in parallel, both from a team perspective, but also then from a facility perspective, where we're now operating. It's a while back in our new laboratory environment here in Campus Solna with significantly expanded capacity. So all this together really sets us up to be able to efficiently run multiple biosimilar development programs in parallel. And that's really what we want to focus on doing now going forward. So just getting back a little bit to what we communicated with more long-term ambition at Capital Markets Day in May last year. Our ambition is still what we'd said then that we're going to initiate at least 1 new development program annually. We want to continue to partner up our programs at the preclinical stage to get suitable co-funding from our commercialization partners. And I think we now have demonstrated that we can do that. We've done it both with Xlucane and with Xcimzane as we demonstrated with the Biogen deal. And I think, particularly, the nature and the terms of the Biogen deal demonstrated that we can get a very high return on investment on such a development. So I think the -- what we want to do is really then to leverage the platform, everything we have, and just broaden the portfolio and be able to do this again and again and again. That's what we want to do, and focus on what we believe we are best at, which is really the preclinical part of the development. And then, of course, we're excited about the upcoming launch of Xlucane, and we still believe that the product has a strong commercial potential. We actually saw a rather significant growth in the underlying market during last year of 14%, I believe, where the market is now EUR 11.7 billion. This is a very sizable market, which we are addressing. Now when it comes to -- when it comes to anti-VEGF for ophthalmic purposes, and of course, then the income we expect to be able to generate from Xlucane, we still believe, shall make it possible for Xbrane to come into a positive operating cash flow environment during the end of 2023, beginning of '24. And still, that we shall be able to broaden the platform as per our ambition and also partner up gradually the different products in the pipeline at the preclinical stage. So that ambition what we talked about and communicated at the Capital Markets Day in May still holds true, and that's what we're working against. So I hope that, that provided some clarity around what we're focusing on for the year to come. And I think we now can shift over to address the questions, which we have here on the chat.

Okay. So let's start here. So I'll read out the question and then answer it as well as I can. First question. I would like to ask if Xbrane has already read out analytical similarity from pilot scale batch size for Xcimzane? Can you comment on that? So we have done -- what we typically do is 3 batches at the pilot scale to lock the process. And we are now the host of receiving all analytical data from those batches. So we don't have all the analytical data from those batches in comparison to the originator, but we have sufficiency to feel comfortable around the process. And that also underpin, of course, the due diligence performed by Biogen in entering into a deal around this program. So we feel comfortable around the process, but we haven't received all the analytical data yet from -- for the pilot scale. The batches, that's going to come in gradually during the coming months, but we're not awaiting for that to kind of go through with the tech transfer and scale-up process with AGC. Next question. Could you comment on R&D costs during 2022? How much Xlucane requires spending until it has been approved? And how much there is R&D spending left in Xcimzane project before completing the preclinical phase? So I think this is a question where -- it's a little hard to go into very much details. But it's clear that the development spend, when it comes to Xlucane, is now coming down as we've -- we're completing the Xplore trial, which, of course, has been the main driver behind the expense when it comes to Xlucane. But still, of course, there is still some development expenses left as we go through the regulatory process. But as you probably saw from the financial walk-through of Anette, some of that reduced spend in relation to Xlucane is now replaced by an increased spend on the Xcimzane program, which now is going into more kind of costly phase in relation to scale-up of the process together with our partner, AGC. So I think it's probably fair to be assuming that all in all together, the expenses could be at a similar level in totality, as has been seen in the quarters during 2021. Okay. Next question. In the Capital Markets Day, you've guided that Xlucane is to be cash flow positive since Q3, Q4 2023. However, in that presentation, there was also presented SEK 50 million R&D costs for Xcimzane being in clinical phase. Could you elaborate this Capital Market Day's guidance now after Biogen deal? How much R&D costs would be in 2023? Yes. No, as I said in the presentation, that ambition still holds true, to reach a state of cash flow positive end of '23, beginning of 2024, which is what we said at the Capital Markets Day. The clinical costs for Xcimzane program will be taken by our partner, Biogen. That's clear. But there still is some development costs that are under our responsibility for that program, as I said, related to the scale-up process. But that guidance still holds true, and it's the same as what we said at the Capital Markets Day. Third question. Could you comment on administrative expenses for 2022 and 2023? Maybe this is a question I hand over to Anette.

Yes. Yes, sure. And as you can see, kind of the overall administrative costs have been somewhat reduced in the fourth quarter. But at the same time, we are also building kind of our structure, housekeeping areas. That said, we expect that to continue but to a less aggressive stage. I would say, that's what we see in 2022. So more of a stable, steady stage, that is what we forecast.

Yes. Thanks. And here's one more question about Xcimzane. As the scale-up has been completed and material for clinical trial produced with Biogen being short of arranging and initiating clinical trials applications, et cetera, or would they only be payer? Does Xbrane need to use its resources for Xcimzane product after preclinical phase? Yes, good that we clarify this. No, the responsibility goes over to Biogen after the preclinical phase. So Biogen would indeed be responsible for everything in relation to the clinical trials, applying for initiation of the clinical trials and running the clinical trials. So the resources from Xbrane's perspective would -- we wouldn't dedicate resources to this program post the preclinical stage. I think that's the right way to put it. Okay, next question. Are there any updates on Xoncane development and potential partners? Will Xoncane enter the clinical trials this year? So as you probably noticed, Xoncane, which is our intended or biosimilar candidate to Oncaspar, is not in our list of programs under active development. It's still a program which we initiated. And we've been saying for quite some time that we're seeking ways of partnering up with someone who is willing to continue that development, but also to finance the continuation of the development. And I have no update as of today with regards to that. I hope that we'll be able to get back with some updates on it throughout the year. But if Xoncane will enter into clinical trial this year, the answer is no. Next question. With Biogen being responsible for the clinical development of Xcimzane, can you say anything regarding potentially going for interchangeability? How do you view it under current circumstances? Yes. I know this is an interesting question. As some of you probably noted, the FDA approved the first biosimilar with interchangeability designation. I think this was last year. There is a clear guideline from the FDA what you need to do, clinically speaking, to get interchangeability designation. And this is something which could be of value for Xcimzane since Cimzia is sold in the retail channel, and therefore, interchangeability could be of value. We have sketched on the designs of Phase III trials, which would incorporate going for interchangeability designation as well, and that's fully feasible and that it has been done with other TNF-alpha inhibitors or biosimilar candidates that are TNF-alpha inhibitors. But ultimately, this will be a call which Biogen needs to make, whether they do that or not. And that decision, frankly speaking, has not been taken yet. Next question. Will you start selling Spherotide in Iran? Should there be a deal between U.S. and Iran that lifts sanctions? Okay. So we provided a brief update on our subsidiary, Primm Pharma, a week ago or so, where we stated that, actually, Primm Pharma has now out-licensed IP and also production equipment in relation to Spherotide, through its production partner, ICI. And we've also reduced the costs or limited the costs, essentially, in our subsidiary, Primm Pharma. So under that license, ICI can and are producing Spherotide to sell into different countries. And we are -- or Primm Pharma is getting a royalty on that out-licensing. And so that's the current arrangement. And with that arrangement, we're happy that the subsidiary is now cash flow positive so that we, [ to emphasize ], do not have to -- we don't have to make further cash injections into the subsidiary. But still, the process is ongoing to try to find a suitable acquirer for Primm Pharma altogether, that then hopefully could be taking the investing behind and taking the development further of this program into European -- particular European market. So that's the situation there. Okay. No, I think that was a good set of questions, and hopefully, that provided some further clarification. It was also the last question on our list here. So with that said, I think we can conclude the call, but we're always here should you have any further questions. You can reach out to either myself or Anette through our e-mail or phone, and we shall happily get back to you as soon as possible. So with that said, I thank you very much for listening, and we can conclude the call.

Thank you very much. That does conclude our conference for today. Thank you for participating. You may all disconnect.