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

Welcome to the Xbrane Biopharma Q4 report presentation 2023. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead.

Hello, everybody, and welcome to our call in relation to the Q4 report 2023. My name is Martin. I'm the CEO of Xbrane Biopharma. And today, I have the pleasure of having with me few more members of our team to present and handle potential questions coming from all of you. I have Anders Tullgren, Chairman of the Board; and Mats Thorén, Board member. I also have, as I usually have our CFO, Anette Lindqvist; but now I also have our CEO and Head of Biosimilars, Siavash Bashiri; as well as Anders Wallström, our Head of Manufacturing. But we will, as we usually do, start with the formal presentation to go through the highlights of the quarter and 2023 and what we have ahead of us for 2024. And then we will have a Q&A session towards the end. First, to look back at 2023. And I must say that despite the financial difficulties we ended up in -- during the second half of the year. I am very proud of what we've been able to accomplish operationally and everybody who has been involved in development and manufacturing of pharmaceuticals and above all biological drugs know this. We had late 2022 approval of our first biosimilar candidate, Ximluci in Europe, and we work intensively together with our partner STADA during the end of '22 and then coming in into 2023 to produce the launch material really. And we've been spending a lot of time on commercial manufacturing of Ximluci to supply to our partners STADA for further supply to the European market. And this has been a great effort by the team, and I'm proud of the accomplishments related to that. Now as you all know, sales uptake was lower than what we anticipated, and that became apparent to us after the summer last year. And looking at 2023, in whole, 33,000 units of Ximluci were delivered from STADA to end customers during the course of the year. We are though continuing to see strong growth, I would say, on a quarterly basis. Volumes to end customers grew 25% fourth quarter versus the third quarter, and that is in line with the growth we also saw in the previous quarters during 2023. Launches are taking place in additional countries across Europe. The product is now available in 15 markets in Europe. And we also manage, as you know, to submit the BLA, so the application for marketing authorization to FDA to seek an approval in U.S. We did it in April and the application was filed in June and the regulatory process is ongoing with a decision date in April this year. We also made important steps forward with regards to scale up of the production process for our 2 upcoming biosimilar candidates: BIIB801, biosimilar to Cimzia; and Xdivane, biosimilar candidate to Opdivo. And we are now well positioned to produce clinical material for both these 2 programs in order to be able to take the programs into clinic during 2025. We have also strengthened our platform technology, really, and we are making great efforts in protecting our platform technology continuously with patents. And we had 3 patents approved and 25 patent applications submitted. So very active year on that end as well. And we're very happy to see that we've been able to expand our platform technology really from staff in proteins for biosimilars expressed in E. coli to biosimilars expressed in mammalian cells, which really is the future for us as well as the biosimilar industry and we're very happy to see that we're making so strong steps forward in that expansion and also patent protection of those new technologies. So operationally speaking, I must say, I'm very proud of what the team at the Xbrane has accomplished. Now looking at our overall portfolio. We have, as you know, Ximluci Lucentis biosimilar on the market in Europe, regulatory process ongoing in the U.S. Our 2 upcoming programs, BIIB801 Xdivane as I said, is about scale-up and production clinical material and then going to clinic in 2025. Then we have Xdarzane, DARZALEX biosimilar candidate, which is in early process development stage here internally. And looking at the estimated peak sales of the respective originated products, this portfolio is addressing a direct market of EUR 27 billion. It's a very sizable market. I'll go then a little bit more into detail on our first program, Ximluci. Looking at the progress with regards to sales in Europe. We now have the product launch together with [indiscernible] across 15 countries. As I said, and this represents approximately 40% of the overall market opportunity, which is at about EUR 5 billion annual sales of VEGF inhibitor for ophthalmic purposes. So that encompasses Lucentis and respective biosimilars to Lucentis as well as Eylea and Vabysmo, which are to competing products with the same mode of action. And we are making progresses together with STADA Ximluci is #2 amongst the 3 biosimilars on the market in Europe and approximately 1% market or close to 1% market share, looking at the ranibizumab market, so that's Lucentis and the Lucentis biosimilars, which was about EUR 300 million in the fourth quarter. And as we've talked about before, we have seen that the uptake has been slower than what we initially anticipated. This is due to more education needed across different stakeholders on the prescriber and payer side. With regards to what biosimilar is the regulatory process that is required for approval, the underlying clinical data for the stakeholders to feel comfortable with that biosimilars has a similar efficacy and safety as the originator. This educational effort has been more significant than what we anticipated. And when we initially compared to biosimilars in oncology and immunology field, where there has been multiple biosimilar launches over the years. Now in ophthalmology, Lucentis biosimilars were the first biosimilars introduced. So therefore, this additional effort needed for education. Also, the element of the pre-filled syringe, which we are developing, and we are planning to launch in the first quarter of next year. And the lack thereof currently has also limited the uptake further. We believe that launching the pre-filled syringe will unlock further market opportunities in Europe. Nevertheless, we're seeing currently at about 25% volume growth quarter-by-quarter. So we are making steps ahead here, although at somewhat of a slower pace than what we originally anticipated. And the long-term view really with regards to Ximluci in Europe for us remains the same as it has been last couple of years. We do believe that eventually, biosimilars to Lucentis will take above 70% of that market from a volume perspective and we do believe that Ximluci shall be the preferred choice across the biosimilars. And 70% volume market share is what we've seen in other biosimilar settings now in oncology and immunology. But over time, with the right educational efforts and eventually a pre-filled syringe to match the presentation of the originator, we believe that this will also be the end game when it comes to biosimilar to Lucentis. Now shifting to the U.S. The importance of this market opportunity cannot be understated, it's very important market opportunity for us. It's about an USD 8 billion market. And that is, again, looking at VEGF inhibitors for retinal disorders, so including Eylea and Vabysmo in addition to Lucentis and the respective Lucentis biosimilars. The regulatory process for Ximluci is ongoing, as you all know. The decision date, the so-called BsUFA date, is set to April. And as we have discussed before, we are having during this first quarter so-called pre-approval inspections at our respective production sites or the contract manufacturers production sites, which are contracted to produce Ximluci for U.S. And it's a very active process with the FDA right now with many questions and answers, particularly in relation to the ongoing inspections. And therefore, we're not going to comment further on the specific communication taking place between us and the FDA currently. What we can say though is that the decision date, the so-called BsUFA date, remains in April 2024. In parallel to the regulatory process, we are also having discussions with potential license take or companies that we can partner up to commercialize Ximluci in U.S., North America, more broadly speaking, as we also have ambitions for Canada. And we are progressing, and we believe that by the time of approval, we will have a commercialization partner as well in place in order to make appropriately preparations for launch of the product. And the situation in U.S. is quite different to Europe when it comes to Lucentis biosimilars. We've seen quite strong uptick actually. There are 2 biosimilars to Lucentis on the market in the U.S., and they've capped some 40% market share looking again at the ranibizumab market, so Lucentis versus the Lucentis biosimilars, that represents some USD 60 million of quarterly sales, fourth quarter. And important to remember here is that the biosimilars are present only in the presentation with vials. So there are no pre-filled syringes for the biosimilars in the U.S. But still, the uptake is very strong. And I think that one difference between U.S. and Europe is that many retinal clinics tied up to [ chains ], which are private equity owned in the U.S. with a very strong partial focus where essentially the cost of the drug becomes of primary importance rather than the presentation and the potential time you say in the administration step if you're having a pre-filled syringe instead of vial. So the importance of a pre-filled syringe is not as significant in the U.S. as it seems to be in Europe. We also saw some important signs of interest in this segment not long ago with Sandoz acquiring Coherus Lucentis biosimilar business for USD 170 million. So that's a sign of interest and that many companies see value in this segment of the market and in Lucentis biosimilars, generally speaking. Another interesting aspect looking at this market opportunity for us are the ongoing IP disputes around Eylea biosimilar candidates. We saw a court ruling in favor of Regeneron, the developer of Eylea, versus Viatris, one of the developers of Eylea biosimilar candidates, which ruled infringement on several patents expiring in 2027 up to 2032. So it seems to be so that launches of Eylea biosimilars can be later than what at least we previously anticipated. We anticipated potential launches taking place already during the second half of this year. Now it looks like that can be delayed until 2027 and even further. Now there are many ongoing lawsuits in relation to other Eylea biosimilar candidates. So the last word is, for sure, not said with regards to all these IP disputes. But of course, if Eylea biosimilar candidate comes later, that opens up a great opportunity for Lucentis biosimilars to capture more market share of the current Eylea market, which you can see on the left-hand side here, actually constitutes the largest part of this market in the U.S. So that's a very important aspect and I think something which was very positive when it comes to the opportunities for Ximluci in the U.S. So overall, we look very positively towards the opportunity in the U.S., and we look forward to be able to report further when it comes to the progress towards the market. So summing up here, the operational update around our overall journey ahead. We are, as you know, now, going through a rights issue and Anette will speak a little bit more about that. But then during 2024, we have a couple of very important milestones or deliverables, which we need to succeed with. And provided that we do that, we are confident in getting to positive cash flow as we previously communicated first quarter of 2025. And I look very brightly on the future of the company from 2025 and onwards. But just to go a little bit deeper into what we need to accomplish during 2024. First, when it comes to Ximluci, of course, we need to continue to support and work intimately with our partner STADA to further grow the sales across Europe and also the ongoing geographical expansion in the Middle East. And also, we need to, of course, secure the FDA approval and lock in a U.S. partner and make the proper -- appropriately preparations for launch in the U.S. This, we need to succeed with. Then on BIIB801, our Cimzia biosimilar candidate, of course, we need to now in a timely fashion succeed with the scale-up and production of clinical material that then will trigger important income for us as a company with regards to sales of clinical material according to the agreement to buy in and also triggering development-related milestone towards the second half of the year. And then for Xdivane, we need to part from scaling up and producing clinical material for that program. We need to be successful in making not licensing deal with a commercialization partner, something which we have talked about throughout last year, and we have an ongoing process for, but need to succeed with and close during the course of this year. Then, again, provided success on these milestones, we look brightly on 2025. We look ahead towards generating meaningful income from the U.S, launch of the pre-filled syringe in Europe, which, as I said, I expect will unlock for the market opportunity and spur the growth in Europe for Ximluci. And then for BIIB801, of course, the continued development is going to be done taken further by buy-in going into clinic and therefore, also development-related costs for us, as a company, will significantly go down and that program shall switch from consumer cash to generating cash essentially. And Xdivane as well, of course, provided that we strike a deal with the commercialization partner and also dependent on the nature of such a partnership. That program shall also be more favorable from a cash flow perspective coming into 2025. So that's what -- that is what we have ahead of us. So with that said, I'm going to switch over to Anette to go through some details about the financials for the quarter.

So thank you very much, Martin, and welcome to the financial section of this presentation. And we will kick off with the revenue -- revenues. And as you are aware, our revenues consist of product sales, which is net profit share from our [indiscernible] commercial agreement with STADA and also shipments to STADA sold at cost. And the second portion is out-licensing. Out-licensing, we have none in Q4, but for the full year 2023, we had for the 2 early quarters, SEK 28 million. Coming back to sales, we have, as I said, the net profit for Q4 and then the sales of shipments at costs. And those amount to SEK 66 million versus SEK 59 million in Q3, close to SEK 240 million for the year. And we recognize our -- the profit share on shipment as with many companies selling to distributors like the car industry when they sell to different countries. Yes, and the expenses portion. Total company expenses in Q4 were relatively flat versus Q3. But versus last year, they increased by SEK 17 million. That is mainly driven by the ongoing work with BIIB801 and Xdivane, but also portion around Ximluci pre-filled syringe. As you noticed, our G&A now is flattening out. It's too early to say if we can see some indications of this cost saving scheme that we communicated in November. But the planned headcount reduction of 40, now we see in Q1 -- as we approach Q1, 35 FDs have left the organization and a further reduction will happen in Q2 and then further 5 will leave. Then we're going to -- we've already initiated to tackle kind of what we call the slow-moving expenditures, like facilities, rents, et cetera, that takes longer to influence. But we will -- we expect to see our savings to be gradually realized up until the Q3 2024 when we will reach the SEK 50 million per annum. Cash flow and financing. Cash flow at the end of December was SEK 65 million. And the operating cash flow is -- was SEK 85 million -- SEK 81 million, quite a lot lower than last year and also for Q3. And that is in line with what we communicated as part of the Q3 presentation, that provided 2023 milestones are met in 2024, cash flow will gradually be improved during the year. For the -- moving on to some of the details on the rights issue. As we communicated in January, we have -- we announced a rights issue -- secure rights issue of approximately SEK 343 million and that was approved by the Extra General Meeting -- General Meeting approved last week. Approximately SEK 285 million of those are secured through a combination of subscription uptaking and intentions. The rights issue will open up on Wednesday, February 28 and will close on March -- in March 13, and a prospectus will be issued earlier during the week. One share will give the right to subscribe for 1 unit and 1 unit is indeed 50 shares and 9 warrants free of charge. The maximum net proceeds will be, if subscribed on the grant [indiscernible] share issuance will beSEK [ 325 ] million. We will come back on this as part of the Q&A later. So I will leave that with that. Part of the money from the rights issue, we will use to have a onetime amortization of the convertible bond. We have now a nominal amount of SEK 219 million, and we will have due to this one-off amortization of SEK 63 million, which is the entire 2024 amortization. So that will be free after we've done that. And then we will have a remaining outstanding debt of SEK 156 million. The conversion price is still set to SEK 93 million and the interest rate is still 6% up until we reach secured FDA approval thereafter, it will be 0. So by that, I'd like to give the word over back to Martin to just give the key takeaways and the key priorities for 2024.

Summarize the formal presentation here. 2023 was an intense year, very much focused around commercial manufacturing of Ximluci and supporting STADA in the launch of the product and then also advancing our 2 the main program BIIB801 and Xdivane as well as then, of course, acting upon financial difficulties we came into with launching the cost savings program and also making certain consolidations of the portfolio. Important now for 2024, these are the 4 milestones or deliverables we need to meet, supported continued growth of Ximluci in Europe and also prepare for a launch of the pre-filled syringe beginning of '25. The FDA approval crucial to get that in a timely fashion and in that also secure a commercialization partner for the U.S. and support that partner for a subsequent launch. Get an out licensing partner or commercialization partner for Xdivane, also crucial to accomplish during the course of the year and for BIIB801 to scale up this clinical material and then further our support buy in being able to take this program into clinic. So that's the summary. So then moving on to Q&A and back to you, Anette.

Yes. So thank you very much, Martin. And this concludes then the formal part of this presentation. And before we open up for questions from the audience, we would like to take the opportunity to address some of the questions we have received beforehand. And I would like to invite members from the Board and colleagues from management to join me in this session. And I would like to start off with Anders Tullgren, Chairman of the Board to get to the first question is, why did the Board deemed it necessary to decide the rights issue with an amount of SEK 343 million? And why is that the right decision?

2023 was sort of a mixed year. I mean we had a lot of progress, especially on several of our projects, and we achieved some very important milestones. We could go into a commercial phase, and we have brought Ximluci all the way from the lab to actually a commercial launch. But at the same time, we had a slower uptake of Ximluci in Europe than anticipated, and that gave us the financial problems that we end up at the end of the year. And at the same time, we know that we need about SEK 200 million to invest in our key projects for 2024 to be able to deliver on these projects in the time and be ready to launch those biosimilars when the patent expires. So we have 4 very important projects, as Martin said. It's the pre-filled syringe. It's the U.S. launch of Ximluci. It's BIIB801 and Opdivo, and we need to invest in all of those projects for 2024 because they represent a huge value for the company in 2024, but also the years after that. So we have looked at several different financing alternatives and concluded that it was the right decision -- to this time to do this right issue. And I think it's also important to remember that the existing shareholders can be able to participate and maintain the position. So we, therefore, [indiscernible] was a reasonable way to have a right issue where our existing shareholders are invited to invest and safeguard their shares. So with that, I think I answered your first question, Anette.

And just then moving on with staying a bit around the rights issue, we also have received many questions why the terms look like they do and why we did end up with a price of SEK 0.23. And I think, Mats Thorén, if you can answer that question.

Of course. I'll do my best. Thank you, Anette. First of all, I'd just like to stress that we are extremely well aware of the consequences for investors that cannot protect their ownership share in this transaction. And that situation is shared by several members of the Xbrane management and Board. As Anders said, we looked at different structures, but they were either not doable or would bring unacceptable dilution to all shareholders, and therefore, rights issue is deemed to be the best solution. What we do takes a lot of capital and a lot of time, and we need to make decisions for investment, commitments, years in advance. And if we can keep those time lines, we will squander a big part of the value potential in our projects. And I'm stressing this again is because the terms are affected by the size of the share issue that we need. The sum, as Anders described, is around [ SEK 350 million ] that we deemed the company needs to get in and a large part of that needs to be guaranteed. Our market value, prior to announcing the share issue, was just SEK 240 million. So the share issue size is almost 50% larger than the entire market value and that impacts the terms a lot. The way this works is that since we need a large part of the issue to be guaranteed and the guarantors we need to subscribe for shares even if the market price is lower than the issue price, and that is a risk for them. And therefore, they receive both a fee and typically want a subscription price to be set at a discount. And this discount is not set relative to the market price you see on the screen, but to the so-called theoretical ex-rights price or TERP as it's abbreviated. And the TERP is the price adjusted for the new shares that are issued, and that is lower than the market price. And how much lower will depend on how many shares are issued. And due to the size of the issue in relation to our market value and the number of shares we had prior to announcing, we need to issue a very large number of shares in comparison to what we already have. And this drives the TERP down by a lot. And the issue price where we do end up in order to get a discount to the TERP of around 40%, which is market practice and was negotiated with the guarantors, is around [indiscernible]. We understand, I mean, this seems like a staggering amount, and it is. But it's not that the terms themselves are really strange in the principal in how the price was set. It's rather a function of the capital need that we have in relation to our market value. But again, the principal fairly straightforward and in line with what we have been practiced in the market and the sector over the last couple of years. I hope that clarifies something.

I think that, that was very helpful. Moving on to some Ximluci portfolio. And as we mentioned, we are the cash deficits of where we are. So moving on to Siavash, like the question and if you can elaborate a bit on the BIIB801. It seems like the project is at a scale up has been somewhat delayed. So why is that? And what measures have Xbrane taken to improve the time lines? And what is the current time plan?

I think what you need to acknowledge here is that [indiscernible] is a very challenging protein, and that's also one of the main reasons why we are the only biosimilar developer of this biosimilar candidate. And the main attribute to this delay has been that we have internally, together with our partner Biogen, focused on to derisking the scale-up that we are going to do during next year. And we have been successful with achieving the milestones needed for this, and we are ready now to move on to scale up and produce the clinical material during this year. And this will, of course, as Martin said earlier, that this will open up for revenue generation of selling this material to Biogen, but also unlocking milestone payment.

Moving on then to Xdivane. What's really happening with that program, both just the out-licensing and where are we in the development?

We are still working on to -- reach an agreement with a potential partner for that biosimilar and you know that it has taken a long time than we have earlier announced. But it's, of course, important for us to reach the best potential agreement with our potential partner. And I think we have good potential to be able to do this. And we are already now in some discussions with larger players for these assets.

As part of this report, we announced that we had 3 new patents. Can you elaborate a bit on the company's IP portfolio? And why is that important? And also related to any breakthroughs in the developments that we have achieved during the year?

Our R&D team has done significant improvements to our [indiscernible] platform and that's mainly for our mammalian platform producing many of our future antibodies. This has been both in improving the technology, per se, but also the platform process that we have. This is directly attributed to process improvements and yield improvements, which will decrease the cost of manufacturing of biosimilars and giving us a cost advantage towards other potential competitors. And these -- some of these improvements have already been incorporated to our main show candidate of biosimilar candidate reproduced in show, which is the Xdivane and Xdarzane biosimilar, biosimilars to Opdivo and DARZALEX. But this will also, of course, affect our future pipeline of biosimilars were doing that will give us a very good competitive advantage in the future.

And then next question, I would like to ask Anders Wallström, Head of Manufacturing. So it's mentioned in several reports that we have worked on continuous adjustment for the production plan for Ximluci given the slower uptake of sales. So exactly what have you done in both from a short and long perspective?

So we have, of course, secured our contract manufacturers through long-term contracts. And that comes also long binding commitments to several of them through forecasts. So when it became clear that the uptake of the product was slower. Since then, we've worked intensively with STADA, but also with all of those contract manufacturers to optimize the production plans to adjust accordingly, which means to reduce where we can reduce. So we have done a lot of adjustments both to substance and product manufacturing steps, and many of these will take place only during the second half of this year. And after that, you will see inventory go down to a level, which is what we want. Also to mention, we came into this period of launch manufacturing during -- still having COVID with us, which meant it was difficult to get access both to materials and capacity. So we needed to accept binding both costs, both in materials and capacity to get access to this. And now this situation has improved significantly, and it's more back to normal, I would say, in terms of capacity.

Okay. So last, as part of this section, I would like to go back to Anders, Chairman of the Board, to summarize the share, your perspective on Xbrane current position and future prospects of the company and before we open up for questions from the audience.

I mean we have a vision -- a long-term vision of becoming a leading global biosimilar company. And I think in 2023, we made a lot of progress versus that long-term vision. And we can also see that there is much more interest in the company Xbrane, both globally and among competitors and other companies. And I think that there is sort of 4 main reasons for that and 4 things: One is we have a very strong team working on a very strong patented platform that can produce biosimilars with a higher yield. And we have a capacity in our labs in Stockholm to actually develop 1 new biosimilar per year. So that is the core foundation of the company is this very strong platform on this very strong team. Then we have our first product, Ximluci, which we launched in Europe. We had a little bit of a slower uptake. But here, we think in 2024 and beyond with the planned launch in the U.S. and with a pre-filled syringe, that this will be a major product for us with an important contribution to the company. Then we have BIIB801, the biosimilar of Cimzia. We heard that from the team as well. We heard from Siavash that it is a very difficult product to develop. We know that we think that we are the only one. I don't know if anyone else trying to do a biosimilar of this product. And we want to go into the clinic in 2025, so a very important year of upscaling in 2024. And then we have Xdivane. We're also looking for a partner. We're doing the scale of this year and we'll go in clinic next year. So these 4 different components of our projects with the platform, with Ximluci, with Cimzia and Xdivane is why I'm very positive to the outcome or the future potential in Xbrane and where I'm looking positively to our opportunities as long as we can deliver on our planned activities for 2024 and beyond.

And by this, we would like to open up for questions from the audience. So operator, do we have any questions now?

[Operator Instructions] The next question comes from Filip Einarsson from Redeye.

I have a question related to the sales, and then a follow up to that one. So within the report that the sales to end customers grew 25% in Q4 and that Ximluci now have approximately 1% of the EUR 300 million market in Europe. So does that mean we should see that as approximately [ EUR 3 million ] in end customer sales in Q4. That's the first one. And as a follow up to that, is this also the pace of growth we should expect moving forward?

On the first one, yes, that is the way you should interpret it and approximately where we're at. And on the second one, with regards to growth going forward, we have ambitions and hope, of course, of an even stronger quarterly growth than around 25%, what we've seen in last quarters, but at least that I think we should be able to -- or should be expected, but we have higher ambitions as well, but let's see how the market develops. Then as we've talked about also, we do believe that the launch of the pre-filled syringe in the beginning of '25 will be unlocking further potential and spur the growth further.

Right. And could you also provide some more clarity on the partnering processes for Ximluci. I mean you touched upon that, but maybe primarily to Xdivane. What have been the primary factors for these processes taking longer than initially anticipated?

Yes. On the first one for Ximluci. We are having a handful of different discussions ongoing together with STADA and the most advanced one is really in contract negotiation phase, if you will. But we are very conscious. We as well as STADA to optimize this for a long-term perspective and really make sure that we have the best possible partner and the best possible contract and agreement. So I think this is what has taken a little bit longer time than what we anticipated. When it comes to Xdivane, I think it is the same thing really that we believe this program has a great value. It's one of few biosimilar candidates to Opdivo up for out- licensing as far as we can tell. And we really feel we need to make the best out of it and in that comes making sure to tie up the best possible commercialization part and the best possible agreement structure that we can get. So yes.

All right. That's helpful. But could you also -- are you able to provide any guidance in terms of time on any one of these 2 at this point?

Yes, we should be a little bit cautious on time. But during 2024, needless to say, and as we said during this presentation, both these 2 out-licensing this needs to be done, one for U.S., of course, during the first half of this year because preparations for launch provided a timely FDA approval, of course, needs to really start by the time of approval. Yes, for Xdivane during the course of the year.

And I have 2 more, if that's okay?

Sure.

So interesting to hear a ballpark figure on the BIIB801 program on what one should expect related to figures of the sales of clinical material to Biogen and when we can expect these sales to happen approximately?

Yes. On the first question, these are figures we have not provided and cannot go into. With regards to the timing, I think we said during the call that the plan is now to scale up and produce clinical material during the course of the year and hence also realize that income during the course of the year.

Right. So the last one on my end is, I mean, you touched upon this in the presentation, but related to the Coherus/Sandoz deal, and it would be interesting to hear sort of your view of implications given that the value of the deal wasn't very large in relation to the, let's say, last quarter sales. So any input there would be helpful.

Yes. And I can start a little bit and maybe Mats and Anders also want to chip in here. So -- and I shouldn't comment too much really on if the transaction is being done by external partners. But it was an acquisition of the whole business, including commercial infrastructure and everything for that product. And I think one could see also that all the sales were quite impressive on this biosimilar candidate. I think [indiscernible] put it profit levels on that and -- maybe we're a little bit on the lower end due to, I think, on the one hand, the contract structure with the part of the in-licensed the product from a potentially also the commercial infrastructure is set up. So I think that's probably what I can comment. I think that was kind of a sign of interest and potential in this kind of products. I don't know so on the call, I want to comment further, Anders or Mats maybe.

I think it's just important to realize that the SEK 170 million is not the entire value of the U.S. franchise. I mean they carry the cost and pay. I don't know if that's -- I don't know if the figure is official, but probably 40% or 50% profit split to the European partners. So the SEK 170 million will be sort of a fraction of the profit generation potential of the U.S. franchise, not the entirety of it. So we don't know exactly. But in that light, I don't think SEK 170 million is incredibly low. I think it's a good price.

Yes. I think the most important thing is actually the sales that they had. So in Q3, that sales SEK 50 million. We don't know the Q4 sales yet. I think it will be disclosed in a week's time or something like that, and we'll see how it has grown, but I think that the uptake of the biosimilars in Lucentis is quite high. And we, therefore, believe that we can take part of that fast-growing market, especially if there is also a potential delay in the Eylea. So that's why we think that Ximluci U.S. potential is quite high.

There are no more phone questions at this time. So I hand the conference back to speakers for any written questions and closing comments.

Thank you, operator. So the first question comes from [indiscernible] I think Martin you mentioned 15 European countries. Do we know how many frame contracts STADA and Xbrane have won? And what is the status for the U.K. NHS market uptake.

So there are multiple frame agreements and tenders that STADA has won. And important to remember is that each country in Europe is different with regards to also the sizes of the respective countries, these different contracts and tenders are covering. So it's not maybe so interesting to think about the number of contracts here. We decided to disclose the frame agreement with NHS England because that was a very first one amongst all of this. And the status on that one particularly is that as we communicated, that was a frame agreement, but with NHS. But then actually, each trust or a grouping of hospitals under NHS needs to make an active decision with regards to which product to go with under such a frame agreement and that is subject to an ongoing sales process and sales efforts that STADA is working very actively on in order to convert more and more trust under this frame agreement to generate the volumes we were expecting.

Okay. The next one is related to Sandoz and Ximluci, I think that we've covered that question. Moving on for the balance sheet, prepaid expenses of SEK 254 million. Please elaborate what is it, how will this figure develop during 2024? And how is the U.S. launch influencing this? Well, as both Mats and Anders previously alluded to, what we do takes a lot of money and takes a lot of time and we are in long-term commitments with our contract manufacturers. And hence, majority of this spending is really related to drug substance, drug product. First, it was only for Ximluci, but now we also have [indiscernible] commitments for BIIB801 and starting to have some for -- even for Xdivane. The U.S. launch, will have really already prepaid some of that to build up for U.S. launch. So I can't really say [indiscernible] I don't think that would be the case. I think it will be roughly flat, I would say. So Anders again, this is -- will this be the last capital raise before the [indiscernible].

Yes. So what we said is that we need to deliver on these 4 key projects for 2024, so on Ximluci, on the BIIB and Xdivane to get in revenues from those in 2024. And then we also said that we want to, with that, be cash flow positive during the Q1 2025. So that's our plan. So our plan is -- and then, of course, we need to see how it goes with the capital raise and the right issue [indiscernible]. It's too early to say anything more. I think we need to -- we're working towards a very clear plan of being cash flow positive in Q1 2025 and to deliver on all of these. And the capital that we raised in this right issue should help us to do that.

So moving on with the question [indiscernible]. Can you please elaborate on the Q code and its role in regards to the U.S. launch? What is the time line for that? And when can Q code be achieved. Also about, walk us through on the process from FDA approval to launch? So if I may start Martin, if you can kick off to elaborate a bit on this.

Yes. the so-called Q code is quite important for successful sales uptake in the U.S. What that does is that the eye clinics really can get reimbursed at the same instance as they procure the drug with the Q code. If you do not have Q code, the reimbursement will come up on time of administration. And therefore, if there are alternatives, the eye clinics prefer to go with a biosimilar with the Q code. That needs to be applied for post-approval. And I think it's about a 6 months time frame for getting approval of the Q code. And that is also alluding to the next part of the question, something which is related to the timing of launch. So it's preferred to launch closely before or when you have the Q code for -- as good initial say something is possible.

So Anders, is there anything that you would like to add on this?

Well, no, we that needs to happen -- sorry, Anders, I think it was [indiscernible] but the only thing is also that when the agreement or approval come from FDA also any adjustments or modifications to processes and such, that has been agreed with FDA needs to be implemented before manufacturing, and that's also why commercial manufacturing starts immediately upon approval in our case and there is a certain lead time to that as well, even looking away from the Q code is also having some lead time for that.

There are also some signs -- it's a question of [indiscernible] the Lucentis market is rapidly shrinking. It's about 50% estimated shrinks in the U.S. and 25% in Europe, primarily driven by the rapid uptake of Vabysmo. And one can expect then the Lucentis sales to decrease further in the coming years, and there are no meaningful differences between Vabysmo and Lucentis. So what's your view on this?

Yes. Okay. I can kick this one off. So Vabysmo is a new product developed by Roche and it has potentially superior duration compared to Lucentis and that is to say the time that the patient needs to go between injections. I think if I'm remembering correctly, 50% of the patient population in the Phase III trials were able to go at a stable state of 12 weeks between injections to be compared to what we typically see under [indiscernible] strategy for both Lucentis and Eylea, which is kind of on average, an 8-week injection frequency. The way we view it is that Ximluci and the other biosimilars are going to compete, more broadly speaking, in a general market for VEGF inhibitors for retinal disorders, and that there are many aspects that are going to be taken into consideration. And there is going to be part of the market, for which durability is of primary importance and probably going to cater towards more durable products, if that still host to be true in the real clinical setting, which we will see during the coming years. But I do think that the bulk of the market is going to be eventually driven by actually the annual cost for respective pharmaceuticals, where I do believe that biosimilars are going to be the best choices and therefore, going to take a bulk of that overall market. Just brief answer. I don't know if someone else want to chip in and comment on this one?

Moving on. Moving back to the convertible debt? And what is the risk of dilution from the convertible debt after the capital raise? Is this debt now going to be paid with cash, so no more dilution from this debt that could damage the current equity? And was it a big mistake on this convertible debt with what you know to date? I can just say that if I can start off with, personally, I think that this convertible debt was, still at the time, the right -- good decision. We need to go back with that we still then estimated a much larger sales uptake of Ximluci that we saw. So the plan was always to pay the convertible with cash. And even today, we only issued share once for the -- from May last year. So is anyone more -- Mats, do you want to comment? Okay, then we move on. So seeing some more of the financial, do you state that you will reach cash positive during Q1 given certain conditions? Can you please outline the critical success factors for this and give a highlight picture regarding the budget supporting the positive cash flow? So I think, Martin, we've been very clear on the critical success factors in the milestones that we have reiterated a couple of times now. But it is really the key milestones that Martin has outlined and depending on those and given the prescription of the share issue, we are confident that we will reach positive cash flow during Q1 2025. I am not sure, if you would -- no? Okay, next question. The gross margin of Ximluci is 6% in Q4 2023. Is the expected gross margin going forward or do you expect this to increase or decrease? So the gross margin as I explained when we looked at the revenues, it's a bit difficult for us to explain as it is a mixture of a net profit and a sale of shipment. And then we have some manufacturing costs that we also need to consider as part of year-end. So the gross margin, the -- what we realized in Q4 is 6%. That's not the same thing that the gross margin of the Ximluci is 6%. I hope that makes sense.

Maybe I can clarify one point here. Because when you look at our gross margin, it's -- you have the revenue on finished goods what we sell to STADA, which is at cost. And then you have the profit share we receive on top. So of course, the gross margin becomes a consequence of the relation between the 2. And the profit sharing we're getting, as we've been discussing many times before, is now at quite low level, much to do with that sales and marketing expenses on STADA side are high as a percentage of the overall -- their overall net sales, which is natural, given that we currently have quite low volumes and the sales and marketing expenses, by and large, are fixed. So we clearly expect that the overall profit of the product, in itself, is going to improve as volumes go up and therefore, also profit sharing shall go up -- or the profitability of the product shall go up. And therefore, also, over time, of course, as a consequence that our own gross margin also shall increase.

Next question. The intangible asset has a value of close to SEK 900 million per end of 2023. Can you explain what that consists of? It's really one number reflecting the -- what we have on the balance sheet for Ximluci. And so this is what we did the very last year when we saw equivalence data that we had 50% of the development costs workforce on the balance sheet as part of normal practice. It's a very, very low number compared to novel medicines. And so -- and it's already amortized. We start to amortize that in when we started to launch. So it's coming up now to a year, is amortized for joint 10 years. So I think that will -- if we don't have any more questions from the audience, I think that we have come to the end of this section. So with this. Martin, would you say something to the..

With this, let's conclude today's call. Thank you, all of you who listened in and for asking great questions. We are, as always, here, should you have any further questions, you can reach out over e-mail or phone. And with that, thank you and to be continued.

Thank you.