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

Hello, and welcome to the webcast today in relation to the second quarter 2024 financial report of Xbrane Biopharma. My name is Martin, I'm the CEO, and I have also our CFO, Anette Lindqvist, with me today. We will go through a brief presentation highlighting the operational advances during the past quarter and also the financials. And we will take questions thereafter, and you can ask questions, both via audio and also via the chat, and we'll do our best to answer to them. So let's start off here. Most of those of you who are calling in probably know what we are engaged in. We are a biosimilar developer. So we're developing follow-on drugs to approved biologics, which can be launched post patent expiration or loss of exclusivity after respective originated products. Our portfolio consists of 4 biosimilars and biosimilar candidates. First 1 Ximluci, approved biosimilar to Lucentis in Europe and launched since first quarter 2023, by our commercialization partner, STADA. We are going through a regulatory process with FDA for a U.S. approval, and we have partner up with Valorum Biologics to commercialize the product in U.S. post approval. Then we are developing biosimilar candidates to Cimzia and Opdivo, respectively, which both are in late-preclinical stage. We have scaled up the respective production processes, and we are currently driving in a very active out-licensing process to find a suitable commercialization partner for these 2 biosimilar candidates so that we, together with our partner, can proceed into clinical development. Then we have early preclinical development of a biosimilar candidate to Darzalex. All in all, this portfolio is addressing a market looking at the originator peak sales estimate combined of EUR 26 billion. So we're looking at Ximluci first, and we can take a snapshot of the market outside of U.S. for anti-VEGFs for retinal disorders. So this is a market of about a little bit north of EUR 5 billion of annual net sales. And you can see in the graph on the left-hand side, the light blue bars are Lucentis, the originator product, which Ximluci is a biosimilar to. And the red ones, which are advancing on the top are the Lucentis biosimilars approved now in Europe. And we are seeing that the Lucentis biosimilars gradually are gaining share as those of you who have followed us, this is taking longer time than what we initially anticipated, but we are seeing movement in the right direction with gradual market share gain of the Lucentis biosimilars. And we remain our view we had at the initiation of this development. At the end of the day, we believe that Lucentis biosimilars shall take some 70% volume market share of the overall ranibizumab market, and that is to say the active ingredient in Lucentis is called ranibizumab. Over a couple of years, that's what we've seen for biosimilars that have entered on other molecules or biological drugs, particularly in oncology and immunology space. So that's still the outlook we believe in. And of course, we do believe that Ximluci shall be a preferred choice amongst respective biosimilars to Lucentis. And taking a snapshot of we together with STADA are -- when it comes to the commercialization process, Ximluci is now launched across 18 countries. So there's a gradual launch in additional countries, as you can see, and from a value market share perspective, we're well above 1% now. And this is a quarterly market. If we only look at the ranibizumab market, so Lucentis plus the Lucentis biosimilars, that's at about EUR 300 million of quarterly sales and this now second quarter 2024, and Ximluci took well above 1% of that market. And Ximluci is the second amongst the Lucentis biosimilars. It's up against biosimilars commercialized by the [ Aerogen ], Biogen, respectively. And as I said, Ximluci is #2. We're happy to note that the net sales of Ximluci saw a strong growth in the second quarter, just 40% growth in net sales versus the first quarter of 2024. So we're happy to see that. That was partly driven by continued volume growth, as you can see in the graph on the bottom side on the right-hand side here, that's kind of depicting the volume growth quarter-by-quarter in the last quarter. So we've been between 20% to 30% in volume growth and there was a 21% volume growth in the second quarter '24 versus first quarter '24, but the 40% growth in net sales, so that, of course, included a mix effect, which impacted the average selling price positively, and that is stronger growth in market where the price is a little bit higher than in other markets, essentially. So we're happy to see that development and we are working relentlessly together with STADA to work through a successful continued commercialization of this product in Europe. And continued development of Ximluci, we are -- as you might recall, we unfortunately received a Complete Response Letter from FDA on our initial BLA or biologics license application, and that was in April of this year. We had a longer webcast in relation to that Complete Response Letter, and it mainly centered around issues with the reference standard, which we planned to use for release of the product for U.S. market as well as observations in inspections, pre-approval inspections done by FDA at the respective manufacturing sites where the product is planned to be produced for U.S. market. We are now going through a process of qualifying a new reference standard and we've had a meeting with FDA on that topic and agreed on strategy and exactly how we're going to do that. So this full alignment with the agency around that qualification of the new reference standard. And we are also working together with our respective contract manufacturers to resolve the observations which FDA had on their respective sites. And as previously communicated, we're targeting a resubmission of the BLA in the fourth quarter of this year. And it's a standard 6-month review process of a resubmitted BLA. So we're expecting a BsUFA date or a decision date in second quarter of 2025. We're also working on, as you know, from before as well, a prefilled syringe of Ximluci to be launched initially in Europe. And we hope, of course, that this prefilled syringe subsequent can be introduced to the U.S. market, but initially, it's about the European market. We're preparing for submission. This is essentially a variation to the existing approval. For provided approval, of course, a launch in Europe in 2025. As you know, Ximluci is currently improved and commercialized as a vial, while as the originator, Lucentis, by and large, is sold as a prefilled syringe that are 2 presentations on the market, but the prefilled syringe is the predominant one. And there is a certain time saving at clinic, which makes the prefilled syringe the more convenient choice for ophthalmologists. And therefore, we do believe that introduction of the prefilled syringe will lead to -- it will unlock further market opportunities and lead to an upswing in the sales across Europe. That's our expectation. So that was briefly about Ximluci and moving on then to our biosimilar candidate to Cimzia, it's now called XB003. Here we worked during second quarter and the summer months in scaling up the production process on the drug substance side together with our selected contract manufacturer, and we can happily announce that we've been successful in that, and we now have successfully scaled up the production process to suitable scale to go into clinic development. And we have confirmed the analytical similarity to the reference product in the same fashion like what we had at a smaller scale. As you also noted, probably if you followed us over the summer here, unfortunately, we regained the rights to this program from Biogen, we had a partnership since a few years back with Biogen around this product. They went through a strategic review of their full portfolio and several circumstances on their end led to their decision to terminate this license agreement with us and hence, the full rise to this program was turned back to Xbrane. We immediately after having received that notice from Biogen, started an out-licensing process to find a suitable commercialization partner for the program to also support us in the upcoming clinical development of the program. We have engaged an advisory firm in this work, and we're working with the same life science advisory firm, both when it comes to out-licensing of XB003 as well as Xdivane, our Opdivo biosimilar candidate. And we had prior to the termination of the agreement with Biogen, received quite a lot of incoming interest around this program. We believe it's a unique program since it's the only 1 or 1 out of few biosimilars to Cimzia under development globally. And it's still a sizable originated product, some EUR 2 billion annual sales. We believe we have a unique proposition when it comes to essentially being able to provide this, what we believe, commercially viable production costs, thanks to our platform technology, giving us an hyperactivity in the production process of this specific molecule. And I think we have a good continued interest in this out-licensing process. We're running on a tight timeline where we're trying to conclude a license agreement before end of October, and this goes both for XB003 as well as Xdivane. What we're also focused on now is to incorporate into the program, the development activities, which previously were under Biogen responsibility, which entails essentially preparing for upcoming scientific advice with EMA and FDA to agree on clinical development plan as well as the drug product side of the whole development. But these are also areas where we expect that the future commercialization partner will support us. In any case, the program is prepared for and ready to go into clinic in 2025. So as briefly on XB003. And sorry, if we move here to Xdivane, our Opdivo biosimilar candidate, and as you noticed, these 2 programs goes pretty much in parallel right now. We have also successfully scaled up the production process together with the selected contract manufacturer and confirmed the analytical similarity profile versus the reference product. We also, as we communicated in the press release not long ago, received positive feedback from EMA in the scientific advice that we had with them. And we essentially got an acceptance on our proposed clinical development plan, which entailed a streamlined approach. And this was -- we believe this is crucial, actually, in order to be successful with this program. Because as -- those of you who follow this market, what currently is required from a regulatory guideline perspective is to conduct a Phase I and a Phase III trial for a biosimilar candidate where you compare both pharmacokinetics in the Phase I, but then also you compare the biosimilar versus a reference product on a well-selected efficacy endpoint in a Phase III trial. Now for this particular program, and this goes also if you're doing a biosimilar development on Keytruda. The clinical development is much more expensive than for other biosimilar candidates due to it being in oncology, we are running clinical trials, generally it's more expensive, but also due to the very, very high cost of the reference product, and since we need to procure the reference product for the comparator arm in these trials, it becomes very expensive. And -- so there have been budgets for Phase I and a Phase III trial, all in all, for about [ EUR 120 million ] of very significant clinical investments behind these programs. And we came to a point where that budget hurdle, if you will, from a clinical development perspective, made it difficult for us to find a commercialization partner who was willing to support the funding of such a clinical development. Now with this positive feedback from EMA on a more streamlined approach, we see an opportunity to reduce that clinical development budget with at least half. And I think we've opened up for a lot of new interest in this program, and we're running also an active out-licensing process. And we are, again, running towards a tight timeline, but we believe we are going to be able to uphold that one. And the ambition here is to close something by end of October. And also Xdivane is set already to be able to go into clinic in 2025. So that's a brief kind of operational update. So maybe with that said, I'm going to hand over to Anette to go through the financials of the quarter.

Thank you very much, Martin, and welcome to the finance section. So we start to have a look with the revenues of the first slide. And those of you who've been with us for a while, you know that our revenue stream is somewhat complicated. That's driven by accounting regulations like IFRS. So that is fully supported with the auditors, of course. And let me start explaining the diagram on the left. The bars represent the net sales of -- for Xbrane quarter-by-quarter. And then those consist of two things: one that we referenced for product sales, that's a mix of deliveries to STADA; and second, the net profit share received from STADA. Second one is out-licensing of products. So that would be in this last quarter, it would be like the signing milestone payment for Valorum. And you can see how they differ. And then if you then overlay with the line representing the gross margin, if we -- even more strange for an outside, if I may say. Now that is driven by the deliveries we deliver to STADA, sell the products to STADA and with 0 margin. And then we received a net profit back the margin on those, that is then a net profit with marketing and sales are already deducted. Obviously, for -- in this last quarter, the licensees are quite often then delivers gross margin of 100%. So the total revenues in the last quarter was SEK 52 million, and the -- first of all, the net profit from Ximluci was SEK 22 million, rounded number, and that was, as Martin said, driven by very much a positive market mix but also then a positive gross margin impact. And that is because of the marketing and sales costs have now started to decline as kind of the volume and the sales are going up. Well, then the license agreement, as I mentioned, SEK 27 million. And then further on, we also had a positive COGS or cost of goods sold, driven very much by positive production variances, but also retroactive adjustment from one major CMO that resulted in a price adjustment. And that will benefit our COGS moving forward. And you can also see the impact when we get to the balance sheet for accounts payable, which is -- that is because the resolution of the conflict that we had with the CMO, so meant that we held some payments in the AP area. That's now sold. We saw a somewhat adjusted COGS in the future, and we also see that -- actually that will result in a credit note in Q3. Looking on the cost side, you can see the admin cost is starting to come down, partly done by -- partly as course of the impact from the cost savings scheme that we launched in November last year. However, we see a minor impact in Q2, that's because of the majority of the positions leaving the company, which is now 27 positions versus Q2 last year, left very late in March, meaning that will then have full impact in March next year. But we're starting to see a positive impact. Last quarter, we had SEK 5 million around about. Now we can see SEK 11 million. A further 7 will reside during the course of the Q3 that will then mean that 34 positions in total have left the company since June -- counting June Q2. Then for the rest of the R&D section, as you can see, that's where the increase -- you can notice the increase, and that is as we communicated and as expected, that is driven very much by the scale of processes for both for Xdivane and XB003. So that was expected. Yes. And also, to a degree, the PFS, I should have said. So the cash position, and you can see how we have tried then to illustrate the movements from last quarter, starting then with SEK 270 million that we left in March. You can see some significant movements. First of all, we have prepayments as the first of SEK 66 million coming in, in the quarter. That's part of our business as usual, so that we have, on an ongoing basis, that consist of prepayments from STADA majority profit share. And also, in this case, some from VAT coming in from the U.K. and also from Lithuania. Second, we have Ximluci production cost around about SEK 50 million, and that's for the majority of this drug substance for the PFS and getting ready for the U.S. We have second one is the other product coming and then for Xdivane, SEK 40 million, that's a gain of payment to the CMO for the scale of processes and XB003, SEK 10 million. And then you can see also noticeable, we have the SEK 63 million, sorry, for the amortization types, we have SEK 20 million going out for guarantors as part of the share emission. We have organization, which is SEK 29 million as you can see a slight decrease then already, as we mentioned, and then SEK 29 million, resulting in SEK 73 million. And with that, the leaving kind of the cash and cash equivalents of SEK 73 million and the operating cash flow is around about SEK 100 million. And as mentioned, the majority is going to Ximluci and Xdivane in the quarter. And then we expect XB003 to scale up in -- even more so in -- during the Q3, Q4. So with that, I hand back to Martin.

Yes. So to try to summarize. As Anette mentioned, generated revenues of about SEK 50 million. It was a positive impact on the profit sharing from Ximluci, which was good news and then the upfront payment for U.S. territory for Valorum. And yes, positive progress when it comes to commercialization of Ximluci across Europe with an increased growth in net sales during the quarter, which was positive. Positive feedback from EMA on Xdivane program, which positions that program in a different situation and significantly increases our possibilities to partner this program up. And the regained global rights for XB003 as a consequence of the terminated agreement with Biogen. And now looking ahead for the third quarter, of course, as you all have noticed, if you follow the recent press releases. Our full focus now is to successfully out-license both Xdivane and XB003 coming months essentially before October comes to an end. As I mentioned, we are running processes under an established timeline, which comes to an end in end of October, and we are optimistic that we're going to be able to achieve that given the current level of interest we have. And then beyond that, of course, there's continued the development activities for Ximluci and the other programs to keep the pace in the respective programs. So that probably concludes the formal presentation, and I guess we can then open up for Q&A. So we can first allow questions coming...

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

I thought just the first one, do you have any insights from where you stand right now from start down the product sales so far into Q3?

No, not beyond that. The trend we've seen last couple of quarters is continuing. We're not seeing any changes from that trend and as previously communicated and guided, we are expecting to see between 20% and 30% quarterly growth, and I think we're following that trajectory.

Okay. Good. And second one, also, how would you advise us to look at sort of the OpEx base moving forward here in to H2?

Anette, do you want to?

Yes. And thank you, Filip. And obviously, just following the total OpEx gets, of course, a bit complicated because we have kind of the savings as we just presented, and those were in the areas that we described last year. So the majority was salaries, personnel costs and also consultants and also then all other slow-moving movements driven by personnel. Then we have had other things that are taking up a portion of the OpEx. We are continuing with the FDA process, and we have even had some back charges and also from [ lowest ] cost resulting from the share emission. So just looking at the OpEx line, gets us all savings are represented very difficult to follow because some move upwards and some down. I think the alternative cost would be then even higher if we haven't done the savings, if you like.

Got it. So maybe [ a tricky ] question, but I mean, we all know you are very busy with out-licensing processes. But I mean, in a scenario where these are not reached, how should we think about how much cash would potentially be needed until Q2 2025 when you think you will be cash flow positive from Ximluci?

I think we -- and of course, management, together with the Board are, as always, looking at different financing options for the business, and we continue to do so, although, I think we communicated clearly that our main focus now what we want to accomplish is to successful out-license these programs and the upfront payments bridge from a financial perspective to Q2 2025. Now when it comes to the financing gap to Q2 2025, more -- I think we have some optionality, if you will, with regards to what we do and do not do, I think, particularly when it comes to the 2 programs, if your ambition to continue at full pace or if they are discontinued in case unsuccessful out-licensing. So there are some flex there. So I don't think we can come with a firm number there now. It's just dependent on strategy we -- in that case, we choose to deploy, particularly in relation to those 2 programs.

Right. And the last one related to the out-licensing processes. So which one would you say is the most likely to be out-licensed from where you stand right now? And also what sort of deal structure would be preferable?

Yes. I think they both are running at par, so I couldn't tell which one is most likely. We have the ambition to do both, and there are some counter-parties we're talking to who are interested in both. So we -- that's our mission. It's hard to say otherwise, which one is most likely to be out-licensed in time. But when it comes to the deal terms we are targeting, we are of course, targeting to get an upfront contribution, which somehow reflects the investments we've done so far in the programs and the value of the programs, which altogether should bridge our -- us financially speaking to Q2 next year. That's one thing we're trying to accomplish. The other thing we're trying to accomplish here is that the majority of the upcoming development expenditures should be carried by a partner to limit our own -- we can only take development responsibility. But from a financial perspective, we want to be cautious to take -- undertake further commitments to invest in, for example, clinical trials and so on and so forth. And beyond those 2 points, we are trying to maximize the whole structure, and I guess, particularly the back-end to get as much out of the final opportunities as possible because we still do believe very much in both these 2 programs, we believe they have a very, very good potential. I mean if you look at Xdivane, for example, it's targeting an originated product with expected sales of USD 14 billion (sic) [ EUR 13 billion ] by loss of exclusivity. And given the size of that product, I would say, rather limited expected biosimilar competition so far. And on XB003, maybe they own quite similar to EUR 2 billion originated drugs. We believe a lot in the commercial potential of these products. And of course, we want to make sure that we get as much of that upside as possible.

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

So thank you, operator. So then the first one is coming from [ Chen Shunli ], what's the measurement that you can take out to further reduce costs? And maybe if I kick off and say that the majority of our cost base is really related to kind of the 3 biosimilar candidates, often tied up by contractual obligations to contract manufacturers. That's really where the majority of the spend is. And we have ongoing negotiations with them, what we can face differently, what we can move. So that is not something that we have worked with for quite some time now. Second, we are, as I mentioned, slow moving costs, and that's reduced kind of personnel-related costs in all aspects. We have introduced travel restrictions, education restrictions. We are questioning every consultant and also that we have then moved down in our headcount target then from 93 to 71 in total. So I think that we are -- everyone and I would like to emphasize that we have, all our employees behind us here that everybody is questioning whatever they can to reduce the cost base and some we get immediate impact of and some other areas are slightly slower like the rent, et cetera, et cetera. Anything you would like to add there, Martin?

No.

Second is also from the same, what is the progress of the prefilled syringe? And then I can take that with the second question coming from [ Staffan Eriksson ], when can we see a prefilled syringe both in the U.S. and in Europe?

And I can take that it's progressing according to plan, and we stick to the plan that the prefilled syringe could be or should be launched, provided approval, of course, in Europe next year. When it comes to the U.S., we need to get back post expected approval for Ximluci in the U.S., Q2 next year, then we need to get back on timing of the prefilled syringe.

Then the last question from [ Chen ] is around our confidence around outsourcing time and I think that we have alluded on or explored that earlier. So I move on to a question from [ Oscar ]. What's in the break clause with Biogen regarding XB003? Could Xbrane receive a further milestone payment from Biogen relation to the successful scale-up of the drug substance and how much could that payment be?

This is a question I don't think we can or should comment publicly. But we are committed to follow the agreement with Biogen, and we expect them to also follow the agreement. But more than that, I don't think we can comment at this stage.

A question from, [ Phillip ] that they address kind of why the real reason was why Bausch & Lomb terminated the contract and also then the reason why Biogen left and would choose to leave. And also if Xdivane or I think this is meant to be XB003 was so attractive that the only [ pillar ] biosimilar known why did Biogen decides to terminate such an attractive opportunity?

I can start a little bit here. So if we start with Bausch & Lomb, and this is now a while back. And those of you recall it, we had the webcast immediately after that news was released. And the feedback or information we got from Bausch & Lomb at that stage was a strategic revision where they decided not to engage in biosimilars, to have a new CEO coming in, and they took a decision to focus solely on novel eye drugs and not to engage in biosimilars. And if you come to Biogen and the feedback we received on our end from Biogen was that they went through -- and those of you who have followed this for quite a while, they know that Biogen try to divest their biosimilar business for quite some time, I think probably 18 months or so. They were trying to -- they publicly announced that they should divest the whole biosimilar business. And then in their earnings call in relation to their Q2 report this year, they communicated that they have decided to retain the biosimilar business. Hence, they were not successful in divesting it, one can conclude. Now you know also that Biogen's core focus rests within novel treatments for neurodegenerative disorders. And you've also been following maybe some setbacks they've had in Europe for one of the lead assets. And I think also they communicated in their earnings call that they have been going through kind of a development spend prioritization exercise, and development spend reduction program. So I think and the communication from Biogen to us was related to a strategic revision leading to the termination. But we at least read it in this context that development spend need to be directed towards the core business. And hence, biosimilar business not being core termination of this agreement came as a consequence. That's our interpretation of the rationale behind based on what was communicated to us.

Okay. Next question, actually 2 related coming from [ Dan and Aron ]. So what about Saudi Arabia and Ximluci that have been mentioned earlier?

Yes, there are regulatory processes ongoing in several Middle East [ countries for Ximluci ], so the dossier has been submitted to several authorities, and we expect approvals and launches. Yes, I think during June 2025.

And then -- and I think this is the last one, around the platform value. Is there something that we could explore with other big pharma either to sell or to utilize in any other shape or form?

When it comes to the platform itself, as you know, it's focused on high-yield expression of proteins either in E. coli or mammalian cells now to form show. And -- yes, I mean, our prime focus is and has been to develop our own biosimilars on the basis of that platform. We have those smaller engagements where we've out-licensed certain IP rights and we are in discussions where we could be out-licensing IP for other programs. but that has been more opportunistic from our end, and I see it continuing on an opportunistic perspective as well, I think we need now to be focused on getting our programs to monetize some of our existing programs essentially focused on the biosimilar segment. And then we're taking opportunities as they arise when it comes to further exploiting the platform.

And then the last one is from [ Crystal Ferguson ]. Can you provide any updates on the FDA's perspective on an accelerated clinical development timeline?

Accelerated clinical development?

I'm not sure what is -- if it's referring to any of the..

If this refers to Ximluci, there is no further clinical development to be done for Ximluci, and there's a 6-month reviewal process of a resubmitted BLA as we talked about, if that's what the question refers to. If it's more, generally speaking, around the guidelines for biosimilar development, I think we are now, as we have alluded to for our Xdivane program, seeing an acceptance from the regulatory authorities of streamlined or reduced or accelerated clinical development plan for biosimilars. So we see that happening now. And we're very glad to see that and frankly speaking, it must happen for this industry to be sustainable. And for allowing healthy competition for these respective biological drugs and making them affordable post-patent expiry. And I'm very glad to see that -- we see that's happening now, and we see the regulatory authorities adopting such thinking.

I think, operator, that concludes the questions on -- in writing. Are there any other questions on the phone?

There's one question coming in here, on the stock price?

Okay. Okay. Sorry. Yes. That's from [ Phillip ]. And it's also on the stock price. We went from [ SEK 180 to SEK 16 ]. What the plan to turn around the company? Is there any thoughts on budget split? So yes, sorry about that, Martin.

In the end, our focus is exactly on turning around the company and our focus is to success -- apart from everything else we're doing successful out-license these 2 programs, Xdivane and XB003, in order to bridge the financials towards expected positive cash flow without having to do any further dilutive financing. That's where our focus lies. When it comes to share split and so on, we haven't discussed it, and it's something we will have to get back on.

And another one coming in. Do you know what's biosimilar -- what biosimilars Valorum have in oncology, if any?

I don't think they've disclosed that. So I don't think we can disclose too much on that, but we can say that they see similarities between oncology and ophthalmology with regards to how these drugs are commercialized in the U.S. They are hospital dispensed and they see that they can do it in a different way for biosimilars both in oncology and ophthalmology. And hence, they are very much focused on both these 2 therapeutical areas.

Okay. So with that, operator, anything from the audience.

We have no further questions on the phone line.

Good. Okay. Then I think we can conclude this webcast. And we thank you all who listening and asking questions, and we are here should you have any follow-up questions, Anette and myself. So please reach out via e-mail or phone. Thank you for now.