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

Hello, and welcome to Xbrane's presentation of the Q4 Report 2024. My name is Martin. I'm the CEO of Xbrane and I have with me our CFO, Jane Benyamin. And let us go straight into an operational update from the quarter. And after that, Jane will go through the heights from a financial perspective, and then we'll wrap up with Q&A. Most of you are probably aware of our general business. We are in the space of developing biosimilars. And the slide here shows our biosimilar portfolio. It is addressing originator sales of about EUR 26 billion annually. So a sizable market opportunity we are addressing. The first biosimilar we developed was biosimilar to the eye drug Lucentis. It's called Ximluci, and it's approved in Europe since late '22 and launched in March 2023 by our commercialization partner, STADA. And we are going through a regulatory review process with FDA for an approval in the U.S. Then we are developing a biosimilar to Cimzia, EUR 2 billion TNF inhibitor used in treatment of psoriasis and rheumatoid arthritis. Quite a unique program. We are the only one or one out of very few developers of biosimilar candidates to Cimzia and we believe that can be a great opportunity for us and the future partner. Here we're going through an out-licensing process. We'll talk more about that. We have the ambition to close an out-licensing deal within the close or near-term future here. Then Xdivane, it's our biosimilar candidate to Opdivo, which we recently partnered up with Intas in a global co-development and commercialization deal. We're very happy with that. And this program is now going full speed ahead towards clinic in a time line that goes towards approval and launch up on loss of exclusivity in the U.S. December '28. We'll talk more about this program and this deal with Intas later. And then we have early-stage development of biosimilar candidate to Darzalex in the portfolio. Let's start with the snapshot of Ximluci ex-U.S. sales, if you will. The product is now launched across 21 countries, out of which 19 in Europe. You can see the map here on the left-hand side, the countries in which the product so far has been launched. We are, together with our partner, STADA, seeking approvals also outside of Europe with main focus on Middle East and select countries in Asia, and we hope to be able to get approvals across a few other countries during the course of the year and subsequently be able to launch. We see continued strong growth from a volume perspective of the sales from STADA to end customers. We've seen 20% quarter-to-quarter growth last quarter, and that was also the growth level Q4 versus Q3 2024. I'm very happy to see that, and that the sales trajectory is now following our forecast. There's although still a huge potential for this product across the European market, this is a market of about EUR 5 billion, if you think about anti-VEGFs for ophthalmic purposes. So that is to say Lucentis and Lucentis biosimilars, but also Eylea and other products with the same mode of action. Ximluci has now only a 3% volume market share if you look at the ranibizumab market. So that is to say Lucentis and Lucentis biosimilars combined. And as -- those of you who follow us know, we have higher ambitions than this. We've seen other biosimilars collectively take up to 60%, 70% of the originated product over the course of couple of years. Now sales penetration of biosimilars to Lucentis has been slower than for many of these other biosimilar situations, but we now see that the acceptance of biosimilars in the ophthalmology community in Europe is improving, and it is all moving in the right direction. And needless to say, it's a huge potential if we are able, together with STADA, take this 3% volume market share up to what we initially were hoping for 25% volume market share. We're happy to see that Ximluci is currently the second biosimilar from a market share perspective across Europe, on Lucentis biosimilar. And all in all, during the course of '24, we generated SEK 63 million in revenue from Ximluci, and Jane will talk more about the financials. But the important point to make here is that this comes solely out of profit sharing from sales of the product. We have made no shipments of product to STADA during the course of '24. And as you maybe recall, we did substantial shipments during the course of 2023, which constituted the bulk of our revenue generated during the course of '23, but now it's solely profit sharing. So I think it's all moving in the right direction across Europe, and we're confident that we're going to continue to see this growth trend during the course of this year and onwards to get towards the levels which we originally were anticipating. Now moving over to the U.S. U.S. still poses a very significant market opportunity for us when it comes to Ximluci. It is about USD 10 billion market. Again, if you look at anti-VEGFs for ophthalmic disorders, including Eylea and other products with the same mode of action as Lucentis. As you maybe recall, we have a partnership with Valorum Biologics for commercialization of Ximluci in the U.S. This agreement is currently being renegotiated. And as a consequence of this, and I think maybe Jane will talk a little bit more about that, the upfront payment is going to be reduced on the benefit of higher royalties. So I think it improves our earnings potential or royalty potentials in the long-term perspective when it comes to Ximluci U.S. Now getting over to the regulatory process. We resubmitted the BLA late last year. And we've since had communication with the FDA, and FDA is currently requesting some additional documentation from one of our contract manufacturers, which is now being submitted to the FDA on a gradual process, and it's all going to be submitted when we come to April. And when we get there, FDA are going to decide on a so-called BsUFA date or decision date and also determine whether or not a reinspection of this production site is going to be required or not, and that will also dictate the review process for FDA. We still are hoping on a midyear approval, but we are going to have to get back to all of you in April once all the documentations requested by the FDA are submitted and BsUFA date is set. But we still believe in the market opportunity or opportunity for Ximluci. There's one biosimilar to Eylea launched so far, but the bulk of Eylea biosimilars are held back by formulation patent, which of course, poses a meaningful opportunity for Lucentis biosimilars to nag into the Eylea market. And we do believe due to the reimbursement structures under Medicare Part B that introductions of new biosimilars in a certain segment creates a good opportunity to take additional market share due to the whole mechanism of reimbursement first year being set on the basis of the WACC, as you're not going to have an average sales price at that point in time. So we're excited about the use opportunity and we're working hard to navigate through towards an approval and, of course, working closely together with Valorum to make the preparations for subsequent successful launch. Now moving over to Xdivane, our Opdivo biosimilar candidate. As we talked about during the close of last year, we were in the process of trying to identify and tie up a good commercialization partner for this program. And we're very happy the way this ended up with a license deal with Intas. Intas is in Indian biosimilar developer. They have been developing a handful of biosimilars, which are all launched in the European market via their European sales arm Accord. And they have a very strong position, I must say, across Europe. 1/3 of all oncology injectables are being sold and distributed by Accord in Europe. So they have a very strong position within oncology in Europe. They're now establishing themselves in a very meaningful way in the U.S. in preparation of launch of Xdivane as some of you maybe saw they acquired Coherus, a pegfilgrastim biosimilar, to kind of set the start of that infrastructure within oncology biosimilars in the U.S. So very happy with this collaboration. And what it entails is that we're sharing the development responsibilities. Intas are going to be responsible for the clinical regulatory development, which then is a substantial investment, as most of you know, to carry through the required clinical trial. And Xbrane is responsible for certain additional CMC-related development activities, including process characterization and validation. Intas paid an upfront EUR 10 million. We have upcoming milestones of another EUR 3 million, and then there is a profit-sharing scheme post launch. So we do believe that this program is going to contribute in a very meaningful way to Xbrane's income generation from 2029 and onwards. Looking at this from a time line perspective, we have done all the preparatory work to be able to initiate the clinical trial. We have scaled up to clinical commercial scale. We have confirmed analytical similarity versus the reference product, and we have produced the clinical material. So jointly together with Intas now, we are gearing up to be able to get this trial initiated. As we've talked about before, we have a streamlined clinical program agreed upon with both EMA and FDA, which makes us comfortable that it's going to be executionable within the time frame of or leading up to BLA submission Q4 2027 and then leading to an approval Q4 '28 so that this biosimilar candidate can be launched in the U.S. upon loss of exclusivity. And Opdivo, as you -- some of you know, is expected to reach peak sales of USD 14 billion. A significant portion of that is in the U.S. And given the size of this originated product, I think we see rather limited biosimilar development activity. We believe that Xdivane is going to be 1 out of 4, 5 biosimilars to Opdivo, which makes it a very meaningful income generation opportunity for us. And then moving over to XB003, our biosimilar candidate to Cimzia. And as I mentioned in the beginning, Cimzia is a TNF inhibitor with EUR 2 billion sales roughly. It has a niche position within the TNF inhibitor market. It's a market of about EUR 40 billion. And of course, we've seen quite a few biosimilars on the other TNF inhibitors. But despite that, Cimzia is holding up its position and that's given its niche within pregnant and breastfeeding women, which is actually a sizable niche within these indications. And what's exciting here is that we believe we can be the only biosimilar to Cimzia upon launch. And of course, that makes the whole situation more favorable when it comes to discounts versus reference product. You need to offer in order to drive a meaningful volume market share. So this is a very exciting opportunity, we believe. And we've done some great progress, I think, in the development. It's very difficult to develop and manufacture biosimilar where high production yield is required in order to get to commercially viable cost picture. We've been able to reach what we believe is required, thanks to our patented platform technology. And we have had initial advices from both EMA and FDA, which makes us feel comfortable with the analytical profile of our biosimilar candidate. And as you know, we are working hard now to out-license this program and find a suitable commercialization partner as we did with Intas for Xdivane. And we are in promising discussions with, I would say, due diligence have come to an end when it comes to the leader in this whole process. And we are on track towards being able to close a deal during the course of this quarter. So that's clearly our ambition and target. So we hope to be able to get back with positive news in that direction within the near-term future. With that said, I'm probably going to hand over to Jane for a financial overview of the quarter.

Yes. So we can see that the revenue in the fourth quarter amounted to EUR 66 million with a gross profit of SEK 61 million, corresponding to a gross margin of 93%. On an annual basis, we see that the sales from out-license products amounted to SEK 132 million and SEK 63.4 million was generated from product sales. This resulted in a gross profit amounting to SEK 180.5 million with a gross margin of 91%. Total revenue for the year of 2024 reached SEK 198.7 million. The administrative expenses amounted to SEK 10.1 million for the first quarter and SEK 40.1 million for the full year. The main underlying expenses are related to personnel costs and normal activities. R&D expenses amounted to SEK 80.8 million for the quarter, and SEK 391.8 million for the full year. The main activities are related to the upscale of Xdivane production volumes, the resubmission of the BLA to the FDA and the scale-up of production processes for XB003. SEK 78.9 million has been capitalized on a full year basis. The operating cash amounted to SEK 94 million positive for the last quarter of 2024, which comprises of SEK 115 million from an upfront payment from the Intas Pharmaceutical partnership for the Xdivane deal as well as achieved by milestones from Biogen. For the full year, operating cash amounted to EUR 133.7 negative million. Cash from the investment activities accounts for negative SEK 17.3 million for the quarter and negative SEK 52.2 million for the full year, referring mainly to the capitalization of Ximluci and Xdivane development costs. From the financing activities, we have a positive SEK 16.8 million for the last quarter, which mainly corresponds to our bridge loan in the amount of SEK 20 million that was settled in January of 2025.

Thanks. So to summarize, the fourth quarter revenue generated of SEK 66 million during the quarter. Key highlights, the license agreement around Xdivane with Intas. Progress of Ximluci sales across Europe being launched in 21 countries and continue to see a growth trend of 20% quarter-by-quarter. And overall, if you compare towards Q4 2023, it's a little bit more than 200% volume growth. And then resubmission of the BLA of Ximluci to the FDA. And looking ahead, during the course of this year, what we are really focused on now, as I said, to conclude an out-license deal with XB003 to navigate through an FDA approval for Ximluci, which is going to be branded Lucamzi in the U.S. and together with Intas, initiate a clinical trial for Xdivane and then, of course, to work closely together with STADA to continue the strong growth trend of Ximluci across Europe and additional territories. So with that said, we can move over to the Q&A and start to see if there are any questions on the ones who called in.

[Operator Instructions] The next question comes from Chien-Hsun Lee from Pareto Securities.

I just have some quick questions. So regarding the account payables there, $242 million, can you elaborate a bit on your payment schedules?

Yes. We have agreed payment plans to 3 of our main suppliers, which constitutes the bulk of these accounts payables, where we made a certain payment just after year-end, so in January. And we're now making gradual payments to these 3 main suppliers.

Okay. And maybe another question regarding the upfront payment from Intas. So the remaining part is expected to be recognizing by Q2. Is that correct?

Yes, it's going to be recognized up until May this year.

The next question comes from Filip Einarsson from Redeye.

So I wanted to start on the Valorum topic. And can you explain why you haven't received the upfront from Valorum yet? And what topics are the current negotiations on?

Yes. So it has been related to ongoing refinancing or financing of Valorum, which has made an ability for them to pay the upfront as agreed in the license agreement. And then as a consequence of that, renegotiation of the license agreement has been initiated. It's yet not concluded, but I do believe it's going to be concluded in the near-term future, which essentially is meant to create more financial room, if you will, for Valorum to carry through the preparatory commercial activities for an upcoming launch of this program given the financial resources they have at hand. And as a consequence of that, significantly increasing the royalty rate for Xbrane and STADA.

Okay. So about a few more. Could you also tell us what is your view on the U.S. ranibizumab opportunity in light of somewhat recent statements?

Yes. No, I think we still view it as a very significant market opportunity. The volume is there, definitely. I think it -- what the Sandoz news shows is probably that the discounting has been a little bit higher than anticipated or pricing has been going down a little bit quicker than anticipated. And although I think they've said that they're going to go -- get back on the topic, I think our read on it is that they are withdrawing the product from the market to reintroduce it with kind of a resetted ASP, if you will, which then determines a new reimbursement level. That's my read on the situation. And as far as I can tell, it's not impacting our overall view of the market opportunity. We still believe that ranibizumab in itself and then going beyond from that, the whole Eylea market and the current off-label Avastin market poses combined very good market opportunity for our product, Ximluci [ comes in ], what's going to be branded in the U.S.

Okay. And when do you expect the prefilled syringe to be launched ready?

We're still working on the syringe, and we are targeting to get towards an approval during the course of the year in Europe initially, and then we need to take that further on into other territories such as the U.S. subsequently.

Okay. And the last one, if I may. And that is from a liquidity point of view, how far will your current cash take you?

Well, I think what we need to do is that we need to get a deal done with XB003 during the course of this quarter, as we've communicated in order to via an expected upfront payment from such an arrangement, secure the company's need for its further working capital requirements.

[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.

From the written questions, I see we have questions regarding the upfront payment, which you have addressed, and also a question with regards to the syringe, which has also been addressed.

Yes. And I can comment also, there's a mention about Biogen. There was a milestone expected to come in of USD 5 million from Biogen. Subsequently, we had a discussion with them and agreed upon an immediate payment by half of that milestone. So that's why we took a credit loss also on USD 2.5 million in relation to that milestone.

And can you present some big differences and similarities between Xbrane and just Evotec? In which situation does Xbrane have a stronger position?

Yes. I think what we really have focused on from Xbrane's perspective and where I really do believe we have a competitive advantage is related to our platform technology, which I feel confident in that it provides us with a higher productivity, if you will, or yield in the expression of the targeted antibodies and leading to a lower production cost. And I think we can see at XB003, our Cimzia biosimilar candidate as a testament of that, where we are the only one or one of the very few developers of a biosimilar candidate to Cimzia, where you really have a challenge in getting to high productivity or high production yields on a fairly difficult-to-produce antibody fragment in this case. So I think this demonstrates the potential of our platform technology and our focus. And I do believe that production cost is in this market going to be more and more important. And therefore, I do believe that Xbrane and our platform technology is going to become more and more relevant within the space.

So we have received another question with regards to Biogen. I think that was addressed.

Yes. Any other questions? Or -- something is coming in here. Biogen, we addressed. Okay. Will you publish a summary of Q&A after the meeting? Yes. We -- I think we've done it in the past, but maybe not in the most reasonable or recent quarterly calls, but that we can certainly do. Okay, let's see here. Another question. How will the out-licensing of products affect the profit and loss this year? Well, too early to tell. We have certain revenues, as we talked about from the upfront payment from Intas, which is going to be partly recognized during the course of this year. We are hoping and expecting on an out-licensing from XB003, which we also do believe shall lead to revenues being recognized during the course of this year. We also have milestone payments expected from Intas. So we believe that out-licensing or license fees, generally speaking, are going to contribute in a meaningful way to revenues during the course of this year. And they come in that sense at 100% gross margin, if you will. So I think we'll have a quite good contribution from license fees during the course of the year. It's hard to say at this point in time, though, exactly what amount it will be. Okay. Let's see. I think there's another question on Biogen. Did we address that? Why the Biogen payment was halved? I think we came into a certain dispute with Biogen with regards to if -- to which extent the milestone had been completed or not. And I think in the light of that, we were also in need of a rather quick payment and resolution. So that, I think, was the background to the agreement on taking an immediate payment of half of the milestone payment. Not going to the prefilled syringe. We have addressed that.

Yes.

Okay. Are you planning to reduce your company costs? If so, how? We did a cost reduction program in end of '23. We introduced that one. And we've seen the results of that during the course of last year. And we are continuously, after that, looking very carefully at our costs, but we need to balance that versus making progress on the respective different programs in order to be able to generate revenues and income that goes across all the programs essentially. So it needs to be balanced, but we work very consciously looking at the cost picture. Good. Okay, I think that probably concludes the Q&A. There's a question about cash flow -- the time line of cash flow positive. And it actually, as you probably can see now, also fluctuates from quarter-to-quarter based on a slide which Jane showed where actually there was a positive cash flow during the course of Q1, but that was driven by and large by upfront payments from Intas coming in. So it's going to be fluctuating, I guess, actually, based on certain such events. But we're also seeing that the cash being generated from sales in Europe from STADA is progressing. So that will contribute more and more in a meaningful way. And also we have the expected upcoming approval of Ximluci in the U.S., which also then is expected to contribute from a cash perspective in a meaningful way via milestone payment from affordable loan, but also prepayments of goods to be shipped. So it's a little bit hard to predict at this point of view, and we're going -- at this point in time. So we're going to have to get back to this question, but it's also going to be fluctuating a bit during the course of the year due to this kind of event such as out-licensing.

Would you say that STADA other sales activities in the European Union for Ximluci are progressing as planned?

Not as they were initially forecasted upon launch. But when we reset the whole sales plan Q3 2023, and then that plan is now followed, and we see volume growth, which are in line with the expectations, which were set back then.

I think that was the last question.

Good. Okay. Then we thank all of you who listened in to this call. And those of you who put forward questions, we are -- as there was a question here, going to put -- provide transcripts to the Q&A and put them on our web page. So with that said, thank you very much, and we're here should there be any further questions. Thank you.

Thank you.