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

Hello, everybody, and welcome to our webcast in relation to the Q2 report 2026 of Xbrane Biopharma. As usually, I will go through an operational update of the quarter, and then Jane will go through a financial update. We'll start off with Ximluci, our biosimilar to Lucentis, which is on the market in Europe and commercialized by our commercialization partner, STADA. Those of you who have followed us know the arrangement. We share the profit contribution 50-50 of the sales of Ximluci and it's currently launched across 24 countries in Europe and a few countries in the Middle East. And a sizable market opportunity we are addressing EUR 5 billion steadily growing, although facing somewhat increasing competition in relation to biosimilars to Eylea gradually coming to the market in Europe as well as in the U.S. Looking at the current quarter, we are still at a market share around 7% from a volume perspective. And I mean, we're releasing this Q2 report quite early. So we haven't received the final data actually for the quarter in relation to units sold and so on and so forth, but 7% volume market share as of April 2026. What you can see from the financial figures in the report, we have resumed the shipments of final goods to STADA during the quarter, and that is expected to remain during the remaining quarters of the year. And accumulated, we have now profit sharing of SEK 127 million. We are also, as we've been discussing before, working intensively to reduce the production costs across a multitude of different measures we're going through. And we expect that this will have a significant impact on the production cost, which is going to be realized from 2027 and onwards. And as you can see also from the financials although we had some one-off effects on the quarter on the production cost side, there is an improvement potential in the gross margin. And we expect that these production cost measures will impact the gross margin positive. We have an inventory also as we've had for some time. It is at a level of SEK 175 million and of drug substance as well as drug product and finished goods. So still a quite sizable inventory on our balance sheet, which gradually now is being converted into cash as deliveries to STADA is resumed. In relation to the regulatory process with the FDA in the U.S., as those of you who follow us might recall, we received a complete response letter in October last year. It was related to observations at one of the manufacturing sites being involved in the production of Ximluci, the brand name in the U.S. is intended to be Lucamzi, but it's still the same product, Lucentis biosimilar candidate. The production site has now -- which is a contract manufacturer to Xbrane has now worked through all these observations and the related actions to remediate these observations and all the documentation has been sent to the FDA, which resulted to us resubmitting the BLA to the FDA in April this year, and we now have a BsUFA date or decision date in October this year. So we hope, of course, that we, this time, can get an approval for the product in the U.S., and we are in parallel now making the appropriate preparations for the launch of the product in the U.S. provided an approval, of course. So we're making preparations together with our partner, Valorum, which is going to commercialize the product in the U.S. Then moving over to Xdivane, our biosimilar candidate to Opdivo. We're quite excited about this program. It's going through a very intense development phase right now, both on the whole CMC side, which is related to process validation on both drug substance and drug product side and also the ongoing clinical trial. So we are targeting a submission of a BLA to the U.S. FDA during the course of next year, and everything is moving according to plan to be able to achieve that. So we're quite excited about this program. We believe it to be substantial potential given the size of the market and the originated product and also the level of competition in relation to the size of opportunity. And then I want to spend a few minutes also on Xdarzane, our biosimilar candidate to Darzalex. And here, we entered into a co-development agreement with the CDMO, JOINN Biologics a few weeks ago. So this is, I think, a quite interesting development and a possibility for us to be able to take a step forward in the development of Xdarzane without having to invest into the product right now. So I mean just some background information. Xdarzane, biosimilar candidate to Darzalex, it's a product being used in treatment of multiple myeloma, a form of cancer. It's a sizable product, sales of USD 14 billion in 2025. Patent goes off 2029 in the U.S. and 2 years after in Europe. And as far as we can tell, there are, in total, 4 development programs of biosimilar candidates to Darzalex. So I would probably say, given the size of this opportunity, also at least a quite low level of competition. And here, it's also -- the product was initially launched as an intravenously administrated product, but a lot of the volume has now moved over to subcutaneous administration formulation. And our development here is targeting both these formulations. And a few words about JOINN Biologics then it's a global CDMO based in U.S. and China, have a sizable production facility in China with significant capacity on the drug substance side. And we believe with the ability to produce at competitive cost levels, which is crucial, of course, for any biosimilar development. Some words about the structure of this arrangement. So essentially, JOINN will continue based on where we are at in this development. And JOINN will develop the production process and demonstrate analytical similarities to do all analytical development work and demonstrate analytical similarity versus the originator. And that's the first step really, and that's under JOINN's responsibility and provided a successful outcome on that step in the development, the [ core ] is Xbrane and JOINN will co-own the program. Then Xbrane will lead the efforts to find a suitable commercialization partner for this program. And then take the further steps into clinical and regulatory development. And our ambition is, of course, to get the majority of those steps financed by a commercialization partner, while as the steps related to scale-up process and characterization and validation and eventually commercial manufacturing will be performed by JOINN Biologics. We're quite excited about this agreement and this collaboration and actually the possibility for us to continue this program without having to invest significantly into the program at this point in time. So that was a brief operational update, and I'm leaving over to Jane for a financial update.

Yes. So as you might have read in the report, revenue for the quarter amounted to SEK 46.8 million, whereof SEK 46.6 million relates to shipments resumed of finished goods to STADA. The cost of goods sold amounted to SEK 44.4 million, which gave us a gross margin of 5%. The low gross margin is a result of a revised accrued profit sharing from STADA amounting to SEK 5.5 million and also an inventory adjustment amounted to SEK 5.7 million. Had these adjustments not been made, the gross margin would have amounted to 26%, which is more in line with our current expectations. However, we are also, as Martin said, working on decreasing production cost measures and investing in those together with our partner, STADA. We are expecting that the sales will continue during the third quarter and also during the fourth quarter. The fixed costs amounted to SEK 17 million, whereof SEK 7 million is related to administration costs and SEK 10.1 million is related to R&D, out of which SEK 2.7 million are related to amortizations of intangible assets. SEK 12.5 million have been capitalized as intangible assets. As for the breakdown of the cash flow for the quarter, you can see that we have received SEK 13 million from profit sharing. We have put in SEK 34 million into the production of Ximluci for which we have received revenue during the second quarter, but also revenue to come during the third quarter and fourth quarter. We have the fixed cost of SEK 17 million and received money from the sales of first quarter and the second quarter amounting to SEK 21 million and invested in Xdivane amounting to SEK 4 million. All in all, the closing balance for the quarter was SEK 49.5 million. So the cash and the cash equivalent amounted to almost SEK 50 million, and the operating cash flow amounted to minus SEK 4.8 million.

So key takeaways. Constant market share from a volume perspective of Ximluci in Europe. And we are working through, which is a key focus when it comes to Ximluci in Europe now to reduce the production cost. And we believe that these measures will have an effect in 2027 and onwards and lead to significant reduction in production cost and improvement in gross margin. Decision date when it comes to Ximluci BLA October this year. So we hope, of course, for an FDA approval this time around and a subsequent launch of the product in the U.S. Everything proceeding according to plan with Xdivane, targeted BLA submission during the course of next year and the co-development agreement signed with JOINN Biologics and the ability for us to continue the development of Xdarzane. So that's really the key takeaways from this quarter. So with that said, we leave over to any potential questions from listeners having called in.

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

I have 2 to start with, if that's all right. So firstly, in the report, you stated an expectation of around a 50% reduction in cost in 2027, which sounds like a lot. Maybe if you could just elaborate a little bit on what you're doing to accomplish this?

I mean it relates to a multitude of different process improvements really we're going through. So not so much more we can say there. But yes, we do expect it to lead to significant cost reduction. And this is really the key when it comes to biosimilars, generally speaking, as the market has developed to ensure that you have a reliable and cost-efficient supply chain. So that's really what we are working through and ensuring now when it comes to Ximluci.

Yes. And so would you say is this early 2027 or late 2027 target for this to be done?

So I think the effects will gradually be seen from mid-'27 and onwards.

Right. And then I also have another question. This goes from a while back. But if I remember correctly, there was sort of a disagreement between you and Valorem relating to the upfront payment. You updated the market on this. I think it was end of 2024 or early 2025. Has there been any update on this topic since?

I think that there should not be an expectation on an upfront payment in relation to Ximluci in the U.S. It's still an ongoing discussion on the exact financials, but I think that's the right expectation to have.