Oncopeptides AB

STO:ONCO

Earnings Call Transcript

[Operator]

Welcome to the Oncopeptides Audiocast with Teleconference Q4 2021. [Operator Instructions] Today, I am pleased to present CEO, Jakob Lindberg, CFO; Annika Muskantor and CMO, Klaas Bakker. Please go ahead with your meeting.

[Jakob Lindberg, Chief Executive Officer]

Thank you, Jakob Lindberg here. Good afternoon. Good morning to those on the other side of the Atlantic. We are here today to report our Q4 report and the webcast associated with that. As you know, we have had some significantly positive events lately. Unfortunately, just like on our last webcast, we cannot go into details regarding the scientific rationale for our actions. We will, of course, at some point in time, share them with you when we can, but we can't at this point in time. But we will highlight how we judge them and hence, help you make your assessment of it.Please go to Slide #2. As you know that this webcast is regulated, and you should make your own assessment of the data that we provide. And for any type of information and our forward-looking statements, I just advise you to read this disclaimer in full.Slide #3. Thank you. As already stated, we have 3 people on this call, myself, Jakob Lindberg, Chief Executive Officer; Klaas Bakker, Chief Medical Officer; and Annika Muskantor, Chief Financial Officer, and we will try to answer all your questions as good as we can at this point in time at the end of the call.Please go to Slide #5. So these are the highlights, and it has been a very turbulent time for us. In quarter 4, we, as you know, end of October, we voluntarily withdrew the PEPAXTO from the U.S. market, which was a very dramatic end to that piece of our FDA interactions. This led to complete refocus on research and development that we intended and plan to close our commercial operations and scale down the organization that we have in Sweden.We also needed to focus our clinical development program to support the ongoing European Medicines Agency review and application process because, frankly, we didn't have the cash to sustain the clinical development program at the time otherwise. And we needed to establish a compassionate use program in the U.S. for PEPAXTO to support those patients that remained on treatment.We also present the data from melflufen at the American Society of Hematology meeting in December that was well received. And in line with our internal estimates, we actually had also a cash possession of SEK 362 million by year-end 2021.The high sort of the dramatic development in this company continued in 2022. So after the reporting period, we -- first, we published the OCEAN data in launch of hematology, which is a very well-respected journey. And then after a significant amount of analysis of survival data, this led us to rescind the voluntary withdrawal letter of PEPAXTO in the U.S. This is an action completely within the regulatory framework. And technically, and I think this is very important to note, that means that right now, we are an approved product in the U.S., but we voluntarily choose not to market it while we are in discussions with the federal drug -- with the Food and Drug Administration, the FDA, of the U.S.Slide #6. Thank you. At the end of last year, we set out to deliver on 3 milestones. We wanted to secure the cash runway, and we wanted to have secured it in quarter 4 of last year. That still means that some costs must spill -- will spill over into 2022, but all the actions are taken to make sure that we reach that target.We wanted to reach an agreement with the FDA regarding the path forward in quarter 1 of this year. And we expected a CHMP opinion from the European Medicines Agency by quarter 2.If we go to Slide #7, you can see that we successfully secured the cash runway. We did exactly what we stated to the market that we would do, and we have done that, and we communicated this in the press release, and we will go a little bit into more detail on that one later.But then actually the process with the FDA changed because based on the data that we analyzed, we reached the scientific conclusion, and I think this is very important, the scientific conclusion that we should remain on the U.S. market and that we benefit -- melflufen treatment benefits patients. Now that is our position. And we are currently in dialogue with the FDA regarding this data set.We are, of course, continuing the application process with EMA and expect still a CHMP opinion during the second quarter of this year. Klaas Bakker will go into a bit more details regarding these 2 points, but the importance is we did this for scientific reasons, nothing else. And of course, we wouldn't have done that if we didn't think that there was a chance of us succeeding in remaining on the U.S. market.Let's go to Slide #8. This is with regards to the first objective that we set out to secure the cash runway. So we closed the commercial organization in the U.S. and the EU, so they are closed. We have significantly downsized the Sweden-based headquarters and we have significantly decreased the operational burn rate. As communicated in our press release, we have sort of an underlying operational cash run rate of around SEK 12 million to SEK 15 million at the end of the month, but we still have some close-down costs associated with this reduction that will taint quarter 1 of this year, but the underlying burn rate has been significantly reduced, and that is what we're going for.We have also reduced the clinical trial activity because we had to, but we have remained active in those parts that are critical to support the application process in Europe as well as the interactions with the FDA. So we stand by our previous statement that we have sufficient cash to take us through this year.Now I'm going to leave the word over to Klaas Bakker to go through the EMA and the FDA processes to the extent that we can share information at this point in time. Klaas?

[Klaas Bakker, Executive VP & Chief Medical Officer]

Thank you very much, Jakob, and good morning, good afternoon, everyone. If we could please go to Slide #10, please. So as Jakob stated earlier, though we are formally an approved drug in the U.S. as of today, we have no intention to market PEPAXTO at this time. And this means that we would want to reach a mutual understanding with the FDA on how we interpret the OCEAN study. We think we have solid scientific grounds, which led to the rescinding of the withdrawal. But we are in active dialogue with the FDA that is ongoing as we speak.In addition, we will continuously work with the FDA to make melflufen available for those patients that need it, and which patients are that are the patients that are currently treated with melflufen and who have no other treatment options available. And we provide drugs to these patients as of today.If we go to Slide #11. As you all are aware, we have an ongoing application process with the European Medicines Agency. Important to note is that the analysis that has led to the rescinding of the withdrawal has also been shared with EMA. So both agencies sit on the same data set. The 180-day questions are expected to come in, in the end of March. And so far, we have not experienced any delays with regards to the European process.To highlight the unmet medical need in Europe is that we have currently 70 patients on treatment in our early access program. And this makes clear that there is a place for melflufen on the market in Europe. And based on the EMA process so far, we have continued with our market access preparations in Germany. So that if we get an approval, no time has been lost in order to have a German launch. This is critical in Germany as this is the first launch country in Europe, and we have made sure that we wouldn't lose any time there.With that, I would like to turn it over to Annika Muskantor, our CFO. Annika?

[Annika Muskantor, Interim Chief Financial Officer]

Thank you, Klaas. So if I kind of ask you to turn to Slide 13. Now we generally just look at year-to-date data, but given the radical changes in Q4, we felt it was relevant to highlight some of the drastic reductions in the quarter given that it encompasses both sales up until the withdrawn in late October and the closedown related costs. So I will focus mostly on the last quarter of 2021. But we, of course, also touch on the full year's numbers on the following slide. Please do note already up front that we will be not going into details on the associated closedown costs However, what we can conclude is that operating expenses for the quarter amounted to SEK 349.7 million to be compared to SEK 511.6 million for the fourth quarter of last year.R&D-related expenses amounted to SEK 184.3 million, and it has decreased from SEK 231.4 million for the same quarter last year. To give a bit more color, the reported cost for OCEAN was SEK 31 million in Q4 this year, and that can be compared to SEK 67 million in Q4 of last year.Marketing and sales amounted to SEK 167.8 million and has decreased from SEK 173.6 million for the same quarter last year. Administrative expenses have come down to SEK 33.6 million compared to SEK 60.7 million for the fourth quarter of last year. To give a bit more clarity on staff numbers. As you can note, the number of coworkers have come down significantly and has done so across the company.At the end of Q3, we reported 321 coworkers. On December 31, we exited the year with 162 coworkers. And that number, you can expect to come down further during Q1 of 2022 as termination periods come to an end. Now all in all, the activities and events during the quarter resulted in a negative cash flow from operating activities of minus SEK 446.5 compared to minus SEK 357.2 for Q4 of last year. And with that, I would like to change focus to the full year financials. If I can ask you to go to Slide #14, please. Now inevitably the full year encompasses Q4, which was the very eventful turnaround quarter. And what we see in the full year is that operating expenses for the year amounted to SEK 1.486 billion to be compared to SEK 1.591 billion last year. R&D-related costs for the full year of 2021 amounted to SEK 679.9 million, a decrease from last year while R&D related costs amounted to SEK 866.2 million.Marketing and sales-related expenses amounted to SEK 698.3 million compared to SEK 456.5 million last year, the increase driven, of course, by the buildup of commercial operations and close down of the rates all within the same financial year.Administrative expenses amounted to SEK 175.5 million, which was a decrease from SEK 197.7 million last year. All in all, resulting in a cash flow from operating activities of a negative SEK 1.516 billion for the 12-month period, this to be compared to a negative SEK 1.297 billion for the corresponding period in 2020. That leaving a previously announced cash balance of SEK 362.2 million at the end of the year compared to SEK 840.3 million at the end of 2020.And that concludes the financial section. I'll hand back to Jakob.

[Jakob Lindberg, Chief Executive Officer]

Thank you, Annika. So we are heading into Q&A. So if the operator could introduce the Q&A session. Thank you.

[Operator]

[Operator Instructions] We currently have no registered questions, I'll hand back to the speakers for any further remarks. I apologize, our first question comes from the line of Patrik Ling from DNB Markets.

[Patrik Ling, Senior Analyst Healthcare]

Sorry, being a little bit slow on the keyboard there. But Annika, I know that you didn't want to say anything about the future, but could you just give us sort of a sense for what type of activities that will impact your cash runway now in the first quarter? And if these are activities that will be fully paid in the fourth quarter? Or will there be any lingering effect for a longer period down the year?

[Annika Muskantor, Interim Chief Financial Officer]

To try to add some clarity to that. We do have some cost impacting from a cash perspective, Q1 in terms of redundancies that was initiated in Q4 last year, and we're -- and so was coming to an end during Q1. And on top of that, we have basically the EMA applications, and we have the closing of the studies. But we do count on those mostly impacting H1, and you should see a tapering off effect in those.

[Patrik Ling, Senior Analyst Healthcare]

And could I also ask, when you talk about an underlying burn rate of SEK 12 million to SEK 15 million per month. What do you include in that burn rate? Is that including the remaining cost, for example, the OCEAN trial or what is included in the burn rate.

[Annika Muskantor, Interim Chief Financial Officer]

It's the underlying operational in the sense of staff and ongoing operations and the base operations related to the daily activities of the company. Now dependent on development and discussions, those could, of course, vary.

[Patrik Ling, Senior Analyst Healthcare]

But, for example, the OCEAN trial, is that included?

[Annika Muskantor, Interim Chief Financial Officer]

No.

[Patrik Ling, Senior Analyst Healthcare]

So that comes on top of it. So all the trials that remain on track where you for 1 reason or the other do not want to shut them down. That is on top of SEK 12 million to SEK 15 million.

[Annika Muskantor, Interim Chief Financial Officer]

To the greatest extent, yes.

[Patrik Ling, Senior Analyst Healthcare]

Okay. Great. That's all for me.

[Operator]

Our next question comes from the line of Erik Hultgård from Carnegie.

[Erik Hultgård, Research Analyst]

I have 1 question, if I may. It relates to how you plan to communicate until we get the CHMP opinion in Q2? So will you -- do you plan to disclose the details of the questions late March, for example.

[Jakob Lindberg, Chief Executive Officer]

Thank you, Erik. Fundamentally, it is really not customary to communicate what is a dialogue between the regulator and yourself, unless it is materially bad where I think they wouldn't mind. But if it is good, but prior to any formal decision, we would not say anything.When it comes to the science underpinning, the rescinding of the voluntary withdrawal ladder, we would -- we talked to you about that as soon as some other body have talked about that, that is either a regulatory body or a peer-reviewed article, but until then, we wanted to go through the regular channels and that is the main reason why we don't talk about it today.

[Operator]

[Operator Instructions] And we currently have no further questions. I will hand back to the speakers for any further remarks.

[Jakob Lindberg, Chief Executive Officer]

Thank you. Jakob here. We will try and this line goes back to Erik Hultgård's question. We will try to keep you as updated as we can along the way. It is bit of a funny situation we're in that we are having extensive discussions with regulators that we can't share until regulatory actions have been taken. And we also have new data that we can't share until it has been public through other channels. But we will make our best to keep all of you as informed as possible throughout this period. And we are very excited actually about where we are. And then we just don't know exactly how this will end. And we know that last year was a very turbulent year and a tough year to be an Oncopeptides shareholder, and we hope that we can make up for some of that in 2022. Thank you very much for being with us on this webcast and do not hesitate to contact our IR function, if any questions arise after this call. Thank you.