Texted version of the presentation for the year end report 2019. - - PDF document

Texted version of the presentation for the year end report 2019. Date: 28 February 2020 Presenters: Martin Åmark, CEO and Susanna Helgesen, CFO Martin: Thank you very much. Hello everybody and welcome to this webcast in relation to our year end report for 2019. So I will first just give a brief update of where we are from a business perspective, and then I will hand over to our CFO, Susana, who will walk you through the financials. Martin: If we go to page number three here. The highlights are the following, if we first talk a little bit about Xlucane, our leading biosimilar to the ophthalmology drug, Lucentis. We'll talk a little bit about where we are in the development. Xplore, which is the ongoing phase three trial for Xlucane. It's an equivalence trial where the objective is to demonstrate the equivalence versus the originator drug Lucentis. Martin: We are in full speed recruitment and the trial is going very well. As many of you probably know, we're targeting to recruit 580 patients with age-related macular degeneration. We are working now with a little bit over 130 actively recruiting clinics all over the world. And we reached well over 50% of the intended sample size in the trial and it's now going very quickly ahead, with some 60 to 80 patients being recruited on a monthly basis into the trial. Martin: I think now it progresses very well and we're aware that it has been a marginal delay as per the originally communicated timeline with regards to recruitment, but I think it's now we see that the recruitment speed really has picked up and I think it's due to several factors. On the one hand that we now have all the intended clinics up and running and actively recruiting. Martin: And as you who have been involved or following these kind of trials before, you probably know that the recruitment typically follows more of an exponential curve than a linear curve and it was due to the ramp up time it takes to get up all the sites up and running and actively recruiting. Martin: So now we have that, then the competition for patients has decreased significantly after Christmas as a larger clinical trial finalized their recruitment before Christmas to some extent at least competing with Xplore with regards to the patients we've recruited. So now when that also came to an end, it also contributed significantly to an increased recruitment speed. Martin: We have strict inclusion criteria in the trial to have an as homogeneous patient population as possible, particularly with regards to the visual acuity at entering the trial. This is good, we believe, from the

perspective of demonstrating ultimately equivalence versus the originator and then having as homogeneous patient population as possible is beneficial. But the backside of it is that it leads to a little bit higher screen failure rate than anticipated. But I think there's a good side of it, which is beneficial from demonstrating what we want to demonstrate equivalence. Martin: Now it's moving ahead very quick to action and I think it looks very good. And then as you can imagine, a lot of the ongoing activities within the company and together with our partner STADA in relation to preparing for filing with at least EMA and FDA. In order to finalize the setup of our commercial supply chain so that you have that up and running and prepared and everything is moving on track to have an approval in place and being able to launch the product together with STADA as the originators patent protection expires in July 2022. Overall I think this is moving along very nicely and we were enthusiastic about the big development and our partnership with STADA and the prospects we have for this product commercially and also what we can do for the patients with these different indications. Martin:

• Okay. So moving along to what we do with the preclinical portfolio, we work very actively on

development of our biosimilar to Cimzia and to Opdivo. It is the two programs we are working heavily with from a preclinical perspective and they both are moving along very nicely. And to say a few words about the Cimzia biosimilar here, we think this is a very nice target, patent expiration 2024/ 2025 as of now we are the only biosimilar developer going for this target. Cimzia is a sizable product of 1.7 billion Euro in sales and actually growing with some 18% and now in 2019, so strongly growing product as well. Martin: I think this looks more and more as we move along as a more attractive target and a product we really believe will have the potential to be a commercial success for us. And with regards to the Opdivo biosimilar, we have are one of the front runners with. As you probably all know, Opdivo, is a larger product then Cimzia, with some seven billion Euro of annual sales now and growing strongly also. The patent expiration from 2026 and onwards. So we also would believe that we'll be able to do strong commercial case out of this. Martin: Also we are working a lot on strengthening our platform technology, both from a scientific perspective but now also from an IP protection perspective. We have recruited an IP professional, and created a small IP department, which allows us to pick up all the great innovations coming out of our scientific team and file patent applications to build more of an IP portfolio around our platform. We filed three patent applications this year and I'm sure that we're going to file additional patent applications throughout the course of this year covering essential aspects of our platform technology targeting cost efficient production of biologics. Although now we are applying it on biosimilars, but it's a platform that really can be leveraged for any biological product with the benefit of low production costs. Martin: Now we're talking more about the financials but coming out of 2019 we had a cash position of 164 million Swedish Krona, which is as per the budget we had. Let me open the next page, yes, a few words from the market's perspective, particularly in Europe and the US we see biosimilars continuously in Europe taking higher and higher market shares versus their respective originator product and it's going

quicker and quicker in the launches that we see. We're happy to see that in the US also now we see signs of commercial success for biosimilar developers now in particularly the Coherus biosimilar to peg- filgrastim, which actually ended 2019 with a $356 million of sales. Martin: So I think that Coherus has demonstrated in a way what can be done in terms of biosimilar launches and commercial successful biosimilars in the US. Looking at these figures the leading biosimilars have reached 400 plus million Euro in annual sales, which is in the vicinity of what we have explicitly targeted as, as our net sales ambitions for our leading biosimilar Xlucane. Martin:

• Okay. We can move on to the next page, and we're also of course monitoring the direct market which is

being addressed by Xlucane and the market for VEGFa- inhibitors for ophthalmic use. With the key products Lucentis and Eylea and now also, Novartis launched their VEGFa- inhibitors Beavou in 2019 this market is growing strongly, some 10% of annual growth, and Lucentis, the originating product that we are targeting here, is also growing in the market, so it's a very sizable market that we are addressing and growing market. And I think there's still plenty of room for further growth of these respective products, and given the amount of patients which currently are going untreated or are not getting sufficient treatment, if you will in terms of number of doses on an annual basis due to the high costs of these respective originated products and the limitations in reimbursement. Martin: I do believe that we are going to see continued growth in this market and also that given the issues we have with the costs of the respective products, biosimilars will take a prominent place in this market as they start to launch 2022 and onwards. Martin:

• Okay. So that's the brief update from where we are from the business perspective and all. We are going

to hand over to Susana to walk you through the financials. Susanna: Thank you Martin. Let's move over to page six and the update on the Q4 financials in the financial summary for Q4 as well as for the full year, you can see that the Xbrane did not report any revenues. This is due to the cost sales of tour sites to Iran, RND expenses for Q4 amounted to 26 million Swedish Kronas which is in line with same period last year. R&D expenses for a full year amounted to 116 million Swedish Krona and the increase is primarily due to the ongoing explorer phase three study regulatory preparation for MAA/BLA filings as well as establishment of manufacturing and supply chain for Xlucane. Out of total operating expenses, R&D represented 67% in Q4 and 78% for the full year. Operating loss amounted to 56 million Swedish Kronas in Q4 the greater loss in Q4 compared to last year is primarily due to write down of Spherotide inventory and production facilities in Italy. Susanna: This due to the bankruptcy of the parent company of our CMO in whose facilities we have our production equipment installed. Operating loss for the full year amounted to 165 million Swedish Kronas and the greater loss compared to last year is because we did not have any material revenues from sales

• r out licensing and that our cost of R&D and SG&A have increased. EBITDA amounted to minus 37

million Swedish Kronas for Q4 and minus 140 million Swedish Kronas for the full year. The net results for Q4 amounted to minus 56 million Swedish Kronas and for the full year minus 166 million Swedish

• Kronas. Xbrane ended the year with 164 million Swedish Kronas in cash and cash equivalents and an

equity ratio of 54% that has been strengthened due to capital raises. Earnings per share amounted to minus five Swedish crowns for Q4 and minus 14.84 Swedish Krona for the full year. Susanna: Let's move forward to the next page and look more in detail from the financials. On page seven you see a table to the left for the total income quarter by quarter and here they have added both revenue and

• ther operational income. In Q4 we have a total income of 2 million Swedish Kronas that consists of

licensed revenue from non-core operations and exchange with gains on receivables and payables. It is a decrease from Q4 last year and this is due to the fact that we have paused sales of Spherotide to Iran. If you look at the net result to the right, it's amounted to minus 55.9 million Swedish Kronas in Q4 the loss has increased since last year which is primarily due to write downs of inventory and production facilities for Spherotide amounting to 16.8 million Swedish kronas, as well as increase SG&A and other

• perational expenses.

Susanna: Let's more forward to page 8. Looking at SG&A in the table to the left, we had total expenses of 8.3 million Swedish Kronas in Q4 which an increase by 17% from last year. Increase is primarily due to the fact that Xbrane is a growing company. Some of the expenses during the last year have been related to transactions, capital raises and the main market listing and they have adjusted for those non-recurring in the adjusted SG&A. Susanna: If we move forward to R&D expenses to the right, we have expenses amounting to 25.6 million Swedish Kronas in Q4. This is in line with the same period last year, compared to last year we also have R&D spending for our preclinical biosimilars of 3.3 million Swedish Kronas. In the bar to the right, we have presented R&D expenses for biosimilars, which is everything except for Spherotide. Susanna: Let's more forward to page 9. In Q4 we had cash flow from current operations before changes in working capital of minus 32.9 million Swedish Kronas. For the full year, this amount was minus 141.3 million Swedish Kronas. Susanna: Moving further down to changes in working capital, we did not have any changes in inventory as this has been written down to zero. With changes in trade and other receivables and payables, we usually have quite a fluctuation due to two things. First, we have a front loaded payment structure for the clinical trial, which means that we pay much of the cost in preparation and early phase of the study such as deposit to the CRO and purchase of reference drug. Susanna: The second thing is that we have the re-invoicing structure with STADA, meaning that 100% of the assets and liabilities for Xlucane development is booked in our balance sheet and thereafter an asset or liability towards STADA for their 50% also ends up on the opposite side of the balance sheet. Operating cashflow

amounts to 6.3 million Swedish Kronas in Q4 and minus 148.6 million Swedish crowns for the full year. Cash flow from investing activities amounted to minus 0.2 million Swedish Kronas in Q4 and a minus 1.2 million Swedish Kronas for the full year. Susanna: Cash flow from financing activities amounted to minus 0.8 million Swedish Kronas Q4, for the full year this amounted to 216 million Swedish Kronas and consists of new share issue of 252.5 million Swedish Kronas, related transaction costs of minus 33.4 million Swedish Kronas, amortization of loan of minus 0.1 million Swedish Kronas and amortization of lease liabilities of minus 2.8 million Swedish Kronas. Total cashflow for Q4 amounted to 5.2 million Swedish Kronas and for the full year 66.3 million Swedish Kronas. Susanna: Let's move forward to page 10. On the left you can see variation in operating cashflow quarter to quarter and for Q4 the amount was positive 6.3 million Swedish Kronas. Looking at the cash balance to the right, we ended the year with a cash position of 164.2 million Swedish Kronas. Cash balance is in line with previous quarter as this is due to positive changes in working capital that is balancing our expenses. Susanna: Let's move forward to page 11. Looking at the summarized figure of the balance sheet in blue, you can see that it has increased to 338.9 million Swedish Kronas compared to last year in red where it amounted to 252.9 million Swedish Kronas. Susanna: Starting up on the assets side, they have non-current assets of 91 million Swedish Kronas which is almost the very same number as last year. The change here are smaller in this month and the implementation of IFRS this accounting standard that pretty much balanced the depreciation and write

• down. We had current assets of 83.7 million Swedish Kronas and over these 51.5 million Swedish Kronas

covers the purchase and packaging cost of reference drugs that will be used in the Xplore trial. Prepayment to our CRO for the clinical trial amounts the 14.5 million Swedish Kronas. Cash amounted to 164.2 million Swedish Kronas and an increase due to equity issues. Susanna: Moving over to the other side of the balance sheet, we have shareholders equity amounting to 184.3 million Swedish Kronas and also here an increase due to equity issues offset by losses. Non-current liabilities amounted to 15 million Swedish Kronas whereof 4.2 million Swedish Kronas is related to STADA´s part of the longterm deposited to the CRO. Non-current leases amounted to 6.3 million Swedish Kronas. Current liabilities amounted to 139.6 Million Swedish Kronas, that includes deferred income and accrued expenses amounting to 112.5 million. Swedish Kronas whereof 85.2 million Swedish Kronas is deferred income from STADA. Furthermore, trade and payables amounted to 21.1 million Swedish Kronas. That was all on the financials back to you Martin. Martin: Thank you Susanna. Last page we had been participating in several investor conferences lately amongst them, the JP Morgan conference, in San Francisco and Jefferies conference in London in November last year and then several investor conferences arranged by Vator Secruities in Vienna, Zürich and Tel Aviv.

Going forward up until summer, we are going to be participating in several capital market days arranged and they are going to be communicating a week or so in advance, of each instance where we are going to be presenting but to give a snapshot, we are going to participate in several presentations with Redeye and also in their growth date in June, and then we're going to participate in Vator Securities Unicorn Summit, 13th of May and a the ABG Life Science day on the 26th of May and we will be communicating a week or so in advance of each investor conference where we intend to present the company. Martin:

• Okay. With that said, we have come to the end of the presentation and thereby we'll open up for Q and

A and we noticed that a few questions have come in via the system here. So what we are going to do is to read the question first and then try to answer it as good as possible. Martin:

• Okay. First question, "from the report concerning Xlucane the study is progressing well with no safety

concerns raised, have you been able to monitor also efficacy and have you seen any possible differences between patients in terms of efficacy?" Martin: To answer this one. What our CRO is doing is that they are monitoring certain aspects with regards to particularly safety but also efficacy, but more from the perspective of ensuring that they see no abnormalities in terms of how the vision improves or deteriorates, if you will. It is done in a blinded

• way. So the study is blinded throughout the first interim analysis taking place, but it's important to

monitor particularly so that there's not an abnormal amount of patients losing vision which you wouldn't expect compared to normal usage of the originator product and that could be a sign that the biosimilar would not working as it should and thereby this would call for further investigation. However, no such abnormalities have been observed so far. So that is what we can say and what is monitored from the patient in efficacy perspective. Martin:

• Okay. Next question. "What is the current view of the expected end date of recruitment of Xplore?"

Martin: I have said that initially here we're currently above 50% of the intended 580 patients. We keep the speed of 60 to 80 patients a month, which essentially means that if we maintain this recruitment speed, we shall have completed the recruitment between 3 to 5 months. Martin:

• Okay. Next question about new patent applications, "are these related to E.coli or mammalian cell types
• r both. What is the significance of these modern technologies when it comes to production costs. Does

these technologies benefit all the products in the portfolio or are these related to specific products?" Martin: What I can say is that the recently applied patents are related to aspects for E. coli. However, as many of you know, we have started to work with mammalian cell based products and particularly our biosimilar to Opdivo which is expressed in mammalian cells, and we have here some aspects which we throughout

the year intend to file patents for. Our technological platform and the patents we have filed target lower production costs. That is kind of the competitive advantage which we are targeting with our platform. Martin: However, the exact amount of that advantage depends on each target protein that we apply them on, it's hard to say in a general way and but we do believe that our fundamental platform has a very strong potential when it comes to a lower production costs compared to standard systems. As we have demonstrated up to 12 times the yield compared to standard system, which then could talking about the drug substance itself lead to you know, 80 to 90% lower cost compared to what you would have gotten with a standard system, we believe that we have a very powerful platform of technology in place here. Martin: What we developed over time with regards to our technological platform we are implementing on the new products that we start to work with. It's hard to go back on products for example, Xlucane which is already in clinic, we can implement new things we come up with and innovate, we are applying them to all products which we currently are developing from a preclinical perspective. Martin:

• Okay. And next question here, "are the recent file patent used in the place of Xlucane?" Okay. So answer

to that one is a No. Martin:

• Okay. So let's see here. And also we have a question here which is related to filing off Xlucane. "So

multiple biosimilars have had an extended approval process related to issues with production. And how do you view this work? Is your primarily CMO Biotechpharma, a big company in this space and how is their experience in track record?" Martin: So we are working very actively currently with all our contract manufacturers for Xlucane to on the one hand generate all the documentation we need for filing towards EMA and FDA and making sure that that they are prepared for potential pre-approval inspections by FDA or local authorities in Europe. Martin: Looking up on our different contract manufacturers, we selected them because they are highly qualified for conducting these different steps in the supply chain and also that they earlier have received approvals from respective local authorities, BiotechPharma has GMP certification from Lithuanian

• authorities. Their site is located in Lithuania and thereby authorized by EMA and our drug product

contract manufacturer Swissfillion, in Switzerland, has a GMP certification for other products both from SwissMedic and from the FDA. And there's a mutual recognition agreement between SwissMedic and

• EMA. I think we have selected very good suppliers here which are able to on the one hand produce at

commercial scale and at the capacity required but also to successfully come through the inspections by both of the FDA and respect the European and local authorities. Martin:

• Okay. There's a mixed question. "The study is expected to be finalized mid this year and marketing

authorization applications to be sent to FDA and EMA later this year. When can be expected an answer from respected authorities? Is it approximately the same time if in the US and Europe?" Martin: We can say here generally speaking is that EMA has a 12 month registration process while at FDA has an eight month registration process. Martin: Last question that we have here I believe is related to the markets for the VEGFa-inhibitors specifically

• Avastin. As I showed on the previous page, we only show the market for the VEGFa-inhibitors ,which are

approved for ophthalmic use but not for Avastin which is not approved for ophthalmic use, but nevertheless to some extent used off label for that purpose. The question is related to the market share

• f Avastin in Europe in the US and how that has developed over time and how we view the competition

from Avastin. From what we can gather, based on the surveys from the ophtalmology community, Avastin hs approximately market share of some 30% in Europe and 50% in the US a market that comes

• n top of the market we showed on the previous page here, however it's used off label and has been

attached with some serious safety risks because of the compounding required and the splitting up of the dose into several smaller doses to be injected intravitally in the eye. Martin: We see this actually more as an additional opportunity than anything else. And that when we come with a lower priceed biosimilar to Lucents, a product, which is approved for the indication and come in a prefilled syringe for the purpose at the lower price point, we should also be able to take a certain portion off the market, which currently is constituted by Avastin off-label usage. That probably concludes the questions and answers to the questions we received. But with that said, we are going to end this call and thank you everybody for calling in and listening in and we will also be putting up this presentation on the webpage and also the transcript of the call. So thank you very much.