Pharma Mar SA
MAD:PHM
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Pharma Mar SA
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Good morning to everyone. I would like to welcome to all of you to our first quarter results conference call. On the call with me today are Mr. Luis Mora, Managing Director of PharmaMar; María Luisa de Francia, Chief Financial Officer of PharmaMar; and Pascal Besman, our Chief Operating Officer of PharmaMar U.S.
Following our prepared remarks today, we will open the line for questions. I would like to remind you that today's conference call may include forward-looking statements regarding future events or the future financial and operating performance of the company. Such forward-looking statements are only predictions based on our current expectations and actual results might vary from those projected. We disclaim any obligation to update any information provided herein, and we refer you to our safe harbor statement on our corporate presentation, which is available on the website together with the press release of the results we released yesterday.
We started this year, as we left last year, which is with the business growing and again, showing a very robust financial results and balanced position. This is given to the continuous growth of our recurring business, which are revenues plus royalties, and this growth is basically coming from our oncology business. In relation to our cash, the group generated EUR 36 million in operating cash flow, during the first quarter of this year, which leaves us with a total net cash position of EUR 206 million, which is an increase of 23% since December last year. But to give you more details about all these financials, I turn over now to Maria Luisa.
Thank you, Jose Luis. Good morning, and thank you all for joining this first quarter results call. In the first 3 months of the year, financial data has evolved in line with our expectations and consistently with what we have seen in previous quarters, confirming the strength of recurring revenues that have increased 7% compared to March 2021. Oncology sales, which includes commercial sales of Yondelis, revenues from Zepzelca under early access program and sales of active ingredient to our partners increased 1% compared to March 2021. Yondelis sales and Zepzelca revenues remain at similar levels to previous quarters with raw material sales increasing the most. Royalties received from our partners also increased compared to the first quarter of 2021 by 27% from EUR 8.7 million in March '21, up to EUR 11 million. Please note that this amount is an internal estimate. Nevertheless, there is an upward trend in the sales made by our partners every quarter.
Regarding R&D expenses, this quarter has increased 29% up to EUR 19 million, of which EUR 11 million were spent on oncology activities, EUR 5 million on virology activities and EUR 2.5 million on RNA activities. EBITDA in the first 3 months of 2022 increased 6% year-on-year to EUR 20.6 million. This quarter, we have generated cash from operating activities of EUR 35.8 million, mainly due to the collection of commercial milestone from the Jazz agreement in the amount of EUR 22 million. The group continued to reduce its financial debt by a total of 4% since December 2021.
As a result, we end the first quarter with net cash flow of EUR 205.7 million 23% higher than net cash at December 2021. I end my presentation as I began it by highlighting the consistency of the figures that we have presented to you today and pointing out that financially, we are ready to address all the clinical developments foreseen in our current plans and to place new molecules in clinical development.
And now I pass it to, Luis Mora.
Thank you, María Luisa. Thank you very much. Regarding oncology area, María Luisa mentioned before, Yondelis sales in Europe have been slightly lower compared with the first quarter last year, mainly due to the net price pressure in Southern European countries. The volumes have been a little lower, also we are seeing in April that they are recovering. Regarding Yondelis in the rest of the world, the sales are better than 2021. Our partners do a good job. We can say Yondelis today in soft tissue sarcoma is a standard of care in the second line, we maintain the market share in like last quarter.
Regarding lurbinectedin, the LAGOON trial, remember is a pivotal trial, Phase III is progressing as planned. For lurbinectedin, the new registration dossier started being prepared in different countries by our meeting, our partners meetings have been held with different regulatory authorities and we will see the progress in this regard through this year. We expect the regulatory decisions in some countries during this year. There will be heavier for the early access program in some European countries is important. We'll achieve more drug request day by day. This shows the great interest for lurbinectedin, the need for treatments in small cell lung cancer and the confidence in our products.
Work is also being done in the new Phase III trial in mesothelioma. We are working on that, which we hope will start in the second half of the year. Regarding Zepzelca sales in the U.S.A. I can only say we are very satisfied with both our partner jobs and the evolution of Zepzelca in that country. Lurbinectedin, as we anticipated in the last conference call is in Phase II and its development, it continues as planned in different tumor types in the Basket trial. And we can say also we are working in 2 new compounds. We plan to enter in Phase I, the clinical trials this year 2022. Regarding the area of biology, the Phase III trial, the NEPTUNO trial continues to decrease also at a slower rate than we would like due to the changes in incidents and hospitalization of the pandemic in the different countries. I can advance that we are preparing a new study for the different population in NEPTUNO where there are no therapeutic solution for this patient. They will be in immunosuppressed patients with COVID-19.
Finally regarding Sylentis, we recently announced that it has started a new Phase III with drug Tivanisiran with the objective and for the safety for dry eye syndrome. In addition, the Phase III of efficacy continues to the recruit satisfactorily, and we hope that the recruitment will end within this year. Thank you. And Pascal, please?
Thank you, Luis. Good morning, good afternoon to all of you. I'll start off with a recap of a few key events from Q1, and then I'll highlight some coming attractions for Q2. In Q1, we had a very nice KOL event with Dr. Besse from Gustave Roussy in France and Dr. Jacob Sands from Dana-Farber, Harvard discussing second-line small cell lung cancer today and tomorrow. And it's clear that small cell has been an underserved unmet medical need and lurbinectedin is filling that void and that it is well tolerated. Dr. Besse presented an interesting case study of a patient who had a partial response lasting 36 cycles. That would be about 26 months, which is wonderful, of course, an anecdote of 1 patient. We also can share an anecdote of 1 patient, an American lady from Alabama, who's been on lurbinectedin for over 4 years from clinical trial to extended access. Certainly, we don't mean to make anyone extrapolate out to anecdotes. However, it's nice that there is this hope of a lasting response.
At the ELCC virtual meeting in March, we had an abstract presented on lurbinectedin real-world safety and associated costs from Switzerland, real-world setting. And it showed that lurbinectedin's costs were EUR 1,200 in comparison to topotecan of the order of EUR 8,000 and CAV of EUR 4,500. And this is mainly due to reduced myelosuppression and the use of primary prophylactic G-CSF in topotecan and CAV case. So an interesting abstract that was presented that we hope will further the case for lurbi in Europe at the appropriate time.
Moving on to things to look for this quarter at abstracts for ASCO. We've had 4 accepted. I can only share with you at this point the titles. One is the BRCA cohort of the Basket trial in breast cancer, the Phase II. The second is number of patients from the ATLANTIS study that continued on to monotherapy lurbinectedin after the limitation of 9 cycles of doxorubicin. The third is the LUPER study, which is a combination of lurbinectedin and pembrolizumab in the relapsed small cell lung cancer setting. And the fourth, which is an e-publish only, but I would guide you to have a look at it. It's an interesting study is lurbinectedin efficacy from our Basket trial compared to standard of care from real-world setting external control arm. And the author of that is Dr. Ganti who is the Chairman of the NCCN panel for small cell.
Lastly, a comment on Zepzelca, with ASCO around the corner and this year being in person and virtual and from what we can tell, we'll be well attended and the opening up of the U.S. post-pandemic, we may see accelerating progress for Zepzelca, especially in the community physicians who have been harder to reach because they stayed in their offices for the last 2 years. And small cell does have a large proportion in the community setting so this could be a benefit going forward, just a thought going forward, and we hope to see that. And lastly, a comment on business development. We continue to pursue our goals there and are in active negotiations certainly, the impact of the market -- the public markets is being felt, people seem to be more motivated with fewer options for equity raises being there. And so we're being opportunistic and reconnecting with many counterparties and hoping to meet many at ASCO.
And as I always end, I say, we'll let you know as soon as we have something to let you know. With that, let me pass the microphone back to Jose Luis.
Thank you. Thank you, Pascal. And this will be the end of our prepared remarks today. So Victoria, if you would like to open the line for questions?
[Operator Instructions] And our first question comes from Christian Glennie from Stifel Institutional.
Thanks for taking the questions. Can you hear me okay?
Yes, we do.
Just wanted to tease out or clarify something you said I think Luis may have said around some market shares of Zepzelca. I think in terms of U.S. sort of maintaining that market share, is that sort of right? I mean when I look at the sales or the implied potential sales, obviously, reading between the leads and the key leads around royalties, whatever royalty looks like Q1, the estimate sales around sort of flattish versus Q4 last year. Is that the right way to think about it?
No, no. Now I spoke about Yondelis market share, not Zepzelca. Regarding ZEPZELCA, we can say nothing. This is just regular, we can't say more than we said before. I had speak about Yondelis market share in Europe and in the rest of the world, standard of care, et cetera, but not Zepzelca.
In regards to Zepzelca, Christian, in U.S., as Luis said in the third quarter results call, they had a 37% market share, but they haven't updated ever since.
Yes, yes. Fair enough. Okay. And then just wondering, unless I missed it, just an update on the mesothelioma trial out there?
We are still working on that. I had announced in the last conference, that we are very close to achieve an agreement with monotherapy from a big company, and rest of the protocol for the Phase II, we are still working in that. And our obviously to start this trial in the second half of this year. We have already all the panel and key opinion leaders, the hospitals, contacts, et cetera. The trial will be done in Europe and in USA.
Okay. And then maybe a bit more on asset that is interesting, maybe we don't spend enough attention on is obviously the Sylentis asset and now that you are starting the Phase III. Just a bit more on the cost of that trial, the timing there to data and the commercial strategy, partnering and/or commercial strategy for that asset?
At this stage, we are going to say what we already announced. For the dry eye it needed 3 pivotal trials, 2 for efficacy and 1 for safety. The plans for efficacy has already started, and we expect to finalize the agreement this year. The safety Phase III trial is already ongoing. We announced it some weeks ago. And number three, the third clinical trial Phase III, we will announce when we will start. But usually, the second efficacy trial started when the first one is finished, okay?
And the timing, sorry, the timing on completing the first phase?
We've finalized an agreement for Sylentis efficacy trial this year, probably in the first half of the next year we will give a readout of the results. The safety is yet said started [indiscernible] is 1 year when in a past trial, we will see. And trial #3, we will start when the first one is finished. Okay.
And in terms of the commercial -- potential commercial strategy, I mean, is this something you already try to license and now decided to sell or?
I can't announce today what is the strategy, okay?
Okay. And then I mean, Pascal, I mean there's obviously the search is ongoing for new assets, anything else you can sort of share in terms of how many might be in the half past or late-stage. I know it can't be drawn on timings, but this concept, the same sort of concept around some asset that plugs into your European commercial infrastructure, maybe it's from -- it's $50 million to $150 million product or something like that? Anything to say around sort of what you previously said on that as well?
Well, I'm going to be really boring Christian, I'm sorry, but I'm going to just end up repeating what I have said previously, which is we're involved in multiple potential discussions regarding oncology assets for the European theater. Some are commercial, some are late stage, and we've got a lot of capacity to do small- to medium-sized deals and excess capital if we need it, but really beyond that would be inside pool.
Our next question comes from Alvaro Lenze from Alantra Equities.
The first one would actually be a follow-up on the question from Christian on the evolution of your royalties presumably from Zepzelca during this quarter. We see a quarter-on-quarter decline. So what my question would be whether this reflects some sort of seasonality or just an effect of inventory management by your client or through the distribution network or whether this is just an adjustment of -- because given that this is just an estimate, because you don't not have the final number, whether this is an adjustment from the estimate that you made last year. So just to make sense of the sequential quarter-on-quarter evolution?
Regarding your question, remember the first quarter '22 royalties expected from Jazz is an estimation, then we will see the final figure. The second one, I don't see what you say the decline of the royalties, sorry, but I cannot share that.
Only was that we -- the explanation was 6 months ago, 8 months ago, our adjustment was a public statement by Jazz. An adjustment in the difference within gross and net sales regarding the rate or the [indiscernible] estimations. Then for that we even slow in quarterly basis, the volumes.
Okay. Okay. Understood. Another question on the tax side, you reported a tax gain this quarter, just as last year. If you could provide us what your normalized tax rate would be? And when do you expect that run rate tax rate level to be achieved?
Yes. We have the tax benefit because we monetize the deductions on -- due to the R&D activities. That's why we have positive figures in income tax benefit. And we expect to continue doing it as long as legislation allow us.
Yes. I understood just what -- for how long will last. I understand that this is that you are taking in balance some previously off-balance sheet tax assets that were not recognized before? So I understand that?
But yes, this is not due to our off-balance tax yield. This is because of monetization of R&D investment, yes.
Okay. So this could continue for the whole year, maybe into 2023? Or is this...
Yes, yes. It will continue. It will continue. But it depends on the quarter and the profits of every quarter, the amount that will compensate this monetization.
Okay. Perfect. And then a question on the pipeline. You mentioned the 2 new compounds coming in. Whether you could provide some detail of how related are these new compounds to trabectedin and to lurbinectedin or whether these are completely different compounds and whether you expect them to be mostly used in solid tumors or maybe 2 other parts of oncology in blood cancer or something like that?
I can't announce because when we will start the clinical trial, we will announce, but we can announce to you these 2 new compounds from our R&D platform. Both compounds in principle will be focused in solid tumors. Both compounds are different mechanic for cancer, okay? One compound today, both compounds are closed. One is [ 354 ] and the other one is [ 3534 ]. This is internal code, okay? And we expected to start these trials Phase I in the second half. We are already in contact with the hospitals, with the doctors, the TIs. We were in charge of these trials. And in principle, the style, we will conduct that in 4, 5 different countries like European countries and USA, okay?
Perfect. And my last question. Okay. So my last question would be on Yondelis. The performance has been remarkable in terms of market share despite the age of the product. But as we approach patent exploration, do you have any insight that you could share with us on competitors, generic drug manufacturers researching for a potential generic version of trabectedin and when do you expect to see either price or volume competition from generics?
Well, as you know, Yondelis is about 15 years in the market, is a mature product. And obviously, the generics, not only Yondelis but all the products are coming. Then we know in different countries in Europe the generic companies actively submitted a different dossier. But this is -- in this sector, as far as you know, not all the dossiers submitted are linked to the sales of the products and their gain, then we will see. Yondelis, what is interesting is we maintain the market share. In April, we recovered -- more than recovered the volumes than the first quarter, the difference between first quarter of the last year. And we are working in that. The generic sure, not only for Yondelis but other products will be coming.
Every -- later, this is not in PharmaMar hands, this is in the generic company hands, then we will see. But we expected some generics will be coming next year, in '24 and the end of ''22, we don't know. The dossiers are submitted not only the Yondelis, it's more than 20 products, oncology products. But on the other day, decisions are in these generic companies hands, okay?
Then impact in -- if this occurs, the impact is not global impact because it's different country by country. In some countries it's different region by region or in autonomy by autonomy, then it's not linear in all the countries. It is secured without the other samples or the other products of the company and this is the trend today. For generics, the commercialization change is by tenders. It is not needed the commercial positive actually commercial support is more standard and like that. But in any case, we will see.
[Operator Instructions] And our next question comes from Joseph Hedden from Rx Securities.
First one on Zepzelca, and the combination trial with pembrolizumab. I'm just wondering what's your thoughts on how important that trial is now considering that there's a first-line study ongoing with atezolizumab?
Yes. Thanks, Joe. That is an IST run by [indiscernible]. I think your point is well taken that pembro since this trial has started last its third line label and is still in the NCCN guidelines, the second line. However, it's an interesting trial insofar as the combination of pembro and lurbi maybe pursuable in other indications.
Okay. And then just talking about the atezo and Zepzelca combination, and I appreciate it's Roche and Jazz's study. But I seem to remember there may be an interim analysis there at some point. I'm just wondering if you can refresh our memory as to when that might occur.
No, your memory is correct, Joe. There may be.
Right. Okay. But is that it's not -- I take it it's not '22, and then it might be a '23 event?
There hasn't been announced that there is an interim first of all. And therefore, it's so fact it hasn't been announced, there may be an interim, they haven't given the timing.
Okay. And then if I could -- you made an announcement last week or a few days ago about the oligonucleotide plant. Just wanting to get a few more details on that. You obviously talk about need in the Spanish market because you're going to outside players at the moment. So is this designed to serve just Spanish customers or would it be open for other kind of RNA players across Europe?
Yes. Thank you very much. This is a pilot plant. The capacity is not a lot, and we will use this plant for our trials and our needs. We have the other plants. We will announce opportunity. But this is the pilot plant inside of the Sylentis facility. Okay. And these quantities, they will produce -- we don't need to move to the third parties production in this stage under development of the product. GMP is being prepared for this task. Okay.
Okay. So have you had much interest so far people wanting to use potentially upfront?
Yes. yes, because in the world, there's not a lot facilities for oligonucleotide producer, then some third parties approach us and they want to have some -- if we have product to sell for them. Our priority is to produce for our needs. But if we have a space, we will sell to the third parties, okay.
Okay. And then I was just thinking about the finances from a cost perspective, how much investment are you putting into that? I noticed in Q1, there's not really any significant CapEx investments. So when is that coming through? And how much is that likely to be? Or are these -- is this refitting a facility that you already had and we shouldn't expect anything significant?
No, the pilot plant we announced the investment is not material. It was already done. The major investment was done in 2021, okay? In this quarter, we finalized the quality assurance works in order to be ready, but was not -- less than $1 million, okay, but was done in 2021.
Next question comes from Isabel Carballo from ODDO BHF.
Quick question on your level of cash, you ended the quarter with a high level. And I was wondering if you want to maintain some level of cash beyond your corporate move plans beyond your acquisition, special acquisitions?
Isabel, you don't have very clear line. Could you repeat the last part, we want to maintain some cash beyond?
Yes, which level of net cash you feel comfortable to maintain after the M&A.?
Are you talking about the possibility of acquire some products to include in our commercial sales force or structure?
Exactly, exactly. You are right in different options. And as you mentioned, and I was wondering that you also have some R&D projects, new R&D projects coming in and also some investments. So the level of cash you would need for all of that?
No. What we have mentioned always is that this amount is the one that will allow us to carry out all the clinical trials that we have currently on our current plan from now, 5 years plan and also to introduce and include new products in our pipeline. This is -- this amount is the devote to our current development.
Yes. This is -- yes, this is to ensure, as Maria Luisa said, our current R&D investment. As for -- in the case, we find a deal, and we need to finance well we can use some of that cash. And it is not -- if seen from our balance sheet as well, we reduced debt more than half in the last 3 years. So we've increased our capacity for having straight deal in case we need to finance a potential deal, if we need it.
At this time, there are no other questions. And now would like to pass back over to Jose for any final remarks.
Thank you. Thank you, Victoria. Thank you very much for your help today. I would like to finish by saying that once again, we're very happy with these robust results, which, of course, allow us to concentrate in all our development plans in order to follow our pathway to continue growing. We would like to thank all participants for joining us in our conference call today. And for those who would like to meet with the management, we plan to be on the road in London and in Paris during May and we'll also be participating at the BME investor conference in Madrid, the last week of May. So thank you again for joining the call, and have a nice weekend.