BioArctic AB

STO:BIOA B

Earnings Call Transcript 2020-Q1

[Operator]

Hello and welcome to the BioArctic Q1 report for 2020. [Operator Instructions] Just to remind you, this conference call is being recorded today. I'm now pleased to present CEO, Gunilla Osswald; and CFO, Jan Mattsson. Please go ahead with your meeting.

[Gunilla Osswald, Chief Executive Officer]

Thank you so much. Welcome to BioArctic's Interim Report for the first quarter of 2020. I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share the presentation here today with our CFO, Jan Mattsson. We have had a couple of fantastic years. And the first quarter has also been a good quarter for BioArctic, in spite of the tough situation that we have around us with the COVID-19 pandemic. BioArctic has a strong cash position and an expanded product portfolio that we are progressing in a good way. Next slide, please. BioArctic is listed on nasdaq.com midcap, and this is our disclaimer. Next slide, please. For those of you who might be new to BioArctic, I'll give a short introduction to the company. BioArctic is a unique Swedish biopharma company, and we focus on new treatments to improve lives for patients with CNS disorders. When I say that I think BioArctic is unique, I base that on 4 different areas. The first one is that we focus on R&D of innovative treatments for CNS diseases, where there is a high unmet medical need like Alzheimer's disease and Parkinson's disease. These diseases affect large patient groups and of course, are relative and have large cost for society. Today, there are only symptomatic treatments available, and we work on disease-modifying treatment, which is meant to affect the underlying disease and to slow down the disease progression. The second area is that we have a great organization with very experienced and engaged coworkers. And important fruitful collaborations, both with universities and with our strategic partners, Eisai in Alzheimer's disease and AbbVie in Parkinson's disease. The third area is that we have an attractive and well-balanced project portfolio with projects spanning from discovery through Phase III. And our partnered projects generate revenues with, for example, milestones, and our strategic partners that carry the cost for the clinical trial, whereas we carry the cost for the earlier programs, which are less costly. And our fully owned projects in the early phase have substantial marketing and out-licensing potential. The fourth area is that we are a well-financed company with a strong cash position of more than SEK 1 billion from the bank. Also unusual for a biotech company is that we have had positive financial results for the last 7 years since I came onboard, and we have had valuable -- and we have valuable collaboration with Eisai and AbbVie with agreements at a value of up to SEK 9.6 billion, plus the royalties if we come all the way to the market. The solid financial situation is, of course, a great benefit in these challenging times that we had around us now. And that makes it possible for us to continue to focus on progressing our programs in a good way. So I think that BioArctic is a dynamic and very exciting company with a huge potential. Next slide, please. I'm very pleased to be able to say that our operations are progressing according to plan despite the COVID-19 pandemic. The clinical program for BAN2401 in Alzheimer's disease are run by Eisai. And for ABBV-0805, the clinical programs are run by AbbVie. Eisai have now 3 clinical studies underway for BAN2401, and the large confirmatory Phase III trial, which is called Clarity AD, have been expanded into more countries. And we were pleased to note that Sweden now has been included during the first quarter of this year. And that's something, of course, that we are very excited and pleased about since BAN2041 is a Swedish invention coming from BioArctic. In Parkinson's disease, AbbVie has progressed ABBV-0805 into the second stage of Phase I in Parkinson's disease patients during this quarter. And we have continued to progress the early portfolio in a really good way during this quarter. Our internal early portfolio, which has recently expanded with a new program in Alzheimer's disease and a new program in other disease -- neurodegeneration disorders, are also progressing well according to plan as is our blood-brain barrier technology and diagnostics. Next slide, please. BioArctic has an attractive and well balanced portfolio, and we have organized our pipeline in 5 focus areas: Alzheimer's disease, Parkinson's disease, Other CNS disorders, the blood-brain barrier technology platform and diagnostic. When I say that the portfolio is balanced, I mean that in 3 different ways. I mean that we have several projects in different areas, even though all of them are focused in CNS. The projects span from discovery through Phase III, and we have a combination of fully financed partner projects and innovative fully owned projects with great potential. Our strategic partners, they finance the expensive Alzheimer clinical -- Alzheimer and Parkinson clinical programs. And BioArctic, we then finance the less expensive preclinical phases, where we will continue to drive the programs and increase the value further before partnering. Next slide, please. We have 2 standing successful -- long-standing successful partnership with Eisai since 2005 and with AbbVie since 2016. Eisai are very committed to dementia and very committed to BAN2401. So far, we have received EUR 62 million in the agreement, together with Eisai, out of a total value of EUR 221 million. So there is still quite a lot to get if we continue in a good way. And if we come all the way to the market, there is a possibility for substantial royalties. They could be of blockbuster revenues for BioArctic. And I think this is great since we don't have any cost for the clinical program, and still, we can hope for great royalties, if you think about how large this patient population is and the population we are looking into is expanding and expanding. I think BioArctic has a great business model from this perspective. In Parkinson's disease, we work with AbbVie since 2016. And so far, we have received USD 130 million out of the total aggregated value of USD 755 million in the agreement. And also here, there are great possibilities for substantial royalties if we come all the way to the market. AbbVie has mentioned that they will start with Parkinson's disease for ABBV-0805, but they are also looking into other indications for ABBV-0805, like multiple systematic atrophy and Lewy body dementia. So this could definitely also lead to substantial revenues for BioArctic. I think that our business model is a great model. And that -- in this challenging time, it's really our strategic partners who handle the challenges with the clinical studies and take the extra financial costs linked to that. Next slide, please. BAN2401, which is our program that has come the furthest. It's a potential disease-modifying antibody for Alzheimer's disease, where we saw a positive Phase IIb results in 2018. And Eisai has now progressed the program and is well underway in Phase III. BAN2401 has a unique binding profile, especially designed and generated to selectively bind and eliminate the toxic forms of amyloid beta called protofibril. It has a unique clinical fingerprint, which was shown in the Phase IIb study, which was a large study with 856 patients with early Alzheimer's disease. We had consistent effect on the all the 3 clinical scales, we had a dramatic reduction in amyloid from the brain, and we had effects seen on several neurodegenerative biomarkers and a good safety profile. The unique clinical fingerprint also showed a rapid onset of clinical effect, consistent effect and no titration is needed for BAN2401. We can give the top dose directly to the patients, which is in contrast to our competitors. And Eisai have now 3 clinical studies with BAN2401 underway, and I'll describe them more on the next slide, please. So as I said, Eisai are strongly committed to BAN2401, and they have 3 different clinical studies underway. The Clarity AD Phase III confirmatory trial in early Alzheimer's disease patients, that is to include 1,566 early Alzheimer patients in a global level. So this study is really spanning over the whole world with Canada, U.S., Europe and Asia. We were happy to see that, also now, they have expanded the number of sites. So Sweden is now included during the first quarter. And according to Eisai, they expect the 18-month results during 2022. The second study is an open-label extension to the Phase IIb trial, where they presented the positive result, and this is for about 200 of those patients who have come back and now get the top dose of BAN2401. The third area is the Phase III prevention program, which is called AHEAD 3-45, which is comprising of 2 different trials, A3 and A45. And Eisai is now preparing this program together with Alzheimer's Clinical Trials Consortium in the U.S. to start this year. This is a large program with about 1,400 subjects. The A45 is about 1,000 subjects with preclinical Alzheimer's disease. And these subjects, they have little to no cognitive impairment, and they have elevated levels of amyloid in the brain. The A3 trial is for about 400 subjects with even earlier stages, early preclinical AD. They are cognitively normal and have intermediate levels of amyloid in the brain. In this program, the measurements will be on biomarkers for amyloid and tau and neurodegeneration. And also clinical scales and a very sensitive scale for these very early stages is called PACC5. So we're really looking forward to the progress of this impressive program that Eisai is driving in Alzheimer's disease. Of course, the COVID-19 situation is challenging for all clinical studies around the world. But I would like to say that I'm really impressed by Eisai, who is taking a variety of measures to reduce the impact on the clinical studies and help the patients in the best possible way and ensure data quality in a good way. Next slide, please. In Parkinson's disease, ABBV-0805 is the potential disease-modifying antibody, which is being progressed for Parkinson's disease by AbbVie. And here, we have strong preclinical results and we are now in Phase I. In a similar way to BAN2401, ABBV-0805 has a unique binding profile. It's also especially designed and generated to be highly selective for protofibrils and oligomers, which are the toxic form of alpha-synuclein is the protein here when we talk about Parkinson's disease. We have very encouraging preclinical data that you can see down in the left corner of this slide. And the program is based on solid scientific ground as they are now driving the program forward. And we are in Phase I and the second stage started or was initiated during this quarter with Parkinson's disease patients. And we focus on the follow-up antibodies in collaboration with AbbVie. So if you go to the next slide, please. There has been great progress in the collaboration with AbbVie in the whole alpha-synuclein portfolio. AbbVie licensed the whole portfolio of these antibodies at the end of 2018. And linked to that, we received a milestone. They started Phase I in healthy volunteers in March last year. And during this quarter, this year, the next stage of the study was initiated, and that is now to study safety and tolerability in Parkinson's disease patients. We have continued to progress the 2 discovery projects, PD1601 and PD1602 in partnership with AbbVie, and we have soon completed preclinical activities for those 2 projects. Our collaboration is very successful. And in March this year, just recently, Drug Discovery Today published an article, describing some key success factors from our fruitful partnership, which is a partnership between a big pharma like AbbVie and a small biotech company like BioArctic. Having a great track record of successful partnering, of course, that could be -- is important for us, and it could be of important for future partnering with our early projects, which I will talk more about on the next slide. This slide discusses our early-stage portfolio areas. And I would like to state again that the portfolio continues to progress well and according to plan despite the COVID-19 pandemic. Of course, we work a bit differently now but I'm happy to see that we have managed to progress our early portfolio without any noticeable disturbances so far. Our largest area is Alzheimer's disease, where we have 4 fully owned disease-modifying projects, all antibodies with different mechanisms from each other. And as I said, in Parkinson's disease, our early programs with AbbVie are also progressing well, and our new neurodegeneration program has got a really good start. Our blood-brain barrier technology platform, which has expanded, is also progressing really well as is our Diagnostics part. Next slide, please. So now we come to our financial summary, and I will hand over to Jan Mattsson, our CFO.

[Jan Mattsson, VP of Finance, Secretary of the Board & CFO]

Thank you, Gunilla. And now some comments to the Q1 numbers. Net revenues were SEK 36.4 million compared to SEK 63.4 million for the first quarter of last year, and this change is primarily due to lower activity in the Parkinson's program as planned. Project expenses decreased to SEK 10.5 million from SEK 30.0 million. And personnel expenses increased to SEK 16 million from SEK 12 million, and this is primarily attributable to an increase in the number of employees due to the expansion of our portfolio. Operating profit was SEK 3.8 million compared to SEK 17.3 million, and this change is attributable to the low activity that we have now in Parkinson's program. Operating expenses are expected to be in the range of SEK 180 million to SEK 230 million for financial year 2020. And in 2019, for comparison, we had costs of around SEK 185 million. Next slide, please. Our cash amounted to SEK 1.1 billion at the end of the first quarter, and operating cash flow was minus EUR 36.3 million compared to SEK 333.6 million during Q1 of last year. And in 2019, we received the SEK 50 million milestone payment from AbbVie, which is the reason why we have such a high number. Net result for the period was SEK 3.6 million positive compared to SEK 13.6 million of last year. And to sum up, BioArctic showed positive net result for the first quarter, and we continue to have a strong financial position. Next slide, please, and over to you, Gunilla.

[Gunilla Osswald, Chief Executive Officer]

Thank you. And to conclude today's presentation with upcoming news and some closing remarks on next slide, please. Some upcoming news flow that we have in front of us. We will continue to generate more information on BAN2401 to be presented at coming international congresses. Eisai are progressing the clinical program for BAN2401, and they will present more information at relevant time point. And of course, we are looking forward to when they will initiate the new Phase III program, AHEAD 3-45 as a prevention Phase III program this year. We are also concluding that we have had a good first quarter of 2020, and we are grateful for our strong cash position, so we can drive our expanded early project portfolio forward in a good way with great possibilities to help patients in the future. Next slide, please. So I would like to end today's presentation, and conclude that BioArctic is built on great science, we have great projects, they are driven by great people and everything we do is with patients in mind. Next slide, please. So thank you so much for your attention, and we are happy to take questions.

[Operator]

[Operator Instructions] The first question we have is from the line of Joseph Hedden from Rx Securities.

[Joseph Hedden, Healthcare Analyst]

Question. On your new discovery program, ND3014, can you give us any information on how you identified the program, and maybe a flavor of the type of CNS disorders this is for? And then also comment on your strategy for 3014. And then on 0805 in Parkinson's disease, you mentioned that AbbVie has started the second portion of the trial. Can you just remind us of the design of the patent portion , perhaps your expectations for when results might be available or when that's completed?

[Gunilla Osswald, Chief Executive Officer]

Thank you so much, Joseph. So we'll start with the exciting program, the ND3014, which is a very, very interesting. And I just need now to make sure that I'm not saying too much because we are not yet revealing the target. But it has a huge potential for several different CNS disorders. What I can say is that it is all thought to be neurodegenerative for different disorders. It is internally discovered and being generated internally, so it's a BioArctic intervention, again. And we are working forward with this. And of course, our aim is then to come up with a new patent and so forth, and then have discussions with potential partners at the right time. So I can say, I mean, it's antibody based, it's disease-modifying, and it has a broad possibilities for application in several disorders. And then 0805, there, it's AbbVie who are driving this. And we are so happy to see that they have announced on ClinicalTrials.gov that the second part of Phase 1 has been initiated, which is Parkinson's disease patients. And is this quite a normal design where you look at multiple dosing with ascending doses. So you will see there, if we look, and there are like 3 to 4 different dose levels. And you have some patients getting 0805 and some patients getting placebo. And this is the trial then which is being run in the U.S. And unfortunately, this is not a fast thing. So you have to be a bit patient here as well as it is always with clinical trials. So there will not be any expectations of results from this trial this year. So -- but it's progressing really well, which we are happy about with the 0805 program.

[Operator]

The next question we have is from the line of Erik Hultgård from Carnegie.

[Erik Hultgård, Research Analyst]

Gunilla, you mentioned that Eisai has introduced a lot of initiatives to secure that patient enrollment continues in clarity, and also that the head study is on track to start this year despite COVID-19. So could you give us some more color on what type of initiatives that they have introduced, say, in order to secure the timeline remains intact?

[Gunilla Osswald, Chief Executive Officer]

I think, I mean, the COVID-19 pandemic, I mean, of course, affects all clinical trials around the world in different ways. And I think it's first reassuring to see how much the regulatory authorities also try to help by putting out guidance on how to handle clinical trials overall. And I -- what I can see is that Eisai are using many of those recommendations and also doing some extra things. So things which is normally stated and what you do is, of course, that you do more and more remote monitoring. You make sure that the patients have a safe way of being part of the trial, like safe transportation, more follow-ups with safety evaluation through phone and so forth when that is applicable. And yes, this study has 2 parts that everyone tries to do with clinical trials now and that to make sure that the patient has the best safety and to make sure that the clinical study results will be possible to keep with high quality. So I can just say that, that's what all the regulatory authorities are recommending, and that's also what we can see that Eisai are doing a lot of different activities. And what I can say, without revealing any details what Eisai are doing, can just say that I'm very impressed with all my long experience in clinical trials, I'm very impressed with what Eisai is doing, and I'm confident that they will handle the challenging situation in the best possible way. Another benefit is that we have a global trial, which is both, I mean, U.S., Canada, Europe and different parts of Asia. So I think that's another benefit for Eisai in this challenging situation.

[Erik Hultgård, Research Analyst]

And just to follow-up on that. I understand fully that Eisai is incharge and is running the studies. But have you got any signals that the enrollment rate for Clarity has decreased in a way, something?

[Gunilla Osswald, Chief Executive Officer]

I have no signal that they will not be able to keep the 2022 readout. And I think that's the most important part.

[Operator]

The next question we have is from Anders Hedlund from Redeye.

[Anders Hedlund, Equity Analyst]

Questions and another COVID-19 question, you mentioned that you have not experienced any significant negative effects on your operations as of yet. But maybe do you see any challenges going forward related to your internal programs and with the question of clinical studies, of course?

[Gunilla Osswald, Chief Executive Officer]

I think, Claus, no one can say what the future will bring us. What I can say is that, I mean, we -- I'm really impressed with our coworkers here at BioArctic and the strong engagement everyone has. Of course, we work a little bit differently. I mean, we can work a bit more from home. We do like the planning of experiments at home. But then they have to be here and do the experiments in the lab. And then they can do the analysis and reporting from home. We have, of course, much, much more meetings through Teams and so forth. But it's a different way of working, but I'm really impressed to see that everyone is focused on driving the programs forward to make sure that we can help the patients in the future.

[Anders Hedlund, Equity Analyst]

Great. And also a question about the financials and the OpEx guidance for 2020, and if it's possible to comment, what makes the difference between the lower part of this range compared to the upper part?

[Jan Mattsson, VP of Finance, Secretary of the Board & CFO]

That has to do with our project portfolio and external costs in the project. We are fairly confident of the level of -- and pre costs and then other costs, but the project cost, that's what makes our range.

[Operator]

At this time, there's no further questions in queue. I like to hand back to the speakers at this time.

[Gunilla Osswald, Chief Executive Officer]

Then I would like to say thank you so much for all your attention and great questions and stay healthy.

[Operator]

Thank you. Ladies and gentlemen, that concludes your call for today. We thank you very much for joining and ask that you disconnect your lines. Have a great morning ahead.

[Gunilla Osswald, Chief Executive Officer]

Thank you. Bye.