BioArctic AB

STO:BIOA B

Earnings Call Transcript 2019-Q2

[Operator]

Hello and welcome to the BioArctic Q2 2019 report.[Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am 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. And most welcome to the BioArctic interim report for the first half of 2019. I'm Gunilla Osswald, and I'm the CEO of BioArctic. And I will share the presentation here today with our CFO, Jan Mattsson.Next slide, please. BioArctic is listed on Nasdaq Stockholm mid-cap stock market, and this is our disclaimer. Next slide, please. So today, I will start with a summary of our significant projects -- progress that we have had in all our areas during the first half of this year. Last year was a fantastic year for BioArctic, and this first half of this year has continued to show great progress in all 3 disease areas as well as in our technology platform area.If we start with Alzheimer's disease. Our most advanced program, BAN2401, where we have the positive results in early Alzheimer's disease being presented by our partner Eisai last summer. They have now, in May, initiated and started the Phase III confirmatory study in early Alzheimer's disease patients. And linked to that, BioArctic received a milestone payment of EUR 15 million. And they have also an ongoing study which is a continuation of the Phase IIb trial with an open-label extension. They have also recently announced together with Alzheimer's Clinical Trials Consortium that BAN2401 will be evaluated as secondary prevention in even earlier stages of Alzheimer's disease. We have also had great progress in our innovative early discovery program but they are progressing according to plan.If we look at Parkinson's disease, where we have this huge collaboration with AbbVie, there we have had significant steps forward with an approved IND based on the work that has been produced by BioArctic. That was approved by FDA. And our partner AbbVie shortly thereafter started the Phase I trial, which is ongoing. BioArctic, we are continuing now and focusing on the early discovery stage project in our collaboration with AbbVie.In the third area, the complete spinal cord injury program, there we also during the springtime did a safety evaluation of the first panel. That interim analysis showed that we had support to continue into the next panel, and that has been started. Now we are in Phase II.The fourth area which is more about the diagnostic and the technology platform regarding blood-brain barrier, and this is a really encouraging area where we have great preclinical results. And here we have got a Vinnova grant, together with Uppsala University, of SEK 10 million. And I see this as an important experiment validation of the high-quality, innovative work being done by Uppsala together with BioArctic. And since then, we have also recruited an international-renowned scientist, a world-leading expert in the blood-brain barrier area from Roche.So I think that we have had a great first half year, which I'm really proud of all our great achievements.Next slide, please. For those of you who might be new to BioArctic, I will give a short introduction to the company.BioArctic is a unique Swedish biopharma company. And we focus on areas where there is a high unmet medical need in the CNS area such as disease-modifying treatment for Alzheimer's disease and Parkinson's disease. And as you know, there are no such treatments available for the patients today. And these areas have large commercial opportunities linked to them.BioArctic was founded based on Professor Lars Lannfelt's discoveries with the Swedish and Arctic mutation in Alzheimer's disease. And since then, 16 years ago, we have built a world-class research and development organization. Also key to our success is the close collaboration that we have with academic institutions like Uppsala University and many other universities, and this is really key for us to continue to generate innovative projects. We have an attractive and well-balanced project portfolio with projects all the way from discovery phase, all the way up to Phase III. And it's a nice combination of fully funded programs through our 2 strategic partners in Eisai and AbbVie but also several innovative early programs of our own which have a substantial marketing and outlicensing potential.BioArctic has a solid financial situation. We're well financed and have more than SEK 1 billion on the bank. We have had positive financial results during the last 6 years. And we have valuable collaboration agreements totaling up to SEK 9.3 billion, plus royalties if we come all the way to the market. So we have a great basis for continued success.Next slide, please. We have a broad and balanced portfolio, as you can see on this slide.In Alzheimer's disease we have 5 different programs, where BAN2401 is the most advanced program, which is [ driven ] by Eisai. And they are sharing all the costs together with Biogen. And here we made an important step during this first half year, coming in through Phase III. Then we have also 3 innovative early programs in discovery phase that are different mechanisms of actions all different from BAN2401, and they are also progressing nicely according to plan.The next area where we did this change in clinical stage is in the Parkinson area, where ABBV-0805 progressed from preclinical to Phase I. And we are focusing on the other 2 earlier programs in the collaboration.And then we have our diagnostic tool and biomarker area, which also is progressing well; and our third area, the spinal cord injury program, which also during this first half year progressed from Phase I to Phase II. So really great progress in the whole portfolio during this first half of the year.Next slide, please, a couple of words about our long-standing and successful partnerships that we have in Alzheimer's disease with Eisai and in Parkinson's disease with AbbVie.Eisai are really, really committed to dementia and Alzheimer's disease. And they are the originator of the most-selling symptomatic treatment Aricept, donepezil. And we just recently got EUR 15 million linked to the start of Phase III of BAN2401, so far, we have got EUR 62 million out of the total value of the agreement of EUR 218 million. And so we have a substantial portion of the agreement still to receive if it continues to progress well. And if we come all the way to the market, we have high single-digit royalties to expect, and that could be a substantial income for BioArctic. We also have the right to other indications and an option to market in the Nordic region.If we then look at Parkinson's disease and our collaboration with AbbVie. They are selling the world's most-selling compound, which is HUMIRA. And they have also an interest in Parkinson's disease with Duopa for severe Parkinson's disease on the market. We have a great collaboration with them since 2016, and we have so far received USD 130 million out of the agreement value of USD 755 million. And if we come all the way to the market, there is royalties added to this, so this also could be a substantial income in the future for BioArctic.So 2 great collaborations that we really enjoy a lot. Next slide, please.So if we start with Alzheimer's disease and BAN2401. So Alzheimer's disease is an area which is increasing and increasing. And there are many patients who are suffering today together with their relatives, and it has a huge impact on society. And since we are getting older and older in the population, this is growing and growing. And we are also looking into earlier and earlier stages of the disease. And today, there is a huge medical need for disease-modifying treatment, and that is what we aim to try to deliver. We have a potential disease-modifying antibody in BAN2401 which has shown to have a unique profile. It was specially designed and generated to target -- selectively target, the toxic forms of Abeta. They are misfolded. They are soluble and aggregated and called protofibrils or oligomers. We think this binding profile is really important. And our compound is highly selective versus the toxic forms; and has a huge selectivity versus, for example, the monomer but also towards protofibrils.We also have a unique clinical fingerprint. And the result that Eisai presented last year shows that we have -- in a large trial with 856 early Alzheimer's disease patients, we showed consistent effects on preclinical outcome scale, on imaging, showing that the amyloid deposits in the brain are being cleared; as well as effects on several neurodegenerative biomarkers, showing that BAN2401 affect nerve regeneration. So it slows down the nerve regeneration of -- in Alzheimer's disease. Importantly also, we had an early effect, and it increased over time. It was also shown that BAN2401 had a good safety profile. And this is an important part in how we differentiate versus some of the other competitors in that we -- now with the BAN2401 can give the high dose directly from start and do not need to titrate, in contrast to our -- some of our competitors who need to titrate over 6 to 9 months. We think this is an important difference.So Eisai has now announced that they have 3 clinical studies underway. The most important is, of course, the confirmatory Phase III trial, which is called Clarity AD, which has started in May. This is a large trial with 1,566 early Alzheimer's disease patients, and it's designed to confirm the positive results in the Phase IIb trial. Eisai has announced that a primary end point readout is expected in 2022, so it's a very aggressive recruitment plan here. And then we also have then the open-label extension study ongoing; and as I said, the announcement of that the Alzheimer's Clinical Trials Consortium, together with Eisai, will be evaluating BAN2401 in the A45 study, which is planned to start early next year.So I think that we have a great opportunity with BAN2401, which has -- so far has shown the strongest Phase IIb results in Alzheimer's disease. And we now have a great opportunity to be the first disease-modifying antibody coming to the market. And we have great opportunity to help these patients in the future.Next slide, please. Now we're coming to Parkinson's disease, which is the second most common neurodegenerative disease. And this is also high unmet medical need since there are no disease-modifying treatments available. Our project ABBV-0805, which now is licensed by AbbVie, has also unique profile. It is also specifically designed and generated to be highly selective for the toxic misfolded forms of alpha-synuclein called oligomers and protofibrils. They are soluble and aggregate and are toxic for the brain. This program is built on solid scientific ground. And we have very strong preclinical proof-of-concept results, where we show that our antibody decreased those toxic species in the brain of the transgenic mice. And we also can see that they have a huge impact on -- in Parkinson's disease model where the motor symptoms comes later. And in this study shown on the graph here, they have a doubling in their life span. So very strong preclinical proof-of-concept results.AbbVie, who inlicensed the whole portfolio at the end of last year, they have progressed quickly and are now in Phase I with ABBV-0805, whereas we are continuing with the early-stage project. So this is also a very exciting area, and a lot of work is happening here and it's really progressing well.Next slide, please. Our third disease area is complete spinal cord injuries, and this is also a high unmet medical need since these patients have nothing. And now we talk about younger patients, often male subjects, who have been injured through motor accidents or sports injuries. This is an orphan drug indication. And this is a combination of a biodegradable device together with the growth factor FGF1, which is being implanted through surgery into the spinal cord of the patient. Here again we have really strong preclinical results, where we see that the nerves in the graft really do regenerate. And we see that the [ rats ] start to gain some of the function again.We have been evaluating this first panel during the springtime with regard to safety, and then it was supported to progress into Phase II. And we have been including the first patient into the Phase II trial, and here we are now in Phase II. We are deliberately continuing with a very slow inclusion since we are pioneering in this area. And we are preparing for an interim analysis within a year's time, and that analysis would include efficacy as well as safety. And so far, most of the trial has been funded by the Horizon 2020 research grant.So next slide, please. So the fourth area, which is more of a technology platform and diagnostic tool area, is also an area where we have made significant progress. And here we have an innovative approach to how we can get antibodies pass across the blood-brain barrier in an efficient way. We call this the BioArctic brain shuttle technology, and this is in collaboration with Uppsala University. We have really encouraging and very competitive results, as you can see down on the graph, with up to a 100-fold increase through the blood-brain barrier. This is quite remarkable. And here we have then been applying for a Vinnova grant that we got, I think it was, in April time. And we are now progressing together with Uppsala University in this collaboration further.And we were really happy to be able to announce that we have recruited Per-Ola Freskgård from Roche. He's one of the world-leading experts in the BBB technology and especially when it comes in combination with antibody. So that recruitment, together with recruitment from other scientists from Genentech, [ Denali ] and from Uppsala University, makes us to continue to build in this very important area. So I am very excited about this. It's early days, but I think this has huge potential for the future.And we are also, of course, continuing with our important work with the diagnostics tools and biomarkers both -- in both imaging and biochemical biomarkers.Next slide, please. So by that, I hand over to our CFO, Jan Mattsson, to go through the financials.

[Jan Mattsson, VP of Finance & CFO]

Thank you, Gunilla.And I will comment on the single Q2 numbers and compare that with the corresponding quarter of 2018.Net revenues increased from SEK 52 million to SEK 171 million in this quarter. And this is mainly related to the Eisai SEK 15 million milestone payment that was linked to the start of Phase III for BAN2401.Project expenses decreased from SEK 28 million (sic) [ SEK 28.5 million ] to SEK 8 million in this quarter, and this was due to lower external expenses in the Parkinson project in this quarter. Personnel costs increased from SEK 12.5 million to SEK 21 million (sic) [ SEK 21.1 million ], mainly related to the onetime incentive payments.And operating profit increased from SEK 6.4 million and ended up at SEK 126.8 million. And we expect the operating expenses for the fiscal year January-December 2019 to be in the range of SEK 190 million to SEK 250 million.Next slide, please. Cash balance amounted to SEK 1.2 billion at the end of the quarter. The 2 main items during the quarter were a dividend to the shareholders and the incoming milestone payment from Eisai. Operating cash flow amounted to 92 -- SEK 97.2 million in the quarter from minus SEK 37 million (sic) [ SEK 37.3 million ] in the previous -- in the quarter of 2018, and the reason for the positive number in Q2 is related to the milestone payment from Eisai. Net profits for the period increased from SEK 5 million (sic) [ SEK 5.1 million ] to SEK 100.3 million in this quarter.And to sum up. BioArctic showed another quarter with positive net results and a strong cash balance.And next slide, please, and back to Gunilla.

[Gunilla Osswald, Chief Executive Officer]

Thank you so much.And then we'll come into summing up. And on the slide -- next slide, which is Slide 15, we'll see the upcoming news flow.So if we start with Alzheimer's disease. BAN2401, there will be data presented next week at the Alzheimer's Association international congress in Los Angeles. And Professor Lars Lannfelt will have a presentation regarding the binding profile of BAN2401. And Eisai will also have a couple of presentation, as was announced this morning in our [ curtain raiser ].And if we then look at future. The important confirmatory Phase III trial, we have to be patient and wait for results until 2022. I don't think we need to wait that long to get some of the results from the open-label Phase IIb extension study, but it's not coming anything at this stage. We need to wait a little bit longer. And then in -- at next year, 2020, then we expect to hear from the Alzheimer clinical trial consortium, together with Eisai, when they are starting the secondary prevention study in earlier stages of Alzheimer's disease. And when our discovery programs advance further and come into preclinical development, then we will be announcing that as well.In Parkinson's disease we have the ABBV-0805 Phase I study being progressing. And we are focusing, as I said, on the earlier stages programs together with AbbVie.In complete spinal cord injury, within a year's time, we will be reporting the outcome of the interim analyses with regard to efficacy and safety. And in our blood-brain barrier technology platform we are continuing the expansion and the development in this exciting area.So I think in summary that, our strong financial position, together with these exciting programs, that creates a great foundation to continue to build on. And we see great possibilities to be able to help the patients in the future.Next slide. And by that, I'll say thank you so much for your attention. And we are happy to take questions.

[Operator]

[Operator Instructions] Our first question is from Joseph Hedden from Rx Securities.

[Joseph Hedden, Healthcare Analyst]

A couple on the development programs. The A45 study that Eisai has announced, can I just dig into a little bit of detail on that study, if possible? It's -- I understand there's going to be a combination with base inhibitors. Is the entire -- is it the intention to treat the entire patient population of that trial with the combination? Or will some patients receive BAN2401 alone? And then on the blood-brain barrier technology, I was just wondering -- I mean it's obviously something you're quite excited about and it looks like exciting technology. I was wondering if there is anything published, so far, that we could perhaps look at or perhaps when your first intentions are of when we might see some data emerging from that. And then I have a couple of financial questions that I will leave for after.

[Gunilla Osswald, Chief Executive Officer]

Thank you so much, Joseph, for the questions. So the first question, on the ACTC's study A45. The Alzheimer's Clinical Trials Consortium, together with Eisai, are working on the design of this trial. And then as much as I understood -- and you're completely right, that there will be a base inhibitor included in this trial. And BAN2401 will be included. As I have understood it, BAN2401 will also be given alone in this trial. And we have to wait until we see the final design, which I don't think is there yet, but I've understood it like BAN2401 will be also given alone. And then your question on the blood-brain barrier. There are some things being published by Uppsala University; and we are happy to provide -- well, publication. And I mean, since we are working with Uppsala University, they want, of course, to publish as much as they can, and we are happy to support that. So you will see things coming out. And this technology is being used together with their and our work with the PET tracers which are based on antibodies. So that's the first part. And on the slide which I showed, I think it was #10 or so, there in the graph, up to the right, where you can also see how the PET tracer with this technology have been used in transgenic mice with the Arctic and Swedish mutations. And that is how they can light up. And the red is then when the antibody really is coming to protofibrils and oligomers of amyloid in the transgenic mice brain. And that has been published, and I think you can see the -- a publication is written under there. And so there will be more publications coming out in this area, and we will be focusing more and more also on this encouraging area because we have really competitive information here. And I think the PET tracer is a nice way of showing how -- quickly showing how this technology can be utilized [ in a good way ].

[Joseph Hedden, Healthcare Analyst]

Okay. That's very helpful. And then perhaps just a couple on the finances. Your OpEx guidance is for SEK 190 million to SEK 250 million. I was just noticing a dropoff on the R&D expenses in the second quarter compared to the first quarter. And indeed it's quite a lot lower than what was reported last year, in any quarter. And I'm just wondering perhaps if you could give any color on what's at the moment driving the development of R&D and what we can expect for the remainder of the year?

[Jan Mattsson, VP of Finance & CFO]

Well, we had somewhat lower external costs in the Parkinson program during the second quarter. That will be on a higher level in the third and fourth quarter.

[Gunilla Osswald, Chief Executive Officer]

It's always like that, Joseph, but it fluctuates when you are in discovery and development stage.

[Joseph Hedden, Healthcare Analyst]

Sure, sure. I understand. It's just it seems like a bit of a larger drop than we've seen before, but is there anything that you can say about perhaps the other programs -- other earlier pipeline programs and progress that you expect later in the year?

[Gunilla Osswald, Chief Executive Officer]

I think they're progressing according to plan. And then they are still in the discovery phase, and we'll come back to that when we can say anything more.

[Joseph Hedden, Healthcare Analyst]

Okay, sure. And then perhaps last thing from me. The income from research collaborations which has always been relatively stable has dropped off in this quarter. And I understand that might be something to do with booking of deferred revenue with AbbVie, perhaps I'm wrong there. Can you perhaps comment on what's driving that?

[Jan Mattsson, VP of Finance & CFO]

What's driving that is, as we have costs in the Parkinson project, we also recognize revenue with the mockup. And as project costs was fairly low in the [ third ] quarter, then consequently also the revenues are low.

[Joseph Hedden, Healthcare Analyst]

Okay, sure. So we expect that to pick up again over the remainder of the year?

[Jan Mattsson, VP of Finance & CFO]

Yes.

[Operator]

[Operator Instructions] Our next question is from Anders Hedlund from Redeye.

[Anders Hedlund, Equity Analyst]

Gunilla, Jan, I'm stepping in for Klas today. And so I was wondering. Gunilla, you didn't mention anything about Down syndrome. Was it -- was that by purpose or -- and then I would -- my question number 2 is that, at this point, what are your best arguments for that top line will actually get presented in 2022 for BAN2401. If I remember it correctly, this other higher pace than the Phase IIb.

[Gunilla Osswald, Chief Executive Officer]

Thank you so much, Anders. Great questions. So the Down syndrome, I mean, that is progressing in preclinical stage and had no news to present there. So that's why. So it is in preclinical stage and nothing new to say today. Then with regard to BAN2401 and the top line results, I think that, when Eisai has communicated that they expect the results in 2022, you are absolutely right, this is a very aggressive recruitment plan. And I think that shows their large commitment to this program and also they -- that also encompass the expectation on how much we think that patients would like to come into these trials because these are the strongest Phase II results which are out there. So there is a huge expectation that this study will be running much faster than the Phase IIb. So I agree with you. 2022 is an aggressive recruitment plan to have top line results by then, but that's what is expected and Eisai has announced.

[Anders Hedlund, Equity Analyst]

Yes, okay. And my last question then. So regarding your strong cash position, can you elaborate a bit more on how you intend to use that in the best way for your shareholders? Are you any active, for instance, in pure business development activities and acquiring complementing technologies? Or is it more about keeping projects in-house for a longer term?

[Gunilla Osswald, Chief Executive Officer]

I think it's a great question which is always being discussed by boards of all companies. And I think that in BioArctic's situation we have a fantastic portfolio. We have a lot of great ideas from the professor and from our scientists. So we are focused on the CNS area with Alzheimer and Parkinson's disease. And we are also progressing the spinal cord injury program. But we are really focusing on Alzheimer, Parkinson and the BBB platform. And I think that's the part where we will be using our strong financial situation. But we never say no. I mean we're always open to different opportunities.

[Operator]

[Operator Instructions] And there seem to be no further questions at this point. I will hand the word back to the speakers for any final comments.

[Gunilla Osswald, Chief Executive Officer]

Yes. I just would like to say thank you so much for the attention and for the great questions, and have a lovely summer.

[Operator]

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.