BioArctic AB

STO:BIOA B

Earnings Call Transcript 2022-Q2

[Operator]

Good morning, and welcome to the Q2 2022 earnings call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Gunilla Osswald, CEO. Please go ahead.

[Gunilla Osswald, executive]

Thank you. Good morning, and welcome to BioArctic's presentation from the second quarter. I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share today's presentation with our CFO, Jan Mattsson. I will give an update on lecanemab and some recent highlights. Lecanemab is progressing really well, and the marketing application for an accelerated approval has been accepted by the FDA, and they have granted a priority review.

I think it looks very promising for lecanemab, and it's a very exciting time for us with the Phase III readout of the Clarity AD study coming closer. And we also have a potential for an accelerated approval in the U.S. within 6 months. I will, of course, talk more about that here today.

Next slide, please. BioArctic is listed at Nasdaq Stockholm Mid Cap, and this is our disclaimer.

Next slide, please. BioArctic is a unique Swedish biopharma company, and our focus is to improve lives for patients with brain disorders. I think that we are unique based on 4 different areas. The first 1 is that we focus on R&D of innovative treatments for brain diseases, where there is a high unmet medical need, like Alzheimer's disease and Parkinson's disease.

These diseases affect large patient groups and they're relative, and it comes with large cost for society. There is a high medical need for disease-modifying treatments affecting the underlying disease and slowing down the disease progression. And that is what we focus on. We have a great organization with very experienced and engaged coworkers and we have important fruitful collaborations with universities and our strategic partner in Alzheimer's disease, Eisai. We have an attractive and well-balanced project portfolio with projects spanning from early discovery all the way to Phase III and now also in the regulatory process.

We have partnered projects that generate revenues by milestones, where our strategic partners carry the costs for clinical trials. And we have earlier fully owned projects with substantial marketing and out-licensing potential. The fourth aspect is that we are well financed with a strong cash position with about SEK 750 million on the bank. And we have valuable collaboration agreements with big pharma like Eisai, and we are looking forward to the EUR 15 million milestone linked to the BLA submission of lecanemab in the U.S. So in summary, I think that BioArctic is a dynamic and very exciting company with a huge potential.

Next slide, please. BioArctic has a rich and well-balanced portfolio. And as I said, we focus on brain disorders. Our fully financed partner projects like lecanemab in Alzheimer's disease and early innovative projects with great potential for the future is encompassing that portfolio. As you can see, Alzheimer's disease is our largest area. And of course, lecanemab is a key project. It's the most advanced program, and it is now under regulatory review in the U.S., ongoing by our partner, Eisai.

And in parallel with that, Eisai is progressing 2 large Phase III programs, and I'll talk more about that today. And I think that even if our first step with the first disease modification like lecanemab is successful, there is still a large medical need for more treatment options and for combination of therapy. Therefore, it's very important to continue the research with more projects. And we have 5 early Alzheimer disease-modifying programs. And those are including 2, which we have combined with our brain transporter technology.

In Parkinson's disease, our partner, AbbVie, took a strategic decision during the quarter to terminate the collaboration on our alpha-synuclein portfolio, and we are now working actively with AbbVie to transfer the projects back to BioArctic with the aim of finding a new partner to progress the projects to patients.

In other neurodegenerative indications, our ALS project, which is targeting TDP-43, another protein, which is aggregating in this patient population. This project is progressing really well thanks to our technology platform and our vast experience from Alzheimer and Parkinson projects. And this has progressed so quickly now that we have already started humanization of antibodies.

With regard to our blood-brain barrier technology, as you know, I think this is a very exciting part, and this is also progressing really well, and we have now combined this technology with several of our internal projects. And we will continue to apply them to more internal projects. And in the future, it could also be applied to other companies' antibodies or proteins on an exclusive license basis.

I think that lecanemab is, of course, very important for BioArctic, but I also want to point out that BioArctic is more than lecanemab as you can see in our portfolio.

Next slide, please. We have a long-standing and successful partnership with Eisai. It started back in 2005, and we have 2 license deals and several research collaborations. At the end of the second quarter, we had EUR 151 million remaining to be received. And we are now looking forward to the EUR 15 million milestone, which is linked to the lecanemab regulatory submission acceptance by the FDA in the U.S.

And I'm also happy to say that our research collaboration with Eisai has been extended further. If we come all the way to the market, then we can expect royalties of high single-digit value. And this could be of substantial value for BioArctic, if you consider how large the patient population is around the world. And we also have the option to market in the Nordics, and this is something we are very much looking forward to, and we are building this organization.

We have been collaborating with AbbVie in Parkinson's disease since 2016, and we have received USD 130 million. And we are now working actively with AbbVie to get our projects back with the ambition of driving the project forward with a new partner. I think that we have a great business model and our strategic partners finance the expensive clinical programs, whereas we finance the more innovative and less expensive preclinical phases and increase the value of the projects before partnering. We have a great track record of delivering high-quality innovative projects.

Next slide, please. Some key events during the second quarter and recently. We start with Alzheimer's disease and lecanemab. The FDA recently accepted Eisai's biologic license application and granted priority review for lecanemab for the treatment of early Alzheimer's disease. And this is under the accelerated approval pathway and it's based on the rolling submission which was completed in the beginning of May. And we now got a PDUFA date of 6th of January 2023, so early next year, which means that we will get FDA's response within the coming 6 months.

The modeling that Eisai has done has also been published in Neurology and Therapy, which suggests that lecanemab could delay progression to Alzheimer's dementia by several years. If we then look at Parkinson's disease and BAN0805, BioArctic has received an additional drug substance patent in the U.S. for BAN0805 for Parkinson's disease. And now we have patent expiry by 2041 with potential for extension to 2046, which is great.

And AbbVie has terminated the collaboration, and we are now working actively to transfer the project back with the aim of finding a new partner to drive the project forward to help Parkinson's disease patients in the future. And as I said, with regard to ALS and ND3014, our TDP-43 product is progressing really well, and I'm so happy to see how we can utilize our technology platform and our vast experience in development of antibodies that are targeting different kind of aggregating proteins. And the humanization of antibodies has already been initiated, which I think is great progress.

The next slide, please. If we look at lecanemab, broad late-stage clinical program, we can see that our partner, Eisai, is strongly committed to lecanemab. And this broad clinical program encompasses several different studies. The most important right now is, of course, the Clarity AD Phase III confirmatory study in early Alzheimer's disease. The patient enrollment was completed in March last year, and we have 1,795 early Alzheimer's patients who were included in the study.

And on top of these, there is 100-plus Chinese patients included, which also is important for future Chinese regulatory application. The study is progressing really well and we have a low discontinuation rate and almost all patients who are there at 18-month treatment continue into the open-label extension study after the 18-month treatment.

Eisai will have the 18-month data available during the fall of this year. So I think there is really super exciting times ahead. It's also great to see that in the Clarity AD open-label extension study, the patients who progress there will now also be able to have a subcutaneous injection formulation to be evaluated. And I think it's important to have the subcu formulation in the future since that is more convenient for patients. So it's a really good alternative to the IV infusion.

The Phase IIb open-label extension study is also ongoing in early AD. And here new data is coming along continuously. All data reported so far at different congresses has further strengthened and confirmed the positive Phase IIb results with profound amyloid clearance from the brain and continued low frequency of the side effect, ARIA-E.

And Eisai has now also started a new thing in this open-label extension study during the quarter. And that is to use blood biomarkers to evaluate a reduced frequency of administration up to every third month. That's also a very interesting thing to see how maintenance dosing could be done and in an optimal way.

The other Phase III program in presymptomatic Alzheimer's subjects called AHEAD 3-45 is comprising of 2 different sub-studies and it's driven by Eisai together with Alzheimer's Clinical Trials Consortium in the U.S. And this is a global study around the world.

The DIAN-TU NexGen study is for individuals with dominantly inherited Alzheimer's disease, and the study started early this year. And in this study, lecanemab is being used as a background treatment in combination with Tau treatment or placebo. So that's also exciting to see a combination trial being progressing now with lecanemab. So I'm really looking forward to the progress of this impressive broad program that Eisai is guiding in Alzheimer's disease.

Next slide, please. I also wanted to mention something about the disease modeling, which is published in Neurology and Therapy recently. And in this modeling, it suggests that lecanemab could delay the progression of Alzheimer's disease to dementia by several years. This is an important way to describe the long-term effects of lecanemab. Since the clinical studies normally are only about 18 months treatment and the treatment for the patients in the future will, of course, be much longer. So therefore, it's really important to do some disease modeling.

And the results from this modeling, based on the Phase IIb data, shows that there is a potential clinical value of lecanemab for patients with early Alzheimer's disease. It shows how it can slow the rate of disease progression and delay progression to Alzheimer dementia with several years and keep the patients at the earlier stages for much longer. And it could also reduce the need for institutionalized care. And this model will be updated when the Clarity AD results are available later this year.

Next slide, please. Lecanemab has the potential to lead the paradigm shift in the treatment of Alzheimer’s disease. I think that we have a high likelihood of success based on the positive and consistent results that we saw in the Phase IIb study. But all the data that we have seen coming from the Phase IIb open-label extension study continues to strengthen and confirm the Phase IIb results. The pivotal Phase III study, Clarity AD, is designed to confirm the positive Phase IIb results.

And of course, all drug development is connected with some risk but I believe that lecanemab has a high likelihood of success. We have the opportunity to be first with a full approval in the U.S. And the first disease-modifying treatment for Alzheimer's disease in Europe and in Japan. The rolling BLA submission to the FDA under the accelerated approval pathway has been completed by Eisai and the FDA has accepted the submission and they granted a priority review so we can expect a decision within 6 months. And there is a potential for an accelerated approval in the U.S. already this year.

And as I said, we are looking forward to the milestone, which is linked to the regulatory submission acceptance by the FDA. But most important is, of course, to get the full approval and the full regulatory applications, like the BLA submission to the FDA, the MAA ambition in Europe, and the JBLA in Japan. All of them are expected to be submitted by the first quarter of next year, of course, assuming positive readout in the Clarity AD study.

There is a potential for a full approval in the U.S. next year and in Europe and Japan next year or the year after. I think that lecanemab seems to be the best anti-amyloid antibody with a great opportunity to differentiate versus other late-stage competitors based on 4 different aspects. The first 1 is that we have a unique binding profile that is selectively targeting the toxic forms of amyloid called protofibril.

The second is that we have a rapid and profound clearance of amyloid from the brain. The third is that we have seen an early onset of clinical effect in slowing of cognitive decline. And the fourth is that we have a better tolerability with a low frequency of ARIA-E versus competitors, even without titration. And lecanemab is the only of the late-stage antibodies that is given by the full therapeutic dose from day 1. And still, we have a better tolerability than the other.

We have then further development programs ongoing. The subcutaneous injection will be an important alternative for self-injections and more convenient administrations at home. The blood biomarkers is also making great progress in parallel with the therapeutics. And Eisai is utilizing the blood biomarkers to screen patients in the AHEAD study and to explore less frequent dosing as maintenance after brain amyloid has been cleared. And this is now being studied in the Phase IIb OLE study.

And other clinical studies in other Alzheimer's populations will also be interesting to follow in the future. So I think in summary, that looks great for lecanemab, but of course, nothing is ready until it's ready. But I think that we have very exciting times ahead of us.

Next slide, please. So by that, I hand now over to our CFO, Jan Mattsson.

[Jan Mattsson, executive]

Thank you, Gunilla. I'd like to start with reminding you that at present our revenue consists of milestone payments and compensation from collaboration agreements, meaning that we don't have any steady revenues yet.

Net revenues in the quarter amounted to SEK 4 million compared to SEK 7 million in Q4 of previous year. And the SEK 50 million milestone payment will be recognized during Q3.

Total costs in the quarter were higher than in last year and costs will continue to increase as we continue to build a commercial organization and further progressing our expanded portfolio.

Operating loss for the quarter was SEK 46 million compared to SEK 34 million in the same quarter of last year. Operating expenses are expected to be in the range of SEK 220 million to SEK 260 million for the financial year 2022 compared to SEK 166 million in prior year. And the reason for the increase is the buildup of the commercial organization prior to the potential launch of lecanemab and costs for the expanded in-house project portfolio.

Next slide, please. Cash balance at the end of the quarter amounted to SEK 752 million. And please note that this does not include the SEK 50 million milestone payment from Eisai, which will be received in Q3. Operating cash flow amounted to minus SEK 46 million during Q2 compared to SEK 29 million in Q2 of last year. Net result for the quarter was minus SEK 46 million compared to minus SEK 34 million last year. And in summary, BioArctic continues to have a strong financial position.

Next slide, please, and back to you, Gunilla, again.

[Gunilla Osswald, executive]

Thank you, Jan. And now some comments on upcoming news and closing remarks. So next slide, please, and now we are on Slide 14. The upcoming news flow that we can expect. If we start with Alzheimer's disease, Eisai are progressing the broad clinical program for lecanemab, of which Clarity AD is, of course, the most important. And here, we will look forward to the topline results that will come during the fall.

The rolling submission under the accelerated approval pathway was accepted by the FDA in July with priority review, and we will get that response within 6 months. Data with lecanemab, will, of course, continuously be presented at international congresses. And the next 1 we're looking forward to is AAIC at the end of July, beginning of August. And this will be a hybrid meeting, partially virtual and partially on-site in San Diego in the U.S. We are also looking forward to providing more information on our other projects when that is relevant.

Next slide, please. So I close by saying that BioArctic is built on great science. We have great projects. We have great partners and great people working for BioArctic. And everything we do is with patients in mind. Our aim is to help patients with brain disorders. And I really think that we are on our way now to help Alzheimer's patients. I think that we have a very exciting year ahead of us.

Next slide, please. So by that, I say thank you so much for your attention. And we are happy to take some questions.

[Operator]

[Operator Instructions] The first question comes from Joseph Hedden with Rx Securities.

[Joseph Hedden, analyst]

Firstly, on lecanemab, you mentioned the low discontinuation rate in Clarity AD so far. I was wondering if you could expand on that further. Can you make any comparison to the Phase IIb trial or other Phase III programs that you've seen before? That would be helpful.

[Gunilla Osswald, executive]

Great question. Thank you so much, Joseph. So I'm really pleased to see that in Clarity AD, the large Phase III trial, where it was 1,795 patients who entered into the trial, the discontinuation rate has been around 14%, and I think that is low. When you do design a trial like this, that should go with 18-month treatment, you normally expect about 20% discontinuation rate. So the study is powered for 20% continuation rate. And if we then only have about 14%, that means that the study is really well powered. So I think that is really good news. And of course, it was a bit higher discontinuation rate in the Phase IIb study due to the different aspects that have been described before. So I think this is really good news for the Phase III trial. So we expect a solid data set later this year.

[Joseph Hedden, analyst]

Okay. Great. And then just on the subcutaneous formulation. Is it that everyone who goes into the open-label extension is getting that? Or is it just a subset of patients getting that as it's really a pilot study?

[Gunilla Osswald, executive]

Yes. So I mean, it has just recently now, during this quarter, been introduced into the open-label extension study. So those patients who came into that study previously got IV infusion. Now some of those patients who previously have had IV fusion can now also get subcu and the patients who are now coming out of the IV -- of the 18-month treatment can get the subcu, so that will be a good opportunity to compare IV infusion with subcutaneous injections in the open label extension study.

[Joseph Hedden, analyst]

Okay. And what's your understanding of the regulatory situation in subcu? Has Eisai had any kind of discussions about what would be needed to -- necessary if the IV formulation is successful, as we hope it would. What you think the FDA would ask for to get the approval for the subcutaneous formulation? I know there have been various smaller studies that have been allowed, but nevertheless, clinical trials are needed to back up subcutaneous formulation where there's already an approved IV product.

[Gunilla Osswald, executive]

Yes. No, thank you. It's a great question. And that's at the moment under discussion with the authorities. So I mean that is the Phase I study that showed how it was well behaved in healthy volunteers and the bioavailability and things like that. And then that it was supportive of progression into a broader administration set, which now is ongoing in the OLE study linked to the Clarity AD. And Eisai is having discussions with regulatory authorities about what is required for a supplementary BLA.

So the first BLA will be on the IV infusion. But then we hope to -- there will be a supplementary BLA in not long distance with a subcu. But exactly requirement is under discussion.

[Joseph Hedden, analyst]

Okay. And then perhaps if I could just ask 1 on the synuclein program. Do you have any expected timeline to completing the handover from AbbVie, getting that back. And then just on the financial side, I think there's about SEK 50 million, something around that region of deferred revenues to be recognized. Could we expect that in the third quarter end?

[Gunilla Osswald, executive]

Yes. I'll let Jan answer the financial part. And we are having discussions with AbbVie about details about the transition of the project back, and we are working in a very collaborative way with AbbVie. So I think that will be happening this year in a really good way.

And then I hand over to Jan for the financial question.

[Jan Mattsson, executive]

Well, the AbbVie project will financially likely be closed during Q3. And this will mean that we will recognize a non-cash result, and this is based on the provision that we have on the balance sheet of SEK 54 million, but we could not give you an exact number as of now. We will come back to this during next quarter.

[Joseph Hedden, analyst]

Okay. Great. That's very helpful.

[Operator]

The Next question comes from the line of Zoe Karamanoli with RBC Capital Markets.

[Zoe Karamanoli, analyst]

One question for me and with 2 parts, please. As you prepare for the commercialization of lecanemab, can you describe some of the activities currently ongoing? And have you engaged with neurologists as part of the prelaunch strategy? And if yes, I'm just curious what's their feedback so far on potential user of lecanemab? Any color you can provide here would be very helpful.

[Gunilla Osswald, executive]

Thank you so much. Great question. So I think what I normally think about with regard to lecanemab, I mean, we are opening up a new era for the patient. We are coming with a new kind of treatment, a disease-modifying treatment, which doesn't exist yet in the Nordic region. And then we are also thinking about -- and it's partially a new indication because we are going earlier for the patients, trying to treatment at an early stage to save as much of the earlier years, when they are having a more fulfilling life for a longer time.

So to identify the mild cognitive impairment patients in a good way, that's really important to increase the awareness about that. And then it's an IV infusion that requires a bit of infrastructure and so forth. So there is a lot of increasing awareness and preparing the society to be able to help the patients to take on this kind of treatment in a good way. So there's a lot of work and activities that need to happen and is happening. So for example, we arranged a seminar at the Almedalen week, which is a huge happening in Sweden always in beginning of July for politicians and people around.

So we're doing things in order to pair the community, the awareness. And of course, also discussions with advisory boards and key opinion leaders and so forth, as you just asked about. So a lot of those activities is happening here at BioArctic. And the feedback we have got is that if lecanemab continues to have the same kind of profile in Phase III as we showed in the Phase IIb study, there is a huge step forward for the patient.

And there is really a wish to get disease-modifying treatments that can help the patients to have longer time in the earlier stages and so forth, but also key opinion leaders recognize the need for more memory clinics and to increase the awareness around. So that's really what we are preparing for. So a lot of activities are ongoing. A lot of activities are being planned in order to prepare for a successful launch of lecanemab.

[Operator]

[Operator Instructions]

[Oskar Bosson, executive]

Operator, if there are no other questions online right now, we've received 2 questions via e-mail. Should I take those now?

[Operator]

We have another question from the phone, if I may take it.

[Oskar Bosson, executive]

Okay. You have one more?

[Operator]

One more, yes.

[Oskar Bosson, executive]

Okay, do so.

[Operator]

Okay. Mr. Fredrik Thor from Redeye would like to ask a question.

[Fredrik Thor, analyst]

I think the Swedish connection was a bit telematic as well, it's difficult. My first question was on the Clarity AD trial. I was wondering if you could expand a bit on how the trial is powered? And what type of treatment effect you technically could show and still get the significant result?

[Gunilla Osswald, executive]

Yes. The study is powered to be a single pivotal study. So there was a Phase IIb study, as you know, with 856 patients that formed the ground. So the study is powered for showing a kind of similar effect that we saw in the Phase IIb study for effect on CDR Sum of Boxes. So that's really the basis.

And in that previous study, we saw about 26% slowing of -- of effect versus placebo in slowing of decline on CDR Sum of Boxes. And that is like 0.4 on that scale. So that's what it's powered for. And did you have a further question?

[Fredrik Thor, analyst]

Yes. I guess, like, is there a lower bound of what type of treatment that you need to find and still get a significant result? Or should we expect results to be significant only if you get the similar treatment effect as to the trial?

[Gunilla Osswald, executive]

Yes. No, I think, I mean, for the FDA, normally, it's important to show a statistical significant effect. So I think the study is really powered for that. And then I think it's also important to see the full clinical effect profile of the drug, CDR Sum of Boxes and the other clinical scales like ADCOMS and the ADAS-cog. And also what is part of really the first accelerated approval submission is to show the effect on how we can clear amyloid from the brain, where we have shown that we have a very strong effect, and also, of course, safety tolerability profile. So it will be a combination of all of it. But of course, the primary endpoint is CDR Sum of Boxes, and that will be the first part to look at.

[Fredrik Thor, analyst]

Perfect. And the final question for me, if possible. On the Parkinson project, BAN0805, is it possible to expand a bit on the time line on getting back the project? And also, yes, what the process will be like in finding a new licensing partner. How long that could take? And how variable it could be?

[Gunilla Osswald, executive]

I wish I could tell you everything. But where we are right now, we are having very good discussions with AbbVie about the process of taking it back. And we are preparing a lot of things. And you know we still have some activities ongoing that will continue and so forth. So we expect this to be a smooth transition during this year, and we have already started interaction with potential new partners. But you never know. I mean you need to have some patience. I know that this will take some time. I wish it was fast, but normal, even though you have interested parties, it takes some time. So you need to be patient. I'm not a very patient person, but I really need to work on this and you need to do that together with me, unfortunately. So I will let you know when I have something to say.

[Fredrik Thor, analyst]

Perfect. That's all for me.

[Operator]

There are no more questions on the phone. Back to you for the written questions.

[Oskar Bosson, executive]

Okay. Thank you. So we received 2 questions from Patrik Ling at DNB. And the first 1 -- well, I'll read the second 1 first, which relates to the question you just received, and I think you've already given the answer. Have you received any incoming requests from new potential partners for the PD project BAN0805.

[Gunilla Osswald, executive]

The short answer is yes. We have a very good track record since we have been delivering high-quality innovative projects and shown that we can deliver to partners. And we have had contacts in our open door policy over the years of companies asking about this program specifically and for others as well. And we have said that it's already partnered, but it's not the situation anymore. So we are having different activities at the moment, which is good.

[Oskar Bosson, executive]

And then the second question from Patrik, is there an advisory committee meeting planned for lecanemab as part of the accelerated approval? If not, if the FDA would like to have such a meeting, how far in advance do they need to tell you about it.

[Gunilla Osswald, executive]

So if there would have been planned an advisory committee meeting, that would have been announced when we got the priority review and the PDUFA date. So the expectation is that there will not be an advisory committee for the accelerated approval process.

[Oskar Bosson, executive]

Those were the questions we had written.

[Gunilla Osswald, executive]

Thank you so much for a lot of great questions. And by that, I would like to say happy summer to everyone. I hope we will be able enjoy some sunshine and some relaxation during the summer period, and then we'll be back. Thank you so much.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.