Calliditas Therapeutics AB

STO:CALTX

Earnings Call Analysis

Record Revenues, Guiding Higher

In Q2 2024, revenues hit SEK 559.8 million, up from SEK 269.4 million last year. TARPEYO sales surged 90% to $46.3 million. Despite costs related to the Asahi Kasei offer, adjusted operating profit was SEK 70.2 million. Full approval in Europe for Kinpeygo and a new patent for the cancer treatment, setanaxib, bolstered prospects. The company raised its 2024 revenue guidance to $165-$185 million, indicating strong market demand. Operational cash flow improved, with a minimal net cash decrease and a strong position of SEK 797.3 million at quarter-end.

A Strong Quarter Driven by TARPEYO

Calliditas reported a remarkable financial performance in Q2 2024, achieving SEK 559.8 million in net revenues, a substantial increase from SEK 269.4 million in the same quarter last year. Central to this success was TARPEYO, which generated SEK 493.4 million (approximately $46.3 million) in net product sales, marking an impressive 90% year-over-year growth. This indicates a robust demand for TARPEYO, the first and only FDA-approved treatment targeting IgA nephropathy, further strengthening its market position.

Operating Expenses and Profitability Insights

The company's operating expenses for Q2 reached SEK 537.8 million, up from SEK 330.3 million the previous year. This rise reflects increased spending across R&D, sales, and marketing to support the growing TARPEYO franchise, as it transitioned through a scale-up phase following its full approval in the U.S. Notably, Calliditas reported an operating loss of SEK 31.5 million but managed to post an adjusted operating profit of SEK 70.2 million by excluding certain extraordinary costs related to a public offer from Asahi Kasei and incentive programs. This adjusted profit indicates that the underlying business is achieving operational profitability sooner than anticipated.

Revenue Guidance Shows Growth Expectations

Building on the strong momentum in TARPEYO sales, Calliditas updated its revenue guidance for the full year 2024, projecting revenues between $165 million and $185 million. This upward revision showcases the company's confidence in sustaining TARPEYO's growth trajectory in the upcoming quarters.

Market Expansion and Strategic Initiatives

In addition to revenue metrics, Calliditas highlighted strategic initiatives aimed at improving market access for TARPEYO. By actively engaging with healthcare providers and payers, the company has seen over 80% of U.S. lives covered by commercial plans adopting new policies that align with TARPEYO's updated labeling standards. This effort is expected to mitigate previous barriers to access. Furthermore, Calliditas participated in major scientific congresses to strengthen its relationships with key opinion leaders in the nephrology community, reinforcing TARPEYO’s position as a treatment cornerstone.

Pipeline Developments and Future Prospects

The earnings call also addressed notable developments in Calliditas's pipeline beyond TARPEYO. The company reported the conclusion of its Phase III NefIgArd study, signifying a commitment to a robust pipeline that includes promising treatments for other diseases, thereby encouraging investor confidence in sustainable growth. The recent approval of Kinpeygo in Europe will add further value to its offerings, while a new patent for setanaxib extends the company's intellectual property protection and potential revenue streams.

Conclusion: A Bright Future

In conclusion, Calliditas's Q2 earnings reveal a strong position bolstered by a significant increase in sales of TARPEYO, enhanced operational efficiency, and an optimistic outlook for revenue growth. The company’s strategic focus on expanding market access, combined with a robust product pipeline and recent approvals, makes it a compelling investment opportunity for investors looking for growth in the biotechnology sector.

Earnings Call Transcript 2024-Q2

[Operator]

Welcome to Calliditas Q2 2024 Report. [Operator Instructions] And there will be no Q&A session after the presentations.

Now I will hand the conference over to the speakers. Please go ahead.

[Renée Aguiar-Lucander, executive]

Thank you very much. Welcome to our Q2 2024 report. My name is Renee Aguiar-Lucander, CEO of Calliditas. And I'm joined today by Richard Philipson, Chief Medical Officer; Fredrik Johansson, our Chief Financial Officer; and Maria Tornsen, President of North America.

Next page, please. I'd like to draw your attention to disclaimer notice, which covers forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, and I refer to our public filings, including those containing risk factors.

Next page, please. So I'd like to review some of the key events in Q2, which included the conclusion of our Phase III study, NefIgArd, with the readout of the open-label extension from which we reported 9 months efficacy and safety data, similar to that observed in the active arm of the Phase III trial for those patients who are retreated with Nefecon after 15 months of observation.

In April, we reported positive top line data from our Phase II proof-of-concept study in head and neck cancer, with a lead product candidate from our novel and unique NOX inhibitor platform, setanaxib. This shows statistically significant impact on both progression-free survival as well as overall survival. We also were granted a new patent by the USPTO for the treatment with setanaxib in cancer with expiry in 2039.

In May, our partner, Everest Medicines, launched Nefecon in China, and EMA issued a positive opinion for full approval of Kinpeygo in Europe. We also participated on several important conferences where we presented additional data, which Richard will cover a bit later in the call.

Next page. In the quarter, there was an offer announced by Asahi Kasei on May 28. Asahi Kasei announced a public cash offer for all shares in Calliditas for SEK 208 per share, valuing the company at approximately SEK 1.2 billion. The tender is presently ongoing, with the last day announced to be August 30, subject to any potential extensions. The offer is recommended by the Board and around 45% of shareholders have entered into undertaking to accept the offer, subject to customary conditions.

Next page. So with regards to commercial highlights of Q2. So from a commercial perspective, this quarter was a record quarter in terms of revenues, with $46.3 million of net TARPEYO revenues, representing 90% growth over the same quarter last year. In addition, we saw record enrollments with 750 new enrollments and continued strong growth in new prescribers.

The strong demand we're seeing is very encouraging, and we continue to see demand in the market for TARPEYO with summer seasonality seemingly being less pronounced this year, in comparison to last year.

The team has, during the quarter, undertaken a very substantial number of P&T committee meetings and the vast majority of major plants have now updated their rules to align with the new label. We are expecting the full approval, and this kind of reduced market access friction to continue to drive TARPEYO revenue growth for the year.

Revenues from partners in the quarter amounted to SEK 49 million, representing growth of close to 300% compared to last quarter as Nefecon was launched in China also in May. Operating profitability for the underlying business, excluding those costs related to the offer by Asahi Kasei, for the quarter came in at SEK 70 million, enabling us to reach our target of achieving operating profitability in the quarter.

These exclude costs related to advisory services and provisions for incentive plans in connection with the Asahi Kasei offer amounting to approximately SEK 102 million, taking us to an overall operating loss for the quarter of SEK 31.5 million. Achieving operating level profitability is a goal we were hoping to achieve and targeting in Q3, and we're obviously delighted that we reached this target already in Q2.

With regards to cash. We were almost cash-neutral for the quarter, with cash burn amounting to approximately $700,000 or SEK 7 million. We believe that we'll be -- continue to be profitable on the operating level for the remainder of the year, excluding any deal-related costs based on continued revenue growth from TARPEYO and the Nefecon franchise as a whole.

Next page, please. Following the quarter, in July, we reported positive data from our Phase IIb trial in PBC, Primary Biliary Cholangitis, with both the 1,200 and 1,600 milligram doses achieving statistical significance in terms of the primary endpoint. This was a heavily pretreated population, making this outcome even more rewarding. Richard will cover this in more detail shortly.

Also in July, Kinpeygo was granted full approval for the treatment of primary IgAN in adults by the European Commission, which also triggered a EUR 10 million milestone payment, which will be recognized in Q3.

With that, I'd like to hand over to Richard, who will take us through the PBC data discussion.

[Richard Philipson, executive]

Thanks very much, Renee. Next slide, please. And the next slide.

So I'd like to start by giving you a summary of the recently announced results of the TRANSFORM study of setanaxib in primary biliary cholangitis or PBC. As a reminder, this was a Phase IIb study evaluating patients aged 18 years and older, with a confirmed diagnosis of PBC, a serum; alkaline phosphatase level of 1.67x the upper limit of normal or higher, ;and a liver stiffness of 8 kilopascals or higher as measured by Fibroscan.

In this double-blind, placebo-controlled study, patients were randomized to 1 of 2 doses of setanaxib or placebo. Patients randomized to setanaxib received either a 1,200 milligram daily dose administered as 800 milligrams in the morning and 400 milligrams in the evening, or a 1,600-milligram daily dose administered as 800 milligrams, twice daily. Treatment was administered for 24 weeks, and the primary endpoint was changed in alkaline phosphatase at week 24 compared to baseline.

Next slide. So we screened the 178 patients, of whom 77 patients were randomized. The demography and baseline characteristics of the trial population were representative of the target patient population, and the treatment arms were generally well-balanced. It is worth noting, as Renee has already said, that this was a heavily pretreated population at baseline. 43.4% of patients were receiving dual therapy, that is UDCA plus Ocaliva or UDCA plus [ a ] fibrate. And 13.2% of patients were receiving triple therapy of UTCA plus Ocaliva, plus a fibrate.

Next slide. With respect to the primary endpoint change from baseline in the ratio of alkaline phosphatase at week 24, there was a statistically significant difference for both dose comparisons versus placebo. For the 1,600 milligram dose group, there was a 19% difference compared to placebo. And for the 1,200-milligram dose group, there was a 14% difference compared to placebo. Again, it's worth noting that although week 24 was the time point for the primary comparison, significant changes were observed from week 8 onwards.

Next slide. We also observed favorable improvements in liver stiffness at week 24 in patients treated with setanaxib compared to placebo. This is encouraging as clinically relevant changes in liver stiffness are typically detectable by Fibroscan over a minimum of a 52-week observation period. Next slide. So in terms of safety. Treatment-emergent adverse events were balanced across the treatment groups overall at 76% of setanaxib patients and 85% of placebo patients experienced at least 1 treatment emergent adverse event, but most of these were considered unrelated to treatment.

Serious treatment emergent adverse events occurred approximately at similar rates in the setanaxib and placebo-treated patient groups, with 12% of setanaxib patients and 11.5% of placebo patients experiencing serious treatment emergent adverse events. And events leading to study treatment discontinuation occurred in 14% of setanaxib patients, and 7.7% of placebo patients.

When we look at the adverse events occurring at a frequency of 10% or higher in the overall study population, then it's noteworthy that nausea, headache and pruritus actually occurred at a higher frequency in placebo-treated patients. Arthralgia and fatigue both occurred at similar frequencies in the combined setanaxib treatment group and placebo-treated patients. And nasopharyngitis occurred as a higher frequency in the combined setanaxib treatment group compared to placebo.

So in conclusion. The primary endpoint for the study was met. Statistically significant reductions in alkaline phosphatase was observed in both setanaxib arms versus placebo from week 8 onwards, and actually from week 4 onwards when we looked at the 2 active doses combined. We saw favorable improvements in liver stiffness at 24 weeks in patients treated with setanaxib compared to placebo. And setanaxib was generally well-tolerated.

So I'd now I'd like to move on and provide a brief update on the company's activities at ERA-EDTA this year.

So next slide. So at ERA EDTA in May, which was held in Stockholm. Calliditas gave an oral presentation on the real-world challenges associated with the use of systemic glucocorticoids in a U.S. IgA nephropathy cohort. And we also presented a poster describing the outcomes of a matching adjusted indirect comparison of eGFR in patients with IgA nephropathy treated with Nefecon or sparsentan.

And we also sponsored a symposium entitled Clinical Markets in IgA Nephropathy: Is All Proteinuria the Same? And this was chaired by Professor Jonathan Barratt.

In the latter poster presentation, we used patient-level data from our NefIgArd Phase III trial and trial level data from the sparsentan PROTECT trial in IgA nephropathy to estimate the relative effect of Nefecon with optimized RAS inhibition compared with sparsentan on the absolute eGFR change from baseline at 9, 12 and 24 months, with common comparators of optimized RAS inhibition for NefIgArd and irbesartan for the PROTECT study.

The results from the anchored comparison shows statistically significant favorable effects of Nefecon with optimized RAS inhibition versus sparsentan on eGFR for all time points analyzed, as shown in the figure in the slide on the right. These results suggest that Nefecon with optimized RAS inhibition may preserve kidney function to a greater extent than sparsantan and provide support for Nefecon as a disease-modifying therapy in IgA nephropathy.

So I'd now like to hand over to my colleague, Maria Tornsen.

[Monika Tornsen, executive]

Thank you very much, Richard. Next slide, please. As you recall in Q1 2024, we had our strongest quarter since launch with 705 enrollment forms. In the second quarter of 2024, we continued to see a very strong demand for TARPEYO with 750 enrollment forms received by our patient services hub, TARPEYO Touchpoints. Another record quarter.

During the second quarter, we also had 343 new prescribers, and we now have over 2,300 health care providers who have prescribed TARPEYO. We believe the strong demand we are seeing is a result of our full approval, our new label with the removal of the UPCR criteria, and physicians recognizing TARPEYO as a disease-modifying agent that treats the disease at the source, reducing the pathogenic IgA.

As mentioned, our total sales for TARPEYO in Q2 was $46 million, another record quarter. Year-to-date, net sales for TARPEYO is $73 million. And as a result of the strong performance, we are raising our full year guidance to $165 million to $185 million for the Nefecon franchise.

Next slide, please. In the second quarter, we launched our new promotional campaign, highlighting the full approval and shining a light on TARPEYO's eGFR data. As you know, TARPEYO is the first and only FDA-approved product to reduce the loss of kidney function.

As mentioned last quarter, we've been spending time educating U.S. payers on the new label, and I'm pleased to report that we now have seen significant changes in key commercial plans. Over 80% of U.S. lives covered by commercial plans now have policies aligned with our new label and removed UPCR completely or reduced to 0.8.

In Q2, our medical teams also participated in multiple scientific congresses where they presented scientific data and engaged with key opinion leaders, including the National Kidney Foundation, and the 61st ERA Congress, which was held in Stockholm, Sweden in May.

Next slide. We are very excited at the opportunity ahead of us. We've already seen the positive reaction to the full approval of TARPEYO. We will continue to educate U.S. health care professionals on TARPEYO's position as a disease-modifying cornerstone treatment of IgAN. In October, we will participate in the ASM Congress, and we also look forward to the rollout of the KDIGO guidelines in the fall. We expect the guidelines will include TARPEYO and also broaden the definition of the at-risk [indiscernible].

And as I mentioned earlier, we've seen a significant impact on payer policies in Q2 and we will continue to educate U.S. payers to ensure more plans reflect the new TARPEYO label and secure broad access for patients.

Next slide, please. Finally, the IgAN treatment paradigm is evolving and addressing the source of the disease is crucial. TARPEYO does that by targeting the production of pathogenic IgA. As shown in the diagram, there are no other approved treatments that work in the same way. Majority of health care providers view TARPEYO as a disease-modifying agent that treats the disease of the source, reducing the pathogenic IgA.

In market research, health care providers further state that the primary reasons they choose TARPEYO are for its efficacy in reducing UPCR, significant eGFR data, favorable tolerability profile and because TARPEYO is treating the underlying cause of IgAN. And as you've seen from our strong results reported today, TARPEYO is becoming a cornerstone treatment for IgAN.

With that, I will hand it over to our CFO, Fredrik Johansson, to discuss our financial results. Fredrik?

[Fredrik Johansson, executive]

Thank you, Maria. I will now present to you the financial overview for the second quarter. And as always, all numbers presented to you are in million SEK, unless otherwise stated.

To start with, we report SEK 559.8 million in net revenues for the quarter. For the same quarter last year, we reported net revenues of SEK 269.4 million. TARPEYO net product sales for the quarter amounted to SEK 493.4 million or $46.3 million, which is a reported increase of 90% from the same quarter previous year. The remaining SEK 66.4 million in revenues in the quarter are related to our partnerships, primarily from royalties from [indiscernible] Everest and shipment of products to Everest. For the same quarter last year, we have partnership revenues of SEK 10.1 million.

Our total operating expenses for the quarter amounted to SEK 537.8 million, compared to SEK 330.3 million for the same quarter last year. Included in the operating expenses for the quarter are expenses related to the Asahi Kasei offer and expenses related to provisions for social security contributions for incentive programs, due to the increase in our share price. This totaling SEK 101.7 million. These costs are distributed over R&D, sales and marketing and G&A.

The cost for research and development increased by SEK 31.7 million in the quarter to SEK 120.7 million, compared to SEK 89 million for the same quarter previous year. Besides the previous mentioned provisions for incentive programs, the change in the period primarily relates to increased costs for Nefecon manufacturing scale up.

The cost for sales and marketing increased by SEK 61.5 million in the quarter to SEK 253 million, compared to SEK 191.5 million for the same quarter previous year. The increase is primarily related to scale-up of the sales and marketing of TARPEYO in the U.S. following the full approval and also, the mentioned provisions for the incentive programs.

The costs for G&A increased by SEK 89.6 million in the quarter to SEK 166.8 million, compared to SEK 77.2 million for the same quarter previous year. The increased costs for G&A primarily relates to the mentioned provisions for incentive programs and advisory fees related to the public offer from Asahi Kasei.

We made an operating loss in the quarter of SEK 31.5 million compared to an operating loss of SEK 75.2 million for the same quarter last year. As mentioned by Renee, excluding expenses relating to the Asahi Kasei offer and expenses related to provisions for social security contributions for the incentive programs, due to an increase in the share price, we report an adjusted operating profit of SEK 70.2 million in the second quarter.

The cash flow used in operating activities in the quarter was SEK 7 million, compared to SEK 163 million for the same quarter previous year. And this leaves us with a net decrease in cash in the first -- in the second quarter of SEK 11.2 million. And we continue to have a healthy cash position of SEK 797.3 million at the end of the quarter.

That was all for me. Thank you, and back to you, Renee.

[Renée Aguiar-Lucander, executive]

Thank you very much. Next slide, please. Thank you.

So obviously, as we've reported, Q2 was financially strong with positive progress of our pipeline. So some of the key takeaways, obviously, we had a record quarter in terms of net product revenues from TARPEYO, in terms of posting $46.3 million for the quarter, as well as for the Nefecon franchise achieving approximately $53 million for the quarter.

We also achieved our target of operational profitability, excluding the advisory costs and incentive program provisions, as stated. We also was-- our partner, STADA, was granted full approval of Kinpeygo in Europe by the European Commission. And also saw a new patent issued by the USPTO having setanaxib, in terms of treatment of cancer with expiry of 2039.

As Fredrik has said, we have a strong cash position and obviously saw an almost neutral impact on cash for the quarter. And we are expecting continued strong demand for TARPEYO for all the reasons that Maria described. And as mentioned, in terms of our revenue guidance for 2024, we're updating that, reflecting these growth expectations. And so the revenue guidance for 2024 is updated to be USD 165 million to USD 185 million.

And with that, this concludes our Q2 2024 presentation. Thank you very much to all for listening in.