Calliditas Therapeutics AB

STO:CALTX

Earnings Call Transcript 2019-Q4

[Operator]

Ladies and gentlemen, welcome to Calliditas Therapeutics Q4 Report 2019. Today, I'm pleased to present CEO, Renée Aguiar-Lucander; and CFO, Fredrik Johansson. [Operator Instructions]Speakers, please begin.

[Renée Aguiar-Lucander]

So welcome to our Q4 report for 2019. If you turn to Page 3 of the presentation, we will go through some of the key events for the quarter. So the main event for the quarter was clearly the full recruitment of the NefIgArd pivotal study Part A. As you might recall, the first patient in into this study was November 2018, and the company set itself a target to fully recruit the study of 200 patients before the end of the year 2019, which we achieved and which we're extremely proud of, considering that it's not particularly easy to recruit in an orphan disease and doing so on time is something that, I think, is a real achievement for everybody in the company and particularly the clinical team.So we now have 200 patients included, as you recall, in terms of the design. It's an oral once-daily dosing for 9 months. And this means that we will be reading out top line results in Q4 2020, which is this year. In terms of the primary endpoint, just to remind you, it's reduction in proteinuria, and we will also obviously read out the supportive -- key supportive secondary endpoint of eGFR. In terms of the kind of continued recruitment into Part B, as you might recall, once again, we have to recruit an additional 160 patients in order to complete Part B, and that is progressing well.We can also see that -- obviously, we can't talk anything in detail about anything that we see in the continued blinding of the Phase III, but we are seeing an overall lower kind of withdrawal rate at which we have been communicating about something that we were expecting to see as there is a standard design of the Phase III and not a solicited adverse event recording, which is one of the reasons that we believe the withdrawal rate of the Phase IIb might have been slightly higher than what one could expect in a standard design. The other point is that the NMPA sort of Chinese regulatory authority accepted the IND application, which was filed by Everest Medicines in December of last year. We signed that deal with Everest in June. And so as you can imagine in terms of all of the work that goes in from a standing start to achieve an IND acceptance within that period of time we thought was exceptional and also, I think, reflects the -- not only the expertise of our partner, but also the kind of collaboration between the organizations. And this means obviously that the NMPA will look at the kind of global data sets, complemented by a reasonably small number of Chinese subjects in order to look at the application for market approval in China. So if we go to the next page, the other thing that occurred in Q4 is that the company had its first Capital Markets Day on November 4. And there was significant participation, both locally in Stockholm as well as on the web. And we were very honored to have Professor Jonathan Barratt there to provide, I think, excellent KOL input with regards to the disease background and the pathophysiology and various treatment paradigms. It also gave the company an opportunity, obviously, to review the Part B design as well as some of the market research results that we had gotten from the IQVIA research in the U.S. If we turn to Page 5. In terms of the post quarter event, there are some press releases, obviously, that we have provided, so that would be -- that we had a positive interaction and opinion from PDCO with regards to our pediatric investigational plan. And this, obviously, something that you have to do with the company. You have to have this kind of agreement or interaction before you can file generally an orphan indication with EMA. And it also then obviously provides a potential additional extension of the orphan protection of another 2 years in Europe. There were also an additional press release in post quarter where we saw Sofinnova Partners and Vivo Capital become shareholders in the company through transactions with some of our largest institutional shareholders. We also had a press release regarding an ITF in the beginning of the year as well as an EGM press release, which is slated for March 3, which is coming up. So I guess that those really are the key events for the quarter subsequent time. And with that, I will hand over to Fredrik to review the financials.

[Fredrik Johansson, Chief Financial Officer]

Thank you, Renée, and good afternoon, everyone. I will present to you the financial overview for full year of 2019, and all numbers presented to you are in million SEK, as usual, unless otherwise stated. So I'm very glad to report we had SEK 184.8 million in revenues for the year, and this is originating from the $15 million signing fee from the out-licensing deal with Everest we closed in June and also the $5 million milestone from Everest in December for the IND approval in China. Our total operating expenses amounted to SEK 212.8 million for 2019 compared to SEK 132.5 million for the year before. So out of the operating expenses, the cost of research and development increased by SEK 50.6 million to SEK 149.8 million during the year compared to SEK 99.3 million for the last year. The vast majority of the increase in expenses continues to originate from the clinical activities in the NefIgArd trial, which continues to progress as planned from both patients' recruitment and a cost perspective. The sales and administration costs amounted to SEK 62.9 million for the year, and this is compared with SEK 31.1 million for last year. The increase of SEK 15.8 million between the periods is mainly related to the pre-commercial activities in the U.S., which were almost nonexistent last year and from the transaction-related cost for the out-licensing deal for China with Everest. And this leaves us with an operating loss of SEK 28 million for the year compared to operating loss of SEK 132 million for last year.The cash flow from operating activities for the period amounted to minus SEK 71 million compared to minus SEK 128.2 million for the same period last year. The improvement in the operating cash flow is due to the signing fee payment from Everest of $15 million, and that's largely the increase in the operating expenses. And the net cash effect from investing activities and financial activities was SEK 180.8 million, which is mainly derived from the SEK 199 million net effect from the direct share issue we made in July less the SEK 60 million in signing fee for Budenofalk in-licensing. Our cash position was SEK 753.5 million at the end of the year. So we continue to have a very solid cash position.That was all for me. And now back to you, Renée. Thank you.

[Renée Aguiar-Lucander]

Thank you. So I guess, we're now on Page 7, for those who are following along. This is really just kind of a summary of what we're expecting for the year. And obviously, the main event for the year is the Q4 readout of top line data for NefIgArd Part A, as well as some of the open-label extension trials that we will be initiating during the year. We will -- as we have also previously communicated, we will go and have interactions with FDA this year with regards to some of the pipeline indications that have liver targets.So I guess, with that, it concludes our presentation, and we are happy to take any questions.

[Operator]

[Operator Instructions] Our first question is from Max Herrmann from Stifel.

[Max Stephen Herrmann, Head of European Healthcare Equity Research & MD]

3 questions, if I may. Firstly, just in terms of partnering, obviously, a great, great partner to sign and obviously, in China and then deliver a milestone within a short space of time. I wondered in terms of Europe, whether you believe finding partners before the data is possible or whether that's going to be a post Phase III results event? Other than maybe a bit of an update on Budenofalk and your plans there, if there's a preference for AIH or primary biliary cholangitis? And then just then to maybe some guidance on financials, just in terms of likely R&D spend in 2020. And whether you've got -- I believe you didn't receive, from what I can tell, the $5 million milestone from Everest before the year-end. I wonder if that's now been received.

[Renée Aguiar-Lucander]

So in terms of the European partner, I think that, certainly, some of the feedback that we have received from a variety of interactions and discussions at the -- from the kind of partner perspective, they would very much like to kind of be involved, if possible, very close to the data readout. Obviously, there's quite a lot of preparations that are required for commercialization. So I think that what we will probably do is we will initiate discussions with potential European partners this year. And I guess, depending on the kind of the potential results of those discussions, we will either enter into an agreement this year or hold off until after we have the data. So it's a little bit dependent on what we find when we kind of go out there and initiate these discussions. But I think it's the company's intention anyway to start having those kind of discussions this year. In terms of the Budenofalk, so there is obviously a study that's been carried out by Dr. Falk in AIH. So I think that with regards to AIH, it will make most sense to be most kind of rational to go forward with Budenofalk in that particular indication. I think with regards to PBC, we haven't really made any decision yet as to kind of which compound we might take forward in that indication. But with regards to AIH, I think that -- in that indication we will clearly proceed with Budenofalk. With regards to the financial pieces, maybe I'll hand over to Fredrik. You can cover that.

[Fredrik Johansson, Chief Financial Officer]

Yes. Regarding the question if we received the payment? Yes, we have. And then regarding the operating expenses for 2020, we have not given any guidance in the past, and I will not do so for the year either. But from a financial standpoint, we -- the Phase III study is continuing to recruit. And we, of course, have -- we'll have more patients in the study in 2020 than we had in 2019. That drives cost also. We will -- we have the add-on studies that will add to the cost base as well. And also, we are continuing the pre-commercial activities in the U.S., and that will further ramp up for the year. So all in all, I expect the operating expenses to, of course, be higher than last year.

[Operator]

[Operator Instructions] Our next question is from Richard Ramanius from Carlsquare.

[Richard Ramanius, Associate Equity Analyst]

I think the last caller asked most of my questions, but I have one left. Will the -- at least one. Will the accelerated approval be available in China as well? Is it possible to apply for it?

[Renée Aguiar-Lucander]

Yes. So in terms of the accelerated approval in China, there isn't kind of an opportunity to use the same data kind of as we are using in order to get an accelerated approval. That's at least our understanding. So I think that using just kind of the 200 patients, it's our understanding that, that would not be available. However, it is also understanding that there might be a potential to use a similar kind of regulatory pathway when there are more kind of Chinese nationals in the study, and that could be read out. But that is not completely clear, I think, at this point in time because, as I'm sure you're aware, it's a certain amount of fluidity in kind of the Chinese regulatory developments, which are being kind of reviewed and revised and have been over the last couple of years. So from that perspective, it is my understanding that it will not be at least on the basis of the data that we're going to read out this year. And I think we're just going to have to wait and get a little bit more clarity from our partner on that as it progresses and Chinese nationals are included in the study.

[Richard Ramanius, Associate Equity Analyst]

Yes. I also wondered if you could say something more about the sales -- the building up of the sales organization. I noticed that the costs increased from about SEK 10 million to SEK 24 million in administrations and sales. So is that like a reasonable number to expect? SEK 24 million, is that a reasonable number to expect per quarter in 2020? Or do you think you will continue building up your sales organization?

[Renée Aguiar-Lucander]

So I guess, I can take the first part of that question, and I will leave any kind of financial views to Fredrik. I think, strategically, what we're doing is, obviously, we are investing in terms of buildup of I would call the kind of the pre-commercial activities in the U.S. So this really relates to medical affairs, market access, a lot of educational initiatives, both on the kind of medical and the patient side. So there is a significant amount of activity, and there will be both resources and kind of spend on those type of activities in the U.S., which are going to be typical kind of MSL type and other kind of educational efforts. So clearly, we are going to continue spending on that, and that's going to be going on throughout this year. Fredrik, I don't know if you have anything you want to add.

[Fredrik Johansson, Chief Financial Officer]

No, I think you made a great statement here. And I'm not ready to give any guidance on a quarter-to-quarter basis regarding the cost development.

[Operator]

[Operator Instructions] Our next question is a follow-up from Max Herrmann from Stifel.

[Max Stephen Herrmann, Head of European Healthcare Equity Research & MD]

Just a couple of follow-up questions. On your presentation, you talk about in-licensing of a new project for 2020. So just interested to understand a little bit more about that. And then also, what are the -- sorry to bring this up, but just coronavirus outbreak in China and how that potentially impacts the timing of you being able to get patient enrollment going in China.

[Renée Aguiar-Lucander]

Yes. So this obviously is a major issue, and it's been covered by quite a lot of kind of publications and journals in the health care space, is that we are clearly aware of the fact that the coronavirus is impacting China in quite a broad and significant way. From our perspective, yes, it is our understanding that none of the centers that were planned or plan to kind of be included in China were located in the Wuhan province directly. But obviously, I think that this has also been quoted by some of the very largest companies that have huge activities over there like Astra and Pfizer, et cetera, that there is -- clearly, there is an impact on a broader basis in China, but it's very -- it's a bit early yet to actually have a view on what the implication -- potential implications of that will be. So I think we're just going to have to wait and see. And it is something that, obviously, our partner is monitoring very closely. And we're in very close contact with our partner to try and see if and when we will have a better view on what the actual impact of this is going to be on a broader basis. So I think that's something that -- it's a very relevant concern, and it is something that we are certainly kind of keeping tabs on. But as I said, at this point in time, it's a little bit too early to draw any conclusion from what is going on, but it is going to probably be something that we can comment more about in the next time we speak. So that was -- and the second question, sorry, now I forgot, Max, I'm really sorry. Can you repeat...

[Max Stephen Herrmann, Head of European Healthcare Equity Research & MD]

No. That's all right. It's just on the -- in your presentation you have a kind of milestone of in-licensing another program for 2020. So a bit -- know a bit more about the areas that you're targeting. And whether that's another budesonide formulation or more broadly?

[Renée Aguiar-Lucander]

Right. So yes, we have thought that as a corporate goal for the organization that we would like to definitely have another project in-license before the end of this year. The areas that we're looking in are the 2 separate area. One is we are looking fairly broadly in the nephrology space, so therapeutics within nephrology. And so obviously, we will have a sales force and a sales organization in the U.S. And so anything that we can complement within the nephrology space we think would make sense. So we're looking broadly there. However, as I'm sure you're aware, there are not hundreds of kind of therapeutic options or opportunities in nephrology, but that is an area that we're clearly looking at and interested in.The second area that we're also pursuing is kind of orphan indication broadly. And so this is -- I said -- broadly meaning anything really that has a similar risk/reward profile to that of the company today. We would like to try and keep the profile of the company very, very similar to what it is today, which we believe is benefiting from a very kind of positive risk/reward profile. And as such, we would not look at, for example, projects in CNS, which just tend to have a much higher risk profile. We would look at other kind of works unrelated kind of potential projects where there is presentation where we can actually kind of take that forward and see a reasonably short-term kind of road forward, both from a kind of clinical development and commercialization perspective. So those are probably the 2 main areas that we are actively looking and have been looking in for quite a while. And we are hopeful that we will be able to conclude one of those transactions before the end of the year.

[Operator]

[Operator Instructions] And as there are no further questions, I will hand it right back to the speakers for any final comments.

[Renée Aguiar-Lucander]

Well, thank you very much for participating in the Q4 webcast. We look forward to speaking to you again in a couple of months' time. Thanks a lot.