Moberg Pharma AB (publ)

STO:MOB

Earnings Call Transcript 2020-Q3

[Operator]

Hello, and welcome to the Moberg Pharma conference call. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present CEO, Anna Ljung. Please begin your meeting.

[Anna Ljung, Chief Executive Officer]

Thank you, and hello. My name is Anna Ljung, and I'm the CEO of Moberg Pharma. I also have our VP of Finance, Mark Beveridge with me on this call today. I'm happy to present our interim report for the fifth quarter since we had a prolonged year, July to September 2020. You can find the report on our web page, and there you can also find a PowerPoint presentation that will be used as the basis for this telephone meeting.So I will start on Page 3 in that presentation, with the brief introduction to Moberg Pharma. So we are a Swedish pharmaceutical company that base our products on drug delivery of known substances, which reduces time to market and development risk compared to traditional drug development. And our lead program is MOB-015 against onychomycosis, nail fungus, with global sales potential of $250 million to $500 million annually. And based on the outcome of the 2 Phase III trials on more than 800 patients, where we met the primary endpoint, we have sufficient data to file for registration in EU. We are targeting filing during next year. And based on average processing times of 1.5 years, we expect approval early 2023, which would enable launch by the end of 2023. For the U.S., we will discuss with FDA, but we believe that one additional study is needed. It would be very similar to the North American study that we already completed, but with a shorter dosing regimen, enabling even stronger claims and higher complete cure rates. And when it comes to partnerships, we have partnerships in place for some of the major markets, including EU, with our partner Bayer, the world-leading OTC anti-fungal treatment under the brand name Kerasal; and Taisho for Japan; as well as the market-leading in dermatology in Korea, DongKoo; and Cipher for Canada. In total, our partnerships include milestones of $120 million in addition to payments for product sales. We have a tried and tested model where we work with strong local partners that take responsibility for and invest in marketing and sales versus we take responsibility for development and production and deliver finished product.And of course, this is a model that does not tie any capital with the exception of U.S., where we want to build our own presence targeting podiatric. And this is actually not the first time we take a nail fungus product to the market. This company was founded in 2006. And by 2010, we launched Kerasal Nail, our first-generation nail product in the Nordics. In total, we sold Kerasal Nail via partners in 30-plus countries, and we are an own sale company in the U.S. We built this through a SEK 440 million franchise that we divested in 2019 for a total of NOK 1.4 billion. Now we want to repeat exactly the same journey again, this time with our second-generation nail fungus product, MOB-015, that has an even greater potential. Turning to Page 6 and the significant event during this period. During this summer, we received top line data for EU, where we met the primary endpoint, showing non-inferiority versus ciclopirox, the most used topical drug for onychomycosis. And after dialogue with our partners, we have our clear path forward, targeting to submit a marketing authorization application in EU in the second half of 2021. We have also strengthened our management team with the recruitment of Cindy Wong, who used to be Head of Global Clinical Development at Mertz and also has a background of CMO at Q-Med and had senior positions as regulatory authorities both in Sweden and Australia, something which can be also used for the next phase for MOB-015 registration discussions. And to date, our operations have not been significantly impacted by COVID-19. And we also have 2 new that we announced last ], the spinoff and listing of BUPI and also a fully guaranteed financing for MOB-015. And I will talk more about that on the next slide.So on Page 5, since we now have a clear strategy to take MOB-015 to market that has been redefined with our partners, we can now choose a suitable financing solution. And the secured rights issue that was announced last Friday means that we have a long-term financing secured for MOB-015, covering both the registration work and fees for the registration in Europe, as well as one additional clinical study for the U.S. market. So we have, therefore, decided to a fully guaranteed rights issue of around SEK 150 million, pending approval by ]. Board and management will invest as well as our main shareholder, Östersjöstiftelsen. We have also some new shareholders participating, such as Nyenburgh and Fårö Capital. Once this rights issue is completed, we will terminate the current convertible note agreement. So if we look at the timetable, the final terms will be announced by November 27, and we will have an EGM approving this transaction by December 1. And then the subscription period will be December 7, 2021. So basically, it will be down by Christmas. Turning to Page 6. In addition to MOB-015, we also have the BUPI project, where to facilitate financing of further development and capture the value in the project, we lastly also announced the intention to spin-off and list the assets in a separate company, OncoZenge. We now have a dedicated team led by the CEO, Pirkko Tamsen, with extensive experience as CEO of drug development companies in similar development stages. While using the know-how from the Moberg team as well as involving the original inventors behind BUPI, next step for BUPI is a Phase III trial in Europe, and OncoZenge is now planning for such a study. To finance this clinical study as well as OncoZenge other operations until clinical data can be reported, around SEK 60 million in financing is needed. And for that reason, Erik Penser Bank is engaged in the financing and also to list the company at NASDAQ growth market during the first quarter of 2021. The plan is to distribute OncoZenge Lex Asea, which means that there will be no tax event triggered by the distribution. We're planning for that -- for each 10 shares that someone owns in Moberg Pharma, our shareholders will receive 1 share in OncoZenge.Turning to Slide 7 and our clinical data. This graph shows the relationship between mycological cure rates and complete cure rates for the current onychomycosis drugs, including also the outcomes in our 2 Phase III trials, the North American trial achieving 70% mycological cure and the European trial achieving 84% mycological cure. These data are world-leading. It's the higher mycological cure rates than anyone would have expected, but it's not translated into complete cure rate. And as you can see, all of our competitors, there is a clear linkage between a high mycological cure, that said being killing the fungus and a normally looking nail, that is the complete cure combination of mycological cure and clinical cure, where the physicians shall not see any abnormalities of the nail surface. And after dialogue with key opinion leaders, we have a clear explanation around why our mycological cure rates does not transform into the complete cure rates that we would expect. And that is driven by the vehicle in our products, where the vehicle enables large amounts of terbinafine to be transported through the nail until the fungus. This transportation takes place by increasing the water level, increasing the hydration of the nail. A side effect from this increased titration is that the nails will be temporary whitened by the increased water content in the nail. And once the water content has normalized, then the nail will return to normal. So then you won't see this whitening effect anymore. But that was the explanation for why we didn't get such a high complete cure rate as one would expect, given the high mycological cure rate. Because as you can see, we're world-leading when it comes to actually killing fungus. Basically, all of our topical competitors have mycological cure rates between 30% and 50%. The only one that is on par is really oral terbinafine, and there you have the side effect issues with damage and so on. So solution to this problem is to reduce the treatment period to 2 to 3 months instead of treating daily for a full year. By doing that, we're convinced that we will receive sufficient amounts of terbinafine through the nail. We have a few data points that supports this. And one of them is where we see that we get 40x higher levels of terbinafine under the nail compared to oral treatment. So we know that we will get sufficient amounts of oral terbinafine to under the nail where it's needed. We also know that oral terbinafine, that's treated for 14 months, and that is sufficient to cure the fungus. And we do have -- so we know that 3 months will be sufficient. We also have actually quite a lot of data on the vehicle itself because MOB-015 is actually built on the know-how from Kerasal Nail, our first-generation product, and it's very similar. MOB-015 is in essence 89% Kerasal Nail and 10% terbinafine and then a few helping substances as well. So we sold more than 15 million units of Kerasal Nail on the market, and we have very few side effects reports and even fewer when it comes to this whitening of the nail. The reason for that is that it's dose dependent. So you don't see it if you treat for 2 to 3 months, and we also have clinical data on Kerasal Nail supporting that. And in reality, patients dose once daily for a full period of a year. And we see that from our competitors -- prescription information from our competitors as well, where all of the topical alternatives on the U.S. market, they are prescribed for once daily for a full year. But if you look at the actual number of scripts per patient, we see that the actual number of scripts corresponds to an average treatment per patient for 2 to 3 months, and then people simply give up.So we think that this product impresses patients who will use it exactly like we want them to use it, but to be able to do this claim fully, we, of course, need to show this in one additional Phase III trial for the U.S. market. For Europe, we can go directly into registration based on the current data. So now I'm moving on to Page 8, where we have this clear development path for MOB-015 because now we have a clear path forward where we're targeting submission in Europe during next year. And that would mean that we could get approval in Europe early 2023 and then launch together with our partner, Bayer, by the end of 2023. And we have chosen a registration route that could provide valuable data exclusivity for up to 10 years after the first market approval. And that is really what sets this time line where we will file by the second half of 2021. And we will, in parallel, discuss with the FDA, where we will have an advising team after the presubmission meetings have been completed, the regulatory authorities in EU. But the assumption from our end is that one additional study is needed for registration in the U.S. And of course, that study showing this shorter treatment that I spoke about will, of course, not only strengthen the claims for the U.S., but that could be used worldwide.And switching to next slide on Page 9, a bit more about this shorter dosing regimen. I may actually already have mentioned everything that is on this slide. Of course, it's a huge benefit from a patient perspective, if you only have to treat for 2 to 3 months compared to having to treat once daily for a full year. And that, of course, the fact that people do not treat for a full year that affects compliance. So this is a competitive advantage. But going back to the -- to our real -- our main competitive advantage compared to all topical alternatives there are today, we have a much higher ability to kill the fungus. And for the orals, for oral terbinafine, it's the same molecule. So we don't expect to be either better or worse on actually killing the fungus. But of course, we don't take the detour throughout the body. We apply it locally, and therefore, we avoid the safety issues that are linked to oral treatment. Moving on to the financial part of the presentation, on Slide 10. Here, you have the last 4 quarters. And as you can see, we have a cost base that has been reduced over these periods, where we went from having the OTC business that we divested early 2019, and now we have a much cleaner organization to follow. And that will be -- we will continue to work with the smaller organization, also divesting BUPI. Although the activity level going forward will increase when we're going into the registration phase. And if we look at the total assets role, you can see that our total assets have been consistent over time. It's roughly SEK 22 million out of the total assets that are linked to BUPI. So that is the proportion that will be distributed to shareowners. And we don't expect any P&L effect by this distribution. So the assets that will be And current cash is SEK 30 million, and of course, with this ongoing right issue of SEK 150 million, there's no growing concern issues. With this rights issue, we will have the capabilities to conduct our activities as planned, and we will also terminate the convertible debt agreement, so going forward, once this rights issue is finalized. And on Page 11, to conclude the presentation. So we now have a clear path forward, where we believe that we can file for registration during next year, and that would enable a new launch by the end of 2023 based on our 2 pivotal Phase III studies in total more than 800 patients. What we will do in parallel is also to work with a third Phase III study in the U.S., a Phase III study that we feel has a very low-risk profile and would enable superior claims with shorter treatment time and fully grasp the full potential of MOB-015 on a global scale.We do have major partnerships in place with Bayer for Europe, with Taisho for Japan, DongKoo the -- in South Korea and Cipher in Canada. And we expect to work through this list and add more partners that we get closer to market as well. In total, these partnerships correspond to milestones of $170 million, and we will also get paid for delivered products. We have chosen to keep the U.S. rights by ourselves. It was a strategic decision that we did last time when we launched Kerasal Nail that turned out to be really successful, and we want to repeat that here, where we keep the U.S. right, we will build our own market presence in the U.S., we will work with strong local partners elsewhere. Last time, we built this franchise and divested it for SEK 1.4 billion, and now we're targeting building something even bigger, and we look forward to doing that. I think I'll stop there, and I'm happy to open up for questions.

[Operator]

[Operator Instructions] And it seems we have no questions on the line. Please go ahead, Anna.

[Anna Ljung, Chief Executive Officer]

Thank you. Then I just want to thank everyone for this meeting. And of course, if you have additional questions, don't hesitate to reach out to either me or Mark. Thank you, everyone, and have a good day.

[Operator]

This now concludes our conference call. Thank you for attending. Participants, you may disconnect your lines.