BioArctic AB (publ) (BIOAB) Earnings Call Transcript

Hello, and welcome to the BioArctic Q2 Report 2020. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present CEO, Gunilla Osswald; and CFO, Jan Mattsson. Please begin your meeting.

Thank you so much, and welcome to BioArctic's Interim Report for the First Half of 2020. I'm Gunilla Osswald, and I'm the CEO of BioArctic, and I will share the presentation here today with our CFO, Jan Mattsson. The first half of 2020 has been very good for BioArctic in spite of the tough situation around us with the COVID-19 pandemic. With a strong cash position and an expanded project portfolio, we are progressing the business in a good way, and that's thanks our great personnel and our great partners. Next slide, please. BioArctic is listed on Nasdaq Stockholm Mid Cap, and this is our disclaimer. Next slide, please. BioArctic is a unique Swedish biopharma company with the aim of improving lives for patients with CNS disorders. When I say that it's a unique company, I mean that based on these 4 areas combined, the first one is that we focus on R&D of innovative treatments for CNS diseases with high unmet medical need, like Alzheimer's disease and Parkinson's disease. These diseases affect large patient populations and their relatives, and it also implies large cost for the society. Today on the market, there are only symptomatic treatments available, and we work on disease-modifying treatment affecting the underlying disease and slowing down the disease progression. The second area is that we have a great organization with very experienced and engaged coworkers and important fruitful collaborations with universities and our strategic partners, Eisai in Alzheimer's disease and AbbVie in Parkinson's disease. The third area is that we have an attractive and well-balanced project portfolio with projects spanning all the way from discovery to Phase III. We have partnered projects that are already generating revenues by milestones, where our strategic partners carry the cost for the clinical studies. And we have the earlier fully owned projects with substantial marketing and out-licensing potential. The fourth area is that we are a well-financed company with a strong cash position with more than SEK 1 billion on the bank, which is quite unusual for a biotech company. And we have also valuable collaboration agreements with Big Pharma like Eisai and AbbVie, totaling a value of up to SEK 9.6 billion, plus royalties if we come all the way to the market. This solid financial situation is a great benefit at these challenging times that we have around us so we can continue to focus on progressing our projects in a good way. I think BioArctic is a dynamic and very exciting company with a huge potential. Next slide, please. The highlights for the second quarter of 2020. I'm pleased to say that our operations have continued to progress according to plan in spite of the COVID-19 pandemic, which I think is a strong achievement. BAN2401 is progressing well. Our partner, Eisai, is very committed, and I'm impressed with how they are driving BAN2401 in a broad way, supporting Alzheimer's patients. The Clarity AD Phase III confirmatory trial has expanded with more countries and more sites, and we are so happy to see that Sweden is also included now, and we have already several Swedish patients onboard. Eisai is preparing for a new Phase III program called AHEAD 3-45 in even earlier stages of the disease, and I'll come back to that. Our discovery stage programs are also progressing very well. And we had initiated a new research collaboration with Professor Lars Nilsson at Oslo University regarding ApoE. ApoE is the most common genetic risk factor for Alzheimer's disease. And one of our discovery programs have a mechanism of action, which is linked to ApoE, and we are happy about the collaboration with Professor Lars Nilsson, who is an expert in this area. Then we come to Parkinson's disease and ABBV-0805, where our partner, AbbVie, has decided to stop recruitment for the Phase I multiple ascending dose study of ABBV-0805 in Parkinson's disease patients. Phase I is continuing with a single ascending dose study. A detailed plan to accelerate the project into Phase II in Parkinson's disease patients is currently being prepared by AbbVie. And of course, this will take some time, but I'm really happy to see AbbVie's commitment to ABBV-0805 and that they are already now preparing for the possibility to enter into the next clinical stage. And simultaneously, this will also reduce the risk of delays. So I think we had a really good first half of this year and quarter. The next slide, please. BioArctic has an attractive and well-balanced portfolio. We have organized our operations in 5 focus areas: Alzheimer's disease, Parkinson's disease, other CNS disorders, the blood-brain barrier technology platform and diagnostics. I think the portfolio is balanced in 3 different ways. The first one is that we have several projects in different areas, all focusing on CNS disorders. The second one is that we have projects spanning from discovery phase all the way to Phase III. And the third one is that we have a combination of fully financed partnered projects and innovative, fully owned projects with great potential. Our strategic partners, they finance the expensive clinical programs in Alzheimer's disease and Parkinson's disease, whereas BioArctic, we finance the less expensive preclinical phases and increase the value before further partnering. Next slide, please. We have 2 long-standing successful partnerships: Eisai in Alzheimer's disease since 2005. And Eisai is very committed to dementia, and they have an industry-leading pipeline where BAN2401 is among the leaders. We have so far received EUR 63 million in our collaboration with Eisai, and the total aggregated value of milestones and research collaboration fees is up to EUR 221 million. So we still have a lot left in the program -- if the program continues to progress well. And if we come all the way to the market, we will get royalties which could be of substantial value. It could be like [ lock backs ] the revenues for BioArctic without any cost for the clinical programs. And I think BioArctic has a great business model here. And also, I'm very excited about now Eisai also expanding potential patient population for the future with the AHEAD study in asymptomatic subjects. If we then look at Parkinson's disease, we have a very successful collaboration with AbbVie since 2016. And in this collaboration, we have so far received USD 130 million out of the total value of agreement of up to USD 755 million. So also here, we have a possibility to still receive a lot, plus royalties if we come all the way to the market. And Eisai (sic) [ AbbVie ] as we have seen, they worked with HUMIRA, have also said that they are looking into other indications as well for the project, 0805. They will start with Parkinson's disease, but they are also looking into several other different indications like multiple systemic atrophy and Lewy body dementia. So also, this area could lead to substantial revenues for BioArctic, the 2 great collaborations that we have in those Alzheimer's disease and Parkinson's disease. Next slide, please. We start with Alzheimer's disease and BAN2401, which is the potential disease-modifying antibody for Alzheimer's disease, where we have presented positive Phase IIb results. And this program is now in Phase III. There's a high medical need for Alzheimer's disease patients, and this is a huge population that is growing and growing. BAN2401 has a unique binding profile and it's especially designed to selectively bind and eliminate the toxic aggregated forms of amyloid beta. BAN2401 has a clinical fingerprint, which is also unique and which was shown in the Phase IIb study, which was performed in 856 early Alzheimer's disease patients. What really impressed me was that we had an early effect and we saw a consistent effect on all 3 clinical scales. We saw a dramatic reduction of amyloid from the brain, and we saw an effect on several neurodegenerative biomarkers and with a good safety profile. And thanks to this good safety profile, there is -- we don't need to titrate BAN2401 in early Alzheimer's disease. So the top dose could be and can be given directly to the patient. And I think that's one of the reasons for why we could show an early effect already at 6 months in this trial. Eisai has now 3 studies with BAN2401 underway that I will present on the next slide, please. So our partner, Eisai, is strongly committed to BAN2401, and they are expanding the program. So there is now 3 clinical studies underway. I'll start with the Clarity AD study, which is the Phase III confirmatory study in early Alzheimer's disease patients, which means mild Alzheimer's disease patients and mild cognitive impairment subjects with Alzheimer pathology. This study is progressing really well, and according to Eisai, they expect the patient enrollment to be completed this year, and the 18 months' results are expected in 2022. The second clinical study which is ongoing is an open-label extension study for the early Alzheimer's disease patients who were part of the Phase IIb trial. This study is also progressing well. And this is an open study, which means that Eisai has the possibility to share data along the line when data are coming in this study. So we are, of course, looking forward to that. Then Eisai and Alzheimer's Clinical Trials Consortium are preparing for a new Phase III program that is called AHEAD 3-45, and that is comprising of 2 sub-studies, A3 and A45. And that's expected to start this year, and it will include approximately 1,400 subjects who are at the preclinical asymptomatic stage, so at a very early stage on the process of Alzheimer's disease. These patients have -- are cognitively unimpaired, but they have intermediate or elevated amyloid levels in the brain. The program is aimed to evaluate the therapeutic effect of BAN2401 on the progression of the disease. So we are looking forward to following the progress of this impressive program that Eisai is driving in Alzheimer's disease with BAN2401. Next slide, please. Then we come to Parkinson's disease and ABBV-0805, which is the potential disease-modifying antibody for Parkinson's disease. And here, we have very strong preclinical results and we are now in Phase I. Parkinson's disease is the second most common neurodegenerative disease, and no disease-modifying treatments are available here either, and the same situation as Alzheimer's disease where there's only symptomatic treatments available. So a huge unmet medical need. ABBV-0805 has a similar unique binding profile as BAN2401. And it's also especially designed and generated to be highly selective in binding and eliminating the toxic aggregated forms called protofibrils or oligomers. But here, the protein is alpha-synuclein instead of amyloid beta, which is in Alzheimer's disease. This program is based on solid scientific grounds, and we have very encouraging preclinical data. Next slide, please. There has been great progress in the collaboration with AbbVie on the alpha-synuclein portfolio. AbbVie licensed the whole portfolio of alpha-synuclein antibodies at the end of 2018 for all indications, and Phase I is ongoing. And here, the aim is to evaluate safety and tolerability of 0805. Our partner has decided to stop recruitment for the Phase I multiple ascending dose study in Parkinson's disease patients, and the single ascending dose study is continuing. A detailed plan to accelerate the project into Phase II in Parkinson's disease patients is currently being prepared by AbbVie. And I'm happy to see AbbVie's commitment to ABBV-0805 and also happy to see that they're already now preparing for the possibility to enter into the next clinical phase, and this will simultaneously reduce the risk of delays in the program. At BioArctic, we are responsible for delivering the follow-up antibodies in this continued collaboration with AbbVie. Our collaborations with AbbVie and Eisai are very successful, and I think it's important to have a great track record of successful partnering when you think about future partnering of our early projects, which I will talk more about on the next slide, please. So our early-stage portfolio continues to progress really well and according to plan despite the COVID-19 pandemic situation. Of course, we work a bit differently, but so far, we have managed to progress our early portfolio without any noticeable disturbances. Our largest area is Alzheimer's disease, where we have 4 fully owned disease-modifying antibody projects. And each project has a different mechanism from each other. One of the early projects has a mechanism of action which is linked to ApoE, which is the most common genetic risk factor for Alzheimer's disease. And we have just communicated that we have initiated a research collaboration with Professor Lars Nilsson at Oslo University. Our novel approach to ApoE as a target, I think that's very exciting. And this is the first time we disclosed anything about this, and we will reveal more at a later stage. Our Parkinson's early program, together with AbbVie, is also progressing well, and so is also our new neurodegenerative program that I think has got a very good start. And as you know and have heard me say before, I'm very excited about our blood-brain barrier technology platform, where we have invested more and we have expanded it, and it's also progressing really well. So I think that our whole portfolio have a really good progress. Next slide, please. And by that, I would like to hand over to our CFO, Jan Mattsson, for our financial summary.

Thank you, Gunilla. As BioArctic doesn't have any sales revenue yet and as our business model is built on collaborations and partnerships, consequently, our financial outcome is dependent on milestone payments that incur on an irregular basis. And this is also why our numbers vary a lot between periods, and this could also be seen in this second quarterly report. Net revenues were SEK 7 million in the quarter compared to SEK 171 million in the second quarter of last year. And this change is mainly related to the EUR 50 million milestone payment that we received from Eisai in the second quarter of 2019 as well as lower activity in the Parkinson's program, according to plan. Project expenses increased from SEK 8 million to SEK 16 million in the quarter this year, and this is due to higher activity in our own projects compared to previous year. Personnel expenses decreased from 7 -- from SEK 21 million to SEK 17 million, and this is primarily related to the one-time incentive payment that was conducted in the second quarter of 2019. Operating profit was minus SEK 38 million compared to SEK 127 million of last year. And our operating expenses for the full year of 2020 is expected to be in the range of SEK 160 million to SEK 190 million, and this is in line with last year's number and slightly lower than the previous guidance. And the reason for this is higher efficiency in the Parkinson program. Next slide, please. Our cash remained high. Cash balance at the end of the quarter amounted to a bit more than SEK 1 billion, and the exact number was SEK 1.050 billion. Operating cash flow amounted to minus SEK 20 million in the quarter compared to plus SEK 97 million for the corresponding quarter of last year. And net results for the period was minus SEK 38 million compared to SEK 100 million. To sum up, our -- BioArctic has a strong financial position, and we continue to invest with proven cost efficiency. Next slide, and over to you, Gunilla.

Thank you so much, Jan. So I will conclude today's presentation with upcoming news and some closing remarks. So next slide, please. And we're now on Slide 16. The upcoming news flow is -- that we are expecting to see is that Eisai are progressing the broad clinical program for BAN2401, which I described. And we expect them to present more information at coming Alzheimer's disease congresses. The next Alzheimer's disease congress is AAIC at the end of July, which will be a completely virtual congress. And we are really looking forward to following all the advancements in the field. We are also looking forward to the start of the new Phase III program, AHEAD 3-45, in preclinical asymptomatic Alzheimer's disease subjects, as I described. And in Parkinson's disease, we look forward to the continued Phase I study being completed and AbbVie's preparation for the Phase II program. So I think we can conclude that we have had a good first half of 2020, and we are grateful for our strong cash position so we can drive our expanded early project portfolio forward in a good way with great possibilities of helping patients in the future. Next slide, please. So I would like to end today's presentation and conclude that BioArctic is built on great science. We have great projects driven by great people, and everything we do is with patients in mind in order to help them to get better lives in the future. Next slide, please. So by that, I say thank you so much for your attention, and we're happy to take questions.

[Operator Instructions] Our first question comes from the line of David Hedden (sic) [ Joseph Hedden ] at Rx Securities.

Joseph Hedden here. Good news on ABBV-0805. Can you just give us an idea of when you expect further news from AbbVie on the Phase II plan? And do you think that it's possible that Phase II could start this year, for instance, or early next year? And could you perhaps give any details on any milestones associated with Phase II?

Thank you so much, Joseph. So of course, we are really pleased with the news about ABBV-0805. And I think a couple of comments. We should be aware that the Phase I program is still ongoing with the single ascending dose study. So I think that's really important to understand that, that's still in progress. And we're really happy to hear that they are doing a detailed plan. And I think -- I wish it was next week, but I think we have to be realistic and see that this will take some time to do this in a proper way to make sure that we have a really good program that can take 0805 further towards the patients in a good way. So I think that we should not expect this to start this year. I think realistic is that we have to wait a bit further. So we will come back with more information when we have more information, but I think that we will just have to be a little bit patient. But I think we are in really good hands. I really trust AbbVie of doing a solid piece of work here and put safety of the patients high up, and also the commitment to ABBV-0805 is really impressive. And with regarding milestones, you know that usually, I'm not allowed to say so much about them. But what I can say is that we can expect milestones in a similar way as in normal development programs, which often is linked to different kind of stages start. So I think we'll have to wait a bit for that as well.

Okay. Great. And then just if I could, a second, still on alpha-synuclein. We saw in April Phase IIb prasinezumab results from Roche-Prothena, and unfortunately, the study not meeting the primary endpoint but apparently meeting secondaries. I know we haven't seen detailed data from those studies. But was there anything in the design of those from you looking at them, and we had some baseline data before, any learnings that perhaps you could take from that?