Cinclus Pharma Holding AB (publ) (CINPHA) Earnings Call Transcript

Hello, and welcome to Cinclus Pharma's Q3 Report 2025. [Operator Instructions] Now I will hand the conference over to CEO, Christer Ahlberg. Please go ahead.

Thank you very much, and hi, everyone, and welcome to Cinclus Pharma's third quarter 2025 earnings call. And here with me today, I also have our CFO, Maria Engstrom; and our R&D Director, Margit Mahlapuu. We will present the latest development from the Q3 2025 and the upcoming news flow. And we -- after this presentation, we will be happy to answer any questions you may have. And -- but before we begin, just some -- I would like to share a quick reminder with our listeners that during today's call, you may -- I mean, we may make forward-looking statements that involve known and unknown risks, uncertainties and other important factors beyond the company's control that could cause the company's actual results and performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. Please note that these forward-looking statements made during this call speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances other than the extent required by law. So with that said, let's go then into the business. And you -- all of the listeners here, not -- maybe not all, but many of you, you know about our substance, linaprazan glurate which is our next-generation PCAB. And we definitely have designed it to deliver a unique 24-hour acid control and we also have the fastest onset of action observed to the date in the class overall. And this is definitely a possibility to position the product to become best-in-class. We have finalized our Phase II with very strong results, demonstrating high healing rates, especially in the severe erosive GERD patients. And now we have also initiating the Phase III program, which is definitely a very, very big milestone for us as a company. An important step towards an approval later on. The first patient has been enrolled. You will learn more about that today. And I would say that the study, the Phase III -- first Phase III study remains significantly and clinically derisked. And we also have very much supported by clear regulatory strategy and extensive preclinical and clinical validations. So the program overall looks very derisked. Our commercial focus, though, remains on patients with the severe erosive GERD where you find the most highest unmet medical need and where also linaprazan glurate superior acid control can actually deliver the greatest benefit. And I think that's important, and that is something that we will develop more into the future as well. So with this unique profile, unique pharmacokinetic, pharmacodynamic profile provides a strong differentiation versus both PPIs on the market currently, but also against all other PCABs on the market and in the market in the future. And also this unique profile to support a specialty commercial model, which also is important for the future commercialization. And also, it's interesting to follow actually that we see an increasing global momentum when it comes to PCABs overall, globally, where it has been launched. And now we actually see that PCABS are available in over 30 countries. And they are also taking over from PPIs in the market where they have been launched and integrated into treatment guidelines for erosive GERD. So it looks very promising for the class overall. Going to the next slide, where we're looking into the correlation between healing and pH level. As you can see on this slide, there is a clear linear relationship between the 24-hour gastric acid control about pH4 and healing of erosive GERD. The more intragastric pH stays above 4, the higher the healing rates observed at 4 and 8 weeks. This relationship is consistent across multiple studies and thousands, thousands of patients where you look at PPIs, first-generation PCABs like vonoprazan or new compounds like tegoprazan. So it's -- you can see the relationship everywhere. And you can say that overall, you can see that PPIs, the current standard of care reach approximately 60% to 70% of acid control. The first generation of PCABs something between 60% to 85%. And we, as a unique next-generation product, we come close to 100% or 96% in our studies. So it's really a unique possibility here. So this correlation reinforces the acid control is the key biomarker for clinical healing, and it's exactly where linaprazan glurate differentiates with our -- I mean, it's -- I mean, with our superior 24 hours control and the fastest onset of action. So if you just look into the next slide, this slide is built on the previous one and illustrates how the correlation between pH above 4 and healing is fully aligned with the data from other studies and especially from vonoprazan U.S. Phase III trial. As shown here from that study, lansoprazole 30-milligram maintains pH about 66% of the time and resulting in approximately 70% healing rate after 8 weeks for this patient -- severe patients. In comparison, in the same study of the vonoprazan 20-milligram achieved 85% pH about pH 4, corresponding to approximately 90% of healing rate after 8 weeks. So it's spot on the line, which we just mentioned. And what you also can see then, if you look into our study where we have shown 96% pH above 4. And if you plot it in into the same line here, you see that it will translate into nearly complete healing for the most severe erosive GERD patients. So this is very strong data. So the reinforced acid controls is the single most important determinant of healing and the linaprazan glurate superior pharmacodynamic profile provides a clear competitive advantage over both PPIs and other PCABs. So taken this together, this supports our Phase III dose selection and underpins our confidence in achieving best-in-class outcomes in the ongoing HEEALING-1 study. So also, I wanted to mention a little bit about the market overall, which I started the presentation with. I mean, looking into the PCABs, the global PCAB market continued to expand rapidly and driven by strong demand for fast and durable acid control, and that shows also the unmet medical need. In the U.S., for instance, Phathom's vonoprazan launch is progressing well. The company projects approximately USD 170 million to USD 175 million in sales this year, and they already nearly have 800,000 prescriptions filled to date. And actually, they expect profitability during next year, 2026. And we also foresee and expect an NDA of tegoprazan submitted in this quarter by the company called Sebela and that further expanding the U.S. category visibility, obviously. And as I said initially, PCABs are now available in more than 25, 30 markets worldwide, reflecting a broad clinical and commercial adaptation. In Japan, the first adapter market, PCABs accounts for approximately 44% of the entire acid blocker segment. And as you know, I mean, at the peak, they were close to USD 1 billion in sales only in Japan. In Korea, South Korea, 4 PCABs already approved, and they represent approximately 23% of all acid blocker prescriptions, and they have a double-digit annual growth, and it definitely continued to displace PPIs. In other markets such as India, we're seeing rapid uptake, more than 20 brands launched, 13 licensing deals signed and treatment guidelines updated to recommend first-line use for PCABs. In Mexico and in Latin America, PCABs have reached position #3 in market within just 2 years, already outpricing traditional PPIs. So everywhere where PCABs are launched, it looks very promising. So combined, this trend highlights a clear global shift towards PCABs, reinforcing the strong commercial potential for linaprazan glurate as the next-generation best-in-class therapy. So let's go in then to the events during the quarter. During the third quarter, as we already have mentioned here, we received positive feedback from regulatory authorities allowing us to initiate the Phase III HEEALING-1 study. And we're going to evaluate, as you know, then erosive GERD patients, all grades, focusing on the primary endpoint where we would like to deliver superiority for the severe erosive GERD patients in 4 weeks. We have now initiated the Phase III trial, which will enroll approximately 500 patients in up to 100 clinical sites in 7 European countries. We have dosed the first patients, and you will soon learn more about that. And that -- so that actually happened during October. And that is, of course, an important milestone for us as a company and also for the substance, of course. We have also presented an abstract at the biggest European Congress in Berlin, highlighting the positive data from an optimized tablet formulation developed for the Phase III and also for the commercialization later on. In addition, important step forward an NDA, we received positive feedback from the FDA following the CMC meeting, confirming alignment on our manufacturing and quality strategy in preparation for an NDA submission. So with that said, I will hand over now to Margit to present regarding the updates on the ongoing Phase III HEEALING-1 study. So please go ahead, Margit.

Thank you. So I will give a brief summary of the status of our Phase III study, HEEALING-1. And as Christer already mentioned, the first patient in this trial was screened in mid-September and dosed in early October. And in total, we are aiming to enroll about 500 patients in up to 100 clinical sites across 7 European countries. Our primary endpoint is superiority in relation to comparator lansoprazole in healing of severe patients, which means LA grade C/D patients after 4 weeks of treatment. And we will also monitor a number of key secondary endpoints where we -- but the focus is then on healing and symptom relief, both at 4 and 8 weeks of treatment and both in patients with severe eGERD, which is in C/D grade patients, but also in all patients, which would mean then LA grade A to D patients. And overall, the patient recruitment has started really well and is fully aligned with our projections. You see on your right side of the slide, the line diagram where the planned recruitment is shown in green and the actual recruitment rate is shown in yellow color. And you see that the actual and planned screening of patients are fully aligned. And as of mid-November, we have recruited approximately 10% of patients, which is according to our plan. As expected in the beginning of the trial, the recruitment is always a little bit slower as the sites are being activated. And then as the trial proceeds, the recruitment also accelerates. So topline results from HEEALING-1 are anticipated in second half of 2026. And after the top line results have been obtained, we will start second HEEALING study and also maintenance study, which will proceed both in Europe and in U.S. Now on this slide, you see the 7 countries who are participating in HEEALING-1 trial. The countries are listed on your left side. And on the right side of the slide, you see where the clinical sites are localized. And here, every red flag indicates the city where we have clinical sites. In many cities, of course, we have many sites. So the number of flags do not correspond to the number of active sites. We have also decided to add some additional sites have expressed interest to join the trial, and we expect the regulatory approval for these sites in early spring 2026. So now I leave over for financials.

Thank you, Margit. So then we go to the Q3 financial highlights. And we ended the third quarter with a cash position of SEK 540 million, providing us with a solid runway into Phase III program. Cash flow for the quarter was minus SEK 49 million, mainly reflecting increased R&D spending as the HEEALING-1 Phase III study is now underway. R&D expenses totaled approximately SEK 46 million, including the first patient in milestone payment of SEK 3.5 million. The R&D represented 86% of total operating expenses compared to an average of 83% over the past 8 quarters, underscoring our continued investment focus on clinical execution. We also saw an increase in number of coworkers, primarily due to the addition of specialized consultants supporting the Phase III program and ongoing regulatory activities. Overall, our operating loss for the quarter was approximately SEK 44 million, in line with expectations and consistent with the company's planned growth phase. So then moving on to the year-over-year financial comparison. Net sales totaled SEK 9.7 million in the third quarter. This primarily reflects the periodization of the upfront payment from Zentiva related to the out-licensing agreement for Europe. The recognition follows the cost allocation across the ongoing Phase III program. Operating expenses increased by SEK 14.7 million year-over-year, mainly due to initiation of the Phase III study where the SEK 3.5 million milestone for the first patient in was included. EBIT was negative SEK 44 million compared with a negative SEK 39 million in the same quarter last year, driven by the higher R&D spend according with the start or associated with the start of the pivotal study. Financial net improved by SEK 0.7 million, primarily due to interest income on cash holdings and favorable foreign exchange effects. Net profit for the quarter was negative SEK 40.7 million compared to negative SEK 36.5 million last year. Also here, reflecting the higher operating costs tied to Phase III execution. Going to the balance sheet. The cash, as I said earlier, ended -- or the cash in the end of the period was SEK 540 million compared with SEK 644 million at the same time last year. This follows, of course, our increased R&D activity with the Phase III study. Noncurrent assets increased by SEK 9.6 million, mainly relating to leasing of new office spaces. Other current assets rose by SEK 24.7 million, driven by prepayments to the CRO, the Phase III CRO and some CMC activities. Noncurrent liabilities increased by SEK 55.9 million. This was linked to the Zentiva contract liability representing deferred revenue beyond 1 year. Current liabilities increased by SEK 50.6 million, reflecting the short-term portion of the same Zentiva contract. Overall, our financial position remains strong with sufficient resources to support the ongoing Phase III trial and advance our preparations towards commercial readiness. Then we go to the shareholder slide, and this slide shows the structure at the end of September 2025. The 15 largest shareholders together hold approximately 56% of the company's shares, demonstrating a stable and long-term oriented ownership base. Our cornerstone IPO investor remains significant shareholders, including Trill Impact, the 4th AP fund, Linc, Irrus Investment and Eir Ventures. These investors have continued to provide strong institutional support since the IPO, reflecting confidence in Cinclus Pharma's long-term value creation potential. Our founding shareholders, Peter Unge, Kjell Andersson, Mikael Dahlstrom and Nylof Holding and Lennart Hansson collectively hold about 14% of the company, maintaining close alignment with the company's mission and strategy. The cornerstone investors account for roughly 24% of the shares, which together with the founders represent nearly 40% combined ownership. This consistent and engaged shareholder base provides both stability and strategic continuity as we advance linaprazan glurate through late-stage development and prepare for commercialization. Over to you, Christer.

Okay. Thank you. So just to summarize then, the financial statements, what we could see when it comes to the run rate, we are financed into 2027 over the readout of the HEEALING-1 study, the first Phase III trial, which is estimated to be top line results in the second half of 2026. So that looks promising. And all the other milestones reflect, I would say, steady execution across clinical, regulatory and CMC fronts as well as financially. And this is definitely a strong foundation as advanced in linaprazan glurate through the Phase III trial -- first Phase III trial here now. So -- and before we just leave this meeting for questions, I just would like to highlight our upcoming KOL event, December 11, titled Healing the Unhealed: Redefining Acid Control in Erosive GERD. The session will feature Professor Prateek Sharma, a world-renowned gastroenterologists, educator and researcher who has authored more than 550 publications and contributed extensively to advancing the diagnosis and management of erosive GERD diseases. Professor Sharma will discuss the current burden and clinical impact of GERD and erosive GERD, the strengths and limitation of PPIs, the emerging role of PCABs in improving acid control and healing erosive disease and illustrative patient cases that underscore real-world challenges and unmet needs. We look forward to informative session. And with that said, I will now open for questions and Q&A session.

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

You mentioned that PCABs are taking a growing share of the market. And I'm just wondering if that has any implications on future trial design. So you've got a superiority study in HEEALING-1 versus lansoprazole. Do you anticipate that there will be the need to change that should you proceed to the HEEALING-2 study and use vonoprazan as a comparator? Or do you think that trial design still holds up?

Okay. Good question. What we can say is that, of course, I mean there are -- both from a commercial point of view, but also from a regulatory point of view, we will not change the comparator in this. We will use the same comparator as the other PCABs has used, lansoprazole. So we will have an indirectly comparison. But the reason why we stay with PPIs is mostly from a regulatory point of view because we need to have the registered products in the market when we set up the studies. We cannot, from a regulatory point of view, compare with a drug that is not approved, for instance, in Europe. And so we need to stick with this. So -- but of course, as I tried also to describe here earlier is that the key aspect here is definitely the acid control. And since the biomarker with acid control in relation to healing is such strong and linear, the most important is, of course, to deliver the best acid control in class -- and that will, of course, end up with them. And that is the argument actually why we also will have a very good, good and also the rationale behind why we will have a very good healing as well as symptom control for these severe patients. And I also, of course, we are looking into factors in the trial to become superior, of course, in healing, but also in symptom relief. So that will be definitely a differentiation factor that is not delivered by the other PCABs. So we will also include this when we have the data, the hope is to include this in the label and the ambition is to include it in the label. And that by itself will differentiate also versus the other that do have noninferior labels.

Okay. And perhaps if I could just ask one on the market dynamics or what you see happening in the period over -- while you're still running the Phase III with tegoprazan potentially launching in the meantime, how do you see particularly in the U.S. things changing in terms of uptake of relative drugs?

Well, I mean, that's irrelevant. Firstly, we can say before going into U.S., we can say, in Europe, we might be the first PCAB on the market. It looks possible, but let's see. That is the first step. In U.S., it looks like we can be the #3. And therefore, we always have planned to have a product that is designed to deliver the best acid control, which is the biomarker, which is the proof to have a reason to be in the market. And we definitely will focus all on the patients where the severe patient that we still have an unmet medical need. And that will be the case also in the future. You see if tegoprazan, the best PCAB, what it seems to be when it comes to acid control is vonoprazan except for ours, linaprazan. So in tegoprazan, it looks like they have a little bit less acid control compared to vonoprazan. So in that case, they will not add any additional to vonoprazan. Of course, when we get in, our ambition is to become best-in-class. And there will always be patients that have not -- either not -- are not healed by the first line -- by the first-generation PCABs but also, we know that market is very dynamic. So you know that also in vonoprazan studies, 25% of the patients relapsing within 6 months. And it's higher figures, what do we understand in tegoprazan. So the patient will come back to the physicians again after relapsing. So -- and in that position, you have definitely a switch possibility. And since there are so many patients, just talking about the severe patient, we're talking about in U.S., 4 million, 5 million patients. And definitely, there will be a space for a superior acid control product, even though it will not be first. So the market will be there and definitely it still will be a very big dynamic market when we enter.