Calliditas Therapeutics AB (CALT) 2024 Q1 法說會逐字稿

Welcome to this Q1 2024 report from Calliditas Therapeutics. My name is Renee Aguiar-Lucander. I'm the CEO of the company, and I'm today joined by Fredrik Johansson, our Chief Financial Officer; Richard Philipson, our Chief Medical Officer; and Maria Tornsen, our President of North America. Next page please.

I would like to draw your attention to the 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 public filings including those containing risk factors. Next page, please.

So I would like to take you through some of our Q1 highlights, which included the appointment of Maria Tornsen as President of North America, who brings over 10 years of rare disease experience to Calliditas including multiple product launches, both in the US and ex-US.

Following our full approval in December last year, we were able to roll out new marketing materials to a fully trained field team in February, introducing the new indication of reduction of loss of kidney function to nephrologists in the US. In February, we also announced that the USPTO had issued a new patent covering TARPEYO with expiration in 2043. In March, we had also announced that the FDA had granted a seven years of orphan exclusivity for the new indication which expires in December of 2030.

Finally, we also saw the approval in Singapore of Nefecon which will be known as Nefigan. Next page, please. In terms of commercial highlights for the quarter, this I want to -- from a commercial perspective, this quarter was another record quarter in terms of enrollments with 705 new enrollments, reflecting a 27% increase over the previous quarter in which we saw a 51% increase. This continued strong demand is very encouraging, and we continue to see strong demand for the product in the market.

As expected, we saw somewhat of a lighter quarter from a revenue perspective due to the typical reverification process. But this quarter also saw something quite unexpected in the form of a cyber-attack on Change Health, one of the three providers of claims processing in the US. We use one specialty pharmacy managed by Biologics, which exclusively use Change Health, which due to the delays in processing due to this cyberattack led to a negative impact on the quarter of approximately $4.7 million, resulting in net product revenues for the quarter of $26.8 million.

We do not expect this to have an impact on our annual revenues as these revenues are not lost but merely pushed out in time, which is also borne out by the strong start to Q2 reflected by net product revenues quarter to date of approximately $25.5 million with an additional five weeks to go in the quarter. The team has during the quarter undertaken a very substantial number of P&T committee meetings, and we're starting to see some plans update their rules, but our expectations remain that the majority of plans will update their rules in the June-July timeframe.

We are also hopeful that EMA will review and make recommendations regarding a potential full approval of Kinpeygo at their next meeting. And in the period post the quarter, we also are excited to see the commercial launch in China by our partner, Everest Medicines. Next page, please.

Other post-period events. So we did have a positive readout of our Phase II proof-of-concept trial in head and neck cancer which Richard will give you a little bit more information on, where we saw statistically significant benefit in progression-free survival as well as overall survival. There's also an R&D day that has been scheduled for May 30 to provide some additional information around Setanaxib.

We also had supportive open-label extension data, which was presented at ERA-EDTA. There were several abstracts presented at the ISN World Congress of Nephrology, which again, Richard will cover shortly. There was also a new patent in the form of a notice of an allowance that was received for Setanaxib in the area of cancer. And as I already mentioned, there was a commercial launch in China by Everest Medicines. Next page, please.

So in conclusion to this section, I just want to highlight that we are very excited about what 2024 will bring following the successful start in Q1. That includes the potential full approval of Kinpeygo in Europe, the commercial build-out in China with the potential for Nefecon to be included in negotiations related to national reimbursement already this year potentially, the readout of Setanaxib data from the Phase II trial in PBC, which we expect to be able to share with you in Q3.

The readout from a Phase II investigator-led study in IPF, which we are hoping to be able to share with you in Q4. Reimbursement decision is expected for additional countries in Europe by our partner working with that STADA. And then we're also hopeful that we will see the start with Phase III study in Japan with Nefecon by our partner, Viatris. And obviously, we are certainly looking forward to continued strong growth of TARPEYO in the US market.

And with that, I'm going to hand over to Richard Philipson.

Thanks very much, Renee. So the next slide.

I'd like to start by talking briefly about our received conference attendance. Next slide. We're delighted to have had a strong presence at the World Congress of Nephrology, a conference organized by the International Society of Nephrology, which was held in Buenos Airies from the 13th to the 16th of April of this year. We presented four posters and also held a sponsored symposium where Dr. Richard Lafayette, Laura Mariani, and Heather Reich presented and discussed the evolving landscape of eGFR and Proteinuria Surrogate Markers in IgA nephropathy.

We very much value the opportunity to meet with nephrologists from the US and also from many other countries where we were able to talk about IgA nephropathy and hear about their experiences in managing the condition. I'd like to highlight some of the data and analyses that we presented at this conference. Next slide.

One of the important observations that we made in the secondary analysis of the Phase III Nefecon trial was at the time to 30% reduction in eGFR or kidney failure was significantly delayed in patients treated with Nefecon. This analysis was presented in a poster at WCN and is also illustrated in a figure on the right of this slide, demonstrating a 55% reduction in the risk of an event in patients treated with Nefecon compared to placebo-treated patients, which was statistically significant with a p-value of 0.0014.

It's also noteworthy that this treatment effect was consistent irrespective of baseline UPCR category with hazard ratios of 0.51 and 0.42 for the below and above 1.5 gram per gram UPC categories. Other posters presented additional analyses from the Nefecon trial. These posters included a subgroup analysis indicating that Nefecon was efficacious and well-tolerated irrespective of white or Asian race, a poster described the beneficial effects of Nefecon on the eGFR slope in patients with lower levels of baseline proteinuria, and finally, a poster describing quality of life outcomes. Next slide.

So I'd now like to move on and talk about the recently announced results of the company's Phase II proof-of-concept study in squamous cell carcinoma of the head and neck. Next slide. As a brief reminder, this was a randomized placebo-controlled double-blind Phase II study investigating the effects of Setanaxib 800 milligrams twice daily in conjunction with pembrolizumab 200 milligrams IV administered every three weeks. Patients with recurrent or metastatic squamous cell carcinoma of the head and neck and with moderate or high levels of cancer-associated fibroblasts in the tumor were randomized to receive Setanaxib or placebo on top of standard of care pembrolizumab.

The tumor biopsy was taken prior to randomization and, again, approximately nine weeks after the start of treatment. Treatment continued until disease progression. For brevity, I'll subsequently describe the treatment groups of Setanaxib or placebo, but please remember that these randomized treatments were both given in addition to pembrolizumab. Next slide.

The study was conducted at 37 sites in seven countries. The last patient was randomized on October 25, 2023 with data collected until all randomized patients had at least 15 weeks of follow-up. The primary analysis comprised 55 randomized patients and included 38 progression events, which was in-line with our target for the statistical analysis. The treatment groups were well balanced at baseline, and importantly, no patients were excluded from any of the analysis sets nor were there any important protocol deviations that were considered likely to impact efficacy. Next slide.

We observed statistically significant improvements in progression-free survival and overall survival. Median progression-free survival was five months in Setanaxib-treated patients versus 2.9 months in placebo-treated patients. The hazard ratio for this outcome was 0.58. In other words, patients treated with Setanaxib had a 42% lower risk of experience in disease progression at any time during the study. At six months, 92% of Setanaxib-treated patients were alive compared to 68% of placebo-treated patients. The respective percentages were 88% and 58% at nine months and the hazard ratio for this outcome was 0.45.

In other words, patients treated with Setanaxib had a 55% lower risk of death at any time during the study. We also saw a higher percentage of Setanaxib treated patients achieving a best response of at least stable disease. 70% of Setanaxib-treated patients showed the best response of at least stable disease compared to 52% of placebo-treated patients. And the responses in Setanaxib patients appeared to be more durable. It was very pleasing to see a corresponding increase in CD8-positive T cells in tumor tissue in response to Setanaxib treatment, which supports the mechanism of action of Setanaxib in solid tumors and indicates an increase in the immunological activity of the tumor.

There is no significant difference in the primary endpoint of best percentage change from baseline in tumor size. From a safety point of view, the tolerability of Setanaxib when given with pembrolizumab was generally good with no new safety signals identified. Next slide.

So in summary, we saw statistically significant improvements in progression-free survival and overall survival, with more durable responses in Setanaxib-treated patients. There was an increase in intra-tumoral CD8-positive T cells in Setanaxib treated patients which is in-line with the mechanism of action of Setanaxib and indicates an increase in the immunological activity of the tumor.

Finally, Setanaxib was generally well-tolerated when given with pembrolizumab, and there were no new safety signals. So I'd like to now hand over to Maria Tornsen.

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

As you recall in Q4 2023, we had our strongest quarter since launch with 555 involvement forms. And in the first quarter of 2024, we continue to see a very strong demand for TARPEYO, with 705 involvement forms received by our patient services from TARPEYO Touchpoints. During this quarter, we also had 354 new prescribers, which is another record since launch, and we now have close to 2,000 healthcare providers who have prescribed TARPEYO.

We believe the strong demand we are seeing is an early sign of the impact of our full approval, our new label with the removal of the UPCR criteria and physicians recognizing the impact TARPEYO has on reducing the loss of kidney function. Our total sales for TARPEYO in Q1 was $26.8 million. As Renee mentioned earlier, Q1 was impacted by seasonal changes due to the open enrollment period in the US as well as the cyberattack on Change Health, and this does not impact our 2024 guidance.

As you can see from our estimated quarter two sales to-date, we've seen a very strong revenue in the first eight weeks of the quarter with approximately $25.5 million of net sales. Next slide, please. In the first quarter, we launched a full approval of TARPEYO with multiple commercial and medical activities. As a reminder, TARPEYO is the first and only product approved by the FDA to reduce the loss of kidney function for patients at risk of progression. Our field teams are trained on our new label and are promoting it to healthcare professionals. We have also launched various new patient educational programs and materials.

And for market research, we know that patients appreciate TARPEYO's nine-month treatment course with no REMS requirement as TARPEYO provides them with the freedom to complete the course and see the long-term benefits. Our medical team have been engaged in multiple scientific exchanges and participated at Congresses. At WCM in April, we had presentations highlighting the eGFR results and impact of quality of life experienced by patients in the clinical trial. And finally, our market access team have been busy engaging with payers, educating them on our new label, the inclusion of the eGFR data, and removal of the UPCR criteria. Next slide, please.

We are very excited at the opportunity ahead of us. We see a very strong demand for TARPEYO, both from existing and new prescribers who recognized TARPEYO's positioning as a disease-modifying therapy in IgAN. Our focus is on continuing our promotional efforts with our expanded field team and drive scientific exchange at large conferences.

We're eagerly awaiting the update of the KDIGO guidelines and estimate they will be published in the second half of 2024. These guidelines have the potential to broaden the definition of the at-risk population and also support the use of TARPEYO as the only fully approved drug would impact on eGFR. As mentioned earlier, we continue to focus on engaging with US payers to ensure that their policies reflect the new label. We have already seen one of the largest payers in the US, United Healthcare, update their policy in May, and we are anticipating that the largest payers will update their policies mid-2024. This should facilitate access for patients and reduce market access barriers.

And with that, I will hand it over to our CFO, Fredrik Johansson, to talk about our financials. Fredrik?

Thank you, Maria. Next slide, please.

I will now present to you the financial overview for the first quarter as always. The numbers presented to you are in million SEK, unless otherwise stated. To start with, we reported SEK295.5 million in net revenues for the quarter. For the same quarter last year, we reported net revenues of SEK191.3 million. TARPEYO net product sales for the quarter amounted to SEK278.3 million or $26.8 billion which is a reported increase of 50% from the same quarter previous year.

As Renee mentioned, the Change Health cyberattack had an estimated negative impact on our revenues in the quarter of approximately $4.7 million or approximately SEK50 million. This revenue is not lost but will roll forward into the next several months. Therefore, we update to you today on the progress to date for TARPEYO in the second quarter, and we are encouraged to report that the preliminary TARPEYO net sales in the second quarter to date amounts to SEK25.5 million, which are almost already at the level at the reported Q1 TARPEYO net sales with approximately 40% of the quarter remaining. The remaining SEK30 million in revenues in the quarter is related to our partnerships, primarily from royalties for Europe from STADA.

For the same quarter last year, we had royalty revenues for Europe of SEK4.4 million. Our total operating expenses for the quarter amounted to SEK485.3 million compared to SEK362.4 million for the same quarter last year. The cost for research and development increased by SEK24 million in the quarter to SEK150.6 million compared to SEK126.7 million for the same quarter previous year. And this is primarily related to our pipeline, where we just had a positive readout in head and neck and have two more expected data readouts this year, including the readout in PBC, which is expected in the third quarter.

Moreover, as we had four trials running, including the open-label extension and the head and neck, which are close to be completed also from a cost perspective and the PBC and Alport trial, which are running with full speed. The R&D costs between the quarters may be somewhat (inaudible) and less linear this year. But as previously communicated, we expect R&D cost for the year to be broadly in-line with the previous year.

The cost for sales and marketing increased by SEK72.9 million in the quarter to SEK240.1 million compared to SEK167.2 million for the same quarter previous year. The increase is primarily related to sales and marketing of TARPEYO in the US, where we during the quarter continued work to leverage the market opportunity for the TARPEYO full approval we received at the end of last year. This included costs related to completely new marketing materials due to the new indication.

And as previously communicated, we started this investment in the commercial organization already in Q4 and we have particularly strength in the sales, marketing and market access functions during the first quarter. We made an operating loss in the quarter of SEK203.8 million compared to a loss of SEK180.1 million for the same quarter last year. The cash flow used in operating activities in the quarter was SEK198.2 million compared to June of SEK31.9 million for the same quarter previous year. And this leaves us with a net decrease in cash in the first quarter of SEK207.5 million, and we continue to have a healthy cash position of SEK810.3 million at the end of the quarter.

At last, I wanted to bring to your attention that we leave our '24 total net comprehensive net sales estimate unchanged at between SEK150 million to SEK180 million for the year. That was all for me. Thank you. And now back to you, Renee.

Thank you very much. Next page, please there we go. So just some key takeaways for the quarter. As you've heard this was another record quarter, both in terms of enrollments in new prescribers, with 705 new enrollments and 354 new unique prescribers. We have seen an improved product protection of TARPEYO in the form of both orphan exclusivity as well as patent protection with the new patents expiring 2043 covering TARPEYO and orphan exclusivity in the US for the new indication expiring December 2030.

As Maria has shown, there continues to be strong demand for TARPEYO with this disease-modifying mechanism, and we believe that the recent Setanaxib data clearly supports its antifibrotic effect, and we are looking forward to and excited about the upcoming readouts in our clinical pipeline related to our rare diseases. And finally, our total revenue guidance remain unchanged, reflecting strong growth expectations of $150 million to $180 million for the year for the entire Nefecon franchise.

And with that, we are happy to take questions.

(Operator Instructions) Maurice Raycroft, Jefferies.

This is Zhiyao on the call for Maury. Can you maybe talk about how many new patients are formed you have seen so far in the second quarter? And for the $25.5 million revenue in the second quarter, which date was the cutoff date? And was the $4.7 million included in it? And what are some of the additional assumptions and drivers behind the reiterated revenue guidance for 2024? And then I have a follow-up question.

All right. Well, those are four questions. Let me see if I can start with those. So in terms of the actual kind of the $4.7 million, let's start there. So obviously they will be kind of -- it's something that will catch up over the next several months. So it's not something that's necessarily only going to be in Q2. It will probably go both over Q2 and Q3.

As the quarter hasn't ended, we're not really in a position to be any more precise about where we might have seen what coming in from the cyberattack. So I think that's going to have to wait until the quarter is actually completed. In terms of the -- we're not going to report on any other aspects of Q2. I think we felt that this was a bit of an exception because obviously the cyberattack was something that was outside of our control, and it was kind of like this technical issue. So we wanted to provide some insight into kind of the quarter to date, and that is truly quarter to date, so that is as of the reporting date. And so I think that covered all of the questions.

Then I guess the second question is, can you maybe provide some additional color on the Phase III open-label extension data for TARPEYO? How did the data inform the treatment gap and timing for starting a second course of therapy? Also, are the data consistent with what you're seeing in the real world?

So the data will be presented at the upcoming ERA-EDTA. And I think that as we mentioned in the press release, what we've seen is kind of consistent trends and patterns as we saw in the original Phase III trial. So I think that we'll be happy to kind of take more questions or discuss this maybe more at the R&D Day when we cover some of those aspects as well and where we will be joined by Professor Barratt.

Vamil Divan, Guggenheim Securities.

So I just had one other follow-up on the change, the 4.7%. I just try to understand the dynamics there. So those patients have already received the product. It's just a matter of getting the reimbursement now in the payment. There's no risk that they sort of may not end up getting the product as well, and confirm that if you could. And then my other question is on just sort of the prescriber base that you're seeing, obviously, a nice increase in the number of new prescribers.

Is there any change that you're seeing now in terms of which sorts of prescribers are writing for the product, given the broader label just in terms of academic-based physicians versus more community-based doctors or so? Any sort of insight in terms of where the prescriptions are coming from now would be helpful.

Maria, do you want to take that?

Sure. So maybe I'll first address your first question on Change Health. So Change Health is one of the largest claims processors in the US. They process approximately one-third of US lives. And the way it works is that every single time you have a new claim as you need to get a new prescription, either a new patient or an existing patient that is going to get another shipment, our pharmacy need to confirm that the patient still has coverage from their insurance. And that is what Change Health is providing through their online system. And as the system was down, it created some issues in terms of verifying insurances. I want to reassure you that all patients have still received drug.

We didn't lose any patient per se, but it did provide a bit of delay of approximately 10 days when we weren't able to verify the insurance for the patients. But that's why Renee mentioned earlier that the revenue will -- it's not lost that it's going to come over the coming months, and we're going to catch up on that gap that this year in the first quarter.

And with regards to your second question on prescribers, we're very happy that we're seeing both new prescribers but also existing prescribers prescribing to additional patients. I don't think we've seen any change in terms of academic versus community nephrologists, but we've always had prescriptions coming from both groups. But I guess you can say that we are both seeing a healthy growth in terms of new prescribers but also in existing prescribers identifying additional patients.

Yigal Nochomovitz.

Hi, this is Ashik on for Yigal. Thanks for taking our questions. I'm just wondering what you're expecting for the updated KDIGO guidelines. I'm assuming that will broaden the definition of that at-risk population and reflect the updated label language. I'm just curious what you'd expect will be specifically included and if you really view that as a sales inflection point especially with the new prescribers.

Yeah. So I think we are expecting the KDIGO guidelines to at least come up for public review at some point in time in Q3. And I think, that they have -- we have no knowledge of exactly what is going to be in those guidelines. But what we have heard and what we observed in different conferences and interactions with a lot of KOLs is clearly that there is a concern generally that the existing level of 1 gram per gram may not kind of truly reflect the correct patient population being defined as being at risk.

So I think there is a kind of, in our view, a significant probability that, that level may be reduced. To what level, I don't think that we know. But certainly, I think that would obviously just further broaden the kind of target market, as in our label, it does cover patients that are considered to be at risk.

Okay. Understood. And then in terms of the European store at this point, I guess, we are waiting for some new commentary. I am just curious what the remaining steps are, and is there any reason to think that you might push back on a full approval? Or is your expectation that everything should be smooth sailing from this point on?

It is our expectation that we -- that Kinpeygo will receive a positive opinion from EMA. However, as all regulatory processes, you kind of never know until you know, and you can never be sure of what's exactly going to happen, but that would certainly be our expectation. And we are hopeful that EMA will take this up on their agenda in their upcoming meeting.

So if that is the case, there is a possibility that there would be a positive opinion fairly shortly. And then obviously there is that kind of 67-day kind of delay between a positive opinion and the actual kind of formal decision by the European Commission.

Annabel Samimy, Stifel.

So just following on the KDIGO guidelines. You did mention that those seem to -- the guidelines obviously are potentially identifying this at-risk population, but you said that it could also include TARPEYO specifically as a potential treatment. Do you have any sense as to how they might talk about TARPEYO within these guidelines?

And then secondly, I was just curious. We've all been focused on how long patients are staying on treatment, whether it's below nine months, above nine months. But is this really the wrong way of thinking about it? Are you now using this nine-month treatment period as a selling point, I guess, especially in light of the competitive environment that seems to be evolving with only chronic therapies available for these patients or possible for these patients. So can you just talk about, I guess, how you're using that nine-month treatment period as a possible selling point as opposed to sort of a guideline for treatment.

With regards to the TARPEYO guidelines, so obviously we are clearly expecting TARPEYO to be part of the guidelines. And I think that the guidelines obviously are based on scientific evidence which is ranked based on kind of by a third-party really who provides the author with that kind of a ranking. And so we believe, obviously that our data is very strong and that it will be recognized in the guidelines in terms of the fact that we have really, in our view, a disease-modifying immunomodulating effect on B-cells. And so this is something that we would expect to hopefully be reflected in the guidelines, but as to exactly how that treatment paradigm will be expressed and discussed, we don't at this point in time have any insights into how that exactly would be described.

In terms of nine months, and I'll have Maria also comment on that. I guess my view is actually that there is a very significant benefit from a patient perspective, which sometimes I think is forgotten in some of these conversations, where obviously a vast majority of patients who are actually diagnosed between the ages of 20 and 40, 40% of these patients are female. And from pretty much most or if not all of these kind of treatments, there is an issue in terms of becoming pregnant if you are on any of these chronic treatments. I think that this is actually an extremely important issue for a very large and important part of this patient population.

So yes, I do think that there could be a very substantial benefit of actually being able to hopefully delay dialysis, keep patients out of dialysis hopefully, with intermittent treatments rather than forcing all patients to be kind of in chronic treatment. But from a kind of -- from a sales perspective, Maria, do you have any comments?

Yes. So I would say it's two things. I mean, first we know that what our label says is that the recommended duration is nine months of therapy. And that is also what we provide in all of our promotional materials and all of our communications to our field teams. We also know from market research that this is something that patients appreciate. It goes back to what Renee mentioned before, this is a lifelong disease, fairly young patients.

And we see in market research that patients really appreciate this nine-month course with extended benefits, and that is something that they see as a benefit in treating their disease. So it is definitely something that is appreciated by patients from what we can see and also something that physicians recognize when they prescribe TARPEYO.

Great. And just one more follow-up question on the KDIGO guidelines. Do you have any analogs as to what kind of impact that could have when a drug is specifically included in the guidelines as opposed to just identifying an at-risk population to something that's more general.

You know what? I wish I did have something off the top of my head that I could provide you with. It's an excellent question. But I don't necessarily have an analog, but I do think, obviously, this is a rare disease, and I think it is something where these nephrologists are not highly specialized in subcategories of nephrology.

So it's actually a very – it's quite a feat to be a nephrologist and cover everything that it kind of relates to nephrology. So I do think that these guidelines are going to be very impactful because I do not think that many of the KOLs who are often kind of maybe interviewed or discussed in this kind of setting that they are very representative in terms of the broader nephrology community.

My guess is that the broader community of nephrologists will very much appreciate and refer to the guidelines and to get some insight into how they might treat these patients.

Christopher Uhde, SEB.

I just wanted to check in in terms of what can you tell us about the rate of conversion in the quarter from enrollments to actually dispensing medicines? And then I had a question on Setanaxib. What are your thoughts preliminarily for a Phase III trial design when you go to the FDA for an end of Phase II -- in particular, I'm curious about the number of arms, but other comments would be great as well.

So with regards to Setanaxib, I think that obviously we probably would not go to the FDA on our own with regards to any progression on the oncology side. I think our preference would be to use this time right after the clinical data to engage with potential partners, with other interested partners, and gain a bit of insight into which way would be the most effective and efficient way to take this forward oncology as we don't have any plans to really do that on our own.

I also think that if it's an antifibrotic effect, this obviously could very well have or would be expected to have a very similar effect in solid tumors such as pancreatic cancer, et cetera. So there might be other solid tumors that partners would choose to go into, not necessarily just head and neck cancer. So I think that this is something that we will interact with a variety of parties, which we have plans to do over the next couple of months. And really, I think on the basis of that, we will jointly decide on what steps we may or may not take in the near-term related to oncology.

Okay, thanks. That's great.

In terms of rate of conversion, we don't really kind of provide any specifics around that. But obviously, I think what we are kind of seeing, and we can talk a little bit about the potential market access friction that we are seeing today.

Yeah. So I would say -- the way I would look at it is that we have a very strong demand for TARPEYO, we get a lot of enrollment forms as you've seen from what we have reported today. In the US, patients need to go through the prior authorization process, where we verify the benefits and see if their payer will cover TARPEYO. The situation we're in right now is that we have a full approval label with a broad label. But as we mentioned, not all of the payers have updated their policies, and some of the largest payers, we expect to update their policies midyear, which is why we have guided that the second half of the year is going to have a stronger revenue.

So we don't provide specific conversion rates and how quickly a patient converts from an enrollment form to on therapy because it depends on the type of insurance that they have. But I think the way we look at it is we have a very strong demand, which I think is a leading indicator for future growth and future revenue for the brand.

Suzanne van Voorthuizen, VLK.

First of all, can you comment on the operating expenses? How should we think about how those will develop come in time for both R&D and SG&A. And perhaps especially with regards to the sales and marketing expenses, can you clarify what drove the increase? And yeah, how to think about the run rate going forward? And then I have a follow-up question.

I'll take that. So starting with R&D costs, as I said earlier, we expect some lumpiness between the quarters on the R&D cost overall for the year. We expect them to be broadly in-line with the previous year. And for the sales and marketing expenses, what we see now from Q4 to Q1 is I think it was around 20% increase. And I believe that we have now taken, I mean, most of our investment, and I believe that the first quarter is representive. So I would think that, for the year, you should expect a 15% to 20% increase from the level of last year.

Got it. That's very clear. And then maybe a question on Setanaxib. Now with the recent data in oncology, signaling a potential antifibrotic effect. For the upcoming readouts, can you give some context on what you would like to see there? The interim futility in PBC is probably straightforward, but yeah, maybe some thoughts that you can share on the IPF data, the study design there, and thereafter Alport data. What would be (technical difficulty) in your view?

So I think in terms of the PBC, obviously, overall apart from the endpoints and the secondary endpoints, I mean, we are also in that. We are looking at things like Fibroscan. And that would obviously be another really interesting component of validating this antifibrotic effect. So I think there were quite a lot on the PBC data that will complement what we've seen from the head and neck cancer trial.

IPF obviously is really interesting. And I think we -- as we reported out, I mean, we've also seen in the interim readout from the head and neck cancer, we saw that -- that was one of the pathways that was modulated in that smaller group of patients.

And so I think, that would obviously be something that's very exciting. The drug trial is being run right now, as you know, is an investigated study. And it's also run at kind of half the dose of what we are using in our other clinical trials. But clearly, I think any signal that we could get from that in terms of efficacy would be really exciting. And so this is obviously why we are hoping that we can get to see that data kind of in Q4 of this year.

We will spend a little bit more time on this clearly in our R&D day. So the whole point really of the R&D day is to provide a little bit more thinking about this. We will take you through all of the different designs in the pipeline, and I think obviously also talk a little bit more about what we might be expecting to see or what we would think would be kind of a positive to see.

But I think generally, in the PBC, I would say apart from the obvious kind of things, I think, really is the Fibroscan that we're really interested in seeing. And I think also really the possibility of having a statistically significant effect on fatigue, I think is something else that we'd be very excited to see. So I think that those are probably the two things.

Johan Unnerus, Red Eye.

Taking your request, to see add-ons, you mentioned that one private insurance. P&T Committee has taken a decision already and you expect several to follow by mid-year July, sort of. What's your what can we expect from that on the back of a full label? Do you expect to see reimbursement without prior authorization.

Maria, do you want to take that?

Sure. So the insurance companies as you refer to is United Healthcare, they cover approximately 13 million US lives. They made an update to their policy in May which reflects our new label. So we have a broad inclusion criteria, removal of UPCR criteria, the recognition of the impact on EGFR. So exactly in-line with what we expected.

I still believe that TARPEYO will require prior authorization in the majority of cases. That is very typically the US most rare disease highly specialized drugs have a prior authorization in the majority of cases. But I think the anticipated -- the positive change that we are anticipating is that it will be easier to get that first approval because their policies will be aligned to our label. But it will still require a prior authorization expectation.

Great. And you also extended your commercial team and the support team presumably partly to support this review and of course work with the specialists. Can you perhaps give us some more flash what that requires? Or what do you work with since the team is in place since February, I believe.

Yes, of course. So we took the decision in Q3 last year to expand our field team and some other sort of functions in anticipation of the Board approval. We now have today 70 rare disease account managers. So these are sales specialists in the field. We have, in addition, higher source lead areas a month. We have expanded our market access teams in terms of bringing in-house our field reimbursement managers and our national account managers.

And we've also expanded some of our home office functions in marketing to support our field team with materials and also with digital efforts. So in total, we now have approximately 100 people in the field in the US to support the full approval and the promotion of TARPEYO.

Excellent. And finally, from our side, this cyberattack, it seems to be handled well even though it was substantial, especially on Change Healthcare side. Perhaps you can give some feel for what you sort of -- what you -- measures you've taken and preparation if something similar would happen again.

So I think obviously, this is a third-party provider. And obviously, once -- when these things happen there are always quite a lot of follow-up activities, particularly on the Change Health side. I mean, we know from kind of -- they've been actually also going to Congress and have kind of to explain themselves as to what happened there, et cetera. So I think, on their side, they have certainly announced that they are, they have taken actions to try to avoid that this can happen I guess. But exactly what those details are, we are not privy to.

Yes. And is there something that you have done on your side to perhaps mitigate vis-a-vis change or --

We can't really do anything because it's really kind of Biologics that cover our hub. So we can only kind of try and collaborate with them and look at their systems, et cetera, what they might do. But actually, it's very difficult to do anything as a kind of third party because obviously, this really relates to the situation of the change hub.

Rami Katkhuda, LCI Capital.

Hi guys, congrats on the progress. And thank you for taking my question as well. I guess for Setanaxib, do you have any hypotheses as to why you didn't see changes from baseline in tumor size in conjunction, I guess with the PFS and OS benefit and then did you measure the CPS score for these patients? And could those values have influenced the overall results?

Richard?

Yes. So I think in this kind of setting of what we were evaluating, we're looking at this treatment on top of pembrolizumab. Pembrolizumab itself is not typically a drug that we would use to -- that is used to shrink tumors. What you see as the longer-term benefits in terms of progression-free survival and overall survival with pembrolizumab. And what we are seeing when we add Setanaxib on top of that is we're seeing evidence of patients when they respond more patients receiving Setanaxib to achieve stable disease. And those responses when they are achieved are more durable.

So I think when we were setting up the study, I think progression-free survival ideally might have been chosen as a primary endpoint, but we also have to approach it from a feasibility point of view and what's reasonable from a sort of sample size calculation point of view. Change in tumor size is a sensitive way of protecting a clinical effect. So from a sample size point of view, it's a kind of -- it was a pragmatic decision to use that endpoint to allow a reasonable sized study and a feasible study.

But nevertheless, we had submission power to detect changes in PFS and indeed, that is what we did. So I mean overall in summary, what we're seeing is the kind of increase in patients achieving at least stable disease and the durability of those responses being longer in patients who received Setanaxib. I don't think that there's anything that would indicate. We did have a CPS score requirement to get into the study. But I don't think there's anything there that would indicate patients responding differently with respect to their baseline CPS score.

What we do see is that when patients received treatment with Setanaxib, we see evidence from various biomarkers and transcriptomic analysis that we see an increase in the immunological activity of the tumor.

Got it. That makes sense. And then I guess switching gears a bit. Have the baseline characteristics of patients being prescribed or payout changed at all with the full approval? Or is it still too early to tell?

Well, great question. I think if you look at the patients that we received prior to the full approval, we did receive patients that were below the 1.5, that was the cut-off. So I think we are seeing a broader -- it is early days, but we are definitely seeing a broader group of patients being prescribed TARPEYO. And I think you can see that in the enrollment numbers that we have reported.

Physicians that previously prescribed to one patient. They have a second patient now that is eligible for treatment. So we're starting to see the positive signs. I think it's too early to say the type of patient and what does the profile look like since we only have a few months of the new label.

Erik Hultgard, Carnegie.

Two questions from my side. The first maybe for Richard on the Setanaxib head and neck data. So I was just wondering if you have discussed the data with any opinion leaders. And if you are getting any initial feedback on the PFS and OS data more specifically the clinically relevant of the two months extension of the PFS. And if you say would be helpful.

And then also when we could expect to see the peer-reviewed publication for the data or any presentation of the scientific meeting. And then finally, I was just wondering if you could update us a bit on the competitive situation and highlight the key competitive programs in the clinic that we should monitor?

Okay. Yeah. So definitely, we've spoken to external experts and we also have very experienced people working with us who works in large pharma oncology settings. And I think both from that point of view and from the external expert point of view, they consider these outcomes in terms of progression-free survival, impressive. I think one of the reassuring things that we observed is the patients who are randomized to placebo and received pembrolizumab, the behavior of those patients in terms of these longer-term outcomes like PFS is exactly as has been seen in other studies.

So we know that our control arm was behaving very in a very expected way. There is nothing unusual about that control arms, so we're seeing an augmentation, apparent augmentation of benefit when we have Setanaxib on top of that treatment. And yes definitely, those outcomes are considered impressive. We will be preparing a publication, and we will hope to present the data at ESMO later this year.

So again, regarding your question on PBC, so obviously, there is, at this point in time, really the dominant kind of area in PBC that's being kind of focused on or the kind of the PPARs at the moment, they're in kind of regulatory review. I think that there is an expectation that both of those candidates may very well achieve approval this year.

So I think that, that's probably where the -- and I think there are other kind of similar PPARs kind of in kind of development. I would say that the way that we've obviously looked at kind of the PBC is not to kind of be an all-comer for PBC. That's not the way the trial is designed either.

So it's really kind of stratified for patients that have a higher score in terms of a reading of Fibroscan. And so actually, we have a trial that is specifically targeting a particular kind of patient group. And so I think from our perspective, this is really about looking at either of those patients that have a more kind of compromise, I guess, kind of more fibrotic from the view of looking at Fibroscan kind of liver disease and/or really looking at these patients in terms of fatigue, which is a really debilitating and very broad kind of issue for all of these patients.

So I think that those are the two kind of components that we really look at kind of complementing with. So we are not positioning ourselves as kind of kind of directly competing with the PPARs or with Ocaliva for that matter, which is also why in this trial, we've actually allowed patients to come in with both Ocaliva as well as Bezafibrate, et cetera.

So I think that, that's really kind of a slightly different positioning that we have. But those, I think, are still -- those two kind of drugs is really what I think the main focus of your anyone looking at PBC at the moment.

H.C. Wainright.

Hi, Renee and the team, thanks for taking my question. Just had a quick one. Could you guys give us more color on the launch in China for the Nefecon. And I believe you still provide the drug as of now, how that is going to evolve in the upcoming years or quarters regarding that part. Thanks.

Yes. So actually, it's a little bit early for us to have any feedback really from them. And obviously, it was launched really a week or two ago, really kind of in China. But it is something, obviously that we are super excited about. And we are just as curious as you are in terms of how that will develop. So the -- but yes and obviously because China is not a rare disease and it is a much kind of bigger patient population. In terms of supply, you're correct.

We are obviously not directly, but through our existing kind of CDMO relationships, we are providing supply also to China. And I don't see that changing in the near-term. So my expectation would be that in the near-term, we would certainly still continue to play that role.

Okay, that's helpful, Renee.

Okay. Thanks a lot. And I think that was the last question for this particular session.