Calliditas Therapeutics AB (CALT) 2021 Q4 法說會逐字稿

Welcome to this Q4 report. With me today, I have Andrew Udell, President, North America; Chris Ngai, VP, Market Access; Fredrik Johansson, Chief Financial Officer.

I'd like to draw your attention to the disclaimer page on Page 2. With regards to any forward-looking statements made, I refer you to the company's reports and other filings, including those which contain risk factors and other relevant information.

Please turn the page to Page #3. So this quarter, Calliditas has achieved a historic milestone in the company's history as we had our first commercial product approved in the U.S. under accelerated approval by the FDA. This is the result of our pioneering efforts in IgA nephropathy, which started over a decade ago, and we are delighted to be able to offer the first and only approved drug to this highly deserving patient population. The actual approval was provided on December 15, and this is under the branding of TARPEYO. And as I mentioned, it's the accelerated approval by FDA. Indication is to reduce proteinuria in adults with primary immunoglobulin A nephropathy, IgAN, at risk for rapid disease progression. Generally, a urine protein-to-creatinine ratio above or equal to 1.5 gram per gram. As I mentioned, it is the first and only approved treatment for this orphan indication. And the drug itself has been specifically designed to address the origin of this disease with the hope and potential of being disease-modifying.

Other things that happened in Q4, and we finalized our acquisition of the remaining outstanding share capital on Genkyotex, which is now a wholly owned subsidiary as it was delisted from the Euronext stock exchanges. We also initiated a pivotal Phase IIb/III clinical trial called TRANSFORM. This is now another kind of very similar trial in terms of size and ambition to the NefIgArd trial in the area of PBC, which is another orphan indication, this time in liver. We randomized the first patient in February 2022, and we also initiated a Phase II proof of concept after the quarter -- in this quarter in the Q1.

If we take the next page, other things that happened after the quarter. We announced the commercial availability of TARPEYO in the U.S. and shipping our products to patients was initiated immediately thereafter, which reflects a successful launch out of the blocks, and we will hear more about this later on in the presentation.

In terms of the regulatory process with EMA, this is ongoing. We have submitted our answers related to the Day 180 questions. And the target remains intact in terms of receiving an opinion in this quarter, which would then mean an approval a couple of months later, therefore, in Q2. So this is perhaps some of the key events during the quarter.

And I will now hand over to Andrew Udell, who's going to take you through some more information around the launch of TARPEYO in the U.S.

Thanks, Renee. So we should be on Slide 5. So I have the distinct pleasure to discuss the work of an experienced and well-prepared commercial organization. As stated on December 16, we were ready. Actually, we were ready in September prior to the original PDUFA date. Before I go into details, I have to say, the inbound unsolicited outreach has been overwhelming and incredible. This includes both the health care professionals as well as the patient and advocacy community. This is an eager audience.

Next slide, please. The IgA nephropathy market is unsatisfied and represents a substantial opportunity. IgA nephropathy has an estimated prevalence between 130,000 and 150,000 in the U.S. Over time, more than 50% of the patients progress to end-stage renal disease, which leads to dialysis and kidney transplantation, both of which are debilitating and extremely costly, with dialysis costing commercial payers in the range of $200,000 annually and kidney transplant over $440,000. Research has consistently shown that this is an unsatisfied market that is craving advancement and a treatment specifically designed for IgAN. In a survey of 188 nephrologists conducted prior to the approval of TARPEYO, 52% of the nephrologists indicated they believe there are currently few or no effective treatment options available. In addition, they anticipated 65% of their patients will progress to dialysis.

Next slide, please. December 15, 2021, TARPEYO achieves FDA accelerated approval. Once again, the inbound outreach and interactions with KOLs and patient organizations has been extremely encouraging. Immediately upon our approval, our websites go live, our medical affairs team, which has been in the field for a few years, initiated a peer-to-peer launch outreach program to the top KOLs, and our contingent offers to sales representatives became effective.

Next slide, please. In addition, of extreme importance, on December 15, we launched our full-service patient and provider support and services program called TARPEYO Touchpoints. It is designed to streamline access of TARPEYO for the appropriate patients. The program uses Biologics' PharmacyElite model, which contains a hub and exclusive specialty pharmacy services integrated and all under one roof. This includes a dedicated team of care navigators as well as designated rare pod team that contains nurses, pharmacists and fulfillment and distribution team. Additionally, integrated in these services for qualifying commercial insured payers -- patients rather, since our co-pay assistance program provided by CoverMyMeds from McKesson.

Next slide, please. Our sales management was in place in the middle of 2021. Recruitment for our field was prioritized and based on representatives with rare disease, specialty product and nephrology market experience. Due to some recent market activities that included downsizing from some major companies, our sales managers were able to staff over 70% of our territories with representatives with nephrology experience. If you are familiar with this therapeutic area, you realize this is a big accomplishment since the nephrology space currently has very few branded products being promoted. As mentioned earlier, on December 15, our contingent offers became effective. And so prior to the end of 2021, we had accepted offers and had initiated onboarding for all territories. Our goal, which was achieved, was to initiate formal training the first week in January.

Next. In order to optimize -- I'm sorry, same slide, go back. In order to optimize the field force, we developed a sophisticated segmentation targeting and customer relationship management system to reach the top nephrologists that treat IgA nephropathy population. This, coupled with the nephrology experience of most of our field force, has enabled us to get out of the gates quickly. And as you're likely aware, as per our January 28 press release, sales have commenced.

In summary, we remain optimistic based on the facts that we have the convergence of an unmet medical need, a motivated audience, a first and only approved product that was specifically designed for IgA nephropathy and an experienced commercial organization.

I'd like to now turn it over to our Vice President of Market Access, Chris Ngai, to take you through some additional market access activities and expectations. Next slide.

Thanks, Andy. First, I want to provide some context for those who are less familiar with the U.S. access environment. There are thousands of health plans in the U.S. offered by commercial and government-sponsored health insurances. Commercial payers are insurers such as Aetna, Cigna and UnitedHealthcare. Government payers are largely in Medicare and Medicaid. Commercial payers still control more than half of U.S. lives. There is a pharmacy and therapeutic committee, [general core] P&T committee and each [payer that reviews] new treatments for formulary inclusion and utilization management. It typically takes 3 to 6 months for a P&T committee to review a new treatment after it becomes commercially available. During that time, payers often have default coverage or medical exception process in place to manage new treatment. Once the P&T committee makes a coverage recommendation, it is reviewed periodically based on utilization experience.

Next slide, please. We deployed our national account managers to engage with payer customers beginning Q3 of last year. We focused on 49 key payers that covers more than 80% of commercial lives. Research showed that a majority of IgAN patients has commercial insurances. 8 clinical presentations to inform P&T committee review was scheduled before the end of the year, with 6 of those already completed. Among those scheduled, a clinical presentation with us included 3 largest U.S. commercial payers, CVS, Cigna and ESI. As expected, P&T committees started reviewing TARPEYO in late January when the product was commercially available. Our exclusive specialty pharmacy partner, Biologics, helps patients and providers to navigate with the full coverage or medical exception process at each plan prior to its formulary coverage decision.

Next slide, please. For a specialty product like TARPEYO, it is common for payers to set prior authorization requirements. Through our payer advisory boards and mock P&T Committee review exercise, we anticipate requirements to include items such as biopsy-proven diagnosis, nephrologist prescribing, optimal dose of RAS inhibitors and having certain levels of proteinuria and/or eGFR. We do expect providers to align with KDIGO clinical practice guideline when prescribing TARPEYO. Thus, the potential patients are likely to meet these requirements.

I would now like to turn over to our CFO to take you through our financials.

Thank you, Chris. Next slide, please. I will now present to you the financial overview for the full year of 2021, and the all numbers presented to you are in SEK, as always.

To start, we present SEK 229.3 million in revenues for the period compared to SEK 0.9 million for the same period last year. The revenues originating are from the EUR 20 million signing fee received in connection with outlicensing of Nefecon in Europe to STADA and a milestone of USD 3 million from Everest that we received for the quarter.

Our total operating expenses for the period amounted to SEK 753.8 million compared to SEK 380.6 million for the last year. And of the total operating expenses, the cost for research and development increased by [SEK 116.1 million] to SEK 357.5 million compared with SEK 241.4 million last year. Increase in R&D expenses originates primarily from the preparations and the product development for the setanaxib trials where we use randomized the first patient in TRANSFORM PBC trial [the other week] as we mentioned.

The sales and administration expenses amounted to SEK 390.2 million for the period to be compared with SEK 141.7 million for the last year. Increase of SEK 248.5 million between the periods was primarily related to the preparations for the commercialization of TARPEYO in the U.S. This leaves us with an operating loss of SEK 524.5 million for this period, compared to an operating loss of SEK 379.7 million for the same period last year. The cash flow used in operating activities for the period amounted to SEK 461.6 million compared to SEK 309.2 million in the previous year. The cash flow used in investing activities for the period was SEK 24.3 million, and this is mainly related to a milestone payment earlier this year for Budenofalk license for the U.S.

Given the third quarter we closed 2 transactions, where the first in July, signed $75 million credit facility [previous]. And subsequently later in the third quarter, we made the first drawdown of the $25 million tranche. We also completed earning share ratio of 2.4 million shares in the third quarter, raising gross [SEK 325 million] for transaction costs. Our cash flow from financing activities in the period amounted to SEK 435.2 million, primarily due to the above transactions. And we, therefore, report a strong cash position at the end of the year of SEK 955.5 million, which is almost in line with last year's SEK 996 million. Please also note that we have $50 million remaining unused in the previous credit facility where the second tranche of $25 million can be drawdown up until June this year. That was all for me. Back to you, Renee.

Thank you, Fredrik. And as you can tell, we are very excited about the consequences of the success in Q4. And we are well positioned to have a very exciting year, I would say, in 2022.

So with that, we're going to open up for any questions. Operator? Hello?

(Operator Instructions) We have our first question coming from Maury Raycroft at Jefferies.

This is Farzin on for Maury. Are you providing any specifics on sales launch expectations for 2022?

I think at this point in time it's probably a little bit early. Because as you've heard, basically, we're about kind of 4 weeks into the launch. And so I think it's probably going to be a little bit early to do so. I think all we can say is obviously that we're very encouraged by what we're seeing and see all of the signs, I think, has been a very kind of successful launch out of the blocks, but I do think that, obviously, it's still very early days. And so I think we will probably hold off on providing any guidance until we report. I think the earliest we can do that is probably when we report Q1 results.

Okay. Makes sense. And also, can you elaborate on the recent feedback you had with the EMA regarding the Day 180 questions, whether anything specific you're looking for or everything is pretty much general as we expect?

I think, from our perspective, there were nothing -- not much surprise in terms of the questions. As always, I want to caveat that this is a regulatory process, and so we can't really draw any conclusions from the questions that we received or make any assumptions on the basis of any kind of potential approval.

The next question is coming from Annabel Samimy at Stifel. There seems to be an issue. We will skip to the next one, which is coming from Yigal Nochomovitz at Citi.

Renee, I just want to get a better understanding of the addressable population because that would be, obviously, the patients that are at risk for ESRD progression. Now in our work, we've looked at the literature, and we've seen percentage somewhere in the range of 30% to 40% of the IgA patients are at risk. I think you cited something a little bit higher, 50%, maybe 65%. So I just want to get a better understanding of what that true number is with regard to those that are actually at risk for ESRD progression.

Well, why don't I start and see if Andy might have anything to add? So I think that in terms of -- I think that we fairly consistently have stated, and this is obviously based on kind of the available research and materials out there. I think that it is an uncertain number in terms of exactly how many patients are at risk of progression. This comes from the fact that, obviously, it's an orphan disease, and there really isn't any reliable kind of third-party source or anything that we can specifically quote. But I think that we've kind of consistently quoted the fact that up to or just about 50% of patients are at risk of progression who are diagnosed with this disease.

And so I think that, if there is any better information out there, I think we will learn more as we actually kind of commercialize this product and get better access to real data. But I think, as of right now, I think that we don't have any better source than the ones that we have previously communicated, which is around 50% of the patients do fall into the kind of KDIGO guidelines view on patients who progress.

And then with regards to the launch, I mean, obviously, there are a lot of moving parts with the drug launch. What do you believe are sort of key things that you have to get right in the launch to ensure a successful launch out of the gates and a successful brand going forward?

Andy?

I think it really starts with market access and medical affairs. And as you heard from Chris and as I discussed earlier, market access is really key. Having this hub, this patient services and this limited -- exclusive, I should say, distribution model really streamlines things and makes -- it overcomes a lot of barriers that are potential to fall through the cracks for patients to receive their medication. So I think that getting that right is essential. And in addition to being fortunate to have Chris, the person that manages that, she comes directly from actually working at a specialty pharmacy in doing this and has managed several programs. So she's actually physically located geographically close to the hub and specialty pharmacy. So we're very comfortable and confident in that.

The second -- so that's the first thing, and that's off and running. The second thing I'd say that's key is certainly a field force with experience calling on nephrologists. And we've done a lot of work and supplying them with the right message and materials, which I think that they will have all in place. And so far, indications have been positive that we are segmenting and targeting plans have been pretty effective as to the initial reaction we're hearing. So we're calling on the right targets with the right message and the right frequency should give you the right results there as well.

So all in all, I think we're very encouraged, as Renee says, that out of the gates here. And I think that those are the things -- we're measuring every possible thing you can imagine, but that's -- those are the things that are of most importance.

And I think -- I just want to add, though, obviously, that the senior team that we have here in the U.S. has considerable experience in doing this before. So it isn't the first time that any of them is launching a drug or doing this, which I think is important. I also think, obviously, we have been planning and putting this organization in place for well over 2 years now. And so I think we are as well prepared as we possibly could be.

The next question is coming from Erik Hultgård at Carnegie.

I have a couple, if I may. First, I understand it's very early days. You've been commercially available for only 4 weeks, but could you provide us with some early indicators of the progress of -- to track the launch, say something about number of prescribing centers, number of prescriptions, anything? Any color on that would be very helpful.

And then second to that, maybe what time point do you believe that you are more confident to be able to evaluate whether the launch has been successful or not? Or at what time point do you feel confident to sort of see that the launch is above or below expectations?

And then finally, maybe on costs for Fredrik. For '22, if you could comment on the level of SG&A and R&D costs that we should expect at least directionally from Q4.

Sure. So I think that in terms of early indicators, again, I think it's not -- I mean it's really not going to be helpful to provide at this point in time any specific numbers. I think that what we hopefully have conveyed and will continue to convey is actually that as far as the launch is concerned we believe that we are having a very successful launch. And we are confident that the launch will -- has gone very well to date. Having said that, obviously, it is early days. And as we all know, this is not a kind of a disease area where there is a lot of metrics available, codes available around the information that we can compare to or can successfully reference to as we are the first company to launch in this indication. But obviously, as I think we've been wanting to communicate, there's been a lot of inbound interest. I think there is a significant unmet medical need in this indication. And as I said, certainly that in the early days of this launch, it has gone to plan, and it's going -- it's been very successful. But again, it's early days. So I don't see -- do you want to add to add anything...

No, just I would say there's a lot of things we measure that have different time lines. I mean you heard Chris a little earlier, from a payer's standpoint, you're on the time line of the payers. Sometimes they have different set of schedules where they're reviewing the products. So his time lines may be different in certain aspects. We have immediate time lines for reach and frequency of our sales force. And so there are different measures and ways we look at this over time, but certainly the key is that it takes time to overall measure a successful launch. I just wanted to add that.

Right, so when it comes to the cost base, we do increase -- we expect an increased cost base for next year whereas for R&D, we do have the 2 setanaxib programs running next year. So what we expect is approximately sort of pretty strong 2021 year's level around 30% to 40%. When it comes to sales, marketing and G&A, we, of course, will have a full commercial organization in place for a whole year, so we expect the (inaudible) altogether to get an increase of around 70% to 80%, I would say, from '21 year's level.

The next questions come from Rami Katkhuda at LifeSci Capital.

I guess, first, can you remind us how often the KDIGO guidelines are updated and the potential of getting TARPEYO on them?

Sure. So actually, the KDIGO guidelines were recently updated. But in that process, which actually took a fairly significant period of time, there was also a decision made at the kind of Board of KDIGO that the -- which is why it took a bit [here] is that they also were in the process of having more of a digital process in terms of updating them. It is our understanding that they will, therefore, be able to update them more rapidly going forward. And I don't know, Andy, if you have any additional comments on that, but we would expect the KDIGO guidelines to take this approval into account within a reasonable time period.

Yes. I would just echo that and as well as that we have been working with -- if you look at the names of people that are managing that or that discuss and help determine these guidelines, they're all the names of the small community that specializes in treating IgA nephropathy and they're very familiar with us and the product. So it's on the radar screen and it's just hopefully sooner than later.

Got it. And then just quickly switch gears. In the TRANSFORM study, should we expect to see data at the interim? Or is it more of a futility analysis to get to kind of the Phase III portion of the trial?

It is designed as a futility analysis, so we would not expect to provide any data at that period of time since it has this adaptive design, which would allow us to basically just seamlessly go from Phase IIb to Phase III.

The next question comes from Johan Unnerus at Redeye.

First one can be relating to the P&T and PA review, prior authorization. You alluded to that this could be -- process to be completed already Q2, Q3, that seems to be good going. How confident are you in that process?

So I can take that. Historically, when we look at the market basket of new products coming to the market, it is typically around a Q2, Q3 post launch that other products sees a significant increase in terms of P&T conclusions. That's why we give that as a time point for assessing.

That's good. And presumably, that it's important to have that in place before and to run some of the launch into that. Well, after that until we can gauge if the launch is successful or not at this stage. And then, of course, you will have the filtration feedback coming up next year.

I'm sorry. I'm not -- sorry?

No, I was referring -- yes, I was thinking about the aspect of -- judging if the launch is a success or not to have this [PA] review completed and also perhaps to also get security filtration data that will emerge next year that will be important to fully assess if the launch is successful or not.

I see. Okay. Yes. So I think in terms of the launch itself, I think that, obviously, as Chris has already mentioned, I think that around kind of Q2, Q3, that will be a significant period in terms of market access and clarity around that, that I think will obviously additionally help any kind of launch activities and any kind of trajectory at that point in time. I think that in terms of judging the success of the launch, as I mentioned, I think, obviously, it is -- at this point in time, it's early days. We hope to be able to give you some more insights when we report Q1 results. And at that point in time, we will be able to maybe give some indications on a market access basis. But as Chris has indicated, it's probably more likely to be slightly later in the year that we have the majority of these decisions.

With regards to the eGFR, I would say that in terms of any kind of coverage or acceptance of prescriptions, et cetera, I don't think that that's something that the market or health care professionals are waiting for. I think it's obviously a very important metric, which will complement our accelerated approval and, obviously, hopefully lead to a full approval in a broad patient population based on that data. That data will obviously not be available until 2023. But I would say that, that data is not really connected or related to the launch of the product today, which really is very kind of capable and able to be fully launched on the basis of the accelerated approval which we have at this point in time. But obviously, it will be -- it will further strengthen and be a positive event next year when that data becomes available. That is our expectation.

Yes. And a clarification relating to that, I think in some places you mentioned second half of the year and more lately first half of the year in terms of that feedback, if perhaps you can clarify if it's first half of the year.

So in terms of the data coming out of the NefIgArd trial, so obviously, this would be the completion of our entire Phase III program in IgA nephropathy. That is expected to take place in the -- in early 2023. That is still our expectation. Obviously, that would then -- that would follow that kind of data or that completion of that program would then be followed by a submission, a regulatory submission for full approval with the various kind of regulators. And that approval, you would then expect -- if on a normal kind of time frame, you would then expect to have that decision either kind of end of next year or maybe early the year following. So I think that that's the time line we have consistently been providing guidance on, and I don't think that -- there's absolutely no reason to believe at this point in time that, that would change. The one caveat that we always have, obviously, is the -- any kind of impact by -- from COVID-19 or other similar types of events that is outside of our control.

Excellent. And finally, even the labor is useful and wide, covering some 50%. It seems like they could fall into this category, even though it's very early days still, of course, is it possible to say anything about the likely initial patients? Are they -- is it likely to be proactive centers perhaps looking to preventive aspects? Or is it the more severe patients? Or is it patients that are sort of deteriorating faster that are more likely to be early takers, so to speak?

I think I could answer that. So first, obviously, it's early. And all our research, we are the first indicated product. So all our research showed the protocol and where the nephrologists were going to put this product in their treatment protocol. In other words, they were going to use supportive care. And then after that, there's nothing else indicated so that, that seemed to be the proper place of placement for their first patients. Human nature in most launches is to start with your more severe patients in adoption. All our research showed that people understood this, the design of the product, the product they were familiar maybe with budesonide used in asthma. And so the adoption, I think, is going to be quicker because of the comfort level that they have there. So I think that there's no -- I have no answer for you on the first patients that are on the product already as their exact profile, but that's what all our research points to.

(Operator Instructions) There are no further questions at this time. Please go ahead, speakers.

Thank you very much. Thank you very much from all of us to all of you for your interest in our Q4 report, and we really look forward to speaking to you again when we can present our Q1 results. Thank you.