Calliditas Therapeutics AB (CALT) 2021 Q2 法說會逐字稿

Ladies and gentlemen, welcome to the Calliditas Therapeutics Q2 2021 Report. Today, I am pleased to present the CEO, Renee Lucander; the CFO, Fredrik Johansson; and the President of North America, Andrew Udell.

(Operator Instructions)

Speakers, please begin.

Thank you. We start at Page 2 at the forward-looking statement. This presentation contains forward-looking statements. Any forward-looking statements in this presentation are based on management's current expectations and beliefs, and are subject to a number of risks, uncertainties and important factors that may cause actual events or results to differ materially from those expressed or implied by any certain statements contained in this presentation.

And we would, thus, caution you not to place undue reliance on any forward-looking statements, which speaks only as of today, they are made. Calliditas Therapeutics disclaims any obligation to publicly update or revise any such statements, reflect any changes in expectations or in events, conditions or circumstances on which any such statements may be based. or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Any forward-looking statements contained in this presentation represent Calliditas' views only as the date hereof and should not be relied upon as representing the news of any subsequent date.

Thank you, Fredrik, and welcome, everybody, to Calliditas Therapeutics Q2 Report. I will start the presentation on Page 3. And just as a quick reminder of our development pipeline and ongoing clinical trials, the NefigArd trial is, as you're aware, fully recruited. It is continuing on plan and is expected to conclude in Q1 2023. We also remain on track to start our clinical trials related to setanaxib in the second half of this year. And the open-label extension study continues to enroll patients as they have -- as they complete the Phase III studies.

So with that, going to the next page. During Q2, the main highlights really related to regulatory events. So in Q2, we reached a major milestone with the filing for conditional approval in IgA nephropathy with the EMA.

Having received acceptance of accelerated review already in April, we expect to receive the first round of questions in Q3. And we're excited to engage with the regulator during the coming months. Our interactions with the FDA are -- is ongoing, and the review process is expected to conclude on the 15th of September, which is the target PDUFA they've communicated to us by the agency.

Consistent with previous presentations and interactions, we will not comment on what type of questions or interactions we're having with the FDA nor will we comment on any potential inspections or audits or other related questions.

After having just kind of covered the main activities in Q2, I then go over and hand over to Andy Udell, who is our President of North America.

And correction, there is another page missing. Sorry, I will not -- there is actually an additional page. Before I do that, already closed it -- other activities in Q2. I apologize for that.

So the other activities in the quarter. so this is Page 5, it's mainly around operational execution across the board, a lot of which we are focused on the pre-commercial activities in the U.S., where we made substantial investments in preparation for the potential approval of Nefecon.

And in addition, we continue to prepare for the launch of setanaxib studies, which are due to start in the second half of this year. And finally, obviously, we had resources directed at securing additional capital, both for the precommercial as well as the post commercial phase of Nefecon, something which I will address in somewhat more detail shortly.

But before I do that, we will now hand over to Andy Udell, President of North America, who is going to cover a little bit about the market opportunity and these activities that we have been conducting in Q2 regarding putting us in a position for launch readiness. So with that, Andy, over to you.

Thanks, Renee. And on Slide 6, I will start. So we continue to be very encouraged by the results of our research in the market opportunity. As you could see on this slide, in a robust report of 468 IgA nephropathy patients in chart audits for these patients conducted earlier this year. Patients arrive to their nephrologists upon referral already in CKD Stage 2 or 3a, 70% of these patients.

So that's upon diagnosis, that 70% arrive in CKD Stage 2 and 3a. And if you want to add in CKD Stage 3b, you're over or at or about 90% out of the patients.

When we look the patients that do arrive to the nephrologist, when we look in what they're taking, the majority of them are already on supportive care. Greater than 50% of them are already on ACE/ARB therapy.

And if you ask the nephrologist, 88% of them are on an optimal dose in this unsatisfied market. Physicians see the patients 3 times a year. They conduct at least 1 lab test looking eGFR, urinalysis.

They are on multiple meds, as you could see here, almost 5 medications concomitantly. And they consider -- the nephrologists consider proteinuria, and especially eGFR, to be the most valuable measure when they're assessing their patients and their progress.

If we go to the next slide, please. We continue to prepare for the earliest possible commercialization of our product. This includes market access, where our main objective is to reduce and minimize any barriers for patients to receive the product. We continue to finalize and work with our trade and distribution partners, which are world-class and well-known partners.

We have national account managers that are already making call on payers to prepare the market. We have launched our disease awareness campaign you can see here, as mentioned, and that's been going on for a while. And our sales force readiness is well on its way with our sales leadership on boarded and in our preparations right now, final preparations onboard about 40 sales representatives to provide us the most ample brand appropriate reach and frequency of the size of this audience. And with that, now I'll hand over back over to Renee, on Slide 8.

Thank you, Andy. So continuing on the next page, page looking at post period events. The post period closed, the company felt several significant positive events, which I just would like to touch on very briefly.

We secured a strong commercial partner in Europe for the commercialization of Nefecon. This is obviously in line with what we have been communicating previously. We're very excited to welcome STADA to the Calliditas team. And we're truly delighted to have secured such a strong partner for the commercialization of Nefecon in Europe.

We also signed a credit agreement which provided access to a total of $75 million of non-diluted financing to the company, out of which $25 million is accessible post signing and the remainder is subject to FDA approval or certain revenue levels being achieved.

Finally, we successfully closed the top-up round of equity at about a 4.8% discount, raising SEK 324 million representing less than a 5% dilution with the majority of the issue being taken up by our significant existing shareholders.

Collectively, these initiatives ensure that we are well capitalized for a successful product launch, subject to accelerated approval. It also puts us on a path towards being cash flow positive potentially in the medium term and mitigates the need for capital raise in the near term, which is also reflected by the 90-day lock up we signed as part of the recent financing.

We have thus removed the risk related to macro events or other issues potentially impacting capital markets in the second half of the year. And we believe that being well capitalized, we can now have full control over the successful commercialization of Nefecon over both the near and medium term.

If we then take the boat to the next page, just before I hand over to our CFO, Fredrik Johansson, just a brief summary overview in terms of year-to-date. So obviously, we read out positive data on our Phase III study in November of last year. We've presented the overall profile of the site population, primary endpoint as well as the overall safety profile. And have had filings accepted by both the FDA and EMA for approval.

Both of these are being reviewed on an accelerated basis. And we believe that we have a very robust data package with a differentiated mode of action, targeting the origin of the disease with the potential for disease modification, addressing a significant unmet medical need in this patient population. We also believe that we have a significant lead over other development programs taking place in IgA nephropathy at this point in time.

And we look forward to receiving the response from the regulatory agencies with whom we are engaging at the moment. So with that, I'm going to hand over to Fredrik Johansson, who will take us through the financials.

Thank you, Renee. So next slide. And good afternoon, everyone, and good morning. I will present to you the financial overview for the first 6 months of this year, and all numbers are presented to you in million SEK as always.

To start with, as expected, we report a new revenue for the period. Our total operating expenses for the period amounted to SEK 310.2 million compared to SEK 139.4 million for the same period last year. And over the total operating expenses, the cost for research and development increased by SEK 52.6 million to NOK 165.1 million compared to SEK 102.5 million for the same period previous year.

Increase in R&D expenses increased from the method of trials for the NefIgArd Phase III study and the open-label extension study are ongoing and the preparation and product development for the setanaxib trials, which are planned to start later this year.

The sales and administration expenses amounted to SEK 143.2 million for the period to be compared with SEK 36.8 million for the same period last year. The increase SEK 106.4 million between the periods is primarily related to the intensified preparations for commercial and medical affairs activities in the U.S.

As we continue to invest and prepare to be ready to commercialize Nefecon in the U.S. in Q4, if approved. And this leaves us with an operating loss of SEK 310.2 million for this period compared to an operating loss of SEK 138.9 million for the same period last year.

The cash flow used in operating activities for the period amounted to SEK 267.1 million compared to SEK 85.8 million for the previous year. And remember, last year, in the beginning of the year, we will see the China deal milestone payments from others amounting to using U.S. dollar.

The cash flow used in investing activities for the periods was SEK 18.8 million, and this is mainly related to milestone payment for Budenofalk license.

Our cash flow used in financing activities was SEK 10.3 million since we continue to purchase minority shares in Genkyotex. We now own over 90% of the shares into Genkyotex, and we have recently initiated a freeze-up process to reach 100%, which will have its way in the [quarter].

We had a strong cash position at the end of June of SEK 709.3 million. After the close of the quarter, we completed an equity raise of SEK 324 million before transaction costs.

In Q3, the EUR 20 million initial payment under the European commercialization agreement for Nefecon is stable. We also expect to be able to grow down to USD 25 million under the USD 75 million loan facility designed in July with Kreos Capital and to draw down an additional USD 25 million in the after potential use approval of Nefecon.

Based on our current operational plan, our current cash position and amounts available under our loan facility, we believe we have sufficient expense for planned operations and capital expenditures until we become cash flow positive. This currency is projected for the first half of 2023, subject to Nefecon receiving accelerated approval in the U.S. and a successful commercial milestone.

That was all for me. And now back to you, Renee.

Thank you very much. I think we have -- that concludes our presentation. And we are happy to take questions to the extent that there are any questions.

(Operator Instructions)

And our first question comes from the line of Yigal Nochomovitz of Citigroup.

Renee, could you talk a bit about how your commercial launch strategy may or may not differ between the U.S. and Europe? And are there features of the IgA patient population when compare U.S. and European markets that may necessitate a different marketing approach for Nefecon?

Sure. So in terms of the approaches to the European and the U.S. market, obviously, they differ in the way that from the U.S. perspective. We are planning to launch and commercialize Nefecon ourselves in that market. So obviously, from that perspective, we have conducted a lot of market research and spent a lot of time and effort to try and understand that market as best to the best possible ability that we have.

In Europe, obviously, we are going to commercialize with a partner. And so that launch strategy will really be decided and managed by STADA rather than kind of by us. And so I think, obviously, we will be collaborating and sharing information, et cetera. But I think that really is the kind of fundamental difference. I don't think that so far, we have not seen or experienced any significant differences in kind of patient populations or in how kind of patients necessarily are being treated in the 2 different regions.

And I think so from that perspective, we wouldn't necessarily expect there to be any significant difference in kind of how those programs get deployed. But I think, obviously, the main difference is really who will kind of be driving the strategy around the actual launch detail.

Our next question comes from the line of Maury Raycroft of Jefferies.

This is Farzin on for Maury. So are you thinking about your commercial interest in trajectory? And what milestones are you looking to achieve in order to trigger a new tranche of investment?

I'm sorry. In order to trigger, what? A new tranche of investment? Sorry, is that what you are...

For the next upcoming year, like how are you thinking about the commercial investment trajectory?

Okay. So why don't I start and then Andy, please feel free to add from your perspective. Obviously, our -- kind of our investment in the commercial launch is something obviously that we have spent a lot of time doing, as I said, a lot of market research, a lot of interactions on the market access side. I think we have spent a lot of time on kind of defining sales territories and really kind of trying to get as granular as we possibly can be in terms of identifying and finding these patients effectively in order to kind of have a successful launch as possible, obviously, in terms of commercialization.

And so I think it's really been built mainly on all of the market research activities, market access interactions that we've had to date, which we think puts us in a very good position to have some visibility on how we should affect and drive a commercial launch to be as successful as possible. But Andy, do you have anything you want to add?

Not too much other than we look to how things -- if the question is how things are going to change over the period of time of 12 months, I mean, we -- there is a lot of demand right now, and it seems like it's certainly a very hungry market for products to help this unsatisfied patient population.

As is typical for a launch, you have -- it takes a little time for payer approval, and that's a constant process that we will continue to pursue the market access, but we're encouraged about all the research and everything that we've done to date and what we're hearing.

Got it. And then the other question was: You're making comments on the regulatory review process, but is it safe to assume that everything is on track and all the answers, all the questions have been answered satisfactory so far?

We're expecting the decision to be kind of going to come out on the targeted PDUFA data as communicated.

Okay. Our next question comes from the line of Annabel Samimy of Stifel.

I had a couple. First, I guess, as you're approaching commercialization, have you had any further discussions with payers on pricing and have your strategies changed as the competitive landscape is evolving? And now that you're approaching commercialization and you're kind of, I guess, putting the seat to the fire -- the payers' seat to the fire and really providing that access. They continue to view budesonide as a different steroid rather than one that will have to come after they step through other steroids.

I guess that's the first question. And the second is, I guess -- I know it's difficult to compare studies, but maybe you can remind us what the profile of your patient population was in the NefIgArd study versus that NefXtend that just read out. I believe you had patients that would not respond to ACR therapy anymore.

Does that mean that patients were really maxed out on their proteinuria reductions if you really think about these 2 groups of different patient populations?

Okay. Thanks. Andy, why don't you address the first question? And I will address the second one.

Sure. Well, we continue to do our work. It's a process to launch and work with the payers. And to date, we continue to be further and further actually encouraged with these discussions with payers. We have advisory boards and done a lot of work and are encouraged, as I said, on how they view us.

So nothing's really changed in that aspect. We still see things moving towards what we've indicated in the past, if not more encouraging. As far as them viewing budesonide or requiring step through these decisions, we look at the patient population, we got a lot of patient history these charts, and we don't see once again a lot of barriers to access for these patients based on what has been done I don't think that people are going to require people to start new course of steroids or something that's not approved, that would be a little surprising to us using a product that was specifically designed, tested and approved for a specific disease.

Okay. So with regards to the second question, with regards to the -- any kind of differences with regards to the 2 studies, again, based on the kind of published design and methodology paper on the PROTECT study, I guess that what we can read out is obviously that the proteinuria is the same in terms of over a gram of proteinuria as an inclusion criteria.

There's a slightly lower eGFR cutoff in the PROTECT study in terms of it being 30 milliliters, but there's also no limit on the upper end of eGFR in the PROTECT study.

Other differences, blood inclusion relates to blood pressure. So in the NefIgArd study, patients with 140 over 90 or higher would be excluded, as they would not be considered to be well controlled with regards to their blood pressure. So there is a difference there.

Also in the NefIgArd study, obviously, we did not encourage treatment with additional antihypertensive agents, and we did not allow for systemic corticosteroids or other immunotherapy. It's effective therapy to be used at the discretion of the investigators. To what extent these are -- have any impact or not. And obviously, it's difficult to say, but is that really some -- the only answer to your question, I think that I can provide, which is that generally, the inclusion, exclusion criteria are very more similar. And I think those are the differences that we have identified based on the kind of public information.

Our next question comes from the line of Rami Katkhuda of LifeSci Capital.

Two for me. I guess first, can you provide any indication on how STADA is thinking about the pricing and commercialization plan for Nefecon in Europe?

And then secondly, given there's somewhat complementary mechanisms, you kind of envision Nefecon being used in combination with sparsentan in the real-world setting?

So in terms of the STADA question, I think that it's a little bit too early. We very recently kind of concluded our interactions with them. And I think we're starting to engage with them in terms of more on an operational basis to address some of these questions or explore some of these sessions. I don't think at this point in time, I have a clear answer to kind of how exactly they are planning to proceed in the European market.

But obviously, they are -- they have significant resources across all the European markets, and they have a lot of experience in terms of launching products in Europe. But again, I don't have any specific detail of that yet. And I think we will be able to provide that as kind of the -- as we progress the collaboration a little bit further.

In terms of any kind of assumptions or kind of comments around used together or not, I mean I guess the data that we have so far, it seems very promising with regards to Travere, I think that in terms of -- we need to understand quite a lot more in terms of both the impact on eGFR and the study population, the use of concomitant medication, all of these things, I think, are important to kind of get an understanding of before one can have any kind of comments on that.

However, in theory, I don't see any reason why they couldn't be used together. I think ours obviously has a local focus in terms of the origin of the disease. And I think that, that should be able or could be able to be combined with any other systemic approach. And so I think in general, we wouldn't see why that would be necessarily a problem.

Our next question comes from the line of Johan Unnerus of Red Eye.

It's more of a follow-on, since the subject has been discussed. Yes, the results from [fibroscan], it caused a lot of uncertainty, obviously. Is it -- one difference is that they include patients with filtration rates that are more impaired, I guess, more like 3b in that context.

Is there any -- are you focusing more on patients that have less impaired -- filtration. Is it -- can you take the view that it's rational to begin with Nefecon being a local targeted therapy with more perhaps support in the less impaired filtration?

Again, I think it's very difficult to have any clear view on this because all we have at the moment is really just kind of top line data related to proteinuria I think that the changes between kind of 30% and 35% in eGFR are obviously clear. What impact that might have. We have to actually see the data in terms of subgroup analysis or stratified information to see if there is any particular subgroup that has a different kind of approach, a different effect or not.

So I think at this level, with a very limited kind of top line data that's come out, I think we we're not really in a position to comment on anything until we see far more detailed information and as well, obviously, some impact on eGFR.

So long-term filtration rates in 2023 will be interesting then. We're going to see them, I guess.

Yes. I mean I think that obviously, we have provided some information on eGFR at 9 months, which we believe is very supportive. I think that it would be interesting, obviously, for us to see the longer-term impact as well in early 2023 on the population for sure. And I think this goes for all development programs in IgA nephropathy.

Obviously, we are all trying to treat the underlying kidney disease and hence, pathing the impact on eGFR is obviously important under any circumstance. But yes, we are obviously looking forward to the longer-term outcome data that we will see in 2020 as well.

Our next question comes from the line of Christopher Udi of SEB.

It's -- sort of looking forward to the next steps beyond IgAN and taking the focus on budesonide here -- or Nefecon here, my first question is in terms of the AIH and PBC projects, I think -- well, to contact them a little bit with IgAN, where it's, I think, very clear that -- to me at least, that you've got trial data where your targeted approach on treating the source of the disease in IgA nephropathy is a little bit different from the AIH and PBC, where you're targeting the liver.

And therefore, any budesonide -- generic budesonide as well should, in theory, be able to target -- or get the same amount of budesonide to that site. Is there, let's say, the same protection against interchangeability in those 2 diseases, would you say, as there is in IgA nephropathy from generic budesonide? Sorry, long winded question.

So I guess, with regards to PBC, we have decided to proceed into a pivotal Phase II, III, not with Nefecon but with setanaxib. So obviously, based on the Phase IIa information was obtained on setanaxib we have made adjustments and obviously also been in conversation with the regulators.

And so for PBC, we will really go forward and take it forward with regards to setanaxib at this point in time. With regards to AIH, we have been in conversations with the regulators in the U.S. regarding this. But also in that particular program, we would look to use most likely we would look to use Dr. Falk would be in-licensed some time ago because, obviously, again that was the actual compound of that has clinical data than have earlier a trial basically that's been performed already in AIH that showed benefit over kind of standard of care. So I think that, that's really kind of our plans in terms of both AIH and PBC at this point in time.

Okay. Great. That's really clarified that. And can you just comment at all on a bit more detail on the status of discussions with regulators around the AIH? For both the EMA and FDA?

Actually, we're not in conversations with EMA and this is a purely kind of U.S. program that we're looking to do. In terms of both in traction, so we've had good feedback. I think that we are -- we feel reasonably confident that we are able to agree on kind of a late-stage program in AIH. But there is additional interaction that is required in order for us to kind of be able to provide any kind of guidance in a public forum. So we will going to have to come back to you on that.

Okay. Can you just explain, by the way, why you wouldn't be seeking to work with the EMA on this?

Again, because actually, we -- this is a -- it's a licensing agreement. We only have the rights for the U.S.

Our next question comes from the line of Edwin Zhang of H.C. Wainwright.

Congrats on all the progress. A question on EU. Now you have a commercial partner in place in Europe. I wonder if you could comment more on the selection process. And if there is something new that you have learned on the Nefecon opportunity in EU, in particular, what is your current thoughts on your pricing in average compared to the U.S.?

Sure. So we conducted a kind of a competitive process with regards to selecting our partner for Europe. And so this was a process that had a fairly large number of different parties involved. I think it was very kind of -- it was a very robust process. And we have some very hard choices to make towards the end of that process.

In terms of the selection of STADA, and I think that this is something obviously start is a very large organization. It is privately held, but it's over 12,000 staff. I mean, their revenues are in excess of $3 million on an annual basis. They're very profitable, and they have a very strong presence across Europe, and particularly a very strong presence in Germany, which is obviously a key market when it comes to launching products Europe also with regards to pricing.

And this is obviously also something that is -- that we believe is strategic for them. in terms of their focus that they are building -- they're building up their pillars, both in terms of kind of OTC as well as specialty products. And I think this is a good fit with regards to the efforts and resources that they're investing specialty products division.

In terms of pricing, again, I mean, obviously, this process ended not fairly recently. And so I think we're going to have to wait a little bit in order to give a little bit of time to provide more guidance in terms of how they look at potential pricing in Europe. And so again, I think we're going to have to come back to you with more information on that.

All right. In the U.S., I assume you have passed the manufacturer facility inspection at this time. In terms of production, are you ready to meet the market demand after the approval? I hope that the pandemic does not impact the supply chain and the drug production.

We feel that we are very well prepared on all fronts with regards to kind of supply of products for the commercial launch. And so I think that there are obviously a lot of activities and a lot of kind of things that have been planned and put in place over a very long period of time in order to ensure that we are in a position to do that.

Obviously, there are always things that can happen in the supply chain, clearly, but I think that we feel very good about where we are in terms of the preparations that we've made on the supply chain side.

(Operator Instructions)

And there are no further questions at this time. Please go ahead, speakers.

Thank you very much. Thank you all for participating in this Q2 report. We look forward to speaking to you again at the end of the next quarter. Thank you.