Calliditas Therapeutics AB (CALT) 2020 Q3 法說會逐字稿

Ladies and gentlemen welcome to the Calliditas Therapeutics Q3 2020.

Today, I'm pleased to present CEO, Renee Lucander; and CFO, Fredrik Johansson.

(Operator Instructions)

Speakers, please begin.

Thank you.

Thank you, and welcome to this Q3 2020 report from Calliditas Therapeutics.

I'm going to start this on Page 3. So Calliditas, as you know, is a late-stage biopharma company focused on treatments in orphan indications.

Our lead candidate Nefecon is a novel investigational treatment for IgA nephropathy, intended to be disease-modifying.

We're doing that by delivering medication locally, which targets the origin of the disease rather than systemically as most of everybody else who's looking at this area.

We have, as many of you would know, recently reported out our successful Part A of our Phase III clinical trial in NefIgArd, where we reached both primary and secondary endpoints.

The regulatory pathway is an accelerated conditional approval pathway, both with the FDA and EMA based on the surrogate marker of proteinuria.

And as we also know there's nothing approved in this indication.

And based on our calculations of prevalence as well as market research, this is a significant market opportunity that is available for us with a kind of core target market opportunity that, in our view, is about $4 billion to $5 billion in the U.S. alone.

If we turn the page to Page 4 to talk a little bit about the events that we saw during this quarter.

We wanted to give you a brief update on the Genkyotex transaction.

We announced this in August.

And during the quarter, there was an expert opinion, which was received by the Genkyotex Board, which supported the offer price as being fair, both in terms of the tender offer as well as any potential squeeze out should we reach at least 90% in a subsequent tender offer.

The offer has also, therefore, been unanimously recommended to shareholders by the Genkyotex Board.

The tender offer prospectus clearance is targeted for November 24 following acceptance by the AMF.

We plan to launch a mandatory -- simplified mandatory tender offer, which would be open for 10 trading days.

The Board composition has also changed following these events.

And at the moment, Mr. Schnee; Mr. Schur; and myself have been elected as new board members alongside Elias Papatheodorou who is the present CEO of Genkyotex.

In terms of the Genkyotex platform, if you turn to Page 5, we have mentioned this briefly before.

Obviously, as you may be aware, there are several enzymes in the body that are capable of producing reactive oxygen species or ROS.

And NOX inhibitors are clearly dedicated to producing ROS as their primary function.

And this is an essential function in cellular signaling, and they are related to the immune response, inflammation, blood pressure, et cetera.

However, if these -- and so it's obviously necessary to have this, however, it's in a lot of diseases, this is also true then when this is disturbed by an injury, for example, then actually if we get too much ROS it creates oxidative stress.

And therefore, that will lead to disorders and disease.

And if we then turn the page to Page 6. Here is just an example of some of the organs that we know can be affected by this amplification of NOX1 and NOX4, which are the targets of the lead compound from Genkyotex, setanaxib.

As you can see on the left, you basically have, if you would call it a resting kind of version and actually so then that sees an injury of some kind leads to this kind of excessive ROS, oxidative stress.

And then well, through a variety of pathways, create this activated myofibroblast, which will then leads towards fibrosis in a variety of different organs.

And it's this target that the setanaxib lead compound and other fellow compound is targeting -- is to then kind of inhibit these NOX1, NOX4 in order to try to reduce this oxidative stress that we see.

So we believe that this platform can be used in a variety of different indications, both renal, hepatic and lung.

And this is something which we are presently working on, and we'll be able to share with you, hopefully, in -- during Q1 to give you a more specific clinical development plan in terms of how we would plan to proceed with the Genkyotex platform setanaxib.

If you turn to Page 7, just a brief operational summary.

What we also saw during the third quarter is that the company received research coverage in the U.S. by Citibank, Jefferies and Stifel, post our IPO in early June.

And since this, we have also seen coverage picked up by LifeSci.

We also exercised our shoe related to that same IPO in July.

And we also have the pleasure to announce that our Chinese partner, Everest Medicines recruited and randomized their first patient in the NefIgArd study in September.

We also added to our senior team by appointing an in-house General Counsel, who was formerly a partner at Goodwin Proctor.

If we turn to Page 8, some events post the period, so post Q3 there was the American Society of Nephrology, so ASN, which this year as the same as many, many other conferences was a virtual experience.

The company had a poster related to the design of NefIgArd trial as well as some biomarker information, looking at the effects of Nefecon on certain levels of BAFF, BCMA, and TACI in patients with IgAN, which provided further support of the mode of action and pathophysiology of IgA nephropathy.

We also closed the block transaction, so the controlling interest in Genkyotex, which I referred to as being announced in August, we closed that on November 3, and we're also on November 8, announced positive top line results from our pivotal Phase III NefIgArd trial where statistically significant results on both primary and key secondary endpoints were achieved.

So talking a little bit about those results.

If we turn to Page 9, as many of you have heard before, obviously, the trial design was very, very, very similar to our Phase IIb, which was also a very successful trial of 150 patients that was subsequently published in the Lancet.

And the major changes here was obviously that it was a larger trial population, it was twice the number of patients in each arm.

So 200 patients between 16 milligrams and placebo.

It's a global trial that was carried out in 19 countries in just under 150 sites.

And if you turn to the next page for the schematic, you can see that obviously our patients came in just as in Phase IIb on optimized and stable RAS and then were randomized or active in the placebo group.

And again, in terms of -- apart from the design, the only other comment on the Phase IIIb would be that the patient population was sicker in the Phase III compared to the Phase IIb due to changes in the -- or actually publication of the KDIGO guidelines between the commencement of the Phase IIb and the Phase III.

As I mentioned, there was obviously once daily 9 months of treatment orally with Nefecon 16 milligrams and placebo, and that data was then read out after 9 months.

And if we turn to Page 11.

The top line data, which we announced recently showed that the primary endpoint, which in the trial is reduction in proteinuria.

So protein in the urine was in the treatment arm reduced by 31%.

This was actually a higher effect and that was seen in the Phase IIb, where the equivalent number was 27%.

The placebo group was reduced by 5%.

And so the treatment effect of the -- so the basic treatment for you to see a reduction with Nefecon compared to placebo over the 9 months was 27%, highly statistically significant, as you can see.

In terms of a key secondary endpoint, we have been looking at the eGFR.

So this is the estimated glomerular filtration rate, which is reflective of the kidney function.

And what we saw here was a 7% reduction versus baseline in the placebo group translating into just over 4 milliliters per minute, which is, again, compared to the Phase IIb, that number in the Phase IIb was 4.7 milliliters per minute over the same time period in the same treatment arm, was the -- I mean in placebo -- in placebo in the Phase IIb, whilst in the treatment arm we saw very, very, very minimal to no reduction of eGFR.

And so hence, we saw a stabilization in the treatment group.

Now the tolerability, generally well tolerated.

Safety profile is in keeping with the Phase IIb.

We obviously saw no severe infections.

And we've also mentioned there was a lower withdrawal rate overall in Phase III versus the Phase IIb.

So we are delighted with this strong data set, which clearly confirms the findings, which we also saw in the Phase IIb trial.

If we turn to the last page here, this would be Page 12.

So with regards to next steps, we will now be working, obviously, to submit a file with the FDA and with EMA.

The target is to file with the FDA in Q1 next year, subsequently followed immediately by filing with the EMA, and this would be for accelerated and conditional approval, respectively.

And then depending on the review period, we would then -- and subject to approval, we would then look to commercialize in the U.S., either kind of Q4 2021 or Q1 2022, most likely.

And a potential approval in Europe would be seen later, probably again, depending on review period around the middle of 2022 is what we'd expect to see as the earliest possible approval there.

We also have a couple of open-label programs related to the Nefecon development program.

One is a rollover from a completed NefIgArd study.

So patients are able to roll over into an open-label extension, where all patients, including placebo patients are eligible to receive the study drug.

And we also look to initiate a more extended dosing with Nefecon during next year.

So with that, I turn it back now.

I'd like to hand over to Fredrik for the financial review.

Thank you, Renee.

Let's go to Page 13.

And I will present to you the financial overview for the first 9 months of this year, and our numbers will be million SEK as usual.

To start with, we reported very limited revenue in the 9-month period of SEK 0.5 million, and this was due to deliver of Nefecon to China in the Q1 to be used in the Chinese arm of Nefecon trial, as part of the license agreement with our partner, Everest Medicine.

Our operating expenses for the period amounted to SEK 244.2 million compared to SEK 148.2 million for the same period last year.

And out of the total operating expenses, the cost for research and development increased by SEK 59.3 to SEK 167.4 million compared to SEK 108.1 million for the same period last year.

And the increase in the R&D expenses originates from the increased clinical activities in the NefIgArd trial as we prepared with the readout of Part A in Q3 and continue to recruit additional 160 patients for Part B. We also have large efforts in the preparations in the clinical, regulatory and product development organizations as we're preparing for regulatory submissions in Q1 next year.

During the third quarter, we also performed preparations to start the open-label extension of the NefIgArd drug trial, which Renee just mentioned, which also adds some R&D cost to the base in Q3.

The sales and administration costs amounted to SEK 77.8 million for the period to be compared with SEK 39.1 million for the same period last year.

The increase of SEK 38.7 million between the periods is mainly related to increased costs for pre-commercial activities in the U.S. as a ramp-up for our preparations, especially in the third quarter, we continue to prepare for U.S. commercialization.

And from the preparation of the initial public offering and listing on NASDAQ and the associating costs come with being a duly listed company, which will be visible from the third quarter this year.

And part of the increase is also future administration costs explained by acquisition-related expenses in the third quarter for the ongoing Genkyotex deal.

And this leaves us with an operating loss of SEK 243.8 million for the period, compared to an operating loss of SEK 10 million for the same period last year.

But here, we should remember that last year in this period, we had SEK 138.2 million in revenue in our P&L from the China upfront -- from China deal last year.

So the cash flow, we used in operating activities for the period amounted to SEK 189.1 million compared to SEK 25.6 million for the same period last year.

The increase in the operating cash reduced for this period is mainly related to the $50 million payment.

You'll see it in Q3 last year from Everest as for the China upfront.

The net cash received from financial activities was SEK 847.9 million for the period, which is mainly due to the listing on the NASDAQ when the Green shoe was partially exercised in the third quarter.

Parts of our U.S. IPO proceeds we received have remained in U.S. dollar positions to ensure the control of cash fleets.

Since we build up our U.S. commercial organization and this will mean that we mainly will incur cost in U.S. dollars and having a balance sheet with SEK as the company currency and with a weakened U.S. to SEK ratio we've seen in the third quarter, we've seen financial expenses of SEK 19.6 million during the period due to foreign unrealized currency losses on cash accounts.

Our cash position remains solid as we have had our cash position of SEK 1,396.9 million at the end of September.

That was all from me and then back to you, Renee.

Thank you.

So if we turn to the very last page, I just want to summarize again in terms of some of the investment highlights.

We're obviously delighted with the data package that we recently received and a re-top line readout of our Phase III.

We do believe that we are extremely well positioned as the only company to have a successfully completed a Phase III readout, which had statistical significance on both primary and secondary endpoints in this market where for the patients, there is really nothing approved in this disease today in terms of IgA nephropathy.

And we are hopeful that with Nefecon, we will be able to be granted approval so that we can address this patient population and hold this promise of being disease modifying.

So with that, thank you very much for your attention, and we will hand over for questions.

(Operator Instructions)

Our first question comes from Maurice Raycroft from Jefferies.

Congrats on the progress.

First one is just on Nefecon in IgA nephropathy.

What parts of the filing applications are already completed and which still have to be completed?

So we have been kind of preparing, obviously, in terms of all of the various modules that need to be filed.

Obviously, there is still data that we need to receive, analyze, review, et cetera.

And so I would say that, in general, I think that we're very well positioned to kind of hit our target of filing in Q1.

I think we're well prepared for that.

Got it.

Okay.

And then in respect to Part B, the Phase III, can you please discuss some of the evidence observed in the 3-month follow-up off-treatment in the Phase IIb?

And how does this influence your expectations for eGFR improvement of treatment in Part B?

So in the Phase IIb, what we saw was basically in the 16-milligram arm, we saw that the kind of stabilization effect in the 16-milligram arm remained despite the fact that there was no dosing over those kind of 3 months.

So that was what was observed in the Phase IIb.

In terms of kind of recruitment, which I believe the second part of your question related to, then obviously we are still recruiting in Part B. We have said that we're hoping to still be able to complete that recruitment of these 160 patients before the end of the year.

However, with COVID, as we all know, recently, kind of wrecking havoc again across continents, we may see a slight delay in that kind of completion of recruitment.

But as we sit here today, it's virtually impossible to have full visibility of what that might look like.

Got it.

And maybe one last follow-up.

Just for the Part B part of the study, do you expect the eGFR improvement off-treatment to be broad across the group?

Or do you estimate it will be driven by subgroups?

We're not really commenting at this point in time on anything beyond the 9-month primary readout period.

And that's also due to the fact that, as I said, we're still receiving some data and looking and analyzing that.

So for now, we will keep to kind of just the 9-month time period.

Our next question comes from Annabel Samimy from Stifel.

Just again, along the lines of Part B, can you confirm that all the patients in Part A after the review period, I guess, at 3 months will roll into the Part B in a faster case, do you have a percent of how many patients from Part A have already rolled into Part B?

So yes, the design is exactly as you state.

So the design is that all patients from Part A after a 3-month kind of just safety follow up.

It was just exactly the same design as we had in the Phase IIb that they will roll over into a 1-year observational period.

There has to date because, obviously, we've just read out the 9 months, the very first patients are due to kind of roll over into Part B in this quarter.

So we will -- we have like basic -- I have no information on that because, obviously, that will happen at some point this quarter with a very first patient will do that as the first patient was randomized in 2018.

Okay.

Great.

So then on the U.S. and EU pathway, obviously, it's slightly different there.

Just to be clear that EU -- you're going to file in the EU but the approval will not come until you get that to your data, correct?

I'm sorry until I get what?

The approval wouldn't come until the 2-year data readout, the Part B data read out.

I just want to confirm that's what the process is in Europe?

No.

That is not correct.

So in terms of the pathway in Europe, it's a conditional approval.

So we would file with EMA on the same basis as we're filing in the FDA.

So I think the only difference here might be -- might have caused some confusion is obviously that the FDA has kind of accepted proteinuria as a surrogate marker for pivotal trials kind of on a more general basis.

Europe has actually not done that.

However, as we have said in our previous press release that we have advice from EMA that said that based on the information that we plan to provide them with they can see a route for us to be approved on a conditional basis.

So I think we actually have -- that is the pathway that we are following in Europe based on the advice that we have received.

Okay.

And then if I can, this might be too early for Genkyotex.

But I guess and it probably has assets before, but now that you've got this NOX platform and anti-inflammation, anti-fibrosis for PBC, what is that mean for your budesonide program in PBC, are you going to prioritize Genkyotex and how you are going to be working with both in parallel.

If you could just give us a broader sense, I know you're working on those plans right now.

But do you have a framework that you're thinking of now.

Yes, we are working through some of those questions internally now.

You're absolutely correct.

And I think this is where we will be in a position to be in a clear and more specific around how we're planning to take this forward in early next year.

So I think in Q1, we will be able to share that information, but that is obviously part of some of the discussions that we're having at the moment.

Our next question comes from Yigal Nochomovitz from Citi.

Renee, if you could just help clarify a little bit on the design of the NefIgArd Phase II trial.

First of all, can you just explain the rationale for why you do the 2-week tapering and half the dose from 16 mg to 8 mg per day?

And also for Part B, can you just clarify, do those patients start on 16 mg per day?

Or are they also starting at this 8 mg per day?

So I think that this is just kind of -- I mean, I think it comes from all kind of tradition or kind of abundance of caution or whatever, in terms of doing for the patients on the 16 milligrams.

That there is a 2-week tapering at 8 milligrams.

It's also exactly the same design that was used in the Phase IIb.

So it's just kind of sticking with exactly the same design as we had there.

In terms of -- I'm trying to remember your second question, sorry, so can you repeat the second question?

I'm just wondering for the Part B patients, when they are enrolled in the trial, they're starting at 8 mg or 16 mg?

No, no.

Everybody goes through exactly the same design.

So all the Part B, kind of, if you call it, the Part B patients, go through the same Part A as the patients have who we've just reported out on.

So everybody will go through the same thing.

The only dose in this trial is 16 milligrams.

So the only dose is 16 mg and the only time that 8 milligrams is ever used is during those few couple of weeks after the 9 months have been achieved.

So hopefully, that addresses your question.

Okay.

And then after the tapering, then they are off therapy?

That is correct.

Right, right.

Okay.

Got it.

And then I had a question.

Can you just talk about -- so I understand you're going to be commercializing yourself in the United States, and looking for a partner in Europe.

Can you just talk a bit about the rationale or the thinking behind why you decided to do -- to go independently in the United States and partner in Europe?

Sure.

So for kind of a company of our size, actually, it might seem a little bit counterintuitive, but actually commercializing in the U.S. is actually more efficient.

It's a larger market.

It's not that fragmented.

We can use kind of one team across the entire country.

We don't have different languages, different reimbursement systems.

I think in Europe, companies here find it actually, it becomes quite complex.

It also becomes very expensive in terms of doing this on yourself in Europe.

And since we only have 1 product at the moment, and it's an orphan product, the -- from a kind of financial perspective, commercializing in the U.S. is just a far more doable thing for us to do.

And in terms of trying to commercialize ourselves everywhere, again for a company of our size, we felt that we don't want to over reach, and we would like to do things the things that we do, we would like to do them very, very well.

And so for that reason, we focused on the U.S. market to commercialize ourselves.

As this is an orphan disease, it does not require a significant sales force.

And so this is something that we feel that we can manage very well on our own.

Our next question comes from Max Herrmann from Stifel.

Just one, just on the Part B of the NefIgArd study, just to understand what the objective particularly is.

Are you looking for a disease modification type claim from that element of the study.

Just trying to dig a bit further into, obviously, the eGFR element to the endpoint there.

Sure.

So this is, I guess, similar to a lot of other trials, particularly in oncology, for example, where there is this use of a surrogate marker.

So because we are using a surrogate marker for approval, which in this case would be proteinuria.

The regulators would generally look for a post-approval confirmatory study with regards to the longer-term benefit that can then be seen, which might have been indicated by a surrogate marker.

So the purpose really of the Part B is to look at more long-term kind of kidney protection, if you like, clinical benefit.

So that's really the purpose of the Part B, which is also why it looks at the differential between the treated arm and the placebo over that entire kind of 2-year period from start of treatment until end of the observation period.

But just as a follow-up, that would necessitate a sort of disease modification element to Nefecon because otherwise, the 2 arms would start to, in the kind of Part B element would sort of converge otherwise in order to meet the endpoint, you need to have some sort of disease modification.

So the difference in eGFR that you've shown statistically already in the A, doesn't narrow over time.

That's correct.

I would agree with you.

I think that obviously, the differentials that we have already shown over 9 months is obviously very substantial.

If you look to where kind of EMA and FDA have commented on the levels that they would consider being clinically relevant or beneficial, which are somewhere in the region of between 1 and 1.5 ml per minute per year.

So -- but yes, I agree with you.

Okay.

So hopefully, depending on the data, you may be able to get these modifying claim in the label depending on the Part B element of the study?

Yes, we may.

(Operator Instructions)

Our next question comes from Rami Katkhuda from LifeSci.

I guess, looking towards the pipeline, it seems like higher doses of setanaxib are being assessed in a PK/PD study and the Phase II DKD study.

Do you believe there's potential for increased efficacy in PBC at these higher doses compared to what we saw in the Phase II?

I think that, that would be a reasonable thesis.

So I think that if there -- if the PK studies actually substantiates the ability to use significantly higher doses, generating higher exposure, then I think it would be a reasonable thesis to assume that you could also see significantly better efficacy in studies using setanaxib at higher doses.

Got it.

And then, I guess, are there any updates in terms of conversations with the FDA regarding development of AIH.

No.

Unfortunately, we have no such responses yet.

So we're still awaiting a response from the FDA with regards to this, and we still hope that we will receive this before the end of the year.

Thank you.

There appears to be no further questions.

So I will hand back to the speakers for any other remarks.

Thank you very much.

Thank you, everybody, for joining us in this Q3 report, and we look forward to speaking to you again next quarter.

Thank you.

Thank you very much.

This now concludes our conference call.

Thank you all for attending.

You may now disconnect your lines.