Pharming Group NV (PHAR) 2021 Q4 法說會逐字稿

Hello, and welcome to Pharming's Full Year 2021 Results Call. My name is Jordan, and I'll be coordinating your call today. (Operator Instructions)

I'm now going to hand over to Pharming's CEO, Sijmen de Vries, to begin. Sijmen, please go ahead.

Thank you very much, Jordan.

Good morning and good afternoon, ladies and gentlemen, and welcome to our full year results conference. I have here with me our CFO, Jeroen Wakkerman; and our Chief Medical Officer, Anurag Relan. We will be taking you through a short presentation. Of course, there's questions and answers afterwards. But before I do that, I would like you to take a look at the next slide with the forward-looking statements as we will be making some forward-looking statements that are based on our current beliefs and assumptions and expectations, and those can obviously, as you know, change.

So let's just move on to the next slide. And there, you see some pictures of us and maybe we can move on to Slide #4 as well. And what are we? We are a well-funded business. And we are very happy, of course, that we are supported by a strong commercial sales operation on both sides of the ocean, of the Atlantic Ocean. And we have growing pipeline for rare and ultra-rare diseases with unmet medical need. And our lead product, as you have seen from the press release, recorded $199 million of sales in 2021. So we continue to see over the years that more doctors are prescribing RUCONEST. That was again the case in 2021 and more patients are using RUCONEST. So there is definitely a positive underlying continuing trend in the use of RUCONEST.

And then we are very excited because we're, at this point in time, for the second time in our company's history, the last time was in 2013, we are in position of positive results from a pivotal trial for a new compound. So that means that we are looking to actually be able to, within a year from now, subject, of course, to approval of the product to go into the market with our second product, leniolisib, for the treatment of another orphan disease, APDS, which, of course, is a significant change for the company because last time when we had this, the company was in dire straits, and we did not have the product in our own hands. Now we have this commercialization capabilities on both sides of the ocean.

We have a very strong balance sheet, and we have been already, as you have seen from the results, investing seriously into the preparations for launch because we can do it ourselves now. And the good news is when you have a commercialization operation already, the marginal cost albeit are significant are not nearly as significant as when you have to do this the first time. So we're very excited about this prospect. And Anurag Relan, especially here, we'll talk a lot more about leniolisib later in the presentation.

In addition to that, because of our strong commercialization results and the continuation of that, we're able to actually leverage in-house expertise to drive further R&D, including continuing to hunt for additional in-licensing opportunities that are around for late-stage compounds. And also, we're able to work on an early-stage compound, for instance, OTL-105, which we in-licensed from Orchard Therapeutics, a potentially curative gene therapy for hereditary angioedema to which Anurag Relan will talk a little bit later as well.

So we're very pleased with both results and with where the company is. And we think this is a historical moment for the company as we start turning into a different company that is not only relying on this one product, one market combination, but is looking forward to build a business in the European side of the ocean as well.

And how are we going to do that? And then the next slide you see 3 pillars here. The left one is the commercialization pillar where, of course, not only RUCONEST will be continuing to be rolled out in additional countries, as you have seen earlier this year, but also where commercialization of APDS is important with leniolisib.

And then in the middle, you see that important pillar here where we look for near-term expansion of the portfolio with rare or ultra-rare diseases with in-licensing or acquisition of late-stage assets in the rare or ultra-rare diseases. But also, of course, the development of C1 inhibitor in subsequent indications, but also PI3 kinase delta, i.e., leniolisib, has some interesting prospect of additional indications where the compound could be developed for because there was already a lot of research done by Novartis in research collaborations to look at additional indications for this compound. So we believe there could be potentially more in the future for leniolisib as well.

And then we have an interesting genetic testing effort going on for identification of APDS patients, and we're building, gradually building up a database of genetic profiles of patients that have undergone these genetic tests. So where we can see patterns in other genetic mutations and other primary immune diseases which had not been properly diagnosed yet. That can direct them, and that's the third pillar, for the long term our business development efforts into the direction of new identification of new primary immune deficiency opportunities and direct our colleagues in business development to look for such assets or develop them ourselves in the very long term.

And then you see onto that pillar as well the development of OTL-105, the ex vivo and potentially revolutionary hematopoietic stem cell gene therapy for hereditary angioedema. And last but not least, from our own platform, the alpha-glucosidase program for Pompe disease.

So let's just take a look at, look back at what happened during 2021, and you can see that on the next slide. You see we've been able to expand the reach of RUCONEST. Now we all know that in hereditary angioedema because of historical reasons, outside of the United States the commercial opportunity is not so significant, but we believe investing in extending the presence of RUCONEST is not only helpful to be able to sell more RUCONEST, albeit for relatively modest commercial returns outside of the U.S., but also to put our organization down and build networks in the markets ahead of the launch of leniolisib because that will be a very different story. There will be no price referencing. There will be no additional, there will be no competition in that market. And basically, when we are in that market, it's easier to access. So you see North Africa, the Middle East, Spain, that we actually reached out. We're working still on further expansion of the Pharming presence in some of the other European markets in 2022.

We renewed our strategic manufacturing agreement with Sanofi. We're very pleased with that. Sanofi has been our excellent partner for the last, I would say, 12 years already, and we were very glad to be able to renew that. And that gave us also the opportunity to take a sharper think about whether we wanted to build our own drug substance plant, and we decided to step away from that, which is going to save us from 40, $4-0 million, going forward, which can be put to good use for investments in leniolisib, but also for in-licensing or helping in M&A transactions.

So then we took a look at the late-stage pipeline. We already referred to that earlier, the positive top line data of the pivotal study for leniolisib. And then, of course, as I was referring to, we already started significantly investing in leniolisib ahead of the anticipated global regulatory filings, which will start later on in this quarter. And then, of course, the launch of that genetic testing program, that navigateAPDS, that collaboration with Invitae what I was referring to, which will be significantly stepped up later on this year as and when we deploy significantly more people in the U.S. market to actually find APDS patients ahead of the launch of the product.

And then last but not least here, we received this positive decision from the EMA on the pediatric investigation plan for leniolisib in Europe, which is important because that means that there is a clear pathway to approval in Europe as well as the EMA accepted the primary endpoints that are exactly the same for the pediatric study as for the pivotal study and also as the EMA bought into this whole thing, this is a pediatric investigation plan that covers patients up to 80 years of age, whereas our study already includes patients from 12 years of age. So we already, in a way, have done some of this work for the PIP development program by means of the pivotal trial.

I was already referring to it earlier, we in-licensed OTL-105. This potentially curative candidate for HAE from Orchard Therapeutics. We also finally got our Phase IIb study going for the prevention of acute kidney injury with recombinant C1 esterase inhibitor. And we had some interesting top line results from a clinical trial in severe pneumonia as a result of the COVID-19 infections. So we had a very, very busy year in 2019.

And then we move on to the next slide because, of course, you all want to know what's going on, what's underlying RUCONEST and how does it look like in the hereditary angioedema market. And then on the next slide, you will see a picture of how we see the market for hereditary angioedema that RUCONEST plays in.

Traditionally, and of course, that's a big difference, as I was already referring to earlier, we were late to the market with RUCONEST. There was a lot of competition already around. And this is not the case with APDS. But when you are late, of course, to the market, then you need to have a very efficacious product, and we have a very efficacious product. And that is on the right-hand side, you see there the severely affected patients. And that has been our natural position for RUCONEST from the beginning onwards.

Of course, when you come to the market and there's already products available, you get patients that can't get by on other products. And they found a place for RUCONEST. RUCONEST is highly dosed protein replacement therapy, actually covers all the 3 pathways that are actually involved in hereditary angioedema attacks. Whereas the bradykinin/kallikrein products, albeit efficacious, suffer consistently from breakthrough attacks because they only cover 1 of the 3 pathways. And that is where RUCONEST found its place.

And then the good news for the patients was, of course, that this market was offered a lot more possibilities for prophylactic therapies. And prophylactic therapies have become significantly more popular in the United States. However, all these prophylactic therapies, albeit that there was great advances made in efficacy and that is very good for the patients, obviously, there is still a consistently almost half the patients from time to time or sometimes highly frequently suffer from breakthrough attacks.

And as the paradigm for prophylaxis shifted from the original C1 inhibition towards the bradykinin/kallikrein inhibition, it has become natural to actually have a C1 inhibitor RUCONEST available as breakthrough therapy. That is also the reason why we see consistently more patients being treated with RUCONEST because we see that RUCONEST is increasingly also prescribed as breakthrough medication when these patients get the new prophylactic therapies prescribed. So therefore, we're very confident that RUCONEST continues to serve in a unique position in the hereditary angioedema market, i.e., on the right-hand side where the severe patients are that cannot get by with the existing therapies and also increasingly so in the breakthrough attack segment there on the left-hand side of the market where RUCONEST is prescribed as breakthrough medication for patients that continue to have breakthrough attacks.

So that's why we are guiding for the first time in our history, we have given some guidance on sales for RUCONEST. And we've guided for return to single-digit growth for 2022 versus 2021 for the sales of RUCONEST on the basis of these trends that we see underlying in the market.

And the next slide illustrates that point that I was making that prophylaxis has basically shifted the market from, in the beginning, it was like 60-40. And now it seems to have stabilized at 70% of the patients in the U.S. market get prophylaxis whereas 30% are being served with the acute therapies. But as you have seen on the bottom line, RUCONEST market share has stayed consistent over all those years. And therefore, we strongly believe in the idea that RUCONEST has this stable position in that hereditary angioedema market for the time to come.

So this is what I wanted to share with you about RUCONEST, and I would like to now switch gears and share with you some of the excitement about the possibility to help patients with APDS with the product leniolisib coming, hopefully coming to the market soon. And I hand over now to my colleague, our Chief Medical Officer, Dr. Anurag Relan. Anurag, over to you, please.

Thanks, Sijmen.

And yes, we are very excited about the possibility of helping these patients with APDS. APDS is a serious unmet need. It's a patient population that's currently underserved. It's a patient population that, as we see on the next slide, we think that there's more than 1,350 across the U.S., Europe and Japan that live with APDS. Many of these patients, obviously, are still undiagnosed. We have actually identified through our own efforts and really just beginning with these efforts, we've identified more than 350 patients across these areas. And as we get a better understanding of primary immune deficiencies of which APDS is one of, we have the potential to identify even more patients.

Again, these patients because of their symptom complex, they end up seeing numerous specialists. And because the condition itself has only been described for less than 10 years, there is still a lot of unawareness about the disease. As a genetic disease, the symptoms begin in childhood and disrupt their school and social development. There's a significant impact on their quality of life. These patients undergoing numerous surgical procedures as part of this workup and evaluation, again, seen by numerous doctors impacting their mental health.

And when we look at the symptom complex, it's really across the body. We see the damage from recurrent infections. We see gastrointestinal disease. We see, really, the hallmark of the disease, though, is the swollen lymph nodes, and as a result also in large spleen and liver. We also see autoimmune phenomenon because there is not only this immune deficiency because of the disease, but we also have activation of the immune system. And these patients can get anemia and other cytopenias. And unfortunately, many of these patients go on to develop lymphoma because of this hyperactivation of this PI3K delta pathway.

And unfortunately, the truth is that right now the treatment options for these patients are quite limited. It's management of infections that they develop, trying to prevent infections with immunoglobulin replacement therapy, trying to control the hyperactivation of their immune system with nonspecific inhibitors. And then in rare cases, patients go on to receive stem cell transplantation with all of the resulting complications. Again, there are no approved treatments available for these patients. And so this is why, based on all of the things that we see with leniolisib so far, we're quite excited about the possibility of being able to help these patients and really potentially dramatically transform their lives.

Next slide, please. And one of the first things that we're doing is really going out there and working with physicians on education and understanding the disease. And we've built a network of physicians who are experts in APDS. And on top of that now as we're doing that, we're beginning to understand the clinical phenotype of these patients and using that clinical phenotype to potentially identify additional patients. And a big part of that was this program that we launched last year called navigateAPDS, and this is a partnership that we have with Invitae to provide sponsored genetic testing.

So genetic testing that is no cost to the patient that allows for patients with primary immune deficiencies who have the features of APDS to obtain genetic testing, to obtain an ultimate diagnosis. We know that there are barriers currently to obtain genetic testing, especially in the U.S. And by having this program in place, we hope to eliminate those barriers and really allow these patients with any primary immune deficiency to get a specific diagnosis, not only APDS. And the feedback that we have so far from allergists, immunologists and others who are using this program has been quite tremendously positive.

Next slide, please. But then on to leniolisib. And what we see with leniolisib is that we have an effective PI3K delta selective orally bioavailable inhibitor. And really, the goal here is to use this PI3K delta inhibitor to take care of the hyperactivation in the PI3K pathway and address the root cause. By addressing the root cause, we hope to address the issues that this hyperactivation causes. And really what that hyperactivation results in is abnormal development of the immune system, abnormal maturation of B and T cells and other immune cells and immune system. And because of that abnormal maturation, we see all of the clinical phenomenon that I've been talking about.

And with the genetic test that we have, we hope to be able to allow patients with primary immune deficiency to obtain this diagnosis. Our feedback in working with regulatory agencies so far has been quite positive. As Sijmen already mentioned, we received pediatric investigation plan approval from EMA. We also have orphan drug designation both in the U.S. as well as in Europe. And really, the other nice part about this is that we continue to work with the same doctors that we have been working with for the past 20 years in HAE. These are immunologists who also see patients with HAE. And now we're adding on to that capability by allowing to work with them in this field of primary immune deficiency.

Next slide, please. I'm going to talk a little bit now about the pivotal trial design. And the design really was in 2 parts. Part 1 was the dose-finding part, and this was in 6 patients that received 3 doses of leniolisib over, of course, a total of 12 weeks. The patients were individually dose escalated. And again, these were patients with the confirmed diagnosis of APDS. We looked at the typical outcomes in this type of study, safety, tolerability, pharmacokinetics and the ability to actually stop that hyperactivation in this pathway. The dose that was selected based on these results was the 70-milligram twice daily dose, and that was then used in the placebo-controlled part, the randomized placebo-controlled part 2 of the study in which patients were randomized 2:1 to receive leniolisib at the 70-milligram twice daily dose.

And this study then had the following co-primary endpoint looking really at the hallmarks of the disease, namely lymphadenopathy or swollen lymph nodes and normalization of the immunophenotype. And what I mean by that is that these are the features of the disease that define the disease. These patients have, because of that hyperactivation in that pathway, they have immune cell issues with development and maturation. And because of that, their lymph nodes swell up, and their B cells and other immune cells don't develop properly. So we specifically looked at those features as the primary endpoints in the study. And then, of course, there was safety assessment.

On top of that, all of these patients then have the ability to go on into an open-label extension study. And we're actually in quite a unique position here with a therapy in leniolisib that we have not only randomized, double-blind, placebo-controlled data in a rare disease, but we have data in these patients going on for several years. We have some patients, including patients from part 1, that have been on the therapy for more than 5 years and continue to be on the therapy. And I'll share with you some of those results because I think when we think about the totality of the data and we look at all of the data that we have with leniolisib, what really shows us what this drug is doing is not only that we can say, okay, you've improved how these patients immune cells work. You've improved their clinical features of swollen lymph nodes, but you also can show that you can do this over many years. And again, I think that's a unique position for a therapy that's been developed for a rare disease.

Next slide, please. And in part 1, what we saw was that leniolisib was well tolerated at these doses. And again, we selected the 70-milligram twice daily dose. And what we saw also was that there was significantly less disease activity and patients felt better. There was suppression of this pathway. We were able to normalize some of these things that I mentioned about in terms of the biochemical aspects, demonstrating the improper maturation of their immune system. And as a result, we also saw reduction in the swelling of their lymph nodes and spleen. And then you see those reductions in the table on the left, 40% reduction in just 12 weeks of therapy with leniolisib. And on the right figure at the bottom, you can see that these patients who would have an enlarged spleen for years and then immediately go on leniolisib, which is labeled there as CDZ173, you can see their spleen size decrease. And that's just one example. And we have data now on all patients showing very similar phenomenon.

Next slide. And here, what we can see is the long-term results. Now see, this is the results from those initial 6 patients that were part of the dose-finding study, and these are their IgM levels. IgM is an antibody that's produced early in the immune response. And because these patients' immune cells don't mature property, don't develop properly, in essence, they have a problem with what's called class switching or they have a problem with transitioning to produce a IgG response. Instead, they continue to produce this high levels of IgM antibody. And you can see each of these 6 patients when they went on leniolisib for those first 12 weeks, and those are those bolded lines, their IgM levels dropped.

What's even more interesting is that because of some logistical issues, not all patients could continue leniolisib immediately in the extension study, so they had to stop. And you see those are those dash lines. And unfortunately, their IgM levels started to go up when they went off of leniolisib. And in some cases, you can see for one patient that was off the drug for almost 2 years, her levels went up significantly. But again, once these patients resumed leniolisib again in the bold section, you see those levels start to come back down again. This is a clear sign to us of the effect of the drug not only in the short term, but that's also a durable effect that these patients continue to tolerate the drug well and that their IgM levels come down.

But you say, okay, so their IgM levels come down, you might be wondering, well, what does that mean? And those are those symbols that you see above the numbers. And what those symbols indicate are these patients were able to reduce or sometimes completely eliminate the need for Ig supplementation or replacement therapy, again, indicating that these patients, physicians felt, okay, your immune system is functioning normally. I don't need to give you antibodies from someone else's immune system to fix your own immune system. So it's all coming together quite nicely when we look at this kind of information where we see the immune phenotype or the immune system functioning properly, we see reduction in their lymph nodes and spleen sizes. And then we see that they're actually having to use less immunoglobulin replacement therapy, again, a clear indication that their own immune system is functioning.

Next slide. And what we have now also is the data from part 2 of the study, and this was the double-blind, placebo-controlled part of the study where we showed both a reduction in their lymph nodes swelling as well as a normalization of that immune dysfunction. And we saw these results, and we'll be presenting these results actually, a physician from the NIH, Dr. Koneti Rao will be presenting these results later this month at the Clinical Immunology Society meeting. And we're quite excited to have those results presented, and we'll be continuing to share the results from this study as well as from the other patients who were in the open-label extension study throughout the course of this year.

Next slide. And where does that lead us? Well, that leads us with these results now that we are in regulatory discussions and we hope to be able to file with the FDA later this quarter or excuse me, later in the first half of the year. And then eventually also across Europe with EMA and in the U.K. because we know that this condition also affects children, and we've talked about this pediatric investigation plan, we want to begin our pediatric studies in the second half of this year. We've had discussions with the Japanese regulatory authorities also and look forward to beginning a study in Japan because there are also, there are patients there and physicians have contacted us there and say, look, we'd like to be able to use leniolisib in these patients and test leniolisib in our Japanese population of APDS patients. So we've begun that work. And then as Sijmen said, we hope to be able to obtain regulatory approval in the U.S. as well as other territories across 2023.

Next slide, please. Now I'm going to turn and talk a little bit about the partnership that we have with Orchard Therapeutics. And this is the compound called OTL-105, advance to the next slide. Really, the reason we looked at this, the reason that we eventually licensing the compound, one, of course, we saw the potential benefits to offer a cure to these patients. But on top of that, we really have been working in HAE for 20 years. And the commitment that we have to HAE is real, and we wanted to be able to move when we look forward to say, okay, what can we eventually offer these patients that could completely change their lives. And that's what led us to this partnership.

And the concept here is to use an ex vivo autologous stem cell gene therapy for HAE. The lentivirus that was going to be developed by Orchard Therapeutics will be able to insert a copy of the SERPING1 gene into patients into their own cells and do this outside of their body and then put those cells back into their body so that their own blood cells can then produce C1 inhibitor and really hopefully cure their disease.

In terms of what we've seen so far, we've seen that we can express the protein and that the protein works and that we're able to measure that in a validated way. The study, all of this development is still early stage. But based on the expertise that Orchard have and that we have in HAE, we're quite motivated and positive about the prospects here and look forward to providing further updates during later this year.

And I will turn it over to Jeroen now to give us a little bit more on the financials.

Yes. Thank you very much, Anurag.

In terms of revenue, the revenues for the full year of 2021 landed at $198.9 million, which is a 6% decrease versus the previous year. And as you can see on the graph, we had a very good Q4 in 2020 and that was because basically, because of COVID at the time, patients were prefilling RUCONEST prescriptions, and that hit us in Q1. So in Q1 2021, as we have reported before, we had lower prescription refill rates and also a reduction in the new patient enrollment. And I'm very happy to tell that over the year, it recovered. And in Q4, for example, we had a 3% growth in the U.S. So that also brings hope for the remainder of 2022.

Next slide, please. So the revenues from sales in the U.S. in 2021 were $193.4 million, which is a decrease of 5% versus the previous year. And we saw ongoing recovery in sales following the COVID impact at the beginning of the year. In 2021, the sales in Europe decreased to $4.9 million from $8.2 million, and that was caused by a number of issues, but mainly phasing of ordering. For example, we got a very big order at the end of 2020 in one of the countries where we deliver, and that was not really caught up in the remainder of 2021. And the rest of the world revenue decreased to $0.5 million from $1.3 million in the year before.

Looking at the gross profit, it was $177.7 million, a decrease which is in line with the revenues, but it's also good to say that the gross margin was very healthy at 89.4%. And that was an improvement of 50 basis points versus the year before.

Next slide, please. Looking at the operating profit and the operating costs in 2021. The operating profit was $36.9 million before one-off cost of $23.3 million. It's important to note that because they had an important impact on the operating cost, and therefore, on the operating profit. And that $23.3 million of one-off cost was related to the Orchard Therapeutics transaction. We paid them $13.1 million for the in-licensing of the compound that Anurag just told you about. And we had impairment cost, impairment losses on assets. Two assets really, one was on product. And that was a project to modify the current product RUCONEST for more convenient forms of administration for use by the patient. So we impaired $4.7 million there, which is a noncash item obviously. And we also impaired $5.4 million on the development of our downstream processing facility, which we canceled at the end of last year.

The operating profit after the one-off costs, the real operating profit were at $13.6 million. And well, we continued significant investment in Pharming's long-term growth. And that ranges across, including increased R&D expenditure but also increased costs from leniolisib. So that is prelaunch marketing preparations, about $3 million, and additional manufacturing costs for that compound of about $9 million. So in total, $11.6 million leniolisib cost. We also increased the employee numbers to support the future growth of the company. Costs increased by $8.2 million, and the number of FTEs went from 239 FTEs to 300 at year-end. So an increase of 61 FTEs. And lastly, we have additional insurance costs because of the NASDAQ listing. And also, there were some other costs related to the NASDAQ listing to further professionalize the internal organization.

Net profit was $16 million, which is a 58% decrease. And that was, well, because of the increase that I've just mentioned in the operating expenses, and it was partly offset by favorable currency effects.

Then on the next slide, we see the developments, the key items in profit before tax from 2020 to 2021, sorry for that. So moving on to cash and cash equivalents, which decreased by $13.7 million from $206.7 million at the end of 2020 to $193 million. And that was driven by mainly a positive cash flow from operating activities of $37.8 million. And again, that includes the licensing fee paid to Orchard Therapeutics. They were offset by negative cash flow from investment and financing activities of in total $49 million. And more than half of that negative cash flow in investments and financing activities was because of the payment, the milestone payment, the last milestone payment to Bausch Health in relation to the reacquisition of the North American RUCONEST commercialization rights, which was a transaction done in 2016.

If we then go to the next slide. That's the profit before tax. So that's the development from 2020 to 2021. We started off last year, we ended last year, sorry, in 2020 with a profit before tax of $44.1 million. And in 2021, we had a decline in underlying business gross profit, as I've just mentioned, by $10.9 million. We have the OTL-105 investment of $13.1 million. We have the impairment that I've just mentioned. We had an increase in R&D expenditure. This is mainly related to leniolisib development and manufacturing costs. We had an increase in SG&A expenditure, and that is mainly the insurance costs related to the NASDAQ listing that I've just mentioned. And we have increased marketing and sales expenditure. And again, a big part there was also from leniolisib.

Then we had a very positive effect related in 2021 versus 2020, and that was $34.1 million positive and because we had a negative foreign exchange impact of $19 million in 2020 and a positive foreign exchange effect of $15 million in 2021. And that was all related to the cash that we have on the balance sheet and the euro-dollar moving from $1.23 at the beginning of the year to $1.13 at the end of last year. Other elements are costs that we had last year for a settlement of a loan and some other costs. And that brought us to a profit before tax in 2021 of $23.1 million.

And then going to the next slide, please. Yes, that's the cash flow development in 2021. We started off with $205.2 million. This is the cash, excluding the restricted cash, by the way. We have the operating cash flow before changes in working capital of $42.8 million, so very positive operating cash flow. Negative impact of changes in working capital, that was a mix of increased inventory, reduced debtors and reduced payables. And $21.3 million in investing activities, and that was $11 million, $10.7 million to be exact was related to the downstream processing facility. But also, we built and finalized a third upstream production facility, and that was delivered on time and in budget. Same goes for the ERP implementation that was $3.4 million intangible asset investment, and that was also delivered on time and in budget. And we went live with this ERP system, SAP, on the 1st of January 2022.

We invested $4.6 million in the Orchard shares, which was part of the licensing transaction in the year. And we paid $2.5 million on the leniolisib licensing this year. So that's totaling the $21.3 million cash flow for investing activities.

The cash flow used in financing activities has got 2 buckets. One is the $2.9 million is related to interest and lease costs, and the $25 million is, as I mentioned, the Bausch final payment for the RUCONEST license, so we won't have that anymore in the future. And then we have some smaller exchange rate effects and brings us to cash and cash equivalents at year-end of USD 192 million. So a very strong financial position that we have and it also provides great opportunities for future growth.

And with that, I would like to hand over to Sijmen.

Thank you very much, Jeroen.

And yes, as the final part of our presentation, I would like to share the outlook here for 2022. As I was saying before, this is the first time in our company's history that we're guiding on sales levels that we are expecting for RUCONEST driven by the U.S. and EU operations, but also subject still to the progression of this COVID-19 pandemic. As I was referring to earlier, everything is far from normal in the clinics so far, but we do hopefully going forward. Obviously, quarterly fluctuations in revenues are expected as before.

As I was sharing in the beginning, we're very excited, and Anurag told you about some of the interesting features that leniolisib have to bring the regulatory filings to FDA and EMA with subject, of course, to these approvals. Commercial launch is expected from early on in '21 and in Q1. So within a year from now, we expect that, that could happen. Of course, we expect to start in the United States with the launch. And this is a market where you can immediately go on the market and get reimbursed.

But as I was saying also before, although we have this commercial infrastructure in place, we still have to significantly invest in the preparations for the launch of leniolisib. And that is, for us, a very important point. We want to get this opportunity to bring this product to the market in a proper way. This is historical for our company. We can launch a product ourselves. And we will, therefore, significantly invest on the launch preparations and the focused clinical development and Anurag was mentioning the pediatric studies, for instance, for leniolisib, and that will significantly increase and will also significantly have an impact on our profitability for this year.

But with the continued cash flows, as Jeroen was alluding to, from RUCONEST, these investments will be funded from our own sources. So there's no need to anticipate any additional financing to support our current business. I think that's an important statement to make here.

However, we also will continue to look for potential acquisitions and in-licensing of new late-stage compounds to actually be able to launch additional products within the time frame between now and 3 years' time in rare and ultra-rare diseases. And there, of course, depending on the size of the deal, we do have a strong balance sheet, of course. We do have access to capital by means of raising debt, for instance, but there's also a possibility, of course, that we could actually raise equity money or pay in equity money. And most notably, we, of course, have the NASDAQ listing, put that in place for that occasion to be able to part pay such acquisitions in issuing ADSes in the future. So that is, of course, the exception here. But otherwise, we do not expect any additional financing needs to support our current business. But for the expansion, there might be that opportunity.

So we really continue to focus on our strategic development and ensuring that our growth and our potentially expanded pipeline to provide further life-saving therapies for patients with those unmet medical needs. And we do look for increased returns for our shareholders especially in the long term here because that is the name of the game at the moment, of course, when you're standing in front of a possible launch for new products that will transform our company because, as we stated before, because this is a new disease, because there's no competition and we're first to market, and the numbers of patients that we are starting to identify, we believe that leniolisib is a significantly larger commercial opportunity than RUCONEST for this company.

And that concludes the presentation part of this conference. Operator, I would now like to open the floor, please, for questions, and we will provide answers. Thank you very much.

(Operator Instructions) Our first question comes from Hartaj Singh with Oppenheimer.

I just want to ask a question of Anurag. Going back to the long-term data that you presented for leniolisib on Slide 16, it seems you're having benefits for these patients as they go longer out on therapy. Does that help you in terms of getting patients on therapy? For example, Vertex, when they presented their long-term data with their CFTR modulators, they've seen increased uptake by patients, physicians and actually even the payer community likes it because from a pharmacoeconomic background it's actually pretty useful. So just any thoughts there? And then how much, just second question would be, what's the long-term follow-up data you will have by the time you get, assuming you get approval of leniolisib?

So thanks, Hartaj. No, absolutely. I think this long-term data is critical, not only for regulators, but for physicians and eventually payers, too, because they can see the clear benefits that the drug is having in these patients' lives. And look, the data that we have seen so far is quite encouraging. I shared some of that with you today. And again, and that data you can see in some patients going out. That's 2 years of data there, but we have data going out for more than 5 years in some patients.

With respect to your second question, we currently have data on more than half of patients for at least 2 years, and then for the other half, even further, even further out. So I think we have this unique situation where before we're even applying for approval, we have significant long-term data, plus a double-blind placebo-controlled study in an ultra-rare population. And I think that's quite a good position to be in. And then it gives me a lot of confidence when we look at this, again, the totality of the data.

Our next question comes from Joe Pantginis with H.C. Wainwright.

Sijmen, I wanted to start with you first. You made some interesting comments that I'm happy to hear regarding RUCONEST market share in the 70-30 prophylactic versus acute. So do you think it's a fair statement to say that you're not being fully appreciated that while the treatment landscape continues to change, your market share remains stable? That's the first part. And then the second part is, how would you define your primary or beyond initiative to be able to grow that market share?

Yes. Thanks, Joe. I concur with that statement, indeed. So that's the first one. Secondly, how we grow? Well, we keep working on it. And as I was saying, we see continuing positive trends. Year-on-year-on-year and including in '21, we see more doctors prescribing RUCONEST, and we see more patients being treated with RUCONEST. So that gives us the confidence that this, and I was already alluding to that, under this changing prophylactic landscape, the hypothesis that we positioned years ago that although the patients have got a lot better prophylactic options now, they're all bradykinin/kallikrein inhibitors, and they're all still suffering from breakthroughs. And that means that they had become very rational with that paradigm change to bradykinin/kallikrein away from C1 for prophylaxis to have a C1 inhibitor. Because if you're already blocking fully that pathway and you still get a breakthrough attack, it doesn't make much sense to put additional bradykinin/kallikrein inhibition in place, right, for the breakthrough. And I think that we positioned that a long time ago, and we see that actually gradually happening.

And of course, this is something that is a slow process because, as you know, in markets when products are established, it takes a lot to actually move market share away. That's why we feel very confident that this is a relatively stable market. And we should be able to actually continue to grow gradually into this market going forward. And that's why, for the first time, as I said, we're guiding for continued single-digit growth or return actually better to single-digit growth because of these underlying trends. I hope that answers your question, Joe.

No, it certainly does as the market dynamic continues to change. And I guess my next question, I guess, not necessarily looking for guidance. But when you consider your R&D expense going forward, you obviously have the cost savings from the recent Sanofi announcement but you have the potential for portfolio expansion. So I guess when you link these potential in-licensed products to either your current manufacturing, is this something that you would look to do in-house or sort of add on to what you're doing with Sanofi and the overall impact to your R&D, for manufacturing especially?

Yes. Manufacturing, leniolisib, obviously, is a small molecule. So that's a different, quite a different animal. Sanofi is our long-term partner for RUCONEST, which is, of course, a biological. And we feel very confident and very happy with them, and it's mutual. So basically, manufacturing is not our game, right? We decided. So that's why we have also outsourced. Although we are responsible for the manufacturing of leniolisib, that was tech transferred by Novartis to us, but we have, of course, outsourced the manufacturing of leniolisib to a contract manufacturer that can do these things much more efficient and much better and with a lot lower risk than if we were to engage in this. Although we have expertise in-house, it's better to actually not do that and stick to your strengths. And our strengths are really the clinical development of compounds in rare and ultra-rare diseases and of course, the commercialization of rare and ultra-rare diseases, we really understand that. That's why it's relatively easy to bolt on these additional opportunities for portfolio expansion from in-licensing or acquisition.

But also, I think, Joe, what we also see is Novartis is a very solid company, and they have done some very solid research collaborations on leniolisib in additional indications with renowned institutions. And that is actually something we're looking into as well to actually see whether we can actually formulate an additional clinical trial program in the not-too-distant future to investigate a subsequent indication for leniolisib beyond APDS. And that's a very exciting prospect as well. That will not bring any complications, obviously, to the manufacturing, but just add synergies, I would say.

Our next question comes from Alex Cogut with Kempen.

I just have a couple of questions on the guidance. So within your single-digit top line growth, how much is that due to volume growth expectations or the 5% increase that you've enacted for this year?

Yes, Alex, I saw that. We announced that this morning. We're actually in line with industry practice. We sort of take a typical price increase year-on-year and have been doing that. But there's an underlying volume growth, as I was hopefully explaining earlier in the presentation. And if you want to sort of, I don't know what precisely the mix will be because it's a little bit more complex than that, of course, because there's a gross to net effect as well, which is always difficult to estimate how large that will be going forward. But I would say 50-50 is probably a reasonable guess with regards to pricing and volume effects, but there's definitely a positive volume trend underlying these remarks here. I hope you understand that by now.

Yes, of course. And I also noted a sense in your guidance or in your outlook on no longer investing in the current business. Does that include other indications for RUCONEST?

Yes, it does. But that's a really long-term game, as you rightfully pointed out. And I think the very best case, of course, is that we will be working for a while with our AKI study, which is a IIb study, which has to be followed by a pivotal study. And this is, of course, a different animal. This is going to be large studies. So definitely, that's a long term perspective. But for the short term, I think it's much more important to realize that we are going to significantly invest in leniolisib preparations for launch. But also, as I was just saying earlier, in actually trying to formulate these research collaborations that Novartis has done for leniolisib and coming to hopefully filing another IND in the not-to-distant future for leniolisib for a secondary indication. And that will, of course, drive growth much sooner then that these long-term projects as, for instance, AKI would be.

So I would say for the near-term growth, leniolisib is not only a significantly larger, has a significantly larger commercial potential, we believe, than RUCONEST, but also there's a second indication possibility. And of course, we continue our search for additional acquisitions and in-licensing opportunities, which we can afford, of course, because as I was saying earlier, we have access to additional debt capital, if necessary. We have a balance sheet of EUR 190 million. And as Jeroen was showing, we have very strong cash flows from our operating business. So that all those elements together, I think, those things are far more important to drive the growth prospects of the company here going forward and to help us grow significantly over the coming years. I hope that answers your questions, Alex.

Yes. So just to be clear on the preeclampsia study will never restart.

I think we'll have a critical look at these kind of projects, indeed, what the prospects of those projects would be for the growth prospects of the company. And as you already heard me say, the most important ones are not related to the C1 in the short to medium term but are related to the leniolisib and other opportunities.

Got it. And then on leniolisib, as you mentioned, there's a second potential indication. Can you give us a bit more details on that?

No, because there are several research collaborations that Novartis have engaged in. And we're very happy to have a Chief Scientific Officer since last year, August. He's diving into these things in a very enthusiastic way. And we're trying to, of course, to make a selection which of these research collaborations, research results are the most promising ones that we could actually develop. But those are additional rare indications where the PI3 kinase delta pathway is involved. And as you know, the PI3 kinase delta pathway is quite an important one. So we'll, of course, update the market as and when we have decided on such thing to move forward. It's not going to be tomorrow, of course, obviously, Alex, but not-too-distant future, hopefully.

Fair enough. And just the last one on leniolisib. I've read in the local press that you mentioned that it can be a bigger drug than RUCONEST. So should we take that as official guidance that peak sales there are over $200 million?

No. It's not official guidance because I leave these kind of predictions happily to the professionals, i.e., you guys, the analysts. But if you sort of look at the number of patients, and Anurag was alluding to that, there's already, without any systematic patient search, there's already 60 patients identified in France by a couple of doctors starting a registry. That means that there is already 1 in 1 million patients identified, and we haven't even started looking for these patients in earnest. So we will significantly amp up the search for these patients by means of deploying a significant number of medical, call it, new medical colleagues in the U.S. and the European markets to find those patients. And of course, as and when these patient numbers come up, you can make your own calculations, I would say. But we definitely, at this point in time, are confident that the products will have a potential that is significantly larger than RUCONEST.

Our next question comes from Christian Glennie of Stifel.

Three questions then to Sijmen. You've answered the first one in terms of U.S. potential RUCONEST growth. But thinking about rest of Europe and Rest of World growth or some sort of guidance on '22 numbers. Obviously, you had a bit of a step down last year in Q4, had a pretty low number there. Just some idea about how revenues, RUCONEST revenue might recover or grow in '22.

Yes. I mean, yes, Christian, thanks. You know that there is little commercial opportunity in Europe for all sorts of reasons, historical reasons, mainly. So that's one thing. Secondly, you heard us say that, yes, we are expanding. And of course, we will sell RUCONEST and make some money out of that in the additional territories that we're exploring and exploiting. I think the main thing is, of course, that we are looking to put our network out for the rollout of leniolisib because there we are not inside a reference pricing system with historical prices. But there, of course, we will introduce the product in a certain price band worldwide. So therefore, the commercial potential in that respect for leniolisib is significantly larger than, very significantly larger than RUCONEST, which mean that we can have proper commercialization operations on both sides of the Atlantic, and you heard already Anurag say in Japan as well.

And with regards to those fluctuations in RUCONEST, Jeroen mentioned an interesting one. The fluctuation in RUCONEST also, to a great extent, was because there was, before Brexit in the end of 2020, there was a significant order placed to make sure that the U.K. had sufficient supplies of RUCONEST available. And that order actually meant that for, I think, the most part of 2021, there was no order from the United Kingdom. That was a big swing in the negative results versus '20 in Europe. So you had this big swing in the U.S. Q4 '21 with regards to the COVID where patients were, with hindsight, filling their prescriptions quicker just to make sure they had drug. We have the same in the Brexit. So Q4 2020 was really a super quarter, I think one of the best quarters we ever had. But now we know why that was. And of course, that Brexit thing has been mentioned before.

So it should be a little bit more balanced out this year, we believe. But the guidance overall is not specific for the U.S. It is for the company as a whole, right, the single-digit growth that we're expecting in '22 over 2021. All right, Christian?

Yes. And then on a sort of modeling one, OpEx, 2 things there. One was G&A stepped up quite significantly. What was driving that? And then the overall fourth quarter run rate, if you exclude some of the one-offs on impairments and things, is that a run rate to take forward into 2022, please?

Well, I think, Christian, on SG&A, a big part of the expenditure in the whole year, but also in Q4 was because of these additional insurance costs. And yes, going forward, the impairments that we had were split in R&D from that and the DSP impairment was in SG&A. Those are one-offs, and that will not happen, obviously, again this year. And I don't foresee these kind of big impairments anyway in this year with the current information that we have.

I think we will significantly invest, right, in preparation for leniolisib.

Yes, yes, of course. But yes, you were talking about impairment. But indeed, we are stepping up our leniolisib investments. We did so into 2021, and we will do so even further in 2022. That's clear. And that will have an impact on the profit as we said before. Yes.

These investments will continue. Run rate is the new base.

Yes. Yes. But I think leniolisib will even be more than what we did in Q4 throughout 2022, Christian.

Okay. And then a related point maybe on just to clarify when you call out additional, the manufacturing costs, the $9 million of manufacturing. What does actually relate to then? Is it part of this tech transfer to have your own CMO from Novartis or what?

Correct. Correct. Correct. It's the cost, exactly as you say. It's the cost of the tech transfer and the cost at the CMO that they have been producing the first tablets. So it's basically development cost at the CMO to produce the first products of leniolisib.

And then just finally, earlier then you talked about Japan as a potential new market and obviously with development there. Typically, people will look to partner, find a local partner to program through development, through regulators. Is that something you need to have in place first before advancing the product in Japan then?

Yes and no. We're working together with a one-stop shop, if I may call it that way, that helps us with the regulators, and that helps us already with the regulators, that will help us with the clinical trial. But again, this is not something where you have to put a ton of people in the market to actually go around the country. In Japan, as in some of the European markets, in opposite to the U.S., the treatment of these kind of patients is relatively well concentrated. And the pool of patients we find are located in 1 or 2 or maybe 3 centers. So initially, that's not the necessity, we would say. And then we take it further from that.

So we think that our idea is to keep as much as the value chain inside Pharming as we are doing with RUCONEST. And we see the possibility of maintaining that with leniolisib as well for those reasons, as I just described. There will be some partnerships but it's more that you're looking for distribution partnerships where the vast majority of the proceeds will still end up in our part of the value chain.

We have no further questions on the phone line, so I'll hand back for any closing remarks.

Yes. Thank you very much. Thank you very much for joining this conference. As I was explaining in the beginning of the conference, we're very excited for the second time in the history of our company to have positive pivotal data in our hands, but this time to be able to launch product ourselves. This will mean that we can actually keep the value of the product in-house going forward, which means that the company can transform from the one product, one market it currently is depending on to 2 products in multiple markets on both or actually on both sides of the Atlantic, but also on both sides of the Pacific, which excites us very much.

However, as you also noted in the conference that we will continue to invest very heavily, obviously, going forward in 2022 in this launch, and that will have a significant impact, of course, on the profitability of the company for the short term to stimulate that growth from the new product leniolisib that we anticipate to be launching within a year from now.

I would like to thank you very much for your attendance. Thank my colleagues, Jeroen Wakkerman and Anurag Relan as well. And we look forward to updating you in the future on the next occasion when we have results available. Thank you very much and have a good day.

This concludes today's call. Thank you for joining. You may now disconnect your lines.