Pharma Mar, S.A.

Thank you, Laura, and good morning to everyone. I'd like to welcome to all of you to our full 22 results conference call. On the call with me today are Mr. Luis Mora, Managing Director of Farmama, Maria Luisa de Francia, Chief Financial Officer, and Pascal Besman, which is Vice President, Strategic Development. Following our prepared remarks today, we'll open the line for questions. And before we start, I'd like to remind you that today's conference call may include forward-looking statements regarding future events or the future financial and operating performance of a company. Such forward-looking statements are only predictions based on our current expectations, and actual results may vary from those projected. We disclaim any obligation to update any information provided herein. And we refer you to our safe harbor statement and our corporate presentation, which is available on our website together with the press release and the report of the results we released yesterday. Last year, it was an important year for the company because we achieved important goals and we had an important advance in our development. I guess you had a chance to see our press release yesterday, so I'll not go through every little detail, but let me highlight the most important news from last year. In 22, we saw the approval of lorbinactidine for commercialization for the treatment of small cell lung cancer in countries like South Korea, Qatar, or Emirates. That adds, of course, to U.S., Australia, or Singapore, where the drug has been approved already. As you know, one of our main targets with Abcelka in the next future is to achieve approval in Europe and full approval in the U.S., And in the meantime, we'll have more news about approvals and filings in other countries. Talking about other developments, the two Phase III trials that are ongoing with lorabinectadine for small cell lung cancer are currently recruiting. And in the case of the trial in first line in combination with Tocentric in small cell, that our partner, Josh, is doing together with Roche. They announced in January that recruitment will be completed this year. The Lagoon trial, which is phase three for second line in small cell lung cancer, using lorbinactidine as a monotherapy, is also progressing with this recruitment. It is worth mentioning that both trials will be fileable not only in U.S., and Europe, but also in other territories. Also, last year, we reached an agreement with a company provider of the immunotherapy that will combine with Zephselka for the phase three trial in mesothelioma that we expect to start later on this year. In 2022, we also advanced in the progress of other oncology molecules in our pipeline and we had a new molecule, PM534, entering into clinical development in phase one. And we also did all the work and have ready to include another new molecule in the pipeline, which will happen later on this year. In other therapeutic areas, like RNA of interference, last year we started another phase three trial with Ativan Isidan. So currently we have two phase threes, two phase 3s ongoing with T-vanicidin, one to demonstrate activity, and another one to assess safety, which started in April last year. Also, in RNA of interference, last year we started a phase 2 trial in macular degeneration with another molecule called SIL-18001. which is worth highlighting the fact that it's administered as eye drop solution for this indication. I will turn over now to Maria Luisa, who will give you more details about the financial results.

Thank you, José Luis. Good morning, and thank you all for joining this conference call about 2022 full-year financial results. The main events that had an impact on the 2022 financial statement were as follows. Firstly, we will point out the new legislation applicable in France with respect to drugs marketed under the Authorization d'Accès Compassionnel Early Access Programme, which has resulted in significant discounts leading to the need for a provision of 15.2 million euros. units sold in France in 2022 were slightly higher than those sold in 2021. Secondly, in the last quarter of the year, and after 15 years of Chandeliers on the market, the generic products selected in began to be marketed in Europe. with the consequent pressure on prices and volumes. In 2022, the impact, although failed, has not yet been significant. In 2022, Iondelis reached one of the commercial milestones set in the license agreement signed with J&J in 2001 for 10 million euros. Finally, the decision to discontinue the diagnostic segment results in the recognition of a number of expenses and provisions amounting to some 3.5 to 4 million euros. Thus, in the analysis of recurring revenues, we see a decrease of 5% compared to the previous year. As you know, these recurring revenues are made up of sales and royalties received from our partners. YONDELI's sales in Europe were 63.8 million euros. In 2021, they were 69.4 million. Sales in Europe of CEXELCA under the Authorization to Access Compassionate Program amounted to 15.5 million euros, 30.2 million in 2021. This decline in sales was partially offset by an increase in royalties of 23% to 50.3 million euros, of which 46.9 million euros correspond to just pharmaceutical sales of Celca in the United States. and by an increase in raw material sales to our partners for both John Daly's and Cepselka, up 11.6% from 19.2 million euros to 21.4 million euros. In relation to non-recurring revenues, the main difference was due to the achievement in 2021 of a commercial milestone under the Just Pharmaceuticals Agreement, which resulted in revenues of 22 million euros, as well as to the amount recognized as revenues from those deferred incomes from the same agreement, which also was higher in 2021 by about 10 million euros. These differences were also partially offset by the achievement in 2022 of the milestone under the J&J License Agreement for Yondeli in the mentioned amount of €10 million. In terms of expenses, there was an increase in R&D expenses as a result of the up to four phase III trials ongoing in 2022. 11.3 million euros more than the previous year, or 16% higher. In marketing and general expenses, the return to international face-to-face meetings, congresses, and commercial actions have also led to a certain increase in expenses. And finally, as we mentioned at the beginning, the income statement is also affected by the discontinuation of diagnostic activity. All of the above leads to an EBITDA of 51.4 million euros compared to 97.8 million euros in 2021. And a net result for the period amounting to 49.4 million euros. Income taxes in 2022, 5.6 million positive, includes the activation of tax credit to be applied in the future, as well as the monetization of R&D deductions received in 2022. Finally, it's important to note that in 2022 operating activities generated gas of 38.3 million euros. Thus, the net gas position at the end of the year amounts to 192.8 million euros after deducting the 39 million euros of total financial debt. This is 15% above the net cash at the end of 2021. To summarize the financial part, I would like to highlight the generation of operating cash flows, even with growing R&D expenditure, with the consequence maintenance of cash levels and reduction of debt. I would like to end my intervention with a reference to ESG issues. As far as environmental concerns In 2022, the group has measured its carbon footprint, including scopes 1, 2, and 3. In 2023, the group is planning to work on an emission reduction plan in accordance with the science-based target initiative standards. On the social side, I will briefly give some data on quality of employment. For instance, 98.8% of the contracts are permanent, and all of our employees have a health insurance policy. On diversity, we have employees of 15 different nationalities, and on equality, 60% of our employees are women with a weighted wage gap of 3.4%. Finally, regarding governance, I would add that 41% of our board members are independent, 33% are women, and also 47% of our senior management and management are women, too. And now I pass the microphone to Luis Mora.

Thank you, Maria Luisa. Our pipeline, you can see the confirmation of our investment strategy in R&D. There's a strong increase in the H3 client for this year, 2023, and new molecules under development. Regarding John Daly's, after already 15 years in the market and maintaining an excellent market share of more than 30% in its label, Closer to 2022, we've done increases in salt, demonstrating that this is a standard of care in soft tissues or coma. And we have an excellent commercial network. But in the last quarter of 2022, and Maria Luisa explained before, the generic of directive already appear, impacting in price in different European territories. According to the different regulations, the initial impact oscillates between 30 to 50% time reduction, depending on the countries, and the different distribution channels. Also, in some countries, the access system changed, starting the offers to tenders, and we will see what is the evolution to 2023. It is important to highlight the important development plan, which we've been active in, with two phases in the small cell and cancer, in first-line and second-line treatment, with trials underway. Three new factors three, mesothelioma, leiomyosarcoma, And in the last quarter of this year, we plan to start considering the ovarian cancer trial. This aside, Pascal will do more details. In 2022, we have reached an important agreement with the company that is going to collaborate in the mesothelioma trial, and we hope to start around the summer of this year. Regarding Cylentis, two phase three and one phase two in advancing according to the plan under development. And the recruitment is ongoing, and we will see the results of that when it's coming, but we expect it in early next year, so probably we will have the 3,000 data. In Phases 1 and 2, we have a cuvectinine, P534, and also in this third quarter, a new compound, P54, we will start the Phase 1. Finally, with haplidine, putideptin, we are initiating a Phase 2 trial in immunosuppressed patients, with SARS-CoV-2. As you can see, this is an ambitious development program that will certainly bring new treatment options for the patient and new opportunities for PharmaMart. Now, Pascal will review more details in some clinical trials. Pascal?

Thank you, Luis, and hello to all. I'm going to give you some details on our current and near-future Phase III trials. In addition to the combo combination pivotal trial with atezolizumab in first-line maintenance therapy, which is ongoing by Jazz in partnership with Roche, I have three PharmaMark-led trials to share with you. First of all, the Lagoon trial. This is a three-arm trial of lurbanectidine monotherapy at the 3.2 milligram approved dose. versus a combination with irinotecan versus the control arm of either oral or intravenous topotecan or irinotecan, where the primary endpoint will be arm A versus arm C with 90% power to deliver a hazard ratio of 0.8. It's important to know that there is a statistical plan such that either arm can both lead to a potential approval, or only one. The order will be Arm A versus C, which is the primary analysis, followed by B versus C. There are four learnings and new pieces of information that led to this trial where we've made some tweaks that we think increase our odds of success. I will share with you. The FDA requested that we make sure that 70% of the patients have prior IO. This reflects the population of the United States and is very helpful to us because whereas there is no data that we are aware of that shows synergy or additive benefit from IO and topotecan or iguana-tecan, we have plenty of such data with lurbanetidine and IO, some of which of course has led to the combination trials you are already aware of. The second tweak we have done in this case is unlike our prior trial, we are requesting brain scans to make sure that all of the brain mets are stable or tapering doses. This was our worst subset in the prior trial with a hazard ratio of 1.3. So we think that can help that as well. The third tweak we've made is no prior GCSF. If you recall from our basket trial, the use of GCSF was not mandated for primary prophylaxis, and therefore the secondary use was only 20%. By having forced GCSF on all patients in prior trial, we were basically helping the control arm. And lastly, and perhaps in my opinion at least most worthwhile to think about is that this is the first trial where the regulators have allowed oral topotecan instead of IV. Oral is more used because it's more tolerable, and despite having been approved in a non-inferior trial, it is numerically inferior. But most importantly, IV topotecan as your control arm introduces patient selection bias, Because with a 92-year-old person coming in on their walker, you're not enrolling them as a physician into a trial with a 50% chance of IV. So we think the addition of oral will mean that some lower performance status patients will be admitted into the trial, which will help us. So with this trial and the first-line maintenance trial, you can see that we're not just happy in second-line small cell patients. We want to change the treatment paradigms. Let me move on to mesothelioma. This is another aggressive thoracic malignancy with a long latency period caused by an external stimulus, in this case, asbestos. The treatment paradigm has had very slow progress. The only real change has been the recent addition of Nevo IPI in both US and EU into the frontline setting. The patient numbers are smaller than small cell and dominated here by Europe. Looking at our trial now, this is based on ESMO 2019 monotherapy data and what we have seen of the addition and synergistic benefit of I-O in multiple data sets. Because of the recent approval of Nevo Ithi in certain territories, this is a trial that will be prior to one platinum, and there we will stratify for those who have had I-O versus those who have not. It will be a monotherapy versus a combo therapy with a tezolizumab versus the control arm, which is dealer's choice, gemcitabine or vinorelbine with an overall survival primary endpoint. We're finalizing the protocol and expecting to have our first patient in this summer. The last indication is leiomyosarcoma, which we are hoping to start also in the first half of this year. Let me start with the rationale for this. We have seen data that's been published for yondelus in this indication with a very strong overall survival. And we've had in the public domain some data from lurbanectin in this indication, some published, presented last year at CETOS. And yet we also have more that is not yet public domain that we are aware of. We know that lurbanectin synergize with doxorubicin from multiple prior trials. And that's why we want to test it in this trial in combination in the frontline versus doxorubicin. I'll show you the protocol momentarily. Do bear in mind that we are unparalleled in the land of sarcoma treatment from our 20 plus years of experience with Yondellus trials and commercial. We know the centers, the doctors, the patient associations, the reimbursement channels, so we feel very confident that this is a trial we can win on. As for the business case, leiomyosarcoma is 50% of SARS-CoV-2 sarcoma, and half of that is metastatic. So the treatment target market in EU5 is around 2000, and we think we can get a good chunk of market share. Furthermore, We expect to see six or more cycles, much more than in small cell, as this is a first-line trial. And so you can do the math that this may be somewhere around the 30 million European indication for us. In the U.S., because of the IP, the opportunity will be more limited and shorter. However, given in Europe that the 10-year orphan clock has not been triggered yet, we could have eight years or so, in our opinion, to see this business case bear out. And now for the trial design here. This is a phase two, three adaptive design who will have two different dosing regimens in the part two B versus standard of care doxorubicin. An interim analysis will then be held to pick the better dose. And then the primary endpoint will be PFS by independent review of the 80 patients in the phase two B and the 120 into part three so 200 in the analysis. This will have 60 sites over Western Europe and the US only, where we have the sarcoma experience, and so we hope to get data back end of 2026. With that, I will turn it back to Jose Luis for further comments and to take your questions. Thank you.

Thank you, Pascal, and well, so after hearing About all these projects, 23 is definitely going to be a very busy year for us. Firstly, we expect to hear about new approvals and submissions of LRB in different countries. And in regard to the drug development, and particularly development with lorbinactidine, as Pascal just mentioned, we expect to start a Phase III trial for mesothelioma and a Phase III trial in other indications like leiomyosarcoma. In regard to both of the phase three trials for small cell lung cancer, Lagoon and Inforte, both are currently ongoing, so we'll continue recruiting. And in the case of Inforte, our partner just announced in January, as we just mentioned, they expect to finish recruitment later this year. Also, with lorabinectadine, we expect to finish this year the phase two trial in combination with idinotecan for small cell lung cancer. And about other molecules in our pipeline, in 2023, we expect further developments with PM534 and PM14, and also expect to have a new molecule, as we've mentioned, PM54, which will get into clinical development during the first half of this year. And finally, as Louise mentioned, in RNA of interference, we expect to conclude this year the two Phase III trials, that we have currently ongoing for dry ice. So we hope all these developments will lead us to achieve our goals in the short future. And after this year, we expect to see more important news like data in those two phase three trials in RNA that I just mentioned. Perhaps some more license agreements in these indications and others. InfoWriter trial will be still ongoing in 24 and might start generating some news afterwards. The other trials in phase three, like Lagoon, might start generating some news in 25. So all in all, a very busy and exciting couple of years ahead of us with a strong balance sheet and cash position, which will allow us to finance our developments. With this, we conclude our speech today. And we open the line to questions. Laura?

Thank you very much. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We'll now take our first question from Amy Sardia at Needham & Company. Your line is open. Please go ahead.

Hi, good morning. This is Ethan Leon for AMI. Thanks for taking our questions. Maybe a couple here. First, on the Phase 2 update for NERBI plus Urbino-Tcan, I guess any chance this could support maybe, you know, an SMBA in the U.S. or a submission in Europe?

No. We expect to finalize the trial this year and the recruitment, and probably in the last quarter of this year, we have the data. We will see the pain of the basalt. Remember, it's a single-hand trial in combination with the inoxicants, and we will see. It's difficult to answer this question after we have the data.

Okay, got it, got it. And then maybe, I guess, you know, you talked in the past kind of, you know, thoughts around, you know, in licensing, you know, assets to kind of, you know, to leverage kind of your marketing sales force. Maybe remind us again of, you know, the type of assets that you think best fit in your portfolio. And then kind of curious if you've seen an evolution in the market for such assets you know, at present versus, say, you know, 2021, 2022. Thank you. Yeah.

We continue to screen the market and to have conversations with several options. The assets that we want to incorporate in our pipeline in the sales network is for solid or rheumatological tumors. The level of the potential peak sales between 70 to 120 million, this is the level of the assets research in the market. And it is. I mean, it's not a lot of options today in the market, but some options more. And, okay, the activity is not a stop, obviously. It's continuous. And we have today several options. We had in the past some compensations. And, obviously, this is the deal. Then to two parts need to agree. But we hope in 23 or 24, we finally achieve some licensing.

Great. Thank you very much. Thank you.

Thank you. We'll now take our next question from Christian Glennie at Stifel. Your line is open. Please go ahead.

Hi, guys. Good afternoon. Thanks for taking the questions. To kick off with just a few sort of on the financials and the modeling side for 2023, I didn't fully catch what you seem to be implying from the generics to Yon Delis in Europe, or what should we be implying in terms of erosion of sales potentially in 2023? And is there an expectation that there may be some U.S. generics coming in in 23 on Yondelas?

No, not in USA. We don't expect that in the short-term generics in USA. The major impact is here in Europe. I explained before that the impact, according to the legislation of different countries, is a reduction price between 30% to 50%, which is automatically In some countries, not in all countries, the market access channel change is through tenders. Like Italy, in Spain, not yet, but little by little. When the Jedi war, the discounts is played in this game, okay, from the price. then we will see. We will see through this 23 what we'll see the real impact. I repeat, the price impact between 30 to 50% depends on the company. It's automatic. Thanks.

Right. Okay, thanks. That's helpful. And then on Zepselker and the royalties they reported, Obviously, we'll see what number Jazz comes up with sort of overnight, but it implies maybe sales of around about sort of 275 million. At this point, there's no mention of potential milestones, commercial milestones on those U.S. sales. Is that just a timing thing, or should we assume that you haven't hit the next threshold?

Well, we can mention nothing about the Jazz sales or if the milestones are coming. This royalty growth is a good signal. The SELCA is a good level of sales in the USA, and the royalties you remember we announced come from high gains to 30%, depending on the level of sales. Then if it's growing, it's because they jumped the other scale of royalties. This is what it caused. It's a signal. It's in parallel. with a good level of sales, the Delta in USA.

Okay, so we may still end up with a milestone being paid, potentially, for 2022. You can comment more.

If you want to see more about the Delta sales in USA, ask Josh. It's not our market.

Okay. Okay. And then just finally on R&D, what should we be expecting for 23? Is it a similar increase? Obviously, you've got the same trials are ongoing. You're going to start mesothelioma. What should we be expecting for R&D?

Well, as I explained before, it's a very busy, very busy year. The pipeline is plenty of spaces to reach with the CLK, with the Lentis, the II, etc., then obviously that every new drug is coming to phase one, et cetera, then the increase of R&D will be clear. The level of increase we will see in the panel, you know very well, is very linked to the number of patients we enrolled, the number of countries, centers included in these trials. But in principle, we can't... expected to increase like this year if you compare with the last year, the past year, 21. OK.

OK, thank you.

And we'll take our next question from Joseph Hayden at REC Securities. Your line is open. Please go ahead.

Good afternoon. Thanks for taking my questions. Just firstly, on the Q4 royalty number for UrbanEctodine, can you confirm if that contains any adjustments that you had to make after Jazz reported its Q3 sales?

Well, this is not any adjustment. This is our focus about the royalties. We don't have exactly fewer, but we don't expect any deviations of that.

Okay, but I mean, you have to make adjustments after JAS reports its actual numbers, presumably, and these are accounted for in the next quarter's royalty lines. So were there any that were related to Q3 in there, or is it purely the Q4 royalty forecast?

It's not a material adjustment.

Okay, fine, that's great, thanks. And then... Just on the ATU program, you mentioned a slight increase in the number of patients in that this year. Is there any scope for further increase of patient numbers in this program, or do you think it's pretty level now? And also, on the price, we know that the price has come way down there due to French regulations. Is that settled now, or will there be further discounts?

Well, in 22, The number of patients treated in France, I remember, is about 700 patients. Okay. It's about 7%, 8% more than the previous year. The price is flat. But the previous year, many of the patients were treated under a two. And in July 21, changed the law for use compassionate. But many patients was a carryover. and some patients was already included in a two. Then this impact in the level of discounts were in December 21. The level of discounts applying under this new legislation are linked with two variables. One is the level of sales, and two depends on the number of patients treated is in the law. Then based on that, the calculation, internal calculation from about 50, 60, a little more than 50% than the sales, okay? And this is a low. Now the company sends the information to the financial authorities and we expect that they come with a credit note. But the price is flat from 2020.

Okay, that's great. Thanks. And then just on Yondeles, obviously generic competition coming in there in Q4, is this going to impact the size of your oncology self-force? Are there going to be any meaningful cuts there this year?

Well, our self-force and medical affairs, there are different areas in the network. Now it's a lot of work, not only for John Dallas, and it's different in different countries. I mean, it's not the same in Germany than Spain, or same in Italy than France. It's not like Netherlands and Belgium. Then the generic impact is in different manner. The second one, the activity to prepare the market for the next Compounds are coming for TELCA, et cetera. They started to work in 23. And the other important reason is if we want to achieve an agreement for licensing in, we need to Salesforce. That makes sense to have licensing in without Salesforce. Then what we don't will increase is the SPs in the Salesforce and the new capabilities, okay?

Okay, great, thanks. And just to follow up on that, in terms of your business development efforts, is there anything more to say on that front in the new year?

Well, we are a big activity, I can confirm. Big activity, many contracts, screen the market, and we have always in the table assets for analyze, but We will maintain this activity because it's our important goal for us, and we want to have a new asset, not only one, only two, as soon as the better. Then we will see. I can't say more. Okay.

Okay. Okay. And last one for me, just on that R&D slide that you showed where it's good to see that you're expanding the phase three indications now. That's great. I noticed the one that you didn't go into further detail on was ovarian cancer phase three. Can you just describe how your plans there are different from the CORALE trial that you've already conducted with Lerbinectadine?

In ovarian cancer, we have still considered. In this trial, potential trial was more because we know very well the ovarian cancer. in Europe. Then several competitive groups in ecological oncology and key opinion leaders approach us. Because the patients relapse to PARP inhibitors, they have a poor prognosis and not a lot of options for treatment. We conducted a phase I, II in the past, and well combined, very well, very good combination, we've been active in PARP platulotaxel. Several patients entered in this trial and with encouraging results. Based on that, based on the medical needs, based on the mechanical action of this combination, we start to work with these key opinion leaders and competitive groups to design this trial. Now it's advanced. The protocol is more or less finished. in contact with these groups, and we expect it, if all goes well, to start this trial at the end of this year. This is the plan of this trial.

Brilliant. Thanks. Thanks very much.

Thank you. We'll take our next question from Alvaro Lenze at Alantra Equities. Your line is open. Please go ahead.

Hi. Thanks for taking my questions. Most of them have already been Just some clarification. I don't know if you commented on this during the prepared remarks, but the increasing in general and administrative expenses in Q4 seems a bit higher than we expected. Is this for preparation for any additional marketing efforts in some countries, or is this just one-off item that we should not assume going forward? And my second question would be regarding In the current setting of second line small cell lung cancer, what is the growth rate that we should expect in the U.S. from the royalties before there is an extension to first line or something like that?

Alvaro, in regard to general and administrative expense, they are affected by genomic liquidation or the starting of the closing, the process of the closing of the company. That's why it's a bit higher than last year.

Could you please quantify how much could that have been in Q4?

Not exactly, no. No, I'm sorry.

No, I don't have number here, but... And I mean, regarding the second question, well, you know, we can't say any number about the jazz market and the jazz state. That's it. Sorry, but I can't explain more.

Okay, thank you very much.

Thank you. And now over to you, Jose. Questions over at your end. Thank you.

Thank you, Laura. We had a few questions, written questions by email in regard to the Neptuno trial and the close of the trial, Luis, and, you know, about recruitment, recruited patients and available patients. If you could give more detail on that. Okay.

Thank you, Pepe. Well, the first trial, as you remember, was designed for a particular population, population in the hospitalization patients, moderate COVID-19, need the oxygen, et cetera, et cetera, so on. Across the pandemic, we observed this topology of patients decreased dramatically. This population, I don't refer... in severe or in the patients donated in the hospital. I refer this to special population. What's included in the protocol? And we are stopping them that we announced recently for the lack of recruitment, lack of patients. The evolution of the pandemic is linked with this level of recruitment. We closed the trial with 205 patients, evaluable patients, The total of patients randomized was about 15, 20% more higher than that. But the valuable patient was 205. And in the primary analysis, in the top line, what we announced in the pre-release was a clear, clear positive trend in favor of pletidepsin. But the final data is still under analysis and screening database. We will publish in our scientific publication, obviously. Okay. All right. Thank you. Laura, with this, we finish the round of questions.