Pharma Mar, S.A.

Good morning to everyone. I would like to welcome to our third quarter results conference call. On the call with me today are Maria Luisa de Francia, Chief Financial Officer, Luis Mora, Managing Director of Pharmamar, and Pascal Vesman, which is the Vice President of Strategic Development. Following our prepared remarks today, we'll open the line for questions, as we always do. And I would like to remind you that today's conference call might include forward-looking statements regarding future events or the future financial and operating performance of the company. Such forward-looking statements are only predictions based on our current expectations, and actual results might vary from those projected. We disclaim any obligations to update any information provided herein. And we refer you to a safe harbor statement on our corporate presentation, which is available on our website together with the press release and the report of the results we released yesterday. Well, as shown in the preceding quarters of this year, in the third quarter, our commitment to increase our investment in R&D remains evident. Most of these R&D investment is in oncology, and we're making substantial progress in advancing our development efforts. It is worth highlighting that LAWN trial, which represents the confirmatory phase three study of lorinectadine as monotherapy in second line for small cell lung cancer, is recruiting, or recruiting is proceeding as planned. We're also making significant headway in the preparatory work for launching the phase two, three trial of lorbinactidine in first-line leiomyosarcoma, which we expect to start shortly. Also, in oncology, we're actively engaged in early-stage clinical trials with other molecules like ectobactidine, PM534, and PM54. These underscore a strong belief in the potential of these molecules, and we're fully committed to ongoing R&D investment That will foster sustained growth in the years ahead. Turning to our revenues, we're pleased to report a notable increase in royalties from the sales of the Celca in the U.S. for this quarter. It is important to note that this is an estimate, as we're currently awaiting sales information from our partner, JAS, which is scheduled for release results on November the 8th. We maintain a robust balance sheet and strong cash position, even after distributing dividends and factoring in the funds allocated for the acquisition of company treasury shares. With that, I'll now pass the floor to Maria Luisa, who will provide you with more comprehensive overview of our financial results.

Thank you, José Luis. Good morning, and thank you all for joining this conference call on third quarter 2023 financial results. I will start by reviewing the evolution of revenues. The first quarter of the year is a continuation of the previous quarter and does not contain any exceptional elements. YonDeli sales continue to reflect the impact of the arrival of generics directed in products from the market, resulting in a 61 percent decline in YonDeli sales. mainly due to lower prices as the volume impact is 18% compared to the same period last year. In relation to lorbinectin proceeds associated with the early access or compassionate use program in France principally, demand is this nine-month period has been slightly higher than in previous year, approximately 3%. I would like to remind you that the main cause of the increase in this item between periods is due to the positive recalculation made in relation to the 2022 rebates once we received from the French authorities the settlement in relation to such rebates. This adjustment was recorded on the second quarter of 2023. Following with recurring revenues, royalties received from our partners performed well in this quarter, particularly royalties from SEPCELCA sales in the U.S. In the first nine months, royalties increased 8% year on year. As I always mention, just third quarter royalties is an estimate made by PharmaMart. On the expenditure side, The most noteworthy is the increase in Airbnb expenditure, which is up 19% to €70.3 million. This increase is mainly due to the Phase 3 trials currently underway, plus preparatory work for those trials about to begin, as Luis Mora will explain later. All other operating expenses remained fairly stable between the two periods, taking into account that in 2022, they included certain amounts corresponding to the genomic liquidation process, which do not take place in 2023. All of the above lead PharmaMar to a net result of €8 million, including a positive €5.1 million of income tax due to the monetization of R&D deductions. I will finish highlighting the net cash position as of September 2023 that amounts to 145.9 million euros after deducting 39.8 million euros of total financial debt. At this point, we should mention the capex investment in the period which exceeds 10 million euros mainly due to the new first of a new oligonucleotide manufacturing plant that is in progress that Luis Mora will comment later. We should also mention the shared buyback program to which we have allocated about €7 million since its launch until 13 September. To conclude, as Jose Luis Moreno mentioned before, we have a solid balance sheet to continue with our business plan. And now I pass the microphone to Luis Mora.

Thank you, Maria Luisa. Good morning. As Maria Luisa has already commented, generality sales in Europe continue to be affected by the generatics. There are currently two generic companies market-interactive in Europe, which parts with a greater pressure on price and sales volumes. Though in volume, the difference compared to 2022 is only 18%. The same does not happen in the rest of the markets where we see an increase in the use of jondelis. The increase of jondelis in the NCCN guidelines in first line in combination with doxorubicin for layer amino sarcoma is very positive in sales in the USA. Regarding Tepscalca, the estimated royalty figure for the quarter reflects a notable increase in sales in the USA, and we expect it to be maintained in the coming quarters. In September, we launched Tepscalca in Switzerland with reimbursement, and it's being very well received by the doctors and meeting our expectations. The compassionate use program is demonstrating that Tepscalca is already establishing itself in France as standard treatment in small cell lung cancer in second and third line. The Lagoon Trial, a confirmatory trial for the USA and registration trial for Europe, continues recruitment as expected in about 140 hospitals, and we hope to increase the number of centers to 200. And we hope to complete the inclusion of patients in the summer of the next year. So far, the information received by the IDNC regarding safety is positive. Another important trial that has already completed its recruitment is a Phase II in small cell lung cancer with a combination of lurbinectadine plus irinotecan, and we expected the results around end of this year. The first line maintenance trial in small cell lung cancer that our partner, Just Pharmaceutical, is carrying out with Roche remains on the data they have communicated, and they expected to have an interim result in the last quarter of the next year. The pivotal trial and frontline registration of leiomyosarcoma with lurbinactivine plus doxorubicin versus doxorubicin, we hope to include the first patient very soon. This has raised great interest among specialists in the recent ESMO Congress. Regarding the trial of lurbinactivine in esoterioma, we have evaluated the project and we have decided to not start it. The rest of the compounds that we have in clinical development are cuvectidine, P534, P54, continuing the clinical development in the Phase II and Phase I, according to the plan. In the regulatory field, perhaps the more relevant things refer to the Cephselkalocea in China. It is already being presented and is in the evaluation phase without major problems. And we hope to know the opinion of the Chinese authorities in the middle of the next year. In parallel to this dossier, the Chinese authorities have authorized our partner for a region of China to launch a compassionate use program. Now regarding the virology area, the most relevant is the NERATA trial, the Phase II trial with politideftin in immunosuppressed patients, which is in the recruitment phase in 11 countries. Xylantis, which is in Phase III, with the product Ibaniciran for dry eye syndrome in patients with Sondgren syndrome, has already completed recruitment, and we expect the data in the first quarter of 24. During this year, 2023, the construction of an industrial oligonucleotide manufacturing plant is being carried out, which will serve both to cover the needs of Cilentis and for third-party manufacturing. The first phase of the construction will be finished this year, and after validation and inspections work, we hope it will be operational in 2024. And now I pass the word to Pascal. Thank you, Luis.

Good afternoon, good morning, wherever you are. I'm going to talk today primarily about recent data presentations and try to offer some context. I'd like to focus first on some of our activities at major medical meetings, starting with the IASLC World Lung in September. Here we presented two abstracts between them that show the effect of platinum re-challenge after lorbanectinine given as monotherapy or in combination with Dr. Rubison is similar to that previously reported with platinum re-challenge as second-line therapy in sensitive patients. This reports that lurbanectin is an alternative second-line treatment option to platinum re-challenge for patients with platinum-sensitive relapsed small cells. Intuitively, it makes sense that the benefit from using a sequence of A, platinum followed by platinum followed by LRB is likely suboptimal in comparison to B, platinum, LRB, platinum rechallenge. And in addition, it gives patients a platinum holiday, which may enhance downstream benefits. Moving on to ESMO last week, first in small cell lung cancer, the Looper trial shows again the synergy of LRB and IO, this time Pembro, which forms the basis for the Inforte trial of Lurbanectin plus Atezolizumab versus Atezolizumab in frontline maintenance. Just looking at the ORR with the usual caveat about reading across trials, Pembro-Lizumab sees a monotherapy ORR in this setting of 19%, Lirbinectadine has shown monotherapy ORR of 35%, and the Lirbipembro combination in the Looper trial, 46%. This mirrors a similar cross-trial comparison of Atezo-ORR, where we have seen ORR of Atezolizumab in single digits, Lirbinectadine again at 35%, and the combination of the two at 58%. When you continue to see one plus one equals three, something good is going on in terms of synergistic or additive benefit. And to remind and reinforce what Luis said, Jazz and Roche have indicated they expect the complete enrollment early next year, which should deliver data with the PFS co-primary endpoint around year-end 2024. Moving on to LMS-AMR-sarcoma, also at ESMO last weekend, we saw a phase three trial of 150 patients in first line from Dr. Poitier of Roussy in Paris with trabectin, also known as Yandeles. Recall that lurbanectin is an analog of trabectin with a similar mechanism of action. In this trial, the combination of lurbanectin, I'm sorry, the combination of Trabactidine and doxorubicin was compared to doxorubicin in frontline patients with a primary endpoint of PFS by independent review. The data presented showed that the PFS was more or less doubled from 6.2 to 12.2 months with a hazard ratio of 0.37 and a statistically significant p-value, 0.0001. Looking at overall survival with the caveats of post-progression treatments, the median saw a 40% extension of OS with a hazard ratio of 0.65. What was particularly pleasing in this case was to see that the control arm of doxorubicin, the overall survival, came in at more or less exactly what we've modeled with our Phase III trial in these patients, which, as Luis said earlier, should start shortly. With that, I'll turn the microphone back to Jose Luis.

Thank you, Pascal. And with this, we conclude our speech today, and we open the line to questions. Nadia?

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you choose to retract your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. And our first question goes to Amy Fadia of Needham. Amy, please, your headline is open.

Hi, good morning and good afternoon. This is Ethan Leon for AMI. Thanks for taking our questions. Just a couple of quick ones. Maybe first, regarding kind of the Zabzalka U.S. royalties, I think if I sort of subtract the number you reported for the first nine months from what you reported for the first six months last quarter, the Zabzalka U.S. royalty does come in a bit higher. than in past quarters. I'm curious, does that total, you know, contain some adjustments made from prior quarters? And if so, can you share the amount?

No, this figure we included in this quarter does not include any adjustments in the past quarter. And this estimation is due for best information we have in hand. Got it.

Understood. Thanks. Maybe a second one kind of on the Zabdelka EU sales from kind of the EAPs. So understand kind of it's, you know, it makes sense that it kind of stepped down for third quarter versus second quarter. I guess do you think, you know, that's kind of a good quarterly run rate to think about? Or would you anticipate this to at least maybe potentially grow slightly at least over the next few years prior to a potential EU approval? Just curious how you're thinking about that one.

Well, the raw material sales to our partners or the buyers depend on the level of the stocks of our partners have, okay? And your question is regarding the early access program. You know that this type of activities, we can't do any activity of the marketing and promotion. Then it depends on the patient, the doctors, et cetera, et cetera. I can see that our early access program in France is the biggest. It's growing quarterly in the patients treated. Then this is a good sense. The cell canal, even if it's not approved, It's established standard of care in France is the most important country where we have. Probably will be affected, but not a lot, for the Lagoon trials, which is open some centers in France for the recruitment. But we observe many doctors move from the third line to the second line, even in early access program for the patients treated. That the feedback we receive in the ESMO, they are so happy to have this drug in hands to take patients.

Got it. I understand. And maybe just a last one. Kind of on the API cells, I think you mentioned about, I think you had made some comments about LRBI in China, I guess. Could we anticipate the API line maybe ticking up slightly as a result of that? As we go into 2024, maybe just curious your thoughts on kind of API.

For China, you will see the increases for the next year. Obviously, as I explained before, we expected the opinion for the Chinese authorities in the middle of next year. Then usually you start to build the stock six months before. Then we expect that we'll start to see this figure in the early next year. Got it. Thank you for taking our questions.

Thank you. And the next question goes to Joseph Hayden of RX Securities. Joseph, please go ahead. Your line is open.

Good afternoon. Thanks for taking my questions. First one, could you talk a little bit more about your expectations for the LERB-E iridotec and combination data upcoming and the significance of that, please?

Yes, what I said before, we finalized the recruitment and we expected the data at the end of this year or beginning of the next year. Well, we don't know now the final result. We know there's some interim analysis we presented in some co-congresses in the past when we only have recruited 30, 35 patients, something like that. The results were very impressive. at this stage. Very, very impressive regarding the response rates, duration of the responses, number of cycles for the patient, and the group safety profile. But, repeat, we don't know at this stage of the data. Obviously, the data is highly positive. Our plan is to share this data with the regulatory authorities in order to decide the next steps.

Okay, thanks. That's helpful. And then just to clarify, on your lervinectadine expansion plans, I know you're starting a potentially registrational trial in leomyosarcoma soon. Did you say that now the mesothelioma plans are on the back burner or cancelled, or is that just a 2024 project?

No, no, it's a different project that we analysed. the project very careful. We reassess all the problem in mesothelioma and we decide to stop. When you reassess this type of project, you reassess everything. On the other hand, the leiomyosarcoma trial is a great opportunity for the patients and for the drug and obviously for the company. We have high expectations about this trial. In fact, in the recent Congress, in the ESMO Congress, many key opinion leaders approached us. 90% of them want to participate in this trial. We expect good results. Taking account, doxorubicin in first-line treatment is about 40, 50 years. There is nothing approved today apart of doxorubicin or ifosfamide. I think it's a great opportunity for the patients and for the company, this trial.

Okay, thanks very much. And then just finally, I wondered if there was any advance on potential BD opportunities. Have you got any update on that front? Thanks.

Thanks, Joe. Obviously, if we had anything to say, we would have said it. So I'm going to be rather pedantic and repeat what we said. We're engaged in multiple conversations with multiple partners about multiple structures for multiple assets. We continue to diligently look at them and look for a fit that makes sense for us. And as I said, as soon as we have something to report, you guys will be right in the first hundred people to know.

Okay, thanks, Pascal. Thanks, Luis. Thank you.

Thank you. We have no more audio questions. I want to hand back to Jose for any written questions.

Yeah, thank you, Nadia. We have a brief question in regard to the license agreement situation in Japan for low-renected employees. I'll hand it to you.

Yeah, well, now we are... some opportunities for that. Like Pascal said before, we decided to agree with all the information to the market. But what is good is the interest in some companies to have the world connected in Japan. More than in Lagoon trials, we will include the Japanese patients. Then the regulatory potential, regulatory path in Japan now is so clear. And the impact in great interest for the several companies for this potential deal. Obviously, when we sign, we will announce. Okay. Thank you.

And with this, we finish the round of questions. And to conclude, let me just summarize by saying that this year's financial highlight is centered on the increase in R&D investment and the rise in royalties generated from Fetelka in the United States. We're also making significant progress in our ongoing clinical trials, and despite the impact of generics on Yandeli's revenues in the European market, our balance sheet remains robust and will maintain confidence in our investment strategy. We anticipate that this strategy will yield very positive news flow, as highlighted by our team during today's call. So I can wrap up by saying that we expect results for the Phase 2 trial of Lurvie Irino by Eurendisch. We also expect completion of lagoon trial recruitment next year. We expect data release for the Phase 2 trial of Lurvie Atejo also next year. We expect top-line PFS data of enforced trial to read out the end of next year, early 2025, as it is announced. And we anticipate data release for phase three trial of T1ECLAN that will be in the first quarter of next year. So next year seems to be going to be a very, very busy year for us. And with this, we finish our call today. And we would like to thank you all for joining us and wish you a nice weekend. Thank you very much.