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spk05: Welcome to the second quarter earnings call for Alvatech. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to introduce and hand over the call to Benedict Stephenson, Director of Investor Relations and Global Communications of Alvatech. Please proceed.
spk11: Thank you, and good morning or afternoon to everyone joining this call today. Yesterday evening, the company issued a press release that can be found on our website, www.albutex.com. The release outlines key highlights related to our second quarter results. Additionally, presentation slides that cover our call today will be posted on our website at www.albutex.com. Our presentation materials and some of our statements that we make today may include forward-looking statements. These statements do not ensure future performance and are subject to risks and uncertainties that are outlined in company filings with the Securities and Exchange Commission and the NASDAQ Iceland Stock Exchange. These risks and uncertainties could cause actual results to differ materially from forward-looking statements that are made. With me on today's call are Robert Westman, Executive Chairman and Founder of Avotech, who will give you a quick overview and recap recent strategic milestones. Mark Levick, Chief Executive Officer will cover our portfolio and competitive landscape. Anil Oke, Chief Commercial Officer, who will give a commercial update. Joel Morales, Chief Financial Officer, who will review the financial highlights. And finally, Ming Li, Chief Strategic Officer, who will present our newly published ESG portal and ESG disclosures for 2020 to 2021. With that, I would like to turn the call over to Robert Westman, who is Executive Chairman and founder of Alvotech.
spk06: Robert Westman Thank you, Benedek. I want to welcome everyone to our second quarter earnings call. This is actually our first active call for Alva Tech as a public company. We believe that biosimilar stands to benefit in long term as the healthcare systems are struggling with cost. Biosimilars have the potential to help make healthcare more sustainable. On the June 16th, we made our debut at Nasdaq in New York. And on June 23rd, we listed on NASDAQ First North Market in Reykjavik, Iceland. Alvatech is the only company who are listed in both Europe and Iceland, and one of the few to play by similar companies with scale that are publicly traded. Alvatech is a company that has taken 10 years and over a billion dollars to build. We have been fortunate to make these investments and built our company meanwhile being private. We are very proud of being and having very strong R&D, a manufacturing platform, and having pipeline of eight biosimilars and biosimilar candidates with an addressable market over $85 billion. We employ over 800 people around the world with more than 85% focus on R&D, technical operational quality. Our state-of-the-art facility in Reykjavik is designed to support the growth of our pipeline through 2030, handling end-to-end manufacturing of drug substance, drug product, as well as fill and finish. We have established global reach across six continents and well over 90 countries with a network of 15 high-quality regional partners that are experts in their home markets. In addition to allowing us to leverage our partners' expertise and commercial infrastructure, we are entitled to substantial milestones and approximately 40% of in-market sales. Of course, the backbone of the company is our leadership team. Although by a very young industry, they have also been quite blessed to recruit experienced and accomplished leaders. with relevant experience to join us. This includes our CEO, Mark Levick, who previously led Biosimilars at Sandow, and Joe McClellan, our Chief Scientific Officer, who led Biosimilars development at Pfizer. Most of our senior executives have had direct experience with Biosimilars, and we believe that historical knowledge has helped us to navigate AlvoTech to where we are today. Before I pass the presentation over to our CEO, Mark, I want to highlight the main changes in the business that have taken place since we announced our business combination with O3 Acquisition Core 2. Since then, we have had substantial advancement across our portfolio, including IP clearance around our lead product, AVTO2, a high concentration bias similar to Humira, as well as FDA acceptance of our BLA that included supporting data to gain interchangability for the U.S. market. We have also launched the product in multiple markets. But beyond that, it is important in biosimilars to be multi-product, and we have advanced our biosimilar candidates for Stellera, ILEA, Proglia, and Xgeva. In case of Stellera, we have reported positive top one result, making us only the second company to do so. On the corporate side, we have, of course, listed in both the U.S. and Iceland, and we have recently announced plans to move our Icelandic listing from First North Market to the main port, which we believe can open up more opportunities for Alvotax. We have also expanded our board of directors to increase both diversity and independence. Finally, we have made available an ESG portal which provides further transparency to our sustainability efforts and performance metrics. We look forward to continue to update our stakeholders and shareholders on our progress as we continue to execute on our strategy that focus on biosimilars and the promise to bring these valuable medicines to patients around the world. With that, I would like to turn the presentation over to Mark Levick, our Chief Executive Officer. Over to you, Mark.
spk07: Thank you, Robert. I will be covering our portfolio, and it is important to reiterate our global multi-product approach. Diversification in both markets and products will be key if we are to create a sustained growth model with biosimilars as we aim to do. Alvatec's portfolio includes eight biosimilars and biosimilar candidates with a total addressable market of over $85 billion based on estimated peak sales of the reference products. After we announced our intention to list the company, we've launched our first biosimilar, announced top-line results from clinical and safety studies for one biosimilar candidate, and transitioned two additional proposed biosimilars into clinical patient studies. In addition to the four products, which have either initiated or completed clinical studies, we continue to progress biosimilar candidates in preclinical phases of development, which target respiratory disease, immunology, and oncology, representing a substantial addressable market. Our first biosimilar, AVT02, a high concentration, low volume biosimilar to Humira, has now launched in the EU as Ukindra, and in Canada as Simlandi. Later in the presentation, I will break down the opportunity for AVT02 in the US in further detail. In May, we announced top-line results from our confirmatory patient studies for AVT04, Bustekinumab, a biosimilar to Stelara, becoming only the second company to reach this milestone. We will also go into this program in a bit more detail in subsequent slides. In July of this year, we initiated a patient study for ABT06, Aflibicept, our biosimilar candidate to ILEA, a leading ophthalmology therapeutic that has experienced double-digit annual growth. In July and August of this year, respectively, we initiated a pharmacokinetic and a patient study for ABT03, Denosumab, our biosimilar candidate to Prolia and Exceva. The markets for these two products, which are two presentations of the same biologic, have been growing by over 10% annually over the past five years and represent an addressable market of more than $5 billion collectively based on 2021 data. Now, I'd like to dig a bit deeper into both AVT02, our biosimilar to Humira, and AVT04, our proposed biosimilar to Stellaris. While we have launched ABT02 in Canada and in multiple markets in Europe, the largest opportunity remains the U.S. market, which alone represents a $17 billion addressable market based on 2021 data. And we expect to launch ABT02 on July 1, 2023, in the U.S. market. It is important to note that the innovator company switched strengths of the product in 2018 in the U.S. and has gradually, through prescribing patterns, moved the majority of the volume to this new strength. Today, over 80% of all volume of Pumira used in the US is the high concentration form. Now, Alvatec has developed that form and has completed a switching study to support potential interchangeability. This, we believe, puts us in a position to potentially be the only company to have both the high concentration and interchangeability on the 1st of July next year. Having the high concentration products, in addition to creating a potentially better patient experience with less volume on injection, allows you to offer specific offerings only available in that strength, which can lower doses for certain indications. Having interchangeability could potentially allow switching between an approved biosimilar on well over 80% of the US market. We believe our proposed biosimilar that also utilizes a premium auto-injector has the best product profile, and we believe that it will be important in order to realize commercial success. From a competitive standpoint, there are a number of developers of ad-limit, and there have been shifts in strategy among developers to move their programs to the high concentration form and or initiate a switching study in pursuit of interchangeability However, we are still the only company that has completed a switching study utilising the high concentration form of adalimumab. We have also received filing acceptance of our BLA that includes data to support both biosimilarity and interchangeability and have a goal date in December of this year. From public disclosures, we know that both Amgen and Celtrion have initiated interchangeability studies utilising the high strength form. However, they remain behind ours from a timing perspective. Our second potential offering is a proposed biosimilar to Stelara, AVT04. We are working towards filing the product in major markets this year in 2022. And we are one of two companies which have announced positive top line results from patient studies utilizing a Stelara biosimilar candidate. As of today, No company has publicly disclosed filings for a Stelara biosimilar in the US or Europe. Furthermore, we have utilised the same host cell line as is used to produce Stelara, called SP20, which we believe helps reduce development risk. Utilising the SP20 host cell line facilitates silylation of the monoclonal antibody that is associated with longer half-life, which can support more infrequent dosing. The product is also sold at a premium price point, which we believe make it an excellent eye similar target, both from a patient need and a company profitability perspective. With regard to the competitive landscape, we were the second company to have reported top line results in a patient study. And we believe that thus far, the competitive landscape remains somewhat limited. Considering the size of the market, which exceeded $9 billion in 2021, the year-over-year growth rate in the market since the product was first launched, and potential LOE based on the expiry of the basic patent in major markets. We believe that part of the reason for the landscape is driven by the complexity and barriers around SP20 and perfusion technology, which is the process required to produce monoclonal antibodies when using a murine cell line. At our core, Alvitec is a portfolio company. We have been pleased with our steady progress that we have made in our pipeline since our transaction was announced, and we hope to continue a similar cadence of updates as our business continues to evolve. We anticipate that most significant near-term catalysts are the filing acceptance of our proposed Stellara biosimilar in major markets and regulatory clearance in the US for an interchangeable biosimilar to Humira. both of which we hope to be in a position to announce before the close of 2022. With that, I would like to turn the call over to Anil Akay, our Chief Commercial Officer. Anil.
spk04: Thank you, Mark. As we have recently announced, Alvotec has started to commercialize our high concentration biosimilar to Humira in Canada and certain European markets. This is a very exciting time for AlgoTech as we are adding product revenues in addition to the milestone revenues that we have been collecting as an R&D-based B2B company thus far. In April of this year, it was announced that Jump Pharma Group, through their BioJump division, launched Simnanli, offering Canadian patients a high concentration biosimilar to Humira. Jump is a well-established pharmaceutical company in the local market. and market close to 300 different products in addition to a number of well-recognized over-the-counter products. They have extensive commercial infrastructure covering all parts of the country and support many of their launches, including Simlandi with Jump Care, which is their patient support program that's critical to the success of biosimilar launches. Jump is our exclusive strategic partner in Canada and not just for adalimumab, but also for other biosimilar candidates. The combination of our biosimilars with JAMS' well-established and well-recognized infrastructure and name, we believe, sets us up well for accessing the Canadian biologics market. In Canada, Cymlambi, along with Celtrion's biosimilar, were the first two high-concentration Demira biosimilars to enter the market. And even the originator had not broadly launched the high concentration form in adult patients prior to our launch. In June of this year, we also launched Kukindra in France, Germany, Finland, and Sweden. And we have been gradually expanding the scope of our launch in recent days. Our strategic partner, Stada, is a global company with strong roots and coverage across Europe. Particularly in retail markets, we believe that the reputation and recognition of our partners is an important element to maximize the commercial potential of our partner biosimilars and biosimilar candidates. Stada is a longstanding company and has been a reliable and trustworthy provider for more than a century in their home market. And like with Jump, Stada is a broad strategic partner and covers seven biosimilars and biosimilar candidates under our exclusive agreements. We look forward to the evolution of our launch and our partnership as we continue to mature as a company. And while these are our first launches, our intention is to go broadly across global markets with our portfolio. We have partnerships in most markets, large and small, and we believe that the global approach is the most effective way to maximize the value of our assets. Our partners are some of the most respected and well-recognized names in their respective markets, including Teva in the U.S., Fuji Pharma in Japan, and as mentioned earlier, Jump in Canada, Stada in Europe. We are also well-represented by quality partners in many of the emerging markets across Asia, Latin America, and the Middle East and North African region. We have been incredibly fortunate to build this network of strategic partners and believe this is the best way to navigate the complicated nature of market access globally. All of our partnerships are exclusive. Nearly all are multi-products. This allows us to balance the benefits of targeted partnerships where we may benefit from the specialized local and regional expertise of our partners with the complexity of handling multiple partnerships. One final point that I would like to say about our commercial setup is that we believe it allows us to create a highly leverageable infrastructure, which lets us to focus on R&D and manufacturing. And infrastructure helps us to add markets and launches on top of a relatively stable infrastructure. And now, I would like to turn the call to our Chief Financial Officer, Joel Morales.
spk10: Thanks, Anil. I'll now provide some brief financial highlights for the period ending June 30, 2022. As mentioned, we closed our transaction with OACB on June 15, which provided the company with net proceeds of approximately 140 million. We closed the period with approximately 128 million of cash on hand as of June 30, which includes proceeds from the transaction. but excludes an additional 25 million of restricted cash we have on reserve to satisfy the requirements of our bond agreement. Higher redemptions resulted in less cash contributed from the trust than originally planned. However, as we previously disclosed, prior to the close of the transaction, we explored two financing options to further strengthen our access to liquidity to offset the potential of redemptions. Firstly, we continue to negotiate final terms of a second lien loan facility. Higher redemptions and unexpected global market conditions have delayed this process. However, we are now negotiating final terms of this facility with lenders who are currently in our cap structure, and we expect to have the facility in place by the second half of 2022. And secondly, we've secured a standby equity purchase agreement with your fill. with the capacity to raise up to $150 million of additional funding for the company that can enhance cash liquidity as well as free flow, which are both potential needs resulting from higher than expected redemptions. Most recently, in August, to further enhance our liquidity profile, our board of directors and shareholders agreed to settle $50 million of shareholder advances in equity at the original pipe valuation of $10 per share, which we view as favorable terms to the company. Additionally, our shareholders have extended the repayment terms of the remaining 60 million of shareholder loans to coincide with additional capital raises in the future, such as when we utilize our CEPA facility. In terms of operating performance, the company is reaffirming its prior financial guidance for 2022 as presented during our analyst day last March. As we have mentioned, we launched ABT02 in certain European markets in Canada. We expect those markets to materialize more meaningfully towards the end of the second half of this year. We're currently increasing scales for our ABT02 manufacturing process to support our ongoing launches, as well as new launches that we're expecting next year, including in the U.S. That stockpiling using the scaled-up process has resulted in a build of inventory through June 30 And we expect that to continue over the next several quarters, particularly as we prepare for our new launches in 2023. Another point of clarification that is worthwhile noting is that our year-to-date cost of product revenues are disproportionate relative to our revenues in the period. We do expect this to normalize as we increase scale and expand on our launches. This increase in volumes, we expect to have a favorable impact on cost of product revenues particularly as we see increased absorption of our fixed costs. With the equity and debt facilities and settlements in place, and based on our current operating plans, we believe we will have sufficient cash runway to continue investing in our platform and pipeline and achieve positive cash flows over time. And finally, we close the period with 243.6 million shares outstanding, including the Urinal shares, which have not yet vested. And with that, I'd like to turn the presentation over to Ming to cover sustainability at Alvatech.
spk12: Ming? Thank you, Joel. And as Benedict mentioned earlier, I am the Chief Strategy Officer at Alvatech. But more recently, I have been appointed as the head of our sustainability efforts at the company. At Alvatech, we believe that a well-structured sustainability program is essential to the long-term success of our business. We believe this can help identify incremental risks that face us, and new opportunities that may create long-lasting benefits for all of our stakeholders. Furthermore, we also believe that Alvatech is in a special position to participate in a more evolved sustainability framework. We strongly believe that increased affordability driven by biosimilars can promote the sustainability of healthcare systems globally. Biologics, in some markets like the U.S., represent a disproportionate share of pharmaceutical spending when compared to the total share of prescriptions. In many emerging markets, biologics are often not fully utilized due to the high price and limited reimbursement of many of today's effective biologic medicines. In either case, biosimilars are well positioned to address the need that has arisen from the therapeutic prominence of biologic medicines. Moreover, as Robert noted earlier, there are limited pure play biosimilar companies that exist, and therefore, there are limited ways to gain direct exposure to what we believe is the promise of biosimilars. In addition to the importance that biosimilars can play in healthcare sustainability, Alvatec has a few additional intrinsic qualities that are relevant when considering a broader strategy around sustainability. The location of our manufacturing site in Reykjavik, Iceland allows access of our main production site to substantial renewable energy resources on an isolated grid. This allows us to easily offset our minimal scope one and two emissions footprint, and thus we have been carbon neutral for scope one and two since 2020. Additionally, the location of our main manufacturing site, conveniently located between the large biologics markets of the US and EU, is subject to less water scarcity and wildfires, which are two risks that are commonly analyzed within an ESG framework. However, intrinsic qualities alone will not be sufficient. We understand that sustainability is a commitment and a process to a framework that will evolve over time. Just recently, we have made available on our website an ESG portal to allow our stakeholders to access information and data that will be useful in assessing that commitment. This applies to environmental, social, and governance factors that may be of interest to our stakeholders. We welcome all stakeholders to review the information and data that have been made available. The metrics released are consistent with NASDAQ and or GRI frameworks. As we globally commercialize our portfolio and increase scale as a company, it was important for our board of directors and management team to have a good baseline of information from which to make decisions regarding our sustainability program. Finally, we have instituted a number of policies in the lead up to our listing that help support proper governance and transparency. And it made the policies and in certain cases, the output of these policies available for public viewing. As our ESG framework evolves, we look forward to continuing to update our stakeholders on our evolving program. With that, I would like to turn the presentation back over to Benedict Stephenson.
spk11: Thank you, Ming. And with that, we conclude our formal remarks, and we now open up for questions from the audience. However, before we start the Q&A session, Mark Levick will make a quick remark regarding the presentation deck. Mark?
spk07: Hello, everyone. I wanted to note that since the drafting of our prepared remarks, there has been a recent addition to the clinical trial registry from Samsung. that includes a switching study for adalimumab utilizing the high concentration form. In the presentation materials that have been made available, that update has been made. For us, this reinforces that we have taken the proper strategy when it comes to addressing the $17 billion US tumerum market. And with that, I turn it over to the Q&A.
spk05: Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. And your first question comes from the line of Thibault Botherin from Morgan Stanley. Please ask your question.
spk01: Hello. Hi. Can you hear me? Yes, we can. Oh, perfect. Thank you very much. I have two questions, please. So the first question is on the launch of the Biosimilar EU Mira in Europe by your partner, Stada. It's obviously a very competitive environment. It's quite a mature market with established competitors. You have a high-dose formulation here, but Celtrion launched a few months ago with a high-dose as well, and they struggled to take market share. So I guess my question is, What are your expectations for this market and what market share can you realistically take? Is it possible to see Stada reaching double digits in markets in Europe? That's my first question. My second question is on the high concentration. What we've seen in Europe is, before the launch of Biosimilars, high concentration was above 90% of the volume of Humira and low concentration biosimilar still managed to take 60% market share so it looks like the high concentration didn't really prevent low dose biosimilar from taking share so just wanted to kind of if you could put this in context with the launch in the US and the third question is basically on one of the kind of reassuring PBMs in the US on your ability to supply because it looks like you have all the facilities and you have the talents to execute on reliable supply but obviously you don't have the track record of some of your competitors such as Amgen, Sandoz and so on who have been obviously supplying biologics to the market for a certain number of years. So what steps can you take in order to reassure PBMs, payers and clients in the U.S. that Alvotech can actually supply large amounts of volumes to the market. Thank you very much.
spk04: Thank you Thibault for the questions. Anouilh speaking, Chief Commercial Officer of Alvotech. Of course there are three questions so I will start with the first one and give you a bit of a flavor regarding our thinking in the U.S. So the question one regarding our European launch, first of all, I would like to underline that Stada is a very well-established name in Europe. So their brand name as a company is also a very important element in Alvotek's success on top of our product profile. As you know, European landscape is a different landscape than the U.S. Typically, the physicians and the buyers would like to see long history of the players before they make their decisions. And this is what Stada is really providing here. Last but not least, Stada's go-to market model in the retail markets are innovative. Of course, I will not be able to disclose the details, but Stada is applying different go-to market models, which is basically increasing our chances of success. In a nutshell, we are very happy with the progress we are making in Europe with our commercial partner, Stada. When it comes to the US, just to remind, our launch date is 1st of July, 2023, based on the settlement that we have made with Advi. Also, again, just to remind, we are the only company who has successfully announced and interchangeability study on high concentration, citrate-free, low-volume adalimumab biosimilar. So what we know as part of our conversations with the stakeholders, and not only payers but several stakeholders, the product profile that we have is a preferred product profile based on various elements. Therefore, we are very positive and we are very well preparing for our launch in the US by 1st of July 2023. When it comes to your third question around capacity and our capability, capacity will certainly be important. One of the unique attributes to Alvotek as a company is that we have been operating as a private company for nearly a decade. And we have been able to finance significant investment into our infrastructure. As Robert mentioned, we have put over a billion dollars into our infrastructure since the foundation of the company. And as such, we build a facility well before we expect to commercialize a product. And we feel that is long-term differentiated for Alvotek and our partners. Also, it is important to remind that Alvotek is widely controlling the value chain, including key production elements instead of relying on third-party CMOs like some of our competitors. Alvotek is a vertically integrated company. I would like to underline that. That's a very important differentiation when it comes to supply reliability. I won't provide a specific number here on this call, but we do aim to be a leading supplier of Adalimumab, not only in the US, but globally for the long term. Thank you.
spk02: Thank you.
spk05: Thank you. We will take our next question. Please stand by. And your question comes from the line of Carl Burns from Northland. Please ask your question.
spk09: Thank you for the question, and congratulations on your progress. With respect to 04, You're looking at the regulatory submission prior to year end 22. Would you expect the commercial launch to be in late 23 or would it fall into early 24? Thanks. Thanks.
spk12: Thank you, Carl. This is Ming, Chief Strategy Officer. Thank you for the question. So we haven't provided... It's specific launch timing expectations outside of adalimumab, so we won't provide any new launch timing today. Obviously, biosimilar market formation tends to be an IP-driven event. And the facts here are LOE in Europe is sometime in 2024. The main patent expires in the US in late 2023. So that's the patent environment. we certainly want to be ready with our product at the earliest possible date. I hope that helps answer the question.
spk09: Definitely. Thanks so much. And just a follow-up, and I know that AVT16 and 33 are early stage in terms of development, but do you have any comments in terms of potential timeline with respect to confirmatory and PK studies when they would be initiated? Thanks.
spk12: Yeah, these are all in preclinical development. So, you know, the most recent news on our first four and, again, with the fifth and sixth are going to be next. So, I think we're a little bit early to provide any guidance on 16 and 33. Great.
spk09: Thanks, and congratulations again.
spk05: Thank you. Thank you. Once again, if you do wish to ask a question, please press star 1 and 1 on your telephone.
spk02: We will take our next question.
spk05: And the question comes from Jason Durberry from Bank of America. Please ask your question.
spk08: Oh, hey, guys. Thanks for taking my question. I just wanted to understand, perhaps you guys have addressed this before in a public forum and I missed it, but the relationship between the two approval events in the U.S. for biosimilar Humira, the low concentration, I know you guys had the FDA visit the site for the manufacturing and you're just kind of awaiting approval. Does the low concentrate approval in any way gate the high concentrate interchangeable action date approval decision in December. Just wondering if there's any interlinkage there. Thanks.
spk12: Hi, Jason. Thank you for the question. I think for just a point of clarification, both applications are high concentration, so there is no low versus high. The second is another BLA that includes biosimilarity and interchangeability. Mark, I think I'll pass that on to you for further clarification.
spk07: Yeah, great. Thanks, Ming. And thanks, Jason, for the question. So just following on from Ming's clarification, we do have two BLAs, one for the biosimilarity and one for the interchangeability. They are separate BLAs. We're working with the FDA on both those in parallel stream approval processes.
spk02: Thanks.
spk05: Thank you. There seems to be no further questions. I will hand the call back over to management for closing remarks.
spk11: Yes. On behalf of the AlvoTech team, I want to thank everybody who participated in today's call and was listening on the webcast. We look forward to seeing you all again. Thank you.
spk05: This concludes today's conference call. Thank you for participating. You may now disconnect. speakers, please stand by.
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