Idorsia Pharmaceuticals Ltd

Good afternoon, good morning all, and welcome to the first half conference call to discuss our reporting. With me on the call today are our CEO, Jean-Paul Cosell, and our Chief Financial Officer, Andre Muller. They're both here to give additional granularity to the reporting that we did this morning and will be hosting the prepared remarks. Further, we'll be hosting a Q&A session where our general manager and president of the U.S. organization, Patti Tor, and our president of European and Canadian regions, Jean-Yves Chaflon, will be joining us. Next slide. As customary, before handing over the microphone, I need to remind everybody that we will be making forward-looking statements. We have therefore been appropriately warned about the risks and opportunities of investing in Adorsia shares. With that, I hand over to Jean-Paul. Jean-Paul, the floor is yours. Next slide.

Good morning. Good afternoon, everyone. Many things are happening today at IDOSIA. We are working very hard with the FDA and the MEA to have approval. But today, I will first focus on the society that we announced just last week, the cost reduction initiative, and then I will describe to you the progress we are making with COVID-19. Then, André will take you through our financial results. Next slide. Just last Thursday, we announced the sale of our operating businesses in the Asia-Pacific, ex-China region, to Societaires for a total consideration of 400 million Swiss francs. The transaction includes the acquisition of Eidosia affiliates in Japan and South Korea, the assignment of the license for PIVLAS in the Asia-Pacific region, and the co-exclusive license for Daridorexan in the region, together with the assignment of all potential milestones in connection with the license granted to Mochida. The transaction also includes an option for Sotae, upon payment of separate option fees to license and for the development and commercialization in the territory. The transaction created value for both companies while maintaining our ability to develop our drugs for patients in the region. Importantly, it brought cash that has given us some breathing space to adapt our company. Next slide. In order to give us the time we need to realize commercial success, any funds that are secured must be prioritized for activities that maximize their return in the near term. To this end, we are launching a cost reduction initiative with a target of reducing cash burn at headquarters by approximately 50%. then become fully effective in early 2024. I'm very sorry to say that in order to achieve the required savings, up to 500 positions at headquarters, mainly in research and development, and the associated support function could potentially become redundant. The cost reduction initiative is dependent on the full portfolio review potential out-licensing deal, and an employee representative consultation in Switzerland. Since our immediate objective is to maximize the time the company has to deliver commercial success, now let's take a look at the progress being made with QVD. So let's start with the summary. Next slide, sorry. Next slide, so. Let's start with a summary of the U.S. performance by looking at what has been achieved in the insomnia market and focus on the immediate priority for the team. Our approach at launch was to drive demand for Qubedix. This was necessary for early product adoption and payer negotiations. In January, ESI added QVBIC to the national preferred formulary. This was followed by CVS national coverage, as announced in July, which significantly increases affordable access to QVBIC for the 20 million lives that CVS covers. To begin, QVBIC is in Tier 3, But we expect the Q-Vivix will be in Tier 2 at parity with the other vaccine receptor antagonists by early Q4. And as our access continues to improve, this means more prescription will be coming through the retail channel and will be paid prescription. Now that we have the product demand and solid commercial coverage, we are moving away from the consignment model and accelerating our retail dispensing. You will see this in the next slide. We anticipate Medicare Part D access in Q1 2024. This would open 33% of the overall insomnia market, allowing us to compare more broadly in the entire market. The elderly population is also a very important patient group for QBV, as the rates of insomnia are higher than in the general population. And our product efficacy and safety data is consistent in this population. Next slide. So let's look at the demand for QBV. QBV demand has continued to grow quarter after quarter since launch. They are about 60, in 2022, they were about 65,000 cubic prescriptions. While in just the first half of this year, they were approximately 125,000 prescription dispensed, representing an increase of more than 85%. The right-hand chart is showing the channel where the prescriptions are dispensed In the last quarter, we see a shift from a consignment model which we used to drive demand to a retail model. This movement represents an important trend that we expect will accelerate as our market access position continues to grow and will enable us to pursue more paid scripts. Next slide. Importantly, we see our refill increase, validating that patients have a positive experience with Tuvidix. As insomnia is a chronic condition for many, strong refill rates are fundamental to positive patient outcomes and long-term growth of the product. We will continue our educational efforts for both physicians and patients, and specifically Specifically, we are working of setting the right expectation, really explaining to the patient that they have to take it every, they take QVB every night to get the maximum benefit. We are going to explain safety profile of QVB and, of course, the specificity of the unique pharmacokinetic profile of QVB. We continue to evaluate our Salesforce footprint, and we have moved from approximately 400 sales representatives at the start of the year to 325 as of July 1st. And we have now crossed 30,000 total writers of query links since launch. While we have opportunity to further expand the number of new writers, we are focusing on transitioning current 2-Vivic trialists to loyalists, driving more depth in prescribing. Next slide. Now let's move to Europe and look at the great progress being made with the launch or the launch preparation as well as with securing access and reimbursement. As you know, we launched in both Germany and Italy in November 2022. In Germany, we are engaged with authorities in two parallel processes. First, the Amnok pricing and reimbursement process for the first four weeks of treatment. And we are expecting the outcome of this first negotiation by the end of the year. But in parallel, as you know, prescriptions of sipping medication in Germany are limited to four weeks. And we are, there is a GBA review to allow QVV for chronic use more than four weeks. And we should hear about this process at the end of Q3 this year. If this four-week limitation for QVBIC is lifted, we plan to submit a second AMLOG dossier for the treatment of chronic insomnia beyond four weeks. reflecting the indication in chronic insomnia disorder granted by ZMEA in 2022. In Italy, QVBIC was launched in the self-pay market, noting that no sleep therapy is reimbursed in Italy, with prescriptions limited to neurologists, psychiatrists, and specialists from sleep centers. A reimbursement and general practitioner expansion dossier was submitted in Q2 2023. In Switzerland, the reimbursement dossier for QVVIC was submitted in November 22, and the review is ongoing. While we are waiting for the reimbursement, which is anticipated for the end of this year, QVVIC was launched in the self-pay market. In the UK, The NICE review is in progress, and we expect to launch QBVIC by the end of 2023. And in Spain, we will make QBVIC available in the self-pay market also by the end of this year. And we are currently evaluating the best way to demonstrate the value to payers in this market. In France, the Transparency Commission recognized through an ACMR-4 rating that QVDIC brings another value to the current treatment landscape of patients with chronic insomnia. After CBT-I, for patients who do not have access to CBT-I, QVDIC will be the only available and recommended treatment for chronic insomnia disorder. In France, in addition, with the rating of the clinical benefit, which has been granted by the Transparency Commission, this rating would lead reimbursement without copay for 95% of patients covered by public and private health insurance in France. We anticipate a commercial launch in the first part of 2024. And last but not least, Following approval by Health Canada in April, we plan to submit QBV for reimbursement by private payers by the end of the year with the commercial launch anticipated in the first part of 2024. Next slide. Let's look a little closer to the demand dynamics in the European market. After a little more than six months on the German market, we are pleased to see a constant growing demand for QVD. Our in-team field, the teams, our reps, are coding on both the specialists and the primary care physicians. We pay particular attention to the specialists, such as the sleep center, psychiatrists, neurologists, who have more time for their patient and we can set the right expectation for gaining the best experience and the benefits of QVD. This strategy brings greater depths of prescription as well as more repeat prescription. We are also, in Germany, building on the experience of the 20 expert centers who have contributed to the enrollment of more than 800 patients in the registration study. Next slide. We see the same constant growing demand for tubulic in Italy after six months on the market. Here we call on specialists only. And we are making sure to explain to this patient the benefits of Tubivic and really the need for chronic treatment. This is extremely important to have this explanation since the drug is fully saved by the patient. We are happy with the engagement that our Italian team has been able to build with a community of specialists in such a short time. That brings me to the end of the overview, and now I will hand over to André to work you through the financial. Next slide.

Thank you, Jean-Paul. Good afternoon or good morning to everyone. As Jean-Paul alluded to it, we are more than happy that we managed to close this transaction with Soce regarding the APAC ex-China business because it extends actually our runway to early 2024. And to be very clear, we do not want to be in the same position, I would call it the back to square one, By the end of the year, and to this extent, there are several initiatives which are ongoing to raise additional cash in the second half of 2023. One of them, and also Jean-Paul mentioned it, is to reduce our cost base. The reason for it is that we want that any amount of cash that will be raised needs to last longer moving forward in 2024. Next slide, please. So we are on slide 14. Here you have the breakdown of the net sales over Q1 and Q2 for the first half. As you understand, the PIVLAS has still been consolidated, the 32 million sales. because the transaction closed post 30th of June. But moving forward, the whole business in Japan and South Korea will be deconsolidated, i.e. the net sales and operating expenses and corresponding financial and tax expenses relating to the APAC-X China region will no longer be reported in the PML. They will be reported in a dedicated line on results from a discontinued operation and, of course, again on these discontinued operations. So moving forward, what you will see, starting with Q3, for the first half, are only the QVV cells of 11.7 million. Next slide, please. So here you see, and I will come back to the non-GAAP operating expenses, how the P&L came about. Net revenues of 51, 44 million cells, because here PBLAS is included, other contract revenue of $7 million. We see a non-GAAP OPEX of $3.93, leading to a non-GAAP operating loss of $3.42, with the usual depreciation and amortization, stock-based compensation. This leads to a U.S. GAAP operating loss of $3.75. And below EBIT, mainly a financial expense, you end up with a US GAAP net result of minus 405. Next slide, please. Not spending too much time on the OPEX, you see here how they compare to last year. As one could expect, research and development, we try to limit the OPEX, and we succeeded with 54 compared to 60 million in the preceding H1 2022, 99 with development, and an increase in SEM, mainly driven by the U.S., but also with the launch or launch preparation across EU5 with, for the first half, 235 million. Next slide, please. Here, just to give you a sense of what is the scope we operate and how it will be reflected moving forward. We have reported non-GAAP operating results of 342. If you exclude the 5 million positive impact of Japan and South Korea, it means that moving forward, H1 non-GAAP operating results are or will be 346 million. If you exclude the DNA and share bait compensation, it will be $377 million. Next slide. Cash flow. As you know, we started the year with $466 million. And if we want to reconcile with just non-GAAP operating results I showed previously, which includes Japan for 5 million, we've had significant working capital requirements, 70 million. You will see a proceed from borrowings will come later on 30 million. Other items which led to a liquidity of 33 million. Next slide, please. So coming to the liquidity and these 33 million, they include 10 million, which was the payment made by SOCEI in June at the signing of the non-binding term sheet, 10 million, and also a 20 million bridge loan funded by Jean-Paul Le Closel. So it's a bridge loan of 75 million, of which we had first a drawdown of 20 million by the end of June, and which has been actually repaid last Friday, when we got the additional payment from the closing of the Sofai-Hebtaris deal of 6.6 million. It is a $400 million deal, and there will be an adjustment normally within 90 days of closing, so around mid-October, where approximately we should get $4 million, plus or minus. What the liquidity does not include, what it excludes, is the cash flow. held in Japan, 11 million, because this is a reported separate item in our financial results, so-called assets held for sales relating to Japan and South Korea. So next slide. This is my last slide. want to reinforce the operating guidance, so $650 million non-GAAP, $735 million U.S. GAAP operating loss, but on the new scope of transaction, so excluding the impact of the social year deal. And as you have seen, actually, we have spent 346 million in H1. So to achieve this guidance, it implies that we will spend less, around 300 million, in the second half of 2023. And as we see, I will hand over to Andrew again.