Idorsia Pharmaceuticals Ltd

Good afternoon, good morning to you all. My name is Andrew Weiss, and I want to welcome everyone to our webcast today to discuss the nine-month 2023 financial results. Presenting today, we have our CEO, Jean-Paul Cozell, and our Chief Financial Officer, André Muller. Then, joining for the Q&A session, we will also have our new General Manager and President of EIDORSA US, Tosh Butts, and our President of EIDORSA UCAN region, Jean-Yves Chaflon. Next slide, please. Before handing over the microphone, I need to remind everybody that we will be making forward-looking statements. You have therefore been appropriately warned about the risks and opportunities of investing in NIDORSA shares. With that, I hand over to Jean-Paul for his introductory remarks.

Next slide. Good morning. Good afternoon, everyone. The third quarter was a very active time for us as we implemented numerous measures to adapt the company. Today, I'd like to run through these measures and then describe the current performance of QBVIC around the globe. Then André will take you through our financial results. Next slide. In just the past few months, we sold our Asia-Pacific business, not including China, for 400 million Swiss francs. We reduced the workforce at headquarters by around 50% and received a number of research projects. We changed the leadership of our U.S. commercial operation. We started by taking the reins in September. Tosh has hit the ground running and is already joining us on the call to answer questions on the performance of QB Week in the U.S. And very importantly, we reacquired the worldwide rights to apocytetan. Next slide. I am very happy that we came to the agreement with Janssen for the return of apocytetan to Eidosia. Recently, the WHO has characterized hypertension as a key public health issue. Apocytetan is the first anti-hypertensive drugs which works via a new mechanism of action in 30 years and has been shown to be effective in patients with resistant hypertension. With this deal, Johnson & Johnson, which remains a significant shareholder of IDORSIA, continues to have a vested interest in the success of aprocitantin and IDORSIA. The review process with the US FDA is progressing well. Following the provision of additional REMS materials to support the streamlined REMS, designed specifically for apocytetan, the company is working towards the PEDUFA date of March 19, 2024. We are laser focused on gaining approval and getting ready to provide apocytetan to patients as soon as possible. Next slide. Let's move to the performance of QBVIC in the U.S. Since the launch of QBVIC in the U.S., more than 275,000 prescriptions of QBVIC have been dispensed. As explained previously, our approach at launch was to drive demand for QBVIC for both early product adoption and payer negotiation. In January, ASI added QBVIC to their national preferred formulary. This was followed by CVS national coverage in July to begin with in Tier 3, but in September we were added to Tier 2 formulary of CVS Carmark, putting us at parity with the other two DORAs available in the U.S. Additionally, through the quarter, UVVIC has been added to several employers' plans. We also expect the first medical Part D coverage to begin in January 2024, which will open an entire new channel to the team. With improved access, we decided to move our specialty pharmacy partner from VitaCare to Nipur, which is better positioned to pull through paid prescription as they can dispense both commercial, payer-paid, and consign high-dossier paid prescriptions. VitaCare could only dispense consigned prescriptions and rely on partner pharmacies to dispense commercially.

Next slide.

As you can see here, prescriptions volume were flat quarter on quarter, so a temporary product volume volatility was experienced during this transition period. which is to be expected from a major business model adjustment in addition to the seasonality impact. Already, COVID-19 prescription volume is returning to growth, which is expected to accelerate from this new prescription volume baseline. I can tell you that in the last couple of weeks, we have seen weekly growth of 8% in total prescriptions, so I am confident that the impact of the decision to transition to this new model is now behind us.

Next slide.

Despite the negative impact for a few weeks, we start to see the benefit of this transition from VitaCare to NIPR. In the third quarter, we were at 18% paid prescription, an increase of 11 percentage points from the previous quarter. As you see here on this slide, a year ago we were only at 24% payout paid prescription. Actually, in September we were at 57% paid prescription, so we are clearly seeing the results of the increased coverage and the switch of the specialty partner. And as our access continues to grow, so will our percentage of paid prescriptions. we now have an effective model in place to grow both QVVIC revenue and volume. Next slide. We have seen also some great milestones for QVVIC in Europe this quarter. Remember that QVVIC is the first and only dual orexin receptor antagonist in Europe. We have now made it available in five European countries, Germany and Italy last November, Switzerland at the end of the last quarter, and most recently in Spain and the UK. Pricing and reimbursement processes are progressing well in key European markets. In the UK, the recently published final guidance from NICE means that patients in England and Wales will have broad, unrestricted access to QVVIC on the NHS. In Germany, the GBA review of the four-week prescription limitation, so-called , resulted in the limitation being lifted, and we anticipate the official publication in the coming weeks. This makes Curivix the only sleep medication in Germany that can be prescribed for long-term treatment. In addition, we can now plan the submission of a second AMNOG dossier for the treatment of chronic insomnia disorder beyond four weeks, reflecting the indication in chronic insomnia disorder granted by the MEA in 2022. We aim to make this submission in February 2024. This great progress enables European patients with chronic insomnia to fully benefit from a treatment that has robust clinical data demonstrating improvements in sleep quality and quantity, as well as daytime functioning.

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As you would expect, we see a sustained sales growth momentum in this quarter in Europe. Despite the insomnia market seasonality usually impacting the third quarter, QVVIC absolute volume increased significantly from Q2 to Q3 in every market. QVVIC market share also increased in every country despite entrenched conventional hypnotics. In total, already 55,000 months of treatment of QVV have been prescribed to patients with chronic insomnia in Europe. Next slide. I am fully aware that Eidosia needs additional funding in the coming months. As you can see from this slide, we have a rich portfolio, which gives us strategic flexibility and multiple avenues to explore potential fundraising through partnerships of one or a combination of products. That brings me to the end of my prepared remarks, and I will now hand over to André for the financial results. Please, André. Next slide.

Thank you, Jean-Paul. Good afternoon or good morning to everyone. As Jean-Paul, as you can imagine, My primary focus is on the near-term funding to extend the cash runway beyond mid-February 2023. Next slide, Nadia, please. Here you can see a net sales. As they are reported, so including PIVLAS, Q1, Q2, you've seen 18.5, 13.5, 18.9. And so 1.3 million for Q3 is actually the first 19 days until we close the transaction with SoSafe. And this will be the final number for the full year regarding PIVLAS, because Jean-Paul mentioned that we sold the Japanese business to SOSE. Now coming to the scope we operate. You see QEVIC growing 4.3, 7.4, 8.4 in Q1, Q2, and now Q3. leading to a total net sales of 20.2 million. And as Jean-Paul explained, and Tosh will also give you more detail, we had a hiccup with the transitioning between VitaCare and NipperRx, which explains the modest increase in Q3. Next slide, Nadia, please. On this one, you see the impact of the SOSE deal, which, of course, has a huge impact on the reported numbers in Q3, so for the nine months. And, of course, it will also be valid for the full year. So we have already received 396 million cash. $10 million in June, $386 million mid-July, and we expect plus or minus $4 million in October. Later October or early November, we see a two-up. We see a closing balance sheet at the date of the year closing. The impact on the P&L is a total of $363 million. You get an impact of $68 million on the contractor revenue. You get a gain on the sale of disposal, which comes as a reduction of the OPEX for $302 million, and an impairment of intangible assets. This was relating to Claude Zeltan, Specifically, we see a license with Roche, which has been assigned actually to a source bank of $7 million. Next slide, please, slide 15. So here you see the non-GAAP operating results, as reported in blue, and pro forma in green. 131, but actually 29 million. The 20 million sales you saw a few slides ago, in net sales, and 9 million of contract revenue. Cost of sales is also lower, because we no longer account for the royalties paid on Class of 2010 to Roche, because this is now assigned to Saussure. Research is, as you know, a group research effort. We did not have any research activity in Japan, so 74 million. Summer development, local specific development activities in Japan, which explains the difference between group reported 138 and Proforma 130, excluding Japan, and SG&A, because in order to launch Clairvaux-Zenton in Japan and also prepare for the registration of Clairvaux-Zenton in South Korea, you see a 22 million difference between group as reported and Proforma, excluding Japan and South Korea. So the main difference as we saw is the impact in revenue, which explains that the non-GAAP operating results, as reported, are 387, but on a pro forma basis, so the scope of the business we currently operate is 456 million Swiss francs. Next slide, Nadia, please. So on slide 16, you see we start again from the reported and pro forma non-GAAP operating results. You see a little difference between reported and pro forma, except, of course, in the reported deal, the impact of 295 million. which is the addition of the gain on sale of 302 and the impairment of intangible assets. Again, this is offset in the OPEX in the US GAAP numbers. So, yes, the US GAAP operating results are shown at 145. But on the pro forma basis, we are at 507 million. Next slide, please.

So here you have a comparison.

We'll not spend too much time on this one. Again, on the pro forma numbers, but comparing 2003, the first nine months of 23, the first nine months of 2022. As you can see, we have curve on the OPEX. Research is going down, 74 versus 86. Development is going down, 130 versus 148. mainly a marketing and selling is significantly going down 277 versus 333 and the revenue are are are growing mainly uh through a net sales we see uh with the launch of uh of uh qvv because now we speak in pro forma numbers only of security and as a result you see a set We almost saved compared to the comparative nine months 2022, almost saved 100 million, leading to pro forma non-GAAP operating results of minus 456. Next slide, please. Same here with the US GAAP operating results. The impact, we saw it on non-GAAP operating results, almost no difference with DNA and stock-based compensation. We booked restructuring costs at the headquarter following the cost reduction initiative launch in July, which is almost complete, of $11 million. leading to pro forma $507 million.

Next slide. So now the cash flow.

And here, the cash flow, again, trying to give you a view of of the liquidity beginning of the year 466, how we went to 255 million by the end of September. You've seen the pro forma revenue, 29 million, again, excluding the impact of 68 million of the license of QEVIC to SOSEI. Non-GAAP OPEX, we discuss it at length 486. The cash so far from the associate year deal, 396. Three to four million more expected in the coming weeks. Working capital changes of 85. which I put as other in order to reconcile these numbers with this waterfall with Proporma revenue. So 255 million cash by the end of September. Next slide, please. I was on the road with Andrew over the last few weeks and months, and I wanted to add this slide for the sake of all investors in Eidosia. The indebtedness, as reported, is $1,293,000,000. Mainly, we see with two bonds, the bonds that will mature in June, in July 2024. That's the $200 million convertible bond, which is accrued for $199. You have $597 of the 2028 convertible bond, nominal value $600 million. And that's really because the strike now, both bonds are really out of money with a strike price north of 30 Swiss francs. So this is, I would say, not a U.S. gap, as you can see, but these are really convertible bonds that we would have to pay should we not be able to reach the strike price. The J&J convertible loan of $335 million will mature at the latest in June 2027. And J&J can convert this loan at any time into new shares, up to 29.1 million shares. The only reason why it's a debt according to US GAAP is that there is one single reimbursement of this convertible loan, one single feature, which would be a change of control or fiduciary. If not, this loan will eventually, a year later, in June 2020 or seven, be reimbursed in additional shares, 21.1 million, as said. And the other one is the sale and leaseback because of some features where we have an option to buy back the buildings sold last year for 162 million. So see, roughly 1.3 billion debt, as you can see, has different nature with fundamentally 800 nominal value of convertible bonds, 24 and 28, 200 and 600 million respectively. This does not include the conditional consideration for the reacquisition of the apostatel rights. And I, let's go to the next slide. As you have seen in the press release published early September, we reacquired the worldwide rights to acrocitantin from Janssen. Jean-Paul mentioned it. And J&J is entitled to up to 306 million Swiss francs. Only if the drug is approved in the U.S. for 90 percent, so more or less 270, 500 million Swiss rinks, and 10 percent, so roughly 31 million Swiss rinks, if it's approved by EMA in Europe. Eidosia will pay to J&J 30 percent on any outlicensing deal of a postitentum. 10 percent on any other out-licensing deals, and low to mid-single royalties on the annual net sales. So, just to give you also, because we got this question, why 306 million, quite an odd number, this was your conversion of 350 million U.S. dollars. And this is a number of $350 million U.S. dollars. That's more or less the amount which was invested by Janssen in the collaboration with $230 million U.S. dollars back in December 2017, and 50 percent sharing of the development, filing, and CMC costs since the opt-in until September 2023.

Next slide, please.

As Jean-Paul mentioned, we had a busy third quarter. reacquiring the right, going through the cost reduction initiative at the headquarter, closing the deal. And what is reflected in the new guidance, 600 operating loss and 670 U.S. GAAP operating loss, is reflecting the efforts made by the company in order to also prioritize the pipeline portfolio and reduce the spend. So next slide, please. So as you can see, we are adapting the company to create sustainable value, and with this, I hand over to Andrew.

Thank you, André. Thank you all for your prepared remarks, and we now have time to address questions. As mentioned at the beginning, we are now joined by our president of IDORSA UCAN region, Jean-Yves Chatelain, who joined us already at the last call. We also have our new general manager and president of IDORSA US, Tosh Buck. Prior to joining Eidosia, Tosh served as Executive Vice President and Chief Operating Officer of Chemocentric. Tosh has a rich expertise spanning complex operations and the commercialization of products across different disease areas and medical settings. Thank you for joining us today, Tosh. In terms of logistics, I will ask the analyst to ask one question and jump back into the queue. Operator, please open the lines.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced. To withdraw your question, please press star 11 again. Please stand by. We will compile the Q&A rules. This will take a few moments. And now we're going to take our first question, and it comes from Peter Verdot from Citigroup. Your line is open. Please ask your question.

Yeah, thank you, Pete. One question for Andre on financing. Just in light of the liquidity position, can you give any comfort or color on the QVVIC, AppPro, and or pipeline deals that you have publicly stated you're seeking to provide a cash runway to break even? I realize you can't go into big details, but anything you can say on level of interest, confidence in getting something done in Q4 would be appreciated. And just a tack on, Andre, this is a second part of the first question on financing. Just in light of the current share price, is it fair to assume that the backstop rights issue that you probably talked about is now off the table or is that still on the cards? Thank you.

Well, I will thank Peter for your question. As you said, it's premature to give you too many details. We have a few balls in the air. with different scopes. Nothing is excluded today regarding the scope of business assets that we could partner. Of course, we aim to find right terms for such outlicensing deals. I would say nothing is also excluded, even if an equity raise or an equity-linked deal based on the current stock price is not our favorite option, but it could be really a backstop option if need be, i.e., we would not be able to close a deal, an accessible deal, with one of the assets that could be a partner.

Thank you very much. Thank you, Pete. Thank you, Albrecht. Operator, next question, please.

Yes, of course. Just give us a moment. Now we're going to take our next question, and it comes from Brian Balchin from Jefferies. Your line is open. Please ask your question.

Hi, thanks. It's just on KiloVec. Maybe it's one for Tosh, but Can you just help us understand what gives you confidence in seeing inflection in 4Q, just as we're not really seeing that pick up in IQVIA based on October data? And then I see that you said you've got 57% paid scripts in September, so that's 11% up from 3Q, but we saw an 11% increase in paid scripts from TQ to 3Q, which didn't translate into a meaningful jump in sales. So what gives you confidence that 4Q is going to be different? Thank you.

Hello, Brian. Can you hear me okay? Yeah, we can. First of all, thank you for the question. It's a pleasure to be here. Yeah, look, first of all, given our new reduced TRX prescription volume baseline following a flat third quarter, we've had to have a reduction in promotional efforts. We're expecting that, and with continued market access improvement, we expect to see some consistent volume growth now from our new baseline. In terms of inflection points, you're aware that on September 1, we got CVS commercial access provided, and we're focused on pulling that through. We've also got a couple of regional plans that are given some additional access in the commercial space. And our account director team are working hard to pull that through. For example, Blue Cross Blue Shield in Florida, which is the largest Blues plan, has added QVIVC. Blue Cross Blue Shield in North Carolina, which is also a top five Blues plan, has added QVIVC too. Our team continues to work on those every day. And then looking forward, the next and bigger inflection point we would expect will be in January. where we win our first Part D access with the Optum United Group.

I'll stop there. Thank you. Thank you, Todd. Operator, next question, please.

Yes, of course. And the next question comes from Rajan Sharma from Goldman Sachs. Your line is open. Please ask a question.

Hello, thanks for taking my question. So just on APRA and the new PDUFA, so firstly, could you just kind of help us understand the streamlined REMS and the kind of additional color on that, and specifically, I guess, the rationale as to why that wasn't included in the initial filing? I guess there's something changed since that initial filing versus now. Thanks.

Okay, so as we have mentioned, the REMS will be addressing the risk of teratogenicity, and we have provided the data concerning, you know, the risk in human beings, because mastitentin, and we could provide some data related to macetantin to the FDA, and we also provided some preclinical data giving a rationale for the low risk, which we believe is the risk with apocytantin. And the FDA has really indicated us that First, the rents will be only for there is no lever rents to that's what we were informed about that. And the 2nd thing is that we will try to make these friends lighter, which means that it is and this is still under discussion, but it should only be requiring. the pharmacy and the doctors to register, so to be aware of the teratogenicity risk, but there will be no need for the patient to act in a way. This is just an information REMS, and because it is different from the other, because of the other REMS with endothelial receptor antagonists, It requires time for the FDA to put that in place with us.

Thank you, Jean-Paul. Thank you, Rojan. Operator, next question, please.

Yes, of course. Just a reminder for the participants, if they wish to ask a question, please press star 11 on the telephone keypad. And now we're going to take the question from Sushila Hernandez from Van Laar Schot Kampen. Your line is open. Please ask your question.

Yes, thank you for taking my question. Could you elaborate on your pre-launch activities for APROSI DenZan and in particular your cash period on that and also what kind of scenarios do you have in mind for potential commoditization activities? Thank you.

APROSI, do you want to take that question, please? OK, so this is really, we just got recently the write back. So we are analyzing the situations and we will take a few weeks in order to really decide the best way to create value with Apocitenta. We got a lot of information from the work done by G&G and we are analyzing and no decision has been taken. So for now we are really more making a sort of analytical work, consulting with experts, and also consulting, starting to consult for visa payers, and we will take decision in the later stage.

Thank you, Jean-Paul. Operator, next question, please.

Just give us a moment, please.

Dear speakers, there are no further questions, and I would like now to hand the call over to Andrew Weiss for any closing remarks.

Andrew Weiss Operator, can you call for another question, please?

Yes, of course. So now we're going to take another question.

Just give us a moment. And now we're going to take the question from Peter Veldhult from Citi. Please ask a question.

Yeah, thanks, Megan.

Just my last question. I mean, Jean-Paul, just a blunt question for you. Given the predicament faced and the timelines you're working to, how committed are you or are you still very 100% committed to pursuing a standalone strategy for a dossier or have you set yourself a sort of a gating factor when other considerations might be on the table. Thank you.

I think that, you know, we are not, I think we are evaluating many licensing, partnering, and the question of the sale of Vigorsia, especially at this price, is not on the table.

Thank you. I think that's clear. Thank you. Thank you, Jean-Paul. Operator, was there another question that came in?

Dear speakers, there are no further questions at this time.

Thank you very much.

So this concludes our call for today. Thank you for your ongoing interest in AIDORSIA, and we look forward to speaking to you again.