Nxera Pharma Co Ltd

Time has come, so we will now begin the financial results briefing of Nexara Pharma for FY 2024. Thank you for taking time out of your busy schedule to join us today. I am Nomura, CFO. I will be the moderator. Today, we have Chris Cargill, CEO, Dr. Matt Barnes, President of Heptaris and Head of UKRD, and Dr. Makoto Sugita, Chief Medical Officer and President and CEO of Nexara Pharma Japan. simultaneous interpretation is provided. Please click on the earth icon in the lower right corner of the screen or click the details button and then the globe icon and select either Japanese or English. If you choose off, you will hear the speaker's original voice. Today, we will explain the progress of our business using the materials in the first half, followed by a Q&A session in the second half. The presentation materials will be shown on the screen and are also available on our website. If you want a copy, please access our website by selecting IR News from the Shareholders and Investors tab in the upper right corner of the website. For the Q&A session in the second half, institutional investors, analysts, and members of the media are welcome to raise your hands and ask questions during the Q&A session. For all others, please submit your questions via the Q&A button. Questions can be submitted any time during the webinar and will be answered as time permits during the Q&A session later. So we will start the briefing, I will first explain the full year financial results, followed by an operational update from Chris, Japan and APAC commercial business by Sugita and R&D progress, mainly in the UK by Matt. Finally, Chris will explain our FY 2025 goals and medium to long term objectives. Please turn to page five of the presentation. This is page 5. This is the summary of the financial results for the fiscal year ending December 2024, divided into three parts, revenue, profit, and cash. First, revenue increased 126% to 28.8 billion yen, compared to 12.8 billion yen in the prior year. Details will be explained later, but this is thanks to the fact that sales of pivlots were strong. and that it contributed for the full year in 2024 while it only contributed for five months after the acquisition in 2023. And also thanks to an increase in milestone due to the progress of many partnered programs. Next, regarding profit. Core operating profit increased by 3.6 billion yen compared to a loss of 3.1 billion yen last year. This is thanks to the sales growth mentioned earlier, as well as the fact that R&D and SG&A expenses were both lower than the revised estimates as the integration progressed well. Also, operating profit on accounting basis was a loss of 5.4 billion yen, which is calculated by subtracting non-core expenses of 9 billion yen, Of these non-core expenses, most of the M&A-related non-recurring expenses in 2023, mainly additional cost of sales charge and integration costs, were completed in 2024 and will not be carried over to 2025. Finally, cash decreased to 36.2 billion yen, compared to 49 billion yen in the prior year. This was mainly due to the advanced purchase of API of QVIVIC to ensure the stable supply in line with the launch. Moving on to slide 6. The summary is explained in a bit more detail, showing the trends in revenue and its breakdown, operating profit and core operating profit on the left, and the factors behind the increase or decrease from the same period last year on the right. One thing I should add from the summary is that, as you can see from the breakdown of milestone on the upper right, Two milestone payments from Neurocrine in line with the development progress of M4, the success of the long-term toxicity study and the Phase 2 study of M4 contributed greatly. Next is slide 7. Slide 7 shows the breakdown by business domain as well as by core operating profit and accounting operating profit. As mentioned in the summary, the non-recurring costs associated with the acquisition of Edorcia Japan in 2023, specifically A, the inventory adjustments, and C, integration costs, shown in pink on the right side, ended in 2024 and will not be carried over to 2025. Including these, non-core expenses for 2024 amounted to approximately 9 billion yen, putting pressure on accounting profits, but the core operating profit for the entire group was 3.6 billion yen. Next, slide eight. This slide shows our forecast for R&D and SG&A expenses for the fiscal year. R&D expenses are expected to be between 12 and 14 billion yen, a slight increase from the 11.8 billion yen forecast for this year. The main factors behind the increase are the costs associated with the progress of development of our three in-house developed products that have entered clinical trials, EP4 antagonist, EP4 agonist, and GPR5-2 agonist, as they move from Phase 1b to Phase 2, and the expected development costs in Japan and APAC through in-licensing. Regarding SG&A expenses, as the integration process has settled down and we have made progress in streamlining our expense usage, this will offset the increase in amortization of intangible assets due to the launch of Qvidic and the increase in IT investment costs aimed at further efficiency. And we are aiming for a flat to slightly decreased level overall from 2024. That concludes my brief summary for the full year financial results. Chris will now update you on the business. Chris, please.

Thank you, Nomura-san, and good afternoon, everyone. Please turn to slide 10. So it was a fantastic year of progress as we continue to invest to transform the company into one of Japan's leading biopharma companies. We achieved our full year sales target for PIVLAS of 15.2 billion yen, beating our guidance set at the Q3 2024 results for sales greater than 15 billion yen. We secured the on-time PMDA approval in Japan for Daradirexin, brand name Qvivic. And while we did not achieve an in-license of a new product in the financial year 2024, we remain active in multiple discussions with global partners to secure new products for Japan and APAC. We executed two new major partnerships. O-Ringer Ingelheim paid for an exclusive option to license our GPR-52 agonist program for schizophrenia. Shionogi became our powerful commercial partner in the successful launch of Qvivic, a potentially best-in-class treatment for adults with insomnia. We initiated a new Phase 1 study for our wholly-owned EP4 agonist program, targeting IBD. And we launched a new brand concept for the entire company, Nexera Pharma, which was well-received internationally. We've now completed all transitional service agreements with Eudorcia and are now fully independent of Eudorcia's supply chain and financial and IT systems following the acquisition of Eudorcia's businesses in Japan and Korea. Please turn to slide 11. So across our core businesses, we remain extremely productive. We are accelerating investments in science and drug development to support our goal to build a high growth, high profit emerging biopharma company for Japan. In the UK, we continued to invest in the next wave drug discovery platform to ensure we are the definitive leader at drugging GPCRs. And we're focused on developing drugs that target GPCRs in the largest areas of unmet need, such as neurology, metabolic disease, and immunology. It's a very exciting time to be at Nexera as together with partners, we now have multiple programs advancing through the clinic. Of note was the successful phase two study of MBI-568 by our partner Neurocrine, which is a potentially best-in-class profile muscarinic M4 agonist fast-follow program for patients with schizophrenia. Following its successful end of phase two meeting with the FDA in January, Neuroquin will move this program into a global phase three study in the first half of this year. In Japan, PIVLAS has firmly established itself as the leading product preferred by neurosurgeons for the prevention of cerebral vasospasm associated with ASAH. And furthermore, our second product, Qvivic, was successfully launched by our partner, Shionogi, in December 2024. Qvivic rapidly became one of the most detailed products in Japan across December 2024 and January 2025, which validated our strategy to secure a powerful commercial partner to ensure Qvivic is available to as many patients in the $1 billion US market for dual orexin antagonist treatments in Japan. Please turn to slide 12. As you can see on this slide, we have a broad and balanced innovative pipeline that's targeting some of the biggest areas of unmet medical need. Nexera Pharma is well advanced in its mission to accelerate innovative medicines to patients and become a leading player in Japanese pharmaceuticals. With two recently launched products driving stable top line sales growth, plus a pipeline of innovative clinical stage programs, the risk reward is very attractive. We have the upside potential of a biotech with the diversification and protection of a commercial pharma company. Please turn to slide 13. So we are delivering on science with significant future commercial potential. In Japan, where our commercial business is now thriving, we prioritize focusing on diseases that truly matter in this region, such as age-related conditions and quality of life diseases. PIVLAS and Qvivik are both amazing products servicing diseases in this area. We're focused on recruiting the best team in the industry, and collectively our colleagues have contributed to nine Japanese NDA approvals in recent history. And we aim to stay lean and agile. We believe we're second only to Chugai in Japan when it comes to sales force efficiency, generating over 400 million yen per sales representative annually in Japan. In the UK, the hub of our research activities, we focus on the continued investment in our next wave drug discovery platform to be the definitive leader in drugging GPCRs. We focus on innovating in areas that matter, especially neurology, metabolic disease, and immunology. And our partnered programs are exposed to some of the fastest growing areas of healthcare, such as muscarinic agonists for neuropsychiatry with Neurocrine, orexin agonists for narcolepsy and sleep disorders with Centessa, and oral small molecule GLP-1 agonists for obesity with Pfizer. In the next sections, my colleagues Sugita-san and Matt Barnes will provide more detail regarding the two products that we've recently commercialized in Japan and our most advanced programs in the clinic, including both partnered and wholly owned programs. Thank you and over to you now, Sugita-san.

Thank you, Chris. Thank you very much, ladies and gentlemen, for taking time out of your busy schedule to attend today. I am Makoto Sugita. As of October 1st last year, I assumed the position of Chief Medical Officer at Nexer Pharma Inc. and concurrently serve as the President and CEO of Nexer Pharma Japan Inc. Today, I'd like to provide you with an update on the latest developments in our commercial business in the Japanese and Asia-Pacific markets, focusing on the market growth of pivlats and kuvivik, as well as our future plan. Now, let me begin the presentation. Next slide, please. Let me introduce pivlats, one of our key products. PIVLATS is an endothelial A receptor antagonist developed to suppress cerebral vasospasm following surgery for subarachnoid hemorrhage caused by cerebral aneurysms. By doing so, it helps prevent secondary complications such as cerebral infarction and ischemic symptoms. Currently, surgical treatments for cerebral aneurysms such as coiling and clipping are widely performed. However, post-surgical complications due to cerebral vasospasm remain a major challenge that significantly impacts treatment outcomes. PIVLADS was specifically developed to address this issue by reducing the risk of postoperative vasospasm. In doing so, it supports neurosurgeons in their treatment efforts and contributes significantly to improving patient outcome. Market Growth and Sales Performance of Pivlots Since its launch in 2022, Pivlots has demonstrated steady growth. Last year, it achieved a market share of 69%, and we expect this to exceed 75% by 2025. Sales have also expanded steadily, with a 47% increase from 2022 to 2023 and a 14% increase from 2023 to 2024. With this continued growth in both market share and revenue, we are targeting sales of 13 to 14 billion yen in 2025. Moving forward, we will strive to reach more patients and promote broader adoption in medical institutions. Now, the NHI-based revenue will be shown on net basis, our revenue basis going forward, so the numbers will be different going forward, so please take note. Now, to further accelerate the growth of PIVLOTS, we are implementing three key strategic initiatives. Enhancing medical information dissemination. We will strengthen educational activities for neurosurgeons by leveraging clinical data, promoting the appropriate use of PIVLOTs, and expanding adoption across more medical institutions. Next is further expansion of market share. While PIVLOTs has already secured over 70% market share, we aim to exceed 75% by 2025. To achieve this, we will deepen our collaboration with medical institutions and expand our network to ensure continued market penetration. Lastly, improving profitability and ensuring sustainable growth. By optimizing our sales strategy and maintaining competitiveness, we aim to build a solid foundation that supports long-term market growth. As demonstrated, Pivlats is accelerating its market penetration while maintaining stable revenue growth, establishing itself as a leader in the neurosurgical field. With our 2025 revenue target of 13 to 14 billion yen, we will continue to drive market expansion and strengthen our leadership in this sector. Next slide, please. Next is Kuvidik for insomnia. Let me first explain the mechanism of action of Kuvivik. Kuvivik is an insomnia treatment classified as dual orexin receptor antagonist, DORA. Orexin is a neurotransmitter that plays a crucial role in maintaining wakefulness in the brain, keeping the brain in a state of alertness through its interaction with the orexin receptor types A1 and 2. DORA works by simultaneously blocking both of these receptors, thereby suppressing the excessive wakefulness system and promoting natural sleep. This makes Kuvivik a new type of insomnia treatment. Next is market growth and expansion of Kuvivik. Kuvivik entered the market as the third DORA insomnia treatment. In recent years, there's been a rapid market shift in Japan from benzodiazepine and Z-class insomnia treatments to DORA medication. The market data clearly shows this growth. The growth trend of DORA-based insomnia treatments in Japan are as follows. Since 2019, the market for the two existing DORA drugs has grown by over 10% annually. The prescription rate for DORA drugs has now reached nearly 50%, with further increases expected. The domestic market size in Japan is projected to reach approximately 10 million US dollars. As such, the market share of DORA medication in the insomnia treatment market in Japan is rapidly expanding. Japan's importance as one of the key markets for DORA globally is growing. Nexera Pharma has formed a strategic partnership with Shionogi and Company, and we are working together to make QVVIC the best-in-class treatment. We are accelerating its market launch with this partnership. By implementing this appropriate marketing strategies and strengthening collaboration with healthcare professionals, we aim to further drive the growth of DoraMarket and evolve QVVIC into a leading product in this space. Next slide, please. The growth of QVVIC is not limited to the Japanese domestic market. We are currently actively expanding into Asia-Pacific market. In Japan, through our partnership with Shionogi and Company Limited, we have built a system that can address over 20 million insomnia patients. Since its market launch, Tuvivik has steadily increased its recognition in Japan, and along with the growth of the overall DORA market, further market expansion is expected in the future. In South Korea, we are progressing with partnership with local companies, and clinical trials are progressing smoothly, with a market launch targeted for 2027. With more than 6.5 million insomnia patients in South Korea, there is significant market growth potential. Currently, our partnership is in the form of development cooperation, but we will continue to consider strategies for sales and marketing going forward. We are also in discussion with several potential partners in other Asia-Pacific markets, and we are committed to building optimal strategies tailored to the unique characteristics of each country to ensure steady market expansion. As shown, our company is not only focusing on the Japanese market, but is also actively expanding in the Asia-Pacific region, building a system to reliably deliver QVVIC to patients who need it. We will continue to strengthen collaborations with our partner companies and develop market-specific strategies to drive the growth of the DORA market, clearly differentiate Kuvivik from our DORA products, and achieve sustainable revenue growth. Through these efforts, we will strive to provide sustainable corporate value to our shareholders. This concludes the report on Qvivik's expansion strategy in the Asia-Pacific market. I will now proceed with an explanation of our 2025 revenue targets and future growth strategies. In my last slide, I will explain the sales growth of our key products, Pivlots and Qvivik, and 2025 revenue targets. So, our target for 2025 fiscal year pivots 13 to 14 billion yen, QVVIC 4 to 5 billion yen. To achieve these targets, we will focus on three pillars. One, expanding market share. Two, optimizing sales strategies. And three, accelerating growth in the Asia-Pacific market. These initiatives will ensure steady growth toward our revenue goals. PIVVLATS has consistently grown in the market, while QVVIC is now at a crucial stage where building a solid foundation for its future growth and expansion is key. PIVVLATS is achieving stable market share expansion and revenue growth, QVVIC expanding from the Japanese market into Asia Pacific region, achieving the 2025 revenue target of total 17 to 19 billion yen. We are committed to providing innovative treatments that contribute to improving patient quality of life while also driving further market growth. We also promise to continue enhancing corporate value for our shareholders. Next, R&D progress will be explained by Dr. Matt Barnes. Matt?