Xbrane Biopharma AB (publ)

webcast today in relation to the second quarter 2024 financial report of X-Brain Biopharma. My name is Martin, I'm the CEO and I have also our CFO Anette Lindqvist with me today. We will go through a brief presentation highlighting the operational advances during the past quarter and also the financials and we will take questions thereafter and you can ask questions both via audio and also via the chat and we'll do our best to answer to them. So let's start off here. Most of those of you who are calling in probably know what we are engaged in. We are a biosimilar developer. So we're developing fall one drugs to approved biologics, which can be launched post patent expiration or loss of exclusivity of the respective originated products. Our portfolio consists of four biosimilars and biosimilar candidates. First one Ximilusi, approved biosimilar to Lucentis in Europe and launched since first quarter 2023 by our commercialization partner Stada. we are going through a regulatory process with FDA for a US approval and we have partnered up with Valorum Biologics to commercialize the product in US post approval. Then we are developing biosimilar candidates to CIMSIA and OPDIVO respectively which both are in late preclinical stage. We have scaled up the respective production processes and we are currently driving in a very active out licensing process to find a suitable commercialization partner for these two biosimilar candidates so that we together with a partner can proceed into clinical development. Then we have early preclinical development of a biosimilar candidate to DARS-LX. All in all this portfolio is addressing A market looking at the originator peak sales estimate combined of 26 billion euro. So we're looking at Ximilusi first and we can take a snapshot of the market outside of US for anti-VGFs for retinal disorders so this is a market of about a little bit north of 5 billion euro of annual net sales and You can see in the graph on the left hand side, the light blue bars are Lucentis, the originator product, which Simulus is a bisimilar to. And the red ones, which are advancing on the top, are the Lucentis bisimilars approved in Europe. And we are seeing that the Lucentis biosimilars gradually are gaining share, as those of you who have followed us, this is taking longer time than what we initially anticipated, but we are seeing movements in the right direction with the gradual market share gain of the Lucentis biosimilars. And we remain our view we had at the initiation of this development that at the end of the day we believe that Lucentis biosimilars shall take some 70% volume market share of the overall Ranibizumab market and that's to say the active ingredient in Lucentis is called Ranibizumab. Over a couple of years that's what we've seen for biosimilars that have entered on other other molecules or biological drugs particularly in oncology immunology space. So that's still the outlook we believe in and of course we do believe that Eximilusi shall be a preferred choice amongst the respective biosimilars to Lucentis. And taking a snapshot of where we're together with Stada are when it comes to the commercialization process. Eximulus is now launched across 18 countries so there is a gradual launch in additional countries as you can see and from a value market share perspective we're well above one percent now and This is a quarterly market if you only look at the Radavisma market so Lucentis plus the Lucentis biosimilars that's at about 300 million euro of quarterly sales and this is now second quarter 2024 and Eximilusi took well above one percent of that market and Eximilusi is the second amongst the Lucentis biosimilars it's up against biosimilars commercialized by Teva and Bayan respectively and as I said Ximilusi is number two. We're happy to note that the net sales of Ximilusi saw a strong growth in the second quarter close to 40 percent growth in net sales versus the first quarter of 2024 so we're happy to see that. That was partly driven by continued volume growth, as you can see in the graph on the bottom side, on the right-hand side here. That's kind of depicting the volume growth quarter by quarter in the last quarter. So we've been between 20 to 30% in volume growth and also 21% volume growth in the second quarter 24 versus first quarter 24. But the 40% growth in net sales, so that of course included a mixed effect which impacted the average selling price positively. and that is a stronger growth in market where the price is a little bit higher than in other markets essentially. So we're happy to see that development and we are working relentlessly together with Stada to work through a successful continued commercialization of this product in Europe. And continued development of Exim Lucy. We are, as you might recall, we unfortunately received a complete response letter from FDA on our initial BLA or biologic license application. And that was in April this year. We held a longer webcast in relation to that complete response letter and it mainly centered around issues with the reference standard which we planned to use for release of the product for US market as well as observations in inspections, pre-approval inspections done by FDA at the respective manufacturing sites where the product is planned to be produced for US market. We are now going through a process of qualifying a new reference standard and we've had a meeting with FDA on that topic and agreed on on strategy and exactly how we're going to do that. So just full alignment with the agency around that qualification of the new reference standard. And we are also working together with our respective contract manufacturers to resolve the observations which, if they had on their respective sites. And as previously communicated, we're targeting a resubmission of the BLA in the fourth quarter of this year. And it's a standard six months review process of a resubmitted BLA. So we're expecting a BESUFA date or a decision date in second quarter of 2025. We're also working on, as you know from before as well, a pre-filled syringe of casein leucine to be launched initially in Europe, and we hope of course that this pre-filled syringe subsequently can be introduced to the US market, but initially it's about the European market. We're preparing for submission, this is essentially a variation to the existing approval, for provider approval of course, a launch in Europe in 2025. As you know, Ximulus is currently approved and commercialized as a vial, while as the originator Lucentis by and large is sold as a pre-filled syringe. They have the two presentations on the market, but the pre-filled syringe is the predominant one. And there is a certain time-saving at clinic which makes the pre-filled syringe the more convenient choice for ophthalmologists and therefore we do believe that introduction of the pre-filled syringe will lead to it will unlock further market opportunities and lead to an upswing in the sales across Europe that's our expectation. So that was briefly about Exim Lucy and moving on then to our very similar candidate to Simsea. It's now called XB003. Here we worked during second quarter and the summer months in scaling up the production process on the drug substance side together with our selected contract manufacturer and we can happily announce that we've been successful in that and we now have successfully scaled up the production process to suitable scale to go into clinical development and we have confirmed the analytical similarity to the reference product in the same fashion like what we had at the small scale. As you also noted probably if you followed us over the summer here, unfortunately we regained the rights to this program from Bayern. We had a partnership since a few years back with Bayern around this product. they went through a strategic review of their full portfolio and several circumstances on their end led to their decision to terminate this license agreement with us and hence the full rights to this program was turned back to X-Brain. We immediately after having received That notice from Bayen started an out-licensing process to find a suitable commercialization partner for the program to also support us in the upcoming clinical development of the program. We have engaged an advisory firm in this work, and we're working with the same life science advisory firm, both when it comes to out-licensing of XB003, as well as Extivane, our Optivo biosimilar candidate. And we had, prior to the termination of the agreement with Bayern, received quite a lot of incoming interest around this program. We believe it's a unique program since it's the only one or one out of a few biosimilars to Simsea under development globally. And it's still a sizeable originated product, some 2 billion Euro annual sales. and we believe we have a unique proposition when it comes to essentially being able to provide this at what we believe commercially viable production costs thanks to our platform technology giving us a high productivity in the production process of this specific molecule. I think we have a good continued interest in this out licensing process we're running On a tight timeline, we were trying to conclude a license agreement before end of October, and this goes both for XB0003 as well as X-Divane. What we also focused on now is to incorporate into the program the development activities which previously were under bi-year responsibility, which entails essentially preparing for upcoming scientific advice with EMA and FDA to agree on clinical development plan, as well as the drug product side of the whole development. But these are also areas where we expect that the future commercialization partner will support us. In any case, the program is prepared for and ready to go into clinic in 2025. So let's briefly on XP-003 and sorry if we move here to ExDevane our Optimo by similar candidate and as you notice these two programs goes pretty much in parallel right now. We have also successfully scaled up the production process together with the selected contract manufacturer and confirmed the analytical similarity profile versus the reference product. We also, as we communicated in a press release not long ago, received positive feedback from EMA in the scientific advice that we had with them. And we essentially got an acceptance on our proposed clinical development plan which entailed a streamlined approach and this was we believe this is crucial actually in order to be successful with this program um because as Those of you who follow this market, what currently is required from a regulatory guideline perspective is to conduct a phase one and a phase three trial. for a biosimilar candidate where you compare both pharmacokinetics in the phase one, but then also you compare the biosimilar versus the reference product on a well-selected efficacy endpoint in the phase three trial. Now, for this particular program, and this goes also if you're doing a biosimilar development on Keytruda, the clinical development is much more expensive than for other biosimilar candidates. Due to it being in oncology, we are running clinical trials generally more expensive, but also due to the very, very high cost of the reference product. And since we need to procure the reference product for the competitor arm in these trials, it becomes very expensive. so there have been budgets for phase one and phase three trial all in all for about 120 million euros of very significant clinical investments behind these programs and we came to a point where that budget hurdle if you will from a clinical development perspective made it difficult for us to find a commercialization partner who was willing to support the funding of such a clinical development. Now with this positive feedback from EMA on a more streamlined approach we see an opportunity to reduce that clinical development budget with at least half and I think we've opened up for a lot of new interest in this program and We're running also an active out licensing process. And we are again running towards a tight timeline, but we believe we are going to be able to uphold that one. And the ambition here is to close something by end of October. And also Extivane is set or ready to be able to go into clinic in 2025. So that's a brief kind of operational update. So maybe with that said, I'm going to hand over to Annette to go through the financials of the quarter.

Thank you very much, Martin, and welcome to the finance section. So we'll start to have a look with alongside the revenues of the first slide. and those of you who's been with us for a while you know that our revenue stream is somewhat complicated that's driven by accounting regulations like IFRS so that is fully supported with the auditors of course and let me start with explaining the diagram on the left the bars represent the net sales of 404x brain quarter by quarter and then those consist of two things One that we reference for product sales as a mix of deliveries to Stada and second the net profit share received from Stada. Second one is out licensing of products so that would be in this last quarter it would be like the signing milestone payment for Valorum and you can see how they differ and then if you then overlay with the line representing the gross margin it becomes even more strange for an outsider if I may say that is driven by the deliveries we deliver to start up sell the products to start up and with zero margin and then receive a net profit back uh and the margin on those that is then a net profit with marketing and sales uh already deducted Obviously, for in this last quarter, the licenses are quite often then delivers a gross margin of 100%. So the total revenues in the last quarter was 52 million. And first of all, the net profit from Singlucci was 22, a rounded number. And that was, as Martin said, driven by very much a positive market mix, but also then a positive gross margin impact. And that is because of the marketing and sales costs have now started to decline as the volume and the sales are going up. Then the license agreement, as I mentioned, 27 million. And then further on, we also had a positive COGS, or cost of goods sold, driven very much by positive production variances, but also retroactive adjustment from one major CMO that resulted in a price adjustment. And that will benefit our COGS moving forward. And you can also see the impact when we get to the balance sheet for accounts payable, because that was the resolution of a conflict that we had with the CMO. So it meant that we held some payments in the AP area. That's now sold. We saw a somewhat adjusted COGS in the future. And we also see that actually that will result in a credit note in Q3. Looking onto the cost side, You can see the admin cost is starting to come down, partly as a cause of the impact from the cost saving scheme that we launched in November last year. However, we see a minor impact in Q2. That's because of the majority of the positions leaving the company, which is now 27 positions versus Q2 last year, left very late in March, meaning that that will then have full impact in March next year. But we're starting to see a positive impact. Last quarter, we had 5 million roundabout. Now we can see 11 million. A further seven will resign during the course of the Q3. That will then mean that 34 positions in total have left the company since June, counting June Q2. Then for the rest of the R&D section, as you can see, that's where the increase, you can notice the increase, and that is as we communicated and as expected, that is driven very much by the scale of processes for both for X-Divane and XB003. So that was expected. Yep. And also to a good degree, the PFS, I should have said. So the cash position, and you can see how we've tried then to illustrate the movements from last quarter, starting then with 270 that were left in March. You can see some significant movements. First of all, we have prepayments as the first of 66 coming in in the quarter. That's part of our business as usual, so that we have on an ongoing basis. That consists of prepayments from start of majority, profit share. and also in this case some VAT coming in from the UK and also from Lithuania. Second, we have Xymluchi production cost, around about 50 million, and that's for the majority of this drug substance for the PFS and getting ready for the US. We have... We have a second one is the other product coming. And then for xDevane, 40 million. That's again a payment to the CMO for the scalar processes. And xBee 003, 10. And then you can see also noticeable, we have the 63 million for the amortization to heights. We have 20 million going out for guarantors as part of the share mission. We have organization, which is 29 million. As you can see, a slight decrease then already, as we mentioned, and then 29 resulting in the 73. And with that, Then leaving kind of the cash and cash equivalents of 73 million and the operating cash flow is around about 100 million. And as mentioned, the majority is going to Ximilutti and Xdivine in the quarter. And then we expect XB003 to scale up even more so in Q3, Q4. So with that, back to Martin.

Yeah, so to try to summarize, as I mentioned, generated revenues of about 50 million Swedish crowns. It was a positive impact on the profit sharing from Kissim Luce, which was good news, and then the upfront payment for U.S. territory from Ballorum. And yeah, positive progress when it comes to commercialization of Kissim Luce across Europe with an increased growth in net sales during the quarter, which was positive. positive feedback from EMA on ExDevane program which positions that program in a different situation and significantly increases our possibilities to partner this program up and they regained the global rights of XP-003 as a consequence of the terminated agreement with Bayern. And now looking ahead for from the third quarter. Of course, as you all have noticed, if you follow the recent press releases, our full focus now is to successfully out-license both X-Divane and XB-003 coming months essentially before October comes to an end. As I've mentioned, we are running processes under an established timeline, which comes to an end in end of October. And we are optimistic that we're going to be able to achieve that, given the current level of interest we have. And then beyond that, of course, there's continued development activities for Kissim Lucy and the other programs to keep the pace in the respective programs.

so that probably concludes the formal presentation and i guess we can then open up for q a so we can first allow questions if you wish to ask a question please dial pound key five on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key six on your telephone keypad the next question comes from philip enison from red eye please go ahead

Hello everybody and thank you for taking my questions. I thought just the first one, do you have any insight from where you stand right now from Stada on the product sales so far into Q3?

No, not beyond that. The trend we've seen the last couple of quarters is continuing. We're not seeing any changes from that trend and as previously communicated and guided we are expected to see between 20 to 30 percent quarterly growth and I think we're following that trajectory.

Okay good and second one also how would you advise us to look at sort of the OPEX base moving forward here into H2?

Anette do you want to?

Yes and Thank you, Philip. And obviously, just following the total OPEX gets, of course, a bit complicated because we have kind of the savings as we just presented. And those were in the areas that we described last year. So majority was salaries, personnel costs and also consultants. And also then, you know, all other slow moving movements driven by personnel. Then we have had other things that are taking up a portion of the OPEX. We are continuing with the FDA process and we have then had some back charges and also from lawyers' costs resulting from the share emission. So just looking at the OPEX line gets us all savings are, you know, represented um very difficult to follow because some move upwards and some some some down i think the alternative cost would be then you know even higher if we haven't done done the savings if you like got it um so uh maybe a tricky question but i mean we all know you are very busy with the updates out licensing processes but i mean in a scenario where

these are not, you know, reached. How should we think about how much cash would potentially be needed until Q2 2025 when you think you would be cash flow positive from Inducci?

I think we, and of course management together with the board are as always looking at different financing options for the business and we continue to do so, although I think we've communicated clearly that our main focus now, what we want to accomplish, is to successfully out-license these programs and the upfront payments bridge from a financial perspective to Q2 2025. Now, when it comes to the financing gap to Q2 2025, I think we have some optionality if you will with regards to what we do and do not do i think particularly when it comes to the two programs um if they are envisioned to continue at full pace or if they are discontinued in case unsuccessful out licensing um so there are some flex there so i don't think we can come with a firm number there now it's just dependent on the strategy we in that case would choose to deploy particularly in relation to those two programs.

Right and the last one related to the outlicensing processes so which one would you say is the most likely to be outlicensed from where you stand right now and also what sort of deal structure would be preferable?

I think they both are running at par, so I couldn't tell which one is most likely. We have the ambition to do both and there are some counterparts we're talking to who are interested in both, so that's our ambition. It's hard to say otherwise which one is most likely to be out licensed in time. But when it comes to the deal terms we are targeting, we are, of course, targeting to get an upfront contribution, which somehow reflects the investment we've done so far in the programmes and the value of the programmes, which altogether should bridge us, financially speaking, to Q2 next year. That's one thing we're trying to accomplish. The other thing we're trying to accomplish here is that the majority of the upcoming development expenditures should be carried by a partner to limit our own... We can undertake development responsibility, but from a financial perspective, we want to be cautious to undertake further commitments to invest in for example clinical trials and so on and so forth and beyond those two points we are trying to maximize the whole structure and I guess particularly the back end to get as much out of the final opportunities as possible because we still do believe very much in both these two programs we believe they have very very good potential. I mean, if you look at Xtivine, for example, it's targeting an originated product with expected sales of 14 billion US dollar by loss of exclusivity. And given the size of that product, I would say rather limited, expected by similar competition so far. And on XB-003, maybe they own by similar to 2 billion originated drugs. We believe a lot in the commercial potential of this program and of course we want to make sure that we get as much of that upside as possible.

Okay, that's helpful. Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

So thank you, Operator. So then the first one is coming from Qianxun Li. What's the measurements that you can take to further reduce the costs? And maybe if I kick off and say that the majority of our cost base is really related to kind of the Three, by similar candidates, often tied up by contractual obligations to contract manufacturers. That's really where the majority of the spend is. And we have ongoing negotiations with them, what we can face differently, what we can move. So that is something that we have worked with for quite some time now. Second, we are, as I mentioned, slow-moving cost, and that's to reduce kind of personnel-related cost in all aspects. We have introduced travel restrictions, education restrictions. We are questioning every consultant, and also that we have then moved down in our headcount target then from 93 to 71 in total. So I think that we are, everyone... I would like to emphasize that we have all our employees behind us here, that everybody's questioning whatever they can to reduce the cost base. And some we get immediate impact of, and some other areas are slightly slower, like the rent, et cetera, et cetera. Anything you would like to add there, Martin? Second is also from the say, what is the progress of the pre-filled syringe? And then I can tie that with the second question coming from Stefan Ericsson. When can we see a pre-filled syringe both in the US and in Europe?

I can take that. It's progressing according to plan and we stick to the plan that the prefilled syringe could be or should be launched or provided approval of course in Europe next year. When it comes to the U.S. we need to get back post-expected approval for Xymlusi in the U.S. Q2 next year. Then we need to get back on timing of the prefilled syringe.

Then the last question from Jen is around our confidence, around outsourcing time, and I think that we have alluded on or explored that earlier. So I'll move on to a question from Oscar. What's in the break clause with Biogen regarding XB003? Could XBrain receive a further milestone payment from Biogen in relation to the successful scale-up of the drug substance? And how much could that payment be?

This is a question I don't think we can or should comment publicly. We are committed to follow the agreement with Bayern and we expect them to also follow the agreement. But more than that, I don't think we can comment at this stage.

A... A question from Philip that they address kind of why the real reason was why Bausch & Lomb terminated the contract and also then the reason why Biogen left or choose to leave and also if Exxon or I think this is meant to be Bip 003 was so attractive then they only built by similar known why did decide to terminate such an attractive opportunity?

I can start a little bit here. So, if we start with Bausch & Lomb, and this is now a while back, and those of you who recall it, we had a webcast immediately after that news was released, and the feedback or information we got from Bausch & Lomb at that stage was a strategic revision where they decided not to engage in biosimilars. They had a new CEO coming in, and They took a decision to focus solely on novel eye drugs and not to engage in biosimilars. And if you come to Biogen, um the feedback we received on our end from bayern was that they went through and and those of you who have followed this for quite a while they know that bayern tried to divest their by similar business for quite some time i think probably 18 months or so they were trying to they publicly announced that they should divest the whole by similar business um and then in The earnings call in relation to their Q2 report this year, they communicated that they have decided to retain the biosimilar business, hence they were not successful in divesting it, one can conclude. Now, you know also that BioGEN's core focus rests within novel treatments for neurodegenerative disorders and you've also been following maybe some setbacks they've had in Europe for one of the lead assets and I think also the communicator in the earnings call that they have been going through kind of a development spend prioritization exercise and development spend reduction program so I think And the communication from buy-in to us was related to a strategic revision leading to the termination. But we at least read it in this context that development spend need to be directed towards the core business and hence biosimilar business not being core, termination of this agreement came as a consequence. That's our interpretation of the rationale behind based on what was communicated to us.

Okay, next question, actually two related, coming from Dan and Aron. What about Saudi Arabia and Exim Luchi that have been mentioned earlier?

Yes, there are regulatory processes ongoing in several Middle East countries. The dossier has been submitted to several authorities and we expect approvals and launches I think during 2025.

And then, and I think this is the last one, around the platform value. Is that something that we could explore with other big pharma either to sell or to utilize in any other shape or form?

When it comes to the platform itself, as you know, it's focused on high yield expression of proteins either in E. coli or mammalian cells now of the form show. And a prime focus is and has been to develop our own biosimilars on the basis of that platform. We have those smaller engagements where we've outlicensed certain IP rights and we are in discussions where we could be outlicensing IP for other programs. But that has been more opportunistic from our end and I see it continuing on an opportunistic perspective as well. I think we need now to be focused on getting our programs to monetize on our existing programs, essentially focused on the biosimilar segment. And then we're taking opportunities as they arise when it comes to further exploiting the platform.

And then the last one is from Crystal Ferguson. Can you provide any updates on the FDA's perspective on an accelerated clinical development timeline?

I'm not sure what is, if it's referring to any of the... If this refers to Xymluci there is no further clinical development to be done for Xymluci and there's a six months reviewer process of a resubmitted VLA as we talked about if that's what the question refers to. If it's more generally speaking around the guidelines for biosimilar development, I think we are now, as we have alluded to for our X-Divane program, seeing an acceptance from the regulatory authorities of a streamlined or reduced or accelerated clinical development plan for biosimilars. So we see that's happening now. And we're very glad to see that, and frankly speaking, it must happen for this industry to be sustainable and for allowing a healthy competition for these respective biological drugs and making them affordable post patent expiry. And I'm very glad to see that we see that happening now and we see the regulatory authorities adopting such thinking.

I think, operated, I conclude the questions in writing. Are there any other questions on the phone?

There's one question coming in here on the stock price.

Okay, sorry. Yes, that's from Philip. Any thoughts on the stock price? We went from 180 to... What's the plan to turn around the company? Is there any thoughts on an inverted split?

So, yeah, sorry about that, Martin. In the end, our focus is exactly on turning around the company and our focus is to successfully, apart from everything else we're doing, successfully out-license these two programs, XB003, in order to bridge the financials towards expected positive cash flow without having to do any further dilutive financing. That's where our focus lies. When it comes to share split and so on, we haven't discussed that and it's something we will have to get back on.

Another one coming in. Do you know what biosimilars Valurum have in oncology, if any?

I don't think they've disclosed that, so I don't think we can disclose too much on that, but we can say that they see similarities between oncology and ophthalmology with regards to how these drugs are commercialized in the US. They are hospital dispensed and and they see that they can do it in a different way for both in oncology and ophthalmology, and hence they are very much focused on both these two therapeutic areas.

Okay, so with that, operator, anything from the audience?

We have no further questions on the phone line.

Good. Okay. Then I think we can conclude this webcast. And we thank you all who are listening and asking questions. And we're here should you have any follow up questions on it myself. So please reach out via email or phone. Thank you for now.