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.