Santhera Pharmaceuticals Holding AG (OTCPK:SPHDF) Q2 2019 Results Conference Call September 3, 2019 7:00 AM ET
Thomas Meier - CEO
Conference Call Participants
Bob Pooler - valuationLAB
Barbora Blaha - Credit Suisse
Ladies and gentleman, welcome to the Santhera Pharmaceuticals Announces Financial Results for Half Year 2019 Conference Call. I’m Stuart, the Chorus Call operator. I would like to remind you that all participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator instructions] The conference must not be recorded for publication or broadcast.
The conference may contain certain forward-looking statements based on current assumptions and forecasts made by Santhera Pharmaceuticals. Such statements involve certain risks, uncertainties and other factors which could cause the actual results, financial condition, performance or achievements of Santhera Pharmaceuticals to be materially different from those expressed or implied by such statements.
These factors include those discussed in the comprehensive risk factor disclosure on the Company's website at www.santhera.com. Santhera disclaims any obligation to update any forward-looking statements. The conference may be downloaded on Santhera’s website during the two weeks following the call.
At this time, it's my pleasure to hand over to Mr. Thomas Meier, CEO. Please go ahead, sir.
Thank you very much. Good afternoon and good morning, everyone. Thank you for joining this call today to discuss Santhera’s 2019 half year results and update on our pipeline and strategic focus. I would like to start with an overview of our corporate development activities over the past 12 months and the summary of Santhera’s strategic focus going forward.
Over the past year, we have clearly repositioned our Company through a number of corporate development transactions. Our strategic focus going forward will be on neuromuscular and pulmonary diseases, and developing pharmaceutical products to address high unmet medical needs in these areas. These business development transactions have contributed to a very promising portfolio of innovative drugs, as I shall describe in a minute.
In the neuromuscular field, our ambition is to help all patients with Duchenne muscular dystrophy, irrespective of the disease causing mutation, disease stage or age of the patient. Our portfolio now comprises two late-stage products, which could be used in all patients, irrespective of their genetic background. For young still ambulatory patients, we have an option to vamorolone, a drug candidate for the preservation of gross motor function and mobility.
Idebenone with the trade name Puldysa, is targeted specifically for older, primarily non-ambulant patients to preserve respiratory function, the decline of which is a predominant cause of early morbidity and mortality in patience with DMD.
Both our DMD products made excellent progress this year. For Puldysa, we filed for conditional marketing authorization in Europe. For vamorolone, a week ago or so, our partner ReveraGen published positive Phase 2 extension study results and advanced the pivotal Phase 2b study VISION-DMD.
Our pulmonary product, POL6014, which we in-licensed last year, is currently in Phase 1 development for patients with cystic fibrosis. This inhaled peptide has potential in several pulmonary diseases associated with chronic lung tissue inflammation caused by increased neutrophilic elastase activities.
In parallel to the extension of our pipeline, as just described, we decided, as a Company, to focus on neuromuscular and pulmonary disease products where we see excellent business opportunities in the future. In contrast, we saw more limited product opportunities in the ophthalmology area and consequently decided to out-license our ophthalmic business with Raxone to Chiesi Group.
This transaction provided financial backing that allows us now to advance our core product pipeline candidates for neuromuscular and pulmonary diseases.
I will now briefly summarize the news release that we issued earlier today, starting with the financial performance followed by operational achievements during the period. Finally, I will discuss Santhera’s outlook and plans for the coming six months and beyond. As always, at the end of my summary, we will open the lines for your questions.
Starting now with the financial update. We are pleased to report solid top line sales with Raxone of CHF 18.2 million in the first half of the year. This is an increase of 14% compared to the same period last year and is in line with the previous full year sales guidance for this product. Investment in clinical development continues to be a key priority. Late-stage clinical trials led to a 2% increase in development expenses. We are reporting operating expenses of CHF 38.2 million, a 4% decline year-on-year, driven by lower expenses for commercial activities. Overall, our operating results was minus CHF 22.4 million.
Santhera closed the half year with the net result of minus CHF 26.9 million, which is comparable to the same period last year. In recent months, we have undertaken a number of activities to increase liquidity. In April, we raised CHF 7.1 million by the placement of 500,000 shares. These were the remaining shares we had available at the time. At the end of June, cash and cash equivalents were at CHF 12.7 million. Following the closing of the licensing deal with Chiesi, cash and cash equivalents today are at CHF 43.7 million.
Looking ahead for the full year 2019, we are anticipating sales of CHF 25 million to CHF 27 million, and we will discuss this further when we come to the Company outlook towards the end of my presentation.
Let me now summarize the various clinical, regulatory and business milestones reached by Santhera in the first half of this year.
In May, we reached an important regulatory milestone with the submission of our application for conditional marketing authorization for Puldysa or idebenone to the European regulators. The intended indication is for the treatment of respiratory dysfunction in patients with Duchenne muscular dystrophy, who are not using glucocorticoids. Following validation by the EMA, one month after our submission, we anticipate a response by EMA’s Commission for Human Medicinal Products or CHMP, around the middle of next year.
From a regulatory point of view, we are pleased -- also very, very much pleased about the renewal of the positive scientific opinion for idebenone by the UK regulators through, MHRA, allowing us to continue treating patients with DMD in the UK, under the Early Access to Medicines Scheme. At this time, we have 73 DMD patients under active treatment in the UK.
Another milestone offered strategic importance for Santhera in the first half was the announcement of an exclusive license agreement with Chiesi Group for Raxone for the treatment of LHON, for a total consideration of up to €93 million. With the closing, end of July, Santhera has received the initial payment of €44 million and has transferred all the rights to Chiesi Group for a development, commercialization and distribution of Raxone for the treatment of LHON and any other potential ophthalmological indication for all territories worldwide except the U.S. and Canada.
Beyond these milestones, there have been a number of important releases of clinical data during the first half. In February, we announced the results of the SYROS study, which investigated long-term efficacy of idebenone in preserving respiratory function in patients with DMD. The study demonstrated that long-term treatment with idebenone consistently contributed to the preservation of respiratory function for up to six years in a real world setting.
These new data, which have been presented at international scientific conferences already, were a core element of our regulatory filing for conditional marketing authorization in DMD and close of previous data gap. Very recently, we have seen positive data from a six months Phase 2 extension study with vamorolone in DMD patients published by ReveraGen in the journal Neurology. The data demonstrated dose-related improvement of gross motor muscle function in patients.
In addition, vamorolone was reported to be safe and well-tolerated up to the highest dose tested. And biomarker data indicated a reduction in side effects typically for traditional corticosteroid drugs. Based on these data, Vamorolone has potential to replace standard corticosteroids currently used in patients with DMD. ReveraGen is currently conducting a pivotal Phase 2b study, called VISION-DMD, which would be the basis for regulatory approvals, both in the U.S. and in Europe. The trial is currently one-third enrolled and we expect top line results also in summer next year.
Probably the most important late-stage clinical trial conducted by Santhera is the SIDEROS trial, which is currently also the largest ongoing interventional trial in patients with DMD. At this time, 84% of the 266 patients to be enrolled in SIDEROS are recruited and participating patients are treated with idebenone or placebo for 18 months. We currently anticipate top line results from SIDEROS to become available mid-2021, and we plan to file for U.S regulatory approval around the fourth quarter of 2021.
Recently, the Company has also taken first steps towards development of gene therapy in the rare neuromuscular diseases. Early in the year, we launched the collaboration with the Biozentrum at the University of Basel to advance gene therapy research for the treatment of laminin-alpha2 deficient congenital muscular dystrophy for which there is no current treatment to slow disease progression. Under the collaboration, Santhera now aims to advance encouraging findings from scientists at the University into a therapeutic approach that could be tested clinically.
In summary, Santhera is currently conducting six clinical trials. In addition, we are also providing Puldysa idebenone and the early access programs to DMD patients in several European countries and the United States.
This summarizes the key achievements for the first half of this year. Before I close my summary and take your questions, let's turn to the outlook.
As mentioned earlier, we are updating our Company guidance from annual net sales for Raxone in LHON to CHF 25 million to CHF 27 million for 2019. This figure reflects that from the beginning of August, Chiesi Group has taken over commercial sales in all European countries except France where we continue to commercialize Raxone for the time being.
For the remainder of 2019, we will focus on advancing our long-term growth strategy with clinical development programs as outlined today. For Puldysa, we have already started preparations for market entry in Europe where we prepare for launch in first countries in fall next year.
With this, I would like to thank you for your attention and will now hand back to the operator to allow your questions. Operator, please?
[Operator instructions] The first question comes from Bob Pooler from valuationLAB. Please go ahead.
Thank you. Thomas, congratulations with [indiscernible] repositioning of the Company based on more molecules than previously. Three questions if I may, first just on Raxone in LHON. You have your full-year guidance as you said of CHF 25 million to CHF 27 million. What are the total sales expectations, so including Chiesi sales for 2019?
Okay. Let me answer that immediately. So, we are actually with half year sales and we have also seen the July and now the August sales. If we would have kept the business, if we would have been fully in line with our previous guidance which was CHF 35 million to CHF 37 million in sales. Now, we handed over to the large extent now to Chiesi from August 1st onward, but our previous sales guidance, we would have kept, if we had continued that.
Okay, great. So, that’s in line. And then, just following on that one. So, you still generate Raxone sales in LOHN in France, will that be extended to 2020?
Yes. So, the situation is that, we will hand over the French territory to Chiesi Group as soon as the pricing reimbursement discussions have completed. We do not expect that this will happen in this year, but it will be anytime next year. So, it’s a bit difficult today to already predict sales of French territory for next year. This, we’ll have to do by the end of this year when we give additional guidance. But, I assume currently that the full year 2019, we keep France, and sometime in first half next year we will hand over France to the Chiesi Group.
Okay, great. Then, the second question on the Chiesi transaction, which was closed early August, could you provide more detail on how the handover will proceed and when you expect it to be finalized?
Yes. So, there’s a number of activities, as you can imagine involving training, transfer of knowhow and technology, also transfer of logistical services to Chiesi. This is in full swing, and actually a large part of our Company is involved in that. We anticipate that the handover process, as we call it, will be finalized by the end of the year. This involves also national activities, handover certain business and key opinion leader contacts to Chiesi Group. But, it should all be ended by the end of this year, so that as of 1st of January, essentially, our team in the countries can start really focusing on building awareness for Puldysa in DMD and start preparation for market launch for this product in Duchenne muscular dystrophy.
Okay. Then, my third question, just on vamorolone, at the end of August, ReveraGen published the proof-of-concept extension data. What’s your impression on the data and how does it translate to the pivotal VISION-DMD trial?
Yes. So, these data together with previous published data, in our view, a very solid proof-of-concept, and as I say earlier, I should also say that we have discussed these data obviously with our colleagues and counterparts at Idorsia. So, both teams have looked at the data and we came to the conclusion that this is a very solid proof-of-concept. What is very impressive is the consistency of the findings across multiple gross motor function readouts that demonstrate that Vamorolone clearly is beneficial to patients treated now for six months. But, we also saw consistent signals that the side effect profile is more benign and more tolerable, compared to standard prednisone glucocorticoids, which is the assumptions that we have a drug that is as potent as standard corticosteroids but has less side effects. The totality of the data, in particular now the six months data that were recently published really underpin that. And, we are now very confident that the ongoing Phase 2b VISION-DMD trial as a pivotal trial has -- is well set up and has picked the right endpoints to demonstrate the final outcome needed for registration purposes.
Okay, very clear. Thank you for answering my questions.
[Operator Instructions] Next question comes from Barbora Blaha from Credit Suisse. Please go ahead.
Hi. Thank you for taking my question and congratulation on the results. I have just the question regarding the financial situation in 2020. I assume you will end the year with the cash of around CHF 15 million to CHF 20 million and you need around CHF 40 million OpEx for six months. And I expect EMA decision regarding Puldysa in May 2020. So, can you please comment on the Company's financing going forward, please?
Yes. We -- obviously, the budgeting process is not yet finalized. But, we have clearly given guidance that our financial resources plus the -- still to be expected income that we generate next year from the sales in France, we want to reach the milestone of this CHMP decision, which probably is earlier by maybe one or two months than the readout of the vamorolone pivotal trial. So, clearly, we want to be independent of the need of additional financing. And the current situation is that we can manage that. Clearly, after that at some point next year, we need to have additional cash in order to launch the product. But until that, we will make every effort that we are reaching that milestone with the existing liquidity.
[Operator instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Thomas Meier for any closing remarks. Please go ahead.
Thank you. Well, I would like to thank you everybody who attended the call today and those who asked questions. I’m looking forward to an interesting couple of months ahead of us. But, I would like to thank you really for your interest and also your confidence in the Company. And with this, we can end the conference call today and ask the operator to close the lines. Thank you very much.
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