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Edited Transcript of COPN.S earnings conference call or presentation 30-Jul-19 8:30am GMT

Half Year 2019 Cosmo Pharmaceuticals NV Earnings Call

DUBLIN Aug 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Cosmo Pharmaceuticals NV earnings conference call or presentation Tuesday, July 30, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alessandro E. Della Chà

Cosmo Pharmaceuticals N.V. - CEO & Executive Director

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Conference Call Participants

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* Bob Pooler

ValuationLAB AG - CEO and Senior Healthcare Analyst

* Christian Glennie

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

* Philippa Gardner

Jefferies LLC, Research Division - Equity Analyst

* Henrietta Rumberger;AWP Finanznachrichten AG;Reporter

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Cosmo Pharmaceuticals Half Year Results Presentation Conference Call. I am Sherry, the Chorus Call operator. (Operator Instructions) And the conference is being recorded. (Operator Instructions) The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to the management team of Cosmo Pharmaceuticals. Please go ahead.

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [2]

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Good morning, everyone. This is Alessandro Della Chà. Thanks for joining this call. Let me quickly walk you through the presentation. Let me tell you that this has been a very rich first half. We have been doing a lot of things. And the first slide and the second slide on the key events, I think, give a very fair representation of the work that has been done in the aftermath of the delay of Methylene Blue MMX. So one of the first things that we have done is that we have announced our revolutionary artificial intelligent product for the detection of lesion during colonoscopy.

More importantly, we have announced the existence of the product simultaneously with the announcement of a worldwide distribution deal with Medtronic after very extensive due diligence on our product and its perspective. So we have seen a deal that we've done with Medtronic as a validation deal.

We have subsequently entered into a collaboration agreement with Medtronic in the artificial intelligence field for additional applications. Actually, we are already working on this new application. We are creating offices and new spaces in our plant in Lainate to host the dedicated team that will work in the artificial intelligence field on these new applications, and we have hired people for the purpose. We have also signed the Eleview distribution agreement with Medtronic, upon mutual termination of the agreement with Olympus, not just for the U.S., but also for China and South America. And I think that everybody now is starting to have the precise perception then, possibly the second most important pharmaceutical market in the years to come is going to be China rather than Europe or Japan.

We have announced also the existence of a new chemical entity called with our internal code CB-03-10. This is an oncology drug for the treatment of solid tumors that currently don't have a treatment, and specifically the Stage IV colorectal cancer and pancreatic cancer. This comes from the -- our internal scouting of compounds with Antiandrogen properties. We have filed the investigational new drug with the FDA. That has been accepted. We hope that we will be able to start our Phase I trial in the fourth quarter. And our intention, as stated in our R&D Day, is to partner this up with a large company once we have completed the Phase I and we have gathered early signals of efficacy.

In the meantime, we have filed the NDA of ByFavo, formerly known as remimazolam with the FDA. The FDA, June, has told us that the NDA has been accepted for filing. We have now a scheduled inspection with the FDA in the fall, and approval is planned to occur in April 2020 according to our plans.

In the meantime, we have completed the restructuring of our U.S. organization, formerly known as Aries. We expect that we'll be able to see savings materialize in the vicinity of EUR 20 million in the -- for the full year. Only a portion of this are impacting the H1 cost. This is why you're not seeing the full impact on the saving in this first half.

Again, we have had very, very positive result of Breezula full Phase II clinical trial announced by our associate, Cassiopea. The reason why we're mentioning here this result is because you may recall that due to the existing service agreement between Cosmo and Cassiopea, actually it's the Cosmo team that's working for the development of this drug because Cassiopea has only a handful of employees. And therefore, even though Cosmo owns 45% of Cassiopea, this outcome is the fruit of 100% of our work. So we're very proud that, that is happening as well.

The Aemcolo Phase II proof-of-concept in IBS-D has progressed, and we are right now launching 3 different Phase II studies, investigator-initiated studies in SIBO, small intestine bacterial overgrowth, minimal hepatic encephalopathy and acute uncomplicated diverticulitis.

Health Canada has approved Eleview, which will be commercialized by Pharmascience under the existing license agreement. And Aemcolo commercial plans based on our direct marketing online strategy are progressed and the launch is formally planned actually for tomorrow.

In the meantime, our -- the sales of our artificial intelligence device that has been branded GI Genius by Medtronic has started in Europe. We have received the first orders of the product right now in the month of July. And in the meantime, we are preparing a start of the quick trial that's required for the U.S. registration.

Let me walk you -- so you see, this has been a busy year. And actually this, for us, is just a transition year where we're laying the foundations for things to come. So the H1 has progressed exactly in line with our expectation. We haven't seen anything specific, but I would state very clearly that we don't expect at all to see neither in H1 nor in H2 of 2019 any specific impact of everything that we've been doing this year and we will continue doing this year. So we will see the impact next year, which is the year in which we expect to return to profitability. And that's going to be a pivotal year for us.

So as I said, we just have to keep in mind in looking at the financials. And, on one side, everything that's happening was widely expected; on the other side, that everything that's been announced as new is not supposed to have any specific impact here.

And just to be clear, if you think of Aemcolo, well, Aemcolo is, as I said, is scheduled to launch on the digital market tomorrow. Therefore, results, if any, will be only relevant to just a few months of the year. Same for Eleview,

Medtronic is expected to relaunch Eleview under their commercial organization starting in August. Therefore, this will have a limited impact in 2019.

Having said that, revenues are EUR 21.5 million versus EUR 36.7 million last year, and this is largely due to the fact that we have seen, unfortunately, Uceris being genericized. And that is where we have taken the biggest hit. As I said, that was completely expected, unfortunately, upon the genericization.

And net operating expenses, you see are going down. And this is -- does not yet fully take into consideration the restructuring of the U.S. organization because you will see the impact more clearly at the end of the year.

The operating loss for the half is EUR 17.2 million versus EUR 7.2 million last year, again due to the decrease in the revenues. Net financial expenses are up EUR 2.6 million. That's mainly due to the bond. We had a financial income last year of EUR 4.8 million that was mainly due to the conversion of our dollars into euro. And the loss after taxes for the period, as expected, is around EUR 20.8 million.

Importantly, I want to point out that the operating cash outflow before the changes in the working capital is EUR 11 million, which means that we are in control of the business and we're reducing the cash burn that stems from the ordinary operations. And I'm going to walk you through the whole details of the income statement. Here, you're seeing on Slide 12 -- no, sorry, sorry. I jumped. I've jumped one page.

On Slide 10, you see the decrease that recorded as a consequence of the sales of Uceris going down. They've gone down from $69 million to $32 million, in the -- if you compare the 2 first half. Cortiment, in the meantime, is growing, and I suggest that this is a franchise that one should look at very carefully because it is constantly growing every month, every 2 months, another country is added to the country where Cortiment is now approved and sales will start. I think that Ferring is really doing an excellent job, and one should expect this over time to become a very, very significant franchise.

Lialda, as you can see, is relatively stable, meaning that the decrease is not so impactful. We've seen a reduction in manufacturing income due mainly to the launch of the generic in U.S., but we're also seeing an increase in royalty, mainly due to Japan-related royalty. In Japan, the drug is performing very well.

Eleview, you are seeing the sales basically halved as a consequence that I was explaining before that Medtronic is not yet launched. And just keep in mind that according to the agreement that we have with Medtronic, for the first year of sales, we will receive 50% of whatever proceeds is gathered from sales executed to the existing list of customers that we were already selling Eleview to. So this means that, roughly, the proceeds for the first year of sales. And if they start in August 2019, will be between August 2019 and August '20, will be halved between Medtronic and Cosmo.

There have been upfront fees and milestones last year, which we received from Pharmascience and EA Pharma that are not recurring this year. So this is one of the -- again, it's a contributor explanation of why we have seen this decrease in the revenues.

Let me move to the income statement. As said, the operating expenses are EUR 38.7 million versus EUR 43 million last year. The operating loss is EUR 17.2 million. Net financial expenses, we have mentioned. Share of result of Cassiopea, we have a loss of EUR 2.8 million, which is comparable to the same loss that we had in the same period last year.

If we go to the assets, that's Slide #15, I would like to point out mainly the following, that the cash and investments in funds and bonds is EUR 324 million. We have an investment in our associate, Cassiopea, that has a market value of EUR 180 million at the 30th of June, 2019. The total asset is EUR 594 million. But I want to stress the point that this does not include treasury shares.

In H1, the company has purchased 212,000 treasury shares at a cost of EUR 17.2 million. Other shares, we have bought after the issuance of the convertible bond. And so currently, the company holds 413,000 treasury shares at a cost of EUR 35.5 million. And the statement of financial position liabilities, here you see mainly incorporated the convertible bond because we have, as usual, very, very limited liabilities, and the ones that we have, they only stem from the ordinary course of the business and in part the working capital.

Statement of financial position. I think we have gone through that. Here you have a breakdown of our financial position. And then the other noncurrent assets and the current assets. The statement of financial position in respect of cash and financial assets we have gone through. Cash and investment in funds, as I said, is EUR 323 million.

So Slide #20 basically recaps, we have assets of EUR 594 million, liabilities of EUR 190 million, equity of EUR 404 million. I think an important slide is the slide on the cash flow that shows you how, basically, the cash burn that stems from the ordinary course of business has been substantially reduced and will be reduced even further as we progress in the year.

The changes that you see in working capital of EUR 4.9 million is essentially the investment that we're doing for the buildup of the inventory of GI Genius. So we are clearly moving forward in filling up our warehouses with devices that we expect Medtronic will be able to place in the near future. EUR 2.2 million are the interest that we have paid under the convertible bond, EUR 3 million is the first payment of contingent consideration to acquire the remaining 40% of the company.

I would like to stress that Linkverse is the company that's manufacturing the devices, GI Genius devices. Linkverse is owned 100% by Cosmo, the intellectual property around GI Genius is 100% owned by Cosmo. And this EUR 3 million is actually a first payment of contingent consideration to acquire the remaining 40% of the company because we formerly owned 60%. EUR 17.2 million is the purchase of treasury shares in the first half. EUR 2.0 million so far is just a loan that we have made to Cassiopea that we expect Cassiopea either to return to us or to be converted in equity of Cassiopea, if Cassiopea should go through a capital increase.

The investment in intangible assets is mainly due to the payment of the milestone of EUR 7.5 million to PAION upon the occurrence of the acceptance for filing of the ByFavo NDA, and the payment of the PDUFA and the payment of the PDUFA fee.

So this slide sum up the net decrease in cash and cash equivalents, and I hope that it will be possible to appreciate that the cash burn that stands from the ordinary course business is very, very limited compared to the overall amount because the most part of it is represented by investment. In the following slide, you have just a more detailed breakdown of the cash flow that provides you information on the way this is built up.

It's more important for me to walk you through the outlook and the key priorities. More important, because as I said, what we're seeing here is -- was expected. So we're -- we won't be seeing any fruit of the work that's been done in the current years. The key priorities for the second half and beyond are the launch of Aemcolo in the U.S. As I said, that's scheduled to begin tomorrow.

We will be pursuing regulatory approval for our artificial intelligence device in the U.S. with the FDA. We have filed the final protocol to the FDA. We're expecting an answer now. We think that the trial will start in the fourth quarter, and we expect it to be concluded in the first quarter. The trial will be mainly run through centers under the umbrella of the Mayo Clinic. We expect they should be around 8 centers. And we expect that the brand of the Mayo Clinic will grant, as usual, the very high-quality of the data that will come out of the trial.

We are finalizing the new protocol for Methylene Blue MMX. We expect to start to engage discussion with the FDA after the summer break. We're progressing the task to bring ByFavo, remimazolam, to the market. As I said, there's been the usual back and forth with the agency asking questions and receiving answers. And we have, as I said, an inspection that's scheduled -- the pre-approval inspection that's scheduled to occur in September.

We're progressing the Aemcolo Phase II IBS-D trial. And even more importantly, as I mentioned, we have started trial in 3 additional indications. Let me just repeat them to you for the benefit of everyone: SIBO, small intestine bacterial overgrowth; minimal hepatic encephalopathy; and acute uncomplicated diverticulitis.

So if we go to Slide 26. And we just see the summary of what has happened in this first half of year. We have taken, as I said, a number of key steps. We have reduced our cost base significantly. We have announced new products, opportunities, GI Genius, and CB-03-10, the oncologic drug.

We have closed important deals with Medtronic. We've shifted the strategy for our medical device by entrusting Medtronic with their distribution and for Aemcolo because we have decided to access first the digital market. Don't forget that the reason why we've done that has to do with the dimension of the market. One thing is the number of patients that actually have trouble with diarrhea. Another thing is the number of travelers that go to high- to medium-risk countries of traveler's diarrhea. The number of U.S. people traveling to high- to medium-risk of traveler diarrhea country are 46 million every year, and therefore, we believe that there should be a substantial opportunity there.

Again, I'm stressing the point, we're not expecting significant results this year. We're just laying the foundation of things to come. But in the meantime, GI Genius has started sales in the EU. We're building up the inventory, but our goal is to have it approved within the first half of 2020, so that we can start -- in the U.S., so that we can start the sales there.

Aemcolo launch tomorrow. Eleview relaunched in August. As of 30 of June, the total cash and investments in funds, plus market value of our Cassiopea stake and treasury shares is around CHF 590 million versus a market cap of 1.2 million. We're expecting, not 2019, but 2020 to be a pivotal year, where we expect to return to profitability.

So I thank you for your attention. And we're ready to take any question you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from the line of Giampaolo Montalto from Cosmo.

(technical difficulty)

The next question comes from the line of Bob Pooler, ValuationLAB.

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Bob Pooler, ValuationLAB AG - CEO and Senior Healthcare Analyst [2]

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Just on the full year guidance, do you expect to narrow the loss for the second half?

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [3]

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Yes, that's correct. So we don't think that we should change the guidance at this point in time.

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Bob Pooler, ValuationLAB AG - CEO and Senior Healthcare Analyst [4]

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Okay. But not change the guidance, that would imply that you'd become [profitable] already the second half? Or do you expect still a small loss for the second half?

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [5]

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So well, you will recall that we were expecting a loss of EUR 12 million, if I'm right. Plus that loss did not include the loss, as we had mentioned, the loss of our associate, Cassiopea.

So yes, of course, we do expect a loss. We are holding onto the guidance because we will be seeing the sales of Aemcolo and the sales of Eleview, as I said, both to start in August.

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Bob Pooler, ValuationLAB AG - CEO and Senior Healthcare Analyst [6]

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Okay. And then in July...

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [7]

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You will see -- just to be more precise, and you will also see the impact of the savings in the U.S. more clearly in the second half. And just to give you an example, we've been paying severance that are impacting this first half, but you won't see them in the second half because the personnel then will be gone.

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Bob Pooler, ValuationLAB AG - CEO and Senior Healthcare Analyst [8]

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Okay. Okay, that's clear. Then in July, if I may, one further question. You're launching the GI Genius in the EU, but also the Aemcolo traveler's diarrhea, of course, that's -- yes, the model, the DTC model, business model there. Any expectations there, maybe numbers there you can give? Or is it just too much of a wild card, in particular, Aemcolo, because that's a novel concept.

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [9]

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It's a novel concept. I don't want to shoot from the hips. And you have to understand that when you go through this model, the most important thing that you have to do is that you have to create awareness. And once you have created awareness through the campaign, you will see the results. So I don't expect at the beginning anything very significant because I do expect, as it frequently happens in this case, that as you spend in the advertising, you see the sales coming up. And not necessarily you will be making more sales that your actual advertising spend at onset. This is -- you see the curve, clearly, you will see sales that will start to grow once the awareness has been established.

The good thing in this kind of model, nonetheless, is that we will be able to see the feedback in real time. When you start sales with a field-based sales force, it usually takes several months before you can see whether there's any impact at all. In this specific case, as soon as the campaign start, we will be able to have feedback, and we will, therefore, be able also to make adjustments. But you're right in saying that we are going through uncharted territories. And therefore, there is not such a thing as a precise metric here. So I don't want to shoot anything from the hips. I'm confident nonetheless because you're seeing a shift of the overall market towards this kind of marketing, so I hope it will pay.

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Bob Pooler, ValuationLAB AG - CEO and Senior Healthcare Analyst [10]

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Yes. Well, I see you're right on time for the traveler's season, so that's good.

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [11]

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Yes. Thank you.

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Operator [12]

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Next question comes from the line of Philippa Gardner, Jefferies.

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Philippa Gardner, Jefferies LLC, Research Division - Equity Analyst [13]

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A couple of questions, if I could, please. Could you provide an indication of the size of the severance costs that there were in the first half, please? Secondly, on the opportunity for GI Genius in Europe. I think your comments seem to imply that you see the U.S. as a bigger opportunity. So can you just talk about what you see as the opportunity for GI Genius in Europe?

And then thirdly, on the MMX, the Methylene Blue Phase III trial design. I guess I think you sort of said previously in the last few months that you were fairly confident that you knew what was required. So I'm guessing -- I'm just trying to understand a little bit about what is the holdup in terms of getting the protocol filed with the FDA?

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [14]

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Okay. Thanks. I will have someone here on my team just to check briefly what the extent was, the severance cost have been so far in the first half. Currently, I think it was around EUR 3 million that has been paid in severance. You have it? Okay, EUR 3 million. And then you were asking me about -- if I understand correctly, the GI Genius perspectives in Europe.

Now our take is that possibly in Europe, we should have a number of endoscopy towers that should be more or less that of the U.S., more or less. Clearly, different distribution. So you should look at the number of towers as the expression of the overall market.

So in the U.S., we have stated that we should have around 20,000 towers, and we expect to have the same number of towers, more or less, in the U.S. (sic) [Europe]. So in order to have a very approximate dimension of the market, you should figure out those 20,000 towers in Europe as the full available market. And then you should make a guess on how much you expect that of that market Medtronic will be able to occupy.

What I would like to stress instead, it's the following. If you look at the initial indication that we have as a fee that need to be paid on a yearly basis to be able for the single endoscopy tower to house GI Genius. Well, if you imagine that, you can try to make a calculation. Basically, if you assume the overall number of colonoscopies, and then you divide it by the number of towers, you end up figuring out how many endoscopies each tower does. That's clearly just an average because you have towers in small centers that work very little and towers in big centers that work very much.

You can have towers in big hospitals that make 10, 12, 15 colonoscopies every day. Now if you project that the initial cost, taking in mind how many colonoscopies are done by the towers that work the most in the centers that are more likely to start using the artificial intelligence, you end up concluding that the price that will be paid per colonoscopy with the use of the device is very, very minimal. It's very, very minimal. This gives a significant room for improvement as Medtronic ramps up in the acquisition of market share.

I hope that this is clear enough. This means that if you measure the dimension of the market by multiplying the fee for the number of towers, you have a figure. But if you assume that the price will likely change over time, then the dimension of the overall potential market increases very significantly.

What I can tell you, this is -- it's a piece of a feedback. And you may -- it may not be even worth me saying that, but what I can tell you is that, as you can imagine, currently, the device has been placed with eminent KOL. Some of those that are using this that are providing feedback to Medtronic are saying that once they started using it, as it was largely expected, they're sort of getting addicted to it. Meaning that it is so simple and so useful and doesn't really create an encumbrance in the daily practice that they don't see why they shouldn't actually keeping it on all the time. So we think that this is a very valuable indication because this is exactly the way that the artificial intelligence is supposed to work. This is an aid, it's a second observer. And as long as the second observer doesn't disturb you and you keep it running in the background, it's just helping you without making too much fuss.

In respect of the third question, which was about Methylene Blue MMX. As I said, yes, we have taken our time to prepare the new protocol. We expect to start engaging the FDA in the fall, and our plan remain as we have communicated, we would like to finalize an agreement with the FDA by year-end, and so be able to start the trial next year.

One of the reason why it's taking us so long is because we are really delving into statistical calculation to make sure that while we do have a sample size that's good enough for what we intend to prove, we also don't have a sample size that was as big as the previous one because we would like the second trial to be faster, quicker and less expensive.

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Operator [15]

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Next question comes from the line of Henrietta Rumberger, AWP.

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Henrietta Rumberger;AWP Finanznachrichten AG;Reporter, [16]

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I have just a quick question, maybe I just didn't hear something about that. But I guess for GI Genius, I mean that needs to be produced somehow, doesn't it? Are you going to do that yourself? And wouldn't you need to sort of refurbish all your production sites for that? Maybe as I said, maybe I misunderstood something.

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [17]

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No, no, no. Sure. Let me answer immediately to this. Thanks for the question. GI Genius is manufactured by us. According to the agreement that we have with Medtronic, most of the production activity has been subcontracted to a very large, very important Italian supplier that works for the aerospace industry. I can tell you that Medtronic was astonished when they visit their facilities because it's really a top player. He produces components for Boeing, for Airbus. And therefore, it was able to grant the highest standard of quality.

As you can imagine, one of the most important thing for a giant, a multinational like Medtronic is that they need to make sure that the product is manufactured with the highest quality standard. And we have been able to satisfy this completely. So just a portion of this is made by us, and you also have to keep in mind that from the pure supply chain structure, the device that we're manufacturing requires very highly sophisticated components, but not components that are made expressly by us, which means that, that is not a problem for us to use one microprocessor or another microprocessor if we have any issue with the supply chain.

This is to tell you that the qualifying part of the device is not the hardware, it's the software that's been 100% developed internally by Cosmo. So Cosmo is the owner both of the IP, and more importantly, of the algorithm which are part of our trade secrets and know-how and are not being divulged to anyone.

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Operator [18]

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(Operator Instructions) The next question comes from the line of Christian Glennie from Stifel.

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Christian Glennie, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [19]

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Three questions, if I may. Firstly, on Aemcolo and the IBS-D data, that Phase IIb data. What's the timing there and the sort of expectations beyond it assuming positive data?

And then on GI Genius, just to clarify the trial that you talked about doing the protocol for, I think it was end of this year and then starting in Q1 next year. What sort of trials does that look like in terms of the design, in terms of comparison groups and what are you trying to -- what does that trial need to achieve for that GI Genius product?

And then just finally on the financials, the profitability target for next year, is that at an operating level or also the EBITDA level? Or is that at a net income level?

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [20]

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Okay. Thanks, Christian. So quickly on Aemcolo, we are expecting to conclude the trial by year-end. Frankly speaking, it has been way more difficult than we were expecting to recruit patients here in Europe. The process of recruitment, it's very long and certainly longer than we had originally expected. So it's not the issue of the trial per se, the issue is finding the patient, as you will surely appreciate. While IBS-D is quite, let's say, popular in the U.S., it's less popular in Europe, and we're conducting the trial in Europe. So to come to a full diagnose of IBS-D in Europe is more challenging than in the U.S., this is why it's taking longer. So my expectation is going to be a fourth quarter or first quarter of 2020.

More important for me and the specific point, is what's going to happen in the 3 investigator-initiated trials. Because those are trial with a very small sample size, whose aim, as you know, is to quickly produce data that will be published in academic journals that will explain, hopefully, how good that is. And these 3 trials, they're all run in the U.S., they're not run in Europe.

In respect of GI Genius, that is a very good question, and thank you so much for raising the point. We have had a very, very good discussion with the FDA on the 3rd of June this year to figure out what was needed in terms of main end point for the trial. The attention of the FDA is shifting to a different metric. They're slightly detaching themselves from the well-known, I guess, for everyone, ADR, which is the adenoma detection rate. And they have proposed a different end point, which we think is way more fit for the needs of the patient, which is called APC, which is adenomas per colonoscopy.

One of the issues that you have with the adenoma detection rate is the following, let me put it bluntly: if you have 3 adenomas, and 1 has a very low degree of malignity, and 2, maybe small serrated adenomas have a high degree of malignity, if you are a patient and you do the colonoscopy, you'd rather have them -- the whole 3 found rather than just 1.

The adenoma detection rate counts, as you will recall, only 1 adenoma per patient, which of course, it's okay, but it's not ideal. As I said, if you have 3 adenomas, you wish the endoscopies to detect all 3. Because if they haven't -- if the endoscopy detects the one that has the lower degree of malignity, it will put you on an interval for surveillance which is different from the interval you would be in if also the more malignant are found. So the FDA is proposing this new metric, which is called APC, as I said, adenomas per colonoscopy, which is the overall number of colonoscopy (sic) [adenoma] which are found, on average, during colonoscopies.

And we think that given the way the GI Genius is supposed to work, this will go significantly up. And I think that it's also very advantageous for us that we will be the first one to basically test our device with the state of the art metric for quality of colonoscopy. In the long run and maybe even in the medium run, we expect to produce very significant results.

Keep in mind that use -- that the missed rate of adenomas and polyps, depending on the reference study, is between 20% and 50%. But even if you take the lower threshold, it's 20%, which means that a lot of lesions are frequently missed. So I think GI Genius will really be on the -- not just on the cutting-edge of technology, but also on the cutting-edge of the metric that you need to satisfy to be competitive. And clearly, this is very important for Medtronic as well because they want to have a very strong marketing tool to promote it as efficiently as possible.

In respect of 2020, well, there are so many variables that it is difficult for me, it is difficult for me to tell you. I'd like to take a conservative approach because you have to keep in mind that if things go as planned in Cassiopea, meaning if Cassiopea goes -- Cassiopea will be filing the NDA for Winlevi soon. If it's not -- it should be filed, let's say, in the next 2 weeks maximum.

As that proceeds, you should expect the -- and specifically next year, you should expect the spend in Cassiopea to increase significantly, and so will increase our share of loss. A significant value will be created in the meantime. But from an accounting perspective, there will be a significant loss, and a portion of the loss, we will have to consider.

So I would concentrate more on the EBITDA level than on the net result.

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Operator [21]

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That was the last question.

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Alessandro E. Della Chà, Cosmo Pharmaceuticals N.V. - CEO & Executive Director [22]

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Well, thank you so much then. Thanks for everyone, and enjoy the rest of your day.

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Operator [23]

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Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.