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Edited Transcript of IMMNOV.ST earnings conference call or presentation 8-Nov-19 2:00pm GMT

Nine Months 2019 Immunovia AB (publ) Earnings Call

LUND Nov 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Immunovia AB (publ) earnings conference call or presentation Friday, November 8, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Mats Grahn

Immunovia AB (publ) - CEO

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Conference Call Participants

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* Lars Hevreng

Danske Bank Markets Equity Research - Research Analyst

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Presentation

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Operator [1]

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Hello, and welcome to the Immunovia Q3 Report 2019. Today, I am pleased to present Mats Grahn, CEO. (Operator Instructions)

Mats, please begin.

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Mats Grahn, Immunovia AB (publ) - CEO [2]

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Thank you, and welcome to this Q3 2019 report conference. Agenda today, I will cover a bit of the financials and then we will talk, of course, about our core area, PanCan-d, pancreas cancer diagnosis. I will have a little special session today to give you more details on the process of going from an initial study in an area to market entry to give a context to our updates in general on our projects. And then after that, I'll move into the pipeline projects and, of course, a summary.

We have prepared slides to these presentations to give you further clarity to the talk, and there is a web link. There, you can click through IRR from the press release to this one. I hope you have been able to do that.

So then let's say, first, a few words about the financials. As you have seen in the report, we have a good position when it comes to our cash at hand, close to SEK 300 million, SEK 297 million. The burn rate for 2009 (sic) [2019] will be approximately SEK 110 million, which gives us more than 1.5 years run rate, driven by increases in the future now going in next year before the sales organization investments and the prospective study costs. So financials are in good shape, and we are moving forward as planned with our strategy.

So with that, I'd like to move into the first part of the product side here, which is the PanCan-d. I will show you the first slide, which has IMMray PanCan-d, and summarize the status there. We are very happy with the current progress. As you know, we presented extraordinary good results in the optimization study this summer and presented them at important meetings. And also have gone through them at webinar, the first in our series of webinars that will follow through the whole progress towards market and also afterwards from now on.

On top of that, the ongoing Commercial Test Model study is on track. And we have got all the sample deliveries as planned during quarter 3, and the project is scheduled for completion at the end of the year, just as planned. This means that the process towards sales start in Q3 2020 is well on track. And this will enable us to have the first test on the market for pancreas cancer diagnosis with a very, very strong performance. And gives the company an opportunity to really dominate the pancreas cancer markets -- diagnostics market going forward.

And as I've been reporting before, we estimate the potential -- total potential at this market to USD 4.4 billion in U.S. and Europe. An important and extraordinary opportunity for the company now moving forward towards sales start.

We have also, during the period here, further grown our Key Opinion Leader network. We have the largest, the most valuable Key Opinion Leader network in the world in pancreas cancer. They are crucial for, of course, getting access to samples. But also really, really important when it comes to commercialization going forward, being the first customers and influential in terms of national guidelines and with the payer side.

In parallel to all this, the marketing and sales preparation activities are accelerating. We will report on this going forward step-by-step all the way to market entry and beyond. So that is what you can expect to get -- to hear more and more about from now on and all the way to market.

I would move to the next slide and remind you about the excellent optimization results. I really want everyone to understand how extraordinary these ones are. This is from, of course, the optimization study. And there are several aspects of importance here: one, the controls, the ones that we compare to how to distinguish the pancreas cancer from others is really reflecting the clinical commercial situation for all the 3 risk groups we have.

To the right, you have the early symptoms. These are people that come to primary care or to the gastro centers and have early symptoms or worrying symptoms that could be pancreas cancer, but in many, many cases are something else. That means that the task here is to find the ones who have pancreas cancer versus people who have some other disease or state that gives similar symptoms. And that is, of course, more difficult than to find them versus healthy people.

We had, in this optimization study that we reported this summer, samples that have been collected in the clinical situation for many, many primary care station and the gastro centers, mainly in U.K., at our collaborations with UCL. So we have as close as you can get to the commercial clinical situation. And we could show that, within 97% accuracy, could find the pancreatic cancer ones versus the non-pancreatic cancer but other symptoms, very, very important.

Similar for the new onset diabetics, in the middle of the slide. There, you have at first to find the ones who have pancreatic cancer among people who all have diabetes. So they either have diabetes and no cancer or they have diabetes and cancer. And in that situation, we found that we with the same -- same test, of course, could find the pancreatic cancer ones with 96% accuracy. This is truly extraordinary. No one else has reported that before. So I wanted to make sure that everybody has that in clear mind. That is what gives us the possibility to come out with a test that has extraordinary and very, very strong performance.

Let's move to the next slide and look at what are the next steps. As mentioned before, after the optimization study, we have now moved into the Commercial Test Model study. The difference here is that we now run the study on additional samples that have been collected. And I have just reported as well during the quarter that we have got and delivered as planned, and everything is running on time.

The difference to the optimization study is that here, we run with a candidate commercial signature. In the optimization, we use the whole discovery ship, so to say. So this is really to test this and fine-tune the algorithms to define and lock, which will happen at Christmastime, end of the year, as planned. So that's the commercial step, has started to close on and very important milestone because that's when we lock the test completely for commercial use. And then run the smaller verification and validation studies before launch in order to create the documentations required for clear CAP Accreditation and CE marking.

Moving into the next part of this call, I would like to spend some time talking about the process, what it takes to go from the initial study, the first study results you get when you start a new area to the market. And this is what I'd like to do because it will give you a better context when you -- when we have updates on our various projects, where they fit in in the schedule, so to say, or going all the way from early first promising results to market. And this is a process that has been developed during the whole PanCan-d project. And it's a core part of Immunovia's infrastructure, very strong asset. And of course, our intention is to put all our updates going forward into this context. So you will see more of this one going forward.

So let's take a look on the next slide here where we have the various steps. At the bottom-left corner, you have step #1. That is when you have the first study that shows great results or promising results in a certain area. That step -- that result is the foundation for a decision to invest by the company into the area.

So once we have that one, the next step is to build the Key Opinion Leader network, and that is important because of many reasons. We need to get the world's best key opinions to give their expert advice on the clinical use, how are they going to use the test, what's important, what's the required specifications to reach to be successful. We also get input how to design the study, how should the study be done, what type of samples do we need and how many in order to prove that these market needs or clinical needs are met. So that is an extremely important step. And last, of course, we need to get access to these samples that are required to run the test, and the Key Opinion Leaders sit on them. They, so to say, own them and the patient flow in the area.

So the Key Opinion Leader building network is step #2 on this slide, is extremely important. Once that has been completed, the samples are delivered and including clinical data. Clinical data means, of course, for example, is it a control, is it a diseased one, what type of other information, is the person under some kind of other treatments, effects, age and so forth. Very important to have to be able to do a proper study.

So after this arrival of the samples and the clinical data, then the lab work is done, which is now a very efficient process at Immunovia. Lab work leads to a lot of data, raw data that then is in step #4, handled by the bioinformatics analysis team to determine how well we can answer the clinical question in the study we were set out to solve.

So as you see, this is steps #1, 2, 3, 4, it leads to a result. The result may then fulfill the market needs or you may be closer, you may need to do more studies, #5. So you continue, based on the results in step 4, to define the next study that will take you to the market-needed results. And then, of course, you have to go back to your key opinion network to get additional samples that may complement or add to the information you need.

So if you already have then built up a good Key Opinion Leader network or extended it during the time of the first study, then this is a process that goes faster and faster. So it goes in a number of projects, discovery studies in the gray bubble, as you see here, until you have reached the level where the results of the study conforms to the requirements of the market. That's when you move into the development studies.

The box that is white in this slide were the different steps that you run, as we did in the PanCan-d, an optimization study, if it's needed, and then the formal steps, the Commercial Test Model study verification, validation and then commercialization. So that's important to understand that there are these paths for a product. And that's -- I want to stress the importance of the Key Opinion Leader network in this whole thing. They are experts on the clinic you need and use. They have samples. They are key early customers later on in the commercialization phase. They are involved in national guidelines and policies, which is important also for reimbursement and adoption. They're advisers to the reimbursement organizations, and they're also engaged in patient organizations.

So I would like to, as the next panel in this presentation, give you the details of step #2 here in this one. How -- what does it entail? What are the steps how you build up a Key Opinion Leader network? So let's take a look on that one in the next page. And before that, just a reminder, we are very close to market with PanCan-d, as you see. We are at the Commercial Test Model study. We'll be ready at the end of the year. We successfully completed the IMMray PanCan-d, and we have only the verification/validation studies left, and then we will start selling. So that's the one.

Now let's go down to the Key Opinion Leader network in step 2 and show a little bit of the details that it takes to build a Key Opinion Leader network. So for being able to get in contact with the world's leading people in a certain area, being it lung cancer or RA or pancreatic cancer, whatever, you have to have some initial results. And that's what you do to present earlier studies. Of course, you have to have something to show that it's worth their valuable samples, their valuable time, develop expertise to work with us.

Then once you have, so to say, gotten their ear, you discuss the collaboration, how to set it up, as I mentioned, really about the clinical need, the details of that, what's important in this particular situation. And then you detail the focus of the collaboration and start to write the study protocol. The study protocol defines how many samples, which type of samples, what controls, how many stages of the cancer you need in the first run and so forth.

And then the financial frames are added to the helping, what's this going to cost. They normally want to have some compensation for the samples. And adding that together into budget approval, you also start to run the discussions with the legal departments of the university hospitals. That is the case always there. Therefore, once you have convinced that you've got into details with the Key Opinion Leader, the legal departments get involved from the university hospitals. So -- and the study protocol is a part of the agreement. When you have finalized the protocol, the budget, then you can close the legal agreement and sign it.

After that, there is always, in all activities in hospitals that are tied to development of external companies, required an ethical approval from the ethical body at the hospital in general. And when that one is in place, the samples are delivered and the clinical data with it. So this is to give you an understanding for what it takes to do for every Key Opinion Leader you involve, that you want to deliver patient samples.

This takes the longest time when you start a new area where you're not known as a company. Once you are known, you have a different situation. We are extremely well-known in the pancreas cancer field. So -- but this was -- we have done 25, 30 deals with the world's most famous Key Opinion Leaders. That means that we're now in a situation where it's opposite; people want to work with us and bang on our door. When you enter a new area, the first big names you involve takes a long time, and it averages about a year before you get delivery of samples for the first study in a new disease area.

Okay. Let's move forward then into the pipeline products on the next slide here. I want to remind you about what we are doing in the lung cancer area. We have the ongoing study with a pharma partner where we are running the second study, which is now looking at lung cancer stage 1 to 4 versus healthy and versus symptomatic controls, and the symptomatic controls are the ones we are waiting for.

But the reason for running this for pharma is that they want to have a proof that it works very well in lung cancer before they move into the companion diagnostics area, which is the #2 on this slide here. They are really interested to find out whether the technology works for distinguishing responders and nonresponders to their drugs. So that would be the next steps based on the result of this ongoing study.

In parallel into this, Immunovia, we are interested in early diagnosis, which is different from, of course, responder and nonresponder. However, the studies ongoing right now gives us interesting and very good data to run the discovery phase we just talked about in the process here of this one. And there are 2 goals with this one. The market-wise closest one is to look upon people who are screened with something called low-dose CT in high-risk people, heavy smokers in U.S. particularly right now, where 8 million people are eligible for taking part in that screening in U.S.

And the problem there is that 25% of the people who are tested always turn up positive. They find some kind of noodle, some kind of lump in the lung which has to be worked up. Almost all of these lumps are false positives, and the need is here to have a test that easily can distinguish between false positives and true positives.

What has happened during this year or in the summer, actually, is that there has been quite a lot of movement in Europe as well to potentially adopt this type of screenings for heavy smokers. So that market may increase substantially if Europe or parts of Europe decide to go into the same way of working here, which makes it even more interesting.

And there is also a group of people who have chronic obstructive pulmonary disease, which is difficult to breathe, problems in lungs, often connected to the heavy smoking, but not always. So if you add the ones that are not heavy smokers and also COPD that may be included in this screening going forward, then you add another 2 million to 4 million people in U.S. and similar in Europe. So it's a very interesting step.

And here we are in the process, as we just discussed, of building the Key Opinion Leader, getting access to samples that are really interesting in this area. Ultimately, of course, it would be also interesting to do exactly the same thing as in pancreas cancer, to use a test that you can find the cancer early before screening with CT. So that's a long-term objective as well in the area.

When it comes to rheumatoid arthritis, that's also in the longer term an early detection problem, so to say. Today's immediate need is that the current CCP test, which is the golden standard on the market, tests negative for 25% or more of the patients who have advanced rheumatoid arthritis.

The objective here is, of course, to see, based on the results we had last year, indicating that we actually find the ones that the current test tests negative for, although they have RA. We want to now show that we find these ones as well when we compare not only to healthy, but to people who have symptoms that could have been RA, but it's not. And here, the process of engaging one of the world's most well-known Key Opinion Leaders has been successfully concluded, and we are just now waiting for the ethical approval before they deliver the samples. And we will, of course, report as soon as that has been done.

Interesting in this area is that it's moving versus -- or towards early detection as well. You would like to detect RA early, and there are movements in health care doing that. However, the problem for today's situation is that the current gold standard, anti-CCP, cannot be used in early stages of RA because 80% of the ones who have early RA test negative for anti-CCPs. There has to be other solutions. That would be a movement with time in this project. First is to show that we find the ones that test negative in advanced one and then earlier and earlier. So that's the strategic plan there, and that's the status as well.

So in the next slide, coming back to the process here, a study in the earlier stage of discovery consists of the different steps of #2, Key Opinion Leader network building, to get the input to the study protocol, to get the right definition of what you -- how you should represent the clinical situation, to get the samples, to get through the ethical approvals and get delivery. Then comes the sample delivery and lab work, which is actually a much, much shorter one than the first one, and analysis. And then the analysis and the result determine whether it's time to do another round based on results you got or if you can move into product development in the standard way, as you have seen here.

The -- with RA alone, as I said, we are at the sample delivery stage where we just need to get them delivered and then we can rather swiftly move forward towards the sample -- lab and analysis. And we'll, of course, update as soon as we have these samples in-house and the time lines.

I also just want to emphasize the last thing here, it takes the longest for the first study to run. Once you have the Key Opinion Leader network and you need to do a second round, which you very often need to do, then the step 5 gets shorter and shorter as you build out your network. So that's the case.

All right. To move to the last slide and talk about the summary of this. We have a fantastic situation on the pancreas cancer side, which is our core area, which is really determining the success of the company in the coming year. We are extremely pleased also with the early-stage pipeline projects as we're seeing very large market potentials moving forward. So -- but getting to pancreas cancer, that is the core we are working with.

Optimization study did show extraordinary good results. No one else has shown this before. Commercial Test Model study is on track. First test on the market with very strong performance will be launched Q3 2020. We have the world's largest Key Opinion Leader network, and the market activities are well underway. We will spend more and more time updating you on the market activities going forward.

So finally, we have, as a company, an opportunity to dominate the pancreas cancer diagnostics market with a total potential of USD 4.4 billion in Europe and U.S., and this is within our reach. It's a fantastic time, extremely exciting to work at Immunovia at the moment.

Thank you for listening, and I'll open up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Lars Hevreng from Danske Bank.

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Lars Hevreng, Danske Bank Markets Equity Research - Research Analyst [2]

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One, now when the commercialization is coming closer, could you -- and the market potential, you're mentioning in the press release, of around $4.5 billion or so. And I guess what -- based on what you have said also on targeted pricing for tests, et cetera, could you address a bit on the potential bottlenecks in terms of volumes? The upscaling of the delivery processes, what you are focusing on at the moment? Because I guess you are planning for quite substantial volumes ahead.

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Mats Grahn, Immunovia AB (publ) - CEO [3]

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Yes. There were many questions in one, all very good. So let's start to say, from the back end, which is production, we have over the last year invested quite a lot in the production area where we have a very efficient production, fully automated, where we, as some of you know, we print the slides, where the antibodies are printed on the actual slide, which is the physical product. And then we have, with each robot, a capacity of 120,000 tests per year. We have 2 robots up and running, and we can very, very easily add additional robots to a moderate cost. The facilities are built out already and prepared for several more ones.

So there's, I will say, for quite many years, no bottleneck in production. We will increase the antibody production, of course, in line with this. But in production, it's very well prepared. The 2 commercial labs, IMMray Dx labs, the one outside Boston and in Lund, are also ready and doing the last preparations to get ready for Q3. They are also well prepared for the first year's work and volumes that can be also increased quite substantially by adding more people. And also, there are opportunities for some automation as well, additional to what we have already.

Analysis of the test is completely automated already in these labs. It goes from the scanner where the slides are read automatically to the algorithms that reside on a service, the Amazon service systems, and are automated and analyzed going back. So it's just the preparation of the blood, and before you do this application, use the slides that is left to automate. And that's not needed for the first years, really.

So that's very well handled. Then we work intensively, of course, with the logistics. And logistics, meaning people have to do a blood draw, standard blood draw, and the samples are sent to our laboratories here. In terms of sending examples, there are more established systems with FedEx and DHL and all these companies to send samples across the Europe and across the U.S.

We are also, in U.S., adding an innovative way together with other companies in order to make it very, very convenient for both the clinicians and the patients to have the blood drawn. They will not even need actually to go to the hospital or to the primary care stations also. There's an opportunity in our set of systems in collaboration with some other companies to do home phlebotomy, to have a blood drawn at their home even. That will be a big competitive advantage.

So in that sense, we have the logistics, the production and all that really well set up. We have also worked very hard, as you know, for a long time with market access with a very strong collaboration with the key opinion -- sorry, the patient organizations to make sure that the people at risk in the familial group are well aware that the test is coming, its use and so forth. We have worked with payer surveys and payer discussions in order to have a feeling for that the price is right, which it is. We have done service on self-pay people among all the ones we need, and we show that more than 90% are willing to pay at the price levels or even higher actually than we want to.

So we feel well advanced in this area. And of course, we are having the detailed plans how to scale up and when to employ every salesperson and how they should go to and so forth once they're on pay.

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Lars Hevreng, Danske Bank Markets Equity Research - Research Analyst [4]

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Okay. And can I just follow up? You mentioned the preparation of the blood that you don't require automization of the sale that during the -- you said not needed for the first year. And that means what kind of volumes could you handle in these -- the way you're going to handle...

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Mats Grahn, Immunovia AB (publ) - CEO [5]

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We can handle the -- yes, we can have the volumes that are well in line with our forecast.

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Lars Hevreng, Danske Bank Markets Equity Research - Research Analyst [6]

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Okay. And then also the -- these major prospective -- on the ongoing prospective trials, could you just -- the timing of the interim, so to say, just to remind us in -- yes.

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Mats Grahn, Immunovia AB (publ) - CEO [7]

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Oh, yes, right. Yes. What we will do now is that we are collecting all the samples, and we will run them right after the validation study on the commercial. Because then, we can also use the results for later potential FDA filings and things like that, which is great.

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Operator [8]

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(Operator Instructions) And as there are no further questions, I will hand the word back to Mats for any final comments.

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Mats Grahn, Immunovia AB (publ) - CEO [9]

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All right. Thanks a lot for listening. We are extremely pleased, as I said, with the PanCan-d movements going forward. That's our core focus. We will get there in Q3 next year and get the first test with very, very strong performance on the market, enabling us to potentially dominate the pancreas cancer diagnostic market for the foreseeable future. And don't forget the potential, there is a huge need of this one, USD 4.4 billion total in U.S. and Europe, and it is within reach.

Thank you for today.

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Operator [10]

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This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.