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Edited Transcript of MVIR B.ST earnings conference call or presentation 28-Apr-17 12:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Medivir AB Earnings Call

Huddinge Apr 29, 2017 (Thomson StreetEvents) -- Edited Transcript of Medivir AB earnings conference call or presentation Friday, April 28, 2017 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christine Lind

Medivir AB - President and CEO

* Richard Bethell

Medivir AB - CSO

* Ola Burmark

Medivir AB - CFO

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Medivir Q1 report 2017. Today I'm pleased to present the CEO, Christine Lind. (Operator Instructions) Speakers, please begin.

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Christine Lind, Medivir AB - President and CEO [2]

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Thank you, Mya. This is Christine Lind, the CEO. I will be reviewing the summary of the first quarter and some significant events after the end of the first quarter. Richard Bethell, our Chief Scientific Officer, is also with me and will review selected projects and the advance that we have made in those projects. Ola Burmark, our Chief Financial Officer, will then be reviewing the financial highlights from the quarter, and then we will have a Q&A session at the end.

Second slide, please. In the first quarter, Medivir has made significant progress. We have continued to transform the business to focus exclusively on research and development. A handful of things that we were able to accomplish this quarter, including the implementation and completion of our redemption program, the out-licensing of our commercial rights to Olysio and any future simeprevir-containing products to our existing partner, Janssen, as well as the return of commercial rights to Adasuve in the Nordic region to Ferrer, who is the market authorization holder for that product.

And, of course, it was announced in the quarter as well that I would be taking over the CEO position as of April 1.

For our own part, we've also continued to make progress in our R&D pipeline, and you will hear a little bit more about this particular project as well as some other projects when Richard gives his update. Importantly, we had the fourth and final DMC safety review of the MIV-711 osteoarthritis study with the best possible outcome to continue that study as planned with no adjustments.

And, of course, in the financial results of the quarter, we had total revenues of SEK17.8 million in the first quarter, primarily relating to royalties associated with the sales of Olysio.

Next slide, please. In the major events after the first quarter, the significant news certainly is in our pipeline in (inaudible), both from our own pipeline as well as those from our partner, J&J. We have reported positive Phase II headline efficacy data for the remetinostat study in early-stage CTCL. And again, Richard will elaborate a little bit on that data in our project update.

And our partner, J&J, presented additional data from the ongoing Phase II studies at the EASL conference, a liver-disease-focused conference, on the HCV combination that includes simeprevir, which is called JNJ-4178. This data was quite well received and both reiterated and extended the previously presented data that we have shown in the past.

I will now turn it over to Richard Bethell, our Chief Scientific Officer, to do the R&D update. If you could advance to slide 5, please.

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Richard Bethell, Medivir AB - CSO [3]

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Yes, so looking at slide 5, so just to start out by saying that given the reporting of the headline data from the Phase II study of remetinostat, the focus of this R&D update will be on the remetinostat project, a next development for cutaneous T-cell lymphoma.

So just a little bit of background on the disease. Early-stage CTCL is the area where remetinostat is being developed. And in this stage of the disease, the cancerous T-cells are confined to the skin. It's a very slowly progressing cancer, often referred to as very indolent disease. So patients remain at this stage for extended periods and require long-term treatment.

As you can imagine by looking at an example of the lesions shown on this slide, this is a distressing condition for patients and their families. It's disfiguring, and there are additional significant quality-of-life issues, particularly pruritus, which can be extremely intense and which profoundly affects a patient's ability to conduct normal activities.

If we move on to the next slide, slide 6. So while there are a number of treatments available for early-stage CTCL, there is a significant need for new treatments. And that's because the existing agents either lack the ability to deliver sustained efficacy or they are highly irritating to patients' skin or otherwise have tolerability problems.

As a result, patients tend to switch between treatments because of the long duration of the disease, and as they use up treatments, they become in need of new ones. As a result, it's expected that all patients will get to be treated with all the available therapies.

So the key unmet needs in the disease offer a drug that is both tolerable and that can be efficacious on non-responding lesions and that also address clinically significant pruritus. And it's significant that the drug treatments that are available today often actually lists pruritus or skin irritation as significant adverse events associated with the drug treatment, indicating that this is particularly a poorly met need of early-stage CTCL patients.

As you can see from the quotation under the slide from the leading US physician -- this isn't just Medivir's view, this is the view of a broad range of European and US based oncodermatologists that we have talked to during the evaluation phase when we were looking to acquire this project, and since we acquired the project at the end of last year.

Can move on to slide 7. So remetinostat is a topical HDAC inhibitor. There are other HDAC inhibitors that are approved for late-stage CTCL, but these are all administered to deliver systemic HDAC inhibition. And as a result, the patients derive benefits systemically, but they also experience profound systemic side effects. There is a high level of fatigue associated with this and a number of hematological adverse events associated with systemic HDAC inhibition.

So remetinostat is a topical HDAC inhibitor that is designed to be effective in the skin but to minimize the systemic side effects. By virtue of its design, it is stable in the skin but degraded very, very rapidly in blood, so at a half-life of only a few minutes in the blood, as you can see in the graph on the bottom left. I'm on slide 7.

So the great news for us this past few weeks was the delivery at the headline data. This was an open-label study in patients with early-stage CTCL in which we looked at three different dosing regimens for the drug. The efficacy was assessed using a parameter called CAILS. This stands for the Composite Assessment of Index Lesion Severity, so in which the physicians score the severity of up to five different CTCL lesions in different parts of the patients' skin.

There was a clear trend covering the (inaudible), so the delivery of the application of a 1% gel formulation of remetinostat that is applied to the patient twice a day in the right-hand column of the efficacy table, with 8 out of 20 patients showing a confirmed response. One of those eight patients had a complete response, which means that all of the index lesions were completely cleared.

Also very encouraging was the safety profile that was seen across all arms of the study. So this was a highly tolerable treatment and, in particular, we saw no adverse events that are characteristic of systemic HDAC inhibition. And indeed, we see that the only meaningful adverse events were confined to the skin.

So overall, this has a very, very good efficacy profile and a safety profile that's entirely in line with the way the drug was designed for administration. So we think that we've got a molecule that has the right balance between a good level of efficacy and safety; a safety profile that will encourage and enable patients to stay on treatment for long periods of time. And that's confirmed by lengthy median time on study, which was around 9 to 10 months in a trial that was designed to allow patients to stay on treatment for between 6 and 12 months.

Can move on to slide 8. So just a reminder about the market for CTCL drugs. First of all, this is an orphan disease with orphan drug pricing. So looking at the US patient population, there are around 20,000 patients with CTCL. Patients with late-stage CTCL, so stage IIB to IV, comprise about 25% of the patient population. And these are patients in whom the tumor has become systemic and who wouldn't be eligible for remetinostat as the major treatment.

In contrast, the 15,000 patients, or 75% of the patient population who have early-stage disease, these are the patients who would be eligible for remetinostat. So this is the larger proportion of the population.

Based both on the pricing of existing drugs for the treatment of early-stage CTCL and consistent with its orphan drug status, we have been in consultation with payers in the United States. We believe that USD50,000 is a reasonable expectation for a drug that delivers a good level of efficacy with an appropriate safety profile on a per-patient basis.

And based on the patient numbers, that amounts to a potential market of $900 million if every patient was treated. Overall then, we see that a 15% market share in the US would translate into over SEK1 billion in annual revenue.

Next slide, slide 9. So, just looking forward now, so this is a drug where we expect to have market exclusivity until around 2034, including both the patent life on the drug molecule itself and taking into account patent extensions.

We are now, of course, planning to have a Phase II meeting with the FDA which we expect to take place over the summer, and why we are currently in the planning phase for the Phase III program, which is expected to initiate before the end of this year. Based on our expectations at the moment, which of course would need to be confirmed with the FDA about the Phase III study design, we see the potential for launch in 2021.

This, of course, is an orphan disease, and we're expecting a Phase III program which is relatively limited in the number of patients. So we are expecting to spend around USD47 million to take this all the way through to NDA submission over a three-year period. That includes both the costs of the Phase III study and all additional third-party milestones.

Just a final word just on CTCL. So we do see that treating physicians are excited by the potential of an HDAC inhibitor. So a proven mechanism in CTCL by virtue of the existing products that are already on the market for late-stage CTCL. We're excited by the potential of having an HDAC inhibitor that is suitable for these early-stage CTCL patients.

Moving on now to slide 10 and changing tack now for an update on the MIV-711 program. So we have announced previously that enrollment in the 201 study, the primary study of MIV-711 in patients with moderate osteoarthritis of the knee have been completed in October of 2016.

The final scheduled Data Monitoring Committee meeting, as Christine mentioned earlier, took place in January. That was based on a review of unblinded safety data, the first 200 patients who completed three months of treatment in the study. And, as Christine also noted, the recommendation from the DMC was to continue the trial as planned.

So we are fully on track to deliver primary data from this study in third quarter of 2017.

As we've also previously announced, we have an additional study of -- an extension study for patients who've completed treatment with MIV-711 in the 201 study. So this extension study is the 202 study, looking both at patients on the upper dose of MIV-711 who respond to treatment, giving them the opportunity to continue on MIV-711 at the 200 milligram dose for a further six months, in the hope of continuing to see additional benefit on both joint structure and also to look for effects of the drug on cartilage.

In addition, we will be -- we have been recruiting patients whose symptoms got worse while taking placebo in the 201 portion of the study. This group can be seen to be a potential group of rapid progressers who may derive particular benefit -- who may derive additional benefit from or greater benefit from taking MIV-711.

So these patients are being offered now six months of treatment with MIV-711 as part of the 202 study. That represents an additional interesting group of patients in which to look for the efficacy of the drug on the structure of the joint and on their pain symptoms.

We've talked -- given periodic updates about the cost of the study, and just to confirm that a further USD7.4 million, or SEK65 million, is expected to be spent to complete the ongoing Phase IIa studies. And as we've also previously communicated, we are fully expecting to partner MIV-711 in the event that we obtain positive results from the Phase II 201 study and the IIa program overall.

Moving on to slide 11 and the last of the R&D slides, and an update on JNJ-4178. So we've communicated last year the data from the Phase IIa study of JNJ-4178. So this is the combination of simeprevir and odalasvir and AL-335. So simeprevir, our protease inhibitor; odalasvir, NS5A inhibitor; and AL-335, a nucleotide polymerase inhibitor.

This was a repeat of the presentation that had previously been given at the Paris Special Conference on HCV back in September of 2016, showing the very high level of efficacy of the three-drug combination involving simeprevir for both six and eight weeks for treatment in non-cirrhotic genotype 1 patients. So showing 100% SVR in cohorts 1, 3 and 4.

So the update in this presentation was that there were data, additional data, showing that JNJ-4178 has sub optimal efficacy against genotype 3; that the combination is, therefore, no longer being developed for patients with genotype 3 infection. But studies are ongoing to look at the efficacy of the drug combination in cirrhotic patients.

And in addition, it was also announced that the Phase IIb program, which had previously been announced as starting towards the end of last year. But that Phase IIb study in non-cirrhotic subjects has been fully recruited, so this is a study looking at the efficacy, safety and the PK of the three-drug combination in patients with HCV genotypes 1, 2, 4, 5 and 6, and looking at both six and eight weeks of treatment.

So this is a very exciting development project with a number of different activities being conducted by our partner, Janssen. We are, based on the progression of the project, expecting that they will be in a position to file for approval of the three-drug combination in 2019.

Medivir, of course, has a financial interest in the development with additional milestones and royalties if JNJ-4178 is approved.

That concludes the R&D update, and I'll, therefore, hand over to Ola Burmark, our Chief Financial Officer, to give the financial summary.

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Ola Burmark, Medivir AB - CFO [4]

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Thank you, Richard. Then we move on to -- first to slide 12, then to slide 13. So the financials for the first quarter, as already mentioned, we had a total turnover of SEK17.8 million, which primarily was royalties related to simeprevir or Olysio, and also some royalties for the Xerclear or Zoviduo product.

Total costs, operational expenses amounted almost to SEK100 million. So the earnings or loss before interest, tax, depreciation and amortization, EBITDA, was minus SEK80.9 million. In that, we have personnel costs of about SEK10 million of a nonrecurring nature, driven by the re-organization that were [implemented] last year, but we had employees stayed over the first quarter in order actually to fully implement the new organization.

Basic and diluted earnings per share is negative, minus SEK3.59, and the net worth per share is the SEK38.93. The cash flow from operating activities in the quarter amounted to minus SEK123.9 million, and the liquid asset and short-term investments in the end of first quarter was almost SEK710 million.

Slide 14, please. As you notice, the cash and short-term investments are lower than compared to the beginning of the year. And that's, of course, that's the voluntary share redemption program was completed during the quarter. The total redemption program totaled -- comprised a total of 6.7 million shares, and actually almost 6.6 million of these shares were registered for redemption. So we had a 98.6% acceptance level, and both A and B shares were redeemed.

This resulted in cash proceeds of approximately SEK857.5 million was distributed to shareholders. So the total shares currently outstanding in Medivir now amounted to 20,318,977 shares, whereof 474,000 shares are A shares and 19,000 or 20,000 shares are B shares.

Thank you, and I'll hand over to Christine for summary.

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Christine Lind, Medivir AB - President and CEO [5]

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Thank you, Ola. As we stated earlier, Medivir has made quite a lot of progress in the first quarter that we've been operating as a primarily R&D company again. We are quite proud, if we look at page 15, of the deep pipeline that we have assembled in the transformation of the Company, including a very strong and diversified pipeline from early to late stages for which we retain 100% of the rights, as well as a solid partnership pipeline, which our partners continue to advance through their development of our projects.

We are quite excited about the future for Medivir with these pipelines and look forward to providing you many more updates on each of these projects as we continue to make progress with them in the future.

And with that, I would like to open it up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) There appear to be no questions on the line, so I'll hand back to the speaker.

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Christine Lind, Medivir AB - President and CEO [2]

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Okay. Thank you, Mya. Thank you, everyone, for participating on today's call. We look forward to the continued progress and to speaking with you again next quarter.