Pharming Group N.V. Q2 FY2023 Earnings Call

Thank you very much, Adam. Good morning or good afternoon, ladies and gentlemen. Welcome to our Second Quarter and First Half 2023 Financial Results Call. I'm here with my three colleagues, Dr. Anurag Relan, our Chief Medical Officer; Stephen Toor, our Chief Commercial Officer; and Jeroen Wakkerman, our Chief Financial Officer to take you through the highlights of these results and of course to answer all your questions that you may have afterward. But before I do that, I would like to point you to the slide that mentions forward-looking statements because we will be making some forward-looking statements today, which are based upon our current plans, beliefs, market circumstances, etc., that may, of course, change towards the future. I would like to move on to two slides ahead and basically share with you some of the excitement over the last six months that we had. We had a very busy six months and, indeed, made a lot of progress. First and foremost, we're very, very pleased to see that RUCONEST had 20% growth over the second quarter results versus the first quarter, which is a spectacular recovery from what was a one-off weakness in the first quarter. Looking at it, we're very confident that we can continue to be on track for low single-digit growth for the entire year, based upon the leading indicators that all point in the right direction. Of course, Stephen will touch upon that later in his part of the presentation. The significant cash flows that RUCONEST has been generating over the years not only helped us to, back in the days of 2019, in licensing Joenja from Novartis but also helped finance the development of Joenja, as well as prepare for its successful US launch, and that's exactly what happened. The FDA approved the product a couple of days before the PDUFA date, and we were very quickly off to a strong start in the market. In the ultra-rare business, having 43 patients on paid therapy in the first quarter out of 60 in the pipeline as of June 30 is no mean feat, and it's a testament to the preparation of our US colleagues. It beats analyst expectations based on their reports predicting first quarter sales for Joenja. We've made a lot of progress in regulatory reviews as well, submitting the file to several territories including Canada, Australia, and Israel. We also made strides forward with a pediatric clinical program, which is important because there is a big unmet medical need to be fulfilled in children younger than 12 years. We're working very hard to finalize that pediatric program so we can submit the file for the extension for younger children. The third pillar is the significant inflection point we believe we can achieve with leniolisib and its second indication. We have already submitted our plans and initiated discussions with the FDA on our proposed development program for that second indication, and Anurag will provide more details on that later. Lastly, we're actively searching for additional in-licensing opportunities for rare disease assets to further leverage our commercialization structure. Let's move to the next slide that shows a visual of our pipeline. We're still under review with the European Union and the UK. The pediatric trial has started; leniolisib Japan is on the brink of starting that trial as agreed with the Japanese authorities. As I've mentioned, we made progress submitting files to Canadian, Australian, and Israeli authorities to expand our geographical footprint for leniolisib and Joenja. We also made great strides in strengthening our leadership team. We're pleased to have found Dr. Richard Peters, our new Chairman Elect, who succeeds Paul Sekhri, who reached his maximum term. Dr. Peters has an impressive track record in the health care industry, especially in rare diseases with successful companies like Genzyme and Sanofi Genzyme. He has been a CEO of two NASDAQ-listed biotech companies and has experience from earlier successful companies such as Amgen and Sanofi. We're also very pleased that Alexander Breidenbach has agreed to join us as our Chief Business Officer. He will focus on our growth strategy execution and has extensive experience in senior positions, most recently as Chief Business Officer at ACM Biosciences and with a distinguished career at Roche. This strengthens our team with experienced individuals. Next slide, please. Our strong rare disease commercial infrastructure is crucial for our success. We have dedicated sales forces in the US and EU, and teams in the Middle East and North Africa, calling on immunologists and academic hospitals. Our medical affairs team is essential for success in rare diseases, including medical directors, geneticists, and publication specialists. We've built our market access teams on both sides of the ocean, working with authorities to ensure reimbursement of our products. As seen with leniolisib, we quickly got it reimbursed in the US. We have excellent teams, including patient support teams and educational initiatives for patients. This well-organized team knows how to address the needs of patients in a new disease like this. We're ready to leverage this for Joenja when it gets approved, and we've now decided to expand to Australia, Japan, and Canada. One more slide about the durable commercial asset that RUCONEST represents: it's rare for a product already on the market for nine years to still be growing. RUCONEST is the only recombinant protein therapy available for hereditary angioedema, crucial as many patients experience breakthrough attacks even with prophylactic treatments. More and more patients recognize RUCONEST as the right drug for managing such attacks. While the majority of patients can confidently self-administer, it’s essential to have this medication available when needed. RUCONEST's efficacy gives patients the confidence to manage their breakthrough attacks. Now I would like to switch over to Anurag to present the Joenja story. Anurag, over to you.

Thanks, Sijmen. On the next slide, we can see a little bit of information about APDS, which is a rare, serious, and progressive primary immune deficiency, first described about 10 years ago. We estimate that APDS affects about 1.5 million patients per million, based on literature estimates and our own patient-finding efforts. Through these efforts, we've identified more than 640 patients in key global markets so far. This number represents a portion of the total estimated 1,500 patients with APDS. The signs and symptoms of APDS vary widely, resulting in significant delays to diagnosis due to the rarity of the disease. These delays lead to significant morbidity and mortality for patients. We're addressing this with patient-finding efforts to make Joenja available. Treatments for APDS have primarily focused on symptom management, such as antibiotics or immunoglobulin replacement therapy, rather than addressing the root cause. A genetic test is a simple and effective way to diagnose APDS, which we'll discuss later. On the next slide, we see that Joenja was approved by the FDA earlier this year. Joenja modulates a hyperactive pathway, allowing the immune system to develop properly. This development is crucial since improper development in APDS patients leads to autoimmune phenomena and infection-related problems. With Joenja, we can balance the pathway and support proper immune function. Next slide. Here's a highlight of some data on Joenja. The indication statement shows that Joenja is approved in the US for patients 12 years and older with APDS. It was based on a randomized placebo-controlled study meeting both co-primary endpoints and several secondary endpoints. From a safety perspective, there were no drug-related serious adverse events or withdrawals due to Joenja. Importantly, long-term follow-up in the open-label study showed many downstream clinical benefits, including reduced use of IVIg or immunoglobulin replacement therapy and lower infection rates. The results were consistent with those from the randomized study. We continue to collect further data on lymphadenopathy and biomarkers from the study, including markers of abnormal B-cell development in untreated APDS patients. As you’ve seen from our data, we’re off to a solid start with patients beginning Joenja quickly in the US, and Steve will discuss this progress further shortly. Next slide, please. Our efforts to identify APDS patients are ongoing. APDS is part of a larger patient pool with inborn errors of immunity, and we've previously identified more than 640 patients with APDS, including 200 in the US. Our focus is on education, testing patients, family testing, and various medical affairs activities to raise awareness of the disease, as well as assisting patients and clinicians in identifying those who have APDS. Many patients have not received a definitive diagnosis of primary immune deficiency or inborn error of immunity. To assist these undiagnosed patients, we've made a comprehensive genetic testing program available in the US. We're working to help patients with inconclusive results, called variants of uncertain significance (VUS), as we know this is a significant portion of patients. We’re conducting literature reviews and engaging with clinical laboratories to gather more information. Functional testing, both in the US and worldwide, is being conducted, along with family testing to determine if variants exist in other family members. I expect that this work will yield a substantial number of patients in this uncertain VUS population. Next slide. We're actively working with European regulators and expect an opinion from the CHMP later this year, which could potentially lead to approval two months after a positive opinion. We're also focusing on the UK and plan to file with the MHRA following the European Commission Decision Reliance Procedure. The Japanese clinical study is open for enrollment, and I anticipate first patient treatment within this quarter. We've also made progress with filings in Canada, Australia, and Israel, launching our named patient program to ensure Joenja is accessible in certain markets. Earlier this year, we noted that pediatric patients can enroll in our first pediatric study for ages four to 11. We'll also be beginning our second pediatric study for the age group of one to six years later this year. Next slide. A brief update on our progress with the EMA follows. We submitted responses to the CHMP Day 120 list of questions and received further questions as part of the Day 180 procedure. We're pleased that CHMP will consult an ad hoc expert group to discuss APDS and leniolisib trial results, recognizing the rarity of the condition and the significant unmet need. They’ll hold a closed meeting including Pharming representatives, investigators, and APDS patients. We expect the CHMP opinion in the fourth quarter, with a potential approval two months later. Next slide, please. It’s over to Steve.

Thanks, Anurag. Good morning, and good afternoon, everybody. I'm going to provide you with a short update on RUCONEST's progress in Q2 and the Joenja launch in Q2 of this year. The disruptions we saw in the first quarter were market-wide and affected our competitors as well. As I indicated in the Q1 call, they were transitory. In the second quarter, RUCONEST performed well. The leading revenue indicators, including growth in unique prescribers, new patient enrollments, and vials shipped to patients, were all strong. In fact, new enrollments have hit over 70 for both Q1 and Q2 despite Q1 market issues, clearly reflecting the underlying demand for RUCONEST. In the second quarter, RUCONEST revenues globally increased by 20% compared to the first quarter and a 2% increase when comparing the second quarters of 2023 and 2022. Given the strong bounce back in the second quarter, which we signaled in the Q1 call, we maintain our outlook of low single-digit revenue growth for the rest of 2023. Next slide, please. As I mentioned earlier, the number of unique prescribers continues to grow in the US. The 687 prescribers represent 62% of the HAE prescribing community and continue to grow even nine years post-launch, despite significant market changes. This clearly shows a sustained need in the treatment landscape for a C1-esterase inhibitor like RUCONEST. We expect to continue growing the unique prescriber base in the coming months and years, along with the patient base benefiting from RUCONEST. Next slide, please. Now, let's turn to the Joenja launch. Pharming has applied all its rare disease commercialization experience in the US, which is a must-win market. We have 54 salespeople and leaders, including the existing RUCONEST team, where approximately 30% of APDS patients reside, and the Joenja institutional team focusing on the centers of excellence that treat the other 70% of APDS patients. These teams, along with other colleagues, are working to identify patients and provide HCPs with the necessary information and education to confidently prescribe Joenja. We also have clinical educators to drive family mapping and testing. As Anurag mentioned, it is critical since there’s a 50/50 chance siblings may also have APDS. Now, let’s move to the next slide to briefly discuss our value proposition. Joenja is the only indicated option for APDS patients and is a precision medication. When a physician prescribes Joenja, they and the payer know it addresses the root cause of the disease. Pharming is committed to ensuring that physicians and underserved patients access it quickly. So, let's look at the impact on a patient. Next slide, please. This is John, a 20-something-year-old man who has dealt with APDS since he was 11 years old. Like many patients, he has been in and out of hospitals and struggled with social skills and friendships, feeling overwhelmed by taking 11 pills in the morning and nine pills at night to manage his symptoms. Joenja has alleviated the burden of pills and is treating the underlying cause of John's APDS. His lymph nodes are decreasing in size, and he’s starting to think about his future, including going to college. This illustrates the promise Joenja holds for our patients and will certainly fuel our launch phase and future growth. Next slide, please. Our preparation for this launch was rigorous and thorough. We’re off to a very good start. Our first fully reimbursed commercial shipments of Joenja were within two weeks of FDA approval, which is quick and unusual. To date, we’ve enrolled 60 APDS patients and shipped to 43 of them on payer-approved product. We’ve made significant progress in partnering with national and regional payers to develop coverage policies, and no patient has been denied access to Joenja. We’re pleased with our post-launch progress and expect to build on this to grow the patient funnel and continue the brand's growth into 2024. I’d like to hand over to Jeroen for the financials.

Thank you very much, Steve. Good morning, everyone. Moving to financial highlights for Q2 2023, our revenues grew to $54.9 million, a growth of 9% compared to last year. This revenue consists of $3.8 million from Joenja sales in the first quarter and $51.1 million from RUCONEST, which is a growth of 2% from last year's second quarter but 20% from Q1, showing a strong recovery. Gross profit grew to $49.2 million, up 7%, roughly in line with revenue growth. Operating costs increased to $23.4 million due to several items, mostly concerning marketing and sales, which I will detail later. For the second quarter, we had other income of $21.1 million from the priority review voucher sold to Novartis, following our agreement in 2019. In the previous year's second quarter, we had substantial other income from the BioConnection transaction that contributed $12.8 million. Comparing to last year, this year's other income increased by $8 million. The operating profit registered at $5.3 million, reflecting a decline corresponding to higher operating costs. The net profit dropped from $15.7 million to $1.3 million, but represents an improvement from the previous quarter. For the first half, total revenue grew by 1% to $97.4 million. Gross profit stood at $87.6 million, resulting in a gross margin of 90%. Operating costs amounted to $118.5 million, increasing by $36.2 million from $82.2 million last year. I'll provide more details later regarding these costs. For the past few quarters, you can see the substantial recovery in revenues and the impact of reimbursement issues, thus seeing a strong second quarter at $51.1 million, with Joenja contributing $3.8 million for the first time. In terms of costs, indeed, they have risen significantly, primarily due to a $10 million milestone payment to Novartis related to Joenja, along with increased marketing and sales expenses necessary for Joenja’s launch. You will notice we also saw substantial R&D cost increases, largely linked to the ongoing approvals in international markets, alongside a buildup of our medical departments in the US and Europe. An overview of our cash flow shows an increase of $8 million in cash and cash equivalents, now at $192.4 million; this mainly stems from the sale of the priority review voucher considered as cash flow from investing activities. Our financial outlook remains strong, driven by the robust recovery, and we continue to guide for low single-digit RUCONEST revenue growth for the full year. Joenja was approved at the end of March and has been commercialized since April. We anticipate a CHMP opinion for the EU in Q4 of this year, potentially leading to marketing authorization two months afterward. Following a positive EMA review, we will submit leniolisib to the MHRA in the UK. We're actively investing in operating costs to accelerate Joenja and RUCONEST growth, with further details about developing additional indications for leniolisib to be provided later this year. We remain focused on investments and in-licensing mid- to late-stage opportunities in rare diseases for the future growth of the company. With that, let's move to the Q&A session. Feel free to ask any questions.

Thank you. Our first question comes from Christian Glennie from Stifel. Christian, your line is open, please go ahead.

Good afternoon, guys. Thanks for taking the question. I guess we'll start with Joenja. Initially, can you explain or clarify the 60 patients on enrollment versus the 43 on paid therapy? Are some of the others on therapy, but still going through reimbursement processes? How should we think about the balance of those 17?

Christian, when patients are enrolled, they receive a free starter pack, which is a one-month supply of Joenja. So, once they enroll, they have access to the medication. Following that, the administrative procedures for reimbursement begin. If that process is completed within the month, the second month will be a commercial pack. If not, another month's supply in the form of a bridging pack is provided. So yes, all patients have access to therapy once enrolled. I hope that's clear.

Thanks. Additionally, regarding the 640 identified patients, you've added 140 compared to the previous 500 reported. The US number remains the same. Where did these extra patients come from? Are they mainly from new international markets like Canada, Australia, and Japan?

Anurag, could you comment on that?

Absolutely. We're continuing to find patients in the US, but also in other markets, including Japan and Australia, where we intend to commercialize first.

Thanks. In the US, you noted 200 identified patients; theoretically, if taking 1.5 per million into account, there could be approximately 500 out there. That’s already a 40% diagnosis rate. How do you think that diagnosis rate could increase in the next few years?

Would you like to answer that, Anurag?

Certainly. We see this trending up as awareness grows and therapy availability improves. In streamlined healthcare systems of Europe, we see prevalence rates higher than 1 per million, while the US has a more distributed and fragmented system. Over time, as awareness builds, we expect to approach or exceed what we see in centralized systems. Additionally, patients with variants of uncertain significance may yield more diagnosed cases as we explore family connections.

As a quick follow-up, do you believe those variant patients would also qualify for Joenja treatment even without a formally defined diagnosis?

Yes, that’s correct. They would indeed be appropriate for Joenja as they would likely have APDS if confirmed; they exhibit symptoms but often lack a clear diagnosis.

One last question, if I may. Can you provide any rough guidance for Joenja for the year concerning patient numbers or revenues? You've got 60 patients in the program already, and the $3.8 million revenue is notable. With a 40% penetration rate among the 150 eligible patients, could you share insights on expected penetration rates or patient numbers by year-end?

I understand the interest, but it’s still early days. We're off to a good start but want to observe more development in numbers. We'll keep you updated quarterly until we feel more confident providing guidance.

The next question comes from Joe Pantginis from H.C. Wainwright. Your line is open, please go ahead.

Hi guys, thanks for all the details. I have questions about the dynamics of the Joenja launch. What is the typical duration to get drugs to patients once identified? How many patients got the drug of the reported revenue that beat expectations? Is any of this linked to inventory channel?

That’s an excellent question. Steve, would you follow up?

Once enrolled, patients receive a starter pack quickly, typically within four to six weeks for approval. We rarely have to bridge with additional supplies. Subsequently, patient demand largely drives most of the revenue, minimizing the need to stock inventory.

Thanks. Regarding OTL-105 and ongoing preclinical models, when can we expect any updates?

Anurag, can you comment on that?

We're making progress with Orchard on these models. While I can't provide a firm timeline, I expect to share updates on our findings and plans later this year.

Great. Appreciate the details and congratulations on the strong Joenja launch.

The next question comes from Sushila Hernandez from VLK. Your line is open, please go ahead.

Thank you for taking my questions. On Joenja, you mentioned the four to six weeks for approvals. Can you elaborate on the time from identification to enrollment?

Steve, would you take this one?

Sure. The time from identification to enrollment typically varies, but once a physician and patient discussion occurs, it often takes a day to a week to complete the necessary forms and generate the starter pack.

That’s clear, thank you. On RUCONEST, you mentioned over 70 quarterly new patients. Are these treatment-naive patients or switches?

Most of these will be switch patients; there are very few treatment-naive patients at this stage. The patients may be dissatisfied with their current acute therapy or require a second acute therapy for breakthrough attacks.

That's clear, thank you. Could you provide progress on your business development activities?

Yes, we have a very active team that has evaluated over 150 opportunities in the last 12 months. The majority were quickly addressed, but a smaller number progressed to due diligence. We have improved the efficiency of our business development process and remain optimistic about acquiring in-licensing assets in mid-to-late-stage development for future launches.

The next question comes from Natalia Webster from RBC. Your line is open, please go ahead.

Thank you for taking my questions. On RUCONEST, with the improvement in Q2, is there any risk of the reimbursement issues recurring? Can you share expectations for H2 and 2024?

We don't expect a repeat of the Q1 issues. They were specific market-wide events not related to Pharming. We also foresee continued growth in prescribers, with 38% of HAE-specific prescribers in the US yet to try RUCONEST.

Thank you. Lastly, on leniolisib, could you clarify the timing for the CHMP decision? You mentioned Q4 previously; is there a delay?

We’re working collaboratively with the CHMP and EMA to address their inquiries, providing a clearer timeline as we receive more information.

Next question comes from Hartaj Singh from Oppenheimer. Your line is open, please go ahead.

Hey, this is a question on behalf of Hartaj. Congratulations on the strong quarter for RUCONEST and the positive start for Joenja. I would like to ask about the growth rate of APDS patients. How should we view the quarterly growth rates for APDS patients? Will seasonality play a role?

The question pertains to the seasonality in APDS growth, correct?

Yes, it’s an ultra-rare disease. We expect steady growth as we remain in the launch phase without significant seasonal influences; growth rates may slow in the outer years as the initial surge settles.

I would like to remind everyone to submit their questions. As we have no further questions, I'll hand back to management for any concluding remarks.

Thank you very much. Thank you for your attendance today. I wish to remind you of the outlook elements for the remainder of the year. We've heard about positive developments in the indicators underlining RUCONEST sales, maintaining our low single-digit growth guidance for RUCONEST revenues this year. The steady flow of new patients entering Joenja therapy and the regulatory interactions we've had with the Europeans as well as submissions in Canada and Australia. We also continue to invest in launching preparations in these markets and the clinical trials planned for the indications of leniolisib, which we will update you on, given the regulator's feedback on our submissions. We aim for a product launch with a broader patient pool than APDS. Also, we plan to provide updates on in-licensing or acquisition news as we expand our commercialization infrastructure. Thank you again for participating today, and we look forward to updating you on the next quarter results in late October.