Pharming N : 4Q/FY 2023 Financial Results - Analyst & Investor Call Transcript

Pharming Group N.V. 4Q/FY 2023 Results Call

March 14, 2024

Operator: Good day and thank you for standing by. Welcome to the Pharming Group N.V. Full-Year 2023 Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. As a reminder, the company will only take questions from dial-in participants. To ask a question during the session, you will need to press star one-one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Sijmen de Vries, CEO of Pharming Group. Please go ahead, sir.

Sijmen de Vries, MD - Chief Executive Officer:

Thank you very much, Operator.

Welcome, ladies and gentlemen. Good morning, good afternoon, wherever you are, to our conference.

Please, next slide. And we're very happy to take you through the full-year results. And you can give me the next slide, because before I do that, I would like to point to the forward-looking statements slide that you now see, where we will be making forward-looking statements that are based upon our current beliefs and expectations, which may, of course, differ from what we expect.

So, having said that, I would like to now go to the next slide where you can see my face, and then move on immediately to the next slide.

We are indeed looking back to 2023 as a very successful year, whereby delivering strong growth, we built the foundation for that global rare disease company that we are setting out to build. And that, we can build that. We can all finance that by, of course, the cash flows that come from the marketing of RUCONEST®, which delivers considerable positive cash flows that can help us to build that foundation further.

We're very pleased that we delivered more than $227 million of revenue, which is a 10% growth, versus last year, which exceeded significantly the expected single-digit growth for RUCONEST®. And we saw that because we had some very good parameters, forward-looking parameters that were

really working. The number of patients increased and numbers of prescribers increased. And basically, it means that patients continue to be reliant on RUCONEST® despite increased therapy options that are available in the market, which, of course, are good for patients. But you can see that RUCONEST® continues to be that reliable cornerstone. And my colleague, Stephen Toor, will elaborate a little bit further on that.

Now, the next exciting bit, of course, that we could therefore, and start to execute on, was the launch in the United States for Joenja® (leniolisib), which is a product we in-licensed from Novartis in 2019. And we were very proud to actually, almost immediately after FDA approval, in April bring that product to the market and immediately get commercial coverage for that product and bring in more than $18 million of sales during those first nine months in the market.

In addition to that, Joenja® has been filed with a number of regulatory authorities in Europe, Canada, Australia, Israel, and as of two days ago, in the United Kingdom. And we are awaiting, of course, and we're working with all these regulatory authorities, and we are awaiting the next steps and necessary approvals in the not-too-distant future.

Then, of course, very important, the label of Joenja® is for 12 years and older, we have a number of pediatric trials that are ongoing, which are, of course, important. And last but not least, we also have completed enrollment for a small Japanese clinical trial. We are preparing for submission to the Japanese authorities by the end of this year. And my colleague Anurag Relan, our Chief Medical Officer, will talk more about that. And as it is an ultra-rare disease and a very new disease that was only described ten years ago, we have a very strong focus on patient finding. And again, Dr. Anurag Relan, will talk about that later.

And then I move to the right-hand side, which of course is even more exciting going forward towards the future because we strongly believe that leniolisib has vast additional potential for further development. And hence, we have basically set out to start a Phase II study in the second quarter of this year for the subsequent indication, which is significantly larger than APDS in patient numbers, PID with immune dysregulation. And again, Anurag Relan will talk about that in more detail a little bit later in this presentation.

And last but not least, we are very, very active. We continue to be very active to in-license or acquire clinical stage programs in rare diseases, preferably in immunology, hematology, respiratory and gastroenterology, to further leverage our commercialization structure that we have been building up and are building up as we speak.

And then on the bottom of the slide, you see that for the first time in our history, we gave total revenue guidance, and that will be between $280 million and $295 million, which is driven, of course, by Joenja®, but strongly supported by RUCONEST® during 2024.

And then I would like to go to the next slide, please, where you see then a depiction of the pipeline that we have. RUCONEST® obviously in the market, Joenja® in the US market. And you see then subsequently under regulatory review by many of the regulatory authorities and the pediatric program that's ongoing and the Japan program that's ongoing. And then the very exciting fact that

we are going to do the Phase II study for leniolisib for the subsequent indication; and last but not least, our very early-stage program, the HAE gene therapy that is in early clinical - preclinical stage. With that said, I would like to turn over to my colleague Stephen Toor, our Chief Commercial Officer, to take you through the commercial update. Thank you.

Stephen Toor - Chief Commercial Officer:

Thank you, Sijmen. Good morning. Good afternoon, everybody.

This is a slide I think you'll be largely familiar with. And I think the key thing to take away from this is that the key features of RUCONEST®, so namely the only recombinant C1 treating the root cause of the disease and 97% efficacy in one dose, is what continues to fuel the RUCONEST® growth and our success over the last nine years. These product features align to the excellent workout commercial medical and patient services teams deliver for customers and patients and their carers, is also why RUCONEST® remains a highly relevant part of the conversation in the US HAE community and globally.

That's remained the case despite three prophylactic launches over the last few years, leading to generally better-controlled patients and the genericization of icatibant. And I fully expect it to remain the case even in the face of acute competition in the future. And that's because HAE patients using RUCONEST® tend to have generally a more severe course of disease. And in that instance, the need for virtually guaranteed and fast efficacy that stops the attack in its tracks is critical, and it's typically the patient's only real objective. In most cases, that overriding need for efficacy won't be replaced by a convenience play.

So, looking at 2023, RUCONEST® performance was characterized by the continued growth in both prescribers and new patient enrolments. And it was also successful despite that market-wide event we saw in Q1 last year related to government reimbursed patients. Now, we have seen some disruption from that this year, but it's been muted by the almost halving of those patients' out-of- pocket costs in the US. And moving into '24, we've also seen that the strength of our leading indicators has continued into this year, namely new prescribers and continued support from existing prescribers and new patient enrolments. So despite some continued disruption in that government segment, we're still on track for where we expect to be in Q1.

Next slide, please.

This is, again, something you're very familiar with. Pharming has been in this space and committed to this community for over 20 years now. And it's really that commitment combined with the product itself, RUCONEST®, our people and the excellence they deliver, which is why you see on the right-hand side there, our prescriber base continues to grow and, as a result, our patient base continues to grow. And it's why, as I said, we remain enthused and confident in the continued growth of RUCONEST®, both this year and in the years ahead. Next slide, please.

Switching gears to Joenja®. We had, as you know, a strong first year, and as we close out that first year, at the end of this month, I'd just like to reinforce what a great launch the team here at Pharming delivered for us.

The launch preparation, as you've heard me say in the past, was first-class. And I think I wouldn't underplay there, what Sijmen said earlier, which is that within one week of approval, we had commercially covered patients with product in hand, which is outstanding.

The patient base steadily grew throughout the year, and we exited, as you know, at the end of the year with 81 patients on paid Joenja® therapy. In that time, importantly, we've seen very few discontinuations, and we have adherence rates close to 90%. So as we convert that caseload that we'd already identified at launch, our focus, unsurprisingly, moving forward, remains finding those new patients for this rare disease and then, given that APDS is an autosomal dominant condition, testing their families to uncover additional patients so that they too can benefit from the management of treatment with Joenja®, which, as you know, is the only indicated product with which you can treat APDS.

And then the other important factor to talk about here, in addition to the US, is of course alongside that launch, we continue to build out our ex-US capabilities in preparation for launches in the European Union, the United Kingdom, Japan, Australia and other countries in the Asia-Pacific region and also in the Middle East and here in North America and Canada.

With that, I'd like to pass over now to Dr. Relan, who's our Chief Medical Officer, for a medical update.

Anurag Relan, MD - Chief Medical Officer:

Thanks, Steve.

What I'm going to do today is talk a little bit about APDS and then provide an update on Joenja®, as well as where we see some additional possibilities for applying leniolisib in this second indication.

On this slide, you can see a little bit of information about APDS, which is a rare primary immune deficiency that, as Sijmen said, was only characterized in 2013. We estimate the prevalence of APDS at approximately 1.5 patients per million. And to that end, we have already identified more than 840 patients across the world in key global markets.

As with many rare diseases, the signs and symptoms of APDS can vary across patients, even within family members who have the same variant. This, unfortunately, leads to many potential delays in diagnosis and care and a lot of frustration amongst clinicians and patients as they try to treat these patients. Fortunately, a simple genetic test can provide a definitive diagnosis of APDS, and until the availability of Joenja® in the United States recently, treatments for APDS have really only been limited to addressing the symptoms of the disease. Again, these symptoms manifest early in childhood because these patients have this genetic condition that they're born with. But these treatments do not address the root cause of APDS, and without a specific indicated treatment, this was quite complicated for these patients to manage their condition and physicians to be able to treat them effectively. Next slide.

And you can see now with the launch of Joenja®, APDS patients have a choice now, specifically patients who are adult and pediatric patients, ages twelve years of age and older. And we've been able to demonstrate this by a randomized, placebo-controlled study where Joenja® met both primary and secondary endpoints with significant efficacy results. We also saw positive benefits in other key secondary parameters as well as exploratory measures.

On the safety side, we saw no drug-related serious adverse events or study withdrawals in the Joenja® studies. And we've also collected quite a bit of data now on long-term use of Joenja® from the open-label extension studies. And we provided some of this data, including reductions and discontinuations in immunoglobulin replacement therapy, or IVIG. We've also shown reductions in infection rates over time, and we've also seen that the safety is consistent with what we see in the short term.

When these patients are on therapy in the open-label extension study for several years, in many cases, we see the same types of safety profile that we saw in the short term in the randomized- control study.

We continue to collect this data, including showing sustained benefits in the size of their lymph nodes, the size of their spleen, some of their immune parameters, including their levels of IgM, and we presented some of this data at some medical conferences throughout 2023. And we expect to continue to present more data from these long-term studies in the coming year.

On the next slide, we can see what we're looking at beyond the FDA approval. So, as we mentioned in the press release, we are working closely with CHMP to address remaining outstanding issues. And we are now awaiting the CHMP's opinion on the leniolisib MAA. We, in fact, expect that leniolisib will be on the CHMP meeting agenda next week, but we are awaiting CHMP confirmation for this. As Sijmen mentioned also, the Japan clinical study, the enrolment is completed there now, and we are finishing the remaining studies to be able to file in Japan, hopefully toward the end of this year, beginning of next year.

Just earlier this week, we filed our application for the MAA in the UK with the MHRA, and we also have several applications already under review in Canada, Australia and Israel, and we expect regulatory action on these throughout the course of 2024.

On the pediatric side, we have two studies that are ongoing. The first is in children ages 4 to 11, and this study is expected to complete enrolment very soon. And then the other study, which we just started with the first patient dosed in November 2023, is continuing as planned.

On top of that, we mentioned that we have a number of patients in expanded access programs across the world, and as well as some new patients that are getting access to therapy through named patient programs. And I'll talk a little bit more in the next couple of slides about some work that we're doing for the second indication, and that progress is on target with the initiation of the development for this second indication. Next slide.

Let's talk a little bit about the patient finding because I think this is critical for any rare disease, but also for one of these newer rare diseases such as APDS. One key pillar of that is medical education, and we're doing a number of activities to support this education. Obviously, we attend numerous conferences and congresses. We present abstracts both on APDS and the seriousness of APDS, as well as some of the emerging data that we have, and ongoing data that we have on the use of leniolisib in these patients. And we, of course, publish a number of these results, and we've done that throughout the course of this year.

You see a list of some of the conferences that we presented at during 2023, and there'll be a similarly long list for 2024. Because a simple genetic test can make the diagnosis of APDS quite easy, we have a sponsored no cost testing program in place with genetic counsellors available to help review test results with patients as - and physicians as well, as well as to provide pre-test and post- test guidance. We've also partnered with a number of genetic testing companies to identify patients that have already been tested and diagnosed with APDS. So really reaching out in numerous ways on the genetic testing front.

And then, as Steve mentioned, APDS is an autosomal dominant condition. But we're finding through our work is that most family members haven't actually been tested for APDS. And this is due to a number of factors that we're trying to address, one by making genetic testing more widely available, but also education. We're doing a number of things to work with clinicians and patients to encourage family testing, and we have a program in place now that allows patients to directly request this through Genome Medical if they suspect APDS or if they have a family member that has APDS. Really, the goal here is to remove barriers to testing for patients that may have APDS.

On the next slide, you can see a little bit more about the activities that we're doing on what's called variants of uncertain significance. We previously mentioned that there are more than 1,100 patients that we're aware of in the United States alone that have this category of diagnosis, which is called a VUS. And what that means is that they have some symptoms that led them to get a genetic test done, but the genetic test result is inconclusive. And it's inconclusive primarily because that genetic variant hasn't been previously seen and hasn't been evaluated, whether it's disease causing or not.

We're doing a number of things here to help resolve this frustration for patients and clinicians. The first is we're working with experts, including those at ClinGen, to develop specific criteria for classifying variants. We're also partnering with a number of companies, including Genomenon, to make clearly available what variants are causing disease. We're trying to gather data, and these efforts that I'm mentioning here have already led to a number of patients getting correctly diagnosed with APDS.

On top of that, we're really trying to make functional testing more widely available, and we're doing a number of things here to support this type of activity, working with a number of research labs to try to make this test more widely available because ultimately, this is the way to resolve a variant of uncertain significance. And then it's not only one thing to test patients, but then also to share these results. And we're doing that through a number of databases, including the one sponsored by the NIH called ClinVar.

And then lastly, we are involved in a project with high throughput methods that will allow testing nearly all possible variants and creating a variant effect map, including variants that haven't been tested yet or haven't been observed yet. And this will allow us to eventually make it possible so that in the future there won't be any patient that has this type of diagnosis, or that has this inconclusive result. And those efforts are continuing on plan, and we expect later this year to be able to talk more about the results from that project.

And on the next slide, you can see some of the medical conferences that we presented at over the past year. These data talk about the seriousness of APDS, and you see the data on mortality that we presented, the data on lymphoma, but they also present data from the ongoing use of leniolisib in the APDS long-term results. We've seen data as well presented on the different manifestations, including manifestations in these patients' guts, in their lungs.

And then lastly, we presented just last month new data on the use of our navigateAPDS Sponsored Genetic Testing Program, and how that is uncovering patients and helping patients get the correct diagnosis.

As I said earlier, we're going to continue to present at a number of conferences this year, have a number of abstracts, a number of publications that are coming out where we can really educate the broader physician community and patient community, about APDS, about the seriousness of the condition, as well as the ongoing data that we're collecting.

Next slide.

Now turning a bit to the next indication that we're pursuing. Obviously, APDS is a primary immunodeficiency with immune dysregulation, but there are other immunodeficiencies with immune dysregulation, and they often have similar clinical phenotypes or clinical presentations, as you see with APDS.

Specifically, what we see is that these patients often get similar problems related to lymphoproliferation, or enlarged spleens and livers, excuse me, enlarged spleens and lymph nodes, but also they also have this problem of autoimmunity, where not only is their immune system not functioning properly, it's also attacking the body.

And what we're seeing is that there is a number of these PIDs, or primary immune deficiencies with immune dysregulation, that have a clinical phenotype that is similar to APDS, and often times are even managed before the availablibility of Joenja® for APDS in the same way. So there's a strong rationale to see what's going on here.

And I think if you see on the next slide, the clinical presentation of these diseases looks very similar to what we've seen with APDS. In fact, when you look at the right, you see all of the same types of things, or many of the same types of things, that we see with APDS. We also know that these patients have a high unmet need. And again, the standard of care immunosuppressive therapies, such as Sirolimus (rapamycin) that have been used, have a lot of limited concerns due to limited efficacy and tolerability.

So there's an unmet need here. And we know that these patients, based on work that's already been done in these various genetic disorders, have altered PI3K signaling. And we know that that altered signaling leads to the clinical symptoms that you see on the right. And as such, we think that leniolisib is well-suited to restore that signaling to normal, thereby helping these patients' clinical presentation also.

And to that end, on the next slide, what we're doing is advancing this with a clinical trial using leniolisib in this patient population. Again, the principle is that by reducing this PI3K-delta activity, we're trying to rebalance the immune dysregulation and improve their clinical symptoms.

We've been partnered with the NIH on this, and we're expecting to start a clinical trial soon. The data suggests that when we look at the patients with specific mutations that have this type of immune dysregulation, the prevalence is approximately five per million, which is a little bit more than what we've seen with APDS, in fact, three times more than we've seen with APDS. We have been engaged with FDA on this, and we've gotten feedback on the clinical trial plans. And we are underway now to begin that clinical trial shortly, which you can see on the next slide describing the study design for that.

It's a Phase II, proof of concept study, single-arm, with 12 patients, where we will ramp patients up, starting at 10 mg and progressing to 30 mg and 70 mg. This study will include patients where we know that the genetic defect, and you see some of the genetic defects listed there, ALPS, CTLA4 haploinsufficiency and PTEN deficiency, among others, where we will - where these patients have this altered PI3K-delta signaling. So we think that leniolisib is appropriately suited to be able to alter and restore that signaling back to normal.

The primary objective of the study, of course, is safety and tolerability. But we will be looking at PK and PD measures, efficacy measures, similar to the types of measures that we studied in the APDS population. And the goal really is to confirm the safety intolerability and then pick the best dose regimen for a Phase III study. And, as I mentioned earlier, we're partnered with the NIH on this, so look for more updates to come soon about the initiation of this study.

And with that, I'll turn it over to my colleague, Jeroen, to discuss the financials.

Jeroen Wakkerman - Chief Financial Officer:

Yeah, thank you very much, Anurag, and I'm very happy to take you through the financial highlights. To start off with Q4 2023 versus last year, we had a revenue growth in the quarter of 49%, and RUCONEST® grew by 34% in Q4 and had a record revenue of $73.3 million. You may remember that we were at a growth of 2% year-to-date at the end of Q3, so we're very happy with these Q4 sales results. And we saw strong performance in leading key revenue indicators in the US, including new physicians prescribing RUCONEST®, new patient enrolments, including high-frequency attack patients, and the total number of patients.

Joenja® revenue grew by 21% versus the previous quarter, so Q3 2023, and the revenue was $7.9 million. And by year-end, we had, as Steve also said, 92 APDS patients enrolled in the US and 81 patients on therapy, on Joenja®.

The gross profit in the fourth quarter of 2023 increased by $25.8 million compared to the fourth quarter last year, and this growth was driven by higher revenues and partially offset by increased RUCONEST® production cost and royalty payments on Joenja® sales.

The operating cost increased by $16 million in the fourth quarter compared to last year, and about half of this, $8.3 million, was directly related to R&D and marketing and sales expenses for leniolisib,

respectively Joenja®. And our expansion efforts, driven by preparation for the launch and further commercialization of Joenja®, led to a $7.1 million increase in payroll expenses.

An operating profit of $1.1 million was realized, in contrast to an operating loss of $10.2 million in the fourth quarter of 2022, and this improvement was primarily driven by the rise in gross profit and partially offset by the increase in operating expenses. The net loss was $2.7 million, and our cash position improved and grew from $209 million at the beginning of the year to $215 million at year-end.

If I then go to the next slide with the full-year results, our revenues grew by 19%, which was a result of higher RUCONEST® sales volumes and supported by a price increase which was below CPI in the US market.

The initial sales of Joenja® was $18.2 million in 2023 following the launch in April of the same year, and the revenues in Europe and the rest of the world increased by 12% to $6.2 million in 2023. The gross profit increased by $32 million, or 17%. And this development was broadly in line with revenue growth.

Our other income reflects for this year well, 2023, the sale of the priority review voucher to Novartis, which was for a pre-agreed price of $21.3 million and is a one-time payment. In 2022 Pharming reduced its minority stake in BioConnection and at the time we recognized a gain of $12.2 million. So that was in 2022.

The operating costs increased by $64.5 million, of which $10.4 million is attributed to milestone payments for Joenja® following the first commercial sale in the second quarter of last year. An additional $25.7 million of expenses is directly related to R&D expenses and marketing and sales expenses for leniolisib/Joenja®, and $24.2 million increase was from payroll expenses, driven by our expansion efforts in preparation for the launch and the further commercialization of Joenja®. And finally, we incurred impairment expenses related to our DSP facility, and that was for an amount of $4.7 million in 2023.

The operating profit decreased from $18.2 million to minus $5.4 million. And that was as a result of the increase in operating cost to build our Joenja® business. The total net loss in 2023 amounted to $10.1 million, compared to a net profit of $13.7 million in the year before. And the decrease was primarily caused by higher operating costs. And in addition, fluctuations in foreign exchange rates adversely impacted the foreign currency results in the statement of income.

On the next slide, we give an overview of the revenue in RUCONEST® over the last years, and obviously for last year you see also Joenja®. But RUCONEST® has grown by 10% in 2023, and we saw a record RUCONEST® revenue since the launch of the product in the US over nine years ago.

Leniolisib is driving enhanced growth. We achieved overall 19% revenue growth in 2023, and we're very pleased with these results and with the continued growth of RUCONEST® from 2021.

On the next slide, you see the OpEx in cost category breakdown by quarter, and the message is that we continue to invest in Pharming's future growth. I've provided more detail on the growth of the operational cost earlier, and specific to Q4, the operating expenses increased by $16 million in the

fourth quarter compared to last year. And $8 million, so almost half of it was related to leniolisib and Joenja® in terms of marketing sales and R&D, and $7 million was related to payroll expenses to support the growth of the organization.

And for 2024, we expect quarterly OpEx to be less than the OpEx in Q4 2023.

Now, moving on to the next slide, to the cash flow. As I said before, it increased from $209 million to $215 million, and the graph shows the key changes in our cash position. The cash flow from operating activities was negative and offset by the cash from the sale of the earlier mentioned priority review voucher. And in addition, there were favorable currency exchange rate fluctuations with a positive impact on the cash, and that was amongst others on the cash that we hold in euros, and the euro-dollar exchange rate increased throughout the year.

Then going to the revenue guidance for 2024, on the next slide. We give a revenue guidance of between $280 million and $295 million for 2024. And that means a growth between 14% and 20%. We, as in earlier years, expect quarterly fluctuations, and Joenja® is a significant driver of this revenue growth. But also, we expect continued growth from RUCONEST®. And the RUCONEST® growth rate is higher than the guidance that we gave in 2023 because we expect some of the momentum from the second half of 2023 to continue.

Last year's guidance was low-single-digit, and we are confident to move that now to low- to mid- single-digit growth for RUCONEST®. The Joenja® assumptions are that we expect continued growth in patients on paid therapy and the pricing in the US is at an annual weighted average cost of $566,000 per year, per patient.

Now, moving on to the outlook for 2024. As I said, total revenue expected to be between $280 million and $295 million.

Joenja® in the US, we expect continued progress finding additional APDS patients, and that is supported by family testing and VUS validation efforts, as mentioned by Anurag, and subsequently converting patients to paid therapy.

For leniolisib outside of the US, we expect increasing revenues from commercial availability or through our named patient program and other funded early access programs in key global markets. We expect to complete leniolisib clinical trials to support the regulatory filings for approval in Japan and for the pediatric label expansion in key global markets, and we expect progress towards regulatory approvals for leniolisib in Europe, the UK, Canada, Australia and Israel.

We will initiate and advance a Phase II clinical trial for leniolisib in PIDs with immune dysregulation linked to PI3K-delta signaling to significantly expand the long-term commercial potential of leniolisib, and we continue to focus on potential acquisitions and in-licensing of clinical stage opportunities in rare diseases, in therapeutic areas like immunology, hematology, respiratory and gastroenterology. And that is to further leverage our commercial infrastructure globally.

Now with that, I would like to move on to the next slide and open up for Q&A and hand over to the Operator. Thank you.