MITHRA PHARMACEUTICA

MITRA
Temps réel Euronext Bruxelles - 12:52:53 09/02/2023
2.880 EUR -1.37%

Transcript : Mithra Pharmaceuticals SA, H1 2022 Earnings Call, Sep 23, 2022

23/09/2022 | 09:00

Presentation Operator Message
Operator (Operator)

Hello, and welcome to the Mithra half year results 2022 call. My name is Rian, and I'll be your coordinator for today's event. [Operator Instructions]

I'll now hand you over to your host, Benoit Mathieu to begin today's conference. Thank you.

Presenter Speech
Benoit Mathieu (Executives)

Good morning, ladies and gentlemen. My name is Benoit Mathieu, Group Investor Relations Manager at Mithra. Thank you all for dialing into this conference call and for being with us for the presentation of our half year results 2022. I am joined in the room by our CEO, Mr. Leon Van Rompay; Mr. Christophe Marechal, CFO; Mr. Graham Dixon, CEO -- CSO, sorry; and Mr. Jean-Manuel Fontaine, Chief Commercial Officer.

This webcast is recorded and will be accessible later today on Mithra's website. I would like to remind you that this webcast is covered by the disclaimer on Slide 2 of the presentation. The format of today's call will be as follows. A brief introduction will be given by Leon before handing over to Christophe for the explanation of the half year results. Graham will provide an update of our development pipeline, and then Jean-Manuel will then address the commercialization update. We will then open the lines for a Q&A session.

Thank you very much, and I would like to now hand over to Leon.

Presenter Speech
Leon Van Rompay (Executives)

Good morning, ladies and gentlemen. Thank you all for dialing into this conference call and for being with us this morning. So far, this year has been very busy for Mithra with several operational milestones that we achieved. Remember, positive efficacy results on Donesta. This summer, we announced 2 operational milestones. The first launch of Nextstellis in the American -- first, the launch of the Nextstellis in the American -- in the Australian market. And of course, the approval of the Food and Drug Administration for a contraceptive vaginal ring, Myring or generic of NuvaRing. As a consequence, Mithra will receive a milestone payment of EUR 6 million in the next coming days and EUR 1.5 million upon commercialization foreseen early next year. However, these positive achievements have not been reflected in the share price evolution. Overall, we are disappointed with the current share price. We remain focused in order to deliver our promises and create value for all our shareholders.

Let's start with Donesta. The recruitment of the 300 additional non-hysterectomized patients in the European safety study has somewhat been disturbed by geopolitical events. However, our team succeeded in implementing a mitigation plan by shifting sites from Russia to other locations such as Poland, U.K., Czech Republic, Spain, United States and Canada. Graham will provide more details during the call with respect to the time lines.

Early this year, we announced a positive top line efficacy result of the Phase III of Donesta. This news has been the trigger to speed up our discussions with interested partners for a license and supply agreement. These discussions are progressing according to our plans. Following the reception of several commercial offers, we expect negotiation to accelerate in the next couple of weeks with an agreement anticipated during the fourth quarter of '22.

Mithra is not only about contraceptive pill, Estelle, nor the treatment of menopausal symptoms with Donesta, we have diversified pipeline around a unique molecule, estetrol, giving multiple opportunities and enabling us and to prepare the future of our company.

In the first half of the year, we conducted preclinical study in vitro and in vivo program demonstrating the efficacy of estetrol to promote wound healing. Moreover, we launched the clinical program on neonatal hypoxic-ischemic encephalopathy, a life-threatening form of neonatal asphyxia. Graham will dive into more details about those 2 indications in his section.

Last year, Mithra acquired the rights relating to 2 developing programs led by Beijing company BCI pharma to -- on innovative kinase inhibitors. And over the last few months, BCI identified 4 distinct chemical series of selective inhibitors showing very -- showing promising profiles in the range of in vitro tests.

A small number of the most promising compounds are now being evaluated in the range of in vivo models in order to demonstrate proof of concept by the end of this year with additional focus in cancer and endometriosis. Several collaborations have been signed with new partners for the third-party service offered by our CDMO, including MedinCell for the development of injectable products for malaria and transplant rejection.

I now will hand over to Christophe for the summary of the financial results. Thank you.

Presenter Speech
Christophe Maréchal (Executives)

Good morning, everyone. I will start this presentation with a quick overview of the financial highlights and then explain more in details the net cash evolution as well as the different financial facilities that had been used during the first half of 2022. I will finally explain our financial strategy for months to come.

During the first half of 2022, revenues amounted to EUR 11.4 million compared to EUR 12.1 million for the first half of 2021. Revenues were largely driven by Estelle as it was the case last year. Product sales of Estelle reached EUR 3.7 million. We also recognized under IFRS 15 an out-licensing revenues of EUR 4 million from the license and supply agreement concluded with our partner, Gedeon Richter, for commercialization of Estelle in Latin America as these revenues were considered as highly probable following the submission of the regulatory fines.

On top of this, EUR 2.4 million are coming from the sales of generic product, including Myring sales in Europe and the rest of the world. Our CDMO also contributed to revenues for approximately EUR 1 million. Revenues generated by the Estelle sales are slightly lower in H1 2022 compared to H1 last year. This is mainly explained by the fact that our partners built up their safety stock ahead of the commercialization.

As you know, the ramp-up has been slower than expected and, therefore, partners have used most of their stock accumulated in 2021 during the first half year of the year, generating less sales at Mithra's level. EBITDA is at minus EUR 21.7 million compared to minus EUR 36.8 million for the first half of 2022. This is mainly explained by R&D expenses, which have been highly monitored with the objective to shift as much as we could in 2023, while securing all time lines of development.

Under management figures, which have the objective to go through the P&L down to the EBITDA, so excluding depreciation and amortization, R&D expenses weighted for minus EUR 22.7 million in H1 '22, so minus EUR 27.5 million with depreciation. Those expenses are expected to catch up and accelerate a little bit in the second half of 2022.

The increase of the general and administrative and selling expenses is mainly attributable to the impact of inflation on salaries and also some insurance cost increases. The net loss for the period stands at minus EUR 31.2 million compared to minus EUR 54.9 million in 2021. This is a loss but certainly lower than what was expected by the sell-side analysts. And as first and already explained, we managed to delay expenses to be incurred in R&D while not delaying any R&D time line. And second, we had a positive impact of the change in fair value of the contingent consideration payable.

Indeed, considering the current economic environment, we took a conservative approach by updating the discount rate, or WACC, which has been increased due to value of liabilities on the balance sheet. This review led to a decrease in the fair value of installment due to former Uteron owners.

Our cash position stands at EUR 29.3 million at the end of the period and will provide you more details on the next slide.

Mithra started the year with a cash position of EUR 32.9 million and ended up the period with a cash position of EUR 29.3 million, which means that the cash used in operating and investing activities, along with the financial charges was compensated by our financing activities. In the first half of the year, we used more or less to following sources of financing. EUR 15 million under the government tax facility, which is an equity line, EUR 12.1 million under the FDA agreement, EUR 23.5 million collected through a private placement realized in June.

As for our cash flow statement, you can see that the operating activities accounted for minus EUR 33.2 million over H1, and this amount is made of mainly R&D expenses. There is also an impact of approximately minus EUR 5 million related to the swaps of FX forward transactions maturing in 2022. This FX forward had been transacted in 2020 to hedge the sales-related milestones from main pharma contract of Estelle but needed to be aligned and swapped to match with the expected settlement of the underlying hedged items.

Without going into too much details, when you swap, there is always cash settlement, which reflects the difference between the FX rates in the near lack of the swaps and the FX rates of the maturing FX forward negotiated in 2020. As the U.S. dollar has strongly strengthened against the euro since 2020, we had incurred a net settlement of EUR 5 million in H1 when swapping.

It is important to mention that the underlying hedged item, so in U.S. dollar have, of course, a higher value in equivalent to euro, but this will be only reflected in the cash flow of the company at the time of settlement. Investing activities, although largely below 2021, still impacted negatively our cash position. Among the minus EUR 12 million, EUR 8 million are related to technical transfer on the E4 Synthesis pathway, which has been accounted as an acquisition of intangible assets so not impacting the P&L.

Then in the cash flows from financing activities, the plus [ EUR 41-point million ] is the net of loan repayment and interest for an amount of EUR 9.5 million, of which EUR 4.8 million correspond to interest paid on the '25 -- on the convertible bond maturing in 2025 and several equity transactions, which I will immediately refer to in the next slide.

Moving on to the next slide. So you can see the several financing facilities used in the first half of 2022. During this period, we partially used our facilities with Goldman Sachs for an amount of EUR 15 million, LDA capital for an amount of EUR 12 million, we also proceeded to a capital increase with the pipe for EUR 23.5 million at the end of June 2022. We still have the option to use our equity line with LDA capital for an amount of EUR 54 million still available and Goldman Sachs International for an amount of EUR 85 million. The GSI facility has, of course, a condition of EUR 10 on the Mithra's stock, which is also a reason why we did the pipe and the Highbridge, Whitebox loan post-June closing.

As just explained, early August, we have secured a loan agreement with Highbridge and Whitebox, which contains some conversion features. We already drawn the first tranche of EUR 50 million and 2 tranches are still available for a total amount of EUR 50 million. Part of the proceeds has been used to buy back EUR 34 million of the convertible bond maturing in 2025. We've bought back this position with a discount of 15%.

As of today, both lenders already started to convert their loans into shares, which is, of course, deleveraging our balance sheet. Finally, Mayne Pharma has its full year 2022 earnings call end of August. During this call, Mayne announced that following the sale of their CDMO, the company will proceed to a capital return to shareholders, possibly in the form of a dividend for a total amount of circa AUD 100 million. We remind that Mithra holds 9.6% of shares in Mayne Pharma.

Presenter Speech
Graham Dixon (Executives)

Thank you, Christophe, and good morning, everybody. I'd like to give you an overview of our current R&D activities. On the first slide, it is the activities outside of Donesta, which I'll cover in subsequent slides in more detail. Estelle, despite being approved, we still have some post-approval commitments. The major one of those is a so-called PASS study. This is a safety study to characterize the effect on venous thromboembolic events. It's required by the regulatory authorities. We've been in discussions for some time with the regulatory authorities, and we're now in a position to submit the final protocols for this study during this quarter. We anticipate that the EMA study will start either later this year or early next year, and the FDA component of the study will start in Q1 next year.

If I now move to neuroprotection, which is again with E4, but with an IV formulation. We actually embarked on our first-in-man study in Q2 this year. This is a study we have to do in order to get through to our final patient population, which is neonates as Leon referred to in his introduction. The objective of this study is to characterize the safety, tolerability and PK of this novel formulation of E4.

I'd like to remind you that we have orphan designation in neonatal hypoxic-ischemic encephalopathy both with the U.S. and with Europe. And we will also, in the coming months, apply for a pediatric rare disease voucher, which actually at the time of approval will give us an accelerated approval pathway of 6 months in the U.S.

If I now move to wound healing, again with E4 at this time with a topical formulation, we have been doing a comprehensive preclinical program over the past 12 months both in vitro and in vivo. This is both to give us a better understanding of the biology of the effect of E4 on wound healing but also to generate new intellectual property. And we have identified several aspects that we will be filing new intellectual property on in the coming months that obviously can then give us, if granted, 20 years of cover. So the patent protection in the wound healing is very significant.

We've already demonstrated in the vitro test that E4 can promote wound healing, and it supports its use potentially in both acute and chronic wounds. For example, we show that E4 stimulates the proliferation of the relevant cell types in the skin. It reduces inflammation, which is a major issue to delayed wound healing. And we've shown in an industry standard scratch test that we actually accelerate wound closure, so very promising in vitro data. We currently have an in vivo proof of concept ongoing, which I'm hoping we can report to you in the coming weeks or months.

Zoreline is part of our complex therapeutics portfolio. We are in the process of finalizing the formulation to go into the clinic. We have optimized our in vitro drug release testing and our in vivo PK in rabbit model, preclinical model, and we've been able to characterize the profiles of our formulations in comparison to Zoladex. We have now several formulations in the animal model. If one of those is adequate, then we anticipate starting a clinical study next year, which will then leave us on track to deliver an approval in 2025 with a 9-month or 12-month approval process depending on the European authorities.

If I now move on the next slide to Donesta. Obviously, a major focus of the R&D activities. We announced positive top line efficacy data earlier this year. The studies continue as we've previously said, to get the full data set and particularly the safety results. The both studies are on track. The C302, so the U.S. version of the study. All patients have now completed treatment. We expect the last patient, last visit in this month, which then leaves us on track to deliver the data by the end of this year and then to have a market authorization in the U.S. first half of 2024.

The European equivalent of the study, we are recruiting 300 additional non-hysterectomized patients, they will be treated for 1 year. We anticipate that we will complete recruitment by the end of this year that will give us the results by the end of 2023, and we are on track to have an approval in the second half of 2024 in Europe. We also, in the last couple of weeks, had the regular Data Safety Monitoring Board, which is an independent committee to oversee the safety of the patients, women in our studies. On this occasion as previously, we had a positive opinion from the committee to continue without any modifications, which gives us continued evidence for the safety profile that we anticipate. So very good news that we continue to get that from the independent committee.

We previously announced that we would do a Phase III program in VVA. We consulted both the FDA and the EMA about our plans. The original intention was to be able to do the study so we could submit at the same time as the major indication in vasomotor symptoms or hot flushes. The feedback from the authorities was that we could do this, but it would need 2 large Phase IIIs in order to do this. If we wait to do it as a supplementary indication, we are likely to be able to get away with only 1 Phase III study, which makes a huge difference in obviously, the budget needed. So what we've decided to do is to defer our approach in VVA to a later date and focus on some more interesting symptoms that women find bothersome during the menopause. So for example, female sexual arousal disorder, we will conduct a Phase III -- a Phase II, sorry, in that indication, as well as Phase II proof-of-concepts in both skin health and in hair quality. Those studies will be started by the end of this year.

So on the next slide, really, this is a summary of the Donesta efficacy program shall we say. We have the Phase III program that I've mentioned that's ongoing and we'll complete either end of this year or second half of next year, depending on the U.S. or the European study. And we have the additional Phase IIs, which will start before the end of this year, and we'll provide data around the year of launch to be published.

If any of the studies show positive outcomes, we will design Phase III studies to perform with the intent of achieving either a claim or an indication in the product label.

So this slide really summarizes the portfolio. As you can see, it's broad and diversified pipeline. We have balanced risks, both across NCE developments and also the generics or the complex therapeutics. But even in the E4 projects, of course, these represent minimal risk as we already have E4 on the market as in our oral contraceptive. We have not mentioned on this slide, but as Leon mentioned, a really exciting new NCE project with BCI Pharma. This is for another innovative Tyrosine kinase inhibitors, and this is for several women's health indications. We anticipate that we will have proof-of-concept in cancer and hopefully, endometriosis by the end of this year.

With that, I'd like to hand over to Jean-Manuel for the commercial updates.

Presenter Speech
Jean-Manuel Fontaine (Executives)

Thank you, Graham, and good morning, everyone. I will start this commercial update with Estelle in the United States and Europe. The largest territories where the product is commercialized, respectively, under the brand names Nextstellis and DROVELIS. I will then provide a short update on Myring in the United States.

If we move on to the next slide, we can start with our contraceptive product, Estelle. It's been commercialized in 2021, and all major territories of the world are today covered by license and supply agreements. In the first half of 2022, a second series of EU countries have launched, including Spain, the Netherlands and Portugal. Switzerland has launched in July as well as Australia, for which early feedback shows strong interest for Nextstellis and E4 in particular. U.K. is scheduled later this year. Brazil regulatory scheduled in the second half of 2022 for commercialization in 2023. The larger markets represents the largest South American market with the value close to EUR 430 million.

If we move to the next slide and to our partner operational highlights, we can have a look at the United States, the largest combined hormonal contraceptive market estimated today at about USD 3.9 billion annually. The commercialization of Nextstellis has entered its second year and has seen a positive acceleration of an Nextstellis uptake with all performance metrics trending favorably and translating now into sales. On the right, you can see the sales levels of the key combined hormonal contraceptives. That's quite interesting because it gives you an outlook in terms of the next competitors we will pass.

If we move on to the next slide, we have about 70,000 cycles that have been dispensed and sold in the first half of 2022. This is about sixfold more than the previous semester, H2 2021. 4,760 writers of Nextstellis since launch in the top decile prescriber base, and prescribers are returning as they are having a positive experience with Nextstellis. 85% of those prescribers who have prescribed in the previous semester are returning in H1 2022.

Market access commercial coverage is almost at par with competition. Together with the levels of product awareness and top-decile prescribers writing, the direct-to-consumer campaign has been launched in July, together with the strategic collaboration with GoodRx, a well-known health hub mobile app that will expand further the reach to consumers.

In addition, Nextstellis uniqueness, thanks to the first native and selective estrogen E4 has been nominated for the 2022 Prix Galien USA Award for the best pharmaceutical agent. As a result of this positive sales trajectory, Mayne, our partner in the United States has confirmed their target of 350,000 cycles dispense sold in their time line going from July 2022 to June 2023. This sets a strong sales evolution trajectory for the brand.

If we move to the next slide, I would like to take a few minutes to come back to the notion of commercial coverage in the United States, which is so critical to determine access to the medicine for women. This is a notable difference between the United States and Europe and the fundamental element to explain the difference and ramp-up in the first year.

Commercial coverage of contraceptive product is key to ensure products prescribed by the doctors are available in the pharmacies and finally, dispensed to women and translated into sales. Whereas in Europe, most contraceptives are available in the pharmacies, the situation in the United States requires that private payers and pharmacies also known as pharmacy benefit managers reference the products on the formulary and with a limited to no restriction to access and also at an affordable co-pay for the patient, for the women.

Classically, this process takes about a year from launch to allow new entrants to be on par with competition and manufacturers usually engaged in couponing to women to limit their co-pay and support the product uptake. And finally, the brand loyalty during this period. Because of this lengthy process, most prescriptions written in the commodity markets are confronted with a high abandonment rate in the beginning with low dispensing levels, hampering the product uptake and revenue progression in the first 12 months.

But today, the dispensing levels, of course, can still improve, but they have for Nextstellis, improved by 60% since February, and they are reaching a dispensing level end of June of about 83%, meaning that more 8 prescriptions out of 10 are finally dispensed and translate into sales.

Recently, the government has also been seeking to enforce the Affordable Care Act to ensure greater access to contraception with limited co-pay to patients. The U.S. 3 agencies, Department of Labor, Health and Human Services, and Treasury have issued a new guidance to ensure contraception is guaranteed to all and at no additional cost. The willingness of the U.S. administration irrespective of the political situation to support nationwide access at no additional cost is likely to impact favorably Nextstellis product uptake in 2023.

If we move on to the next slide, we will move on to Europe, where Estelle is commercialized under the brand name DROVELIS. Gedeon Richter, our partner in charge of Estelle's distribution in Europe has already launched our innovative combined oral contraceptive in several key countries like Germany, Poland, France, Italy, together with smaller EU countries like Hungary, Slovakia and also Austria. Spain, Portugal and Czech have launched in H1 2022 and Switzerland has launched in July, and U.K. is expected later this year. The European sales levels in H1 compared to H2 2021, have tripled to reach about -- to reach EUR 5.7 million.

If we move on to the next slide, Italy, Germany and Poland are driving the sales so far. Italy has the best oral contraceptive launch and has in Q2, launched a digital educational campaign targeting women looking for ancestral contraception. The curve for France is different because they are constrained by a market access situation placing the product in as a second-line intention and not reimbursed. Nevertheless, Richter has confirmed their commercial outlook for the end of the year. So confirming this positive sales trajectory.

If we move on to my next slide on Myring, we are pleased that HALOETTE, the Mithra generic version of NuvaRing in the United States, has been improved, as mentioned before, by the FDA in August 2022. The market remains significant, representing about USD 580 million, which is about 6 million rings. As a result of the FDA approval, 6 million are to be received and an additional milestone will be -- payment will be received upon commercialization. Thank you.

Presenter Speech
Benoit Mathieu (Executives)

Thank you very much, Jean-Manuel. And we would like now to open the lines for the Q&A session.

Question and Answer Operator Message
Operator (Operator)

[Operator Instructions] So our first question comes from Laura Roba from Degroof Petercam.

Question
Laura Roba (Analysts)

First question on Estelle, how do you see Estelle revenue evolving going forward? Because you mentioned that sales in Europe should triple in H2. But what are your expectation in terms of revenue for Mithra there?

Answer
Jean-Michel Foidart (Executives)

Okay. So I probably will start with this question, and then I will have probably Christophe jump in if desired. So I mentioned that the level of sales tripled in the first semester of H1 2022. And the Richter has communicated their commercial outlook for 2022, which is EUR 50 million, and they are on track to reach that commercial outlook. So half 2022, they are on track to reach that objective. Am I answering your question?

Question
Laura Roba (Analysts)

Yes. And then in terms of revenue for Mithra?

Answer
Jean-Michel Foidart (Executives)

Well, I can't communicate our numbers, but I can tell you that, obviously, there are a few milestones -- sales-related milestones and royalties that are expected this year and the years ahead when we do have sales royalties on all sales. So obviously, with the sales increasing, this is going to increase. Providing the precise revenue on 2023 and beyond, I leave that maybe to Christophe.

Answer
Christophe Maréchal (Executives)

The only thing I can say, as explained in my presentation, is that now there's a stock that has been used. And of course, it is generating revenues at the end of the partners. And so when they generate revenues, we get royalties. So a percentage that applies on the net sales of the partner. So it's going to be increasing, of course. As Jean-Manuel was explaining you that there's a ramp-up of the sales from the partner's perspective. But of course, as I was explaining that they had a stock and they were for now utilizing that stock. Once they will reorder, which is, of course, what's going to happen in H2 but also in 2023, it's going to be generating, let's say, revenues. And the more we will have countries ramping up -- and we are, as you saw, announcing progressively, let's say, new launches, new market approval.

So all this will continue to increase the revenues going forward. But 2023 was to be a year of transition on Estelle, so it's going to be the year where we're going to generate tens of millions of euro from Estelle. But certainly, it's going to be improving compared to what we've been posting in H1, and we'll be posting in H2 for the full year 2022.

Question
Laura Roba (Analysts)

Okay. Very clear. And then a second question, could you provide a bit more granularity on the evolution of the OpEx and the catch-up in R&D in H2? Could you maybe also provide us with the share of wages in OpEx? Just trying to figure out a bit the impact of inflation there?

Answer
Christophe Maréchal (Executives)

Well, what I can say is that we said that R&D would -- has weighted for EUR 27 million in H1. It's going to be higher in H2. Let's say we do expect the operational expenditures from R&D, if we incorporate depreciation to reach something -- to reach in H2, an amount of EUR 40 million. So that would lead us some total R&D costs over the full year 2022, something between EUR 65 million to EUR 67 million in total with depreciation included.

This is moving. This is -- as you know, we've said that we are monitoring all these R&D expenses. It's all about also managing the cash of the company until we go for the Donesta deal. So we are safeguarding the cash because the cash is always key for positioning yourself in a negotiation. And so what we look is how we can improve the cash position while not jeopardizing any R&D development.

Question and Answer Operator Message
Operator (Operator)

Our next question comes from Sushila Hernandez from Kempen & Co.

Question
Sushila Hernandez (Analysts)

I just have a question on the licensing deal for Donesta. Are you still expecting one global deal? Or are you also considering some more regional deals?

Answer
Leon Van Rompay (Executives)

We are expecting the best deals possible, whether it's a global deal or several local deals. We have -- everything is open. The dark room is open. We are discussing with different partners and we'd like to take the best out of the -- for the shareholders. That's clear.

Question
Sushila Hernandez (Analysts)

Okay. And then regarding the 3 additional Donesta studies, are you still budgeting EUR 20 million for these 3 studies?

Answer
Graham Dixon (Executives)

We were still in the final discussions with the CROs, but it certainly will be within that budget. So I'm hoping it will be less because we've replaced a big Phase III with 3 Phase IIs.

Question
Sushila Hernandez (Analysts)

Okay. And then just a final question on the Myring. Congratulations on the FDA approval. Could you remind us again what the financial terms are for the supply and licensing deal with Mayne Pharma next to the milestone for approval and launch?

Answer
Jean-Manuel Fontaine (Executives)

Upon market -- I just wanted to say that upon market authorization, we're receiving EUR 6 million and an additional EUR 1.6 million upon commercialization. And then there's supply revenue.

Question
Sushila Hernandez (Analysts)

And are you then also still expecting some sales milestones?

Answer
Christophe Maréchal (Executives)

No. After this total, EUR 7.6 million, we are entering the launch, and so we're going to get supply revenues from the Myring. So you don't have any more additional licensing milestones expected. So there's no sales-related licensing milestones on Myring, while you have such type of sales-related milestones when you talk about Estelle. But on Myring is different. Once we launch, we move to the supply revenues.

Question and Answer Operator Message
Operator (Operator)

Our next question comes from Jeroen Van den Bossche from KBCS.

Question
Jeroen Van den Bossche (Analysts)

Yes. Could you give some more color as to how you look at financing beyond year-end '22, what will be the first line out of what I would describe as pretty complex financing structure going forward that you will tackle?

Answer
Christophe Maréchal (Executives)

Well, of course, my job as the CFO is to be prepared for all scenarios. And so I'm having everyday day-to-day contract with plenty of, let's say, potential financing providers to the company, in the form of debt, in the form of non-dilutive debt also potentially financing against royalties. So my job is to be proactive and be ready for -- to finance the R&D development and so create additional layers of value for the shareholders. But of course, the Donesta transaction and the amount of licensing that's going to be generated from that deal will also give a route -- a way to finance the company.

And so -- but my job is to be prepared. And the good thing is that we see a lot of interest to a company and help financing the company if we need so.

Question
Jeroen Van den Bossche (Analysts)

And would you -- because you're alluding to signing the deal by year-end. Would you believe that it's still possible to actually have cash on balance from that deal by year-end? Or will you -- well, I know it's probably early to say, but are you also preparing for, let's say, using the bridge type financing to reach that goal? Or is it basically still possible to get the money on the account by the end of the year?

Answer
Christophe Maréchal (Executives)

It's possible that once you sign, the payment upfronts are done very close to the execution of the commercial contract. So it's, of course, still possible to have the cash at the end of the year. It's clear that once you have a big deal that is signed having the cash at year-end or just at the beginning of the year, it doesn't make a big difference to the company because we have the financing means to company the Donesta journey. And do remind that, first, there's no obligation to use the facilities we have and the facilities such as the equity line or the loan from Highbridge and Whitebox who are attached with conversion features. So of course, dilution can be -- we are not forced to use these facilities, and we have alternative, let's say, solutions than using these facilities, we will do so.

I mean do remind that all facilities we have, have always a possibility for Mithra to prepay the loans in cash instead and so avoid conversions into shares. So this is the main concern of the company. So it looks complex, but the reason why we have structured always this type of financing is to find a solution to avoid as much as we can dilution and so protect the interest of the shareholders. And yes, it needs a bit of complexity in the way you structure this kind of financing. Otherwise, you go for equity transaction and immediate dilution, which we try to avoid. And yes, we -- of course, if you have, of course, a deal -- major deals announced by the end of the year, we will certainly work on finding solutions to avoid diluting more the shareholders of Mithra. That's going to be the objective of the management. But if needed, we have these facilities which are available. And of course, you can imagine that we don't structure this kind of financing not to use them. So this is available.

Question and Answer Operator Message
Operator (Operator)

So our final question comes from the line of Clément Buffet. [Operator Instructions]

Sorry. Benoit, just to let you know that, that question has dropped off. So we do have a question now in the queue from Maxime Stranart from ING.

Question
Maxime Stranart (Analysts)

If I may, I would like to go back to Laura's questions on the potential impact in terms of sales especially in the U.S. of the order that Mayne has committed to. Could you shed some light on what do you expect product revenues in the second half of 2022 compared to the first half? And obviously, if you could share also a bit more well light again on what do you expect going through with the contracts with Mayne. That would be all for me.

Answer
Jean-Manuel Fontaine (Executives)

Well, if I can just start answering this question. So Mayne CEO during their results did share their vision as the fourth generic to enter the market on the volume of rings that they would be able to capture, which is more in the range of the [ 7% to 10% ]. And obviously, you have the size of the market. So you can appreciate the business, this is going to represent. So that's the first part of the question. I think I'm not sure I understood your question on Estelle -- Estelle's for the United States. If there was a question or it was only about Myring.

Question
Maxime Stranart (Analysts)

No, no, it was on Estelle mainly. So looking at the committed order of 250,000 cycle for the June to June period, I would like to understand how this will translate in revenues from Mithra a bit better? And also basically, what do you expect that order to grow in the upcoming years, just to have a better view on the direction of travel, let's say, for the sales performance in the U.S....

Answer
Jean-Manuel Fontaine (Executives)

Yes, yes, yes, of course. So first of all, having those different metrics supporting the sales with the level of awareness, the prescriber base, the commercial coverage that allowed to start the launch of the direct-to-consumer campaign. This is -- this has enabled Mayne to confirm their sales trajectory for July 2023. And so of course, when we have this confirmation of this outlook by July -- June 2023, this is looking good when we look at the acceleration of their sales in their first semester now and the confirmation of that number by June of next year, this is setting the course for an accelerated growth trajectory that is nonlinear. So this is looking very good.

You need to also appreciate that with the direct-to-consumer campaign when a woman or a patient in general requests a brand to the physician, everything being equal aside, then in 8 cases out of 10, it is granted to the consumer. So this -- the consumer campaign is going to be a strong accelerator. So all of these elements are looking good, are in line with the initial PRs for the agreement with Mayne confirming the peak sales, in terms of volume, in terms of cycles. And if we look at our revenue stream with Mayne, it is a mix of supply, sales-related milestones and royalties.

And so these are all going to be, I would say, further ignited and amplified with the ramp-up of the sales trajectory. And if you go back to the slide deck that I showed you today and you look at the key hormonal contraceptives, key -- branded hormonal contraceptives in the market in the U.S. And if you look at Lolo aside because that has been a product with an extremely long legacy. But just look at some of the products like Slim, which have been launched 3 years ago.

Well, that sales trajectory we're seeing today is making us very confident. We will pass most of those definitely third and second-line competitors in the short to midterm and at a good pace. I can't commit too much. I don't want to say too much, but I'm excited. Over the phone, it's not very easy to see.

Question
Maxime Stranart (Analysts)

Just if I may, I've follow-up, like doing the quick math on the 250,000 cycle. So basically let's do it simply EUR 70 million in sales June to June. You take 40%. So basically, should we see something like around EUR 25 million, EUR 30 million in sales for the June to June period in the U.S. that's something like you would deem reasonable?

Answer
Jean-Manuel Fontaine (Executives)

So you're talking about 150,000 cycles by the year -- by the end of the year in 2022. Is that what you said?

Question
Maxime Stranart (Analysts)

Yes.

Answer
Jean-Manuel Fontaine (Executives)

That's definitely not the number that I find worrying.

Question
Maxime Stranart (Analysts)

Okay. I wasn't too interested during the June to June period. So basically, if we take that, we take $200 per cycle basically implies, yes, EUR 70 million contract out of which you take roughly 50% -- 40%, so basically implying that yes, your revenues on that contract to be around EUR 25 million to EUR 30 million. That was basically my question. If you could share views on that.

Answer
Jean-Manuel Fontaine (Executives)

Okay. So I don't want to comment on the value, okay? Because then there we're entering into confidential information. I just I could just tell you that it's going to be a mix of supplier royalty and milestone. But what I can tell you is that the commercial outlook provided by Mayne is looking good and it will support our revenue stream.

And so if you look at that projection of Mayne between July '22, June '23, and you look at how it looks like until the end of the year 2022 and what it could look like for 2023, these are relatively good numbers.

Question
Maxime Stranart (Analysts)

Pretty clear.

Question and Answer Operator Message
Operator (Operator)

Our next question comes from the line of Clément Bassat from Portzamparc.

Question
Clément Bassat (Analysts)

Clément Bassat, Portzamparc. I have 2 questions. The first about Estelle, could you please provide more colors about the coverage in terms of planning both in the U.S. and in Europe? Also who, Mayne or Mithra will assume the drug discount in the U.S.? And secondly, about your funding, when you claimed the first tranche of the new convertible at 7.5%, you prepay a portion of the old convertible. And you said in the press release, it's entering a request made by several investors. So could you please advise us if the second and third tranche will be conditioned to further prepayment?

Answer
Leon Van Rompay (Executives)

So I would say -- Jean, go ahead.

Answer
Jean-Manuel Fontaine (Executives)

Go ahead. Yes, I'm sorry, just because I think your answer might be more elaborate than mine. So briefly for the difference in market access coverage in the United States and Europe. So it's very different. In Europe, the products are available in all the pharmacies. And in some countries, they are reimbursed into a certain age. But largely, the business uptake in Europe is largely uncorrelated in contraception to reimbursement, okay? So that is not a concern.

For the U.S., it's very different because not only to be listed in the pharmacies, we need to enter into negotiation with the pharmacy change. So that takes time, because you don't want to give up -- the manufacturer doesn't want to give away too much money. And then the pharmacy chain says, okay, you give me this rebate. I put you on the formulary. But I also want to probably limit the budget impact. So I'm really going to give some restriction before the patients can use the product as a first line.

So what you need during the first year, this is a very lengthy process to get the product, one, listed on the formulary; and two, at a relatively -- on the formulary with limited to no restriction. So no restriction means basically that the patient comes, gets into the pharmacy, asks for the product and gets the product and walks away, okay? With restriction, it is that maybe the plan will say, "Oh, you can have it, your plan has referenced it, but you probably need to start for 3 months with another generic product. And if you're unhappy, then in 3 months, you come back and you will get it." So it's a hurdle.

So for the moment, they are 55% unrestricted. If you combine the unrestricted and restricted, but still, it means that they are both referenced, you are up to 70%. So by June of '22, Mayne tended to be around 65% unrestricted, they are at 55% unrestricted. It's slightly under what they anticipated. Nevertheless, considering they have a 70% total commercial coverage, they were pleased to kick off their direct-to-consumer campaign. So they are relatively confident with the progression.

So your second part of your question was, okay. If the -- how do you cover up in the first year to make sure the patient gets access to the medicine? Well, in the beginning, if there is a higher co-pay for the patient because the plan is not already allocated funding -- funding, then the company, the manufacturer does issue coupons, which, of course, impacts their revenue and then consequently impacts also our revenue.

So for a mature product, you go to 45%, 55% gross to net ratio. So the manufacturer commercializing the brand between the gross and the net sales with all the discounts et cetera, the gross to net is 40% to 55%. And usually, in the first year of launch, it is around the 60% to 70%, okay? It's not through the whole year, but it can go up to 70% in the first year to take into account this couponing, which is so critical to hook and the customers and make sure they stay loyal to the brand.

Answer
Christophe Maréchal (Executives)

So the question on the Highbridge, Whitebox loan. So as you clearly indicated, so we've used the first tranche of EUR 50 million to buy back EUR 34 million of the convertible loan -- bond of maturing in 2025. So we bought this EUR 34 million at the discount and so had to paid EUR 29 million to buy these bonds. So we've used EUR 29 million out of the first tranche of the EUR 50 million, leaving EUR 21 million fresh cash to the company, which has been injected, of course, in the operations.

And so for the next 2 tranches of 2 -- twice the EUR 25 million, this EUR 25 million if used would be injected in the operations. So we -- there's -- we will not use that for buying back of the bonds. But of course, I'm not saying that we are not thinking of a further, let's say, buyback transaction in the future, but certainly not using these 2 tranches of the Highbridge, Whitebox facilities.

Of course, looking at the potential transaction buyback transaction of bonds is always feasible. I mean, we are there to be opportunistic sometimes. So if we see a good occasion to do so in the future, we might be doing. But for now, there's no plan to do.

Question
Clément Bassat (Analysts)

Okay. There is no mandatory -- there is nothing mandatory to have...

Answer
Christophe Maréchal (Executives)

No, no. Absolutely. And to be honest, there was nothing mandatory. So we brought the idea of buying back the position, so the full position of Highbridge, Whitebox in the '25, so the convertible bond expiring in 2025 to them. So they've not imposed that we should be entering into buying back some bonds. But the transaction was either EUR 70 million or EUR 75 million or was increased to EUR 100 million, and we decided to propose an increase to EUR 100 million and then enter that strategy of buying back their position.

But of course, these lenders are not providing, let's say, financing to buyback other, let's say, but orders position. So it's clear that for now the 2 accesses to the next tranches twice EUR 25 million would not be used to buyback bonds. And then we'll see if the cash of the company and all the other transactions that you would be generating cash to the company might open the door to further discussions. But for now, we don't discuss.

Question and Answer Operator Message
Operator (Operator)

We currently have no further questions. [Operator Instructions] We have no further questions coming through. So I'll hand you back over to your host for any closing remarks.

Answer
Benoit Mathieu (Executives)

Thank you very much for being with us today, and we wish you a nice day. Bye.

Question and Answer Operator Message
Operator (Operator)

Thank you for joining today's call. You may now disconnect your lines.

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