Calliditas Therapeutics AB (publ) (NASDAQ:CALT) Q4 2023 Earnings Call Transcript

Calliditas Therapeutics AB (publ) (NASDAQ:CALT) Q4 2023 Earnings Call Transcript February 21, 2024

Calliditas Therapeutics AB (publ) isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to the Calliditas Therapeutics Q4 2023 Report. For the first part of the conference call, the participants will be in listen-only mode. [Operator Instructions] Now I will hand the conference over to the speaker, CEO, Renee Aguiar-Lucander; CFO, Fredrik Johansson; Maria Tornsen, President, North America; and Richard Philipson, CMO. Please go ahead.

Renee Aguiar-Lucander: Thank you very much, and welcome to the Q4 2023 presentation. I’d like to draw your attention first of all to the disclaimer notice as usual, which covers forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, and I refer you to public filings including those containing risk factors. Next page, please. So with regards to Q4, I’d have to start just with some highlights. So obviously the key event for this quarter was on December 20th, the FDA granted us full approval of TARPEYO based on the submission of the full Phase 3 data set which we filed in June of 2023. The Phase 3 trial showed a highly statistically significant outcome on the primary endpoint of eGFR with a p value of less than 0.0001.

Additional supportive data obviously has been presented on conferences and in other places in terms of slope analysis, 3 mils per minute per year in favor of TARPEYO versus placebo, and statistically significant impact on microhematuria biomarkers such as IgA1. The new indication that we have received reflects reduction of loss of kidney function and is now also indicated for the entire IgAN population at risk of disease progression. Other things that occurred in the quarter was obviously we also received conditional approval of Nefecon in China, which was granted in November. And this approval, we believe, provides access to a very large market opportunity, as IgAN is not a rare disease in China but actually fairly common with estimates of up to 5 million patients and we’re very excited about being able to — for our partner Everest Medicines to launch commercially this year.

In the quarter, there was also initiation of a Phase 2 trial in Alport syndrome and this is being done with Setanaxib. This is the lead compound from our pipeline platform consisting of NOX inhibitors, a novel platform with Setanaxib being the first ever candidate in clinical trials. So Alport syndrome is a rare kidney disease and today there are no approved medications, and so we’re very excited about being able to hopefully repeat our success in the IgAN space of being the first company to hopefully bring an approved medication to those patients suffering from this rare disease. Also in the quarter, the USPTO issued a notice of allowance for a new patent covering TARPEYO in the US and that provides a run rate until 2043 and this was issued in December of last year.

We also towards the end of the year refinanced an existing credit line that we had with Athyrium Capital and we added a small amount of additional capital to our balance sheet in terms of just under $20 million. And actually this allowed us to continue to have a interest rate only — interest payment only kind of period for another several years. So if we can turn the page please. So talking a little bit more about the commercial highlights and this obviously on the commercial side, we saw a very strong quarter from TARPEYO, reflected by strong growth both in terms of enrollments and new prescribers. So actually we saw a 51% increase in enrollments over Q3, and new prescribers also grew by over 50%. And we believe that this is reflecting of the growing familiarity with the Phase 3 data, especially the convincing eGFR data, as well as good results and positive patient experiences from nephrologists using the product in real life.

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Q&A Session

Q4, so total revenues of $42.4 million, or SEK452 million, out of which TARPEYO represented $32.6 million, which is a 22% growth over Q3 and more than 100% growth over Q4 2022. We also achieved positive cash flow from operations in Q4 and this was a target we had set for ourselves earlier in the year and we are indeed very excited to have successfully achieved that in the year of 2023. So looking forward a little bit into the first half of 2024, we do expect that there might be some initial disconnect between the new label language and the existing pay rules, which obviously are based on the old label. As I’m sure you understand, this is a new label. This would have to go through the same kind of process in a P&T committees as when we originally launched the product a couple years ago.

And so until those P&T committees have taken place and the rules have been amended following the new label, that we are just seeing that they might take a longer period of time to actually convert enrollments into revenues as there might be some market access friction during that period of time. In terms of the — we’re also obviously we’re very excited about being having TARPEYO being selected as a potential blockbuster drug to watch by Clarivate and we believe that the disease modifying profile of TARPEYO will continue to drive significant demand from nephrologists and become a fundamental part of standard of care in IgAN. We’re also looking forward to actually a potential full EMA approval of Kinpeygo in the first half of this year. And obviously we know that our partner STADA is working on rolling out the product across other kind of geographies in Europe as we speak.

And with regards to other ex-US markets, as I’ve already mentioned, we are looking forward to our partner, Everest Medicines, having rolling out their commercial launch which they have targeted for Q2 of this year. Next page please. So some post-period events. So as I already mentioned, we received a notice of allowance for new patent for TARPEYO. This was subsequently issued and entered into the Orange Book in February of this year. And we believe that this significantly enhances product protection for TARPEYO beyond 2029. We also appointed Maria Tornsen as President, North America. She brings very strong commercial rare disease experience to this position with a background from Shire, Sanofi, Genzyme and Sarepta. We are very excited to welcoming her to the team and I’m sure that you will hear more from her over the year as she settles into the position.

Next page please. So obviously we are covering Q4 but actually 2023 as a whole has really been an incredibly eventful and successful year, which saw so many pivotal events for the company. This obviously included the successful readout of the NefIgArd Phase 3 clinical trial, the filing for approval with both FDA and EMA, the publication of the data in The Lancet, the interim readout of setanaxib data from head and neck cancer where we’re hoping to read out that full data set in the first half of this year. As I mentioned obviously the patents and the China conditional approval and ultimately obviously the full approval of TARPEYO by the FDA. So we are extremely excited of what we have achieved this year and we are looking forward to an equally exciting, if not more exciting, 2024 when we will see we bring — we start the year with a full approval in the IgAN population at risk of disease progression with a new indication reflecting the strong eGFR data.

So with that, I’m going to hand over to Richard Philipson, our CMO.

Richard Philipson: Thanks very much, Renee. So I’d like to take a moment just to look back to the end of last year. And we’re delighted to have had a strong presence at the American Society of Nephrology annual meeting in Philadelphia in November 2023. We had a total of seven posters and an oral presentation. And additionally, a commercially sponsored product [theatre] (ph) presented by Dr. Jim Tumlin. And this together demonstrated our commitment to IgA nephropathy and rare kidney diseases. So I’d now like to take a moment to highlight some of the data and analyses that were presented at ASN. Next slide, please. So firstly, Professor Richard Lafayette presented analyses of the NefIgArd Phase III trial at ASN. The focus of the presentation was the time to 30% reduction in eGFR or kidney failure, which was the secondary endpoint of the trial.

The time to this composite endpoint was significantly delayed with a 55% reduction in the risk of achieving this event in patients treated with Nefecon compared to placebo. It’s particularly noteworthy that this outcome was consistent irrespective of baseline UPCR. Next slide. Another presentation at ASN was a modeled analysis of clinical outcomes in patients in the NefIgArd trial, compared with a matched registry cohort receiving supportive care only. We used the NefIgArd two-year eGFR total slope outcome to calculate the hazard ratio for the clinical outcome of kidney failure, eGFR less than 15 ml per minute, or sustained doubling of serum creatinine using the Inker meta-analysis as reference. This modeled analysis showed a predicted median delay to the clinical outcome of 12.8 years when comparing Nefecon with placebo.

Furthermore, the modeled analysis predicted that approximately 50% fewer patients would reach the clinical outcome within 10 years, again, when comparing Nefecon with placebo. Next slide. We also presented biomarker analyses confirming previous findings from the Phase 2b NefIgArd trial. As you know, circulating immune complexes containing poorly glycosylated IgA, when deposited in the mesangium of the glomerulus, elicit an inflammatory response and drives the decline in kidney function seen in patients with IgA nephropathy. We have shown in samples taken from 160 patients in the NefIgArd trial that Nefecon significantly reduces levels of circulating immune complexes throughout the treatment period compared to placebo, supporting the disease-modifying effect of the treatment.

These biomarker observations are in line with what we saw clinically with respect to microhematuria, where significantly fewer patients treated with Nefecon had microhematuria during observational follow-up compared to patients who had received placebo. So I’d now like to hand over to Maria, our President of North America.

Maria Tornsen: Thank you very much, Richard. Next slide, please. So as Renee mentioned earlier, Q4 represented a very strong performance in terms of enrollment forms. We had our best quarter since launch and saw a significant increase in number of new enrollments received by our patient services hub, TARPEYO Touchpoints. During the quarter, we had 555 new enrollments, bringing the total for 2023 to over 1,700. During the quarter, we also had more than 300 new prescribers who made the decision to prescribe TARPEYO for the first time. And since launch, we now have over 1,600 healthcare providers who have prescribed TARPEYO. As we have communicated in previous quarters, we have very good payer coverage and more than 90% of US lives are covered.

And we are also reporting quarterly net sales of $32.6 million. Next slide, please. The fourth quarter contained some significant events for Calliditas. As noted earlier, on December 20th, we received full approval for TARPEYO from the FDA. Our full approval label reflects the reduction of kidney loss in adults with IgAN at risk of disease progression. TARPEYO is the first and only product to receive this indication for the treatment of IgAN and our new label is based on the data that was published earlier in 2023 in The Lancet. As a reminder, our Phase 3 trial met the primary eGFR endpoint and demonstrated highly statistical significance. Having a full approval label increases our addressable market and in order to meet the growing market opportunity, we also made the decision to expand our commercial and medical organizations in Q3.

Today, we have over 70 rare disease account managers who are responsible for the sales of TARPEYO. And we have also expanded other field functions such as reimbursement managers and thought leading liaisons, bringing our total field-based organization to around 100 employees. Already prior to the full approval, we had 90% payer coverage for TARPEYO, and with the new label in hand, our expanded payer and reimbursement team are engaging with US payers to ensure policies are updated to reflect the new indication. Next slide, please. We are very excited about the opportunity ahead of us. We have already seen the very positive reaction the Phase 3 data has had on nephrologists when introduced to the strong clinical results of TARPEYO. We now have an opportunity to promote our full approval label with an increased presence across sales, reimbursement, marketing and medical affairs.

While we anticipate the strong data to result in more enrollments, we do expect it will take some time for payers to update their policies, so the impact of the new label will be fully realized in the second half of 2024. We are also anticipating a seasonal impact to Q1 due to the open enrollment process, which is typical for this time of the year. In 2024, we are also expecting an update to the KDIGO treatment practice guidelines. These guidelines have the potential to broaden the definition of the at-risk population and also support the use of TARPEYO as the only fully approved drug with impact on eGFR. Today, we are already seeing that the majority of patients who reach nine months treatment continue on TARPEYO. And in the first half of 2024, we’re expecting new data from our Open Label Expansion trial.

The Open Label Expansion data set will provide us with additional clinical information on the potential benefits of a repeat course of nine months of treatment with TARPEYO. And with that, I will hand it over to our CFO, Fredrik Johansson, for the financials.

Fredrik Johansson: Thank you, Maria. And good afternoon and good morning, everyone. I will now present to you the financial overview for the fourth quarter of 2023. And as always, all numbers presented to you are in million SEK unless otherwise stated. To start with, we report SEK451.6 million in net revenues for the quarter. For the same quarter last year, we reported net revenues of SEK429 million. Please note that in the comparison quarter last year, milestones of SEK257.9 million were included, predominantly from the outlicense of Nefecon to Viatris for Japan. For 2023, we report SEK1,206.9 million in net revenues for the full year. For last year, we reported net revenues of SEK802.9 million. TARPEYO net Product Sales for the quarter amounted to SEK347.3 million or $32.6 million, which is a reported increase of 108% from the same quarter previous year and over 20% growth quarter-over-quarter.

For the full year of 2023, TARPEYO net product sales amounted to SEK1.075 billion or $101.4 million, which is a reported increase of 189% from the full year of 2022. The remaining SEK104.3 million in revenues in the quarter are related to our partnerships primarily from milestone fees from Everest Medicines in connection with the China approval but also with contribution from royalties from STADA for Europe. Our total operating expenses for the quarter amounted to SEK387.5 million compared to SEK388.7 million for the same quarter last year. For the full year of ‘23, our total operating expenses amounted to SEK1,519.5 million compared to SEK1,209.6 million for the full year of ‘22. The cost for research and development increased by SEK4.4 million in the quarter to SEK106.7 million compared with SEK102.2 million for the same quarter previous year.

And we continue to primarily invest in our pipeline where we have three expected data readouts this year, including the readout in Head and Neck Phase 2 trial, which is expected in the first half of this year. The cost for sales and marketing increased by SEK6.7 million in the quarter to SEK198.5 million compared to SEK191.9 million for the same quarter previous year. The increase is primarily related to sales and marketing of TARPEYO in the US, where we during the quarter continued our preparations to be prepared for the TARPEYO full approval that we received in the end of the quarter. We are very pleased that we made an operating profit in the quarter of SEK41.8 million compared to SEK32.5 million for the same quarter last year. We are also very pleased that we were cash flow positive from operating activities in the quarter where cash from operating activities was SEK22.8 million compared to SEK230 million for the same quarter previous year.

In the fourth quarter we refinanced our credit facility with a EUR92 million loan from Athyrium Capital to extend the interest only period to the end of 2026. We paid back the EUR68 million Kreos loan once the new credit was agreed and the cash flow from financing activities in the quarter was SEK208.5 million and originates from the net of the loan activities. This leaves us with a net increase in cash in the quarter of SEK229 million and we continue to have a healthy cash position of SEK973.7 million or approximately $93.6 million at the end of the quarter. In our year-end report today, we also provide an outlook for total net sales for this year. We expect continued revenue growth this year, and we estimate our total net sales for 2024 to be between $150 million and $180 million.

As the commercial revenue over time will incorporate growing sales from both Europe and China, we will provide an outlook on this basis going forward. TARPEYO revenues will obviously make up the vast majority of the sales also this year, and we do not expect potential milestone revenues from our partners to be material in comparison to product sales. That was all for me. And now back to you, Renee.

Renee Aguiar-Lucander: Thank you very much. Next page, here we go. So some key takeaways for the quarter. So obviously the full approval of TARPEYO in the US reflecting a new label incorporating eGFR and with a much broader patient population was obviously the key event for this quarter. Data supporting this disease modification profile, the local mode of action, a long-term patient benefits of treatment with TARPEYO was, as you heard, shared at a recent nephrology conference. Q4 net TARPEYO revenues of SEK347 million, equivalent to $32.6 million, and total net product revenues in excess of $100 million for the year. And we also saw record enrollment numbers in the quarter, increasing quarter-over-quarter by more than 50%. Fredrik mentioned the positive cash flow from operations and the strong cash position of $94 million.

And obviously, we’ve seen the positive momentum from the nephrology market focused on the eGFR data, increased awareness of longitudinal data related to progression of IgAN patients, and positive patient experiences, including the ability, obviously, for patients to have intermittent treatments rather than being forced into chronic medication. And we believe that this will be — this disease-modding profile of TARPEYO will continue to drive significant demand for nephrologists and become the cornerstone of standard of care in IgAN. The total revenue guidance for 2024 are reflecting strong growth expectations of the range of $150 million to $180 million really concludes the events of this quarter and obviously looking into this year 2024. So I want to just close out this Q4 presentation.

I was saying that we are super excited about what 2024 brings as being the category leader in a growing market with a patient-centric message and we believe that the new label will certainly continue to drive demand and clear patient benefits. And so with that, I’d like to open up for questions.

Operator: [Operator Instructions] The next question comes from Maurice Raycroft from Jefferies. Please go ahead.

Maurice Raycroft: Hi, good morning. Thanks for taking my question and congrats on the progress. I was wondering if you can talk about assumptions and key drivers behind your revenue guidance of SEK150 million to SEK180 million for the year and how the 555 patient start forms in the fourth quarter? And what you’re seeing so far in the first quarter, how those numbers are factoring into your 2024 guidance?

Renee Aguiar-Lucander: Sure. So in terms of what we’ve done is we’ve kind of triangulated a couple of different ways to look at this. So obviously, in terms of the — what we’re expecting to see is basically kind of a little bit of a year of two halves, right. So we are not sure of how really kind of how quickly we can get through the kind of P&T committees of the payers and how quickly they will change the rules to really kind of comply with or to be aligned with the new label. So obviously, what we are expecting is that we might see some of that market access friction where actually physicians are writing prescriptions as per the label, but obviously, where payers are still applying the rules of the old label. So that is something where I think that, we are expecting to see strong growth in enrollment, but we are expecting that, that might take a longer period of time to actually convert those enrollments into revenues.

And this is something that is just a little bit of an unknown to us. I think the second half, we are expecting the second half to be strong. I think that — and where some of those market access friction should be resolved. I think that in terms of another item that is a bit unknown for this year is obviously when the KDIGO guidelines are going to be available. Our assumption really here has been that there’s been quite a lot of delays. It’s unclear when they will actually be coming out. And so our assumption really is that the KDIGO guidelines will not actually kind of come out until probably the second half of this year and maybe even fairly late in the year. So on that basis, we’ve also assumed that we’re not going to really see any benefit necessarily from the new KDIGO guidelines coming out this year.

In terms of the — the other thing that we’ve looked at is just really also looking at other launches and consensus expectations for other products in terms of the renal space. And so we think that this kind of guidance and particularly considering that, obviously, those other renal launches also involve chronic treatment that this type of kind of span that we’re in is very consistent with where those other launches either have taken place or where expectations are with regards to consensus for some of those other treatments this year. So this is really kind of where we’ve taken the input for some of this guidance. And so I think that we really want to make sure that we are on a very stable footing as to any kind of guidance that we’re providing with regards to the franchise this year.

Maurice Raycroft: Got it. And is there anything more you’re saying about first quarter so far? Is it as expected? Or I guess any more color you can provide on that?

Renee Aguiar-Lucander: So I think what we’re seeing is, and we’re expecting is we are going to have that kind of first quarter seasonality, in terms of I would not expect kind of the Q1 to be particularly strong because of that, because of that impact that we saw last year. And I think we’re seeing it so far this year as well. I think enrollments continue to be very encouraging. And so again, I think we’re seeing a lot of demand. And I think it’s more of that kind of structural issues with the kind of US payer system, et cetera, and changing of insurance plans, et cetera, that seems to be impacting some of that conversion. But that’s probably what I can say so far about the quarter.

Maurice Raycroft: Okay. And maybe one other question for me, and then I’ll hop back in the queue. For the P&T committees to get the updated label through that process, is there anything you’re doing to expedite the process? And how do you assess progress along the way?

Renee Aguiar-Lucander: So yeah, I mean we obviously, we started already to try to communicate with a lot of the P&T committees just based on the publication in The Lancet. But in reality, obviously, no one is really going to schedule any kind of P&T committees until they know what the label looks like and that there is truly a new label to discuss. So obviously, there has been quite a lot of interactions prior to this to try to kind of prepare for those meetings. But none of these plans really have to kind of take meetings or do anything or plan anything until you actually have a final label in hand. So obviously, we have, as Maria mentioned, we’ve added some resources in this area, and it’s obviously something that we are considering to be of high importance for the organization, obviously, these first six months.

Maurice Raycroft: Got it. Okay, thanks for taking my questions. I’ll hop back in the queue.

Operator: The next question comes from Vamil Divan from Guggenheim Securities. Please go ahead.

Vamil Divan: Great, thank you guys so much for taking my questions. If I could ask two just about sort of the broader IgAN market. And I’m wondering if you have any sort of updated thoughts? You obviously mentioned all the excitement at ASN, and I think just broadly speaking about more patients getting diagnosed and treated for IgAN now. So I’m curious if you have any sort of updated views on sort of the potential market size, especially in the US or you want to see globally for IgAN? And then second, is obviously really from emerging competition, so in the mid- to late-stage pipeline, specifically from the April DAF inhibitors. So I’m curious sort of if those to make it to the market in the next two to three years, how do you see those sort of impacting TARPEYO’s place in the treatment paradigm, if at all? Thank you.

Renee Aguiar-Lucander: Yeah, sure. So I think we are consistently, just a little bit of a kind of a repeated message really, I guess, from our perspective. But I think what we’ve seen consistently is that this obviously is not an acute disease, right? It is a progressive disease, and it does develop over a reasonably kind of long period of time, doesn’t have any kind of immediate mortality risks. So I think on that basis, I think a large part of that kind of IgAN population has probably not been treated particularly aggressively or potentially not at all, apart from really with ACEs and ARBs and other blood pressure-related medications. So I do think that the longitudinal data as well as some of the clinical trial data showing placebo group deterioration, all the patients that actually have that are on the kind of blood pressure-related medication or have already had reductions in proteinuria, which clearly do not seem to translate into kind of eGFR stabilization, I think that, that data is continuing to kind of make its way through the nephrology community.

And I think there is a really kind of active dialogue in terms of how should this kind of potentially impact the treatment paradigm. So I think that we are seeing a growing part of that market. But again, I think this will probably be a market that will develop and continue to grow really over time as some of these kind of — as more data really kind of makes its way into the peer-reviewed journals. And as I think nephrologists ultimately use some of these available medications and see actually what impact do these medications really have in real life. So I think that it is a growing kind of market opportunity for sure, but I think we still have a little bit of time until that’s reached its peak kind of potential. In terms of the pipeline, so I guess it’s always a little bit difficult to kind of make a lot of statements really on a small population in Phase 2b.

But I think that, obviously, from a kind of mechanistic perspective, assuming that everything lines up and actually some of these results are reproducible. And also, obviously, safety data is critical for this, I think that without really having that kind of whole picture of understanding what the product profile really looks like and therefore, not really understanding which patient population might be appropriate for that treatment, it’s quite a difficult question to answer. But obviously, as part of your first question, it’s also very difficult to know as these kind of treatments that are already available today continue to penetrate the population, it’s also very difficult to know actually what is actually the unmet medical need going to be in this patient population in 2027.

But I think from a mechanistic perspective, I’m going to hand over to Richard to give his view from that perspective.

Richard Philipson: Sure. Thanks, Renee. So I think it’s an interesting question. But with Nefecon TARPEYO, as we’ve spoken about many times, the treatment that’s been designed to target the Peyer’s patches in the distal ileum, and it’s a B-cell modulator in that region, and it has low systemic bioavailability, around 90% of Nefecon’s removed by the liver on first part of metabolism. And when we look at these other treatments, you mentioned the APRIL BLyS mechanism. I mean, these are systemic treatments, which are acting on a different hits, if you like, within the pathogenesis of IgA nephropathy. So taking those kinds of considerations into account and also noting what Renee has already said about we need to understand more about these treatments, they need to build up a greater understanding of the safety, et cetera, but all of those things being equal, there isn’t a fundamental reason why these treatments couldn’t be given together given that they’re acting in different places at different levels within the pathogenesis of the disease.

Vamil Divan: Okay. Thank you very much for the insights.

Operator: The next question comes from Yigal Nochomovitz from Citi. Please go ahead.

Unidentified Analyst: Hi team, this is [Carly] (ph) on for Yigal. Thanks so much for taking our questions. Maybe just a follow-up on some of your prior comments. Curious if you can talk a little bit more about the characteristics of patients being prescribed TARPEYO with respect to baseline proteinuria. I know you mentioned the market access piece that you’re working through, but curious if you’re seeing any shift towards increasing intent to prescribe to patients with lower baseline proteinuria with the updated label?

Renee Aguiar-Lucander: Sure. So I think in terms of what we’ve seen to date, I would say that obviously, because of the label that we had up until December, clearly, the language in that label said generally 1.5. So clearly, it wasn’t a cutoff. And so clearly, we’ve had prescribers and successfully also kind of obviously getting to patients below 1.5. But because of the label, obviously, overall, there has clearly been a shift to the more kind of advanced patient population or serious patient population. I don’t have a specific kind of breakout of how that kind of works, but I do know that obviously, overall, it has had that impact of having the shift. The label obviously just became available in December, and so actually, we have internally obviously produced material, trained our sales force, et cetera.

So we’re really just kind of have rolled that out fairly recently into the market. So it’s a bit early to kind of know to what extent, if at all, there has been any real impact from the label at this point in time.

Unidentified Analyst: Okay. Got it. That’s helpful. And then we wanted to ask about the Phase 2 data coming up for setanaxib in head and neck cancer. Just curious to know a little bit more about what you’re looking to see in that data set and what you think would be an attractive profile for potential partners for that program. Thank you.

Renee Aguiar-Lucander: Sure, I’m going to hand over to Richard to just describe a little bit about what the data readout is going to contain and then I’ll give you a sense of what I think might be comfortable.

Richard Philipson: So just as a reminder, this is a double-blind, randomized controlled trial where we’re giving setanaxib with placebo on top of pembrolizumab in patients with recurrent or metastatic head and neck cancer. And we expect to have the results, as Renee said, a little later in this half. And the primary endpoint in that study is change in tumor size. And we think this is an important endpoint in a study at this stage, development is a little bit more sensitive than just looking at response rates, for example, although we will also be looking at response rates. We will have data on progression-free survival. And we also hope to have transcriptomic data available at the same time as well. So that will give us a very comprehensive view of the clinical impact of the treatment and also the impact of the treatment at a tumor biology level.

And clearly, what we want to see a significant reduction in tumor size in patients who are receiving setanaxib on top of pembrolizumab versus patients who are receiving placebo on top of pembrolizumab. We think it’s a well-designed trial. There’s an appropriate number of patients in the study. I think we need to take also, I’ve talked about the primary end point, but we really need to take all of the endpoints into account and look at the impact of the treatment on the tumor biology as well when we’re understanding the benefits of the treatment.

Renee Aguiar-Lucander: Yeah. And I would just add to that, this patient population has a very poor outlook. I mean these are kind of relapsed metastatic kind of patients with head and neck cancer. And the first line treatment that really pembrolizumab has a very limited response rate of 15% to 20%. So in terms of talking to KOLs and getting some input from them, obviously, even kind of an increase of that to the kind of high 20s would certainly be considered clinically very relevant. So I think that, both as Richard mentioned as well as kind of progression-free survival, I think that would kind of be the, taken together is really, I think, what people would be looking for in terms of this being a highly successful study.

Unidentified Analyst: Okay, great. Thanks very much.

Operator: The next question comes from Rami Katkhuda from LifeSci Capital. Please go ahead.

Rami Katkhuda: Hey guys. Congrats on the updates and thanks for taking my questions as well. Two quick ones from me. First, the language on the label for Kinpeygo is a bit more strict than what we saw with the accelerated approval of the asset in the States. I guess you expect there to be a difference in label language for a full approval as well.

Renee Aguiar-Lucander: You’re absolutely correct. And I think it’s always difficult to know how the two regulators are going to kind of actually assess the same data. They don’t always see eye to eye, they don’t always agree. But certainly, our hope would clearly be that the label on Kinpeygo is very similar to, if not the same, as the label in the US.

Rami Katkhuda: Got it. And then I guess if the open-label extension data is positive as well, is there a potential for the recommended duration of therapy language to kind of be removed from the TARPEYO label?

Renee Aguiar-Lucander: So I think that obviously it’s something that we have been discussing, and I think we’ll continue to discuss, I mean, when the right time is to maybe kind of go and have some interactions with the regulators, both based on kind of real-world data that we’re observing as well as some of the data from our clinical trials and potential data in other kind of Phase 4 studies. So there is certainly something that we are keeping in mind as to when we have the appropriate amount of data or the type of data we think is relevant, we certainly intend to go and have additional interactions with the regulator.

Rami Katkhuda: Got it. I guess do you guys know what percentage of patients currently are on treatment for less than or greater than nine months?

Renee Aguiar-Lucander: No. You mean like overall? I don’t actually. No.

Rami Katkhuda: Okay, no worries, thank you again.

Renee Aguiar-Lucander: Thank you.

Operator: The next question comes from Annabel Samimy from Stifel. Please go ahead.

Annabel Samimy: Hi, thanks for taking my questions. I had a couple here. I guess in terms of the enrollments, you saw a nice pickup. Do you have any sense to the extent to which the pickup in enrollments was from the new prescribers versus your older prescribers who’ve just seen the eGFR data? And I guess with the data, how much can we see the enrollment pick up from there? I understand that it may not necessarily translate into sales, but perhaps the enrollments continue. So that’s our first question. And then the second question is related to the magnitude of KDIGO guidelines. Are there any analogs that you have that could sort of help us, I don’t know, sort of more quantify what the impact of KDIGO could have on an uptick in sales? Or is it just still primarily all the payers that are the gatekeepers here and that’s pretty much who we have to count on. So I guess those are first questions, and I have a follow-up after that also.

Renee Aguiar-Lucander: Okay. So I actually don’t have at hand, the kind of breakdown of the enrollments in terms of new kind of prescribers versus existing but because obviously, there’s always the possibility that new prescribers would have prescribed for more than one patient. But I guess the best estimate really would be that out of 555 enrollment, at least over 300 of those would be kind of from new prescribers. The remaining kind of 200, the easy assumption is that these are kind of repeat prescribers. But again, I can’t guarantee that. But I think that would kind of be my best estimate at this point in time. In terms of the magnitude impact of KDIGO, I mean I think that that obviously could be quite sizable because, obviously, what’s been discussed or at least at different conferences, at podiums, et cetera, is, and it’s based on this longitudinal data is, is 1 gram an appropriate definition to use in the guidelines to define patients at risk of disease progression.

And I think what’s been discussed and debated is, again, in this forum is that maybe that should be reduced. So if that level is reduced to 0.75 or 0.50, then obviously, that would have a very significant potential impact on the addressable population that would be on label. So I do think that it could be a very significant trigger, again, probably not an immediate impact again. But certainly, I think, could have a very significant impact on the overall addressable market.

Annabel Samimy: Okay. And if I can get a little bit more into the [weeds] (ph). So I guess, we’ve spoken to a couple of KOLs, One of the things that stood out was that the way they selected some patients were the ones that had clear inflammation or inflammatory markers were the ones that were more suitable for TARPEYO treatment versus any of the RAS inhibitors. Do you have a sense how many patients that have UPCRs below 1.5 or in inflammatory state and the extent to which expanding that is going to really tap into that entire market or just a portion of the market who are more inflammatory? So maybe you can sort of, I don’t know, address that a little bit.

Renee Aguiar-Lucander: I think that’s actually a very difficult question to answer appropriately actually based on the information we have. I mean, I would say that we know that it’s a very heterogeneous disease. You can have patients that actually have a decline of eGFR with virtually no proteinuria. And I think the only relevant way, I guess, of looking at this would probably be a biopsy. But, Richard, do you have any comments on that?

Richard Philipson: Well, I think, and also I don’t think in the sort of commercial prescriber setting, we’re not necessarily going to have available to us all the information relating to the kind of aspects of the patient’s condition that you’re referring to relating to kind of inflammatory states, et cetera, so inflammatory biomarkers or levels of micro hematuria, et cetera, that’s not necessarily going to be information that we’re collecting and have available to us. So I think it would be difficult to really comment on that.

Annabel Samimy: Okay. And I guess one last simple question. Just to clarify, when you have discussions with payers, you said they like the label in hand, do they not have access to this label at this point? Is there another label do they need to physically put in their hand for them to pay attention?

Renee Aguiar-Lucander: So, I mean, obviously, the label language is now available. But obviously, they do not have to see anyone or meet anyone or have any meetings with regards to anything around the label unless you have a new label, which obviously, they have to go through a new kind of P&T committee. So it’s really more a matter of they have their own process that they go through, whether this is a new drug or a new label update or anything else that would drive them to have to have a P&T committee. So it’s really more a matter of how, they obviously have other things that they’re also scheduled, so when will they agree to put this on their schedule. So when will they actually agree to go through this, because there is a requirement for them to go through this kind of formal process and therefore, also then issue any kind of potential update or change of the rules that they apply based on this new label.

So it’s really kind of the same as when we originally started is that you can always do things on a medical exception basis, right. But obviously, it gets easier when you actually have gone through the P&T committees and there is a more standardized way for the payers to address a certain drug, which is why you can certainly, I mean, this will also depend a lot on kind of how much energy and persistence do the treating physician have to go through potentially these kind of appeals processes until those rules have been amended, and that is just difficult to say.

Annabel Samimy: Okay. Great. Thank you.

Operator: The next question comes from Arthur He from HC Wainwright. Please go ahead.

Arthur He: Hey, good morning, Renee.

Operator: [Operator Instructions]

Arthur He: Hey, Renee and team, congratulations on progress. Thanks for taking my question. So regarding the launch in China, could you give us some update on the preparedness on that part? And remind us what’s the Calliditas’s role to support the launch?

Renee Aguiar-Lucander: Sure. So obviously, the commercial launch will be carried out by Everest Medicines. And actually, as you may be aware, I mean, the CEO there actually has a very kind of substantial and significant experience from other commercial companies in China. And so I think actually that the team that’s been brought on board is actually quite impressive and seems to have a lot of experience in terms of launching products in China. In terms of the actual kind of activity, obviously, I think they have had — they have been preparing for this for quite a long time. And obviously, as we know, this is a much, much larger population than what we have here in Europe and the US. I guess my best kind of view is actually — when I went to Shanghai to kind of visit some of the nephrology units and some of the hospitals there.

I mean, it’s clear that a lot of these hospitals have large numbers of patients that they actually just kind of have on their roster and they’re very well aware of this kind of the potential arrival of this medication. So, I think that it’s really kind of a — it seems to have a good expectation. I think the early access program is very successful. And as far as I’m aware, the company is really targeting a launch in Q2 of this year. So obviously, we will not have any kind of direct involvement in that commercial launch.

Arthur He: Thanks for that color. And just a quick follow-up on the open-label study. Could you give us more color on what exactly the data set looks like regarding the size and the data point? Thanks.

Renee Aguiar-Lucander: So I guess that my understanding really is and Richard, you can correct me if I’m wrong. But this really is just — it’s an open-label study. So everyone obviously is going to be on drug. The inclusion criteria were very similar to the inclusion criteria for the Phase 3. So slightly lower kind of eGFR levels, but actually the proton cutoff was the same and so, I believe it’s about 120 or so…

Richard Philipson: 119.

Renee Aguiar-Lucander: 119 to be exact patients that have been enrolled into the trial. And our expectation is, obviously, because this data obviously has not been unblinded. So even if it’s an open-label study, obviously, we do not know what kind of treatment the patients had prior to entering this open label. But we would expect that the majority of these patients would be placebo patients as they still qualify as being kind of at risk. But we would also expect that there is a group of patients who will have — who will be retreated. And our assumption is that, that would be skewed towards those patients who probably had a more severe disease coming into the Phase 3. Since obviously, they might have had very significant improvements, both on kind of eGFR and proteinuria potentially.

But obviously, we’re still qualifying as being at risk after that kind of two-year period of been spending that in the Phase 3. So that is really — and in terms of the data, it’s really kind of very similar data. So it’s really proteinuria, eGFR safety. I mean it’s all kind of the similar data set from that perspective.

Arthur He: Thank you very much for taking the question. I’ll talk to you guys soon.

Renee Aguiar-Lucander: Thanks.

Operator: The next question comes from Christopher Uhde from SEB Enskilda. Please go ahead.

Christopher Uhde: Hi there. Thanks for taking my question. I just have a few follow-ups. So, I think in terms of average duration of therapy, I think previously, I believe, said it was around six to seven months so far. People are more prescribing along the lines of systemic steroids in terms of that. Are you seeing now that’s starting to improve since the data was presented in approval? And then my second question, you gave a little bit of flavor on retreatment for those who are already going nine months. But do you have any indications so far on the average frequency for the patients overall who’ve been getting TARPEYO? And I guess then my third question is, so in terms of the returning prescribers. I’m not sure how much you can say given what you’ve said earlier, but are you getting a sense of whether the prescribers who’ve prescribed previously are getting better at converting enrollments to treatments quickly like navigating the reimbursement sort of maize better, if you will.

Thank you.

Renee Aguiar-Lucander: Thanks. So in terms of the average duration, what we did is we followed this kind of patient cohort, and I think we reported this, I think, in Q2 of last year. That actually showed us at that point in time that the average treatment duration was about eight months. And so what we would be expecting, and I think we’ll probably follow a cohort shortly and try and see what that looks like maybe towards the end of the year, really kind of we would expect that to kind of be increasing at this point. And the reason why we’d be increasing is obviously partly as you say, there is that kind of habit that kind of still fits. And actually, I think it goes for almost all drugs and there is a sense of nephrologists that you try something for six months and then see kind of what happens.

So, I think that we would expect that to kind of continue to improve based on additional education, medical affairs, intervention, et cetera, to really explain the difference in terms of the local action, et cetera, of this particular drug. So that would be our expectation. In terms of retreatment, I think it is too early for us to kind of comment in any great kind of detail on that. We have seen kind of retreatment happening, but I think we’re going to wait in terms of collecting some more information on that before we really comment on it. In terms of returning prescribers, I wish that I could tell you that these kind of prescribers who prescribe before are getting better at it. Unfortunately, I’m not sure that that’s the case. I think it just comes from the fact that this is a rare disease, and so it might have been three or four months between them kind of prescribing it before and prescribing it now.

And unfortunately, there’s been hundreds of patients in between that period of time for these nephrologists. So I do — I think it’s unclear at this point in time how much better they’re getting actually kind of submitting complete prescriptions. But we are still hopeful that we’re going to get there.

Christopher Uhde: Thank you, so much.

Operator: The next question comes from Johan Unnerus from Redeye. Please go ahead.

Johan Unnerus: Great. Thanks for taking our questions. The first one, considering the enrollment and the unique subscribers and also the price increase, it seems like the guide is rather conservative. Should we expect you to take a rather proactive approach during ’24 and perhaps update the guide more actively?

Renee Aguiar-Lucander: Yes, that would not be — that wouldn’t be an impossibility. I think that obviously, as we — as some of these things become clear, both in terms of how quickly we can get through P&T committees, when the KDIGO guidelines may or may not kind of become available, et cetera. And when it becomes a little bit more clear on that, I think that could certainly imply that we would kind of provide more and more accurate guidance as time goes on.

Johan Unnerus: Great. And this leads us to the second question. What about the regularities and time that these P&T committees tend to meet? And will that happen several times a year or when something is needed to be handled?

Renee Aguiar-Lucander: It does vary actually plan to plan. I mean, some of the bigger plans are more kind of structured. They may have like a quarterly meeting, et cetera, and otherwise might have monthly meetings. But yes, there is a certain cadence that they all have that in which case, they will obviously do more than just one drug, they have several kind of cases that they will kind of address in one meeting. But it’s not necessary — it’s unusual that it would be adhoc. It’s more kind of a structured process that is — that they have agenda for either then on a kind of mainly kind of quarterly basis.

Johan Unnerus: So later in the first half — during the first half, you should have some insight into this dynamic already?

Renee Aguiar-Lucander: Absolutely. And as I said, this is clearly something that within the organization, we are very focused on, and this is clearly something where we are working very actively at driving that process as much as we possibly can from the outside. But there’s a limit, obviously, to how much we can impact that, but there certainly is a lot of focus on it.

Johan Unnerus: And regarding the backlog relating to the private commercial pay. As you said, this is not an acute illness, but it is a chronic illness and specialists will continue to monitor the patients. The backlog is unlikely to disappear. There are very few alternatives.

Renee Aguiar-Lucander: Certainly, yes, there are kind of — there are a few alternatives. I think what you might find is that physicians get frustrated, they cancel it. They kind of meet their patients the next time in a couple of months, they kind of submit again to try and have better lack at this time. So I think it will be a mixture of those physicians who will have — be a little bit more patient and be willing to kind of go through the authorization process and some of those other prescribers who may kind of come back when they think actually the rules have been updated so that they don’t have to kind of jump through the same hope. So I think it will probably be a mix of those.

Johan Unnerus: Great. And finally, if I may, regarding the OP study, some of these patients will be repeat patients as you clarified earlier. Some of them will be a slightly more severe stage. Earlier in the studies, it’s been rather consistent that during the active period, the eGFR has been stabilized. Is that what can we expect from this early study? Of course, we have to wait for the actual results, but what should we expect?

Renee Aguiar-Lucander: I think from a mechanistic perspective, I mean, we wouldn’t expect it to be any different in the open-label extension that we’ve seen both in our Phase 2b and our Phase 3. So yes, we would expect to see a very similar outcome. We’re actually when patients are on treatment, it does stabilize their kidney function.

Johan Unnerus: Very good. Thank you.

Renee Aguiar-Lucander: Thank you.

Operator: The next question comes from Suzanne van Voorthuizen from VLK. Please go ahead.

Suzanne van Voorthuizen: Hi team. This is Suzanne. Thanks for taking my question. A small follow-up regarding the access friction that you mentioned to face in the first half. Should we expect you to update the market on the progress that you make with the payers as part of the quarterly earnings update? Or given its importance, could there be some communication about that separately on important milestones? And then I have another question after this one.

Renee Aguiar-Lucander: I think we’ll probably report as part of the quarterly update. I think, obviously, I mean there is something that we consider as being very important, then we can always — I mean, we could always consider doing something adhoc. But I guess my assumption would be that we would report on a quarterly basis as we have been.

Suzanne van Voorthuizen: Got it. All right. And then maybe on Europe, can you provide some color on what the sales development look like for Kinpeygo? And what was the 2023 sales into the year?

Renee Aguiar-Lucander: So I think we have kind of royalty numbers, but I don’t know if we have anything Fredrik, what would be on a kind of…

Fredrik Johansson: Yes, we have the royalty number, which we separate in our reporting. And overall, for the full year, we reported approximately SEK40 million in royalties for you.

Renee Aguiar-Lucander: Yeah. And so actually, they don’t — STADA is obviously a very large company. They don’t necessarily break this out or kind of disclose any of these details. So therefore, we don’t really have access to those type of numbers. But obviously, we are aware of the fact that the — they are gaining kind of approval and acceptances from a variety of European countries, UK obviously being the most recent one. And it’s my understanding that they’re in kind of negotiations with at least four other geographic regions in Europe with a hope to obviously reach a conclusion there also fairly shortly. But that is the kind of insight that I have this time.

Suzanne van Voorthuizen: All right. Thank you.

Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Renee Aguiar-Lucander: Thank you very much, and thank you very much for listening to this Q4 report from 2023, and we look forward to meeting you again and when we get to report our Q1, which is due in May of this year. Thank you very much.