Santhera: 2019 annual results and highlights pipeline progress

Santhera Pharmaceuticals (SIX: SANN) announces the company’s audited financial results for 2019 and reports on progress in advancing its lead compounds for the treatment of Duchenne muscular dystrophy (DMD), Puldysa (idebenone) and vamorolone, towards market entry and regulatory submission, respectively.

“Santhera is emerging as a leader in addressing rare neuromuscular diseases and 2019 saw us prepare the business for several significant value inflection points this year for our drug candidates to treat DMD,” said Dario Eklund, CEO of Santhera. “The regulatory review for Puldysa in the EU, where we are seeking a conditional marketing authorization (CMA) for the treatment of respiratory dysfunction in patients with DMD who are not using glucocorticoids, is on track and we anticipate obtaining an opinion from the European regulators in mid-2020. Our goal is to provide the first approved drug in non-ambulant DMD patients who are in respiratory decline and we are planning for launch in the first European markets by the end of the year.

“Our second DMD product, vamorolone, is currently being investigated by the originator company ReveraGen in a pivotal study (called VISION-DMD) in ambulant patients with DMD, and our ambition is to replace glucocorticoids as standard of care. We expect read-out of topline data from this trial in the fourth quarter 2020, followed by filing of a US new drug application (NDA) in the first quarter of 2021. Positive data will also pave the way for Santhera to exercise its sub-licensing option for the product.”

2019 full-year net revenues slightly above guidance
In 2019, Santhera reported net revenues from product sales of CHF 27.9 million (2018: CHF 31.7 million), slightly surpassing the Company’s full-year guidance. This includes sales of Raxone for the treatment of Leber’s hereditary optic neuropathy (LHON) in Europe in the first seven months of 2019 and in France for the full year.

Upfront payment from Chiesi Group following closing of licensing agreement
In August 2019, Santhera received an upfront payment of CHF 49.3 million (EUR 44 million) in connection with entering into the licensing agreement with Chiesi Group. The majority of this payment (CHF 46.4 million) was recognized as revenue in 2019 and the remainder will be accounted for in line with the completion of some related obligations. As previously announced per the agreement, Chiesi Group has in-licensed Raxone for LHON and all other ophthalmologic indications for all territories worldwide except the US and Canada for a total consideration of up to EUR 93 million.

Operating and net result markedly improved, largely owing to licensing income
With CHF 80.7 million, total operating expenses slightly surpassed the previous year’s level (2018: CHF 78.7 million). The increase in development expenses to CHF 41.2 million (2018: CHF 38.2 million) reflects expenses for ongoing late stage clinical studies such as the Phase 3 SIDEROS trial in DMD, efforts associated with the pending marketing authorization application for Puldysa for DMD in Europe, ongoing post-authorization studies for LHON, as well as clinical work with Santhera’s early stage development compound POL6014 for cystic fibrosis. Cost savings were achieved for marketing and sales, which amounted to CHF 20.1 million (2018: CHF 24.9 million), as commercial activities were aligned with market entry for Puldysa expected towards end of 2020. General and administrative expenses increased to CHF 19.2 million (2018: CHF 15.4 million) due to one-time expenses related to the transaction with Chiesi Group. Largely owing to the first installment from Chiesi Group in the context of the licensing agreement, the Company reported a markedly improved operating result of CHF -10.4 million (2018: CHF -51.4 million). For the full-year 2019, Santhera reported a net result of CHF -19.0 million (2018: CHF -54.2 million).

Growth plans necessitate additional funds
As of December 31, 2019, freely available liquid funds (cash and cash equivalents) amounted to CHF 31.4 million (August 31, 2019: CHF 43.7 million). In addition, the Company held CHF 1.5 million of restricted cash designated for the interest payments related to the convertible bonds issued in 2017.

Ongoing development activities, ramping up of the commercialization activities relating to Puldysa® and the intention to exercise the option to obtain an exclusive sub-license from Idorsia to commercialize ReveraGen’s vamorolone will require substantial additional funding, particularly in the latter part of 2020. Material uncertainties thus remain as to the Company’s ability to continue as a going concern until December 31, 2020. Executing the Company’s strategy depends on further funding to ensure the continuation of its operations through December 31, 2020.

Santhera is currently evaluating a number of different options to secure additional financing of the Company which besides equity-based funding also includes debt financing, royalty financing, standby equity distribution agreement as well as the monetization of receivables.

At the forthcoming Annual General Meeting on April 22, 2020, the Board will propose the increase of authorized capital from CHF 3,000,000 to CHF 5,500,000 and an increase of conditional capital from CHF 2,500,000 to CHF 4,800,000.

Subject to approval by the Company’s shareholders, this would enable Santhera to raise new capital later in 2020 to support the achievement of regulatory and commercial milestones for Puldysa and vamorolone, to exercise the license option for vamorolone and to further strengthen its resources, especially in view of important product launches planned for 2020/2021. Furthermore, the Company is currently evaluating a restructuring of the CHF 60 million Senior Unsecured Convertible Bonds due in February 2022 including a significant reduction of the conversion price which would increase the likelihood of conversion into shares rather than repayment.

Pipeline projects on track to reach key near-term inflection points
Anticipated near-term inflection points towards approval for both DMD pipeline candidates Puldysa (idebenone) and vamorolone are:

• mid-2020: CHMP opinion on marketing authorization application for Puldysa in DMD in Europe
• Q4-2020: Launch of Puldysa in first European markets
• Q4-2020: Read-out of topline data of pivotal trial for vamorolone in DMD
• Q1-2021: Filing a New Drug Application for vamorolone in DMD in the US

Santhera’s strategic priorities for 2020 are its neuromuscular franchise: Puldysa and vamorolone in DMD. For Puldysa, the focus is on the preparation for European market entry in DMD later in the year and the completion of enrollment into the SIDEROS trial to support planned regulatory submissions, particularly in the US. For vamorolone, the key milestone will be the VISION-DMD topline 6-month data readout, which if positive would allow for preparation of the NDA filing and pave the way for Santhera’s option exercise.

In parallel, the Company is advancing its clinical stage candidate POL6014 for cystic fibrosis and is evaluating further diversification of its platform type pipeline products, including development of additional indications in collaboration with partners. The pipeline also includes a discovery-stage gene therapy approach targeting congenital muscular dystrophies.

Read Santhera's full annual report 2019