Telix Pharmaceuticals Ltd — Call Transcript 2020

Apr 21, 2020

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Telix Pharmaceuticals Limited ACN 616 620 369 Suite 401, 55 Flemington Road North Melbourne Victoria, 3051 Australia

22 April 2020 Shareholder Update Call (post-4C) Telix Pharmaceuticals Limited

CEO Presentation – Transcript

Good morning shareholders,

Thank you for taking the time to dial-in to our update this morning. We certainly recognize that these are challenging times for companies and investors at all ends of the market.

The purpose of this call is to provide a general update on the activities of the company, some brief commentary on our sales activity for the quarter as well as some high-level guidance on the impact of the novel coronavirus on our business. As a general note we have been very proactive in dealing with COVID-19 and with our strong cash position, we expect to be able to weather the current challenging business environment. In fact, it’s been a very productive period for the company in terms of focusing on our first product marketing authorization and business improvement activity that we believe will further de-risk the company for the longterm.

Slide 2

Moving past the disclaimer and onto the executive summary …

Slide 3

I’m not going to go over the various matters outlined in this Executive Summary, however it’s worth noting that it was a very busy and successful quarter for Telix, with some significant accomplishments as we progress toward our marketing authorization for TLX591-CDx, Telix’s prostate cancer imaging agent. It’s reasonable to ascertain that the submission of our US and EU marketing authorization for TLX591-CDx, or “illumet” as we call the kit-based product in

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the US, is top of the priority list for the Company. We were fortunate that we had completed consultations with regulators before travel and meeting restrictions were imposed due to the virus.

Of course, it will not surprise you to know that cancer doesn’t stop for a pandemic and so we have continued to build clinical experience with our products, both through early use of the prostate imaging agent under compassionate and investigational use, as well as the various clinical trials for the broader Telix pipeline. This astonishing image of a prostate cancer patient with metastatic disease, courtesy of Dr. Chaudry from City of Hope – a prominent US cancer hospital – is an example of another major cancer centre using our technology.

Slide 4

I’m not going to spend a lot of time talking about out share price but as we have some fairly new shareholders that are learning about the company, I note that we are trading just below the $1.30 price of the $45m capital raise that we completed last August. That capital raise, mostly from institutional investors, was intended to enable the company to get through the launch of the prostate imaging agent, as well as complete the development of TLX250-CDx for imaging kidney cancer, the second Telix product “off the rank”. That aspiration remains realistic. I’m going to come back to this at the end of the presentation, but we have accomplished an enormous amount since the last capital raise that is not reflected in the Company’s current share price.

Slide 5

In terms of the major accomplishments for the past quarter, there were really four areas of achievement.

Firstly – we have almost completed the preparation of our marketing authorization submissions for the US and EU and we expect to get both submitted in the next few weeks. It’s taken us month or two longer than ideal, but these are huge packages of information and clinical data, and the publishing process is non-trivial. We also had some additional FDA feedback that we wanted to incorporate into the data analysis. The regulatory activity was capped off with the announcement that we have transitioned our existing clinical trial supply agreement with Cardinal Health to a full commercial relationship for prostate imaging in the US market. The two companies are now working closely to prepare for launch, subject to FDA outcomes, and we are confident that we have chosen a strong partner.

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The other major area of regulatory accomplishment is the Phase III ZIRCON trial for our renal cancer imaging agent. Investors often forget that at the time of our IPO, kidney cancer imaging was the front-line application but because we were able to move so fast on prostate cancer imaging, this program has tended to get somewhat eclipsed. The FDA’s rapid approval of our Phase III Investigational New Drug application was a welcome outcome for the company and really demonstrates to shareholders that we can competently deliver on late-stage development programs.

This past quarter, culminating in an ASX announcement on the 8[th] of April, Telix achieved a major strategic outcome by acquiring a licensed radiopharmaceutical manufacturing facility from Eckert and Ziegler AG, a German company specializing in medical isotopes. Based in Seneffe, Belgium – in the Walloon region – the site will become Telix’s EU manufacturing hub for the entire product pipeline. It was a decision that was made after considerable analysis and risk assessment and we are confident that having manufacturing self-sufficiency in Europe is an important strategic advantage for the company. It is a major responsibility for the company to undertake but we have the talent, resources and commitment to operational excellence that is necessary to manage a site like this in a commercially and socially responsible way.

Finally, although we have hunkered down on discretionary R&D in light of COVID-19 – not that Telix invests much on basic research – we continue to work with several academic groups and consortiums in order to help envisage our future product trajectory. We were very pleased to receive $500,000 in non-dilutive funding from the Innovative Manufacturing Cooperative Research Centre, along with an excellent cohort of collaborators, including GenesisCare, iPhase, Cyclotek and the University of Melbourne. This funding will be used to take several potentially exciting new compounds into early clinical evaluation. The Melbourne team is certainly extremely lucky to have world-class radiochemistry research capabilities in their own backyard.

In terms of what’s coming up this quarter – clearly the marketing authorization submissions are the key focus. I’m also pleased to say that we have finally completed our Phase III briefing package for our prostate cancer therapy program, and I expect that this will get submitted in the next few weeks. There have been a lot of exciting new developments in prostate cancer therapy that fundamentally underpin the value of targeted radiation in this disease setting and we are excited to get regulator feedback on our registration trial plans. We’ve had excellent advice from a mixture of US, Australian and European clinical experts and we are confident

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that we have a clear game plan for that Phase III trial, which we hope to be able to start before year-end.

Additionally, without going into too much detail, we are still moving ahead our combination immune-oncology studies in renal cancer therapy. These trials have been slow to get started because they involve 3[rd] party collaborators and the clinical protocols are quite complex. But we are nearly there, we have completed drug product manufacturing and we are now getting the paperwork together to be able to submit to the FDA in the next couple of months.

Slide 6

Since this presentation comes on the back of our 4C, I would like to briefly comment on our prostate cancer imaging kit sales. We are not yet doing public domain forecasting and sales analysis in a lot of detail, but we are continuing to see robust quarter-on-quarter increase in the use of our product. We would typically expect to see around 20-25% quarterly growth, in line with 2019 experience, however this quarter we already experienced some impact due to COVID-19 as certain oncology and radiology services, including surgeries, were deferred. We expect this trend to continue into the next quarter, which will be flat or possibly even slightly down. As I’m going to discuss in a minute, we expect things to return to normal in Q3.

In the US, sales are going to somewhat dry up in advance of the NDA because there will be limited appetite for clinical sites to do a lot of FDA paperwork with a product approval not too far off. That’s not to say that we aren’t aggressively working with new sites to get them up and running and clearly there is a significant clinical interest in PSMA imaging, bolstered by updated imaging guidance from ASCO, which I am going to discuss a bit more on the next slide.

In Europe, we see plenty of continued adoption and there is going to be a very different dynamic in the lead up to product approval. We are working very diligently to build-out our EU commercial team and to strengthen our distribution relationships and strategy in Europe. We’ve made some great hires lately – particularly Christian Davis who headed up the European sales team at Sirtex. Based on some preliminary conversations with health authorities, we also expect to get some temporary marketing authorizations in parallel to the product review and approval process. We’ll keep you posted on that.

My last comment related to sales reflects the process improvement in the company over the last 12 months. You may recall from some of our quarterly sales notes last year, that we were

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struggling with cash collection, particularly from public hospitals. When you’re a small specialty provider, it’s notoriously difficult to get paid in a timely way. We’ve been able to get the average age of our receivables down to about 35 days, across all the countries in which we provide the prostate imaging kit. This is a great accomplishment from the finance team and sets us up well, particularly in Europe, for when we go “live”.

Slide 7

I’ve already discussed much of the content of this slide and we have previously disclosed all this information in various ASX releases. The main thing to note as that we are almost ready to go and we’re very confident, based on the feedback we have received from regulators, that we are on track. I’d prefer not to speculate too aggressively as to when we might see an approval in either the US or Europe, particularly as review timelines are bit up in the air at the moment, but we expect that our submissions will be deemed complete around mid-year and we should be able to give tighter guidance on approval dates then.

One thing I do want to raise to your attention, however, is that back in January, ASCO published updated guidelines on the use of advanced imaging techniques in prostate cancer. These guidelines are, in some ways, quite astonishing because they make recommendations in relation to clinical standard of care that pertain to non-approved products. While it is not uncommon for professional organizations to opine on future standard care, including for products that are pending approval, the recommendations they make are very supportive of the clinical case for Telix’s planned product launch in the United States. It’s also worth noting that the guidance is essentially in line with European guidance, so we are rapidly converging toward a global consensus on how next generation prostate cancer imaging is to be used.

Slide 8

Moving onto the challenging subject of COVID-19. I’m going to spend five minutes or so giving you some perspective on how we understand and are responding to the situation. This graphic essentially outlines both the impact – as well as our expectations – on how COVID-19 will play out for Telix’s business, both in terms of sales impact and clinical trials. Our view is that between now and June, clinical and regulatory activity is going to continue to be severely impacted, to the point where we have essentially negligible expectations. June/July is going to mark the commencement of a recovery process. August is going to be low productivity for Telix, mainly because of the European summer and possibly still a bit of recovery in the US. These are tough times and it’s going to take our healthcare services time to return to normality.

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From a planning and budgeting perspective, we are working on a likely “return to normal” date as 1[st] of September. By then we expect, based on current site and partner feedback, that clinical operations should have returned to normal. The timing of September is also important because at about that same time we should have visibility from regulators on approval dates for prostate cancer imaging. This means that we have the opportunity to be prudent and restart the significant expense of clinical trials with the de-risk of regulator certainty.

I don’t want to paint a picture of opportunity during a truly awful situation, but the impact of COVID-19 on a pre-commercial biopharma company like Telix, is fairly symmetrical. On the one hand, early revenue and cost-effective access to capital has been disrupted, although for Telix our sales are less about revenue and more about customer acquisition at this point in time, and we are not in the market for capital, so the impact is limited. On the other hand, the primary expenditure which is drug product manufacturing and clinical trials is also impacted by of COVID-19. Therefore, with cost control and runway management, this is certainly a survivable ordeal – particularly for Telix.

Slide 9

I’m not going to go through this slide in detail – I think the content is self-explanatory. But perhaps three major comments.

The first is that we have been proactive in managing cost control, including a hiring freeze, cutting out operational burn, suspending most discretionary R&D, and so forth. Preserving our cash through this period is still important, despite our decent balance sheet, and we are prepared to escalate the cost savings further if COVID-19 is prolonged. We have elected not to make headcount adjustments at this time because the team is truly necessary at this critical juncture. It’s all hands on deck.

Secondly, although clinical trial recruitment has slowed or paused, our workforce is focused on achieving several major corporate objectives for the year, including our marketing authorisations and preparation for Phase III prostate cancer therapy. These are very significant tasks that turn out to be quite well suited to working from home and reduced clinical contact. Although many of us are dealing with the daily onslaught of kids and pets in our home offices, overall productivity has remained high.

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Third, we expect that for most of our programs, 2-3 months of delay for both regulatory and clinical activity, is a reasonable estimate. You will appreciate that this is somewhat of a moving target and in some countries, like the US, it’s not clear that we are yet at peak infection. But based on our current understanding, this is our expectation. Again, we are sufficiently capitalized and funded to weather this and we are certainly surviving better than some of our competition.

Slide 10

David Cade, who joined Telix just before Christmas as Chief Business Officer and Head of Investor Relations, put this side together. I think it’s an excellent illustration of how far the company has come in the last 12 months and when you see it all on page like this, it’s quite a remarkable commercial trajectory.

Obviously, the key point of this slide is that although our share price is roughly the same as it was a year ago, Telix is clearly not the same company. Year on year we have continued to develop and de-risk the business through some impressive regulatory, clinical and commercial milestones. 2019 was an extremely tough year but we got a lot done and – notwithstanding pesky viruses – has paved the way for 2020, probably our most important and value-creating year yet.

The bottom line is that we significantly de-risked the business last year and this year is all about cashing in on the progress.

Slide 11

This is my final wrap-up slide. For those of you who have been following the company closely for a long time, you’ll see that some of these objectives have shifted by a few months but, candidly, in the realm of biotech that is probably within reasonable tolerance. We’ve acted quickly and assertively on COVID-19 and had the great fortune to have had those key regulator meetings before things turned crazy. This means that although completion of some of our clinical trials will have a delay – although even this remains to be seen as we are seeing a healthy backlog of patients at some sites – everything we expect to get done this year, should still get done.

We are certainly working diligently toward accomplishing these goals and it should be clear that by the end of 2020, Telix is going to be a very different company, yet again.

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Folks, I am going to wrap-up there. I hope this update was useful. David and I are both here to take questions or feedback and for those in different time zones who will be relying on the recorded version, we welcome your questions via email or telephone. But for now, I will open it up to the floor.

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