Good day, ladies and gentlemen, and welcome to the Arecor Therapeutics interim results for the six months ending 30th June 2021. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session through the phone lines, and instructions will follow at that time. Participants can also submit questions through the webcast page using the Ask a Question button. These will be answered after the call. We'd like to advise all parties the conference is recorded. I will now hand over to Chief Executive Officer, Sarah Howell, to open the presentation. Please go ahead.
Thank you. Good morning, everybody, thank you for joining us today for Arecor Therapeutics interim results. We're delighted to be taking you through the company's performance over the first half of 2021. Joining me here today is Susan Lowther, our Chief Financial Officer. Moving on to today's presentation, before we begin proceedings, I will quickly bring your attention to the standard disclaimer slide, which is included in the presentation for completeness. Our presentation team, myself, the CEO, and Susan Lowther, CFO. Just to give you a little bit of background on Arecor. At Arecor, we've developed an innovative and proprietary formulation technology platform, Arestat, that we use to enhance the properties of existing therapeutic products. These are existing medicines. We're very much focused on improving performance of these products and ultimately patient outcomes.
As a technology platform company, intellectual property is absolutely critical to us, and we have a very broad and robust IP protection of both the Arestat technology platform itself, but also the enhanced versions of products that we develop using this platform. We are a clinical stage company with our first area of therapeutic focus in the diabetes space, and we have two products within clinical development within this franchise, AT247, our ultra-rapid-acting insulin, and AT278, our ultra-concentrated, ultra-rapid-acting insulin, and I'll talk about those in more detail shortly. More recently, we've entered into a second franchise area within the specialty hospital space. These, again, are products that are already on the market, except they're powders that require a complex mixing procedure prior to use. We're able to use the Arestat technology to develop stable liquid, ready-to-use, and ready-to-administer versions of these products.
Essentially, ready-to-go versions of these products that can bring benefits to both healthcare providers and safety benefits to patients. To a certain extent, we validated the commercial potential within the specialty hospital space as we entered into two co-development and licensing deals with Hikma Pharmaceuticals for two of our pipeline products in 2020. Our strategy here across our internal development pipeline is very much to develop these two closer to market to a higher value inflection point prior to partnering for late phase development and commercialization under a pretty standard technology licensing model. We'd expect these to be milestone and royalty bearing. Alongside our own internal development portfolio of products across diabetes and specialty hospital care, we also partner with leading pharmaceutical and biotech companies to develop enhanced versions of their therapeutic products that are proprietary to them. Now, this is a revenue-generating model.
It generates revenues from day one as our partners pay Arecor to apply the Arestat technology and develop novel formulations of their products. Also at the end of these studies, once we've developed an enhanced version of their products, they have the option to take these forward further into development and through to commercialization under a technology licensing model. There's significant upside potential from licensing as these products move through development, and we'll talk about some of those collaborations in a little bit more detail. Overall, we're very much a commercially focused business. We have existing revenue-generating partnerships, best-in-class proprietary products that we plan to develop to a higher value inflection point prior to partnering. As you know, we recently entered into a very successful AIM IPO back in June this year, raising GBP 20 million.
This is really to take those proprietary products to that partnering value inflection points and ultimately to build a significant and sustainable business. Moving on to our operational highlights. Later in the presentation, Susan will talk us through the financial highlights as well. Starting with our proprietary pipeline, as you may have seen, we were delighted to be able to report very positive results from our first phase I clinical study for AT278. This is our ultra-concentrated, ultra-rapid-acting insulin, and again, I'll talk about those in more detail. We also earlier this month received clearance from the FDA for our next clinical study to be performed in the U.S. for AT247. This will be a three-day insulin pump study, and it's important to run this study in the U.S. It's a very important patient population of diabetic insulin users.
Earlier in the year, we were also awarded a GBP 2.8 million Innovate UK grant to support the phase II clinical development of AT247. As I spoke about previously, we also enter into technology partnerships with pharmaceutical companies, applying the Arestat technology to their products to enhance those. We entered into three additional collaborations so far in 2021 with Eli Lilly, Par Pharmaceutical, and Intas. We also continue to strengthen the team. We appointed Dr. Lindsey Foulkes as Chief Operating Officer shortly after the IPO and, of course, continue to extend and strengthen our intellectual property portfolio, and we're able to report a U.S. grant for one of our key patents again earlier this year. Moving on to our portfolio here, I'll take a few moments to talk through some of the key areas here.
What you're seeing on this slide is a combination of the Arecor development internal proprietary pipeline in the dark blue across our diabetes and specialty hospital care, and our partner programs in the orange. Starting with our internal development programs here, what's important to note here is that we're taking existing products that are already on the market, such as insulin for our diabetes products, and we're using the Arestat technology platform to enhance these. This is important because it means that the safety and efficacy, so the effectiveness of these products, is already known, which means we can follow abbreviated regulatory and development pathways to market. We're able to develop these at a lower cost, faster to market, and a lower risk compared to new drugs development here, where limited or no clinical data is required.
For our two lead products within our diabetes franchise, AT247 and AT278, we have best-in-class phase I clinical data, which I'll talk through shortly, but at both of those products. Our strategy here is to further demonstrate the superiority of these products in the clinic and the benefits to patients through to phase II clinical development prior to partnering for late-phase development commercialization. We're very much here targeting superior insulins in an existing GBP 6.4 billion market segment. With our partners, we'll be looking to gain market share within that segment under a technology licensing model. To give you some sense of value here, when we look at benchmarking in the area, we'd expect these licenses to be royalty-bearing in the range of mid-single digit to low double-digit royalty-bearing licenses here.
Perhaps moving on to our specialty hospital franchise, and I'll talk about the Hikma partnerships here. The first co-development and licensing agreement that we entered into with Hikma was for AT282. This is for an existing product, again, that's on the market. It's used within the hospital setting, but it's a powder that requires this complex mixing procedure prior to use. We've been able to use the Arestat technology to develop a stable liquid ready-to-use version of this product. With Hikma as our partner, we have the real potential here to bring the first differentiated, ready-to-go liquid version of this product to market. It's an existing around GBP 600 million market segment. We're working on an assumption here, shared by Hikma, that limited or no clinical data will be required for approval.
If this is the case, which needs to be validated, of course, with the regulators, this could be on market from 2023, 2024. Again, to give you some sense of the value here, Arecor estimate on market share, et cetera, here with the differentiated products come to market, this could peak in the region of low double digits in millions of GBP recurring royalty to Arecor. Perhaps moving on to one of our technology partnerships to talk through as an example here. If we move to AT220, this is a partnership where we worked with a partner on one of their proprietary products in development, applied the Arestat technology to further differentiate this.
Unfortunately, I can't tell you at this stage the company or the product, but I can tell you it's a biosimilar product. This means it's a copy of a complex and biological product that's on the market currently generating multibillion-dollar sales. We've been able to further differentiate this. This product is in late stage development. Arecor estimate that this could be on market from 2023 onwards and royalty bearing to Arecor. Again, to give you some sense of potential value here, we would estimate that this could bring in the region of low single digit millions in recurring royalty to Arecor. That gives you a sense here of the step-up in value as well as we move to the Arecor development programs that we plan to develop to that higher value inflection point prior to partnering.
As I mentioned, we entered into three new development collaborations with pharma partners through 2021, and these also offer the future for license potential as we move through and develop these enhanced versions of these products. Really here it's demonstrating that we are very much a commercially focused business. We build relationships with pharma companies, and we do deals, and these deals also validate the strength and the need for the technology. I'm now going to move on to talk a little bit more about our proprietary development pipeline and also our clinical data that we have for our lead diabetes products. Starting with our diabetes franchise here. For both of our products, we're taking existing insulins that are already on the market and enhancing them. Our goal here is very much to improve treatment outcomes for patients requiring insulin.
We're very much focused in a segment of the insulin market, which is prandial insulins or mealtime insulins, this is currently approximately GBP 6.4 billion market. There are around 56 million insulin users globally, and despite significant advancement in treatment options and care for people living with diabetes, it's still considered that only 6%, that's a single digit, 6%, of people living with diabetes are under good control. When we talk about control here, we're talking about good blood glucose control. Our first product, AT247, is taking existing insulin, and we've applied the Arestat technology to develop a ultra-rapid acting version of this. Essentially, we're accelerating the absorption of insulin post-injection.
The reason this is important is that the daily challenge for a person living with diabetes is to try and control their blood glucose inside a healthy target range, and this is shown by the light purple here on the schematic. They can do this mostly through most of the day and night, but their challenge becomes around meal times, because when we eat a meal, our blood glucose rises very rapidly, and somebody with diabetes needs to then take insulin to bring their blood glucose back inside this healthy range. The fact is that the current gold standard insulins that are on the market today, there's still room for improvement. There's still a requirement for faster-acting insulins that can help people with diabetes bring their blood glucose back into that healthy target range, much more quickly.
We can see this from the fact that on average, a person with diabetes spends around 25% of their time with their blood glucose too high, so in hyperglycemia, and about 5% of their time with their blood glucose too low in hypoglycemia. It's this time spent out of range that leads to the very serious disease complications associated with diabetes. For example, there's a 200% increase in all-cause morbidity, and 70% of people with diabetes die from cardiovascular disease. With AT247, we're very much targeting a best-in-class, fastest-acting insulin that can help people with diabetes better control their blood glucose, particularly around mealtimes. What we're really excited about with AT247, with its superior profile, is the potential for it to enable a fully automated artificial pancreas system, which could be life-changing for people with diabetes. Moving on to our clinical data.
We've performed a phase I clinical study in type 1 diabetic patients, male patients, comparing AT247 against two of the gold standard treatments from Novo Nordisk that are available on the market today. These being NovoRapid, their rapid-acting insulin, and Fiasp, their ultra-rapid acting insulin. What we're seeing here is the pharmacokinetic data. Essentially, this is levels of insulin in the blood post a single injection of either AT247, NovoRapid or Fiasp to the type 1 diabetic patient here. Now I'm going to talk about AT247 in relation to Fiasp, because this is the fastest acting comparator within this study. What we saw here, was a faster exposure and a faster initial onset of insulin. We also saw then a two-fold increase in its exposure in the first 30 minutes.
That's two times more insulin on board in the first 30 minutes, and a 1.5 times increase in that first 60 minutes. I'm talking about this first hour here because it's the critical period when we've eaten food, our blood glucose has risen very rapidly, and we need to get this insulin on board so it can start bringing down blood glucose as fast as possible. As you can probably see here, when we're comparing the green curve of 247 against Fiasp in the blue, we see a left shift of this curve. We also see an earlier offset of exposure of insulin as well. It's being cleared faster. It's this profile that we see as being ideal for use in an insulin pump setting and potentially to be able to enable an artificial pancreas system.
If we move on to the pharmacodynamic data that you're seeing here. Essentially, this is the glucose-lowering effect of the insulin. What we saw here when we're, again, comparing 247 in the green versus Fiasp in the blue, is we saw a nine-minute faster onset of action. That's the start of the glucose lowering of 247 against Fiasp. Then we saw a three-fold increase in glucose-lowering action in the first 30 minutes and a two-fold increase in the first 60 minutes. From the PK data, we'd seen that we'd accelerated the absorption of insulin. We had more insulin on board much more quickly. Importantly then from the pharmacodynamic data, we're seeing that this translates into a superior glucose-lowering action.
It's really this profile, remembering this is comparing against Fiasp, an ultra-rapid acting insulin, NovoRapid, here that we're showing that superior best-in-class, fastest-acting insulin profile for AT247. We really see the most benefit here for the use of type 1 diabetic patients, particularly in the insulin pump setting. Now moving on to AT278. For AT278, we're also taking existing insulin, applying the Arestat technology platform. In this case, we've developed very highly concentrated, so it's 500 units per mil, very rapid-acting insulin. I'll talk a little bit here around the challenge that we've had to overcome and the need for a concentrated rapid-acting insulin and also our headline clinical results. In terms of the challenge here, it's well known and demonstrated that as you increase the concentration of insulin, it slows down its time action profile.
You see a delayed peak and a longer duration of action. As I've just spoken about in relation to AT247, we need faster acting insulins to help people with diabetes better control their blood glucose and control their outcomes. I guess the question is then, why is there a need for a concentrated rapid-acting insulin? The need really is two-fold. There are a growing number of patients who require high daily doses of insulin. These are generally type 2 diabetic patients, particularly those co-presenting with obesity and insulin-resistant patients who are categorized as patients that need greater than 200 units per day. They have two options currently, this patient population. They can either use the only concentrated insulin that's on the market today. This is a 500 unit per ml insulin, which is Humulin R U-500 from Eli Lilly.
With this insulin, they get the benefits of lower injection volume and fewer injections per day, but it isn't rapid acting, there's a compromise here in terms of blood glucose control. They can use the currently available, rapid-acting insulins, NovoRapid, which is available at 100 units per ml, or Humalog, which is available at 100 and 200 units per ml. Here they get the benefits of a faster insulin, so improved blood glucose control. However, they need to inject higher injection volumes and potentially more injections per day here. With AT278 being a highly concentrated 500 units per ml but very rapid-acting insulin, you get the best of both worlds here. The convenience and compliance of lower injection volume and potentially fewer injections a day, but the speed and the blood glucose control and ultimately improved outcomes associated with the rapid action.
We also see very much the potential for AT278 to disrupt the insulin market. We see insulin delivery very much moving towards the next generation of miniaturized insulin pumps. Of course, to enable these, you need a very concentrated but very rapid-acting insulin. There's a real opportunity here to disrupt the market and particularly the underserved type 2 diabetic market, and move more of this patient population onto insulin pump therapy. AT278 has the potential to be the first, but maybe only ultra-concentrated, ultra-rapid acting insulin available to patients. Moving on to our clinical data that we reported earlier this week. We've performed a phase I clinical study. It was a first in man study comparing AT278 at 500 units per ml with NovoRapid, which is Novo's rapid-acting insulin, which is at 100 units per ml.
We have a five-fold increase in concentration for AT278. This study was in type 1 diabetic patients here, 38 male patients. What we were very pleased to be able to report on this study is that the trial met all primary and secondary endpoints here. We showed non-inferiority of glucose-lowering action compared with NovoRapid. Importantly, it really did exceed our expectations here and demonstrated a significantly accelerated early PK/PD profile compared to the same lower dose of NovoRapid. We have been able to demonstrate in this phase I clinical study, the real potential here for AT278 to be a highly concentrated and very rapid-acting insulin with superiority, in fact, against the current rapid-acting insulins that are available on the market.
In terms of next steps for our diabetes franchise, as I mentioned earlier, we've received clearance from the FDA for our IND for our next clinical study for AT247, which will be an insulin pump study that we're planning to initiate in the U.S., later this year. On the back of our excellent results and results that exceeded our expectations for AT278, we're now looking at and planning what's the next best clinical study to do here to further demonstrate the superiority of AT278. We'll look forward to providing more details on that once they're available. I'm now going to hand over to Susan, who will take us through the financial highlights and outlook.
Thank you, Sarah. Our financial highlights reflect the substantive progress we have made in H1. A key highlight was our successful AIM IPO on the 3rd of June, where we raised GBP 20 million investment from new and existing shareholders. Our H1 revenue of GBP 0.5 million was in line with expectations and included revenue recognized from new agreements with Lilly and Par from Q2 onwards. Our increase in R&D of GBP 1.9 million over the prior period of GBP 1.6 million includes investment in our AT278 102 clinical study. Our closing cash of GBP 22.1 million at 30 June reflects our successful placing plus existing cash resources. Moving on to our key financials. Our H1 revenue of GBP 0.5 million was recognized from formulation and development project. This is in line with H1 2020, and note that H1 revenue included a GBP 0.3 million milestone from a license agreement.
In the first half of 2020, we generated grant income from two Innovate grant project, which were in their final stages. The new GBP 2.8 million grant awarded in March was in the start-up phase in quarter two, we recognized relatively modest income of GBP 51,000. We expect an increased level of grant income in the second half of this year moving forward. Our investment in R&D reflects a modest increase over H1 20, we expect further increased investment from H2 onwards. We ended the period with a significantly improved balance sheet with cash of GBP 22.1 million, we are debt-free following the conversion of GBP 4.4 million of shareholder loan notes, which were converted into new ordinary shares prior to the IPO. Thank you, Sarah.
Thank you, Susan. Just really now to close the presentation, really looking at some of our milestones that we've achieved and slightly looking forward here. As you can see, we haven't really talked about 2020, of course, but we met all of our key goals in 2020 and entered into our new licensing agreements too, with Hikma Pharmaceuticals and Inhibrx, and we very much carried that momentum forward through into 2021. We received the GBP 2.8 million Innovate UK grant, successful IPO that Susan's just spoken about, our fantastic AT278 phase I clinical results, and also the FDA IND allowance to allow us to go into our next clinical study to further demonstrate the superiority of AT247. We expect to see further progress under our Hikma co-development licenses and also continued technology partnering growth.
We've had three partnerships that we've entered into, additional partnerships this year, and we expect to see that continued growth there. Really, if we talk about what's happening next, we'll be looking forward to reporting clinical results from AT247, the 103 study, that's the insulin pump study within 2020. As I've said, that further advancement of those Hikma collaborations, and we'd also expect to be entering into new collaborations, Hikma type co-development and licensing deals with our currently early-stage specialty hospital franchise as we take those products to partnering from the second half of 2022 onwards. That brings me to the end of the presentation today, and I'll now hand back to the operator for any questions.
Okay. Thank you, everybody. We can now begin the question and answer session. If you would like to ask a question, then please key star, then one on your telephone. If you decide to withdraw your question, key star, then two. Questions will be answered in the order received, and you'll be advised when to ask your question, and all of the lines remain on listen only. As you remind you can submit questions using the "Ask a Question" button on the Webex page. Wait, sorry, Webcast page. These questions will be answered after the call. We have a first question, and it comes from the line of Julie Simmonds. Please go ahead.
Morning. Lovely set of results and beautiful set of data last week. I'm just wondering on that, firstly on the sort of next trials likely to be done. Do you have any ideas of the size of the number of patients that you might be looking at, and has that thinking changed since you got the data at the weekend?
Yeah. Hi, Julie, and thank you. In terms of the patient populations, as you've probably seen from the results from so far from AT247 and AT278. The first AT247 study was 19 type 1 diabetic patients, and for AT278 it was 38 type 1 diabetic patients. The key here is that these clinical studies themselves are quite contained because we know the profile now and the PK/PD profile of these products, and we obviously know the PK/PD profiles of the gold standard products on the market that we're comparing against. We'd expect to be in the same range for our next clinical studies here. It's all down, of course, the study design and statistically how many patients we require to demonstrate superiority. I think we'll find ourselves in that kind of bracket of patients.
Perfect. That sounds encouraging because it doesn't sound too expensive. Just on the other side of the business, as far as the pharma development contracts are concerned, how many do you think you can take on? Clearly, you've been announcing them since you've been a public company. I'm assuming there are a couple that you're doing which predate that. Is there a limit on the number that you can sign?
Yeah. There's not really a limit here because the Arestat technology platform itself is very transferable and scalable, so it's a question of scaling that within Arecor. We are very much focused and targeted on entering into collaborations, where there is a good strategic fit with Arecor and where we see that there's motivation on both sides to take the products further forward in development. Really the upside potential here is around the technology licensing. That's where we can really build the value within the business. There's no limit, but we do carefully select our collaborations and partnerships.
Brilliant. Thank you very much.
Thank you. There's no further questions. I will now hand over the presentation to Chief Executive Officer, Sarah Howell, for closing remarks.
Perfect. Thank you. If there are no further questions.
Sorry. We've just had another question come through.
Okay.
Okay. It comes from the line of Franc Gregori.
I'm sorry, Sarah, I stopped you mid-flow.
That's okay.
It's a simple question. I think I've understood this. Let me get this right. You are developing compounds which are easier to develop, shall we say, because they're already proven, so the development risk is less. Does it also mean that your studies are going to be shorter? The reason I ask is because that would mean that your patent life is longer, and that means that your royalties, et cetera, would be longer. Have I got it right?
Yeah. You have, actually. As you said, because the safety and efficacy of these products is already known, we don't need to redemonstrate that. In the case of our insulins, our clinical studies are designed there to demonstrate the superiority because we're looking at improving, of course, patient outcomes here. For our insulin products, we expect to have patent protection out to at least 2037. As you may have seen from the pipeline slide, we'd estimate that these could be on market from as early as 2025. Yes, they have a good commercial in life, IP protection around those. We continue to look for and expand our avenues for protecting our products as we move through development.
Lovely. Thank you very much.
Thank you, Sarah. I'll hand back to you.
Perfect. Thank you. If there's no further questions, I'd like to thank you all for your time today, and to thank Susan for joining me. If you do have any further questions, then please don't hesitate to get in touch with us directly. We very much look forward to updating you on our progress again soon. Thank you.