Earnings Call: H1 2021

Sep 23, 2021

Good day, ladies and gentlemen, and welcome to the Arcor Therapeutics Interim Results for the 6 Months Ended 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. I would 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, and thank you for joining us today for Aracore Therapeutics interim results. We're delighted to be taking you through the company's performance over the first half of twenty twenty one. And joining me here today is Susan Lowther, our Chief Financial Officer. So moving on to today's presentation, before we begin proceedings, And I will quickly bring your attention to the standard disclaimer slide, which is included in the presentation for completeness. So our presentation team, myself and CEO and Susan Lowther, CFO. So just to give you a little bit of background on ARROCORE. At ARROCORE, we've developed an innovative and proprietary formulation technology platform, ARRASTAT, that we use to enhance the properties of existing therapeutic products. So these are existing medicines. We're very much focused on improving performance of these products and ultimately patient outcomes. And as a technology platform company, intellectual property is absolutely critical to us and we have a very broad and robust is absolutely critical to us and we have a very broad and robust IP protection of both the ARISTAT technology platform itself, but also the enhanced versions of products that we develop using this platform. We are a clinical stage company with our 1st area of therapeutic focus in the diabetes space and we have 2 products within clinical development within this franchise, AT-two forty seven, our ultra rapid acting insulin and AT-two seventy eight are ultra concentrated ultra rapid acting insulin. And I'll talk about those in more detail shortly. And more recently, we've entered into a second franchise area within specialty hospital space. And these again are products that are already on the market, except they're powders that require a complex mixing procedure prior to use. And we're able to use the ARISTAT technology to develop stable liquid, ready to use and ready to administer versions of these products. So essentially ready to go versions of these products that can bring benefits to both health care providers and safety benefits to patients. And to a certain extent, we validated commercial potential within their specialty hospital space as we entered into 2 co developments and licensing deals with Hikma Pharmaceuticals for 2 of our pipeline products in 2020. And our strategy here across our internal development pipeline is very much to develop these 2 closer to market to a higher value inflection point prior to partnering for late phase development commercialization under a pretty standard technology licensing model. So we'd expect these to be milestone and royalty bearing. So 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's proprietary to them. Now this is a revenue generating model. It generates revenues from day 1 as our partners pay ARIKOR to apply the ARISTAT technology and develop novel formulations of their products. And also at the end of these studies, once we've developed an enhanced version of their products, they have the to commercialization under a technology licensing model. So 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. So 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. And as you know, we recently entered into a very successful AIM IPO back in June this year raising £20,000,000 and this is really to take those proprietary products to that partnering value inflection points and ultimately to build a significant and sustainable business. So moving on to our operational highlights. Later in the presentation, Susan will talk us through the financial highlights as well. So starting with our proprietary pipeline, as you may have seen, we were delighted to be able to report very positive results from our 1st Phase 1 clinical study for AT-two seventy eight. So 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 AT-two forty seven. This will be a 3 day insulin pump study and it's important to run this study in the U. S. As very important patient population of diabetic insulin users. Earlier in the year, we were also awarded a £2,800,000 INNOVATE UK grant to support the Phase 2 clinical development of AT-two forty seven. And as I spoke about previously, we also enter into technology partnerships with pharmaceutical companies applying the ARISTAT technology to their products to enhance those. And we entered into 3 additional collaborations so far in 2021 with Eli Lilly, Par Pharmaceuticals and Intas. We also continue to strengthen the team. We appointed Doctor. Lindsay Folkes as Chief Operating Officer shortly after the IPO and, of course, continue to extend and strengthen our intellectual property portfolio and were able to report a U. S. Grant to one of our key patents again earlier this year. So moving on to our portfolio here, I'll take a few moments to talk through some of the key areas here. So what you're seeing on this slide is a combination of the Arokor development internal proprietary pipeline in the dark blue across our diabetes and specialty hospital care and our partner programs in the orange. So 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 ARISTAT technology platform to enhance these. And 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. So 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. So for our 2 lead products within our diabetes franchise, AT-two forty seven and AT-two seventy eight. We have best in class Phase I clinical data, which I'll talk through shortly, but that both of those products and our strategy here is to further demonstrate the superiority of these products in the clinic and the benefits to patients through to Phase 2 clinical development prior to partnering for late phase development commercialization. We're very much here targeting superior insulins in an existing $6,400,000,000 market segment. And with our partners, we'd 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 to single digit to low double digit royalty bearing licenses here. So perhaps moving on to our specialty hospital franchise, and I'll talk about the Hikma partnerships here. So the first co development and licensing agreement that we entered into with Hikma was for AT-two eighty two. So 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. And we've been able to use the ARISTAT technology to develop a stable liquid ready to use version of this product. And with Hikma as our partner, we have the real potential here to bring the 1st differentiated ready to go liquid version of this product to market. And it's an existing around $600,000,000 market segment. And we're working on assumption here shared by Hikma that limited or no clinical data will be required for approval. And if this is the case, which needs to be validated, of course, with the regulators, this could be on market from 2023, 2024. And again, to give you some sense of the value here, Arocor would estimate on market share, etcetera, here with differentiated products come to market. This could peak in the region of low double digits in 1,000,000 of recurring royalty to ARROCOL. And then 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 ARISTAT 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. So this means it's a copy of a complex and biological product that's on the market currently generating multibillion dollar sales and we've been able to further differentiate this. This product is in late stage development. So Aricore would estimate that this could be on market from 2023 onwards and royalty bearing to Aricor. And again, to give you some sense of potential value here, we would estimate that this could bring into in the region of low single digit millions and recurring royalty to Aricor. So that gives you a sense here of the step up in value as well as we move to the Aracore development programs that we plan to develop to that high value inflection point prior to partnering. And as I mentioned, we entered into 3 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. And 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. So 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. So starting with our diabetes franchise here, for both of our products, we're taking existing insulins that are already on the market, enhancing them. And 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. And this is currently approximately $6,400,000,000 market. There are around 56,000,000 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. And when we talk about control here, we're talking about good blood glucose control. So our first product, AT-two forty seven, is taking existing insulin and we've applied the ARISTAT technology to develop an ultra rapid acting version of this. So essentially, we're accelerating the absorption of insulin post injection. And 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. And they can do this mostly through most of the day and night, but their challenge becomes around mealtimes 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. And 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. And we can see this from the fact that on average, a person with diabetes spends around 25 percent 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. And it's this time spent out of range that leads to very serious disease complications associated with diabetes. So for example, there's a 200% increase in all cause morbidity and 70% of people with diabetes die from cardiovascular disease. So with AT-two forty seven, 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. And what we're really excited about with AT-two forty seven 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. So moving on to our clinical data. We've performed a Phase 1 clinical study in Type 1 diabetic patients, male patients, comparing AT-two forty seven against 2 of the gold standard treatments from Novo Nordisk that are available on the market today, these being Novorapid, their rapid acting insulin and PHYAS, their ultra rapid acting insulin. And what we're seeing here is the pharmacokinetic data. So essentially, this is levels of insulin in the blood post a single injection of either AT-two forty seven, Novorapid or PHEAS to the type 1 diabetic patient here. And now I'm going to talk about AT-two forty seven in relation to PHEAS because this is the fastest acting comparator within this study. And what we saw here was a faster exposure and a faster initial onset of insulin. And then we also saw then a twofold increase in exposure in the first 30 minutes. So that's 2x more insulin on board in the first 30 minutes and a 1.5x 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. And as you can probably see here, when we're comparing the green curve of 247 against FASD in the blue, we see a left shift of this curve. So we also see an earlier offset of exposure of insulin as well. So it's being cleared faster. And it's this profile that we see as being ideal for use in an insulin pump setting and potentially be able to enable an artificial pancreas system. Then if we move on to the pharmacodynamic data that you're seeing here, so essentially, this is the glucose lowering effect of the insulin. So what we saw here when we're again comparing 2 47 in the green versus PHYASP in the blue is we saw a 9 minute faster onset of action. So that's the start of the glucose lowering of 2 47 against PHYASP. And then we saw a threefold increase in glucose lowering action in the 1st 30 minutes and a twofold increase in the 1st 60 minutes. So from the PK data, we'd seen that we'd accelerated the absorption of insulin, we had more insulin on board much more quickly. And importantly then from pharmacodynamic data, we're seeing that this translates into a superior glucose lowering action. And it's really this profile, remembering this is comparing against FIAS when ultra rapid anti insulin, Novarapid, here that we're showing that superior best in class fastest acting insulin profile for AT-two forty seven. And 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 AT-two seventy eight. So for AT-two seventy eight, we're also taking existing insulin, applying the ARISTAT technology platform. But in this case, we've developed very highly concentrated, so it's 500 units per ml, very rapid acting insulin. And 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. So 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. So you see a delayed peak and a longer duration of action. And as I've just spoken about in relation to AT-two forty seven, we need faster acting insulins to help people with diabetes better control their blood glucose and control their outcomes. But I guess the question is then why is there a need for a concentrated rapid acting insulin? The need really is twofold. There are a growing number of patients who require high daily doses of insulin. So 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. And they have 2 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 RU500 from Eli Lilly. So with this insulin, they get the benefits of lower injection volume and fewer injections per day, but it isn't rapid acting. So there's a compromise here in terms of blood glucose control or they can use the currently available rapid acting insulins, Novorapid, which is available at 100 units per ml or Humalog, which is available at 102 100 units per ml. So 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. So with AT-two seventy eight 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 AT-two seventy eight to disrupt the insulin market. We see insulin delivery very much moving towards the next generation of miniaturized insulin pumps. And of course, to enable these, you need a very concentrated but very rapid acting insulin. So there's a real opportunity here to disrupt the market and particularly the underserved type 2 diabetic market move more of this patient population onto insulin pump therapy. And AT-two seventy eight has the potential to be the 1st, but maybe only ultra concentrated ultra rapid acting insulin available to patients. So moving on to our clinical data that we reported earlier this week. So we've performed a Phase 1 clinical study. It was a first in man study comparing 80,278 of 500 units per mil with Novorapid, which is Novo's rapid acting insulin, which is at 100 units per mil. So we have a fivefold increase in concentration for AT-two seventy eight. This study was in type 1 diabetic patients here, 38 male patients. And what we were very pleased to be able to report on this study is that the trial met all primary and secondary endpoints here. So we showed non inferiority of glucose lowering action compared with Novarapid. But importantly, it really did exceed our expectations here and demonstrated a significantly accelerated early PKPD profile compared to the same lower dose of Novorapid. So we have been able to demonstrate in this Phase I clinical study the real potential here AT-two seventy eight 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. So 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 AT-two forty seven, which will be an insulin pump study that we're planning to initiate in the U. S. Later this year. And on the back of our excellent results and results that exceeded our expectations for AT-two seventy eight, we're now looking at and planning what's the next best clinical study to do here to further demonstrate the superiority of AT-two seventy eight. And we'll look forward to providing more details on that once they're available. So 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 June, where we raised GBP 20,000,000 investment from new and existing shareholders. Our H1 revenue of GBP 500,000,000 was in line with expectations and included revenue recognized from new agreements with Lilly and Par from quarter 2 onwards. Our increase in R and D of €1,900,000 over the prior year prior period of €1,600,000 includes investment in our AT278-102 clinical study. Our closing cash of €22,100,000 at 30 June reflects our successful placing plus existing cash resources. Moving on to our key financials. Our H1 revenue of €500,000 was recognized from formulation development projects. This is in line with H1 2020. And note that H1 revenue included a $300,000 milestone from a license agreement. In the first half of twenty twenty, we generated grant income from 2 Innovate grant projects, which were in their final stages. The new GBP 2,800,000 grant awarded in March was in the start up phase in quarter 2, so 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 and D reflects a modest increase over H120 and we expect further increased investment from H2 onwards. We ended the period with a significantly improved balance sheet with cash of $22,100,000 and we are debt free following the conversion of $4,400,000 of shareholder loan notes, which were converted into new ordinary shares prior to the IPO. Thank you, sir. Thank you, Susan. So just really now to close the presentation, really looking at some of our milestones that we've achieved and slightly looking forward here. So 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 to with Hikma Pharmaceuticals and Hibberics. And we very much carried that momentum forward through into 2021. So we received the £2,800,000 Innovate UK grant, successful IPO that Susan's just spoken about, our fantastic AT-two seventy eight Phase 1 clinical results and also the FDA IND allowance to allow us to go into our next clinical study to further demonstrate the superiority of AT-two forty seven. We expect to see further progress under our Hikma co development licenses and also continued technology partnering growth. We've had 3 partnerships that we've entered into additional partnerships this year and we expect to see that continued growth there. So really, if we talk about what's happening next, we'd be looking forward to reporting clinical results from AT-two forty seven, the 103 study, that's the insulin pump study within 2020. As I said, that further advancement of those Hikma collaborations. And we'd also expect to be entering into new collaborations Hikma type co developments and licensing deals with our early currently early stage specialty hospital franchise as we take those products to partnering from the second half of twenty twenty two onwards. So 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. Questions. We have a first question and it comes from the line of Julie Simmons. Please go ahead. Good morning. Lovely set of results and beautiful set of data last week. I'm just wondering on that, with the firstly, on the sort of next trials likely to be done. I mean, 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? Yes. Hi, Julien. Thank you. So in terms of the patient populations, as you've probably seen from the results from so far from AT-two forty seven and AT-two seventy eight. The first AT-two forty seven study was 19 type 1 diabetic patients and for AT-two seventy eight, it was 38 type 1 diabetic patients. So the key here is that these clinical studies themselves are quite contained because we know the profile now and the PKPD profile of these products. And we obviously know the PKPD 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, but I think we'll find ourselves in that kind of bracket of patients. Perfect. That sounds encouraging because it doesn't sound too expensive. And just on the other side of the business, in terms of the pharma development contracts are concerned, I mean, how many do you think you can take on? I mean, 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. But I mean, is there a limit on the number that you can sign? Yes. I mean, there's not really a limit here because the Arasat technology platform itself is very transferable and scalable. So it's a question of scaling that within ARICORE. We are very much focused and targeted on entering into collaborations where there is a good strategic fit with Aracore and where we see that there's motivation on both sides to take the products further forward in development because really the upside potential here is around the technology licensing. That's where we can really build the value within the business. So 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. So if there are no further questions, we'd like Sorry, we've just had another Okay. Okay. It comes from the line of Frank Gregoria. I'm sorry, Sarah. I stopped you mid flow. It's a simple question. I think I've understood this. Let me get this right. So you are developing compounds which are easier to develop, should 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? And the reason I ask is because that would mean that your patent life is longer and that means that your royalties, etcetera, would be longer. Have I got it right? Yes, yes, you have actually. So as you said, because the safety and efficacy of these products is already known, we don't need to redemonstrate that. So 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. And for our insulin products, we expect to have patent protection out to at least 2,037. And as you may have seen from the pipeline slide, we'd estimate that these could be on market from as early as 2025. So yes, they have a good commercial in life IP protection around those. And we look 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. Okay. Thank you. So yes, so if there's no further questions, I'd like to thank you all for your time today and to thank Susan for joining me. Of course, if you do have any further questions, then please don't hesitate to get in touch with us directly. And we very much look forward to updating you on our progress again soon. Thank you.