Earnings Call: Q2 2021

Jul 8, 2021

Good afternoon, and welcome to the Heidelberg Pharma Half Yearly Financial Report 20 21. The call will be hosted by Doctor. Jan Schmitt Brand, CEO and CFO of Heidelberg Pharma AG. My name is Molly, and I'll be your coordinator for today's conference. For the duration of the call, the lines will be on listen only. However, at the end of the call, you will have the opportunity to ask questions. On your telephone keypad and you will be connected to an operator. I'm now handing you over to Doctor. Jan Schmidt Brand, CEO and CFO to to begin today's conference. Please go ahead. Thank you, Molly. Hello, ladies and gentlemen, and welcome to the Heidelberg Pharma conference call to discuss our results for the first half of twenty twenty one and to provide a business update. My name is Jan Fried Brandt, and I am the CEO and CFO of the company. Joining me on the call today is my colleague, Professor Andreas Pall, Chief Scientific Officer and Katja Arnold, our Investor Relations Consultant. Please note that this presentation is available for download on the Heidelberg Pharma website. This conference call is being recorded and a replay will be available on our website after the live event. Before I begin, let me remind you that we will be making forward looking statements on this call as well as during the question and answer session. Please see our Safe Harbor statement here on Slide 2. For a more detailed discussion of the risks and uncertainties affecting our business, please see the 2020 management report, which is available on our website. Please turn to slide 3. On the call today, we will give you a brief corporate overview and outline key achievements for the year to date. We will then provide an update on our proprietary ATEC programs as well as our partner projects. This will be followed by a review of our financial results and an outlook for the year ahead. At the end of our prepared remarks, we will have a Q and A session and we invite you to ask questions in English or in German. Please turn to Slide 4. This slide provides a quick overview of our company. As a reminder, we are the 1st to develop a completely new mode of action in cancer treatment by using the toxin Ammonetine to develop anticancer therapies. Ammonetine is a natural toxin found in the death cat mushroom And has a unique biological modification, the inhibition of RNA polymerase II, which could serve as the basis for developing highly effective innovative drugs. We use our proprietary and innovative technology to manufacture antibody targeted amyloidine conjugates, We call them ATAX. With our novel proprietary technology, we seek to provide cancer patients new treatment options that improve efficacy, overcome resistance mechanisms and kill both proliferating and dormant tumor cells. We plan to use a biomarker to stratify the patient population and expedite clinical development. Our business model is based on 3 pillars to develop a proprietary ATEC pipeline, to partner our ATEQ technology platform and to generate upside potential from legacy from our legacy clinical portfolio. Please turn to Slide 5. As you can see from this slide, We have a substantial and growing pipeline of proprietary ATEC programs, collaboration programs as well as 2 partnered legacy clinical assets. We will update you on key programs in the next few minutes. We made good progress in the first half of the year in building our company. Earlier this year, we were pleased to have Doctor. Matthias Lohr join us as Chief Development Officer, a newly created position. And Doctor. Anders Sush was promoted to Chief Medical Officer. The team has a wealth of experience that is critical as we advance the development of our ATEC programs, including bringing HCP-one hundred and one into the clinic. We have also strengthened our financial footing. In December 2020, our main shareholder, Divini, made a €15,000,000 loan commitment, of which we have drawn €10,000,000 up to now. In March followed a €30,000,000 financial commitment by Divini, which enabled Our going concern and planning for our R and D activities in the next months. With Vivendi's backing, We were able to recently complete a €20,000,000 private placement. I'm particularly excited that we were able to attract new institutional investors with this financing. This included Polar Capital and Invus to well known and well respected life science specialists. With a recent private placement and remaining commitment from DVE, We have sufficient funds for mid-twenty 22 based on our current planning. This was an important step into expanding our shareholder base internationally. I want to briefly discuss the impact of COVID-nineteen on our business. We have been fortunate that our internal day to day business processes have only been affected to a small extent. However, we had to deal with external limitations. We experienced some delays among our collaboration partners with early stage projects due to capacities and temporary laboratory closures. Patient recruitment at some of our partners was impacted And clinical sites report lack of capacities due to the pandemic. There still remain risks in terms of the logistic change, Restrictions in laboratory and manufacturing capacities, processing bottlenecks at regulatory authorities, especially due to priority processing of COVID-nineteen studies, but also limited availability of resources and access restrictions at trial centers. On Slide 8, my colleague Andreas Pahl will now summarize the R and D highlights starting with the ATEC technology. Hello, everybody. I will start with our lead Proprietary product candidate HGP-one hundred and one, ABCM-eight eighty. We have received regulatory clearance in the U. S. To initiate our first in humans trial with this exciting compound and are continuing to initiate trial sites. In Germany, we submitted the clinical trial application to the Paul Ehrlich Institute in March 2021, And we are in the approval process. We expect to be able to start enrolling patients in the Q3 this year. I will provide more details later in the presentation. Looking beyond our lead drug candidates, we are continuing our non clinical development work with 2 other ATEC candidates. Patient P102 is a CD37 ATEC, which we expect to develop for the treatment of B cell malignancies such as 1 Hodgkin's lymphoma and HDP-one hundred and three as a PSMA for the treatment of prostate cancer. Preclinical data on both of these programs were presented at the American Association of Cancer Research or AACR Annual Meeting this spring. The data presented show that CD37 ATAX In PSMA, it takes a strong antitumor activity and inhibit the growth of hematologic ocelli tumors even at low doses. The favorable safety profile due to the good tolerability of these ATECs support that they may represent promising new therapeutic options against these cancer types. In the first half of the year, we have reached important milestones for the manufacturing of htp-one hundred and two and htp-one hundred and three at CMOs, the batches of antibody were produced with very high yields. We also reinforced the development team to get the clinical program started. In February, data from our HER2 targeting proscucinab ATIC against triple negative breast cancer were published in the peer reviewed journal Science Translational Medicine. This data we are jointly published with a research group from the School of Medicine Indiana University in Indianapolis. In preclinical models, this HER2AT showed strong efficacy for treating triple negative breast cancer with low HER2 expression And concomitant hemovagous deletion of chromosome 17p in preclinical knowledge. Furthermore, We have 2 ATEC induced immunogenic cell death of the tumor cells, the type of cell death that elicits an immune response. As a consequence, when combined with the new checkpoint located therapy and preclinical HER2 low breast cancer models mimicking GIBC, The efficacy of the HER2 a tick treatment was greatly increased. This is important because this subgroup of patients does not have efficacious treatment options available. Please turn to Slide 9. Let me now turn into our ATEC technology partnerships. We are delighted that our partner Magenta Therapeutics continues to make good progress with the ATEC programs. MGTA-one hundred and seventeen is Magento's lead targeted conditioning product candidate. This design is to selectively deplete stem cells from patients prior to transplant of hematopoietic stem cell based gene therapy to reduce the need for high dose or high intensity chemotherapeutic agents Or in the case of gene therapy applications to potentially eliminate the need for chemotherapeutic agents altogether. MGTA-one hundred and seventeen targets the CB-one hundred and seventeen receptor, which is highly expressed on cell surface of hematopoietic stem cells and leukemia cells, making it an ideal target for conditioning across broad sets of diseases, Including certain blood cancers, hemoglobinopathies, sickle cell disease and better Telephremia and inherited metabolic disorders. Magenta has announced its plan to submit an IND to begin clinical testing in mid 2021 with a plan to start the 1st immunos trial in the second half of this year. The 2nd placenta ATEC program CD45 ADC is currently in preclinical testing and various transplant and autoimmune disease programs. We were also very pleased to announce that Takeda has extended its research agreement with us by 18 months to the end of 2022 and has nominated a new target. For this, we will receive a payment for technology It will not influence our guidance. Please turn to slide 10. It has been gratifying to see the progress our partners for our legacy clinical programs have made. Let me start with TLX, which is developing TLX250 CDX, a radio labeled form of the antibody gurantuximab, which binds to the tumor specific antigen CA9 on clear cell renal cell carcinoma. Telix is evaluating GLX250 CDX for diagnosing renal cancers using positron emission, tomography, PET and the globus multicenter Phase III trials with sites in Europe, Turkey, Australia, Canada and the U. S. The first U. S. Patient post dose in early 2021 And overall recruitment in this global study is expected to complete in mid-twenty 21, so very soon. Helix has received a BRCA therapy designation from the FDA for this program. Helix has also successfully completed the Japanese Bridging study. The study achieved its objectives demonstrating safety and tolerability. There was no difference between Japanese and Caucasian patients in these areas. Recently in June, a Phase I study in bladder cancer called CYP UP was initiated with TLX250 CDx. The study is exploring the clinical utility of TLX to 50 TDx to image other cancers, the ureterina cancer and an indication where conventional imaging has limitations. Our partner, Retin, has also made some nice progress advancing the development of RHB-one hundred and seven, an oral Serum protease inhibitor. The Phase twothree trial in patients with mild to moderate COVID-nineteen started in early 2021 and is currently ongoing. Linked Health Group has finally started a Phase 1 clinical trial with LH011 in patients with locally advanced metastatic pancreatic cancer. This trial is expected to complete by the end of 2021. Coming now to Slide 11 and HDP-one hundred and one. We are excited about the progress made with HDP-one hundred and one. As I mentioned earlier, We have received clearance from the SFDA to start clinical testing. We also submitted the Clinical trial application in Germany with the Prognelli Institute. We expect a decision from the German regulatory authorities in the Q3 of this Yes. For us, these were very important milestones and the prelude to the initiation of the clinical centers in the U. S. We focus now on initiating the trial as soon as possible. In the U. S, we have to deal with an additional challenge As clinical sites in the U. S. Have specific requirements for the equipment used to prepare the infusion of drugs with the potential toxicity For the clinical staff. We are moving 4 speed ahead with the necessary steps, but we will need additional time for this. So the start of The patient recruitment will be delayed for technical reasons. Currently, we plan with 6 to 8 weeks. Our first clinical data is still expected to be available in 2022. Please turn to Slide 12. Here are some more details about the planned clinical trial. The study is an open label, nonrandomized, Multi Center Phase I2a trial evaluating HDP-one hundred and one in patients with relapse or refractory multiple myeloma for whom limited treatment options exist. The primary aim of the Phase I dose escalation part is to determine the maximum tolerated dose. Up to 36 patients are planned to be enrolled in the first part of the study. We will evaluate if there are any dose limiting toxicities in the patients and establish a recombinant dose for the Phase 2 part. The study's theme as depicted in the lower part of the slide ensures a safe dose escalation to reach a therapeutical effective dose in these patients who have limited or no geopreotide options. The primary objective of the Phase To a part will be to assess the preliminary antitumor activity of HTP-one hundred and one. Our prospective patients are planned to be enrolled and patients will be stratified based on our biomarker, the 17p deletion status. Given that the first Part of this trial is a dose escalation study. The timing as to when we might have first data is difficult to predict, But we plan for initial data next year. As already mentioned, we plan to start enrolling patients as soon as possible. Yes. I would like to give back to Jan for the financials. Please turn to Slide 14. Thank you, Andreas. As a reminder, our fiscal year ends on November 30, and therefore, the first half ends on May 31. Look on Slide 14, in the 1st 6 months of 2021 fiscal year, Heidelberg Tom has generated sales revenue and income totaling €1,100,000 thus falling short of the previous figure of €3,900,000 Sales revenue totaling €800,000 comprises the collaboration agreements for Alibaba Pharmacy Research, ATEC Technology of €600,000,000 and its service business of €200,000 Sales revenue in the prior year quarter was boosted by revenue generated from supplying the Argentine linker to partners. Other income of €300,000 was Also lower than the previous year's figures of €4,700,000 and comprised income from the reversal of unused accrued liabilities, government per grants and other items. Operating expenses including depreciation, amortization impairment amounted to €14,000,000 slightly above the previous year figures of €13,200,000 Looking briefly at the breakdown of expenses. Cost of sales is directly related to sales revenue. This cost is €2,000,000 in the first half, mainly related to customer specific research and for preparatory steps for the next supply of our multi linkers to Lysylchine Partners. Research and development costs rose year over year to €10,100,000 due to the expansion of cost intensive external manufacturing for all three ATEC projects and preparations for the clinical trial with At 72% of operating expenses, R and D remained the largest cost item. Administrative costs were €1,700,000 and include the costs for the holding company activities and the stock exchange listing. Other expenses for business development, marketing and commercial market supply activities, which mainly comprises staff and travel costs of €200,000 Net loss was increased to €13,100,000 due to revenue being lower and higher expenses. Loss per share was €0.42 up from €0.33 in the previous year. Please now look on Slide 15. The group had cash and Cash equivalents of €900,000 at the close of the first half, but had a remaining loan commitment from DEVE. Average cash usage per month was €2,300,000 slightly below our guidance of €2,500,000 to €2,900,000 Equity as of the end of May was minus €100,000 This corresponded to an equity ratio of minus 0.5%. In March 2021, DEVIC confirmed a new financial commitment of up to €30,000,000 which enabled the company to prepare its 2020 financial statements on a going concern basis. Based on this, we started the process of a capital raise. In June 2021, we raised gross €20,000,000 from a private placement with select institutional investors and CVV using €12,500,000 from the latest commitment. Cash rates is secured until mid-twenty 22 based on the current budget planning. Please turn to Slide 16. On this slide, you can see some basic stock performance data, ownership information following the capital increase and the latest analyst recommendations. Holding the green light from the FDA To initiate clinical development of this first ATEC, Heidelberg Pharma significantly intensified its investigations activity in the first half of the year. Virtual meetings were held with many specialist biotech investors across Europe and U. S, including those new to the Heidelberg Pharma story. Investors showed strong interest in our ATEC technology, its potential and the company's strategy. Brian Garnier and company initiated research coverage in April. In line with the increase in the share price And reflecting the issue of new shares, the market capitalization of Heidelberg Pharma doubled from €130,900,000 to €266,600,000 compared to the end of H1 2020. Our Annual General Meeting was held on 18th May 2021.81 point 57% of the current share capital were represented. All resolutions proposed by the management were adopted with a large majority. Let me now wrap up with you what you can look for during the rest of 2021. Please Turn to Slide 18. We confirm our full year financial guidance issued on 25th March 20 21. Like expenses and funds used, sales revenue has so far been below our expectations. We still plan to generate the majority of sales revenue in the second half of the year. As a reminder, this includes potential income from existing ATEC collaborations, including early research contracts. R and D costs are expected to increase mainly due to the clinical trial, manufacturing and preclinical studies for pipeline projects and cash requirements will increase along with that. Please turn to Slide 2019. We expect 2021 to be another busy and productive year at Hysterelijk Pharma. HCB-one hundred and one is about to enter clinical development for the treatment of multiple myeloma. Clinical centers in the United States and in Germany are currently preparing to enroll patients as the education process for the clinical studies moving ahead. Dosing of the first patients is now scheduled to take place in the Q3 of 2021. Meaning, for patient data is expected to become available in 2022. The application to conduct a clinical trial in Germany is currently being examined by the Paul Eric Institute with high performer expecting a decision to be made during the Q3. Preclinical development for the other ATEC candidates, HTP-one hundred and two and HTP-one hundred and three is slated to begin still this year. Turning to our collaborations. Our partner Magenta plans to submit the IND for Magenta-one hundred and seventeen midyear. Dosing of the first patient is planned in the second half of twenty twenty one. In addition, Magenta is working on the preclinical validation of a CD45 ATEC that could be used for the treatment of various autoimmune diseases such as multiple sclerosis. Our partner Takeda will conduct preclinical testing of the AJEP technology on a new target molecule. Regarding our legacy clinical programs, the clinical product candidates outside the ATIC technology are being further developed by our partners Helix and Radix Link Health. As you can see, there's a lot ongoing. Telx expects to complete patient recruitment in the Phase III SIRCON trial later this year And will evaluate TLX250 CDX in other indications. Retil Biopharma plans to test RHB-one hundred and seven as the 3rd arm in a Phase I2a combination study in advanced cholangiocarcinoma subject to discussions with the FDA And they are also continuing the Phase twothree trial with RHB-one hundred and seven in patients with mild to moderate COVID-nineteen. Link Health plans to complete the Phase I clinical trial in Chinese patents with locally advanced metastatic pancreatic cancer at the end of 2021. All research and development activities for our out license legacy programs are performed by our partners. Heidelberg Pharma is not involved. However, as a licensor, we would share some of the revenue associated with any successful development. Please turn to Slide 20 now. We have had a profound belief that the ADC field is an exciting one to be part of and it is an area of research and development that is producing highly promising therapies. We have seen a lot of recent progress in the field by way of financing transactions and regulatory approvals. Just to mention some highlights, the FDA approved ZYNONTA from ADC Therapeutics as a single agent treatment for adult patients With relapse of respiratory disease, large species lymphoma as the first and only CD19 targeted ADC. Chitos Kadila is marketing Wibira, the first ADC biosimilar of Kadcyla. ADCs are also gaining strategic importance in the pharmaceutical industry and are expanding the range of therapeutic options. Daiichi Sankyo has reported that it plans to invest over $13,800,000,000 through 2025 in 3 comprehensive ADC programs evaluating different solid tumors under the development alliance with AstraZeneca and Bristol Myers Squibb acquired from I-thirty an anti-forty one ADC targeting solid tumors in a US615 million dollars collaboration. We are excited about what the future holds for us and are driven by our vision of developing this new generation ADC to address major challenges in cancer therapy. On slide 21, you can find our current conference schedule for the first half of the year. We thank you for your time and are happy to take your questions now. Thank you. Thank you. Please ensure that your line is unmuted locally. You'll then be advised when to go ahead with your question. We do have a question come through. The first question today comes from the line of Olga Smollett Seve calling from Brian Garnier. Please go ahead. Good afternoon, Jan and Andres. Congratulations on the ongoing Thank you for taking my questions. Firstly, maybe could you provide a little bit more clarity on the supplementary tests that clinical sites in the U. S. Are acquiring? And would this requirements apply for German sites as well as specific for U. S. Only? Yes, sure. Thank you. Andreas, do you want to take this one? Yes, sure. To start with the second one, it's easy, but it's not a trial for the German side, it's for U. S. Side specifically. And like mentioned, so we need to run a compact Capability test and stability testing, so that the dedicated devices used by them are in compliance with our clinical Try material. So that's an additional asset that needs to be performed, which is currently ongoing. That's helpful. Thank you. And maybe just a clarification on the clinicaltrials dot gov. There is currently no mentioning of 17p deletion cohort analysis. So I assume that's basically the portfolio can now say that it's planned. And maybe just to specify again, would that be 17p specific probe or to 3 based one? So for the post escalation, it's indeed a post hoc analysis. And to be very specific, it will be a pull out to a specific probe because otherwise You need to argue about correlation. So we are really aiming for Toll R2A, which is a major subunit of the RNA polymerase to really You take the target of the amenity in by the TRICAREFA. That's very helpful. And If I may, just one last question. Basically, on the agreement with Takeda, should we expect the in licensing decision by the end of 18 months? And maybe do you have some visibility on how many targets could be considered? Maybe it's a bit early to say so. As we have reported earlier, There was a couple of changes in the strategy that was implicitly pursued by Takeda in terms of target field of targets and specific targets. So I would say It's too early for a concrete prognosis right now. That's clear. Thank you. And thank you for taking my questions. Yes, you're welcome. We have no further questions in the queue at this time. We have no further questions coming through on these phone lines. So I'd like to hand the call back for any closing remarks. Thank you. Yes. Thank you, Molly. So yes, thanks everybody for attending. And And look forward to an exciting and successful second half of the year at Hylua Pharma. Thank you and bye bye. Thank you for joining today's call. You may now disconnect your lines.