Hello, welcome to the first half reporting presentation of Circio Holding ASA. My name is Lubor Gaal, I'm the CFO, and I'm here with Erik Wiklund, the CEO. Well, we are delighted to present an update and an overview of the first half year, which was certainly very eventful. With that, I would like to start with the presentation. So as you all know, we had a very busy first half year, and we communicated a strategic shift in the first quarter through the circular RNA research. As you all know, we have been building on the research during all of 2022, and circular RNA, we have communicated, will become a very important innovation engine for the future of Circio.
In the first half year, we decided to make this the primary focus of the company and consequently deprioritize the future clinical development of TG01 and TG02. To reflect those changes more fully to the outside world, we decided also to rebrand the company, to really show the evolution that this company has taken from its origin in cancer vaccines, well, to now to circular RNA. Now, we presented that, of course, and we're very glad to hear that the shareholders approved that in the AGM. Since April, we are now trading under the Oslo ticker, CRNA, with our new name, Circio. We're also, of course, very happy to present that we've made great progress in our circular RNA research.
We achieved technical proof of concept for our novel circular vector, and Erik, our CEO, will explain in much more detail on what we have achieved in the first half year, in the second half of our presentation, including some really breakthrough or like really a big achievement in increasing the half-life, and he will go into much more detail to explain why that is important. That research and progress in our research has also enabled us to really file new IP. Circular RNA is a very dynamic and active field. There's a lot of active players and a lot of intellectual properties being filed. We are in a unique position, and Erik will explain exactly what makes our approach different to the existing companies. We were able to file new patents in this dynamic field.
There are some of these which are very broad patents related to our technology and some more specific, and we're in a very good position. Of course, as we continue to do more research, we will continue to file more patents. We're also very happy to update on the progress we have made with our TG01 program. As we have communicated, we have entered into a collaboration with academic centers here in Norway as well as in America, and our collaborators have been able to initiate a clinical study and enroll the first patient. So we now have one patient in our multiple myeloma study here in Oslo, as well as the first patient for our pancreatic cancer study in the U.S. One of the other highlights were the sec.
We secured a convertible bond financing in the first half year with Atlas Capital Management. Here's a recap of the slide we presented at the time when we announced it, which was in early February, and then, of course, which was put to a vote and approval of the shareholders in early March, and we were very happy to hear that it was approved by our shareholders. This was for an overall amount of NOK 3 million, which we can draw upon over 36 months. There was a rhythm to it that we could draw a tranche every three months to give the investor a chance to convert the bonds into shares. We negotiated certain tranches, tranche sizes, but there was also an option to modify them as and how needed.
Very important for us was, and which we communicated at the time, is that the decision to take the next tranche, and also this, maybe the size of the next tranche, was in the hands of the management, of course, our board, so that we were in full control how we were using this facility. Following the EGM approval in March, we then drawn the first tranche, and now this morning, just prior to this presentation, we announced that we are drawing on a second tranche, and the second tranche is NOK 21.5 million and will be drawn in three installments. We have decided to go this way because, as we said, we will be very prudent how we're going to use this facility, and we'll only draw the money as needed.
This looks, this reflects our progressive forecast of our cash needs going forward and drawing upon the NOK 21.5 million. We will, you know, have a security to last into the first quarter of next year, which I think will allow us, sufficient time to generate more data and create an opportunity to secure new financing for the company. As an agreement, the fees stay the same, but we have agreed to pay an additional fee of NOK 500,000 per installment. This is a reflection of the current situation. When we announced this agreement, as that in early February, the environmental factors in our industry were different, and also our trading volume was much higher.
Right now, our trading volume is quite low, and the exposure, the risk factor for Atlas is much higher. Also, we wanted to report that Atlas has been trading very lightly. They only converted so far three bonds, and in order to... And so by taking on the second installment, it represents a little higher risk for them, and we are recognizing that with an additional fee and because of the circumstances in our liquidity... With that, I want to go to the financial reporting for the first half. So here you see the financials, the key figures for the first half of 2023. R&D expenses are higher in 2023 than in 2022.
This reflects, at the time, the increased commitment we made to ONCOS-102, and the startup cost for SOT102 , the clinical study that we had planned to do. As you can see, we had, there's a lot of CRO costs in terms of CMC development as well as clinical preparation costs. These costs, of course, will no longer continue into the second half, due to the halt of development of 102 that which we announced earlier this year. So we should see a reduction in R&D expenses going forward, and there will be, of course, R&D expenses in the circular RNA field, which will go up.
It was about NOK 5 million in the first half of the second of this year, but going forward, there will be a higher expense as we go into later stage researches for the circular RNA technology. In terms of payroll expenses, there was some one-off costs in 2023, sorry, in 2022, which that's why the payroll expenses are much higher in 2022 towards 2023. But with the focus, with the shift onto circular RNA, we made some changes in management and in the team. We basically reduced the number of employees and will have significant payroll savings, which will be visible in the second half of this year. As you can see here, we had very high operating expenses of over NOK 400 million in 2022.`
This is a recognition of the fact that we had to take an impairment on ONCOS-102 when we decided to halt the development, subject to further funding. It was advisable to fully impair the asset at this time as the start of that to continue the development at this point in time is uncertain, and so we took the full impairment in 2022. Our cash flow was basically in line with expectations and the R&D commitments that we had taken earlier in the year. So to wrap up the financial part, we had about negative NOK 35 million in cash flow for the first half year. We are in a cash position of NOK 31 million at the end of June.
That's one of the reasons why we now ask for a second tranche in order to give us enough security to take the company into early, the beginning of 2024. Our current market cap is at NOK 125 million, and our daily trading volume is an average over the last 12 months, but lately, over the last few months, is actually much lower than reflected on the slide. There has been no significant change in the shareholder base here at Circio. And with that, I hand over to Erik to talk to you about our achievements in the first half year on the science side.
Good morning. Today, we're pleased to announce that we're actually reporting from Stockholm in the Karolinska Institute. We are expanding our activities here. We're setting up our own laboratory facilities to increase our capacity and technical capabilities on the science side. So as Lubor mentioned, we have been restructuring the organization. We've reduced departments in manufacturing and clinical development, which were more relevant to the ONCOS-102 program, and we're now shifting to rather focus on building the science side of things, and we are therefore expanding our activities in Stockholm, in the Karolinska environment. Circular RNA is now the core of what we do, and this space is gaining massive momentum recently. 2021, 2022, 2023 have been very difficult years in the biotech sector.
Financings have gone down, deal activity has gone down. There is one exception, and that is in RNA therapeutics. RNA therapeutics have actually increased and is now the one pocket in the industry which is performing well in terms of attracting capital. And we've done this analysis here showing that the total deal value in RNA financings, and the yellow indicates the amount, the percentage of that that is focused on circular RNA. And as shown on the graph, more than 40% of this value actually is going into circular RNA-based programs. And this shows that it's not actually mRNA, the background for the COVID vaccines, which is attracting the most financing, even though they've been very successful now commercially. It's actually circular RNA, which is emerging as the new therapeutic preferred modality for the future, it seems.
This slide shows some of the companies and deals that have been done in the space. It's all happened in the last two years with the launch of RNA therapeutics and Laronde, which are maybe the most famous players in the circular RNA space. They launched in 2021 based on years of research showing you can express proteins efficiently from circular RNA. This year, we've had two additional companies launch, Orbital Therapeutics and Renegade, both doing Series A financings of significant size in April and May of this year and adding to the players in the field. So why is there all this excitement around circular RNA? There is one very simple reason, and that's because circular RNA is more stable. It's more durable than mRNA.
It doesn't get broken down as quickly as mRNA. The major caveat of mRNA is that it has a short half-life. It's degraded by what's called exonucleases inside of the cell. We've drawn it here by these Pac-Mans on the side. See these, these, these exonucleases or Pac-Mans, they chop up the mRNA, and usually mRNA will get degraded in a few hours or, or a day or two, depending on how you maybe are able to modify them. Circular RNAs don't have a free end. Because they don't have an end, there is nothing for that exonuclease to recognize, therefore, they are resistant to the major RNA degradation mechanisms inside the cell, and this makes them massively more stable. With a more stable RNA, you can now boost your protein expression. You can make more protein from the same amount of RNA.
It's also more durable, so that protein expression lasts long. And this is potentially a massive advantage when you want to deliver therapeutics or antigens for a vaccine using an RNA template. In addition, the stability and the structure gives you other opportunities to build in more features. Spongeing on microRNAs is one such or other regulatory functionalities. So we view this as a toolbox that can allow you to create really multifunctional medicines. So what are we doing differently and why is our approach unique? Well, all these other companies on that prior slide are focusing on making in vitro transcribed circular RNA, or they make circular RNA in a factory, and then the therapeutic they give to a patient is the circular RNA.
This is not the same as the mRNA vaccines of BioNTech and Moderna, which were successful in COVID. So these other circular RNA companies are basically repeating what was done by BioNTech and Moderna, just using circular mRNA instead of linear mRNA. We take a different approach. We are generating DNA-based templates that carry the instructions to manufacture circular RNA inside the cell or inside of the patient. This is a fundamentally different mechanistic way of doing this. We don't see anyone else taking this angle, so it's largely virgin territory. It means we have to build this from scratch, but it also means we have a unique angle with certain advantages. And it also means there is an opportunity here to build an IP platform, which is rather unique.
We call the core of our technology circVec. circVec is a genetic cassette, a DNA cassette that we can insert into DNA vectors or viral vectors. And then this circVec cassette carries the instructions that is necessary for the cell to make circular RNA. There are certain elements on the, on the flanking sides here, which stimulate the circularization of the RNA, and then the block in the middle is what actually then ends up in the circular RNA, which we have designed to have multiple features. So our circVec in itself is, you could say, what we call vector agnostic. This can be deployed in any DNA-based vector system, and we'll be careful to develop it and file IP that covers this broadly, which means it can be used in a variety of settings.
This shows that this truly is a platform, and it gives us a variety of opportunities for the future for how it can be deployed. So we filed some critical IP for this late last year. We expanded on this with certain vector-specific data in the second quarter, and we have a very active IP strategy here. Together with our own advisors, we're working on a plan, exactly what and how and where to develop and file. So we're continuously building and expanding on this. And then the circular RNA itself is also designed carefully to ensure that it has best possible stability, that we can actually put these functionalities together in one setup. And I will show you some data as to what we have achieved to date.
What we have seen so far is, our circular RNAs are roughly 15 x better in terms of their half-life or stability versus mRNA. The mRNA in our system gets broken down in a few hours. The circRNA lasts for several days. And on the right-hand side, you can see the dynamic, which is exactly what we're looking for. The RNA expression in the graph shows at 48 hours after we give the template to the cell. Because circular RNA is a little bit more complicated for the cell to generate, in the beginning, you get more mRNA and fewer copies of circular RNA. This is expected. But at 96 hours, you see this difference that I've explained. The mRNA is dropping. You see, mRNA goes down by roughly 80% from 48 to 96 hours, whereas the circular RNA accumulates.
It's doubled at 96 hours. This means it's because it's stable, cell keeps making more. It actually increases and builds over time. And with this dynamic, you can boost the expression of your protein you're delivering and extend the durability, and this is exactly what we're after. So this is really the core of what we want to achieve, and now we're validating this data in vivo. So in mouse models, these experiments are ongoing, and we believe this will be very important for attracting future partners and new specialist investors, that we are able to demonstrate that this is not only something that works in a technical setup, in tissue culture and cell culture, but it actually can translate into the same advantage in animal models. So how do we go about this?
I will try and explain this as simply as I can. We looked in the human genome for circular RNA genes, in genetic loci that make circular RNA effectively. There is roughly 50, maybe 100,000 circular RNAs in total that are generated by human genome. Now, we did certain analysis bioinformatically to identify which loci are the most efficient for making circular RNA, and we made a list of the top candidates, and then we tested these top candidates. These are the best human sequences for making circular RNA, and we tested them in our vector setup, and it turns out actually the top hit, the best predicted sequence from our screen also was the best one when we tested it in our vector system. It's the L1 .
The left-hand side, you see it makes more circular RNA than the others, and we test also then the protein we get from that, and again, it's more from this L1. So L1 is where we started. It's our starting point. We identify the best human DNA sequence for making circular RNA naturally, and then we looked at how we can improve this. So we made a variety of design changes, optimizations to see if we can make it better, and that's what you're looking at in the top graph. L1, that's the natural wild-type locus, and then we've improved on it in 1.1 and 1.2. You see here we have the new designs that actually significantly enhance this, this biogenesis rate, the circular RNA production, by at least fivefold.
So we now have a structure that can make 5 times more circular RNA that is possible or is the maximum achieved by a natural human system. Similarly, we optimized for the protein expression, and that's reflected on the bottom from this design D1 to D12 or 12 different designs, and then we look at how much protein we make, and this is, there is big differences. You need to do this correctly. You need to order things correctly, have the correct kind of size, and, and when you do it right, you get very strong expression, far higher than mRNA, and that we show on the right-hand side when we put everything together. We're comparing here our circVec v1.0 design versus an mRNA, and you can see here we clearly are outperforming the mRNA.
And if you link back to some of the earlier designs, they were not as good. So we've been able to, through technical development in the lab, we've been able to build this to be clearly superior to mRNA. This is technically challenging to achieve, and we were able to do this because we have access to some of the most experienced talents in the circular RNA space, and we achieved this in a very short time. We only started this work a year and a half ago. I think we already believe we are at least one order of magnitude better at circular RNA biogenesis from DNA templates than anything else we've seen. So now we are moving this further forward. We're testing it, we're continuously optimizing on our circVac 1.0.
We're putting it into new vectors to build a repertoire of systems that we can use to express our circular RNAs, and then obviously, we are carefully evaluating where this can be best utilized in a therapeutic setting. We've identified three main disease areas that are interesting in this context of a vector-delivered circular RNA: rare disease, cancer gene therapy, and vaccines. I'll start with rare disease, and this is maybe where we see the biggest potential long term. So rare disease is really emerging as an important focus area in the industry. We've seen several successes in the last few years. Regulators are moving to make it simpler to develop for these type of diseases, and here we're talking about genetic diseases that are relatively infrequent but cause major problems for the affected individual.
In many cases, what you need to do is replace a protein which is no longer functional or is lost, and this could be very advantageous to do from a circular RNA because of this durability advantage. So people in the industry believe circular RNA can be a game changer in this, in this, area. We think our approach is even better because we get additional stability of the DNA, we get this increase in concentration. So mRNA, circular RNA is likely to do it better than mRNA. Vector-delivered circular RNA is likely to be even better than that, and this is what we're moving to try and demonstrate. In addition, we can do what we call remove and replace. With our setup, we can actually both remove a malfunctioning protein and replace it with the functional one.
This is not possible with an approach using synthetic mRNA or a synthetic circular RNA. So this is a unique feature of our way of doing things. So here we think we have an advantage in terms of the efficiency of the expression and the durability of the expression of the missing protein, as well as the ability to remove the problem at the same time. So this is where we think the potential is biggest long term, also is where we find the most interest from partnering discussions and investors who are talking to me. We're still looking into cancer as an important potential future application, and we are building cancer constructs, a cancer targeting construct based on our adenoviral in-house platform.
The aim here is to deliver therapeutic proteins and the cancer therapeutics using our circular RNA system based on a viral delivery system, which we have in-house. So this, we are also progressing. We're in vivo experiments with all of these three these three platforms. Then the final is vaccines. We've seen some of the bigger deals that have been done in circular RNA have been done for vaccination setups. We view our platform as a potential for generating a single dose vaccine concept, which can be very much immunogenic or have improved immunogenicity over other RNA formats because of this extended durability. And if that materializes, you can potentially avoid the need for giving booster doses, which could be a massive advantage.
Clinical development of vaccines is a major undertaking, so our strategy in vaccines is to generate the preclinical proof of concept and then partner it out. So here we want to simply show that this works preclinically, using model systems and then find a partner who can develop this, in the future. And we believe, if we progress as we expect, that it may be able, we may be able to partner this out, at some point during 2024. To explain a bit how we're thinking about rare disease, there are a number of these diseases. They have a variety of features. Some of them are more attractive than others in terms of the development program. So what we have done is carefully evaluate and screen using various criteria, what targets are the best.
We've shortened our list to three candidate diseases, which we believe are the best suited to show a proof of concept for our platform. We're now moving to generate circRNA constructs to deal with these issues and test those in vivo. Going forward now, the important data readouts we will have will be readouts from these in vivo experiments, and we have three ongoing experiments that have either started or are very soon to start. The top one, number one, is a cancer gene therapy approach. We're expressing circRNA in solid tumor setup, comparing head-to-head circRNA versus mRNA. This is ongoing. We're expecting data in September. Then the vaccine, we're also testing here, we're testing immunogenicity. Can we get improved immunogenicity with our setup using circRNA versus mRNA? This we call circVac.
circVac is being tested in vivo, and the results are coming in. During the next few months, we will report the outcome of these experiments. And then rare disease, or if you want to call it gene therapy, is the final approach here. We're starting our first experiment in September. Again, we're going to compare protein expression in a healthy mouse system to start, using reporter genes as well as a real disease protein to investigate the expression dynamics. And we believe this data package, if the experiments work as planned, will provide a very important foundation for an in vivo proof of concept that will enable us to attract future partners and then specialist investors into the program. So to summarize, we have a unique edge in the circRNA field.
We're tackling circRNA in a way that no one else is. We have world-leading experts in-house. Thomas Hansen is leading this. He is the most experienced circRNA scientist around. We are expanding our team in Stockholm, building our own facilities, so we are now able to be much more productive as we move forward. We have a differentiated vector platform that is versatile. It can be deployed in different vector systems and different disease areas, and this of course creates a broad set of opportunities for the future and also business development, partnering opportunities as we move forward and generate proof of concept for these various possible uses. And short term, what's coming in terms of milestones is in vivo data from these experiments that I've just described. So as we
I think we're having some technical problem. Just, give us a couple of minutes.
Apologies for that. Looks like we're back. There, there was a Wi-Fi issue, but we found a new Wi-Fi network, so with that, we can do Q&A session.
Okay, thank you. We have gotten some questions. Let's start with some financing questions. Regarding the Atlas financing, what is the reason for not drawing the full NOK 30 million tranche, and why have you agreed to change the terms of the agreement?
Yeah, very good question. As we had communicated originally, and as I said before, we are very prudent with the amount that we draw from Atlas from this facility. We had made an assessment that we only need NOK 21.5 million to get us into the first quarter of 2024. Because of all the changes that we have made to the organization and all the savings that we anticipate to have in the second quarter, second half of this year. In order to be very careful about how much we draw from this facility, we decided to go with a slower plan and also to have it paid out in installments, so that if we don't need the full amount, we wouldn't have to take each of these installments.
Why did we decide on new fees? The world's at a different place than when we decided, agreed on the original agreement in the six months, a lot of things have happened that increased the risk factors for a company like Atlas. In addition, our trading volume hasn't been as it has been in the past. Lately, we have had a very low trading volume, and this investment works on the liquidity of the company in order to recognize the additional risk that Atlas has taken by extending us this cash opportunity. We agreed to change the fee structure to reflect those change in circumstances.
We are also negotiating, I mean, we are, of course, negotiating the full picture of this tranche, and we will put this forward into the shareholders for acceptance in an EGM that we expect to have in the second half of next month, in September. And then the shareholder will see the full picture and decide upon this draw tranche.
And I can add that this issue of trading liquidity is a system or market-wide issue that we see. The biotech sector in general has seen reduced trading volume, not only in Norway, but it's also in the Nordics and Europe. So it's a systemic feature due to a general global downturn we have seen in the biotech sector. And we can add that we appreciate that Atlas has been very careful in their trading, given this situation. They've not converted many of the bonds and traded slowly. So we think this is an advantage, but of course, it increases the exposure and increases the risk, and that is now being reflected.
Thank you. Next question: What is the expected cash burn and runway with the new plan and headcount reduction implemented?
That's a very good question. As we have just communicated, we have made changes in the team structure and the management. These changes in personnel and payable expenses will be recognized in the second half of this year. Clearly, having put on hold a future development of Oncos one and two reduces our cash burn in the R&D expenses. Although we'll see an increased activity for the expenses from circular RNA. As Eric was saying, we are very productive, we are speeding, trying to speed up the developments. Of course, this will lead to some additional R&D expenses, but they are still small compared to the much higher expenses that the clinical development would have cost us.
So our anticipated burn, even though, of course, it needs to be confirmed, on average, we'll basically see a reduction in the low twenties for every quarter. So that's our expected burn. But we will have to see what we fully realize the savings that we have put into place at the moment.
Next question is for Erik. I see a change in priorities in your focus area. Is cancer no longer the first target?
We are a cancer company by background. We have a clinical program with our TG01 still in the clinic. So oncology is still one of our focus areas, and it's what we have in-house and control. Having said that, we see both technically, that maybe the biggest advantage and unique differentiation we can find for our technology is in rare disease, protein replacement, using our vector-delivered circular RNA. And in addition, this is an area which is seeing a lot of interest from both investors and pharma companies at the moment. Everyone is rushing to find new platforms for dealing with these types of diseases.
There are certain approvals that have been made, and products on the market now in these type of diseases, but they have significant caveats associated with them in terms of their durability and their toxicity. So it's an area where an improvement is needed. The technical opportunities that are there now are problematic to use. New innovation is needed, and the medical need is immense. So therefore, I wouldn't say we're necessarily de-prioritizing oncology. We were just moving rare disease up front and center as the best opportunity and maybe the best differentiation technologically.
Next question is about IOVaxis. What is the status of the potential China licensing agreement with IOVaxis?
IOVaxis have been working for the past two years to satisfy Chinese regulators' demand for certain in vivo data. That in vivo data package has been generated. It's also been aligned with the authorities that those data should be acceptable in the form they are. They are currently, at the moment, resubmitting their IND application or the application to start a clinical trial. That should be submitted now in the next few weeks. So they've come to the end of dealing with these requirements for in vivo and safety data, and then they're refiling. From when they refile, it's a three-month period until you get a response from the authorities. The expectation is that they will then get an approval to start the clinical trial.
Once they have approval of the IND, our arrangement or the contract we have stipulates that the upfront payment of $3 million falls due two weeks after. Of course, we never know exactly what happens, but we believe there is a good reason to expect that they will receive their approval to proceed towards the end of this year. Given the amount of resources they've put into doing the work and refiling, we would anticipate that they are intending to exercise their option. If that happens, that of course is attractive for us. It's a potential $3 million upfront payment in the relatively near future.
Thank you. And last question, what upcoming milestones can we expect from the circular RNA program and the TG studies?
On TG, we just now talked about IOVaxis. There's a business development milestone that may be coming up in terms of IOVaxis exercising an option and then starting clinical development in China, which would be great, great for that program. We have two ongoing trials with TG01. One is in Norway, in multiple myeloma, the other is in pancreatic cancer in the USA. Both of these are actively enrolling patients, and patients have been dosed. They are run by academic centers, so we are not fully in control of the trial on a day-to-day basis. But we expect that during next year, we will start seeing data coming in from these studies. Initially, that will be immunological and safety data, as well as liquid biopsy data from the cancer trial.
We will report these as they come in and are meaningful. Starting, we anticipate the first half of the year, the first bits will come, and then more towards the second half. On the circular RNA, the major upcoming milestones are these in vivo readouts. So we have, as I showed, three important proof of concept experiments that are ongoing, and with good data from these, I think we will have a solid in vivo platform to complement the massive data we generated on the technical side. We have the technical development, I would say, being rather impressive, but of course, it's important to demonstrate that it actually works in the biological system. So this data will be critical to be able to attract specialists, biotech investors, partners, et cetera.
And we're in multiple dialogues with pharmaceutical companies that all express an interest to take a look at this data when they arrive. Having said that, in vivo experiment, science is unpredictable, so you never know exactly what comes out of an experiment. You may get new questions, so we simply do the experiment, look at the data, and then decide on what the next step is. But we will certainly update the market, and there will be in vivo results in the near future.
Thank you. No further questions.
So, with that, we conclude our half-yearly report from Stockholm and this webcast. We're always available, so please send us an email or give us a call if you have further questions. We will also follow up with the webcast and an AGM notice when we have the fully negotiated terms in place, for the Atlas financing facility. Thank you, and goodbye. Bye.