Welcome to Lytix Biopharma's Q4 report presentation, where we will report the company's latest highlights and events. My name is Øystein Rekdal. I'm the CEO and co-founder of Lytix Biopharma. Today I'm joined by Gjest Breistein, our CFO, Graeme Currie, our Chief Development Officer, Ole Peter Nørbø, Head of Investor Relations. As with previous reports, today's presentation is being recorded and will be available on our website later today. At the end, there will be a Q&A session. To ask a question, please follow the instruction on the webcast platform. Before we go into the events of the fourth quarter, I will in two slides shortly describe the core elements of our technology and where we fit in the immuno-oncology landscape. Lytix is a clinical stage immuno-oncology company with two ongoing phase II studies.
We have developed a unique platform that has a broad applicability, meaning that our molecules has a potential to be used in a broad range of cancer. Our technology has been validated by international experts within the immuno-oncology space, including the Nobel Prize winner and founder of modern immunotherapy, James Allison, who is a member of our advisory board. The technology has also been commercial validated through our licensing deal with Verrica Pharmaceuticals. Our molecules can address several major challenges within today's cancer therapy, including tumor heterogeneity, which I will come back to in more detail, cold tumors, meaning low number of T-cells in the patient's tumors, and drug resistance. Our solution is based on our molecule's unique ability to induce priming and activation of tumor-specific T-cells, which could be an effective way to increase the number of cancer patients responding to immune checkpoint inhibitors.
Looking at the current immuno-oncology landscape, the major immunotherapies can be classified into four broad classes: cancer vaccines, oncolytic viruses, cell therapies, and checkpoint modulators. Our molecules do not fit inside any of these boxes. They address tumor heterogeneity better than conventional vaccines and are more easy to work with compared to oncolytic viruses. Based on their properties, these molecules can be used as a monotherapy but can also serve as an ideal combination partner for cell therapies and immune checkpoint inhibitors. Let's now move on to the highlights for the fourth quarter of 2022. Our ATLAS-IT-05 study, which is evaluating 315 in combination with the checkpoint inhibitor pembrolizumab in melanoma patients, has expanded from the U.S. to sites in Europe, more specifically to Norway, France, and Spain. This will support the patient enrollment.
Graeme will provide more details on the ATLAS-IT-05 study and the opening of the European sites. Our second-generation molecule, LTX-401, we are continuing to be in good progress with our clinical trial application, which is needed to initiate a phase I trial for patient with liver cancer. In November, Lytix presented compelling data at SITC in the U.S., one of the world's leading immuno-oncology conferences. We presented data showing that treatment with LTX-315 not only kills cancer cells but also activates dendritic cells, which are the cells picking up the tumor antigens and presenting for the T-cells. This data established that LTX-315 generates two critical mechanisms involving in generating tumor-specific T-cell responses. During the Q4, the clinical study report for ATLAS-IT-04 was finalized.
The study concluded that LTX-315 in combination with a type of cell therapy was able to stabilize progressive sarcoma in heavily pretreated patients for up to 26 weeks. We move on to the post-period events, we are very happy to see that Verrica Pharmaceuticals has completed their first part of their phase II study in basal cell carcinoma. Other than LTX-315 demonstrating a favorable safety and tolerability profile, Verrica found that patients receiving the higher doses of 315 experienced clinical tumor necrosis. This means that LTX-315 is causing tissue damage in the basal cell carcinoma lesions in the patients, which is very promising data for this patient group. In January, we were also invited to present and participate in a panel discussion about cancer vaccines organized by Redeye, a Swedish investment bank.
This take us to the clinical and operational update for the quarter, and before I hand over to Graeme, I will explain how our oncolytic molecules address what is considered as the major challenge in current cancer therapy. During tumor progression, new mutations are formed, resulting in tumors with many different cancer cells with distinct mutation. This is called Tumor heterogeneity. Tumor heterogeneity makes it very difficult to eliminate all the different cancer cells in the solid tumors. If not all cancer cells are killed, the remaining part of the tumor that was resistant to the treatment often leads to an even harder to treat tumor, leaving the patients with fewer treatment options.
Our molecules are able to kill all the different cancer cells in a solid tumor, including drug-resistant cancer cells. It opens up the cells resulting in an exposure of the mutations or tumor antigens for a patient's immune system, resulting in activation of a broad repertoire of different T-cell. When oncolytic molecules is injected in a tumor, the cancer cells are killed. The different mutations or tumor antigens are released and exposed for the immune system. The tumor antigens are picked up by dendritic cells and presented for T cells in the lymph nodes. That leads to the activation of many different T cells, which enter into the blood circulation and search for tumor cells which have the same tumor antigens which they were presented to.
Local treatment with our oncolytic molecules can result in an immune response, followed by a significant increase, significant effect on other distant and non-treated tumors in the patients. I will then hand over to Graeme Currie, our Chief Development Officer, for the clinical and operational update.
Thank you, Øystein. Our phase II study, ATLAS-IT-05, has expanded and has opened new sites across Europe. There were six sites that have been opened across three countries, Norway, Spain, and France. We've been fortunate to engage sites that are recognized for their intratumoral immunotherapy expertise. The specific sites that we have chosen have recognized expertise in treating advanced melanoma cancer. Our goal of opening these sites is to ensure that we secure patient enrollment and complete recruitment. Just as a reminder, the primary objective of this study is to document whether LTX-315 can induce responses in checkpoint inhibitor-resistant advanced malignant melanoma in combination with pembrolizumab, and these patients have previously failed a checkpoint inhibitor. Next slide, please.
As Øystein mentioned, our partner Verrica Pharmaceuticals is making good progress in their phase II study, where they're studying basal cell carcinoma. They've completed treatment in part one of a three-part ongoing phase II study to identify optimal dose and also evaluate efficacy in basal cell carcinoma. The part two of the phase II trial is expected to begin in the 2nd quarter of 2023 and will further explore dosing regimens, allowing identification of a recommended phase II dose for part three of the study. Part three is expected to start in the 2nd half of 2023. Current treatments for basal cell carcinoma and squamous cell carcinoma are invasive, painful, disfiguring, and may actually require destruction of healthy tissue to remove the cancer cells. LTX-315 may represent a non-surgical alternative for patients suffering from skin cancer.
As Øystein mentioned earlier, there have been some encouraging signs in the first part of this study that we are having the effect we desire by inducing cell death in these tumors. Basal cell carcinoma is the most common skin cancer, representing a large commercial potential for LTX-315, with approximately three-four million patients being diagnosed with BCC each year in the U.S. alone. Next slide. Moving on to our next generation set of molecules, LTX-401, that is progressing well and moving towards the clinic. Our goal is to submit a clinical trial application in Europe and start a phase I study later in 2023. The focus for this molecule, which is a small molecule, is in treating deep-seated lesions.
In particular, we have some interesting preclinical data in the for the preclinical models of liver cancer. Liver cancer represents a big, a large cancer segment with a high unmet need and is a place where traditionally checkpoint inhibitors have had low potential effect. LTX-401 may solve our need to address more deep-seated tumors such as hepatocellular carcinoma and other cancer types that have metastasized to the liver. The preclinical results we've seen have given us great encouragement that we will have promising anti-cancer activity in liver cancer, a well-recognized liver cancer model, and this molecule may even be more well-tolerated than other oncolytic molecules. LTX-401 has the potential for being used in these deep-seated visceral cancer lesions, and that gives us an opportunity to treat more types of cancer.
I'll now hand it back to Øystein.
Thank you, Graeme. As you can see from our pipeline, a number of activities are happening on the R&D front, which we believe will generate solid clinical data over time. We have a truly unique technology engine that can deliver several drug candidates, all with significant commercial potential in the cancer therapy area. What also makes these molecules so exciting is that they can be effective both as a standalone therapy or in combination with other types of immunotherapy to improve the effectiveness of the treatment. Our lead candidate LTX-315 is currently being evaluated in two phase II studies in U.S. and in Europe as monotherapy in basal cell carcinoma and as combination therapy in melanoma. In addition, we recently completed a proof of concept study with LTX-315 in combination with adoptive T-cell therapy in sarcoma.
We are working on the clinical trial application for second generation molecule LTX-401 to initiate the clinical trial in liver cancer. Lytix has also out-licensed a third oncolytic molecule to a U.S.-based veterinary company exploring its effectiveness in cancer in pets. Preparing for the future and broadening our pipeline, we also have several additional molecules in the early discovery phase. I will now hand it over to our CFO, who will provide you with a financial update.
Thank you, Øystein. The fourth quarter was an eventful period for Lytix Biopharma. Our main achievement was the opening of five new sites across Norway, France, and Spain. A 6th site was opened in Norway in early January 2023. The opening of additional sites will drive patient enrollment towards completion and increase the clinical impact field for LTX-315. Operating income for the period stems from public grants such as the SkatteFUNN R&D tax incentive scheme and Oslo Regional Research Fund. Total operating expenses for the three months ended December 31st was NOK 25.5 million, an increase from the same period last year and last quarter. The major cost drivers for the fourth quarter are the ATLAS-IT-05 trial and activities required for the planned phase I trial with LTX-401. LTX-401 is our second-generation molecule, which we are preparing for a phase 1 trial.
We plan to submit the CTA application to regulatory authorities in the second half of 2023. Net financial items for the quarter was negative with $5.4 million as a result of a weakening or as a result of a weaker U.S. dollar. Overall, we have a lean organization with a strong focus of being fiscal responsible while driving our clinical development program forward. This slide illustrates that we have increased activities during 2022. As a clinical drug development company, our R&D efforts represent most of our costs, and these activities are the result, or are the reason for the increased expenses. At the end of the year, our cash position, including short-term financial investments, amounted to $145.2 million, compared to $197.3 million as of end of last year.
In Q3, we placed NOK 50 million in the liquidity fund, explaining the increase in short-term financial investments. The current cash runway will see us through 2023, and we continue to regularly assess our capital need to secure a good financial position and have the necessary funds to support our new and future activities. I will now hand it over to Øystein.
Thank you, Gjest. Looking forward, there are a few key elements we want you to take with you. 2023 will be an exciting year for Lytix. Our key objective moving forward is to drive enrollment in the ATLAS-IT-05 phase II trial towards completion. Part 2 of Verrica's phase II trial is expected to begin in the 2nd quarter of 2023 to identify the recommended dose of Part 3 of the study, which is expected to start in the 2nd half of 2023. We will continue to support Verrica Pharmaceuticals' phase II study with the supply of LTX-315 and with our knowledge and experience on the technology. We will continue the ongoing CTA process to bring LTX-401 to the clinic and evaluate it against liver cancer.
We will also continue to strengthen our position in immuno-oncology space by presenting our data at scientific, clinical, and business congresses worldwide, build a strong networks and relationship within the industry, and continue to bolster our team through the recruitment of highly experienced colleagues. An example of our R&D effort is represented by the image on the right side of the slide. Here you see a patient, the effect of a patient, and in a patient with sarcoma that had failed previous treatments. When the patient received local treatment with LTX-315 in a tumor lesion in the lower back, the patient experienced a 63% shrinkage in a non-treated tumor in the lung. We have observed similar systemic anticancer effect in a substantial number of cancer patients after local treatment with LTX-315 monotherapy.
This is why we are highly motivated to move forward and feel confident about our molecules making a difference in the majority of cancer patients who still face few or ineffective treatment options. With this, I will now hand it over to Ole Peter, who will take you through the Q&A session.
Yes. We have a couple of questions here. I will start with this one. What is your aim for completing recruitment in the LTX-315 phase II trial? Is there any interim readout this year, and when would final results be reported? Probably this one is for you.
Maybe, maybe Graeme, you would like to answer that.
Okay. Graeme?
Yes. Thank you, Ole Peter. We expected the first patient to be recruited in Europe in Q4, and I'm happy to tell you that that progressed as planned. On the total number of patients, it's not our policy to comment on when the study will complete recruitment, but we will inform the market when we have reached full recruitment of the trial, and the trial is progressing as planned.
Thank you. Next question now is regarding the financial position and the burn rate. Cash burn in 2022 seems to have been approximately NOK 50 million, and do you expect 2023 to be at the same level? This one is for you.
I can answer that. Even though we had a good year in 2022 with good activities levels, I believe we will increase the activity levels even more with eight sites up and running across U.S. and Europe. Yeah, activity levels will increase, and I expect a higher cash burn.
There's a question regarding intratumoral therapy. It goes like this: Are there any other investigational intratumoral cancer therapies that you are aware of that have shown abscopal effects like LTX-315?
What we are recognizing in the immuno-oncology space now is that We strongly are aware that we are first in class and in front of this new field, but we see now more and more interest both in the academic institution but also some new technologies about intratumoral oncolytic therapy. When it comes to intratumoral therapy, there have been immunomodulators and that stimulate the immune system and oncolytic viruses that have shown some promising efficacy. Unfortunately, there have been some disappointments in phase III with some of the intratumoral therapies with immune stimulators. We still see that there's increasing belief that doing, opening, and activating the immune system towards where everything's happened within the tumor is getting more and more attention.
With regards to abscopal effects, there have been some other who have seen effects on other lesions, treated, but I'm not aware that what we have seen, one-third of the patients have, we have seen a significant reduction of distant nontreated lesion have been shown by at least what we are aware of. Some abscopal effect, but I think we, even at suboptimal doses, are showing very promising effect on the systemic effect on other distant nontreated lesion.
Thank you. We have a question regarding the dosing regimen for the ATLAS-IT-05 study. Could you please elaborate on this study with pembro and the reason for expecting stronger data compared to the phase I study? Does this only come down to giving the patients more injections in more lesions to increase the maximum total dosage of LTX-315 before you start treatment with pembro? Perhaps Graeme, should you answer that one?
Yeah, I'm happy to take that, Ole Peter Nørbø. We have learned a lot from our earlier phase I, II studies and the translational research that has been associated with that, looking at different doses and different dosing schedules. We believe, moving into the ATLAS-IT-05 study, that we have optimized the dose to enhance efficacy. We hope that translates into clinical outcomes. Specifically to address the dose, each for each injection, we can give 5 mm of LTX-315. Depending on the size of tumor, we can give up to a maximum of eight injections, if the tumor is large enough, it's defined by tumor the size of the tumor.
We believe we have an optimal dose schedule in the ATLAS-IT-05 study. We have selected a group of patients in this study who will ultimately, if the drug is doing what we believe it is doing, will be immunologically sensitive. We are in an immunologically sensitive cancer. Thank you.
Thank you, Graeme. I believe the final question now is for you, Øystein. How would you sum up the year 2022?
Well, 2022 has been a challenging and busy period for us, to be honest. I'm very confident now that we have secured expansion into Europe in the ATLAS-IT-05 study. It's really making the foundation for the next year. We have presented the compelling data in collaboration with very highly recognized institution like Cornell and National Cancer Institute at the SITC meeting. We have progressed with the preclinical program for preparation for a clinic. We have finalized the ATLAS-IT-04 study, which are giving very promising clinical signals with stabilizing the very sick patients and heavily pretreated up to 26 weeks. We have also yeah, being more active now towards the industry by getting Steve Worsley on board as our Chief Business Officer.
I think in total, we had this very busy year, but we have worked hard, and I think we now are in good process and have a very exciting year ahead of us.
Well, that should end the Q&A session. I would like to thank you all for your attention during this webcast.
Thank you.