Good afternoon, everyone, and welcome to Lytix Biopharma's Q1 report presentation, where we will present the company's latest highlights and events. My name is Øystein Rekdal. I'm the CEO and the co-founder of the company, and today I'm joined by Gjest Breistein, our CFO, and Graeme Currie, our Chief Development Officer, and Ole Peter Nordby, Head of Investor Relation. As with previous reports, today 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, follow the instruction via the webcast platform. Before we go into the events of the fourth quarter, I will in one slide shortly introduce our technology. Lytix Biopharma is an immuno-oncology company with two ongoing clinical phase II studies.
We have developed a unique oncolytic technology platform that has a broad applicability, meaning that our molecules have the potential to be used in a broad range of cancer. Our technology has been validated by international experts within the immuno-oncology space, including Nobel Prize winner and the founder of modern immunotherapy, Jim Allison, who is also a member of our advisory board. This technology has also been commercially validated through our licensing deal with Verrica Pharmaceuticals. Our molecules can address several challenges in current cancer therapy, including the major challenge, which is the presence of many different cancer cells, variants in solid tumors due to mutations over time, and this is termed tumor heterogeneity.
This make them ideal for combination with immune checkpoint inhibitors. Let's now move on to the highlights for the first quarter of 2023. Our ATLAS-IT-05 study, which is evaluating LTX-315 in combination with the checkpoint inhibitor pembrolizumab in melanoma patients, is now recruiting patients at nine sites across Europe and in the U.S. Graeme will provide more details on the good progress we are making in the ATLAS-IT-05 study. In the first quarter, Verrica Pharmaceuticals completed the first part of their phase II study in basal cell carcinoma, testing different doses of LTX-315.
In addition to demonstrating a favorable safety and tolerability profile, patients experienced clinical tumor necrosis at the higher dose levels, which is very encouraging. When it comes to our second-generation molecules, we are in progress with preparing LTX-401 for phase I study in patients with deep-seated tumors. During the quarter, we were also invited to two international conferences to present how our technology addressed tumor heterogeneity and why our drug candidates may be ideal combination partners with immune checkpoint inhibitors. If we move on to the post-period events. Sorry. We are happy to see that Verrica dosed the first patients in the second part of their phase II study early in April. This part is designed to explore dosing regimens to identify the recommended dose for part three of the study.
We find this highly encouraging, as they have also guided for this third part of the study to start in the first half of 2024. We continue to extend our international network, bringing industrial experience and competence to the company through the election of Marie Roskrow as our new Chairperson of the Board. She has extensive background in immunology and oncology and held senior positions in a number of biotech companies. During the quarter, we also hired Karsten Bruins Slot as director of clinical development, and before joining our team, Karsten has worked in Nykode Therapeutics and Roche. Last week, we got the opportunity to present at the conference Frontiers in Cancer Immunotherapy 2023, sponsored by The New York Academy of Sciences, and our presentation was very well received in this network of top leaders in academia and industry.
This take us to the clinical operational, update for the quarter, and I will hand over to Graeme Currie, our Chief Development Officer, for the clinical update.
Thank you, Øystein. I will provide the update on progress of our phase II study, ATLAS-IT-05. This study is in patients who are refractory to checkpoint inhibitors who have advanced malignant melanoma. As we reported previously, the clinical trial application was approved in Europe, and we have six sites now active in our study. This includes sites in Norway, Spain, and France. All of those sites are actively recruiting patients at the current time. We have three sites active now in the U.S. We opened a new site in the first quarter, and there is a fourth site that is anticipated to open in the next few weeks. These sites are all recognized as having intratumoral immunotherapy expertise, so we really have highly experienced sites conducting the study for us.
We expect our initial data readout from this study in the second half of this year. The primary objective is to really document whether LTX-315 can induce responses in what is a highly refractory patient population who have failed pembrolizumab with malignant melanoma. Øystein mentioned Verrica Pharmaceuticals, our partner, who are pursuing LTX-315 in studies in basal cell carcinoma. The study is conducted in three parts. The first part has been completed, and they are currently recruiting patients in part two of this study. The study, part two of the study started in April 2023, and will further explore dosing regimens, really optimizing the identification of a dose that will then further explore efficacy in phase part three of the study. We expect part three to start in the first half of 2024.
Current treatments for basal cell carcinoma are invasive, painful, disfiguring, and may require destruction of healthy tissue. As the disease advances, the treatment may require multiple surgical interventions. These surgical interventions can certainly be damaging and are extremely painful to patients. LTX-315 can really offer a non-surgical alternative for patients suffering with this disease, and if administered early in the treatment course, would be able to really stop the progression and advancement requiring these painful interventional procedures. Basal cell carcinoma is the most common skin cancer, representing a large commercial potential for LTX-315. There are approximately 3-4 million patients diagnosed with BCC each year in the U.S. LTX-401 is our next generation oncolytic molecule that has some of the properties of LTX-315, but it's in a small molecule.
Activities are progressing towards submission of a clinical trial application in Europe to start a phase I study. Liver cancer represents a large current unmet need and really has only been modestly impacted by checkpoint inhibitors. Administering LTX-401 in tumors such as hepatocellular carcinoma and other cancer types that have spread to the liver could really offer a significant improvement in what is quite a deadly disease at the current time with limited treatment options. Preclinical studies have documented very promising anti-cancer efficacy in a liver cancer model with a very favorable safety profile. LTX-401 not only provides the ability to access percutaneous lesions, which we're pursuing with LTX-315, but can also be administered to deep-seated visceral lesions, and that opens up the whole solid tumor landscape for LTX-401.
I'll hand back over to Øystein now to go over the pipeline.
Thank you, Graeme. As you can see from our pipeline, we have a technology engine that can deliver several drug candidates, all with a significant commercial potential in the cancer therapy area, as Graeme just have explained in more detail. Our lead candidate, LTX-315, is currently being evaluated in two phase II studies in the U.S. and Europe as a monotherapy in basal cell carcinoma and as a combination therapy in melanoma patients. Since phase II is all about generating clinical data, we are getting closer to some very important value inflection points for the company. As mentioned, LTX-401 is being prepared for submitting a clinical trial application to the regulatory authorities at a later stage. Preparing for the future and broadening our pipeline, we have also identified additional molecules in the early discovery phase.
I will now hand over to our CFO, Gjest, who will provide you with a financial update.
Thank you, Øystein. In Q1 2023, the activity level increased. Following the opening of new sites in Norway, France, and Spain, the direct R&D expenses increased from a already high level. The opening of new sites has been important for the progression of ATLAS-IT-05. We are now comfortable with meeting our goal of being fully recruited by mid-2023. Total operating expenses for the period ending March 31st was NOK 24.8 million. That represent an increase of NOK 8.7 million from the same period last year. During the quarter, we have seen an uptick in recruitment of patients in ATLAS-IT-05, our main clinical study for LTX-315. In addition, we have continued to support Verrica for their development part program for LTX-315 in basal cell carcinoma.
For LTX-401, the second generation molecule, we are preparing to submit a CTA application, which is required to do to start the phase I study, and that's ongoing. The net financial items for the period was $4.8 million and was a result of a strong U.S. dollar in the first quarter. Overall, we have a lean organization with a strong focus of being fiscally responsible while driving our clinical development program forward. This slide illustrates the continued high level of activity in Lytix. Direct R&D expenses for the period amounted to NOK 15.4 million, representing an increase of NOK 4.7 million from the same period last year. As you can see, R&D efforts represent most of our expenses. Our cash position, including short-term financial investments, amounted to NOK 126.4 million at the end of March 2023, compared to NOK 145.2 million at the end of 2022.
The current cash runway will see us through 2023. We continue to regularly assess our financial position to ensure that we have the necessary funds to drive new and future activities. I will now hand it back over to Øystein.
Looking forward, there are a few key elements we want you to take with you from this presentation. 2023 is an exciting year for Lytix Biopharma, with a good progress in the two ongoing phase II studies with LTX-315. Our key objective moving forward is to drive enrollment in the ATLAS-IT-05 phase II trial towards completion during this summer. Part two of Verrica's phase II trial began in the second quarter of 2023, and part three is expected to start in the first half of 2024. We will continue to support Verrica Pharmaceuticals phase II study with the supply of LTX-315 and with all knowledge and experience in the technology. We will continue the ongoing process to bring LTX-401 to clinical at a later stage.
We will also continue to strengthen our position in the immuno-oncology space, considering new clinical opportunities for our unique molecules and build strong networks and relationships within the industry. An example of how local administration of our oncolytic molecules are able to induce systemic anticancer effect in cancer patient is represented by the image on the right-hand side of this slide. Here you see the effect of LTX-315 in a patient with a sarcoma who has failed previous treatment. When the patient received local treatment with LTX-315 in a tumor lesion in the lower back, the patient experienced a 63% reduction in a non-treated tumor in the lung.
We have observed similar systemic anticancer effect in a substantial number of cancer patient after local treatment with LTX-315, indicating that LTX-315 is able to generate the right immune cells in the patient that are able to fight the cancer disease. This is why we are highly motivated to move forward and feel confident about our molecules making a difference for the majority of cancer patient who still face few or ineffective treatment options. With this, I will now hand it over to Ole Peter, wh o will take you through the Q&A session.
Thank you, Øystein. We have received a couple of questions. The first one goes like this. That is regarding the ATLAS-IT-05 study. How many patients have you recruited in Europe? Would that be you, Graham, to answer that?
I will answer that, Ole Peter. We have a policy that we don't sort of report inter patient numbers publicly. The trial is ongoing, and as Gjest mentioned, we're on track to complete. We will of course inform the market when we have reached our total of the initial 20 patients.
We have another question regarding this study, and it goes like this. What is the minimum ORR you need to reach in the phase II trial for the primary endpoint to be met?
Yeah, I will take that.
Yeah, you take that one.
Ole Peter.
Yeah, I think so.
Firstly, let me start by saying that, remember these patients are refractory to pembrolizumab, so any response that is seen in this patient, study, will be encouraging. The study is an exploratory study. We have not set a threshold of a minimum ORR. We are hopeful that we will see responses in this study and, we are certainly compare ourselves to other, agents in this space where responses range from as low as 10% to, above 20%. We have not set formally a minimum target, for this study.
Thank you. It's regarding the study Verrica is running, and it goes to you, Øystein, I believe. What would be your interpretation of the way Verrica choose to communicate on how they progress LTX-315 through the clinic?
I think we have to refer to Verrica's report of this study. I think ask you all to follow that to answer that we cannot tell anything more than that. I think it's very encouraging what they are reporting, that they are in good progress with part two, and they have showed no safety issues and promising responses, and also that they're already also talking about when to start the third part of phase II study. I think that's very encouraging. As Graeme point to, I think it's a very exciting study because we may have a very good alternative to what is the current treatment option today. The major current treatment option is surgery.
I think this ability to heal the cancer and also protect against relapse and spread of the cancer represent a very exciting approach, I think in this. I think 350 is very ideal for this cancer indication and with this a huge, you know, huge market potential. I think this is very encouraging.
I see questions keep on ticking in here, and this one is also about the Verrica collaboration. It goes like this. Which event will trigger the next milestone payment from Verrica? Would you answer that, yes, Gjest?
I can answer that. We haven't disclosed what event that will trigger the next milestone payment, but it is linked to the clinical development of LTX-315 in basal cell carcinoma. We'll come back to that when it happens.
The question goes, has Verrica stated what it expects peak sales of LTX-315 in BCC could be?
I don't think, and as far as I know, I'm not any detailed information about the numbers, but I think based on the huge number of patients suffering from basal cell carcinoma, this is the largest cancer indication and largest market potential. Even with the propo rtion of this patient, it's a huge market potential. I don't know any numbers or details about their expectation or how much to penetrate that population.
We are back to ATLAS-IT-05.
Yeah.
With positive results from ATLAS-IT-05, would you envisage LTX-315 could go directly into phase III for advanced melanoma?
Thank you, Ole Peter. LTX ATLAS-IT-05 is at the current time a relatively small study. We have an N of 20 patients. If we see encouraging results in that study, it's likely that we would expand that study and continue to enroll approximately the same number of patients again. After that signal would probably be positive that it could progress into phase III clinical studies. At the current time, I would say we're evaluating the path of development for LTX-315 and which we would take, we are still considering.
Another one regarding IT-05. Let me see. It's buried inside here. Let's see. Where is it? There. The ATLAS-IT-05 study is an open label study. Does this mean that management and the advisory board in Lytix have access to the patient results along the way, or is no information about study results available until the study is finished?
I can answer that. We have established a limited and a number of people in a team that handle the patients from patients' results. Only a very limited group of patients, which is not including me, for example, are following this interim data until we have the 20 patients or the interim data that we present. They're on the insider list, so I think we handle this very properly.
Good. Now it's a question regarding financing. It goes like this. Verrica's LTX-315 study has shown promising results and progress. Lytix Biopharma market value is around NOK 400 million. At the same time, Verrica's remaining milestones obligations to Lytix Biopharma are approximately NOK 1.1 billion, sales and royalty, sales royalty is not included. Is Lytix Biopharma management concerned that Verrica will consider a takeover bid as a more lucrative option rather than having to pay future milestones and royalties?
Yeah. I can try to answer that. It's, I don't expect Verrica to do such a transaction. They are a fairly small company, and acquiring Lytix would be a significant transaction for Verrica. Yeah, that's all in all really is something I can't say much about.
Good. Now another question regarding the ATLAS-IT-05 study. In the event of a positive outcome from this study, do you expect Merck would be involved in a potential phase III study?
I can answer that.
Yeah
Ole Peter. At the moment, LTX-315 has been operating independently, so we acquire pembrolizumab ourselves. We believe this gives us the most flexibility of options to work with future companies. We will of course talk to companies who have large checkpoint franchises such as Merck, Bristol Myers Squibb, and other large pharma companies. At the moment, we're not committed, but we have options, and we'll of course pursue the most attractive option in the later stage study.
Yeah. Then there's a question regarding the pricing of LTX-315. What pricing do you expect in BCC as with Verrica versus metastatic cancers? I don't know if you would answer that, Øystein. Yeah.
Yeah. We know, also this is a treatment for the dermatology disease. We are developing 315 for metastatic disease. Of course there will be different prices. We are working closely with Verrica to develop two different drug products to handle that. We have a very good collaboration on that. I don't think I can say more than that but that is the fact that this is a treatment that will be given at the dermatology departments.
Yeah
... versus a more in a clinical setting in metastatic disease. There will be differences.
Yeah
... in price.
The last question I have received now is regarding the Herlev study, the ATLAS-IT-04. It goes like this. Now that the promising results from the Herlev clinical study are available, indicating LTX-315 in combination with TIL therapy to be a perfect fit, have Iovance come forward and shown an interest in starting this development? If not, will Lytix consider alternative therapy development approaches?
Yeah. Iovance have been very busy with promoting their own T-cell technology, have been very busy with that, we have not get any concrete response from them. We have been in contact with them, they are really busy with their focus. I have to say this study was a small study, and maybe one of the most important findings in this study was that we identified LTX-315's or documented LTX-315's ability to generate the right T-cells. We proved in this study that T-cells are recognizing the mutation or tumor antigens and the cancer. We showed for the first time that the T-cell LTX-315 generate are tumor-specific, that was a very important part of that study. We saw some very promising signs of efficacy with the T-cell therapy.
We were able to stabilize the disease for many, many weeks in patient that have failed on many, many up to three levels of treatment with up to 11 drugs, so a very hard to treat population, which is very promising. That said, at the moment we are focusing on molecule-molecule combination because it's too much to go both ways. We have got very important information from that study. Cell therapy in solid cancer is still on the way and we need to see that that's, that will succeed, and because it is cumbersome and quite a complex technology to develop and give to each patient. A molecule-molecule combination are a better combination in my point of view, and I think we are on the right track there.
Yeah. I believe that ends the Q&A session for today. Thank you for all your answers.
Thank you.
Thank you.
Thank you for listening.
Thank you.