Good afternoon, everyone, and welcome to Lytix Biopharma's Q3 report presentations, where we will present the company's latest highlights and events. My name is Øystein Rekdal, and I'm the CEO and co-founder of Lytix Biopharma. I'm joined by Gjest Breistein, our CFO, and Graeme Currie, our Chief Development Officer. 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, and to ask a question, please follow the instructions via the webcast platform. Before we go into the events of the third quarter, I will give a brief introduction to our technology. Lytix is an immuno-oncology company with a technology platform composed of molecules with a commercial potential within several different cancer indication. Our lead candidate is showing promising preliminary efficacy in two ongoing phase II studies.
Our technology has been scientifically validated by international experts within the immuno-oncology space, and our technology has been commercially validated through our licensing deal with Verrica Pharmaceuticals. Our molecules address major challenges in current cancer therapy due to their unique ability to induce activation of a broad repertoire of T cells that can target the high diversity of different tumor cells in solid tumors, indicating and making these molecules ideal for combination with immune checkpoint inhibitors. Let's then move on to the highlights for the third quarter of 2023 and some post-period events. We have recently reported promising preliminary results from our ATLAS-IT-05 study at the European Society for Medical Oncology Congress in October 2023.
In this study, our lead candidate, LTX-315, is tested in combination with the anti-PD-1 immune checkpoint inhibitor pembrolizumab in heavily pre-treated melanoma patients that had previously failed on PD-1, PD-L1 immune checkpoint inhibitors. The early efficacy signal is encouraging, with a disease control rate of 43% and one patient achieving a partial response and reduction of size in both injected and non-injected tumors. Our industry partner, Verrica Pharmaceuticals, is running a phase II study with LTX-315 as a monotherapy for the treatment of basal cell carcinoma. Verrica has also reported convincing preliminary data with complete clearance of tumors treated with the highest dose of LTX-315 tested in the study. With stronger results than expected, Verrica had decided to accelerate the clinical development of LTX-315 and to complete the entire phase II study in H1 2024.
We are also intrigued by the initiative from the University Hospital of Oslo, Radiumhospitalet, to initiate a neoadjuvant study in earlier stage melanoma patients in collaboration with Lytix Biopharma. This study was presented at the 15th Nordic Melanoma Meeting in October 12 and was very well received within the Nordic melanoma expert community. This takes us to the clinical and operational update for the quarter. I will then hand over to Graeme Currie, our Chief Development Officer, for the clinical update.
Thank you, Øystein. Just as a reminder, our phase II study, ATLAS-IT-05, is a study looking at LTX-315 in combination with the checkpoint inhibitor pembrolizumab in advanced melanoma patients who have evidence of being refractory to a prior course of an immune checkpoint inhibitor. The aim of the study is really to show whether LTX-315 can turn these, what appear to be immunologically cold tumors, to hot. And this patient population has really advanced disease and very limited treatment options. Recruitment of the first 20 patients was completed in the middle of 2023, and the first report of this data, which was from an early look at this data set, was pre-presented at ESMO in late October this year.
The positive data that has emerged out of this study, to date, is encouraging. If we continue to see further positive data, we could expand into other tumor types. Next slide, please. As I mentioned, this is a relatively early look at the data. Patients are still remaining on study, and the data is evolving. From this dataset, we had 20 patients who were evaluable for safety data. Fourteen of those met the criterion to be considered evaluable for efficacy. As of the data cut, there was a median follow-up of 15 weeks, which is very early in the treatment course. The combination regimen showed signs of tumor shrinkage and prolonged stabilization of disease in these patients who were advancing on their prior therapy.
They had confirmed evidence of progression, and that they'd also, in their prior treatment regimens, failed a checkpoint inhibitor. These patients really had very poor prognostic factors. A number of these patients had failed double checkpoint inhibitor therapy with an anti-CTLA-4, as well as an anti-PD-1. Patients who were eligible for BRAF/MEK inhibition, they had progressed on that treatment as well. The disease control rate of 43% on these patients who were rapidly progressing is a positive early sign, and there was a patient who had a partial response in this dataset. At the time when we presented that data, that response was unconfirmed, but the emerging data has shown that that response is confirmed. We show evidence of direct tumor shrinkage in both the injected and non-injected lesions.
The dataset also demonstrated that LTX-315 is well-tolerated, with generally mild to moderate adverse events. Next slide, please. If I look specifically at the response in injected lesions, where we had data, which was in 9 out of the 21 patients that were available to look at, nine of those, Sorry, 21 lesions available to look at, nine of those lesions so showed 100% regression or complete regression when looked at by CT scan. Partial responses were not able to be captured in this assessment, because CT just recorded whether a lesion was present or absent. We will continue to look at this data.
On the right here, you can see a lesion at baseline, which started to show signs of necrosis after day 8, and by day 43, showed complete resolution. If we move to the next slide. This is a separate patient at another site who had multiple, relatively large lesions on the right forearm that were chosen to be injected, and you can see the extent of the disease at screening. By day 43, which is still relatively early in the treatment course, there was clear signs of necrosis and regression of these injected lesions. Again, encouraging signs that we have a direct effect. If we move on to the next slide. But not only do we have a direct effect, we do have systemic effects as well.
This is the patient who at the time of reporting was an unconfirmed partial response. On the right-hand side, you can see the baseline CT scan, and this patient was a 75-year-old male, who had Stage IV M1a melanoma and had BRAF-positive disease. They had multiple mets in both the lymph nodes and present on the gluteal muscle, and this is the lesion we're envisaging here. They'd had prior treatment with nivolumab and a BRAF/MEK combination. The baseline, this lesion on the in the gluteal muscle, was around 28 millimeters in size. By day 43, the lesion had started to regress after initial growth, which is what we would expect with these immune therapies, some slight flare of disease before seeing regression.
At day 169, this lesion was measured as 3 millimeters in size. There was complete regression of all injected lesions in this patient. Next slide. This is another patient where we're looking at a clinically systemic result, response. This patient at baseline had a lesion size just over 15 millimeters, was a 77-year-old female with stage 4 M1A, and they'd had prior treatment with nivo. As you can see, again, this patient showed that slight increase at day 43, but then showed regression of the lesions. This patient would have been classed as a partial responder, but unfortunately had 1 new lesion that appeared in one of their lymph nodes at day 106.
The patient is continuing to be followed, and we'll see what happens with that lesion as their treatment progresses. Next slide. So, Øystein, in his early remarks, talked about a study we're embarking with Dr. Henrik Jespersen , who's the head of melanoma oncology at Oslo University Hospital. The plan is to start this in the first half of 2024. The neoadjuvant setting has long been an area of interest for us and is very well-suited to an intratumoral treatment, where you have access, and your goal is to shrink the tumor prior to surgery. We will look to administer LTX-315 in combination with pembrolizumab as in neoadjuvant and some adjuvant treatment, and look for an outcome.
Pembrolizumab has shown encouraging data in this setting, but we believe that that response can be further enhanced with LTX-315. Next slide, please. Okay, I'll hand it back over to Øystein to give you the update on Verrica Pharmaceuticals.
Thank you, Graeme. As mentioned, Verrica has recently presented positive results from the first part of their phase II study in basal cell carcinoma. The results were presented by Dr. Bhatia at the conference arranged by the American Academy of Dermatology in August. The patients were treated once daily with LTX-315, named VP-315 by Verrica, for up to six treatments over a period of two weeks. After complete treatment, the lesion was surgically removed and analyzed by histology. In four out of six patients that were treated with the highest dose, it was not found any cancer cells in the treated lesion. The other two patients show a partial response with 95% and 30% tumor clearance.
Here you see photographs of the basal cell carcinoma tumors and histology analysis of tumor tissue from the same tumors before and after LTX-315, showing full necrosis and complete clearance of tumor cells following LTX-315 treatment in these two patients. These early results from part one of the study are very encouraging and document that LTX-315 is able to kill all cancer cells in the most mutated cancer type of all cancer. We are now looking forward to see the data from part two of the study, which is expected to be completed end of first half year of 2024. Basal cell carcinoma is the most common cancer among all cancer types, with 3 million -4 million incidences per year in the U.S. to... Today, the majority of the patients are treated with surgery, which is painful.
Since this lesion often occurs in sun-exposed area of the skin, scarring and hypopigmentation can cause cosmetic challenges for the patients. LTX-315 could potentially represent a better alternative to surgery because it may lower the risk of relapse and will cause less damage to the patient's skin. Lytix has a licensing agreement with Verrica, where Lytix is entitled to receive up to $111 million in potential milestone payments and teen to mid-teen royalties based on Verrica's worldwide annual sales. This is an attractive deal for Lytix if Verrica succeeds due to the large commercial potential in BCC, with a $6.7 billion market in the US alone in 2021, and a market that is expected to increase significantly in the next years.
So as you can see from the pipeline, our lead candidate, LTX-315, is currently being evaluated in two phase II studies as a monotherapy in basal cell carcinoma and as a combination therapy in melanoma patients. We have already seen positive interim data in, from both studies. An investigator-driven study with LTX-315 in a neo-adjuvant setting in melanoma patients with early stage disease is planned to start early next year at Radiumhospitalet in Oslo. Since we have decided to focus on generating more clinical efficacy data on LTX-315, we have decided to postpone the clinical phase I safety study with our second-generation molecule, LTX-401. We also have additional molecules in the pipeline that opens for additional commercial opportunities.... I will now hand it over to our CFO, Gjest Breistein, who will provide you with a financial update.
Thank you, Øystein. As Øystein and Graeme have already been explaining, Q3 has been a very exciting period for Lytix, where both Verrica and ourselves have published clinical results from our two ongoing phase II studies. Following the complete recruitment of 20 melanoma patients in August, we reported promising results at ESMO. As already mentioned, we achieved 43% disease control with 1 partial response, and in the patient with the partial response, all injected tumors disappeared, while the non-injected tumors shrunk. Verrica reported convincing preliminary data with complete tumor clearance. Verrica has now decided to accelerate the clinical development of LTX-315 and with an aim to complete their study in first half of 2024. This is a big news for Lytix since we have the licensing agreement with them. Now over to the key financial figures.
Total operating income for the third quarter includes NOK 3.9 million in revenue from our industry partner, Verrica Pharmaceuticals. This revenue is from sale of LTX-315 for the use in Verrica's clinical development program. The remaining revenue is from government grants. Total operating expenses increased by NOK 2 million compared to the same quarter last year, but decreased compared to the second quarter, 2023. The reason for the decrease is lower activity in July and August. With all sites open in the beginning of the year, we managed to complete recruitment by mid-2023. The recruitment peaked in Q2 before slowing down during July and August. The slowdown was a result of less activity at the hospitals during the summer vacation period. Our clinical trial represent most of our expenses, with fewer patients recruited during the summer.
For ATLAS-IT-05, direct R&D expenses decreased to NOK 13 million, down from NOK 24 million in Q2 2023. In the operational activity, alongside increased efforts on business development, we saw an increase to NOK 3.4 million, up from NOK 2.5 million for the same period last year. The net financial results amounted to NOK 0.4 million, and is a result, mainly result of, the USD-NOK exchange rate fluctuations. Overall, Lytix is a lean organization with a strong focus on being fiscally responsible while advancing our clinical development program. Our cash position, including short-term financial investments, were NOK 78.8 million at the end of the quarter, compared to NOK 145 million at the end of 2022, and NOK 172 million at the end of September 2022.
The current cash runway will see us into 2024, and we continue to regularly assess our financial position to ensure that we have the necessary funds to support the existing and future activities. So far in 2023, our development program has matured and reached a point where our drug candidates are being re-recognized as a new treatment modality with a significant market potential. I would like to highlight that the interim readouts from both Lytix and Verrica's clinical trials has shown that 315 is able to completely eradicate injected tumors, resulting in full skin healing. These results indicate why we have such a strong belief in 315, that it can have a huge potential, and play a significant role for BCC patients. As we embark on the year's last quarter, we are excited to carry on this important work.
I will now hand it back over to Øystein.
Thank you, Gjest. Looking forward, there are a few key messages we want you to take with you from this presentation. We continue to follow up the patients in the ATLAS-IT-05 study and are planning to present top-line clinical data for 20 patients in Q1 2024. We are in the process to submit an amendment for initiating the expansion cohort with additional 20 patients, and we continue to support Verrica Pharmaceuticals' phase II study, which is expected to be completed June next year. In collaboration with Radiumhospitalet, we plan to start a neoadjuvant study in the first part of 2024. We will also continue to strengthen our position in the immuno-oncology space by continue to keep a strong footprint in the U.S., continue to build strong networks and relationship within the industry, and considering additional commercial opportunities for our unique molecules.
We are, as mentioned by both Graeme, me, myself, and Gjest, we are encouraged by the latest results we see with our lead candidate, LTX-315, in the two ongoing phase II studies. Exemplified to the right with a clinical response in a late-stage melanoma patient that had failed several lines of treatment, including immune checkpoint inhibitors, where a nearly 3 cm large non-treated lesion is almost cleared completely by the combination of LTX-315 and pembrolizumab without being injected by LTX-315. Therefore, we have become even more confident that our molecules have the potential to make a difference for many cancer patients who still face few or ineffective treatment options. With this, I will hand over to Gjest, who will take you through the Q&A session.
Thank you, Øystein. We have received a few questions, so let's just jump into it. The first one, expenses, especially R&D, are a lot lower in Q3 than previous quarters. Why is this? I guess I'm the best to answer that question. As I was saying in the presentation, we saw a reduction in cost during July and August, which was somewhat expected since we peaked the recruitment in August, July, June, and saw a decrease in activity at the hospitals during the summer months. Both patients were not that fond of going to the hospital during the summer, and therefore, lower activity. Second question: How many patients out of the 20 will be available for an efficacy readout?
I can answer that one, Gjest.
Yep.
That ultimately, at the moment, is a moving target. We have just over 20 patients, 23 patients who have been screened and received treatment. There are a number of patients who, for varying reasons, either didn't make it through the treatment course or didn't have a follow-up baseline scan. But we expect to have approaching 20 patients to be evaluable. That number will be determined when we have the full data set.
Thank you, Graeme. Third question here: How important is it to shrink superficial lesions? Where LTX-315 seems to have superior efficacy in the phase II study.
There's a general view in the community that shrinking the superficial lesions increases the chance of getting a complete response, including both superficial and deep-seated lesions in the patient. We don't have a large enough data set really to determine that at the moment, but our goal of treatment is certainly to shrink any of the lesions that we have access to and are injecting with LTX-315.
Thank you. I'll continue to answer the questions regarding the ATLAS-IT-05, and here we have a new one. When do you expect to recruit a first patient in the planned ATLAS-IT-05 expansion cohort? Will the expansion add new centers?
Yeah, again, I can take that one, Gjest.
Thank you.
So, the process of pursuing the expansion, it will require a protocol amendment that needs to go through both regulatory review and a review by the IRB or ethics committee. That can vary, that can be relatively quick in the U.S. There is a set period of 60 days following submission in the E.U. for the amendment to be reviewed by regulators, and ethics committees or IRBs vary. So we, it will be in early 2024-
Right
... that we expect to see be available for enrollment of patients into the study. It will vary by center and by location.
Thank you. Now, we have a couple of questions regarding the NeoLIPA study. What is the market potential for LTX-315 in adjuvant melanoma versus late-stage melanoma? Graeme?
Well, Øystein, do you want to take that?
Well, NeoLIPA, as a neoadjuvant setting is in immunotherapy is a quite early stage at the moment, and we are learning. I think everybody see the positive to move immunotherapy in an earlier stage patient population because you are dependent on a healthy immune system. But to talk about the market is a bit premature. I guess we all expect better efficacy, and with better diagnosis of early-stage melanoma, this market will increase significantly, is expected. So early to say, more has to be done in both neoadjuvant and adjuvant setting, but this market will open up for immunotherapy as we are moving forward with this type of study.
Yeah, just to, just to add on to that, Øystein, you know, there was data published with a checkpoint inhibitor in the New England Journal of Medicine that really showed that treating earlier in disease in the neoadjuvant setting is really the where you see the best rates of response, and that was even better than the adjuvant setting. So I think there is a lot of interest in the community in treating patients earlier and having a better chance of success. The specific market size probably is still emerging, but certainly the data with pembrolizumab was viewed as very encouraging, and I think more and more physicians will be moving to treat earlier in the stage of disease.
Thank you. Another question regarding the NeoLIPA study: Are there any costs expected related to the investigator-led trial in neoadjuvant melanoma?
So I can take that. So, since this is an initiative from Radiumhospitalet, they will cover the expenses with the standard of care, pembrolizumab, the immune checkpoint inhibitor. They will also take care of the patients. So, Lytix is providing the drug and some smaller costs to initiate this study. But this is really very different from a sponsor-driven study where the all the costs are covered by the the Lytix, by the company. Whereas here, the Radiumhospitalet will take most of the costs, which is also very positive for entering into this study for Lytix Biopharma.
Thank you. And now there is a couple of financial questions. There's one: What's the expected cash runway in light of the light R&D expenses in Q3? And also, could you or can we expect the current cost level to continue into H1 2024? I ask those questions with the same answer. We saw, as explained earlier, lower activity in two of the three months of Q3. So we would expect somewhat higher costs in Q4 and going forward, but I am not or we're not estimating as high costs as we had in Q2. The Q2 figures was inflated by starting up several sites in the first half of 2023. And another financial question: What was the income in this quarter due to?
I answered that question earlier, but I will repeat it. We had a revenue from R- Verrica, from sale of 315 for use in their phase II study, and also some government grants. See if there's... There's a question in Norwegian, which I will translate. When will you raise capital the next time? And do you have any other plans? And I can start on that with regards to plans for a potential share issue. We cannot go into details on such matters. The board will continue to consider when and if the company needs the additional funding, and that will be communicated accordingly. And the second part of this question: Do you have other plans for financing? Maybe you can answer that, Øystein.
So, with the promising data we presented, both at ESMO and Verrica, through American Association of Dermatology, and our press releases and webinars, we see more attention from the pharma industry. And with Steven Worsley, our Chief Business Officer, located in U.S., is very actively reaching out also to other partners. So of course, we are in a process now that there are more opportunities along the way, and we start to see interest. We have dialogues, but nothing to share at the moment. But of course, with the more stronger data we generate now along the way, the more the better chances is to get into serious dialogues with partners.
Thank you. And then, we have a last question regarding Verrica, and it goes like this: If Verrica start, phase III, following its ongoing phase II, could you give a ballpark figure as to what kind of milestone payment you would expect? I can answer that. So far, Lytix has received $2.3 million in milestone payments from Verrica, and we haven't communicated the size of the next milestone payment. It is related to the phase, the startup of the, a phase III study, and it will be more than what we have received so far. Just now, it came in, another question. Any update on the cooperation with Iovance?
I know there was a meeting in at ESMO, so there is still dialogue with Iovance. I think they have been very busy with their own technology platform, adoptive T-cell transfer, to get that approved and get that up and going. So as many other companies, very busy with their internal programs, but we are still in dialogue with Iovance.
Thank you. That was all the questions, so I believe that ends the session. Thank you for sending in all the questions. Thank you.
Thank you.