Welcome to today's event, where we have the pleasure to present ExpreS2ion Biotechnologies. So to help us through today's event, we are joined by CEO Bent Frandsen, and CFO Keith Alexander. Today's topic, your H1 report, fresh off from the press, and of course, some focus on the breast cancer candidate after you had your CTA earlier this month. As always, you're very welcome to ask questions in the box down below. We will have a sharp deadline at 9 at 10:30, but we will see and get so many questions in as possible. So do feel free to ask down there, but for now, I think I will hand the call over to you, Bent.
Thank you very much, Michael, and thank you, H.C. Andersen Capital, for hosting this webinar in connection with our quarterly interim financial report released today, 15 August. I'm joined by Keith Alexander, CFO. My name is Bent Frandsen, I'm the CEO, and I'll go through an update of our business first, followed by Keith going through our financial results, and we're happy to take question and answers in the end. So quite a lot of things have actually happened here since we had our last quarterly webinar. We announced the payment of the dividend portion of SEK 22.5 million to ExpreS2ion through our 34% owned associated company, AdaptVac. This was in connection with the phase III completion milestone payment from Bavarian Nordic, that they paid to AdaptVac in connection with the COVID-19 vaccine phase III completion.
Very nice for ExpreS2ion and our cash position. We followed this up with, announcing a rights issue, and we have concluded a SEK 30 million of cash raise in gross proceeds, including, two warrant schemes, called TO10 and TO11, which are exercisable here at the end of this year and end of, of 2025. Very much correlated with the, the progress on our lead, pipeline asset. We have also announced a US patent issue, which is, great. It's also awesome, always awesome if you can, get, even an agency like the US Patent Office to validate your inventions. And this we have for our Null-Glyco modified cell line, and, and this is, this is strong, something we work with, and now we have this stamp from the US Patent Office.
The biggest milestone that we have, and I'm gonna dwell more on this in my talk here, is that we filed a clinical trial application, a CTA. We did that last week on the sixth of August. It's a key milestone in our pipeline. Now we are really on path towards the first clinical trial with our lead assets, the breast cancer vaccine project that we call ES2B-C001. And finally, we've also actually spent some time on updating our website and branding, so we bring a new visual identity to the table here. You may already have noticed that with our new logo and our greenish site, and we are very pleased with this update, and this is to clarify our value proposition, both to customers and partners, and investors alike.
If you look at our pipeline, it's led by our therapeutic breast cancer vaccine candidate, ES2B-C001, followed by ES2B-I002, which is our project code for the CMV, the cytomegalovirus vaccine project that we do in collaboration with the Danish biotech company, Evaxion, and we have further exploratory research in our pipeline. And I'm very, very pleased with ES2B-C001 that we have actually progressed. We have updated the bar here. We have now submitted the clinical trial application on sixth of August, and we are approaching the phase I stage as we speak. Furthermore, on the CMV project, we are approaching animal testing. We'll do immunogenicity testing to test how we can raise antibodies with the potential key candidate that we're looking into. As you know, this takes time, and this is a discovery effort that we initiated in December 2022.
I'm very pleased that we have actually some candidates now that we can take into clinical trials here in the next year. But let me dwell more on ES2B-C001. This is really a breakthrough breast cancer vaccine, and it's based on technologies that we have already validated. There's clinical proof of concept, and there's a phase III validation because it's exactly the same technologies that were applied in the COVID-19 vaccine that was sponsored by Bavarian Nordic under license from AdaptVac. So we take the same technologies and apply them in ES2B-C001, and the good thing about this asset, this is a protein we're making, which is not mutating. It's the same protein, it's very clear-cut, and we make a full-length protein, which makes a polyclonal response.
This is important because existing standard of care treatments, like monoclonal antibodies, like Herceptin and Perjeta, which generate billions of dollars to Roche, they actually target only one domain, and with this, we believe we have a potential, very effective therapeutic breast cancer vaccine candidate. The VLP concept that we apply here has actually also been validated or used in approved vaccines, such as the HPV vaccine for cervical cancer and HPV vaccines against liver cancer. So the concept as such is in existence in commercial vaccines. With the VLP technology that we include here from AdaptVac, we can make a highly immunogenic vaccine, very efficacious vaccine that's able to generate a very strong polyclonal antibody response. And we can also say it has a very safe profile.
We know it from the COVID-19 project, but we've also seen in our preclinical setting long-term non-human primate test data, which are very encouraging in terms of safety. We can say that it's a long immune response, and if we're able to break self-tolerance in this connection, and we can combine it with standard of care even. So at the end of the day, we can apply this on top of existing lines of therapies, or maybe even use it as a standalone, and eventually an off-the-shelf, scalable, and cost-effective therapeutic opportunity. We've had significant progress, as I mentioned. We have carried on with the manufacturing of this. We made the drug substance here in the spring, and approaching the summer, we were able to manufacture and release the drug product.
This is a very important step because it's a drug product that will be used in the clinical phase I trial. We could then carry on with the very important process of making the investigational medicinal product dossier, IMPD, which is a very important document for the regulatory authorities' scrutiny, as well as the investigator's brochure, which is the document which the clinical collaborators will use in connection with carrying out the clinical phase I trial. We have selected the clinical trial setup. We are going to work together with Medical University of Vienna and their clinical colleagues. We're very pleased with this setup. It's very well known in the field, very experienced clinicians taking care of this. So I'm super pleased we have reached a collaboration agreement with Medical University of Vienna on this.
We have, in July, had a very important scientific advice meeting with the regulatory body of Austria, and this was very encouraging. So we have back-up to proceed with the plans that we have set out in our protocol. And one of the key factors is actually that it also includes HER2-low patients. I'll get back to this shortly. So we were able to finalize the protocol, and we submitted that on the sixth of August with all the documents, and we're now in a waiting position. So the first-in-human phase I clinical trial, the protocol title is, as mentioned here, First in Human, phase I, Open Label Dose-Escalating Trial to Assess the Safety, Tolerability, and Immunogenicity/Preliminary Antitumor Activity of ES2B-C001 without Montanide in HER2-expressing breast cancer.
This is the title of the phase I safety trial that we're going to conduct once we have the approval in place. The primary objective of this study is to determine the safety, tolerability, and maximum tolerated dose for the product, alone or in combination with Montanide. Montanide is an adjuvant which has been used extensively in various clinical studies. In fact, more than 200 clinical stage studies have been carried out with Montanide, so it's strongly validated by regulatory authorities around the world to be included as an adjuvant. And an adjuvant may facilitate the immune response. It's a very well-known component in vaccines. We have them in many approved vaccines.
One of the exciting characteristics of the COVID-19 vaccine was that it didn't need an adjuvant because the COVID-19 vaccine with a VLP raised a strong immune response itself. So here in this setup, we are going to look into a combination of with or without Montanide to test for that. The secondary objective is to investigate the immunogenicity, exactly, in combination with the Montanide adjuvant. We have exploratory objectives as well. If we can determine the preliminary antitumor activity, that would be great. Bear in mind, this is primarily a safety study, and the antitumor activity readout will be an exploratory endpoint. The design is set up as an adapted 3+3 design . This is very standard in the field of making early clinical trials in the oncology field.
This is the same setup we're doing with a 3+3 design . We'll look into two treatment groups and have patients amounted to about 18 patients in this setup. The study duration is estimated to be around 20 months. We're looking to have some readouts during 2025 that can show some safety aspects of this study. The estimated study start, as we announced last week, is in the first quarter of 2025. Our strategy to market is really we take responsibility of the early research and development. We've done that so far.
We have had the infrastructure to carry out the early research, including this phase I trial, and the aim is to license the asset out once we have the right clinical evidence for, preferably a bigger pharma partner to take it over and carry out the phase II, III trials and the upscaling and the commercialization. We have some upcoming events where I'm gonna detail more about this. So this is to highlight events taking place in Denmark, in Aarhus, second of September, in Stockholm, 12th of September, and in Copenhagen, 17th of September, where we'll be presenting more of our business and not least ES2B-C001 and its progress. That said, I'll take some more questions around this later, but now I'll hand over the work to Keith. Keith, please.
Thank you, Bent, and thank you, Michael. As Bent mentioned, I'm Keith Alexander. I'm the CFO of ExpreS2ion Biotechnologies. On the coming slides, I'll talk about our financial results for the second quarter and first half of 2024. In the second quarter of 2024, ExpreS2ion Biotechnologies generated operating income of 2.4 million SEK, which is an increase of 16% compared to the prior year quarter. Our net profit in the quarter was 2.5 million SEK, compared with a net loss of 30 million SEK in the second quarter of 2023, and drove a profit of 5 öre per share or 2 öre on a fully diluted basis. At the end of June, ExpreS2ion Biotechnologies had 69 million SEK in cash. I'll dive into the key drivers of these figures and others in more detail in the coming slides.
Starting with operating income, we experienced a 16% increase year over year in the second quarter to approximately SEK 2.4 million due to the progression of client and grant projects. In the middle chart, we focus on net sales, which reflects revenue from projects, licenses, and our webshop. They were well below the long-term average in the quarter, reflecting the transition to a pipeline strategy. However, in the chart on the right, we show other operating income, that is, grant-related income, which was the highest it has been since the fourth quarter of 2020, driven by both our newest grants, including the VICI-Disease and MucoVax consortiums, and old grants, including INDIGO.
Moving to the cost side, which is much more significant than the income side, operating costs in Q2 amounted to approximately 23, 23 million SEK, a decrease of 35% compared with the second quarter of 2023. The decrease is driven by external R&D costs and cost savings from the restructuring announced approximately a year ago. Here, we've illustrated the two largest components of operating costs, starting on the left with external R&D costs. These peaked in the fourth quarter of 2022 due to preclinical development costs for the breast cancer vaccine and have decreased since then. Compared with the year-ago quarter, these costs were 45% lower in the second quarter of 2024. Costs in this category are large, volatile, and primarily driven by our pipeline activities.
Moving to the chart on the right, we've removed the cost of share-based compensation from personnel costs to calculate an underlying personnel cost. The underlying figure is approximately the cash cost of personnel. It peaked in the first quarter of 2023 and decreased by 35% compared to the year ago quarter. The decrease primarily reflects the cost reduction program enacted last August. Note that personnel cost is sensitive to wage inflation and effects since we reported SEK and pay wages in DKK. Moving to the net profit and loss for the period. After financial expenses and taxes, we had a net profit of approximately SEK 2.5 million in the first quarter, compared with a net loss of approximately SEK 30 million in the year ago quarter. We showed the year-to-date comparison on the right.
For the first six months of 2024, the net loss was SEK 10 million, at an 82% decrease from the SEK 56 million loss in the first six months of 2023. Our next slide shows how our cash balance has developed in 2024. At the start of the year, the company had a cash balance of SEK 58 million. Cash burn from operating activities has been approximately SEK 13 million. The net cash inflow from investing activities was SEK 21 million, primarily reflecting the dividend paid by AdaptVac ApS following their receipt of a milestone payment from Bavarian Nordic for completion of phase III activities for the ABNCoV2 COVID-19 vaccine. Financing and effects reduced cash by approximately SEK 500,000 combined.
Putting this all together, at the end of the quarter, the company had a cash balance of SEK 69 million, which was an increase of SEK 11 million year to date. It's worth noting that these figures do not reflect the rights issue completed after the end of the quarter, which contributed approximately SEK 30 million in gross proceeds. On the next slide, we show the trend in our cash balance, which ended at SEK 69 million in the quarter. As mentioned, we received gross proceeds of SEK 30 million. It's not reflected in this chart. This balance enables us to initiate the phase I clinical trial of our lead asset, the breast cancer vaccine, subject to approval of the clinical trial application submitted last week.
Looking forward, we have two warrant subscription periods planned for the fourth quarter of 2024 and third quarter of 2025. The TO10 warrants have a subscription period from November 20th to December 4th, 2024, with each warrant being exchangeable for one new share for a price of 70% of the volume-weighted average price during the first 14 days of November. It's subject to a cap of 1.5 SEK per share and a floor of the company's quota value of approximately 0.11 SEK per share. The TO11 warrants have a subscription period from September 18th to October 2nd, 2025, with each warrant being exchangeable for one new share for a price of 70% of the volume-weighted average price during the first 14 days of September next year.
It's subject to a cap of 1.75 per share and a floor of the company's quota value. In both cases, a maximum of approximately 30 million new shares will be issued. We do hope our investors will invest alongside us in the development of the groundbreaking breast cancer vaccine and ExpreS2ion's future development pipeline. With that, I'll pass it back to Michael for Q&A.
Perfect. Let's jump into it. I know we are busy. The first one, when do we expect start for phase I breast cancer vaccine candidate? Did I understand you correctly, that you expected that Q1 2025? Was that correct, Bent?
That's correct, and the definition for a start in that connection, actually, the first patient, first dose. So that we are expecting in the first quarter of 2025. We've just initiated a process now with the clinical trial application, which is gonna take a while. So we expect a dialogue with the Austrian authorities before we actually get an approval to carry out this study. And even when we have that approval, it's gonna take a little while before we can actually enroll a first patient and get the first patient dosed. So Q1 2025 is the estimated starting time.
Then there's a question, I don't know whether you give this information. The cost of the full phase I program, an estimate of that, and of course, the question, are you financed with the warrants, what you have gotten in your cash balance right now to run a full phase I program?
Bent, shall I take that one?
Mm-hmm. Yeah. Sure.
We haven't disclosed the exact cost of the phase I program. What I would say is it's much less expensive than the phase I we were looking at a year ago at this time. I would say also that the reason why we're not disclosing the cost is that things can change as you go through the study, so of course, the cost can be a bit variable. But, I would say that we've been very diligent on trying to keep the cost very much under control, while making sure that it achieves the objectives that are important, for ExpreS2ion and for the phase I study.
Regarding whether we have enough cash to finish the phase I study, which was the stated objective of the rights issue, it really depends on how the warrant series go. It is possible that we have enough to finish, but we really need to see how things go, and that'll be subject to our share price, and frankly, how the market values our progress as we proceed through this. I mean, entering the phase I is, should be a very material value inflection point, but we need the shareholders to reflect that in our share price.
And then there's a question also: Will you seek, are you seeking, for example, direct issue, larger investors besides the potential for candidates? Are you looking at this maybe getting in some, it's a bad word, smart money, something that can go a little bit deeper and look at your technology. Is that something you're looking at other sides, or is the warrant programs the main part where you are expecting to get this sourcing from?
Keith, would you also like that?
Sure. I think I'll take that in pieces. First, we have no direct plans for an additional rights issue at this time. Second, we would very much like to have some institutional investors on board who are committed to the long-term development of the program. So it's something that's very much on our minds, especially right now, you could say.
And then a very big question, having to ask you to look into the future. If you look ahead three to five years, what company do the shareholders own? Is it a broad base with more candidates? Is it a company focused solely on, you know, what you already have in your pipeline and trying to run a license deal there? Some thoughts from you, Bent, and I know this is. Yeah, it's almost impossible to look into the future, but I'll ask you to try.
Yeah, well, the good thing about being in ExpreS2ion is that we have a clinical phase III validated technology platform. So that's very awesome, and it validates in many aspects our pipeline endeavors. We are now focusing on the breast cancer vaccine assets. We have also the CMV project, as I've alluded to. Before the end of 2025, ExpreS2ion should have the right to select the lead candidate, and then we have to find out how to develop that onwards. So that would be a direct consequence of that asset. In our exploratory projects, I've mentioned it a couple of times, I can't disclose details at this point.
I think we have some super interesting preclinical projects going on there, even getting some animal data, but we have to validate it before we can actually go out and say, "Hey, we have actually really something potentially very valuable here." And then, of course, we had to find out how to proceed with those.
Perfect. Will, like, AdaptVac receive more milestone payments from Bavarian Nordic?
That is a no. So the phase III completion was it for the COVID-19 project in the hands of Bavarian Nordic. I think they've been very clear in their communication that they're not going to proceed with that. So as a consequence, I don't foresee any milestone payments on that project or AdaptVac.
Then a question: Do we have the organization you need when going into human clinical trials? You know, it's another. It's a step up. Do you have the organization or have you outsourced it from the outside, as I think you kind of alluded to, through your presentation here?
Well, we are now in tight collaboration with the clinical researchers in Austria, who are helping us out on carrying out the phase I study, which is going to take place in Vienna. And in addition to that, actually, since we have been in a transition 1 year ago, we have retained consulting experts when needed. So that's the way we've been handling that, and I think it works fine. It's not as risky to hire any experts, and we can handle it like with the consulting experts as we do. So that's the good thing about that.
Then this question: How far do you expect to take the ES2B-C001? I think you alluded to it on a slide there, but if you can tell a little bit more.
The strategy is really to take it to the clinical proof of concept, which would be actually getting output from a clinical phase II trial. That's gonna take a lot of years and demand a lot of money, and I cannot sit here and say that we can carry that out. So that's why we take a business approach of talking with potential partners already at this stage, if they can support the development. But it's a pro and con process because you want to maintain the project yourself as long as possible to gain as much value to shareholders as possible. In principle, it would be great to carry it out to clinical proof of concept, but in reality, we have to look at how we can proceed all the time.
Then, regarding the malaria, what are the possibilities in the projects? Is ExpreS2ion part of the project of large or smaller size? You mentioned negotiation in the report.
Yes, on the malaria projects, which I didn't cover in this webinar, but it's actually very exciting that University of Oxford are carrying out many clinical studies across 4 different malaria projects, all applying our ExpreS2 production platform. And these clinical trials are taking place in phase I and even one in phase II. So that's great. University of Oxford have been very good in being awarded non-diluting funding to fund their clinical efforts. And ExpreS2ion, we don't carry any cost on this ourselves, so we are just very pleased that they progress constantly, and eventually we get into a scenario where it may become commercially malaria vaccines. And of course, by then, there's an upside to ExpreS2ion.
And then let's finish with this one. And unfortunately, there's more, but we need to cut sharp. Could your technology platform potentially be partly out-licensed to fund your own development activities, you know, as a broad umbrella or something like that?
Well, we've been successful in licensing it out for the last decade or so. But it's actually used in research laboratories with a license fee, which is based on scientists using it as a research platform, not really taking it into a pipeline asset. And so the challenge is actually to bring it to that stage, and that's what we're trying to do ourselves with our pipeline efforts. So it's going in the right direction, at least.
Unfortunately, we're running out of time. There's a question here, why do we don't do it in Danish here? You know, most of the shareholders are Danish, but I don't know how far Keith has come with learning to speak Danish, so it's not trying to alienate anybody. It's simply so Keith can participate here. We are doing it in English, of course. So I hope it was okay I answered that one.
I would just add that half of our shareholders are Swedish, and some of them have asked us to do it in English as well. But yes, I'm more comfortable in English, for sure.
Perfect. Perfect.
Yeah.
Unfortunately, we didn't catch all the questions. We will see you again at some point in time, and I will see if we can get answer some of the questions. But thank you for taking us through your results and the trial set up for the breast cancer candidate. And thank you for people for listening in and asking a lot of questions.
Thank you.
Thank you.