Hi, everybody, and welcome to today's event where we have the pleasure to present ExpreS2ion Biotechnology. To help us through this presentation, we are joined by CEO Bent Frandsen and CFO Keith Alexander. Of course, today's topic, fresh from the press, the Q3 announcement. If I should go through the main headlines, it looks like less revenue and bigger operating loss, but well communicated that you are really progressing with your breast cancer candidate. A little bit delay on the COVID-19 phase III data expected readout, but also very strong phase II data could establish the COVID-19. I am sure you will go through this in more details than me, but just to have the headlines. As always, there is a box down below, where you can ask questions through the presentation. We will take the questions in the end. That gives the best presentation.
But for now, Bent, I will hand the words over to you.
Thank you very much, Michael, and thank you to HC Andersen Capital for hosting this webinar where I, Bent Frandsen, the CEO of ExpreS2ion Biotech, and Keith Alexander, our CFO, will go through the company in connection with the Q3 report that we have released today. Before going through an introduction to ExpreS2ion and our business, the usual disclaimer, which I will let you read in details when we publish this presentation after the webinar. We are a biotech company residing in Denmark, public listed in Nasdaq First North Growth Market in Stockholm, and we have a rich pipeline of assets addressing infectious diseases and oncology, and we have a very strong IP position to back up our pipeline efforts. We have vaccine development technologies that are now validated clinically in phase II setting, and now in phase III as we speak.
We are addressing a global vaccine market, which is an extremely high growth market, obviously driven by the COVID-19 pandemic in recent years, but it is a sweet spot to be in as a vaccine developer. Furthermore, we have important catalyst for our market value potential here in the near future. We have just, together with our licensee, Bavarian Nordic, announced the phase III initiation of the COVID-19 vaccine, and it is progressing along. Before moving into our business, this is our management team. I just want to highlight who we are. We are 30 people, working out of our lab and office facilities in Hørsholm, north of Copenhagen, headed by me and Keith, our CFO, and we have Max, Mette, and Mathis in charge of our R&D and technology, preclinical development, and medical affairs.
Furthermore, now we have a four-member board since Allan Rosetzsky, he resigned last month, but still headed by Dr. Martin Jensen. I just want to highlight that we still have more than 200 years of professional skills and experience in the team here, all combined. New, we have a scientific advisory board set up, which is extremely good for our oncology program. This is a board that is set up with six different key opinion leaders. These are highly skilled professional clinicians in the oncology community, in particularly when it comes to breast cancer. So here you see Dr. Giuseppe Curigliano, Daniel Lenihan, Dr. Javier Cortes, Dr. Ulrik Lassen, Dr. Michael Andersson, and Dr. Rupert Bartsch. These are very important people when we are planning our clinical development plan for the ES2B-C001, our HER2-VLP breast cancer vaccine project.
That's super good, and we're very pleased that these very well-known scientists in the community actually endorse our plans going forward. This is the pipeline, as we depict it today. We have had great advances here in 2022 and also here in the recent quarter. It's still led by the coronavirus vaccine, the ABNCoV2 vaccine asset, which has been out-licensed to Bavarian Nordic and which started the phase III trial here in Q3 and is progressing. We then have the breast cancer vaccine project, which we call ES2B-C001, which is a HER2-targeted vaccine, where we have made tremendous progression here in 2022 in the preclinical stage. Furthermore, we have activities in influenza and malaria, which in light of the time, I will not have that much time to review. But I'll go through the COVID-19 vaccine and the breast cancer vaccine in details.
On the breast cancer side, we are addressing obviously a very critical cancer type. One in eight women will experience breast cancer in their lifetime, and more than 600,000 women die every year from breast cancer. And about a quarter of these experience overexpression of the HER2 receptor, which is the target for treatments today and also for our vaccine approach. The breast cancer vaccine market is very much dominated by monoclonals, which have a market value in around $11 billion. These target the HER2 receptor on tumor cells to reduce proliferation and induce tumor destruction. Known brands here are Herceptin and Perjeta. But these products also come with drawbacks. There's the development of resistance, which is known to happen in 20%-30% of patients. There's a potential for heart-related side effects.
And then there's an administration form, which is very expensive and needs frequent visits to the hospital. So what we aim at with our HER2-targeted vaccine approach is to overcome these drawbacks through an internal polyclonal antibody production. We use technologies which, the ExpreS2 platform, which is the foundation of the ExpreS2ion Biotechnologies company. This is based on a proprietary insect cell-based protein production system whereby we can produce the antigens. In the case of the ES2B-C001, it's a HER2 antigen that we make in the S2 cells. Furthermore, we have a virus-like particle technology, which we have in-licensed from AdaptVac, which is a company that ExpreS2ion owns 34% of. So with this VLP technology or virus-like particle technology, you can attach any protein of interest on the surface of a virus-like particle and thereby create a highly immunogenic construct.
This is, by the way, also the technology, the completely similar technology platform that we use in the COVID-19 vaccine. This is great news. In this quarter, we have just announced that a scientific article has been published, and this describes the preclinical proof-of-concept data that we have highlighted during the last year. We have made some very nice data in collaboration with University of Bologna. I have told previous investor relations calls about these proof-of-concept data, which we announced in December last year, in January, and again in May in 2022. Already now, here in the end of October, there is a scientific paper describing all these data, which is great, actually. Now we can refer to this scientific paper, which has been peer-reviewed, and it describes these excellent proof-of-concept data. We are progressing on the ES2B-C001 as planned.
We want to start the clinical testing in 2024, and before that, we have to scale up manufacturing and conduct the preclinical safety that are necessary to move into man. We have put tick marks here on the most important steps. The GMP manufacturing we are outsourcing to manufacturers who make the antigen and the VLP, respectively, and the processes have been transferred. At the moment, we are making the proper good manufacturing batches that are needed for the tox study and the study in man later on. On the preclinical safety, we also outsource the research here. We had a meeting last year, sorry, this year in January with the Danish Medicines Agency that advised us to conduct safety in two different species.
This we are doing, and we have finalized the first safety study in rodents, and are expecting a report here in the very beginning of 2023. Furthermore, the GLP study, which is the tox study that will enable us to file the clinical trial application, will be conducted in non-human primates in 2023, and we expect readout from that in the middle of next year. Then the aim, of course, is to file the clinical trial application before the end of 2023, so we can move into the first clinical trial in 2024. On the COVID-19 vaccine side, we are reliant on Bavarian Nordic. They have the exclusive license to bring this very exciting COVID-19 vaccine to the market. It is called ABNCoV2. Bavarian Nordic have sponsored a phase II trial, which they have announced results from.
Very recently, actually exactly one month ago, they announced some further new data coming out of the phase II trial where they documented that there is a six months protection in the people who have been involved in this phase II trial. This is very good because it indicates that there will also be long-term protection of this vaccine, as we have hypothesized all along. Furthermore, they started the phase III study in September and are in the middle of enrolling up to 4,000 tester subjects, both in the U.S. and Europe. I know at the moment in Denmark, actually, where I want to enroll myself, actually, in this study. I can tell you more about that later. This is going along as planned.
Bavarian Nordic have just announced one week ago in connection with their Q3 financial report release that they expect headline results in early 2023. We are looking very much forward to that. Then they will embark on the rolling submission in 2023 and move on towards launch. Hopefully, this will bring some cash flow into ExpreS2ion. This will be through our 34% company, AdaptVac, because the license that Bavarian Nordic has is between Bavarian Nordic and AdaptVac, which ExpreS2ion owns 34% of. There are some substantial milestone payments and royalties that can be expected from this product, and that will be funneled into ExpreS2ion as well. That was a quick introduction to ExpreS2ion Biotech and our most important assets in the pipeline. I will hand over the mic to Keith.
Thank you, Bent, and thank you, Michael. During the third quarter of 2022, we continued to focus the majority of our efforts on the preclinical development and CMC manufacturing of our breast cancer vaccine candidate. I will walk through the impact this had on our financials. Starting with this slide, which is on operating income. We experienced a 65% decline year-over-year in the third quarter to approximately SEK 900,000 , and a decline of 53% on a year-to-date basis to SEK 4.6 million . Looking at the trend shown in the chart to the left, you can see that operating income in the quarter was the lowest of the last 11 quarters. In the middle chart, we focus on net sales, which reflects revenue from projects, licenses, and our web shop.
They are below the long-term average, and year-to-date, they decreased by 67% compared with the same period in 2021. This is as expected due to our increased focus on developing the pipeline. In the chart to the right, we show other operating income, essentially grant-related income, which remained at low levels compared to 2020, when we benefited from the COVID-19 related grant. On the next slide, moving to the cost side, which is, of course, a much more significant portion of our income statement than the income side at this point. Operating costs in Q3 amounted to SEK 33.6 million , an increase of 170% compared with the third quarter of 2021. The increase is primarily driven by external R&D costs, for which we have shown the progression for the last seven quarters in the chart to the right.
These costs increased primarily due to CMC costs for the breast cancer vaccine candidate as we develop the appropriate analytical methods with our CMC partner and acquire the needed materials. Bent mentioned the significant progress we have made in these areas in his comments. On a year-to-date basis, operating costs increased 91% to SEK 79.1 million . Aside from R&D costs, the other main driver of increased operating costs is higher personnel costs due to higher headcount and non-cash incentive compensation charges, which are, of course, reversed in the cash flow statement. Moving to the next slide. After financial expenses and taxes, we had a net loss of SEK 30.7 million in the third quarter, which was an increase of 227%. The year-to-date net loss increased 137% to SEK 70.7 million . On the next slide, we show how our cash balance has developed year-to-date.
In the first three quarters of 2022, our cash balance increased by SEK 62 million due to fundraising activities, net of transaction costs. These include the rights issue completed in the second quarter and the TO2 warrant subscription completed in the third quarter. Cash was reduced by SEK 60 million as a result of operating and investment activities. Finally, we realized a SEK 9 million gain from currency changes year to date. Note that the figures are adjusted for storing some of our cash in our escrow account from late 2021 through nearly the end of the second quarter of 2022. You can read about that in more detail in the three previous quarterly reports. On the next slide, we show the trend in our cash balance, which ended the quarter at SEK 150 million. This is the second highest level the company has experienced at the quarter end.
On our final financial slide, which is the next slide, I'd like to note that the number of investors in ExpreS2ion Biotech Holding AB at the end of the quarter was approximately 13,000, based on Euroclear data, holding 37.6 million shares. We also note that several investors have decided to participate in the phase III clinical trial of ABNCoV2. As always, we'd like to thank all of our investors for their continued support and interest in ExpreS2ion. During the last nine months, the ExpreS2ion team has accomplished a great deal and is working diligently on delivering significant milestones in the coming months and years. With that, I'll pass it back to Bent to discuss those milestones further.
Thank you, Keith, and this is the last slide where I'll just go through our key catalysts here in the near-term future. On the coronavirus project, the ABNCoV2 product opportunity, we are, as mentioned, of course, reliant on Bavarian Nordic progressing further. It's super nice that they are in phase III now, and they are progressing now as planned. 2023 will be very important for this asset. They expect an initial readout in early 2023, and then Bavarian Nordic expect to initiate a rolling submission throughout 2023. A launch can be expected towards end of 2023 or 2024. On the breast cancer asset, this is what we call ES2B-C001. We are in the middle of the GMP manufacturing scale-up, and we have initiated the preclinical safety studies where the readout can be expected in the middle of 2023.
Importantly, here, we expect to file the clinical trial application before the end of next year. The aim is to start the first human clinical study in 2024, and as soon as we have the clinical data, we expect also an out-licensing window to open for this important asset. On influenza and malaria, which I had not had time to cover that much, we are progressing as planned. I would say, however, on the influenza project, it's a project which is run in a 16-party consortium funded by the EU, and the initiation of production scale-up of preclinical safety is very much dependent on new grant funding. Hopefully, that can be reached in 2023. On the malaria side, the most important asset or the most important assets are the Pfs48/45 transmission blocking vaccine as to the RH5 VLP blood stage malaria vaccine.
These are progressing in and towards clinical testing, very much dependent on the progression of University of Oxford, also with respect to further new granting for this academic setup. That's all we had to say here for now. I'll hand the mic back to Michael, and we are ready here for Q&A.
Perfect. I would like to ask, I think we start with Keith. Are there any special cost associated with this quarter's cost level, or is this level going forward? Did you have some ramp-up cost to the breast cancer, or is this a current cost level we maybe also should look for going into 2023 and the quarters there?
Sure, Michael. I understand the question, and it's awfully close to asking us to give some guidance into our future results.
However, what I can say, I think will be helpful. The costs associated with the preclinical and CMC activities are based on a lot of different sub-activities that are happening, and some of those are quite lumpy in terms of the cost impact. I think we've also made it very clear that preclinical activities and CMC will continue into the middle of next year, based on the milestones that we presented. So that's what I can say about that. I hope it helps.
Perfect. Then to Bent, are there any possibilities to get the claims from the data in the phase II about durability and protection against variants when the vaccine should be marketed? Are the phase III designed also to try and make some of those claims that could make your variant vaccine stand out?
Good question. I am reliant on Bavarian Nordic in this connection. I cannot say about the claims here, what exactly Bavarian Nordic they want. They have announced good long-term data on the phase II background, and I am sure that will continue, also going down the road. This will, of course, also be a key feature in the phase III setup as well.
So the phase III, to your knowledge, and I know you do not have the power over it. To your knowledge, it is also set up so you could measure this also in the phase III?
I cannot comment on the details in the phase III.
Oh, perfect. Then we jump over to your breast cancer candidate. I know you can talk more about that. Can you already share some preliminary thoughts on clinical trial designs?
I could. I would, however, say it is only last month that we have had a kickoff meeting with the scientific advisory board. This was a very encouraging meeting because they certainly endorsed what we plan to do, but I want to be in full alignment also with respect to, after such a meeting, that you write down the minutes and that you agree on this is the way we want to do it, and so forth, et cetera. I think this is a very good question that we should get back to at our next call. Then I am sure I can provide some more details on this.
Perfect. Then there is a question here, and again, you need to relate to that Bavarian i s the main partner here. Is there any risk of further delays on the COVID-19? It moves a little bit from late 2022 to early 2023. If I understand correctly, it was because they could not find the conformity, sourcing that. Is that solved to your knowledge here, and is there any risk to further delays, too little patients or something like that? If you can share some thoughts on it. I know you cannot say very much.
Well, my thoughts when I relate it to our breast cancer vaccine as it is, that you can really never be sure on patient recruitment rates and the whole setup in a clinical trial. That is why you have to be quite cautious in announcing exact dates. I think, who would have known that it is in 2023 that the headline results will come from the phase III. But apparently getting the first patients in the trial, that also takes some time. I know when it comes to our breast cancer vaccine project, there are patients out there. But I do not dare to comment on the recruitment rate, as we speak right now. Relating it into the breast cancer vaccine project, we are starting as soon as possible in 2024.
Perfect. Can you provide some view expectation to the current global COVID-19 situation and the expected market competition in the coming years? I noticed a small study, and I know it's a small study and it was thrown away, that these mRNA vaccines really didn't show any progress even in the newer variants. Really still very weak against new variants, where you are actually showing some strength. Is that the way you're thinking that you could be placed and the view on the markets the coming years?
Absolutely. I'm very happy for that question because it exactly shows that there is a position for ABNCoV2. It has a broad protection, apparently also against variants of concern, potentially a long-term protection as well. It's a very stable product. It can be stored at room temperature, handled at room temperature, which is a strong competitive edge as well. Especially as this is still a pandemic all over the globe, also in areas where cold chain logistics are extremely expensive and not that available. This is good for ABNCoV2 and the groundwork.
Speculating on the market, and now I call it speculating because I know no one knows this, but there will still be a market even if you hit market in 2024. That's still your expectations?
Certainly, COVID-19 is around, and it will be around for many years to come. I think at the moment we are maybe describing it a little bit like an influenza. It's not as dangerous as it was a year, two years ago, although it certainly claims lives still. There will be a market for this for sure, also in the years to come.
Perfect. Then there's a question here. When does the clinical for Pfs48/45 transmission, the malaria, start?
Yes, that's a really good question and that I wanted to highlight also in my previous description of our milestones here in the near term. I had hoped that University of Oxford could start a phase I trial with this malaria in 2022, at least that's what I was told in the beginning of the year. But for various reasons, they cannot initiate the clinical trials right now. But it is in the plan. If you look at the clinical trials register, the study is set up there, but it hasn't formally started yet. So as soon as University of Oxford, they can communicate that to me, I can communicate it onward to our shareholders.
Perfect. Then there's a little bit of a wide question. Would you consider a capital increase prior to starting clinical work on your breast cancer candidate? Or are you hoping to find it in the cash flow, the funding of the next phase?
Keith?
Sure. First I'll say we don't disclose about capital increases and timing on that. But a clinical trial is extremely expensive, so we think about things on a constant basis.
Perfect. Primary endpoint in randomized phase III parts is Wuhan virus level. How prevalent or how much of that do we actually have in the Europe? Can it actually be proven there?
Well, it's still a coronavirus antigen, and the Wuhan strain is the original one. I don't think it matters. That's what we've seen, that we can also protect against variants of concern. The interesting thing is with our S2 [mate] antigen, we have a design that covers and actually gives a very broad protection, makes the immune system recognize it as a potential agent and raise the antibodies that we want to, irrespective of whether it's Wuhan or another variant of concern. That's the important message here.
Perfect. I think we went through all the questions. Thank you to you, Keith and Bent, for taking us through the presentation and answering the question. Thanks to the audience for listening. May everybody have a nice day.
Thank you.
Thank you.