Hi, welcome to today's presentation, where we have the pleasure to present ExpreS2ion Biotechnologies. To help us through today's presentation, we are joined by CEO Bent Frandsen and CFO Keith Alexander. Today's event will cover the Q1 results released just earlier this day, so fresh out from the press, and then maybe a little bit on the pipeline development in the quarter and after the quarter.
As always, you can ask questions in the box down below. Do it in Danish, I will try and translate to the best of my ability, but you can also ask in English. The presentation will be in English. For now, I think I will hand the call over to you, Bent.
Thank you very much, Michael, and thank you to H.C. Andersen Capital for hosting this webinar in connection with ExpreS2ion's Q1 release. My name is Bent Frandsen. I'll be presenting the first half, and Keith will take over, our CFO. We are a listed company at Nasdaq First North Growth Market in Stockholm, and we do vaccines.
As we say here, we do innovative vaccines for a healthier world, and we have a very exciting pipeline to underline that mission. We have the usual disclaimer to start with because of our public listing status. I'll let you read that in details when we publish this presentation at our webpage after the meeting. Well, first and foremost, we are a leader in advanced protein sciences and focus on a pipeline in multi-billion EUR markets.
These are within infectious diseases and oncology, where we have a high- potential pipeline supported by a strong patent portfolio. The patents in our key assets are beyond 2041. As mentioned, we are targeting sizable unmet medical needs and markets. We have a vaccine development platform, which we have been using since we started the company back in 2010, based on a strong, improved protein production system.
We have a strong track record with this. It's been validated through partnerships, and we have regulatory- approved assets in our pipeline, even at phase III clinical stage now. With our platform, we have even made more than 500 proteins over the years with a very high success rate if you compare with other vaccine technology platforms.
We address the global vaccine market, which has now reached about $200 billion, obviously driven a lot by the COVID-19 pandemic in recent years. This is also a field where we are in, and one of the key catalysts in our milestones going forward. As mentioned, we have a phase 3 stage clinical asset that's in COVID-19, and it's moving towards commercial launch in the next year or so. It's exciting times for us.
This is the pipeline as we show it now. It's our focused programs led by the COVID-19 asset, which we call ABNCoV2. It's actually fully, exclusively out-licensed to Bavarian Nordic, who are sponsoring the clinical development phase going onwards. It's in clinical phase 3 since September 2022.
We know from Bavarian Nordic that headline results from the phase III data can be expected here in the middle of this year. That's also 12 months durability data coming out of the phase II trial that we're also expecting very soon. We have the breast cancer vaccine project, which we call ES2B-C001. This is a late pre-clinical phase.
We are progressing this towards the first clinical trial that we expect to initiate in 2024. This is 100% run by ExpreS2ion under an exclusive license agreement that we did with AdaptVac a couple of years ago. We have a pipeline, a new pipeline activity in influenza. It's called MucoVax. It's a very nice program that we have initiated together with a group of researchers from Copenhagen University.
It's sponsored 70% by a Grand Solutions award from the Innovation Fund Denmark. That's super nice, and it will lead us into making novel nasal- delivered influenza vaccines. We also have a new pipeline asset called CMV, cytomegalovirus vaccine. We call it ES2B-I002. This is a research collaboration that we initiated and announced in December 2022, very recently, together with another Danish biotech company called Evaxion.
We joined forces research-wise with the best of both worlds to make a novel CMV vaccine. We have exploratory research going on in the company. We were based on protein engineering, and we have some very novel research going on. We have patented novel glycosylated S2 insect cell lines that we can use to increase immunogenicity and make better vaccines. This we are exploring further.
We have another part of our pipeline that we've called the legacy programs. These are based on projects that we initiated before we did our strategy shift in 2020, where we are now a pipeline-focused biotech company. These are activities within malaria. A handful of malaria projects. I want to highlight the ones that we do together with Oxford University, which is well, well-known in this field.
All of these program actually also use our vaccine technology platform based on insect cells. Highlighting some of the key assets here in our pipeline. ABNCoV2, our COVID-19 vaccine that is run by Bavarian Nordic. It has shown some very strong features. It has a very strong boosting effect across variants of concern, and it has also shown durability.
We saw in the autumn six months durability data, which is unique and way beyond what you see in the most well-known vaccines, which are based on messenger RNA technologies. We've seen very high level of protection, and quite remarkably, we don't need an adjuvant in this vaccine, which is basically the only protein-based COVID-19 vaccine without the application of an adjuvant.
Which is a good thing to improve also the safety profile of the product. It's stable even at room temperature, and it also shows a very high level of neutralizing antibodies against both the original Wuhan strain and new variants of concern such as Omicron. We are now awaiting the next milestones near term, both the 12 months durability data and the phase III results. This is the program that is run by Bavarian Nordic under a license agreement with AdaptVac.
AdaptVac is the biotech company that ExpreS2ion set up as a joint venture in 2017. Today, ExpreS2ion owns 34% of AdaptVac. Under the license agreement between AdaptVac and Bavarian Nordic, AdaptVac already received EUR 4 million upfront, three years ago. It's closing in on development and sales milestones as the program progresses. We know very recently at Bavarian Nordic's investor call last week that the phase III milestone is paid upon completion of the final study report.
It's not a success milestone, but a milestone coming in irrespective of the outcome of the phase III study. Additional milestones are also expected when the regulatory submission process initiates in the U.S. and Europe. Then AdaptVac is also eligible to receive single to double-digit percentage royalties of Bavarian's revenues.
At the same time, because ExpreS2ion has our production technology in the final product, we have a license agreement with AdaptVac allowing for that. Under that, we can receive up to EUR 2 million in commercial milestone payments and lower double-digit percentages of AdaptVac's royalties. As I mentioned, as this program is approaching towards a commercial phase in the next couple of years, these are super exciting times actually for both AdaptVac that we own 34% of, but certainly also for ExpreS2ion.
On the breast cancer vaccine project, which we call ES2B-C001, it's progressing towards the first clinical trial in 2024. On the non-clinical side, we have communicated the very nice proof of concept data. We've seen consecutively over three different pre-clinical studies. Very good ability to even stop development of tumors in breast cancer animal models. We have now also performed in vivo dose range finding studies in animal models, which is also an important step towards completing the pre-clinical package.
Now ongoing as we speak, we are conducting the pivotal GLP, Good Laboratory Practice, safety study in a qualified animal model. This is important because this will be part of the clinical trial application that we expect to file in the beginning of 2024. Furthermore, on the manufacturing side for the breast cancer vaccine candidate, we have it all set up now. The two components, the VLP component and the antigen component, are being manufactured under GMP, good manufacturing, settings.
The combined product is has already completed the engineering run and on path for the GMP batch here later this year. As for the clinical development, we have had interaction with the Danish regulatory authorities, DKMA, and meetings have been running well, so we are in alignment with them in advance of the clinical trial application. We have the necessary set up internally as well as with external consultants, set up to run this.
We have progressed on the clinical quality management system, our QMS system. We are right now in a very important phase of making requests for proposals from clinical contract research organizations. ExpreS2ion is going to outsource the clinical handling of the development program to a clinical CRO. The process of selecting a right CRO for this is very important.
As you can imagine, it comes with a price, but certainly also the capabilities and the bandwidth of an organization like that is super important in our clinical setup. This we are doing right now with the intention to select the right clinical CRO here in 2023. As mentioned in the bottom, we expect to file the clinical trial application in the beginning of 2024 and expect to dose the first human in this study in 2024.
A snapshot of the key catalysts going forward across our pipeline. I already mentioned COVID-19. We are dependent on Bavarian Nordic progressing. Very exciting to see the 12 months durability data right around the corner. The phase III initial readout here in the middle of 2023, and the initiation of the regulatory submission that will be take place very soon.
Hopefully, we are in a position where we can say ABNCoV2 is a commercial product in 2024. The breast cancer, as I mentioned, we are running towards the clinical trial application in the beginning of 2024, and bringing this into a clinical phase I trial in 2024. Also, the influenza programs, both the legacy project INDIGO as well as the new project MucoVax are progressing. On the INDIGO project, it's dependent on non-diluting funding under the development consult we have set up for that. On the MucoVax, we got the non-diluting funding in place for that, so we can conduct the research that allows us to select a lead influenza vaccine candidate in the coming year.
On the CMV, the cytomegalovirus, project that we do together with Evaxion, we are in the middle of doing the research that will lead us also to eventually select a lead candidate going forward. Finally, on malaria, I mentioned University of Oxford before. They are progressing into clinical trials with a couple of these assets actually, however, also dependent on non-diluting grant funding in that setup. All this is progressing, and we are very excited. With that, I'll pass on the word to Keith.
Great. Thank you, Bent, and thank you, Michael. During the first quarter of 2023, we continued to focus our efforts on the preclinical development and CMC for our breast cancer vaccine candidate while working on important internal R&D developments and partner projects. I'll walk through the impact this had on our financials.
Starting with operating income, we experienced a 25% increase year-over-year in the first quarter to approximately SEK 2.6 million. Looking at the trend shown in the chart to the left, you can see that operating income in the quarter was up from recent quarters and near the long-term average. In the middle chart, we focus on net sales, which reflects revenue from projects, licenses, and our webshop. They were near the long-term average in the quarter. The increase is due to a few large clients.
In the chart on the right, we show other operating income, that is grant-related income, which remained at very low levels compared to 2020 when we benefited from the COVID-19- related grant. Moving to the cost side, which is much more significant than the income side, operating costs in Q1 amounted to approximately DKK 32.6 million, an increase of 95% compared with the first quarter of 2022.
The increase is primarily driven by external R&D costs, for which we've shown the progression over the last eight quarters, actually, on the chart to the right. As with recent quarters, these costs increased primarily due to CMC costs for the breast cancer vaccine candidate and more specifically, the cost of manufacturing for clinical activities. It is important to note that R&D costs and total operating costs decreased sequentially compared with the fourth quarter of 2022.
Looking at other major co-cost drivers, personnel costs increased 22% in the quarter due to an increased number of full-time employees and related costs. After financial expenses and taxes, we had a net loss of approximately SEK 26.3 million in the quarter. This amounts to an increase of 90% year-over-year compared to the first quarter of 2022.
Our next slide shows how our cash balance developed in the first quarter of 2023. At the start of the year, the company had a cash balance of approximately SEK 111 million. We spent SEK 41 million on operations and investment activities. This primarily reflects investment in the breast cancer vaccine. Finally, we realized a very small SEK 1 million gain from the currency changes in the first quarter.
Putting this all together, at the end of the quarter, the company had a cash balance of SEK 72 million. After the end of the quarter, the company announced the completion of a rights issue through which the company raised an additional SEK 54.5 million before deduction of issue costs. This permits the company to target a filing of the clinical trial application for the HER2 breast cancer vaccine in the beginning of 2024.
On the next slide, we show the trend in our cash balance, which ended the quarter at SEK 72 million. As I mentioned, this does not include the proceeds from the rights issue, nor does it include potential proceeds from the TO-8 warrants, which we will conduct later on this year.
On the final financial slide, I'd like to note the number of investors in the company at the end of the quarter was approximately 13,000, holding 37.6 million shares. As always, we would like to thank our investors for their continued support. In conclusion, the company continues to invest in the development of the breast cancer vaccine, that the cost was less in Q1 than it was in the fourth quarter. Looking forward, we are as excited as our investors about the forthcoming ABNCoV2 phase III data and phase II 12-month longevity data, while taking the final steps to prepare the breast cancer vaccine for phase I clinical trial. With that, we'll take any questions from the participants.
Perfect. There's a question here. Will the grants on the MucoVax influenza vaccine come this year, or what is the timeframe? I think you mentioned DKK 14 million around, you have a part of the DKK 43 million. Is that correct? What is the timeframe when we can expect that to hit your P&L?
Yes. I can respond to that. The overall project budget is actually DKK 41 million, and it was subsidized with DKK 29 million, which was the largest award from a Grand Solutions grant application from Innovation Fund Denmark last year. ExpreS2ion, we have DKK 14 million approximately cost budget on that and receiving DKK 10 million.
It's a 5-year project, but most of the cost for ExpreS2ion will fall and thus be subsidized in the first couple of years because we need to research into and develop the construct that we will take into a vaccine candidate, and that will take place in the beginning part of this. Most of these DKK 10 billion will fall in the first couple of years, so to speak.
Perfect. There's a question here. Can the 12-month durability data be used in registration or selling the COVID-19 vaccine?
Well, it will be super exciting to see because as you know, as I think I alluded to that the messenger RNA vaccines, their effect wane off after three to four months. We saw very nice six months durability data. If that can be extended to 12 months, that's very, very unique for a vaccine to have a high level of neutralizing antibodies across a year. I think so commercially, I'm quite sure that Bavarian Nordic will be very thrilled with that set of data. No doubt about it. It will stand out in the vaccine industry, I think.
Yeah. I know you can't speculate on their behalf, but I think on their investor call, they talked that, you know, to the U.S. regulatory.
Yes
They need to discuss something with them because they have chosen a pathway that doesn't fit this technology. Do you think there's a possibility that if it's strong data that will be used as a push against FDA? I know it's not an easy organization to push, but. I know you need to speculate on it, but could that be a possibility? Is the data maybe? Is the data valid enough? Is it a big enough study, you know, to actually start writing about it in articles and trying to make a push on the chosen way that the U.S. regulatory has used?
I'm quite sure even Bavarian Nordic will take the dialogue, even with FDA also on the back of such data. It's right. Bavarian Nordic have also said quite straightforward that the major challenge is really is the regulatory pathway going forward and w e'll see with the, with the advantage of the vaccine itself, and potentially, even long durability data.
That is why, and maybe it's a little bit leading question, why you are excited to get some phase II data, even if the phase III data is very shortly coming. Is that the importance of those, if I should understand it right? Yeah.
I think so, yes.
There's a question. On the latest webcast, Bavarian was very clear about the milestones payment. You also put it in your presentation. Can you elaborate on the three milestone and how much is paid in each milestone? That's question number one.
Keith, will you take that one?
Sure. Although the answer is no, we can't elaborate. That's part of the agreement between Bavarian Nordic and AdaptVac. It's not actually our agreement. The best we can say is please look at what Bavarian has stated publicly, which we've tried to iterate, reiterate in our presentation today.
Okay.
I think that's fair.
Is there a clear agreement with AdaptVac regarding payment of milestones to the owners, with your 34% ownership? How much money does AdaptVac need? Have you made a clear pathway for the potential milestones to flow through AdaptVac and into the owners?
There's a very clear shareholder agreement under which ExpreS2ion owns 34% of AdaptVac. AdaptVac is an earlier stage biotech company with a much shorter, smaller burn rate and no programs that are approaching more expensive development costs, like moving into later stage pre-clinical or clinical stage phases. The owners of AdaptVac, of course, therefore will likely get a portion of the proceeds from that. I cannot say it's a percentage. I say it's 34% of the proceeds coming in from Bavarian Nordic. We have to acknowledge that AdaptVac has a running business, but as I mentioned, it's a very small business.
Perfect. As I read it, and this is a question, not as I read it, as the one asking. As I read it, ExpreS2ion gets EUR 2 million. When do they fall in the process, and from whom?
Those EUR 2 million are associated with reaching a commercial stage. They are also right around the corner. It's up to EUR 2 million, so it's in trenches. I cannot say exactly the split between Completion of the clinical package and the approval milestone, but it can lead to up to EUR 2 million, and it could potentially also be within the coming years.
How large do you estimate the COVID-19 market after WHO no longer classified COVID-19, COVID as a health emergency? Do you see any changes to your estimates? There's a lot of estimates in market. Has that changed anything in your mindset, or have you seen anything change out there as this reclassification of COVID-19?
The COVID-19 market has been the most dynamic market at all here in the last couple of years. We've seen it even exceeding, we know, it's $200 billion. Right now we say in our overview of our pipeline that the COVID-19 exceeds a EUR 30 billion market. If you look at the revenues Moderna and Pfizer-BioNTech they are generating, it's still very, very, very high double-digit annual revenues that they generate.
But it's also known that it's going, it's decreasing. We may have to adjust that market potential here later in the year. There's still a market potential, however, which is very, very high, and I think Bavarian Nordic also with ABO-003 has the potential to generate a large market share in a very large market.
There's a question here. Can you comment on the year expectation toward ES2B-C001 VLP, the breast cancer candidate, financing need, and progress in partnering development?
Uh, yeah--
If we start by the partner development, and then we can talk about the financing, as a second part.
We are obviously coming from a research place, and we have generated preclinical proof-of-concept data which are quite compelling, and actually have also been published in a scientific journal, which is super nice. partner-wise it helps to generate clinical data, and that's why we put it like we do in our pipeline overview.
That, as soon as we have clinical data, then we are in a better position to take partnering discussions with potential partners. Not saying that we're going to out-license this as soon as we have clinical data, but you need to have a dialogue with the right commercial partners, and you need to generate the right data for that purpose. It's a dynamic process, and we know what to do.
Do you expect to get EUA for ABNCoV2, or do you need to wait for full approval given that the pandemic has slowed down?
Keith, will you also take that one?
Emergency Use Authorization? I think Bent I would refer primarily to Bavarian Nordic and what they--
Yeah
Said. This is more in their category than for us to comment on.
There's a question here. What further financing measures beyond the right issue warrants are planned, and when?
I'm happy to take that one. Obviously, we just completed the rights issue. Associated with that, there's the warrants in September. We look at everything that is potentially available to us, including the milestone payments that people are asking about. Those could be, of course, a major game- changer for us. Beyond that, we're always looking at grants. Those are very attractive because they're non-dilutive. We prefer to take those when they're available, especially when they're related to a specific project.
Perfect. Isn't it a problem that the share price is low and the market cap almost corresponds to the cash holdings, valuing your potential asset very low with the current market cap and the cash holding after the-- what will you do to increase the share price? I know it's a little bit of a broad questioning, if you have any comments to how you're going to explain markets, more about the potential, and so on.
Bent, do you want me to take this one?
Yes.
Sure. Well, we're of course, not very happy with the share price. We'd like it to be much higher, and of course, we are aware of the history of it being much higher. Unfortunately, there are some things that are beyond our control, such as, what has happened overall with the COVID market and Russian invading Ukraine, inflation, affecting overall investor risk appetite.
These are things that affect a small biotech company like us enormously. But looking forward and what can we do to help the share price grow? Well, we can focus on those milestones that Bent keeps on presenting. Those are the things that will should provide shareholder or share price inflection points and grow our share price in the future.
That's what we can do as management.
There's a question. What is the minimum milestone ExpreS2ion will receive if Bavarian get the COVID-19 vaccine approved but choose not to launch the vaccine due to significantly change the market outlook?
I don't believe that the amount has been stated for the first milestone, the milestone related to the completion of the phase III. We can't specifically comment on the amount, but it would be some portion of that. We have our 34% ownership of AdaptVac. Then we also have the other milestones that Bent has mentioned. It should be some portion of the amount that Bavarian pays to AdaptVac.
There's a question, and it is probably Bavarian we should ask it, but I'll try and get a little bit comment from you. To the extent that the demand for the COVID-19 shrinks in volume terms, can it be compensated at least partly by charging higher prices than those seen in the past? Is that a development you are seeing in the market?
If I should look on the comments from Moderna and the other ones, that seems like the way they are going, right? into the private market, the payers market, and so on. It looks like they are increasing prices. I don't know whether you have any thoughts about that, Bent or Keith.
I think it's too speculative from our side to comment on it, and it's really Bavarian Nordic who should comment on that one. Yeah.
I guess, Keith, you will answer the same way.
I think you answered it perfectly.
Good. I think we have gone through all the questions. Thank you for the audience for a lot of good questions, and thank you for you, Keith and Bent, for taking us through your Q1 and answering all the questions.