Welcome to today's event, where we have the pleasure to present ExpreS2ion Biotechnologies. To help us through, we are joined by CEO Bent Frandsen, and CFO Keith Alexander. Of course, today, the Q2 result, maybe more interesting also, the announcement about the strategic review of both the breast cancer and I guess also the rest of the business. I think we will dig a little bit deeper into that. As always, you're very welcome to ask questions in the box down below. Do it in Danish, English, Swedish. I will try and translate to the best of my abilities, but we will do the presentation in English. For now, Bent, I think I will hand the call over to you.
Thank you very much, Michael. My name is Bent Frandsen. I'm the CEO of ExpreS2ion Biotech. I'm joined here today by Keith Alexander, our CFO, and we'll go through our Q2 report, and not least, as Michael alluded to, the release today regarding our breast cancer vaccine candidate. First, our usual disclaimer chart, I'll let you read that yourself after the presentation is uploaded on our webpage. We have, just ahead of our Q2 release today, announced, made a new announcement pertaining a strategic review of our breast cancer vaccine candidate, what we call ES2B-C001. Here we're talking about that we will take certain activities towards CTA readiness. They will continue, including the ongoing GLP critical safety study. We will also investigate strategic options for this asset going forward.
In connection with this, we have announced that we will initiate a cost reduction program. Here, we will enabling our near-term cash position to maintain the current activity level into 2024, and the aim is to extend the runway beyond that. We know it's a tight funding market, and this is the reason for this announcement today. At the same time, we will identify how to best create value with our unique technology platform, expertise, and exploratory pipeline projects. We are here to develop innovative vaccines, and we have research that also allows us to do that, and we aim to develop vaccines with a faster and less costly path towards value creation. That said, I will pass over the words here to Keith, and I'll join you back in a minute.
Thank you, Bent and Michael. I'll keep my prepared comments very brief today, so we can focus on the strategic review and, and take your questions. Starting with operating income, we experienced a 31% increase year-over-year in the second quarter to approximately SEK 2.1 million. In the middle chart, we focus on net sales, which reflects revenue from projects, licenses, and our webshop. Those were near our long-term average in the quarter. In the chart on the right, we show other operating income, that's grant-related income, which remained at very low levels compared to 2020, when we benefited from the COVID-19 related grant. Moving to the next slide, which is much more significant than the income side, operating costs in Q2 amounted to approximately SEK 35.3 million.
This is an increase of 23% compared with the second quarter of 2022. The increase, as you know, is primarily driven by external R&D costs, for which we've shown the progression over the last seven quarters in the chart on, on 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. Going to the next slide, showing our profit and loss for the period. After financial expenses and taxes, we had a net loss of approximately SEK 30 million in the second quarter, which amounts to an increase of 18%. Moving quickly to our cash development year to date, our next slide shows how it's developed over the year.
At the start of the year, the company had a cash balance of SEK 111 million. Over the year, cash flow from financing activities was SEK 48 million, primarily reflecting net proceeds from the rights issue conducted in the second quarter. We spent SEK 76 million on operations and investment activities, primarily reflecting investment in the breast cancer vaccine. Finally, we realized a SEK 5 million gain from currency changes in the first quarter. Putting this all together, at the end of the second quarter, the company had a cash balance of SEK 88 million. For my final slide, we show the trend in our cash balance, which, as I mentioned, ended the quarter at SEK 88 million. With that, I'll pass it back to Bent to discuss developments in the quarter and beyond.
Thank you, Keith. We've actually had a very nice second quarter with some positive news on the COVID-19 asset, the ABNCoV2, where the clinical development is being sponsored by Bavarian Nordic. We saw here in June, very nice announcements from our point of view because we got a proof of concept, clinical proof of concept on the, on the readout from the phase II study, showing 12 months durability. There was also a positive readout on the phase III trial, showing noninferiority to messenger RNA vaccine. This was very important for the technology platforms that are used in this asset, which, as you know, come from ExpreS2ion in terms of the manufacturing technology for the antigen, as well as the VLP technology from AdaptVac. This asset, according to Bavarian Nordic, still has some data from the phase III trial.
They are pending its secondary endpoints, which will also be assessing the protection against the current circulating variant of concern, the so-called XBB.1.5. In fact, Bavarian Nordic, we are awaiting the feedback on the progression of this asset. So far, we know they will return in this month, in August, with an update, and we're looking forward to that. However, we have also noticed the concern that Bavarian Nordic, they've expressed on this asset, because although it's very strong clinical validation of the technology platforms in the asset, the protection on the newest circulating variant of the XBB.1.5, seems not to be as protective as what has been seen in all the earlier variants of concern, ranging from Beta, Delta, through the Omicron variants. Let's see.
With respect to the breast cancer vaccine asset that we call ES2B-C001, we have shown remarkable preclinical proof of concept for this asset. Over the years, we have announced strong animal proof of concept, and it's even been published in a peer-reviewed journal here very recently. With this asset, we've been on path to move into a clinical phase I stage next year. However, we also realize that the funding for this is difficult, and the current capital markets are tight. On the background of this, and also in connection with a manufacturing issue we've had here very recently over the summer, which we know will make a delay of three months. Based on all this, we are saying that, or the board, have decided that we will pause the program and assess strategic options for this asset going forward.
It means that we, in due time, tell our shareholders that, "Let's see what we can do with this asset, with the data that we have generated now, and then we have to find a solution in terms of the financing of the phase I study, moving onwards." We are still committed to certain activities for, for this asset, and of course, on the GLP preclinical safety, we expect data from this around New Year, and this we will complete, of course. Furthermore, we have also a exploratory work being conducted in our pipeline and other research activities. The CMV, the cytomegalovirus vaccine project that we do in collaboration with Evaxion, which is a very well-known AI-focused biotech company, is on track. Furthermore, we have an influenza project going on, which is called MucoVax.
We have just initiated, initiated that here in Q2, and that's a 70% granted project. In addition to these activities, we have further exploratory pipeline projects going on, and we are building on our technology platform activities. This is particularly important because we are a strong vaccine developer. We have shown that our S2 insect cell-based system works even in a phase III stage clinical program. We are also taking the experience that we have in our laboratories and working on novel vaccine technologies. We are looking at some interesting stuff here that I hope that here in the second half, we can make some announcements regarding this. Keith has already been through the operations and the cash situation, so I will move to the next slide. This is the pipeline pertaining to our focus programs as we look at it today.
Obviously, still highlighting the COVID-19 asset, the ABNCoV2 asset in clinical phase III, all sponsored by Bavarian Nordic, and we're looking forward to seeing what happens here in later this month on the way forward for this asset. On the breast cancer vaccine asset, ES2B-C001, we've been preparing for the first clinical trial in 2024, and now we see that with the difficult market situations and the challenge in raising cash for actually moving into the clinical phase I, we, as announced earlier today, we will put a pause on this and evaluate how to progress with this asset going forward. As I just mentioned this, with respect to influenza on the MucoVax project and the CMV asset that we do in collaboration with Evaxion, they are in a discovery phase, but moving towards preclinical pharmacology in the near future.
Furthermore, the exploratory pipeline, which I hope to provide some more information about here in the second half. We still have our legacy programs, which are all also based on our proprietary S2 manufacturing system, but not on, on VLP systems. They are still done in collaboration with primarily academic partners, and this is the, the status of them. On the COVID-19 asset, ABNCoV2, just to highlight what I've mentioned, the primary endpoint was reached in a phase III trial, showing non-inferiority to Pfizer's mRNA vaccine, COMIRNATY. We also, in the phase II, saw greater durability than approved across, than approved vaccines across variants of concern, including Omicron variants. We have seen strong boosting effect across the variants of concern.
We know it's stable even at room temperature, then the protection so far from Beta through Delta and Omicron variants have been very high. Even despite this particular vaccine, which is the only one in the industry, has no alternates as a COVID-19 vaccine. Now we're looking into soon news with the phase III secondary endpoint. The potential income coming from this asset is through the licensing deal that our 34% owned company, AdaptVac, has with Bavarian Nordic. We refer to the communication from Bavarian Nordic that the phase III milestone is paid upon completion of the final study report, and additional milestones can be expected when there is submission in the U.S. and Europe. This is. The reference here is from Bavarian Nordic's webinar back in May.
Let's see what will be communicated in later this month. Lastly, an overview of our focus pipeline towards key catalysts. We still show here, on the COVID-19 asset, the near-term milestone payments in terms of initiating rolling submission. Again, let's see what Bavarian Nordic comes out with soon. On the breast cancer vaccine asset, it's great that we have shown that GMP manufacturing works, and we've seen the initial readout from preliminary non-clinical toxicology studies, and we are conducting the non-clinical toxicology study, with the aim of completing that around New Year. On next milestones with this asset, as you saw from the press release earlier today, we put a pause on it to explore strategic options going forward. On the influenza and cytomegalovirus, CMV, vaccine assets, we are progressing with our research in these.
With those words, I'll hand over the word back to Michael.
Yeah. Let's take a lot of course, there's a lot of question with, with you in regard to your announcements today, so let's jump into that. What cost is still needed to be incurred for the ES2B-C001 to make it phase I ready? I think you have indicated, but maybe what costs are still needed for you to keep it alive, but without going into phase I?
Keith, will you?
Sure. I, I, I want to actually answer that specifically with regards to the exact cost, except to say, if... Well, as we said at the rights issue, if the awards were fully subscribed at the price that was quoted, then we'd be able to fund through the CTA process, and that would cover everything. If you want to talk a little bit about some of the specific things that need to be paid for between now and then, you can look at some of our old milestone slides. Some things that would- we would talk about are the safety study, which is, is ongoing, that, that Bent mentioned already. There's production. There's also preparation with the CRO for getting into the clinic.
There, there are a lot of activities that are involved there, at a, at a very granular level. Does that answer the question?
I think so. I think so. There's a question here: How does the company view its current strike price, and could that impact their decision to buy shares? I'm not really sure. I don't think you have a share buybac k program, so, I don't know how quite to answer that. I'll ask you the question.
Yeah, I can take that one, too, and just say that we won't speculate on the share price, and we won't comment on the share price. That's our policy.
Perfect. Is there any update to the timeline for, for full phase III, and a re- regulatory filing decision for, for, for the, for the COVID-19 vaccines? You mentioned something about maybe you will hear something in August. Was that correct, Bent?
Yeah, of course, we are referring to Bavarian Nordic, who sponsored the clinical phase III activities. According to them, they announced quite recently that they would get back with secondary endpoint from the phase III data here in August. That's what we're looking into.
Okay. How do your restructuring affect timelines for your other projects besides the ES2B-C001 and, and, and, and the COVID-19 vaccines? Is it changing something for the malaria, influenza, or, or some of the early products you have with, with big partners?
When it comes to the legacy programs that I described, which are primarily the malaria projects and earlier influenza project, as I mentioned, these are more or less all depending on the non-diluting self-funding, which are being handled by the academic collaborators. We're quite dependent on those for this to move forward at all. With respect to the focus programs, this restructuring on, with respect to the breast cancer vaccine project that we're talking about and cost savings, we will implement in the organization will not have an effect on our MucoVax project or the CMV collaboration with Evaxion or our earlier exploratory research, which on the contrary, we are doing these measures to exactly extract value from our exploratory work in the near future.
There's a broad question: Please elaborate on the strategic option you're considering for the breast cancer candidate. Is it more likely to be an outright sale or out licensing with the earn-outs? You, you've before expressed that, of course, an out licensing so early in the phase might not be attractive, but is that, you know, has this situation changed that, and, and, and so on? A little bit on what strategic options are you considering?
There are actually a, a range of strategic options, which I cannot go into details about, but obviously, some kind of collaboration going forward or divestment. We originally intended to develop this through a clinical proof of concept to increase the value to our shareholders. This is obviously a huge undertaking, where we are now saying this is much larger than we knew. That means we have an asset in a preclinical stage with a value, of course, how do we generate most value out of this? That we have to explore further.
I think it's worth mentioning that the decision has just been made, so it's very early in that process.
Mm.
Yeah. No talks about anything. Perfect. There's two questions who goes around: What is your estimated cash reach post-restructuring and before you get any cash from fresh raises? Maybe more to turn it around, can you kind of indicate what cost run rates you will be in Q4 and maybe looking into the quarters in 2024? Then we can make our own estimates on the cash run rate, or on how much cash you have to get by with.
I, I understand why that question is being asked, and, and I can definitely sympathize with it, but I would again say that, you know, this is a very fresh decision. We need to go through all the ramifications of it in more detail in the coming days and weeks. Also, we just have not provided guidance in the past, so I, I don't think we're providing guidance at this time.
Perfect. There's a question here: Have you already been in dialogue with potential partners? I guess maybe it's a more shift to a partner strategy in earlier on. I don't know whether you can comment on that, on that, Bent or Keith.
I mean, in biotech, you need to have partnering dialogs going on all the time. We. That, that's all I can say about that.
Perfect. Going to the AdaptVac, there's a lot of questions around that, so I think we will take it in general. There has been some lot of speculation on, on potential sale of AdaptVac. I know it's speculation, and it's by the shareholders, so I, of course, we'll see how you will comment on that. Maybe more interesting, if it would happen, how would that affect your possibilities to license out your technology platform? Are they very connected in, in, in many projects? A little bit about comment on the rumors, if you like, on that, AdaptVac might be a way of funding your way in, in the future.
Maybe a little bit, if that happens, not that we're saying that it does, how will that affect, you know, your, your way of using your technology platform?
Well, both platforms are, in a way, plug-and-play systems, meaning that, that with AdaptVac, you can attach any antigen of interest on the surface of, of the VLP. It doesn't necessarily have to be manufacturing, manufactured using, ExpreS2 system. On the other hand, ExpreS2 system is very favorable in making the, the, the right antigens for vaccines. We could go through the, through, through other technologies as well to make this a valuable vaccine. It goes a bit both ways. Now, both AdaptVac and ExpreS2ion, we've been exploring the combination of these two technologies in a COVID-19 asset, which was already out licensed to Bavarian Nordic, and then on the breast cancer vaccine asset, which ExpreS2ion has been sponsoring.
The good thing, of course, is with Bavarian Nordic's sponsorship, that both companies, both ExpreS2ion and AdaptVac, right, that we have gained proof of concept, and even in a meeting a primary endpoint in a phase III trial, that's outstanding and not something you see in many biotech companies with early-stage technologies.
There's also a question here, and I need to ask it to you. I don't know whether you can comment on why haven't you thought about selling the shares in AdaptVac to secure funding for the development of the breast cancer vaccines? I, I, I, I know it might fit in under what you call a strategic review, but any comments on, on, on that?
I mean, there- one, there's an assumption in that sentence, and, and two, we can't comment on it regardless. Our, our capital strategy is, is broad, and we've considered a lot of different things.
I don't think we should comment on any of them until an arrangement is made, and then we will have, we'll have a responsibility to comment on them.
Yeah. Perfect. This is a question regarding the corona vaccine. You know, the first one, how long will it take to make updates to the vaccines regarding the XBB.1.5 variant from your side? I know that's also depending on whether Bavarian chooses to go further with that. There are some questions down there, but some time frame, you were talking about the speed in your technology platform.
Mm
... as being one of the, the benefits of, of, of, of, of your technology.
To develop a cell line that can be applicable to a new variant of concern in a vaccine like this, it takes six to nine months, which is much more than what Bavarian Nordic, they are also alluding to, that you would need a technology that could make a new antigen in three or four months, perhaps. We are not there with the ExpreS2 platform. However, the broadness of the application of what we've seen in the COVID-19 vaccine, bear in mind, this was based on the original Wuhan strain, but we saw protection both against Beta, Delta, and Omicron variants. Except for the very newest, circulating variant of concern, the XBB.1.5, protection has waned, apparently.
I mean, you can only speculate in, in retrospect, but we had actually made an Omicron variant that you could attach to the vaccine and, and make a quick bridging study and, and have a broad protection. But that's Bavarian Nordic's choice, of course.
Sure. Yeah. Yeah, yeah, yeah. I, I know you... Well, I need to ask a question, but I know you don't want to speculate on Bavarian's behalf, but Bavarian is on the contract with the Danish state to apply for EMA, FDA, regardless of XBB outcome. I don't know whether that's correct. Sorry, is this correct, will you have milestones paid out for that within 2023?
That's totally speculative, which-
Yeah
we can't comment on. Yeah.
Yeah. I think Bavarian should be asked that question. It's in their agreement with the, the ministry.
Yeah. If Bavarian Nordic decides to file ABNCoV2 with you, would they finance an updated vaccine that covers the current variant better, and how long would it take for that to be ready for submission for regulators? I, I think it's also, it was a little bit, about to what you answered before.
Yes, should be directed to Bavarian Nordic.
Yeah. There's a lot of questions, but maybe this one I think is a little bit genuine. What stock triggers are there within the next six months? You know, you alluded a little bit to, you know, what news flows will come from you. What could we expect sitting on the other side? What is on your side of the desk that you expect to have? I know you can't comment on whether it's a stock trigger, but you can comment on the, as a potential news flow that you hope to be able to share with investors the coming six months.
Keith?
Sure, but I, I would revert back to the milestone slide, the last one in the presentation, which shows the, the, the milestones that we're looking forward to. Whether they have an impact on the share, we can only speculate, and we're not gonna do that. There are some for both the, the, the COVID-19 vaccine as well as for the breast cancer vaccine. Then beyond that, I, I think you could see the milestones that are on the slide.
There's a question here: What happens if Bavarian don't file for approval for the COVID-19 vaccine? Will the rights still belong to Bavarian or be handed back to AdaptVac, ExpreS2ion?
ExpreS2ion doesn't have insights into the licensing agreement between Bavarian and AdaptVac, so that we cannot comment on.
There's a mail that spread around the community. I guess it's an investor comment, that the ABNCoV2 was converted for Omicron. Could that be used with better effect against XBB? Have you already converted the vaccine for XBB, and how long does this take? I think it's also a little bit about your comments before.
Hmm. Yeah.
Can you discuss a little bit about the GMP aspect, which has caused another delay for the ES2B?
Can you repeat that question? I'm not sure-
Yeah. Can you discuss the GMP aspect, which has caused another delay for your breast cancer vaccines?
The GMP aspect? Sure.
Yeah.
Of course, the CMC, the manufacturing part of any biologic is important, just as the non-clinical and clinical activities, and it's not a trivial matter to make the right manufacturing processes. In any case, it's something that we can overcome, and we would expect a three to four months delay on solving that issue, which is solvable. It actually had an impact at the original envision for filing the CTA. This coincides with the other challenges, why we are looking into these strategic options revolving the breast cancer vaccine asset.
Perfect.
Okay.
Let's take a last question, and I, I think maybe you already has answered. What is the primarily change that occurred, change in your view from buying all the rights of the breast cancer vaccine to, to divest this project? Is it solely the, the financial part, you know, the, the, the possibilities to fund that, or, or have you seen something else that, that, that made you, makes you this change?
Bent, I can take this one. It, it's solely a financial, issue. As we write in the press release, the data has been very, very good, so, if we'd had the finances to continue it into the clinic, we would have done that.
Yeah. There is still coming in a lot of questions. I think maybe we will take a, a, a round when, when, when Bavarian has put out, because a lot of the question is surrounding their messages. I think it doesn't make sense to, for me to ask a lot of them because I know you answered, Bent, and Keith, so, we are also a little bit over time. Yeah, I know you have-
I think we're back on the 31st of August.
Yeah.
It's a far out call, so, let's move on there.
Perfect, I know you have a, a sharp end here at 12:00. Thank you very much for taking the questions, and thank you for the audience for being such, giving us so many questions. I'm very sorry I need to put some together, I also had to leave some out, let's hope we can get some answer in the future and maybe know more when Bavarian has reported.
Thank you.
Yeah.
Thank you very much.
Thank you, all.