Earnings Call: Q1 2021

May 21, 2021

Technologies, who just released its Q1 report today. And with me today, I have the CFO and the CEO of the company, who will take you through a presentation of the Q1 results and milestones. So I will give the word to both Keith and Ben and take us through the presentation. Thank you, Frank, for allowing us to present Torr investors here, it's Andersen Capital's digital Investor Relations platform. My name is Bette Branson. I'm CEO of Expression Biotechnologies. I'll go through a few introductory slides of the company and Michael, who achieved me the first one before handing over to Keith Alexander, our CFO, and the company will cover financials in connection with our release. You'll notice Keith is American, which is private citizen in English. Next slide please, Frank. First, the usual forward looking statement and disclaimer that we will let you study in order trying to take your own informed decision of trading in our share. Next slide please. So Expression Biotechnologies is a Scandinavian biotechnology company with operational activities in Denmark and public Desmond in Sweden with a clinical stage development pipeline of high value vaccine product candidates. Our vision is clear. We want to be leader in the Oncology and Infectious Disease deals. And with our current pipeline assets, we believe we have a fair chance of fulfilling this vision. We've been listed at NASDAQ First North Gross Market since 2016 and have been able to increase our market capitalization since public inception from SEK 33,000,000 to about SEK 1,300,000,000. Most of this growth is coming from our recent focus on pipeline Development. Xpression holds a 34% ownership in the joint venture partner, Adaptvac, which holds the unique VirusWrike Particle Technology or the VLP system, which is a proprietary vaccine One slide, Frank. Yes, Frank, which is a proprietary vaccine efficacy boosting technology that complements our S2 insect cell based protein production really well. Both on the S2 insect cell system and the capsid VLP system. The IP protection by issued patents extends well into the 2030s and for the S2 insect cell system, we have pending patents even until 2,040. Our development pipeline, which I will cover after this slide, is very robust and collectively the pipeline projects address some of the most grave and wide Spread diseases where the world regretfully see numerous deaths. COVID-nineteen we've seen more than 3,000,000 deaths by now. Breast cancer where more than 600,000,000 600,000, sorry, die each year. Influenza that kills more than 300,000 each year and malaria where about 500,000 are killed every year. At the company we are proud to have unique vaccine solutions to address these disease areas. Finally, our cash position is very sound due to recent raising of SEK 131,000,000 in the rights issue in Q4 2020, as well as the successful raising of another 39 that Smit Krummer here in our recent exercise awards that was associated with the autumn capitalization. Next slide, please. As mentioned, our development pipeline is very robust and covers clinical stage projects too. Most recently, we've been able to progress significantly on the 2 lead projects within COVID-nineteen and breast cancer. In COVID-nineteen, the expression developed, the SRCO2 antigens are decorated on the surface of virus like particle using AdaptMx technology. This project was initiated shortly after the identification of the genomic sequence of the woman coronavirus in January 2020. This project got funding early on from an EU Horizon 2020 grant and very quickly caught the attention of commercial licensing partners. Through a licensing agreement between Adaptemag and Bavarian Nordic. Bavarian Nordic has obtained exclusive rights to commercialize this vaccine opportunity. Furthermore, Xpression and Adapta have a licensing agreement, which allows for the use of Xpression's technology in the final COVID-nineteen product. This vaccine opportunity have in preclinical This vaccine opportunity have in preclinical animal testing settings demonstrated some of the most promising if not the best data at all. The data sustains the front profile that it may be a one shot only long term protecting and strong immune inducement vaccine. And on top of this with the stability allowing storage in ambient temperatures and handling even at temperatures up to 49 degrees Celsius. In breast cancer, the expression developed HER2 antigen decorated on the surface of the VLP. This is fully licensed from Adaptac to expression. And here we developed the vaccine product onwards Based on very promising preclinical data, which have shown in transgenic mice that Transcendent mice that spontaneously develops HER2 tumors and has showed ability to modify the disease progression and possibly even breaking tolerance. We have given this project the project code ES2BC001. It has now in our hands shown to have a solid biophysical profile. And we just last week announced our selection of a lead candidate that will now focus on in our development work going forward. In influenza, Xpression is part of an EU sponsored consortium called IndiGo where expression manufactured hemagglutinin proteins will be tested in a novel adjuvant system to develop new generation influenza vaccines. The emphasis here is on making products that are cost competitive to be able to distribute also to developing countries. The cost friendly element is an important notion also within malaria. Here we are involved in a handful of different vaccine projects. While COVID-nineteen has actually had a slowing effect on the development in these projects, we are very pleased about the recently published clinical Phase 1, 2a data for the Oxford University sponsored malaria vaccine project where expressions S2 technology is applied to make the complex protein IS5. These data concluded that the RS5 vaccine in combination with the so called AS01 adjuvant Vaccine is safe, well tolerated and immunogenic in healthy adults. A significantly reduced blood stage Parasite growth rate was observed in the vaccinated population following controlled human malaria infection, which is defining milestone for the blood stage and med area vaccine field. Next slide please. Through most of our pipeline, we've seen really important news here during the Q1 of 2021. Let me highlight them here. First of all, we have communicated in early January the clinical trial application that was sent by the Dutch authorities for the COVID-nineteen vaccine. It took 2 months for this CTA form to be approved. The approval came in March and allowed us to initiate dosing in the 1st healthy volunteers within the Q1. And on 12th April, we announced that the safety profile of the dosing of the first 18 healthy volunteers. So far the Vaccine has been very well tolerated and first immunological investigations are ongoing. Within breast cancer, we obtained and communicated on the granting of the exclusive license from Adaptemax to expression on the 2nd February. In the same month, we announced the research collaboration with University of Bologna. University of Bologna hosts state of the art animal models that will help us developed this project onwards. It's the same models that were used as basis for the research in the 2018 Paladini paper, where the previously mentioned proof of concept in animals was documented. In May, we announced the selection of the lead candidate, which now makes the breast cancer vaccine project more tangible as we look for testing the specific construct that we have developed that's unique biophysical properties that look very promising. Finally, within malaria, it was pleasing last month to announce the publication of the clinical Phase III data in the scientific journal as I just referred to. So all in all at Xpression we are very excited of these accomplishments during the Q1. Now Keith will take over and describe the financials during the quarter. Perfect. Thank you, Bent and thank you, Frank. As Bent mentioned, I'm the Chief Financial Officer of Expression Biotechnologies, and I'm located in Denmark, despite my accent. Now I'll present a few prepared remarks about the financials. Frank, do you mind moving forward 2 slides. During the Q1 of 2021, we laid the foundation for Our future with investments in equipment, personnel and facilities needed for the development of ES2B C001, which is our breast cancer vaccine candidate, as well as a scale up of the ABN COV-two COVID-nineteen vaccine for further clinical development. Let us tell you a few of the key figures. Here you can see the summary for the Q1 along with comparisons to the Q1 of 2020 and the full year of 2020 results. Our net loss increased from SEK5.2 million to minus SEK11.2 million, primarily as a result of the investments in pipeline projects and lower grant income. We'll go into more detail on this in the coming slides. The net loss per share was SEK0.40 in the Q1 of 2021 compared with SEK0.37 in the Q1 of 2020. We concluded the quarter with SEK 82,800,000 in cash, which is approximately DKK 61,000,000. Our cash position was reduced in the quarter primarily as a result of the operating loss and a one off reduction in current liabilities related to the COVID-nineteen project. After the close of the quarter, on April 28, We announced the outcome of the exercise of the Series T04 warrants through which we raised an additional SEK 39,000,000 in an offering which was 97.6% subscribed. Given the share price development in the quarter, it is not surprising that the subscription level was so high. Still, it's something we're quite happy about. Frank, do you mind moving to the next slide? Now we'd like to focus on a few developments in the quarter. First, our operating income was significantly lower in Q1 than in the preceding quarters. This is because we have realized the full grant income from the EU Horizon 2020 grant related to the COVID-nineteen vaccine development project. And the CRO business remains impacted by COVID-nineteen itself. On the positive side, income from the CRO business was stronger than it had been for the last 3 quarters. Both operating and net profit are impacted by the one time payment for the ES2B C001 license of SEK 3,400,000, which is equivalent to DKK 2,500,000 as well as higher costs associated with pipeline projects and personnel. These are partially offset by lower interest expense due to changes in our capital structure. Frank, do you mind moving to the next slide? Moving to the group income statement, we would like to spend some time discussing our operating costs, focusing on the largest figures. You will note that raw materials and consumables and other external costs have both increased significantly. These are both driven by investments in our pipeline business and most notably the preclinical development of ES2B C001. Our personnel costs have also increased. Our headcount today is now 25 with recent additions adding strong competencies in clinical development, oncology, Project Management and Quality as well as Administrative Functions. Frank, would you mind moving to the last slide? The final comment that I'd like to make is on the change in our investor mix we experienced during the quarter. First, the chart on the left hand side shows the turnover experienced in the Q1 by health care companies listed on the NASDAQ First North Growth Market. Note that the turnover is calculated as the number of shares traded by divided by the market capitalization of the company. So it's a reflection of share liquidity. Expression Biotech AB had the highest turnover of the group in the Q1 and twice the level of the second company in The chart on the right is based on data from Euroclear and it shows how the number of investors by country changed during the quarter. We have removed the actual numbers since nominee registered investors are not broken out by country. In the Q1, the number of Danish investors increased almost fourfold and the number of Swedish investors increased by approximately 1 third. In total, the number of investors approximately doubled from 6,000 to 12,000. Finally, Expression Biotech Holding AB will be added to the MSCI Global Microcap on May 27, 2021. We look forward to welcoming additional index investors. With that, I'll pass the mic back to Bent to comment on the key milestones for the rest of the year and closing remarks. I'll stick around for any questions after his comments. Thank you. Thanks, Kees. So taking a look at our outlook for the near future, Jay will show it as we have also described it in our newly issued annual report. And I'm very pleased that we already in the Q1 of 2021 see some successful completions of milestone news. That's shown here with the green tick marks. Going forward for the COVID-nineteen vaccine, We rely on the very Nordic continuing the development of the efforts now. They are deeply committed and involved in this project now. And it's It was also very pleasing to notice the successful cash raise in March right after the approval to conduct the first clinical trial. The announcement of further monkey study data showing that the COVID-nineteen vaccine has strong immune protection even against variants of concern like the UK and South African variants is also extremely encouraging. Bavarian Nordic has conveyed dedicating 200,000,000 days kroner to develop the clinical Phase 3 supply and manufacturing setup for the COVID-nineteen project. And furthermore, they continuously seek new funding for the clinical Phase 3 trial, which provided their clean funding, could initiate in the second half of twenty twenty one and possibly start distributing commercially during 2022. For ES2B C11 in breast cancer. We have the funding in place and a clear Roplin for bringing us towards clinical testing in Maine in 2023. By the end of this year, we hope to obtain new animal proof of concept data through the collaboration with University of Follernen. Based on this, we will in parallel develop the GMP manufacturing processes and scale up and perform toxicology studies later in 2022. And that was formed part of our clinical trial application for submission in the first time of 2023. Within influenza, we expect to move into preclinical animal studies later this year and we continue to perform research and development in this field to establish development of new influenza vaccine candidates. Finally, within malaria, we hope to move into an additional clinical trial with our collaborators at Oxford University. So all in all, we have a great future ahead of us, keep on working to maximizing the value of the company to the benefit of the shareholders. And at the end of the day, to all the community in need of effective vaccines against some of the most deadly diseases in our lifetime. Thank you. I'll hand over the word now to Frank. And Kees and I are available for any questions. Yes, thank you, Ben. Thank you, Keith. We will now welcome questions and I encourage you to be brief in your questions. I see a lot already came in, but please be brief. That will add the for many to have answered their to answer their questions. But we'll start out, Ben, and ask you a little into the COVID-nineteen vaccine. We see that also Walt Seschanssen from Bavarian Nordic had some mention about for possibilities for financing a Phase III study. Is there any news regarding that state financing of a potential Phase study or something that you would like to share with us. So can you elaborate just a little bit more also on the upcoming news flow from the COVID vaccine? Sure. Well, first of all, I think it should be clear by now that They have an exclusive license to the COVID-nineteen vaccine front. So in essence they are committed to developing this on board and will continue to seek funding. What they convey is, of course, something that expressed by technology support. But in essence, they're very Nordic, they're doing the job and I trust they will get the funding in place for this. Then we have a question about the pipeline. Have you any consideration of adding on more projects to the pipeline going forward. We have a vision of being a leader within oncology and infectious diseases. There are many unmet needs within these areas and we have the technologies to address a unique vaccine within this Fjell. So, if the right opportunity to keep us then for ship we would be interested in looking at this in details. I'm sure we can contribute in such an opportunity and gain even further value by potentially expanding our pipeline. We're constantly working within our business development to look at various opportunities. So that's the team of the business. Of course, we had to focus on the pipeline projects that we have, but we're always hoping to discuss of other projects and collaborations, which fit with our pipeline focus. Thank you. With respect to the breast cancer vaccine, Will you need additional financial resources to progress this project? Or how do you see that? For the time being we are well funded. That was the whole purpose with the cash raising transaction that we did in the autumn 2020. So we are well funded and can progress the breast cancer vaccine project into the First clinical stage in early 2023. That's the aim. So we are fine on the financing with respect to that project. Then another question regarding the Phase 3 study of the COVID-nineteen vaccine. Have you the are you aware of whether part of the Phase Richard, who will be in Denmark. I don't know if that claims are very important with respect to the Design of the Phase III of the locations of the Phase III trials. Okay. Then there also is a question regarding the COVID-nineteen that if you choose to test it, whether you see if they will test it as a booster? Or is that also something that we should address to Bavarian Nordic? That's been conveyed by everyone that it would have a product profile that's a booster vaccine. Yes. Very naughty day, they are really the best to answer these questions, I think. Of course, I have constant dialogue with our partners. They're very naughty. But I think I know they should answer the question on this themselves. Okay. Then there is a question also again regarding the COVID-nineteen vaccine. And the question is how a positive outcome of the study will affect your work with your breast cancer vaccine. The good thing about the COVID-nineteen project and the fact that it's been so accelerated. So we're already at the stage with this project is that it uses both the technologies We also use in the breast cancer vaccine candidate, meaning that we produce the SARS CoV-two antigens and decorating on the surface on the VLP. That principle is exactly the same that we use in the breast cancer vaccine, where we make the HER2 antigens in expressionist S2 in XLPS production system and decorate them on the VLP. So it's great that COVID-nineteen progresses along clinically and regulatory wise, not least. So that will be a benefit for the Virtu project, no doubt about it. And then there's some rumors out of the Netherlands that some of your test persons have developed a large number of anti genes even being exposed to only smaller doses of your COVID-nineteen vaccine. Is this something that you can tell us a little bit more about? I can't comment on the ongoing trial at the moment, except that it's running as planned. And we have conveyed that we will provide the data when we had followed the study in July. By then we have run the study through all 42 healthy volunteers in all the study groups and then be exciting to get the full overview of the study outcome. We're looking forward to that, of course. Okay. And there is a question also with respect to expression will be listed in the MSCI index in the near future. What do you expect from this? Keith, perhaps that's a question you can address. I can, but I want to say upfront that we don't have any clear expectations there. Just the understanding that when a Companies added to an index, then the managers of index products will typically allocate part of their portfolio to that company. So perhaps we could see additional investment associated with that. You'd have to ask MSCI and the index providers for more information about the timing and scale of that. Thank you. So also maybe a question For Keith, when do you expect to have a profit or positive figure? I think the question is when you expect to be cash flow positive? Sure. I think our investors know that we are a biotech company. And as such, we make significant capital investments early in the development process and throughout the development process. And doing clinical trials is not an inexpensive So it could be some time until we are cash flow positive. However, depending on how things go with the COVID-nineteen vaccine, that can And another question also goes to the COVID-nineteen vaccines and it goes like Sperber Nordik handles the commercial part of the COVID-nineteen vaccine. How do you benefit financially? Well, this licensing agreement between Adaptec and Bavarian Nordic that provides some milestone payments and royalties through Adapt to AdaptBank. Then AdaptBank and XPression also has licensing agreement because the expressions S2 technology is in the final product. So That's a channel of proceeds from the Nordic that will pay royalties to Adaptec, which will then pay royalties to expression actually. We have conveyed that The royalties in these licensing agreements can be in the 2 digit percentage level. And Bernd, can you remind us how is Expressions' owner Chip, in relations to the vaccines. Of course, that's important to state as well. On top of this, we own 34% of Adaptec. So in addition to the proceeds through these licensing agreements, There's also a 34% ownership of a debt bank. So that's a very nice value I'll take that. So maybe perhaps as final question, looking forward to the rest of 2021. When what is it that you encourage to investors to look for at your company. We'll of course be extremely exciting to see the clinical data coming out COVID-nineteen vaccine trial both in July and also the subsequent clinical trials. Furthermore, on the HER2 project, the breast cancer vaccine project, we expect proof of concept in animals by the end of the year, a very important milestone also for the company as we proceed with this project. Those are the 2 primary goals here this year. And then of course we progressed on our influenza and malaria projects as well. So we expect a continued revenue growth that is very exciting over the year. Okay. So I think let me let that with the exciting news flow coming up be the last question because time flies and we have to cut off for today. So I'll say thank you to both Keith and Ben for joining us and answer all the questions and for the presentation of the Q1 results. So thank you both of you. Thank you very much, Greg. Yes. Thank you.