Ladies and gentlemen, welcome to the Immunovia Q3 Interim Report 2023 conference call. I am George, the conference call operator. I would like to remind you that all participants will be listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Karin Almqvist, CFO. Please go ahead.
Thank you so much. Good morning, and good afternoon to you all, and welcome to this conference call following our third quarter results. Presenting in the call is Jeff Borcherding, our CEO of Immunovia, and myself, Karin Almqvist, being the CFO of the company. The presentation will be followed by a Q&A session. Our operator will, as usual, guide you on how to post your questions, and like last time, you will also be able to give your questions via a chat function. As usual, needless to say, we do welcome questions. After we have closed today's call, you will find the presentation and recording on our website. With that, I would like to hand over to our CEO, Jeff. Please go ahead.
Thanks, Karin. I appreciate it, and thank all of you for joining us for today's call, as we discuss our Q3 financial results and also provide an update on the development of our next-generation test. As Karin noted, we will close with Q&A, and given the number of changes that have happened with Immunovia over the last several months, I hope you'll take the opportunity to ask any questions that you may have. In July, we announced that we were significantly restructuring Immunovia to focus on our novel next-generation test for the detection of pancreatic cancer. In the four months since then, we've made a great deal of progress in this transformation, and those changes have enabled us to focus fully on the development of that next-generation test. As you'll see in the call today, that focus is really starting to deliver results.
Throughout the restructuring of the last few months and all of the changes that it brought, we have certainly maintained our commitment to our mission. We continue to see a substantial unmet need for early detection in pancreatic cancer in a really large total addressable market in this space. As we previously shared, we estimate there are about 1.8 million people in the largest market, the United States market alone, who are at high risk for pancreatic cancer and therefore are appropriate to be part of some kind of surveillance program. These include people that have family history of pancreatic cancer, genetic mutations that put them at risk, chronic pancreatitis or pancreatic cysts, or new-onset diabetes, over the age of 50, all of which can put a person at greater risk for developing pancreatic cancer.
We see a tremendous opportunity to save the lives of individuals that are at high risk for pancreatic cancer, and in doing that, we strongly believe that we can build a successful and a substantial business in doing so. During our second quarter call, I shared our strategic priorities for the remainder of this year, as well as for 2024. As we look at the focus that we have, you know, clearly, we are focused on: How do we get back to market with a better test that's available to more people?
As we think about these priorities, I'll start at the top and just acknowledge that transforming Immunovia has required a number of changes, and, and as we've made those changes, we've had a very clear focus on execution and a very clear focus on communication with our customers, with the clinicians who have used IMMray PanCan-d, to ensure that they understand why we're making the changes that we're making. We're very focused on the development and testing of that next-generation product, and in a few moments, I'm excited to share with you the initial results that we have from our first phase of that development effort.
One of the real assets that we have as a company is the biobank of blood samples from patients with pancreatic cancer, as well as appropriate control patients, and we continue to bolster and increase the size of that biobank and also increase the diversity of the samples that it includes. In parallel with the work that we're doing to develop the next-generation test, we're also collaborating with key opinion leaders in the field to design the clinical studies that we'll use to evaluate the accuracy and the clinical impact of the new test, and to make sure that we understand how clinicians want to use the test and what data they need to see to be comfortable in using it. As we do that, our goal is to really accelerate our time to market.
By planning the studies now, by leveraging our existing biobank, and by continuing to collect additional blood samples, we should be able to come back to market faster than what we were able to achieve the first time around, for sure, and also be able to move faster than some of our competitors who don't have that heritage that we have at Immunovia. Lastly, I think it's really important for us to maintain and enhance the relationships that we've built over the last several years with key opinion leaders and experts in the field, clinicians who are day-to-day scanning and screening people for pancreatic cancer, as well as the advocacy groups that are so important in this space.
I'm excited to share with you that as we've had conversations with all of those groups, I've been very, very pleased with the fact that they have been supportive of our decision to discontinue the IMMray PanCan-d test, and they've been very focused on helping us develop the next generation test and bring that to market. As we look now at the next generation product, or I'm sorry, the transformation before we get to the next generation product, I wanna talk about the steps that we've taken as we really have made changes to position the company for success. We discontinued the sale of IMMray PanCan-d in July, and as we did that, that led to a number of changes within Immunovia with the company itself. You know, in the past, Immunovia had too many employees.
Personnel was our largest expense, and we needed to become a smaller company with a lower cash burn. We weren't sufficiently agile in the past. We weren't able to move as quickly as we needed to, and we needed to accelerate our pace. And finally, we, in hindsight, were too internally focused. Our default approach was to develop proprietary tools to leverage our internal expertise, and we did that too often and didn't sufficiently look externally for outside expertise and best-in-class solutions. So as we make these changes to the organization, we're also making cultural changes to how we operate, and we've moved quickly to execute the steps that you see here to change the company. Previously, we announced that we were moving away from the proprietary IMMray platform, and I wanna share a little bit more about our plans there.
I'll also talk about some of the staff reductions that we've done to become more agile and to reduce our cash burn rate, talk about how we're aggressively cutting expenses, and all of those things really allow us to focus on our next-generation product. Historically, we leveraged the IMMray platform that was proprietary to Immunovia for both the discovery of new biomarkers, as well as day-to-day execution of tests on the IMMray platform. Initially, that offered some advantages. Unfortunately, as time wore on, IMMray has become surpassed by other discovery and testing platforms. One of the challenges that we ran into was simply the cost of operating our own proprietary platform.
As you can imagine, there were a number of fixed costs that we had that were based on the fact that we were creating all of the materials that we needed to run the test, the slides, the antibodies. By doing that internally, it led to a high fixed cost at our headquarters in Lund. We also had a relatively high fixed cost, or I'm sorry, a high cost of goods sold because of the high scrap rate that we had with the platform, and the fact that we were creating all of those, components to the testing in Sweden, and then shipping them to the US for testing.
Scalability was challenging, and in terms of the day-to-day operation of the platform to run tests, it was a hands-on process that required pretty substantial labor, and as a result of that, our turnaround time on tests was about three days. Going forward, we'll take a very different approach. We will use an ELISA platform, which is a widely used commercial platform. This allows us to significantly reduce our fixed costs. We can buy supplies as we need them. That becomes a variable cost rather than a fixed cost. We also expect that we'll have lower cost of goods sold, and that the platform will be more scalable, enabling us to grow as our volumes grow in the future.
Then finally, we think that there's a real opportunity for more automation with ELISA assays, which we should reduce our labor costs, and we believe will reduce our turnaround time to as low as one day. I mentioned earlier that we really needed to take a hard look at our organization, decide what staffing we needed going forward, what was going to be critical for us to be successful with our next-generation test, and where we could make reductions and save money. The discontinuation of the IMMray test and the stopping of commercialization of that test made a number of roles unnecessary. So that allowed us to reduce staffing around the production efforts that were happening in Lund.
It also enabled us to eliminate the sales team and the customer service team and the lab team, for the most part, that was in the U.S., in our Marlborough lab. And what you can see here is that at the end of Q3 in 2022, we had 64 employees. At the end of the third quarter in 2023, we had reduced that down to 25, so 39 fewer employees than we had last year. In addition, we will have some employees who exit the company in the fourth quarter. These are employees who have been given notice, but are currently still employed by the company. By the end of the year, we expect to have 11 full-time employees, down more than 80% compared to last year.
As we do that, you know, we recognize we need to make sure that we're staffed in the critical roles. We're also looking at ways to leverage consultants, leverage contractors, and leverage outside partners to achieve the things that we need to without some of the, the substantial personnel costs that we've had in the past. With that, I'll turn it over to Karin to discuss our Q3 results.
Thank you. The restructuring, including staff reductions and general budget cuts, start to be financially visible, with lower and then primarily headcount costs, and thereby also a lower burn rate. However, in Q3, we were still carrying costs relating to the discontinuation of our old test and costs relating to the ongoing restructuring. Further, we expect that this will be the case at least to some extent, also in Q4. Throughout the year, cash burn has slowly been trending down, and quarterly average for the year is around SEK 40 million. During Q3, we reached SEK 35 million. Our expectation going forward is to continue to see a downward trend, and as we come into Q1 2024, we expect that cash burn will be somewhat- somewhere around SEK 25-30 million.
Closing Q3, we had a solid cash position of SEK 107 million, and given current assumptions, we are sufficiently funded through late 2024. We can move to the next slide, please. So while the quarter has been very intense from an operational perspective, financially, I shouldn't say it has been uneventful, but it has been very much as expected, and we have no additional substantial one-off items like the ones we had in Q2. Comparing this quarter with performance during the same period last year, one should keep in mind that last year's results included a positive impact from exchange rates of approximately SEK 20 million. Taking that into account, costs this year are just shy of last year and down by SEK 3 million.
Going back to the financial impact of the restructuring, we have, as I mentioned before, started to see headcount costs coming down sequentially as well as year-over-year. Looking into Q4, we expect this trend with costs gradually coming down to continue, and we also expect to see some impact on other operating expenses. Then over to you, Jeff, again.
Thanks, Karin. Following that financial update, I'd like to talk a little bit about our next-generation test and the early results that we've had with the discovery program and development work that we're doing. Before I do that, though, I would like to highlight assets that we have as a company that help us to accelerate the R&D process and accelerate time to market with our next-generation test. We have a highly productive partnership with Proteomedix that continues to pay dividends leveraging their expertise, and the collaboration between the two companies continues to go very smoothly. We also have a large biobank of samples to test the new product.
We have thousands of samples in that biobank, including hundreds of pancreatic cancer samples, many of which are stage 1 and 2, which is really critical for showing the ability to detect pancreatic cancer early enough to make a difference. And then, as I mentioned earlier, we have established relationships with leading clinical researchers and professors, both in the U.S. and throughout Europe. Those relationships are incredibly important as we seek guidance on the development of our next-generation test, seek clinical partners to help us test that new product, as well as build advocates for the test as we start to approach launch, down the road. As you may have seen, we announced earlier this week the results of a large discovery study that we recently completed.
This was a study in which we looked at over 3,000 different proteins to identify those proteins that were in patient blood that could distinguish patients with pancreatic cancer from those without it. We leveraged the leading platform for protein biomarker discovery, Sweden's own Olink, and found that platform to be very powerful and also a platform that allowed us to move through the discovery step, relatively quickly. We used over 350 samples from our existing biobank, and again, that I think speaks to the power of having that large biobank. We did not have to go outside and collect new samples for this study. We leveraged pancreatic cancer samples and control samples that we already had within the company. Within this study, we looked at samples from different types of patients.
So we looked at patients who were at risk because of family history, those that were at risk for genetic mutations, maybe those that had chronic pancreatitis, as well as those that had pancreatic cysts or new-onset diabetes. What we did was we looked at these different proteins, these 3,000 different proteins, to see how effectively they could distinguish between cancer and the absence of cancer in those different patient populations. In this chart, you see 15 proteins that rose to the top. We are not showing the specific proteins because we're in the process of looking at patent applications, but did want to give you some specifics about how we do this and what it looks like.
In the chart, second from the left, you can see that the figures highlighted in green are all of the instances in which that protein was able to distinguish between cancer and the absence of cancer at a statistically significant level. And then as you go to the far right, you can see how different proteins worked in different patient populations. Perhaps not surprisingly, there are differences in the biology of these different types of patients. And so as a result of that, one of the things that we are looking at is, how can we develop an optimal test, combining different proteins, that gives us the best opportunity to detect pancreatic cancer early across different populations?
I apologize, these are relatively complex and probably fairly small charts on this slide, but I wanted to give you a sense of how we can look at the data and start to gain some optimism about the results that we may be able to deliver when we build a specific test based on some of those 15 proteins that you saw on the first slide. What we did was, just on a preliminary basis, we looked for opportunities to build test models with a combination of four different proteins out of those 15. We looked at a very, very large number of combinations, and we continue to look at those combinations to see which combinations might be optimal. Once we look at the different combinations, we want to assess their accuracy.
For us, accuracy really comes down to two things: How sensitive is the test, and how specific is the test? Sensitivity means if cancer is there, do we find it? Specificity means if cancer is not there, do we accurately indicate that? Do we avoid having false positives with the test? The curves that you see here on this slide are called ROC curves, and essentially what they do is they look at how, for a given test, that test performs in being sufficiently sensitive and also being sufficiently specific. As you might imagine, there's often a trade-off between specificity and sensitivity. You could have a test that's very sensitive, that's able to identify cancer, but if it's too loose and it's identifying cancer where it didn't exist, that creates a problem with specificity.
Conversely, you can also have a test that has very, very good specificity, where you very rarely have a false positive, but if it's so specific that you miss cancers that are there, that's clearly not acceptable either. So we need a test that delivers both high sensitivity and high specificity. So we want tests that essentially have their curves in the upper left corner of these types of graphs. What you can see in the graph on the far left is that we've just taken two models that we built using a combination of 4 proteins out of the 15 that we identified in that study of 3,000. When we built these two models, what you see is that they are higher and further to the left than CA19-9 alone, as well as the prior IMMray PanCan-d test.
These are very early preliminary results, and these aren't final test models, but it certainly gives us confidence that when you look at the population that we were serving with IMMray PanCan-d, we have an opportunity to not only increase sensitivity or specificity, but very importantly, do that without incorporating CA19-9 into the test. Why do we want to eliminate CA19-9? Well, the reason is that that biomarker, while it is very good for distinguishing pancreatic cancer, the problem is that many people do not produce CA19-9 even if they have cancer.
About 10% of the population does not produce CA19-9, and as a result of that, we want a test that incorporates other biomarkers in a meaningful way, so that our test can be used across different patient populations, including patients like those who are Black and those of Hispanic descent or Hispanic ethnicity, where that problem of not producing CA19-9 is even higher. So the chart on the left gives us optimism that we've got some markers here that have real potential. We've started to look at whether those markers could help us expand the patient populations in which the test is used. You see that in the middle slide here, or the middle graph here, where we're looking at patients who have IPMN cysts, and again, you see relatively good performance from these two sort of preliminary sample models.
And then on the chart on the right, what you see is some of the challenges that you run into as you take a specific combination of markers and try to apply them across all the different patient populations. So the model that you see in orange that performs so well in patients that are at risk for family history or genetic reasons doesn't perform well in patients who are at risk because they have new-onset diabetes. And so as we go through the next phase of the process, which is really about building the new model, one of the things that we'll be looking at is evaluating these trade-offs and looking at different patient populations where we can bring the tests to market.
At the end of the day, we did want to share these preliminary results, just to give you a sense for our optimism coming out of the discovery study. As we think about the next steps in the process, you can see where we are here. We are in the middle of the development effort. The phase that we're in right now involves three key steps. The first is that we will be working on taking research assays and transitioning them to the commercial ELISA testing platform that I talked about earlier.
In addition, we'll be looking at all of those 15 biomarkers, those 15 proteins, and saying, "What is the best combination of those biomarkers to build into a single test?" And then once we have what we think is the optimal test model, we will build that model, and we will do an initial clinical study looking at the specificity and sensitivity of that model. These three steps are being conducted as we speak. They will be our focus for the rest of 2023 and the first quarter of 2024. Assuming that we have success with these steps, what you'll see there at the bottom of the slide are the steps that remain that will be conducted in 2024. First, we will do an analytical validity study.
That's basically a study to ensure that the test is accurately measuring the biomarkers that are included in the test. And then probably the most important step is we will conduct a clinical validity study. That's where we'll look at a large number of patient samples, some of which have pancreatic cancer, many of which do not have pancreatic cancer, and really be in a position to assess the sensitivity and specificity of the test. After that, as we move out of 2024 and into 2025, we'll be doing clinical utility studies where we really look at what happens when clinicians use this test in clinical practice, and do they see benefits from doing that? So we've made very good progress. We are moving quickly, but as you can see, we have work ahead of us, and we are in an R&D process.
So, you know, it's a little bit uncertain as to how everything will play out, but I have a lot of confidence in our team, and a lot of confidence in the work that's happened so far, and that gives me optimism going forward. So in closing, I would just highlight the fact that we're a very different company than we were just a few months ago. We are leaner, we're more agile, and we're more focused than we were in the past.
We're making strong progress in developing our next generation test, and we're making that progress quickly because of the assets and the experience and the relationships that we have, as well as the focus that we have placed on leveraging partnerships, leveraging outside expertise, so that we can move more quickly, we can be more effective, and we can lower our costs by having fewer employees within the company. My commitment is that we'll continue to focus on execution and do all that we can to regain your trust and instill confidence among our investors. We're excited about what lies ahead, and I look forward to answering any questions that you have about our progress to date and what lies ahead.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. Once again, if you wish to register for a question, you may press star and one. There are no questions at this time.
Then I suggest that we proceed to a chat question that we have received. And it is as follows: Can you tell more about how you plan to ensure capital after late 2024?
Yes. So as we said in our last report, and I think we reiterated it in this report, we are exploring a variety of options. But at this point, it's premature to talk specifically about how and when we will raise capital to fund the business after 2024. It is certainly a focus for us, and we will update the market on this. But at this point, it would be premature to talk specifics about that.
Operator, do we have any more questions coming in, or shall we proceed with another chat question?
There are no questions over the phone.
Okay. Then we have another question. Could you elaborate around the timeline for the new test? When do you expect it to be launched?
Sure. You know, as you can probably imagine, because this is an R&D effort, and we are at the relatively early stages, it's too early to give an exact timeline for launch, but I can give you some specific milestones that we are aiming for in 2024. After completing the discovery study that we just finished, I mentioned that we're focused on building the model and conducting that initial model-building study and validation study. We expect that to be done by second quarter of 2024, and that puts us in a position where we can do the analytical validity study, as well as the clinical validity study in the back half of 2024. Those are really the key elements that are needed to show that we have a viable test.
Then beyond that, it's really the work from there that's needed to ensure that we get reimbursement. So, those are the clinical utility studies that will happen starting in what we expect to be early 2025.
Another question: How confident are you that the new test will be good enough to launch? Or how confident are you that it's a better test than IMMray PanCan-d?
Yeah, that's a great question. I think one of the things is that we are focused from the beginning on designing the test to address key limitations of the IMMray PanCan-d test. I mentioned the fact that, IMMray relied heavily on CA19-9 as a biomarker, and we know that as a result of that, we were unable to provide results to about 10%-12% of patients when we were offering that test commercially. In addition, we were really limited in our ability to offer it to patients who are Black, as well as those of Hispanic ethnicity. So, I'm confident that we have identified biomarkers that will allow us to address that deficiency with IMMray PanCan-d. You know, at this point, we've identified a number of promising biomarkers.
It's probably a little bit early to say. We don't know exactly what the sensitivity and specificity will be, but I'm very optimistic based on what we saw in the discovery study.
And unless our operator intervenes and we have any more questions online, I'll continue with another one. You've elaborated quite on coming milestones, but which is the next significant milestone that the market should be looking at?
Yes, so I would envision that by Q2, we will have completed that model-building study and the initial validation study. And I would envision that at that point, that we would share those results in a press release, much as we did with the discovery study. With both of those, because they are R&D efforts, our intention is very much to publish those results. So we generally will share top-line results as they're available, because it's important to share that information. And we expect again, that next milestone will be by second quarter of next year.
We also have a question on staffing reductions. I mean, with all the reductions that we've seen in the company, do you have the capabilities needed to develop and launch the new test?
Yes, so I'm very confident in the team of employees that we have. You know, as we've gone through the transformation, we have been very intentional about the changes that we've made. While we have had to say goodbye to a number of talented employees, we have a very strong group that's left within the company. In addition to that, we've got key consultants, key contractors, and collaboration partners who bring specialized expertise. We are really being intentional about the consultants and contractors that we use, so that we bring in the right expertise from the right source at the right time, and do that at the right cost.
So rather than have employees that can cover all of the capabilities that we need, we want to leverage a core set of employees and augment that with experts from outside the company. An example of that would be our R&D collaboration with the team at Proteomedix, which continues to deliver strong results for us.
Operator, do we have any final questions, or shall we go for the closing remarks?
There are still no questions over the phone. Back over to you for closing remarks.
I would just close by saying thank you for your time today. Thank you for your interest in Immunovia. I realize this has been a difficult journey, and we are certainly not near the end of that journey, but hopefully, you share our optimism and our commitment. We are committed to this because of the importance of our mission. There are too many people who die too early because their pancreatic cancer is diagnosed too late. We need to change that. Immunovia is in a unique position to really make that impact, and by doing that, we can build a very successful company, and I look forward to working with the team to make that happen, and certainly appreciate your support as we do that. Thanks very much, and we will be in touch soon.