Modus Therapeutics today published their Q3 report for 2022. With me to dig into the details of this report, I have the company's CEO, John Öhd. Welcome, John.
Thank you, Jonathan. Thank you for having me.
First of all, for those not familiar with Modus, can you briefly describe what you do?
Of course. Modus Therapeutics is a biotech company developing its proprietary drug sevuparin, which is a heparin-like drug without the blood- thinning. We're developing it with a focus on sepsis and also, of course, with a broadening of the scope towards systemic inflammations of serious types that are not sepsis. Our focus is really sepsis.
To give a feel for the market for sepsis, how big is that market?
I think, I mean, we have a really good foundation in the fact that sepsis is one of the more important causes of death yearly globally. We're looking at around 50 million cases a year, and out of that, 10 million-11 million deaths. For the most severe form of sepsis, there's still a 30% mortality, and for sepsis in general, around 15%-20%. Based on that, there is a great medical need and our expectations for a market, for example, in the more severe form, septic shock, would be that that market size is around $6 billion a year. And for an earlier indication with towards the, if you're successful in registering towards an earlier form of sepsis, that market size could be up towards $27 billion a year.
You mentioned in the report that there is a growing awareness about the need for effective sepsis treatment. How does that play into Modus as a company today?
I think awareness, for any company or anyone doing research in an important area, the general awareness and the awareness out in specific groups that you're dependent on, of that, of the importance of that research is really key. When it comes to sepsis, for a long time, sepsis has been in the shadows of other important causes of death of the same magnitude, for example, cancer or cardiovascular disease. You know, there's been a lot of thoughts around what the reasons are for that, but, you know, that doesn't really matter. Going forward, I think the initiatives that we see today of World Sepsis Day and World Sepsis Foundations that are active around the world, are really important to make people aware of this serious disorder.
I, on a personal level, when we are out talking about our research efforts, we often still encounter an order of surprise when it becomes obvious to those who we talk to how serious a condition sepsis is. Working against that is something that we actively contribute to when we're out, because everything that we want to do is easier if there is awareness. Everything from financing to actually finding the patients to our important clinical trials.
Looking at the quarter then, the operating loss decreased to SEK 2.8 million , compared to SEK 4.4 million , somewhere around that, same period last year. Those improved results were being linked to reduced cost for manufacturing of sevuparin. What is behind these cost reductions, and are they sustainable?
Well, I think first a comment is in place on the nature of cost distributions in a company like ours, a biotech company developing one major asset, is that big costs tend to come in bursts. Investments are significant because the research activities that we do and the things that we do that support research activities are quite expensive. For example, running clinical trials, there could be quarterly, you know, down payments that you need to do that would come and go during the running of a certain clinical trial. In this case, the cost of manufacturing new drug, which is really important.
In our case, that manufacture is a way for us to secure that once we come out of the clinical trials that we now are doing, we have the enough drug to transition seamlessly into the next clinical trials that are planned. So that we don't have the risk of any delays, which can be significant when you manufacture drug otherwise, in that transition to new clinical trials. By this, I think I've also said that the periods between costs manufacturing new trials, new drugs tend to be quite spaced. We don't foresee any need of further drug until later in phase II, so maybe towards 2024 or even early 2025 for the corresponding kind of drug manufacturer. Yes, I think it's sustainable over the near future if, you know, if we're counting the years going forward.
Looking at the financial position of the company, your cash flow position actually, was improved during the quarter given a bridge loan from Karolinska. Do you think that additional financing will be needed in the near term or is this a one-off thing with Karolinska Development?
Well, I mean, we can of course just look at the Q3 report, then even go back to our prospectus from the IPO, where we've been very clear that the present financing based on the proceeds from the IPO would take us, you know, to the end of the phase I-B trial, and to the presentation of the data of that, as well as in parallel in the later phase running the preparations for the next trial in patients with sepsis. Before starting that trial, we can take it up to a certain point where we are prepared to start the next trial. In order to run it, we will need to refinance.
That's why I think we've also been clear that, you know, going forward, we are exploring the different possibilities that we have before us, that we see to achieve financing of the next clinical step.
Talking about clinical trials and studies, you had two major important milestones during the quarter. First patient enrollment in the phase I SEVUSMART clinical trial for severe malaria. Then you had completion of recruitment for phase I-B LPS provocation study as important milestones during the quarter. Describe those studies and what these milestones means for the future.
Yes, of course. I think starting with what we are focusing on, in-house, and that drives our internal development program towards a new sepsis drug, and that's the phase I-B LPS challenge trial. This is a trial where we use healthy volunteers, or we have dosed healthy volunteers, that have also been provoked by a substance that induces a state that is similar to sepsis. Then in that setting, we can study different doses of sevuparin and what kind of effect it will have on this sepsis-like condition.
This is very important because this trial will allow us to get the possibilities to go forward in the patient population with a smarter and more to the point trial, knowing more about the patient population that we should recruit and what kind of biomarkers we could use for predictions and prognostications. From a importance point of view, the phase I-B trial and the fact that we have been able to finalize the recruitment of this trial is really of great importance. This also means that we have concluded the clinical phase. All the visits and all of the doses are finished, and we're now in what you can call readout phase.
Our goal is, of course, in the near future to be able to present the high level data. A lot of our activities are hinging, of course, around this data. The other trial that you mentioned is a collaborative trial where we are, as a part of that collaboration, using that opportunity to explore as part of our added strategy, what sevuparin can do in situations with systemic inflammation that are not sepsis. In this case, it's a very severe condition in young children called severe malaria. This is a program that is sponsored by Wellcome Foundation and is run by Imperial College London in Kenya. We participate as collaborators providing drug to that trial.
You mentioned the readouts from the phase I-B LPS study as important here in the near term. When can investors expect anything from that readouts?
Of course, we're running as fast as we can here. It's our intention to have the readout as soon as possible. I mean, the goal has been that we try to deliver it before the end of Q4. At the same time, we're humble before the challenges that this pandemic time behind us has presented, so we're still, I would say, we're still aware that there could be stumble blocks on the way. As I said, we are in readout phase. All the clinical phase has been taken care of in the trial. We believe that we will be able to maintain a high pace in the readout. I would say that, in the near future.
Overall, what are the main milestones would you say to look for in the, well, coming quarter, except for the readout?
I mean, the milestones is, of course, what we're looking at is, of course, the start in the next year, 2023. We would be looking forward to refinance the company and to be able to disclose the data from our phase I-B trial. Of course, with the hope that that would also give strength to our refinancing campaign. Once we have secured that, we will be looking to embark upon the first patient trial with sevuparin in sepsis patients.
John, thank you very much for taking the time today, and good luck with your ongoing trials.
Thanks so much for having me.