Welcome to the SynAct Q4 2023 report. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to the speaker, CEO Torbjørn Bjerke, CFO Björn Westberg, and CBO Jim Knight. Please go ahead.
Thank you very much. This is Torbjørn Bjerke, and welcome, and good morning, and good afternoon to everybody. This is the Q4 report for SynAct Pharma, and with me here in Stockholm, I have Björn Westberg. Thomas Jonassen is in Denmark, and Jim Knight is in California. We will talk about the overall aspects of the Q4. In the next slide here, you can see the forward-looking statements, which is important to have in this presentation, of course. So the next slide here is really an overview. We have been quite busy the last quarter, busy in evaluating the different aspects of resomelagon, in both from the preclinical side, the data, but also importantly, of course, from the clinical view.
To help us do that, we have used our advisory board, both preclinical advisory board, as well as the clinical advisory board. With the extended clinical advisory board, we have Dr. Vibeke Strand, we have Roy Fleischmann, and Ravi Rao. Importantly, these people have a very long track record, successful track record in developing new medicines for rheumatoid arthritis and other inflammatory diseases. In addition to that, we have had our board evaluating the data, and we'll go into some of these aspects during the call today. But importantly, we are also going to discuss some new data that we came out with yesterday. And why is this important?
This is extremely important because it gives us a very, very good belief that resomelagon could have an important role to play in the treatment of rheumatoid arthritis, but also we believe in the treatment of other inflammatory diseases and viral diseases, and we'll come into that as well. So yesterday, we came out with a bit narrow or more narrow focused group of patients being high CRP. As we have discussed previously, these are very important selection criteria for resomelagon, but also within a six-month of diagnosis. And we believe this is a sweet spot for the compound. Thomas will discuss this in much more details after my introduction here. Importantly, also, we have hired Kirsten Harting as our Chief Medical Officer.
She brings a really successful and broad experience within clinical development. And of course, she will be very important in both the deciding, executing, and management of the trials. This will be in a close collaboration with Thomas Jonassen and the rest of the management team. In terms of the Q4 financial highlights, as you might have seen today, we have much lower clinical costs, and that is obviously due compared to Q3, and that is because the dosing of the clinical trials has been completed. We also have a goodwill write-off of SEK 25.4 million, but that is relating to the TXP acquisition and purely a result of the share price increase from signing to closing of that deal.
We'll also talk about the different options we have in terms of selecting the right clinical trial going forward, because the results of this review is really that resomelagon really deserves to be further developed within RA and potentially also other inflammatory diseases. So this is a very important take-home message. Indeed, we would have liked to discuss also the RESOLVE audit today. However, it is very close to finalization, so I hope that we will get back to that very soon, so you can get a full picture of both the EXPAND and, of course, the post-hoc data from EXPAND, but also the data and the results of the RESOLVE audit.
In addition to what is on the slide here, we have also decided that the Capital Markets Day that we should have in Q1 will be moved after the extraordinary general meeting on the twentieth of March. We believe that this is fair towards our, well, shareholders. They probably will give a picture where that EGM is. So let me now to Thomas about the development in RA. Give you a clinical update on this really, really good results that we came out with yesterday. So please, Thomas. Thomas, are you there? It seems that we have lost Thomas.
Yes, it's the operator here. He seems to have lost his connection, so we're waiting for him to get back in here.
He has lost the connection. Okay. So maybe in the meantime, we should go directly to Jim Knight's presentation and then come back to Thomas when he is online again. So let us go to Jim.
Yep, I'm here.
Are you there?
Can you hear me? Yep.
Yeah. Please go ahead and talk about positioning and partnering and diversifying risk.
I will be happy to do so. Can you go to the next slide, please? So we took a look, you know, as Torbjørn had indicated, we spent quite a bit of time as a management team going over results and really looking for, you know, next strategy, next development opportunity for resomelagon in RA, right? We believe wholeheartedly in the data that Thomas is about to show you, about the effects, the increased effects in intensity for response with resomelagon in patients with elevated CRP, particularly those when, you know, diagnosed within six months, and really reducing the heterogeneity of that database, and Thomas will be to go over that data.
We're really excited about that data, and we believe that really represents an impetus for us to continue development in RA. We looked at three options. We looked at. First option was a newly diagnosed treatment-naive, you know, very similar to EXPAND and to BEGIN populations, patients presenting with severe disease activity. And in this case, we'll have patients with elevated CRP as a hard requirement, as well as, you know, patients that are within six months of their diagnosis. And again, Thomas is gonna share that data, which we released yesterday, with you after this presentation or after my presentation here. The second option we looked at is what primary DMARD-IR . I mean, this is similar to DMARD-IR , as we've discussed before.
The primary aspect of this is really looking at patients who are having an incomplete response to their first use of methotrexate. So these would be patients that have been on methotrexate for 3 to 6, you know, for up to six months. Guidelines state, both U.S. and Europe, that you know, after the initiation methotrexate, one should look to move on or switch therapies if, depending on type of response at three months, and definitely by six months if an incomplete response or no response has been obtained. And the third option we kinda touched on, but as we talked with the KOLs, it was perhaps the one that they were most excited about, which is this combination with biologic agents.
Similar to the primary DMARD-IR , we're looking at patients who are, you know, moderate severe RA, with elevated CRP, who are within six months of starting their first biologic or the first course of that class of biologic. What typically happens, I mean, the biologic therapies in general can, you know, provide pretty pronounced or profound responses. Unfortunately, while, you know, there's an advance in several biologics, several classes, you know, remission, if you will, or trying to get patients, you know, disease symptom-free, is still the goal and it is pretty elusive, right? No, most of the biologic agents can get to about 50% or so, ACR50 response.
So, you know, about half the patients feel about half better, but, you know, it's harder to get patients into a state of low disease activity or, or into remission. What happens now with patients, you know, have those therapies, they'll switch to within a class. If they, say, start on anti-TNF agent , they'll switch to another anti-TNF agent , or they'll switch classes, and unfortunately, you know, they never, physicians claim they never seem to be able to get to that first level of efficacy they got with their first biologic. So there's a need for, you know, additional, safe, safe, well-tolerated therapies, you know, working via different mechanisms of action, such as inflammation resolution, to really help the biologics, you know, work better, if you will, in these patients.
You know, we took a look at these, you know, all from a pros and cons standpoint. If we look at, you know, the option one of the newly diagnosed treatment-naïve, you know, the big part about this, you know, within six months, and Thomas will go over this in more detail, is it really lowers the heterogeneity of the population, right? And EXPAND, we got some patients that I think has previously been discussed, that were had these for a bit longer, you know, in a year or more, in some cases. So not, you know, that newly diagnosed patient population we're necessarily looking after.
And, you know, the supportive data obviously from again, particularly in the elevated CRP population, and diagnosed with the six months, which Thomas will share with us, and, you know, there's a probability of higher, a higher probability of success in this population. On the con side, you know, there are structural impediments that exist, to new first-line agents. I mean, the way that we've always, you know, and, and this leads to, you know, a, a very low level of, of partner interest, you know, especially, you know, as an indication, if you will, out of the gates.
The way we, you know, approached this in the past, and, and probably best evidenced when we shared this with you at Capital Markets Day last year, was really looking at this, this early treatment option, as in patients with poor prognostic indicators or patients that, you know, have an indicator that they might, they may likely have a, a higher, or a, a worse course of disease, as a way of identifying those patients that it might be more appropriate to for resomelagon therapy. All right, sorry. Share here. Looking at looking at the primary DMARD-IR population, this is a population, again, you know, lowering heterogeneity by looking at that primary piece, but this is a population with a, with a high degree of partner interest.
This is a population, you know, where their next choice of therapy is a biologic agent here in the U.S., or a biologic or a JAK inhibitor ex U.S. You know, those products have a lot of safety concerns, that you know, rare but serious safety concerns, and are also given via injection for the most part, or and/or infusion.
You know, data from EXPAND is supportive, to the degree that, you know, we're really talking about the next step, if you will, in the evolution for a patient that were to qualify for EXPAND, if after, you know, 3 to 6 months of treatment with methotrexate, they receive an incomplete response, then that would be a patient that would, in our minds, qualify for a primary DMARD-IR , DMARD-IR patient. You know, on the con side, there's no data in this population to date, and we may need to increase sites for recruitment, you know, to really get after this targeted population. I know I didn't mention on the on.
In regard to treatment-naïve, I mean, that's, you know, has some potential challenges as well and may have to rely more upon Eastern European sites, as we did with BEGIN and EXPAND. Then on option three, you know, very similar to primary DMARD-IR , but, you know, this is, especially from the KOLs, the feeling of where the market's going. You know, more and more patients are going on biologics, and unfortunately, a lot of patients are exhausting their biologics pretty quickly. So again, you know, applying resomelagon in this position on the primary biologic-IR patient, again, would give the ability to, you know, maybe perhaps use that biologic longer, give a more profound response to patients.
On you know, definitely an area of high partner interest, and this is an area where, you know, on the con side, again, no data in this population, and, you know, in, in contrast to, we know it's generally safe and well-tolerated in use with methotrexate, we, we don't have data, in the use with biologics, in combination with resomelagon. Could I get the next slide, please? Yeah, just to, you know, show. And this is a slide that, in most part, we shared at Capital Markets Day, just really looking at, you know, what the, the, the response is, in typical to methotrexate, the first use of methotrexate. And it, it's, it's almost - it's universal.
It's pretty, you know, you know, static, if you will, across when you look at literature, talk to physicians. You get about 50% of patients with first treatment of methotrexate will have an incomplete response in that first time period of 0 to 6 months, and for our definition, would be primary DMARD-IR. You know, we believe this is a, you know, attractive position. It leverages off the data that Thomas will share with us in a few moments here in regard to, you know, earlier treatment patients earlier in the course of their disease, and really gets after, in our minds, a you know, population that partners have told us they're keenly interested in.
You know, and our thought always was, you know, going in with DMARD-IR as the first move and being able to move earlier, right? With the poor prognostic indicators in that treatment-naïve population. You know, probably the best example of that move would be the Bristol Myers Squibb, BMS, has a product called Orencia, which is approved for RA and some other conditions. It's anti-T-cell stimulatory mechanism of action. They have been on the market, you know, for over a decade plus. And they have, you know, really established themselves as a safe and effective product for in a subset of patients.
They're the only advanced therapy that doesn't have a black box warning, you know, a warning of, you know, rare but serious safety signals or safety issues. And they've just now started to move earlier in that treatment algorithm, right? Because, you know, physicians wanted to get comfortable with that therapy before they started using it in earlier patients, and they're now successfully moving into early patients. Again, you know, using their version of poor prognostic indicators, indicating patients that may be more likely to respond to Orencia. Could I get the next slide, please? And just, you know, again, we've seen this slide before as well.
You know, we've got a good amount of interest from physicians in use in DMARD-IR , as well as in the biologic-IR patient population as well. So, physicians, you know, get the attractive profile of resomelagon, oral once daily, and really get, you know, the generally well safe, generally safe and well-tolerated aspect. I mean, that for them leads them for a lot less hassles with using a therapy than some of the things they have to be concerned about today, with some of the more advanced therapies. And I think that's my last slide. Are we going back to Thomas?
So Thomas, are you here?
I'm back on the line. I'm so sorry. We had a complete breakdown of internet access here from the office.
Okay. So it's your first slide.
Thank you very much. Last year, in September, we presented the full data set from the EXPAND study, where we unfortunately could not see any difference between active and placebo treatments in the EXPAND study that was set up as a study, where we tested the compound as once-daily dosing in previous treatment-naïve patients.
In some analysis of this, we identified that patients who had indication of systemic activation, inflammatory activation, meaning that the CRP was outside normal range, was much more prone to respond on the compound compared to to the overall population, and, and especially also with a numerically higher response rate than placebo-treated patients. Indicating that this compound works, should work in or, or should be given to patients with activation of inflammatory system. The originally data from BEGIN study that inspired us to this study here, we had a much larger fraction of the patients who had activated inflammatory system, most likely explaining the difference in the response rate from from that study to the overall patient population in the, in the EXPAND. If we go to the next slide.
Yesterday, we then had a press release where we then presented what we believe is very, very interesting data. Because, one thing is to have an activated systemic or signs of systemic inflammation, as we saw with the patients who have a CRP higher than three. Another thing is that patients with relatively new disease activity, meaning here in this case, defined as patients who were set on treatment with methotrexate within six months of diagnosis of rheumatoid arthritis, which could be considered as early treatment, and for sure is within the in the current recommendation of initiation of DMARD treatment in moderate and severe disease activity.
If we do get that subgroup of patients who is approximately around 50% of the full patient population in the EXPAND study, then we again see here that the compound is very active. We reach an ACR20 of more than 80% within the three months study period, whereas the placebo, independent on inflammatory status and independent on when in disease it's given, is around this early 50s, 50%. So this is very encouraging data confirming that this compound is active in a relevant patient population of newly diagnosed patients with high disease activity. And if we go to the next slides, we have a number of, where we present the number of the secondary readouts.
To the left, we have the DAS28-CRP scores, where we can see that the difference between active and placebo is present after eight weeks, and then after 12 weeks, it's an improvement in that score of 1.9 points compared to 1.2 on placebo treatment. If we then go to the right, we have the CDAI, the Clinical Disease Activity Index, which is the sum of tender and swollen joint, as well as both the patients and the investigators' global assessment of disease activity.
You see that we, as for the DAS28, we have significant treatment effects after 8 and 12 weeks, indicating that we have here, and again, really clinically relevant with a reduction in CDAI of more than 24% in the active group, compared to around 14 to 15 points in the placebo group, indicating that we have a highly active compound in these patients. If we go to the next slide. Here we have the HAQ score, which is a way to evaluate the patient's ability to handle daily living. And here again, we have a score, an increase or an improvement of almost 0.7 points, or more than 50% more than the placebo treated.
So again, indicating that we have a very, very nice treatment effect of this compound in these patients. And the patients, just to take it one more time, the patients are patients who are being referred to rheumatologists, who have high disease activity, who have signs of systemic inflammation, and who have a need for treatment with first-line treatment with methotrexate. In this study, we gave, then we gave our compound or placebo on top of methotrexate treatment, but without any co-administration of glucocorticoids.
So you could say that this, what we show in this study here is on this subgroup of patients, is a very, very nice drug response to or response to the drug in patients who have been initiated treatment according to the current guidelines and who have a large need for treatment in order to reduce disease activity. I have been. So if we could go to the next slide. And I've been asked quite a lot on emails here too, and over the last month, what about the BEGIN study? How did it look if we only looked at those patients who had CRP outside normal range? In the BEGIN study, we had more than 80% of the patients did have activated inflammatory system.
But if we then take out if we take out the patients who had CRP within normal range, we have curves to the right, who you could say confirm the same as we see in the EXPAND study, that we have high activity of the compounds in these patients, in those patients who have systemic inflammation. So if we go to the next slide. So what we saw originally in the full data set of all patients in the EXPAND study, we were not able to show the treatment effect when we compare placebo and active, which was for us quite surprising at that time. We have now, during the last month, dug much more into the data, and relatively fast, we understood that it was important that we had systemic activation or indication of systemic inflammation.
When we then further look into it, it seems to be specifically interest of looking at patients that where we can go in very much accordance with current guidelines and initiate treatment within six months of diagnosis of rheumatoid arthritis. Perhaps I should put one more comment on the BEGIN study. In the Nordic countries, we have a very effective hospital system. So the patients with regard to go from diagnosis to initiation of treatment, which is not necessarily the same in other territories. So here in the BEGIN study, we had a very large fraction of the patients who were where treatment were initiated within two weeks from diagnosis.
And that is according to the current European guidelines, the optimal way of doing it, to go in as fast as possible and treat. This, of course, give possibilities in treatment maybe, but it also gives possibility to go in as second line, early as Jim just have explained. So based on this, we think it's very encouraging and very important to look at the data in this perspective, for the future development of the compounds. Thank you.
Okay. Thank you very much, Thomas. Good to have you in again. Now we're going to the financials, and, Björn, please.
Thanks, Torbjørn. So please note that the references to financial numbers are in million Swedish krona. So I will start with the financial summary, with some key numbers, part of the P&L statement. The full year had R&D cost of SEK 100 million, SEK 105 million, largest ever. The execution of our two key clinical studies, EXPAND and RESOLVE, is the main reason behind this increase. Both studies completed dosing in Q3 this year, last year, and that is the key reason for much lower activity cost in Q4, both versus Q4 last year, but also compared to the third quarter 2023. In G&A, there are some one-off costs for the full period, including cost for the former CEO, severance pay, and also costs related to the TXP acquisition from January last year. Other operating costs, including a write-off of goodwill of SEK 75 million.
That relates to the TXP acquisition closed in January 2023. As the payment was made in SynAct shareholders, the booked amount became much higher as the share price increased by 40% between signing and closing. This increase was the basis for the goodwill amount. As the share price has come down quite a lot at the end of last year, you can say the booked value is more reasonable, more in line with the original value at signing. Looking at the financial position, end of December versus end of 2022, the key changes are: intangible assets amounted to SEK 152 million, once again, related to the TXP acquisition. As mentioned now, but not with any goodwill now, that it was written off in Q4.
Cash amounted to SEK 62 million at the end of Q4, affected by the 12-month operating cash flow of -SEK 100 million, partly offset by the share warrants deal , a net of SEK 54 million. The cash flow for the full year was also affected by the operating loss, but positively affected by the decrease in working capital. We will now see a more moderate cash flow beginning this year until the next clinical studies are started. Long-term debt is mainly a deferred tax liability related to the TXP acquisition, and a potential supplementary purchase price also related to the TXP acquisition. There are no bank loans or similar. So overall, the financial situation is solid, although we need further financing to start in the larger clinical trials. Back to you, Torbjørn.
Thank you very much, Björn. So, let me just conclude here. I think very important message from us to our shareholders is that following a very detailed review of all data related to resomelagon, we believe that the compound might have a good position within the treatment of of RA. You have seen the data that we presented today, we we came out with yesterday. And, you have also heard, Jim Knight, talk about three different opportunities we have to go further on and to develop resomelagon in in RA. In addition to that, obviously, we believe that it has a potential role also in other inflammatory diseases and viral diseases.
But, we believe, of course, that, during 2023, we learned a lot. We learned how to define the group of patients, that will react or that potentially will react to, to resomelagon. In addition to that, we believe that inflammation in, for example, newly diagnosed patient, is quite similar to, to early stage of, DMARD-IR. So we have different opportunities, to, to develop this compound further, and, we will definitely, be discussing this and, selecting the, the right, the right one going further. In addition to that, we will have continued dialogue with potential partners.
We are in active phase there, and Jim also talked about some potential collaboration opportunities in the combination for biologic DMARD patients. So we have a quite exciting way forward, we believe. And make no mistakes, we believe that resomelagon is a valuable tool, valuable compound to develop further. In addition to that, we believe that we have an exciting pipeline also based upon the TXP molecules , the peptides, that could also play quite a role within other disease indications in the company. So we believe that the company is quite valuable, also from a pipeline development point of view.
As Björn alluded to, obviously we need more financing in order to follow any of these routes forward, and we'll definitely work very diligently on that, talking to potential investors in the near future, in order to finance the very exciting way going forward. And as I just want to finalize, we definitely hope to be able to communicate the RESOLVE data as soon as possible for you to get the full picture of the company. So thank you very much for listening in, and now we are ready to take any questions that might come. Thank you. Operator?
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Patrik Ling from DNB Markets. Please go ahead.
Yes, thank you. Just a couple of questions regarding the data that you presented yesterday, the subgroup data from EXPAND. Kind of surprised to see 28 patient in the resomelagon group that actually fulfilled the criteria of increased CRP and less than six months from diagnosis. Because when I looked at your original presentation, I mean, it was only around 40% of the patient that actually had a CRP above the normal range, and the average or the mean time since diagnosis was 42 weeks, which is more than six months. So maybe you can elaborate a little bit on how those data actually fit together.
Let me answer that. Thank you very much, Patrik. So, Thomas, can you take that question?
Yes, for sure. The original data we presented back September fourth, we had a cut on on CRP of six and not three, which of course means that we have a number of patients in in in the span of 3 to 6. So that explains the numbers.
Okay.
The other thing is that, yes, we had. We also, in the original presentation in September, presented mean time on methotrexate or from diagnosis. We have, especially in the active group, a number of real outliers who probably never should have been included in the study, as they have had a medical history for years before they started methotrexate. So that explained the numbers in the original presentation and in this one here.
Okay, so mean history is. I thought it was sort of the mean patient that had been.
No.
Going 42 weeks. So okay, okay. That explains it. Great. Great. Then just the last question. I mean, maybe you can give some timelines on when we should expect this reevaluation of the RESOLVE trial. I think maybe that's for you too, Torbjørn.
Yes. Yeah, so, Patrik, we are in a finalization stage around the audit. In order to be totally regulatory compliant, the audit report goes back and forth with the CRO. We have very good collaboration and very good discussions with the CRO, so I expect it to be finalized within the next week or two.
Okay, great. Good. Thank you. That was all for me.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you very much, and thank you very much for calling in and listening to the Q4 report for SynAct Pharma. Looking forward to talk to you very soon again. Thank you so much. Bye.