Welcome to the SynAct Pharma Q2 2023 presentation. 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 star five on their telephone keypad. I will hand the conference over to the speakers, CEO Torbjörn Bjerke, CFO Björn Westberg, and CSO Thomas Jonassen. Please go ahead.
Hello, everybody. This is Torbjörn Bjerke, the CEO. Thank you so much for taking time to hear this Q2 report from SynAct Pharma. With me today, I have the scientific founder and the CSO, Thomas Jonassen. He will talk about the pipeline as such, and we have our new Chief Financial Officer, Björn Westberg, as well. Before I start the presentation, I would just like to say that since I took the office in May, we had a very clear priority in the management team, and that is to prepare all stakeholders for the next data release. These stakeholders, they include existing shareholders. We have more than 14,000. We're very happy for that.
Potential new shareholders, and that includes specialist investors, both from the U.S. as well as from Europe, importantly, also potential partners. Obviously, in addition to that, Thomas Jonassen and our Chief Operating Officer, Thomas Boesen, has been very busy and is very busy with the team, including our contract research organization, to prepare the data for release, both in terms of EXPAND and obviously also RESOLVE part A. In addition to that, we have been very busy in terms of doing market research, investigating positioning of resomelagon. I would like to also, in this presentation, show you some data from that research, looking at the potential profile of the compound. Next slide here, it shows the forward-looking statements.
Obviously, we need to have that. And then as the first slide here, let me talk a little bit about our main focus in terms of diseases, disease indications, and that is rheumatoid arthritis. As many of you know, it affects about 1% of the global population. So it's a big, big market. There's a lot of suffering here, bearing in mind the fact that between 50%-70% of these patients, they do not get high enough relief of their symptoms. We believe that resomelagon or AP1189 could fit very well into the unmet medical need in rheumatoid arthritis, and we'll get more into that during the presentation. So let's first talk about the different group of patients that we are investigating at the moment.
This, this, these are the patients studied in BEGIN and the EXPAND studies. These are treatment-naive rheumatoid arthritis patients. They present with a high activity, and about 47% of newly diagnosed patients, they have poor prognostic factors. More than 70% of these patients are women, and already in the beginning, the destruction of the joint starts. So i t's extremely important to, to have opportunities to stop that process in the joints and elsewhere. So, that's important. At the moment, these patients are starting treatment with methotrexate, with a lot of side effects, in addition to quite some lack of responses. We'll get back to that.
Sp this is the group of patients that we saw in the BEGIN and that we see in the EXPAND study. The next group of patients is also extremely in extreme need for new treatments, and that's the DMARD. These are the patients that has been treated with methotrexate. That's the first option in the treatment cascade in RA. However, it does not work anymore. We can divide that into incomplete responders. About 70% of these patients are incomplete responders, and of those, about 54% actually present with less response within a six months period, and from six to 12 months, it's 16%. This is also a group patient with big medical need here.
And this is the group of patients that we study in the RESOLVE study. DMARD-IR, so incomplete responses, responders of, of in that group. 2 extremely important group of patients that do not have a lot of options today. I would like to show you the BEGIN data. This is the fundamental for why we believe that resomelagon on AP1189 could really change the the treatment concept of RA and change the life of the RA patients to a better life. As as many of you remember, we looked at the so-called CDAI score, or the Clinical Disease Activity Index, it's called for RA, and we choose patients about 22 in the points here.
Here we count the tender joints, the swollen joint counts, and both patient and doctor assessment. This is a normal way of assessing the severity of the disease for these patients. As you can see here, we, we started with a three group of patients. The gray box here, is, the, the placebo. This is methotrexate, because all these patients start on methotrexate, and at the same time, simultaneously, they are then started with resomelagon AP1189 or placebo. The gray one is placebo. The light blue is 50 mg per per day, as a tablet formulation, once daily. The, dark blue is 100 mg per day. As you can see here, we got significant difference between placebo and 100 mg.
-15.5, which is clearly significant also from a clinical point of view. That was the primary endpoint in that study, the BEGIN study, and that was, of course, very reassuring. Another reassuring point in that study was the ACR. This is the American College of Rheumatology, and that is the scoring system that compares different treatments. It's also a scoring system that assesses the severity of the disease. The 20% is a 20% improvement of, for example, the patient-reported pain scale and swelling in the designated joints. This is a regulatory endpoint from the FDA as well as from the European authorities. Remember, also in the U.S., you start with methotrexate, like in Europe.
If we look at the difference between the placebo, and again, that's the methotrexate plus placebo, and the 100 mg and methotrexate, there was a significant difference here on ACR at 20, and we also saw good signs in ACR50 and ACR70. We all need to remember that this is only after four weeks of treatment. Quite a quick onset action here, we saw. This, this is the fundamental response we have so far in terms of assessing the profile of the compound. So, here we could see in the profiling, the clinical profile, which supports continued RA development, of course, and for potential broad utility of the compound.
So, one major point here is once-daily oral dosing, both from the severe treatment-naive patients as well as the DMARD-IR. These are the patients that has been on methotrexate, but doesn't work anymore. We see the once-daily oral dosing is very, very important. Quick onset of action is quite obvious, of course. It's good both for the severe treatment-naive, because when you start the treatment with anti-rheumatoid medication, you need to have a quick onset to action. You want that in order to get rid of your pain and the swelling and the destruction of the joints. Already after two weeks of treatment, we saw it already after one day in our COVID-19 study. Quick onset of action in both the group of patients, of course.
High degree of efficacy. What we saw in the BEGIN study was that resomelagon AP1189 is quite equal to the JAK inhibitors. As many of you know, the JAK inhibitors are quite effective. However, they are linked to very severe side effects. We saw a similar efficacy in the BEGIN study to the after four weeks of treatment compared to the JAK inhibitors. And that is obviously very important for both group of patients as well. Safe and well tolerated. That is a very important differentiating factors. For example, compared to the JAKs, which are linked to severe side effects, and to boxed warning in the U.S. and as well as in Europe and elsewhere in the world.
JAKs today can only be used from second line of treatment when the biologics have not had any, any response. Here it would be important to, to shift with a more safe drug and efficacious drug, to shift that to treatment regime to earlier stage of the disease, obviously. Non-immunosuppressive is important because many of the drugs that are effective in RA today are immunosuppressive. Because the fact that RA treatment today is a combination play, there are different combinations of medicine in order to try to get into a control of the disease. So a non-immunosuppressive is important, and so far we have really shown that, that this is, this is the case with resomelagon or AP1189.
And compatible, of course, it's very good, and we have shown that in BEGIN that it's very compatible with, with methotrexate, for example, in a combination play. We are getting there in terms of the profiling, and obviously, the next data release, both in EXPAND as well as in RESOLVE Part A, will be important to build on that profiling. This is, this is a very important piece of work that we are doing. So when we transfer that into the treatment regimes, first line and second line of the treatment is obviously quite important. So far, we can see that here is what, where, where resomelagon fits in. If it fits in here, then we believe it would, would fit in, in third and fourth line treatment as well.
But it encompasses both severe treatment and even DMARD-IR opportunities. That im provides for potential partners, for the company, for a volume-driven market opportunity, and of course, with pricing flexibility. I, from time to time, I get the question about, yeah, what, what, what about focusing on first line? But often it is good to have second line as the basis for the price setting, especially in the U.S., and then go backwards to first line after that. This first line and second line is less direct competition with biologics and JAKs, and that creates a unique opportunity for the drug, I think, to have a very, very good place into the treatment of RA, helping a lot of patients and being commercially very attractive.
So I said we have, we have done quite some market research, and how we do that is that we ask high prescribing rheumatologists in the U.S. as well as in Europe on how to use a drug with the profile of resomelagon or the existing profile of resomelagon, both in DMARD-IR, but also in the later stage of after TNF-α or biologic use. As you can see here, all doctors are very interested in new in new medicine that lies to the being a doctor, of course. However, importantly, in terms of the DMARD-IR, the anticipated use here is at least 52%, and that is that opens up for a very, very good commercial opportunity here.
So we are building the, the profile of, of the drug, and we are eager to see, see the next, phase of, of, of data. So Thomas, can I hand it over to you and talk about the update on pipeline?
Yes, of course. I will focus very much on where we are with regard to RI studies. Overall, our pipeline is, as those of you who are familiar with SynAct Pharma knows, that we have the lead compound. It's a mineralocorticoid receptor agonist, or more specifically, a biased agonist stimulating MC1 and MC3 receptors, which are present on white cells, and thereby we modulate the inflammatory response as a combination of anti-inflammation and problem-solving mechanisms. Problem-solving means that it's a question of the compound, that it has the ability to boost pathways, including microphagocytic activity, what's it called, different cytosis, thereby pathways, endocrine pathways that helps of clearing the inflammation.
In other words, that we bring the inflammatory response back to a normal homeostasis, or at least in that direction, without inducing immunosuppression. The really big difference between what we are doing and what most other compounds addressing autoimmune and inflammatory diseases, is that we promote resolution, whereas most other compounds induce anti-inflammatory and, in some cases, immunosuppressive effect. The compound 1189 is a small molecule. We give it as a tablet once daily, with a very attractive plasma profile that gives early onset of action. We are currently, as Thorbjørn has alluded, we are testing in two clinical trials in rheumatoid arthritis. The EXPAND study, which is a continuation of the BEGIN study, where we have completed dosing, and we will come with data next month, in September.
High-level data on, on both safety and efficacy of the compound, where we have given once daily for 12 weeks in previous or in treatment-naïve patients, where we combined it with the treatment with methotrexate. The other study we have up running here is the RESOLVE Part 1 study. This study here, where we have a full protocol, with Part A, that is a study that we are currently running, where we complete dosing here in August, and we'll report in October. Then we have the opportunity then to continue into a Part B of that study. It's fully approved both in the U.S. and countries in Europe, where the study is currently running, with up to 300 patients with three doses of active versus placebo.
That is to be considered a full phase II-B study. We have our nephrology program, which haven't had the same focus within our compound lately. We are currently looking into how we can increase recruitment rate. It is a relatively rare disease, idiopathic membranous nephropathy, and we are working with very dedicated investigators here in the Nordic countries. It's simply so that right now, here during the spring, the number of eligible patients, in other words, newly diagnosed patients with crescentic glomerulonephritis that has been identified by the sites, has been very, very low. We are working on how we can update that, but what we wrote today in the quarterly report, is that we will not be able to report the study in here prior to Christmas.
h, the virus-induced program, where we, during the COVID pandemic, initiated a collaboration with the, with resolution pharmacologist, most pronounced Mauro Perretti, professor at William Harvey Research Institute in London, and Professor Mauro Teixeira, professor in Belo Horizonte, where we conducted our Retrovir study, where we gave the compounds to patients who were referred to hospital for need of oxygen therapy due to hypoxia due to relatively severe COVID-19. It showed up to be effective as it reduced time to recovery, and we are continuing that collaboration with the two gentlemen, where we are currently looking at the potential to modulate inflammatory or the virus-induced hyperinflammation in other inflammatory diseases.
We will come back and report on, on that later during the year. Right now, it's a clear pharmacology program. In January, we acquired, or rather, in December, January, we acquired a TXP Pharma, and we do currently running a pharmacology program with the lead compound, TXP-11, intended for IV infusion in in-hospital settings. We are generating the pharmacological, additional pharmacological studies that is needed to support the clinical trial application. That's questions as identifying minimal effective dose and reasonable dose range to use in ph ase I. Finally, we do still and we do have a small molecule program that we have still very much in discovery phase.
So for the last month, we have been very focused on bringing our rheumatoid arthritis program to in a state so we can report data, and we look very much forward for that. I already here have given highlight on the EXPAND study. It is a regulatory Phase II-B study, where we test the compound versus placebo on top of methotrexate in patients who have referred to hospital with high disease activity. And the aim is, of course, then to not only to confirm what we saw in the BEGIN study, but to see the effects of three months treatment instead of four weeks, and also to generate a more pronounced safety profile.
In the study, where we successfully recruited 127 patients, and we were quite proud that we did it before what we had planned. We are now looking into all the blinded data and prepare them so that we can get the results out and share with you in September. We do have. I would like to highlight that we do have a sub-study in MRI, where we are looking at a two very important readouts: DMARD and RAMRIS. DMARD is, well, you could say, a way to look at inflammation in the synovial, in the joints, and it's an indicator for how you modulate the inflammatory response. Whereas the RAMRIS readout is associated to morphological changes.
As Torbjorn said, early, early changes, early morphological changes is a big issue in, in today's clinic, and it's known that if, that what you see after one to three months with regard to modulating, early destruction of the joints is predicted for, for one year and, and longer prognoses. So that is a very important readout that we have in sub-study, and we will report it, not, together with the key data, that will come in September, but then, relatively fast after. The other study we have, we have up running is the, Part A results study.
It's a four-week study, dose range, where we complete dosing here in September, no, in August, and where we look very, very much forward to see the effect and compare that to what we saw in the BEGIN study. It's, it's known, and, and it, it's well known that, or we know that the response rate after, or the level of response after four weeks, actually, would be as pronounced, as, as we see in the, in the, and we have seen in treatment, at least what we know is that the placebo effect typically are, are slower and also most compounds. But again, four weeks give us opportunity to, to identify relevant doses and to test initial safety.
And as I also highlighted, we will be able to continue into phase, phase into a Part B, and at least from a regulatory point of view, on, on the back, on data. These data is in October, and we look very, very much forward to that. And then just this slide here, because a part of our investigation into the, and talk to rheumatologists, we have identified a number of potential new indications and additional indications. Reactive arthritis is logic. It could be a next indication for the compound. Lupus and lupus nephritis is also high on the list and would also make a lot of sense from a mode of action of the compound.
There's spondylitis also, which you could say is, is, is, is arthritis in the skeleton or in the axial skeleton, would also be a logic way to move forward. We are currently looking into the possibility of how such compounds could be, how such studies could be designed, and importantly also, yeah, further discuss this with potential investigators and partners. That's where we are right now with our rheumatology studies and the other studies and all our activities. With that, I will give over the word to Björn.
Thanks, Thomas. First, note that the references to financial numbers are in million Swedish krona. I will start the financial summary with some key numbers, part of the P&L statement. The first half of 2023 has the largest R&D cost ever, SEK 73 million. I'm quite pleased with that, as it is an evidence that we have progressed our two clinical studies, EXPAND and RESOLVE in line with our plan. That is the main reason that our R&D costs are much higher than the second quarter last year. In D&A, there are some one-off costs, TXP acquisition costs, and also severance pay to the former CEO, increasing the D&A costs versus the second quarter last year.
Looking at the financial position, end of June versus end of 2022, the key changes are the following: Intangible assets amounted to SEK 230 million, related to the TXP acquisition, which was closed beginning the 1st quarter this year. Cash amounted to SEK 44 million end of the 2nd quarter, affected by the 1st half year operating cash flow of SEK 65 million. We will now see a more moderate cash flow the coming quarters in 2023, as the recruitment in both EXPAND and RESOLVE studies were completed in July. Long-term debt is mainly a deferred tax liability related to TXP acquisition and a potential supplementary purchase price, also related to the TXP acquisition. They own a bank loans or similar. Overall, progress as planned. I'm really excited to be part of the exciting plans with SynAct Pharma going forward. Back to you, Torbjörn.
Wonderful. Thank you very much, Björn. Upcoming news flow and closing remarks. Let us look at the upcoming news flow here. In Q3 2023, importantly, of course, there will be a top-line result from EXPAND. We will, we'll communicate the top line. However, in Q4 this year, we'll have more results from EXPAND to communicate. That goes over to Q4 as well. Importantly, in Q4, we will have the top-line result from the part A of RESOLVE. Remember, RESOLVE is really a proof of concept for the DMARD-IR, which is again, as we talked about, a very commercial attractive indication.
So we'll have more, also more results from the Part A of RESOLVE, following the communication of the top-line results. At the same time, and that goes for the whole period here, we also have initiated and are in full execution of more mode of action studies. Thomas talked about the mode of action study in EXPAND, which is important. We also identified the so-called macrophage, macrophage in the inflammation as being a, a, a major target cell. We will hopefully have more to talk about in the coming months in terms of data coming from these experiments, where we work with top scientists around the world.
In the first half of 2024, we'll have initiation of Resolve Part B, following more funding, of course, and then initiation of phase 1 of the TXP-11, which we believe also is important to drive the acquisition of TXP into meaningful and good indications in the clinic. And then, we will probably also have quite a few more pipeline updates. So while we are preparing for Resolve Part B, obviously, we'll also, following good data, of course, be talking to potential partners, and this will be a very exciting process, I believe. So we foresee a very exciting next coming month.
We are so excited to wait for the data, both from EXPAND as well as RESOLVE. We'll have a lot of more information coming from these studies that will hopefully add on very positive to the profile of resomelagon and 1189. Remember, if we can show that this is a general mode of action, and so far, we believe that, then there are so many more opportunities to go for and so much more value to be created. Thomas talked about some of the indications. We have, we have got feedback from the key opinion leaders. However, behind that, there are numerous of good indications.
Remember also that so far we have shown a positive proof of clinical response, both in RA, but importantly also in a very severe acute inflammatory disease like ARDS after COVID-19 infection. We see a lot of good opportunities in one molecule here. And in addition, we are quite proud about the TXP acquisition and the broadening of that pipeline, making us the most advanced company within resolution of inflamation , that we believe is a new theme, and we hope that that will revolutionize the way we treat inflammatory diseases. In the end, I would very much like to thank all of our shareholders.
This is a, this is a teamwork, I would say, both from board management, all our collaborators, and our shareholders. So thank you very much for all your support. This will end the presentation. We go over to the question and answer session now. Thank you.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Sebastian van der Schoot from Van Lanschot Kempen. Please go ahead.
Hi, team. Thank you for taking my questions today. First one, can you maybe go into what you're exactly going to report on in September? Given these are top-line results, are those ACR20, 50, and 70 responses, or can we also expect something on the CDAI? Then, I'm also wondering if you can provide some insight in what you would find to be strong clinical efficacy data. Then my last question is regarding whether the 12-week period for this study and for AP1189 is a long enough period to actually see the immune side effects that you see with injectables and the JAK inhibitors.
Thank you very much, Sebastian. I think Thomas, most of the questions are for you, so please.
Yeah. Okay, question number one, t he September data will focus on the primary readout, the ACR score, where the primary readout is ACR20. Logically, we will also come with ACR50 and ACR70. In addition to that, CDAI. That would be the high-level data that from a risk efficacy point of view. In addition to that, we will, of course, also report safety and to give an interpretation of where we are also high-level demographics. That is what we intend to present as a first-line first-line data on the EXPAND study. You would pretty much say that probably also will be what we present on the RESOLVE Part A. There is the question of. Then you have the question about immune, potentially, immune suppression.
What we know is that most compounds within a 12-week period will, will induce, induce sign of immune suppression, and there are normally, you know, in, in most studies, there is withdrawal or at least reports of, of infections that is, is related to, attributed to, to compounds. So in other words, if we have effects like that, it would probably be also be present within a three-months treatment period. Of course, you would always say we are dosing on top of methotrexate, and methotrexate do induce side effects as well.
But I think it, from a, at least what we can say is that if we do continuously don't see any sign of immunosuppression, I think it's very much in line with what we expect to see with this compound, as it's from a mode of action point, hardly wouldn't suppress, the immune system to a level where it has clinical significance. Then you have third question, and that was?
Yeah, it was on the-
Yeah.
Sorry. It was on the, on the efficacy, what you would, consider to be.
Oh, yeah, that's right.
efficacy compared to other compounds.
Yeah. I mean, very for us, it's very important. That, that, that I mean, the study is designed to show significant difference in ACR20 if the difference is 20% or higher. Meaning that if we, for example, have 40% in placebo group, then we should reach 60 on the active group. 35, 55, and 40, 60, 45, 65, and so on. The question is, of course, the treatment effect of methotrexate in these patient population.
What I forgot to say when I went through the study design is that we have these patients, compared to most other studies that have been reported in, you know, within the last years, the patients are not co-treated, and it's not a possibility to co-treat with two phosphate. We know that in a three-month period from the literature, if you add prednisolone treatment on top of methotrexate, it will reach an ACR20 all the way up to 70%-80%, whereas if you don't have any, you probably end around 30%-40%. Again, let's see where we end. We believe that a 20% increase in ACR score, ACR20, on top of the placebo effect is clinical meaningful, and that's how we have designed the study.
Sebastian, so, so what Thomas is talking about here is, is obviously quite, so efficacy quite similar or quite similar to, to JAK. And, and that is, if, if we can show efficacy similar to JAK±, then, then we believe, it's a home run, to, to, to make that comparison. What we would also like to see, of course, is a, a, a better safety profile compared to the JAK, as, as we did in the BEGIN study. If we can get that profile that we, we lined out in the, in the, presentation today, I think, that will be a commercially very attractive, opportunity that would help a lot of patients.
Yeah, great. Thank you. I'm looking forward to the September readout.
Yeah.
Absolutely.
Thank you, Sebastian.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay. Thank you very much for taking time to listen to us today. We have a very exciting couple of months in front of us, and we are all in the management team and the board looking forward to have interactions with you when we are ready to communicate the next set of data. Thank you so much for today. Goodbye.