Welcome to the SynAct Pharma Q3 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. Now, I will hand the conference over to the speakers, CEO Torbjørn Bjerke, and CFO, Björn Westberg. Please go ahead.
Thank you very much. And, everybody, welcome to SynAct Pharma's Q3 report webcast. With me today, I have Thomas Jonassen, the Chief Scientific Officer and founder of the company, and Björn Westberg, the CFO. Next slide here is forward-looking statements. We need to have that in any of our presentation, as you all know. So, if we look at the SynAct Pharma Q3 report, in the third quarter, we had headwinds, and we realized also that it is indeed challenging to change the life of patients in big need. So although we did not achieve the primary endpoint in the EXPAND study, we know that data from EXPAND supports the compound, supports resomelagon, the efficacy and activity in patients with evidence of systemic inflammation.
Here we saw, and Thomas Jonassen will get more into the details here, but here we saw consistent effects seen across all outcome measures. So the data indicated that in patients with elevated CRP, resomelagon-treated patient had both biggest improvements in the HAQ Disability Index, the so-called HAQ score, which is quite important for these patients. So indicating increased hand strength and dexterity. So this is an important endpoint of that. In addition to that MRI data, the sub-study we did in EXPAND, wrist and hand joints indicate a reduction in inflammation intensity as compared to placebo. And that was indeed supported by matched reduction in tender and swollen counts. This is also important because this tells us something about the mode of action of resomelagon. And thirdly, a significant decrease in plasma levels of C4M in the resomelagon group.
That is a biomarker of synovial collagen IV degradation. As we all know, being a RA patient, you have. Then you do have degradation in your joints, and indeed, collagen is important support of the joints. So this indicating a high reduction in synovial inflammation. So all of these indicates that we do have an active drug in these patients, in this patient group, in this study. And thirdly, we secured SEK 60.5 million in financing, in addition to potential warrants worth about SEK 59.9 million from Heights. We are very happy that Heights come in as a big shareholder in the company. And with those money funding, we will be able to continue the development of the pipeline, which is extremely important in our situation.
As you all know, there's this quite challenging environment out there for biotech, so we are very happy with the Heights deal. Björn will get more into the details on the Heights deal when he speaks in the end of this presentation. So with that, I want to hand over the slide deck and the presentation to Thomas Jonassen, that will talk more about the results we got. Please, Thomas.
Well, thank you very much. This slide here shows what Torbjørn just has alluded to, the effect of the compound and in the EXPAND study. Very briefly, the EXPAND study was a continuation of our BEGIN study, where we test the compound, given once daily as a tablet in treatment-naïve patients with high disease activity. Treatment-naïve patients defined as patients who have much high disease activity and have been referred to hospital with the aim to initiate treatment with methotrexate, which is the primary first-line disease-modifying agent used for initial treatment of more severe rheumatoid arthritis. Our compound was given in combination with methotrexate, meaning that if the patients were eligible for methotrexate treatment, they were offered the possibility to participate in our study.
The study was conducted in sites in Eastern Europe, and the aim was then to look at the compound's ability to reduce disease activity, evaluated through the ACR scoring system, following 12 weeks dosing. We tested one dose, 100 mg, given as a tablet, as I said, once a day. To the left here on the graph, you see the somewhat very, to our great surprise, resomelagon was not able to reduce disease activity compared to placebo treatment.
As you can see here, after 12 weeks, approximately 55% in each group reached this readout of a 20% reduction in the disease activity evaluated through the ACR scoring system, which is a composite of a number of readouts, a total of 7 readouts, including tender and swollen joints and different scoring system both from patient and investigator. And that was, as we said, a very big surprise for us, even though that we had on some of the secondary readout, there was signals of higher response rate, even not reaching statistical significance on compound.
So following these initial reports, we had further evaluated, and we came back during September with a presentation of additional findings, which is, of course, to be considered as post-hoc analysis, as it was not a plan of the original design to look into subgroup of patients. But it's a very informative and also very hypothesis generating, and in our case, supporting for the compound, for the efficacy of the compound. If we look at the patients who had markers for systemic inflammation, and we use here the CRP, and CRP higher than 3 in circulating blood is an indication of, then you are out of normal range, indicating that there is a certain level of systemic inflammation.
Very, if we go back to the BEGIN study, where we had the initial very promising data reported two years ago, more than approximately 80% of the patient had elevated CRP, indicating that a severe activity, not only in the joint, but to spill over to the system. Whereas in this study here, we had 60% in each group, which was somewhat lower than we had expected and might explain, or most likely explain what we saw on the full patient population.
Because if we look at the patients with indications or signs of systemic inflammation spill over from the joints to the systemic, to blood, we see that the ACR scores acted more like what we had expected. We see that 35% had reached that after four weeks, and more than 70% reached that after three months, or 12 weeks dosing, which was in line with what could be expected from the compound and from what we saw on the first, on the BEGIN study. It did not reach statistical significance as it only a soft group of patients.
But what you can see here is very interesting, is that the major or the conclusion you can say here is that the major number of patients with where the compound is active is in those patients with elevated CRP, compared to the placebo, where it was equally effective in patient with CRP normal level as well as increased. So this tells us that the compound is active in patient with systemic inflammation, which is very much in line with the mode of action of the compound, that is aimed to modulate and resolve ongoing inflammation. If we then go to the next slide, we then as Torbjørn highlighted, especially the HAQ score. The HAQ score is a way of evaluating the patient's daily hand, daily living.
I will show on the next slide. I will show the different categories of evaluation you made on average daily living, including the ability to eat, to handle... Yeah, I show that on the next slide. But importantly, what we saw in the full study was that we had a numerically higher, better improvement, because if you go down in numbers and HAQ scores, it's the same as to say that you have an increase, or you have a reduction in disease activity and thereby an improvement in your daily living. And from a normal point of view, you say that a reduction of 0.2 points is considered as a minimum clinical relevant reduction.
As you can see here, we again, if we go to the right part of the picture to the left, you can see here that in the patients with systemic inflammation at baseline, the improvement in average daily living evaluated group through the HAQ score was much larger, almost 50% higher than what you saw in the placebo group. With, as you can see here to the right, a large majority of patients, as much as 85% of the patients actually reached a minimum clinically relevant effect. That is a very high number also, if you go out and compare to other compounds that recently have been reported in the literature.
So this tell us very much that this is, this is a very, very important finding as it indicates that the compound do following 12 weeks, treatment, have, have, have clinical meaningful effects on the patient's ability to, to, to normal, or daily living. Importantly, what Torbjørn also highlighted is, that, it's not at least associated with, the ability to, to, to handshake and, and, dexterity. Here we have the eight different scoring categories. We have the ability to handle, the eating situation, grips, dressing, grooming, other activities. You have, acumen, the, the, the ability to read, the ability to, to, to walk and, and, and, and arc.
So, and if you look here to the left here, specifically the activities associated with the hand joints seems to be very much improved with treatment with resomelagon. And if you then look at the next study, because we then continue as part of what also was reported a few weeks ago, we did continue in a subset of the patients, we had MR I evaluation prior to treatment and after the four-week treatment. And what we saw here is a way to evaluate the activity in the joints is to look at what we call dMRI ME and dMRI IRE, which is the maximum intensity of the radio contrast you give, as well as the velocity with which this go into the affected joints.
And in both cases, both the maximum intensity and the velocity, the reduction from baseline to 12 week was larger in the resomelagon treated patients compared to the placebo treated. Indicating that this improvements in the hand strength and dexterity was also associated with the beneficial effects on the affected joints in the wrist and hands. And if you then look at the joints here to the right, we did in the relevant joints also see a significantly higher reduction in tender and swollen joints, if you look and focus on the wrist and the hand joints. So this indicates that the compound is active and also in a relevant way.
Indicating that if you go to the right patient population, which is patient with systemic inflammation, associated, indicated, shown by increased circulating CRP, the compound is active and has clinically meaningful effects. If we then go to the next slide, just to highlight again the adverse event profile. We presented this at our webcast, September 4th. Very importantly, the compound is well tolerated, and if you look at the treatment-emergent adverse events, it was equally distributed between placebo treatment and the compound.
We did have a higher number of patients who discontinued due to AE, and that was one patient who had a severe urine retention, that was associated with affection of the kidneys and was considered a serious adverse event. But this reduction or this urine retention was of mechanical nature and absolutely had nothing to do with the compound. We had three patients who were discontinued due to nausea, vomiting or gastrointestinal effect. It was presented early in the treatment period, and was slight, associated with the discontinuation. However, we did also see nausea, vomiting, and abdominal pain in the placebo group. So some of it well known that methotrexate induce these side effects.
But in this case, in this study here, and this dose range, it was associated with pre-discontinuation in placebo group, in the active group. And then the last one that was discontinued was a patient who developed hair loss, which is associated with methotrexate. So it was explained to the patient, the patient was no longer willing to take methotrexate and therefore, we had to be taken out of the study. So basically, the conclusion from the adverse event profile is that the compound is well tolerated in the dose of 100 mg given for 12 months.
So together with this promising data in the high CRP group, we very much believe that we do have a compound that would be able to bring forward in treatment in patients in the right subset of patients. And with this, I will give the word to Björn.
Thank you, Thomas. First, note that the financial numbers are in million Swedish krona, unless otherwise stated. I will start the financial summary with some key numbers, part of the P&L statement. The first 9 months of 2023 has the largest R&D costs ever, SEK 94 million. Some evidence of a high activity level in line with our development plan. The execution of our two key clinical studies, EXPAND and RESOLVE, is the main reason behind this increase. In G&A, there are some one-off costs for the full period, including costs for the former CEO severance pay, and also costs related to the TXP acquisition, beginning of the year. There's an increase in the quarter related to employee costs, including costs for the share option programs. As you book these costs, even if there's no cash out this year.
Looking on the financial position, end of September versus end of 2022, the key changes are: intangible assets amounted to SEK 226 million, mainly due to the TXP acquisition, close beginning this, the first quarter. Cash amounted to SEK 29 million at the end of Q3, affected by the nine months operating cash flow of SEK -80 million. The cash flow was affected by the operating loss, of course, but also positively affected by a decrease in working capital.. We will now see a more moderate cash flow the next few quarters as recruitment in both EXPAND and RESOLVE studies were completed in July, and before we are starting up the next phase in development. Long-term debt is mainly a deferred tax liability related to the TXP acquisition, and the potential supplementary purchase price also relates to the TXP acquisition.
Turning to the bank loans are similar. Overall, progress is in line with our development plan, and we are looking forward to continuing our development plan ahead. Coming to the share warrants deal, as Torbjørn referred to at the beginning of this presentation. We concluded a direct share issue with Heights early in October, generating gross proceeds of SEK 60.5 million, and potentially up to SEK 59.9 million related to the warrants component. The gross proceeds of SEK 60.5 million has been paid, and shares have been issued as well. The warrant part may be exercised up to four occasions until the 13th of October 2025. The price for the first part, where shares are already subscribed, as mentioned, was SEK 16.14 , and the price related to the warrants is set to SEK 17.75, which equals 10% above subscription price.
We're quite happy we could attract Heights as an investor, as the financing market is tough. We plan to use these funds to continue our development of the exciting pipeline we have. Back to you, Torbjørn.
Thank you very much, Björn. So just the conclusion slide here. So, although we have faced some headwinds in Q3, we continue to believe in the prospects of resomelagon. And as Thomas said, in the subpopulation, a very relevant subpopulation of EXPAND with systemic inflammation, we saw really promising results in the post hoc data. In addition to that, we need to remember the BEGIN studies, in addition to the study we did in acute inflammation in COVID-19 induced ARDS. So, we definitely believe that this compound has promise, and at the moment, we are waiting for the results from RESOLVE.
We'll give a more comprehensive picture of where we are and what have we learned during these two studies, and that will pave the way of how to develop the resomelagon going forward. And as Björn said, securing the financing at this point of time was very important for us, and we are indeed happy with that. We also announced today that we'll have a R&D capital market day in Q4, and this will be important so we can discuss the strategies going forward with not only the resomelagon program, but indeed also the rest of the pipeline, where we see exciting opportunities.
So in conclusion, we really appreciate the dedication of our shareholders community, and I will tell you that we remain determined as a management team to deliver on the promise of resomelagon and resolution therapy, which we believe could become quite important in treating inflammatory diseases in the future. So with that, I would like to say thank you and open up for question and answers. 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. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay, thank you so much, and thank you for taking time to listen to us, and we'll be back with more update on resomelagon when we have the result data, and see you then. Thank you so much. Bye.