Alligator Bioscience AB (publ) (ATORX) Earnings Call Transcript & Summary

Hello, and welcome to the Alligator Biosciences Q3 report 2021. [Operator Instructions] Today, I'm pleased to present Julie Silber, Senior Director of Investor Relations. Please go ahead with your meeting.

Thank you. Hello, and welcome to Alligator Biosciences Third Quarter 2021 Interim Call. This is Julie Silber, Senior Director of Communications and Investor Relations, and I will be introducing today's call. On the call with me today is CEO, Søren Bregenholt; and CFO, Marie Svensson. After a brief company statement by management, we will open up the call for Q&A. Slide 2, please. Before we begin, I would like to share a quick reminder with our listeners that during today's call, management may make forward-looking statements that involve known and unknown risks uncertainties and other important factors beyond the company's control that could cause the company's actual results, performance or achievements to be materially different from that expected results, performance and achievements expressed or implied by such forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements and reported results should not be considered as an indication of future performance. Please note that these forward-looking statements made during this call speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances other to the extent required by law. This call is being webcast and will also be made available through the Investor Relations website. With these formalities out of the way, I would like to turn the call now over to Søren. Søren, you can begin.

Thank you, Julie. Good afternoon, and welcome to Alligator Bioscience Third Quarter Call. I'm Søren Bregenholt, CEO of Alligator Bioscience. So Slide 3, please. Q3 was my first full quarter as CEO of Alligator Bioscience, and I would like to express my gratitude and thanks to not only the Alligator staff, but also our investors and all the other stakeholders for the opportunity to get up to speed and for the continued support during this transitional phase of the company. Alligator has a dedicated, competent and ambitious path that shares the goal with me to make difference for patients suffering from hard to treat cancers. We started off the third quarter, making great guides with the renewed aspiration and strategy to develop our game-changing therapies through Phase II clinical development for proof-of-concept and potentially beyond. We are currently refocusing our company behind our key assets to be sure that we execute on our clinical trials to generate value in these key assets. Alligator has a robust and diversified best-in-class pipeline of second-generation agonistic antibodies that will develop for the treatment of hard-to-treat cancers. And we also have a cutting-edge technology, which is reflected in our third generation platform, the Neo-X-Prime. And we believe this pipeline provides the company with a number of value drivers in the short, mid- and long term. Slide 3 shows the highlights for the quarter, and I will give you in the coming slides in more detail on these Q3 accomplishments. Slide 4, please. As I just said, we remain focused to invest and advance our key assets, mitazalimab and 1017. We continue to believe that we are well positioned for future growth and value creation. Our antibodies address key immune activation pathways and are designed with optimal efficacy safety profiles, key features that make them complementary to existing cancer therapies, and we, therefore, believe that our antibodies have a new position as part of tomorrow's combination therapies, thereby helping patients with hard-to-treat cancers, like, for instance, pancreatic cancer. During the quarter, we announced a key milestone for mitazalimab as we dosed the first patient in OPTIMIZE-1. OPTIMIZE-1 is a Phase II clinical trial, where we evaluate mitazalimab combination with FOLFIRINOX standard of care chemotherapy in first-line metastatic pancreatic cancer. This is definitely a major milestone for Alligator to take mitazalimab, our CD4 agonistic antibody into Phase II. OPTIMIZE-1 is an open-label multicenter study that will enroll up to 67 patients at clinical sites in Belgium and France. And the trial reinforces our commitment to developing tumor-directed immuno-oncology [indiscernible] in solid tumors like pancreatic cancer. We expect to read out interim safety data in Q1 2022. And we expect to provide an interim efficacy readout from the trial in Q4 also 2022. Slide 5, please. To give you a brief update on our second asset, 1017, which is a 4-1BB second-generation agonistic antibody. In June, we reported reassuring mechanism of action and safety data from the ongoing Phase I study. We are in the process of -- or we continue to dose escalate in this trial to find optimal Phase II dose, and we expect to report data from the Phase I trial during Q1 2022. Slide 6, please. I would also like you to provide a short update on our candidate block ALG.APV-527 of just 527, which is a bispecific antibody targeting [ dose ] 4-1BB and the tumor [ associated to ] antigen 5T4. This molecule is codeveloped with our partner Aptevo Therapeutics in the U.S. and we are preparing for clinical clients, Phase I and expect to hand in file an IND application with the U.S. FDA during the fourth quarter of 2021. Slide 7, please. During Q3, we announced the conclusion of our collaboration with Scandion Oncology. We reported from the trial positive results of the ability of mitazalimab to enhance chemotherapy treatment even in chemotherapy resistant tumor cell lines data that further supports the effort to assess the efficacy of mitazalimab in combination with chemotherapy like FOLFIRINOX as we are exactly doing in OPTIMIZE-1, the Phase II study that I described previously. In August -- Slide 8, please. In August, we entered into a research and collaboration and licensing agreement with Finnish biopharma company, Orion Corporation, to discover novel bispecific antibodies against undisclosed immuno-oncology targets. The agreement covers in addition to the initial project and options for 2 additional projects and under the agreement Alligator Bioscience will imply our proprietary face display technologies as well as our proprietary RUBY bispecific format. During the initial research period of the collaboration, Alligator will receive upfront payments, research support payments, and additionally, as part of the agreement, Alligator Bioscience is a development approved and sales milestones and royalties. The milestones and fees sum up to a total of EUR 469 million in addition to the royalties. Then before we go into the financials, I'm also proud to report that at the end of September this year, Alligator was awarded the prize for the best [ small corp cap ] annual report by [ FRR ] Nasdaq Stockholm, Sweden's Financial Analytics Association and the Sweden's Communication Association. And this is, of course, a testimony not only to the diligence and professionalism of our financial team the dedication shared by the entire team at Alligator. And with that, I think it's very appropriate that I let Marie review our financial results. Marie, over to you.

Thank you, Søren. Now move to Slide 9. I will begin with a review of our third quarter 2021 financial results. Net sales for the third quarter amounted to SEK 3.3 million from 0 sales in prior year period. This is a result of the research and license agreement we mentioned already with Orion and BioArctic Operating loss for the quarter resulted in SEK 37.7 million, a slight increase from SEK 30.6 million in prior year period. This is due to a slight increase in personnel costs but mainly to the ongoing clinical trials for mitazalimab in ATOR-1017. Cash flow for the quarter amounted to negative SEK 30.4 million compared to a negative SEK 32.7 million in the prior year period. For the 9 months period, January to September, net sales amounted to SEK 7.4 million, up from SEK 4.4 million. The increase is due to the revenue from the research and license agreements. Operating loss for the 9 months resulted in SEK 104.7 million, slightly down increase from SEK 10.2 million in the prior year period. Operating expenses during the first 9 months consists mainly of external costs related to the ongoing Phase I clinical study with 1017 and starting the clinical Phase II studies with mitazalimab in total around SEK 62 million, Personnel costs for the same period amounted to SEK 42 million. Cash flow for the first 9 months amounted to negative SEK 24 million compared to SEK 42.6 million in the prior year period. This year, the main inflow of cash was coming from the right issue in the beginning of 2021 and in 2020 from divesting of corporate bonds and interest funds. Move on to Slide 10. As previously announced in the second quarter 2020, Alligator took a strategic decision to focus the company's resources on the projects that have the prospect of generating greatest value, our clinical program. The reduction in costs came into full effect in the third quarter 2020, which is reflected in the diagram to the left showing total expenses on a rolling 12-month basis. In the third quarter 2021, the company expenses increased slightly as we now are running 2 clinical programs, mitazalimab in Phase II and ATOR-1017 in Phase I. At the end of September 2021, Alligator cash at hand amounted to SEK 79 million. In order to support the continued development of our key assets, the company is continuously working on opportunities for partnerships out licensing deal equity financing. In beginning of October, the company announced a fully guaranteed right issue to be completed in November 2021, amounting to SEK 257 million before transaction costs. With this rights issue, the company's financial resources are sufficient for the planned activities for the upcoming 12 months. And now I hand over to you -- back to you, Søren.

Thank you, Marie. And if we could have Slide 11, which is a recapitulation of Marie's comment that in the beginning of October, we decided to execute this fully guaranteed rights issue of shares with preferential rights from our existing shareholders of approximately SEK 257 million. And if we then move to the next slide, which must be Slide 12. The intention of the company is to allocate these proceeds, the majority of the proceeds to continue to support our clinical development program of mitazalimab expand and accelerate our program there, our ongoing OPTIMIZE-1 study, but also expand the program to include a second generation [indiscernible] a second indication for mitazalimab [ rechecked from nature ] which is currently being analyzed. In addition, we will allocate the funds to complete the ongoing Phase I study with 1017 and prepare for Phase II. And lastly, we will invest part of the proceeds in advancing other pipeline candidates like our Neo-X-Prime platform and molecules. So before we head into the Q&A, let me just summarize how dedicated we are committed to deliver on our vision of developing meaningful therapies for patients with hard-to-treat cancer. And we do this through a continued focus on our key clinical programs. I'm working with a dedicated team that provides -- to provide benefits for the patients, thereby creating true value for these patients, for the company shareholders, including also our investors. With my first full quarter under the helm of this fantastic company, I continue to look forward to keeping you updated on Alligators developments on the exciting journey ahead of us. On behalf of myself and the Board of Directors, I would like to take this opportunity to extend a sincere thank you to our staff for their achievements. And I also want to thank you the new shareholders for your continued confidence in the company. And with those final words, I will turn the call over to the operator to open it for Q&A.

[Operator Instructions] And our first question comes from the line of [ Richard Ramunas ] from Red Eye.

I had 3 questions, 2 of them financial. So with that, the first question. Do you expect a meaningful revenue going forward? And in connection to that, can you comment on any milestones from Henlius?

Yes. So -- if we expect meaningful income in the company, we certainly do. We think we have 3 major opportunities in the midterm to generate income. Definitely, mitazalimab once we are able to generate meaningful proof-of-concept data on mitazalimab, we believe that, that is a prime candidate for a [ BG ] transaction, whether it will be mid or at the end of Phase II that remains to be seen. We will -- once we have the complete the data from our 1017 Phase I trial in Q1 next year, we will assess our strategic options with that molecule and one of them is definitely to get a partnership with an appropriate pharmaceutical company to develop the molecule and thereby also generate income for the company. And thirdly, we have high hopes in our Neo-X-Prime platform where we have already a partnership with MacroGenics that is validating the platform and opportunity to generate transactions, and we will issue the opportunity there in the near and midterm to get partnerships and related income into the [ computation ] there. On your second question. So Henlius is a -- they entered into Phase II. Under the current agreement, we will receive a part of the milestones that -- milestone payments at the completion of Phase II that the Korean company AbClon will receive. So that is a couple of years out in the future. Okay. Marie, do you have things to add here.

No. I think it's fine.

Then I have some questions on the cost side of things. Do you expect costs to increase now that you will initiate clinical -- more advanced clinical programs? And also how did you calculate how much money to raise now that you raising SEK 257 million, did you have any clinical milestones in mind that it should last till -- sort of speak that you can cover with this morning?

Yes. yes, of course, we would like to have some type of interim readout from mitazalimab Phase II study to -- So that's, of course, our main goal to have sufficient capital to fund the company's activity to that. And yes, there will be an increase as we are enrolling patients in mitazalimab. And depending on how fast we can recruit patients, the cost in general, we say, it cost SEK 1.8 million per patient coming in, in the study. That's normally over a couple of years.

Okay. And then I was curious about the mitazalimab trial. If I understand it correctly, the readout will be an objective response rate in the fourth quarter last year. Do you -- will you continue the trial and watch over the survivor or other [indiscernible] measures and well?

Yes. So the trial will enroll a total of 67 patients. We expect complete enrollment to be our enrollment to be completed during 2023. We will, of course, continue to dose patients that show a response and either have an objective response or stable disease as we should be doing in a Phase II trial. So absolutely yes.

[Operator Instructions] And as we have no more questions registered, I hand back to our speakers.

Yes, then we will thank you for listening, and let's conclude the call. Thank you.

This may conclude our conference. Thank you all for attending. You may now disconnect.