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

[Audio Gap] Second Quarter 2023 Earnings Call. I am Greta Eklund, Investor Relations and Communications Manager, and I will be introducing today's call. With me are CEO, Soren Bregenholt; CFO, Marie Svensson; and CMO, Sumeet Ambarkhane. They will walk you through the latest developments from Q2 2023 and the upcoming news flow. After which, they will be happy to answer any questions you might have. 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 the expected results, performance or 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 than to the extent required by law. This call is being webcast and will be available through the Alligator website. With these formalities out of the way, I would now like to turn the call over to Soren.

Thank you, Greta, and welcome to this Q2 earnings call in Alligator Bioscience. I'm Soren Bregenholt. I'm the CEO of Alligator. And with me today, I have Marie, our CFO; and Sumeet, our Chief Medical Officer. And as you can probably see from the setting, this is a truly virtual call from several locations in Europe. So if we take the next slide, I'd like to begin by highlighting the latest set of outstanding data we released this quarter in which our lead asset, mitazalimab, continue to demonstrate highly encouraging and differentiated efficacy in our OPTIMIZE-1 Phase II study, which is in first-line pancreatic cancer. As you may remember, we reported last January an interim objective response rate of 52% in the first 23 patients treated in the study. We now have an update on this group of patients, as well as a strong interim response rate for the entire patient cohort of the study that is expected to improve further as patients remain on therapy in the months to come towards the final top line readout in the beginning of 2024. The duration of response of treat to the treatment is very promising, and we expect it to translate into progression-free survival and survival benefits as the data matures. We are now looking forward to top line results from the study, with thanks to the dedicated and the hardened work of the Alligator team, I expected significantly earlier than initially anticipated in the beginning of the first quarter of next year, as I already mentioned. I will be going into more details to OPTIMIZE-1 in a moment, but first, I'd like to recap Alligator's proprietary capabilities and our broader strategic overview. Although investor interest has naturally been very focused on the mitazalimab data in pancreatic cancer, our 4 proprietary platforms that have ability to deliver compounds optimized for safety, efficacy and potency are starting to deliver, and I expect it to provide significant optionality going forward. And I remain convinced that mitazalimab is the type -- is only the tip of the Alligator iceberg, if I may. Across our projects and compounds, we have repeatedly shown our ability to identify and develop high-quality therapeutics with optimal stability and excellent manufacturing potential. Our third-generation CD40 agonist, which we call ATOR-4066, has even shown the ability to remodel the tumor microenvironment, while inducing strong antitumor responses in a wide range of tumors in preclinical studies. Our business development efforts are focused on building partnerships around our proprietary technologies and assets. And all of the years, we have established a strategic network of international pharmaceutical companies with common goals and values of bringing innovative, safe and efficacious immunotherapies to patients with hard-to-treat cancers. Under these agreements, Alligator is eligible for development, approval and sales milestone payments, in addition to royalties if the partner continue to develop and commercialize the product candidate. These partnerships provide an external validation of our technology platform. They derisk our development of product candidates through the sharing of knowledge and resources and facilitate rapid preclinical development. They can also provide significant revenue streams for the company with the potential to develop into distinct business ventures of their own. With this strategy, Alligator has the ability to increase the number of indications we target within our pipeline, extend our patient reach as far as possible and secure long-term financial benefits for the company and our shareholders. In the next slide, we can have a look at the highlights from the second quarter of this year, and we'll start with our lead asset, mitazalimab, and the latest positive clinical data from the OPTIMIZE-1 Phase II study in first-line metastatic pancreatic cancer. Firstly, we conducted a second interim analysis on the 23 patients that we included in the January analysis. This initial interim analysis looked at the response rate developed at the first 17 weeks of treatment. The second analysis, though, was conducted with a later follow-up and demonstrated importantly a deepening of tumor responses amongst the patients, with the objective response rate increasing to 57% from the initial 52% reported. It is great to see that the objective response are improving over time like this. And it is a strong indication of the treatment provides durable benefits to the patients and also a validation of the immune stimulatory mechanism of mitazalimab. We also conducted a full interim analysis on the 57 patient cohort in the study, in which 25 patients who responded to the treatment resulted in an interim objective response rate of around 44%. While this figure may be -- or is numerically lower than what we reported for the initial cohort, it's highly encouraging as we believe it will improve further as the time have longer opportunities to stay on treatment towards the top line readout in the beginning of next year, mimicking what we saw with the response rate in the first 23 patient cohort. Recruitment of OPTIMIZE-1 was completed ahead of schedule in April and thereby eliminating operational risk of this important Phase II study and placing us in an excellent position to deliver top line data in early Q1 2024, much earlier than initially anticipated, as I already touched upon. It is clear from these advancements that we are continuing to make excellent progress with the clinical development of mitazalimab and its route to market. In addition, I'm pleased to report that we received Orphan Drug Designation from the U.S. Food and Drug Administration for mitazalimab in pancreatic cancer. This designation confers significant benefits in the form of marketing exclusivity, cost saving once the drug candidate receives approval. The FDA also cleared our Investigational New Drug Application for mitazalimab, which allow us to initiate the clinical evaluation of the drug in a new indication, urothelial carcinoma, the most common malignancy involved in the urinary system. This is a welcome expansion to our mitazalimab clinical program and further demonstrate that CD40 our -- CD40 agonist has potential beyond pancreatic cancer. In another mitazalimab development this quarter, our partner, Amphera and Erasmus Hospital in Rotterdam, successfully dosed the last patient in the REACTIVE-2 study, which is a Phase I study in pancreatic cancer, evaluating mitazalimab in combination with a dendritic cell vaccine called MesoPher, and it's in patient with metastatic pancreatic cancer. The data that mitazalimab is generating is also generates significant traction with the scientific community. We held presentations at this year's ASCO conference in Chicago in June, outlining the comprehensive data from the January OPTIMIZE readout. And ASCO is the leading global scientific conference for cancer therapies and was an excellent opportunity for us to showcase mitazalimab's strong clinical performance to the world's top oncologists. I'm pleased to say that we've been receiving significant interest in mitazalimab, both from the medical community but also, importantly, for potential partners as seen as a combination therapy for pancreatic cancer and beyond. Following up on the partnership front, our research collaboration and license agreement with Orion Corporation is making rapid progress. And I think it's fair to say that both parties are very pleased with the progress. We have generated several attractive options for Orion to select candidates for final development in our first collaboration projects. And Orion has now exercised its development option in that first collaboration, triggering a milestone payment to Alligator. Finally, our Preferential Rights Issue raised SEK 181 million, ensuring that we remain well financed to deliver our OPTIMIZE-1 top line data, while keeping dilution of our current shareholders to a minimum. We greatly value the support of our investors, and we are grateful for the trust you, they continue to place in our company and our drug candidates. As you see, it has been a very busy and productive quarter for Alligator. We expect the remainder of the year to continue this trend and what is proving to be a period of dynamic development for the company. With that, I would now like to hand over to our Chief Medical Officer, Sumeet, for some more details around the OPTIMIZE-1 interim readout and put them into concept with the current standard-of-care in this debilitating disease. Sumeet, over to you.

Thank you, Soren. Next slide, please. So this is a brief introduction to pancreatic cancer, which is the lead indication for mitazalimab clinical development and also the focus of our ongoing OPTIMIZE-1 clinical trial. Pancreatic cancer is a very aggressive disease associated with a lot of burden to the patients. This is typically diagnosed in late 60s or early 70s. Currently, this is the fourth most common cause of cancer-related deaths in both men and women. And it is expected that the cases of this disease will be increasing substantially in the coming years and decades as the life expectancy increases worldwide. Majority of the times, the disease has already progressed and spread to other organs, unfortunately, in the body at the time it gets diagnosed. And this essentially rules out surgical cure for most of the patients. For the minority of the patients who can undergo surgery, because the disease get diagnosed early, they experience, unfortunately, a relapse or eventually a metastatic progression of the disease. So this stage of the disease, which is typically called as the metastatic pancreatic ductal adenocarcinoma, is the case pretty much for every patient who has a diagnosis of pancreatic cancer. Treatment options for patients with metastatic pancreatic cancer are limited essentially to chemotherapy, and the choice of chemotherapy drugs depends on how fit the patient is. For patients who are fit enough for strong and potentially more effective treatment, either a 4-drug regimen called as FOLFIRINOX or a 2-drug regimen called as Gemcitabine combined with paclitaxel is administered to the patient over multiple months. The results of these chemotherapies are quite unsatisfactory, and majority of the patients survive typically only for approximately a year after they get the diagnosis. For patients who are less fit, treatment is often comprising of single-agent Gemcitabine chemotherapy, and survival with that is even shorter to a few months. So this is a disease area where better treatments are needed very urgently, and that is where an immune-stimulating drug like mitazalimab has the potential to improve patient outcomes. Next slide. So as mentioned by Soren, the interim analysis objective response rate for the entire cohort of 57 patients in the OPTIMIZE-1 study is currently at 44%. And on the left-hand side, you can see that from the chart that this response rate compares strongly to the standard-of-care chemotherapy regimens such as Gemcitabine or FOLFIRINOX, which are down at 23% and 32%, respectively. I should also repeat that the 44% response rate that we are seeing in the OPTIMIZE-1 study is actually expected to increase by the time we get the primary analysis or the top line results of the trial. And indeed, the response rate of our initial 23 patient cohort was 52%, as was published in the first analysis earlier in January this year, whereas in the current analysis, it is 57% with an increased treatment and follow-up duration. So these response rates are a strong indication that mitazalimab combined with FOLFIRINOX offer significant clinical benefit for pancreatic cancer patients over the standard-of-care chemotherapy alone. Similarly, in the chart on the right-hand side, we can see that the median duration of response with OPTIMIZE-1 study was 8.7 months, significantly longer than the 5.9-month median duration of response, which is reported for FOLFIRINOX chemotherapy alone. And this is an important finding because this is an indication of the immunostimulatory effect of mitazalimab, which also potentially points towards a benefit in terms of progression-free, as well as overall survival in this patient population. Additionally, I'd like to mention that 19 patients, that is 33% of the overall evaluable patients in the trial, achieved a stable disease to the treatment. And that resulted into a 77% of disease control rate. This, together with mitazalimab's manageable and good tolerability profile, in combination with modified FOLFIRINOX was again confirmed with this additional interim analysis that we recently published. Next slide, please. So following our reporting of the second interim analysis from OPTIMIZE-1 study and also subsequent to our publication of the study data at the ASCO Annual Meeting in Chicago in June, we held a key opinion leader webcast. And this was -- this event featured Professor Zev Wainberg, who's a globally recognized Medical Oncologist heading the division of gastrointestinal malignancies at the University of California in Los Angeles and well known for his expertise in the field of pancreatic cancer. In this webcast, we discussed the current treatment landscape in pancreatic cancer, also the OPTIMIZE-1 Phase II interim data and also how mitazalimab could transform the treatment paradigm and provide a clinically relevant benefit to these patients. This event, although online, was very well attended by a number of our stakeholders and also by potential strategic partners, equity research analysts and also qualifying institutional investors. Dr. Wainberg expressed his excitement about the recent results mitazalimab has achieved in the clinic and the potential this treatment combination is demonstrating in pancreatic cancer, especially when compared to the current therapeutic options and their outcomes, which are essentially unsatisfactory. Of particular interest was the information Dr. Wainberg discussed about the median duration of response of 8.7 months, which he described as impressive. And he also pointed out that better duration of response usually corresponds with a better progression-free survival. And this sort of gives us a hint on the potentially increased survival benefit of mitazalimab. Dr. Wainberg also highlighted the good safety profile demonstrated by mitazalimab, both as a single agent in the previous trials, but also, even more importantly, in combination with the FOLFIRINOX chemotherapy. And this can potentially allow patients, even with higher ECOG performance scores, meaning, so to say, less fit patients who can also be treated with mitazalimab and the modified FOLFIRINOX chemotherapy combination. This webcast finished with a very lively and informative discussion and question-and-answer session. And indeed, this was a very valuable and worthy event that happened recently. Next slide, please. So looking ahead now to the key inflection points from mitazalimab in the coming months. So we are planning to initiate discussions with regulators in the U.S., as well as in Europe in the second half of this year on what the optimal route to development and commercialization, including entry to the market from mitazalimab in pancreatic cancer would be. We are also anticipating to complete our enabling toxicology work as a part of our preparations for the mitazalimab Phase III clinical development preparation in pancreatic cancer. Following on from the Orphan Drug Designation from the U.S. FDA in May, we are also expecting to hear about potentially receiving the same orphan status also from the European regulators. And this would afford a similar financial and regulatory benefits, including market exclusivity. So all in all, this sets up perfectly for the OPTIMIZE-1 Phase II studies, primary or the top line readout, which, as we have mentioned, it is due in early part of the first quarter of next year, 2024, and several months, almost 9 months ahead of schedule. Moving further into the first half of next year, we will also leverage mitazalimab further with the expected start of our second Phase II study in the new indication of urothelial carcinoma. So with that, I'd like to turn it back to Soren.

Thank you, Sumeet. And before we take the next slide, let me just reemphasize that based on these very encouraging interim Phase II data, Alligator is continuing to invest in IND-enabling -- or Phase II enabling toxicology, as Sumeet just said. We are also continuing investing in manufacturing process development, both for Phase III and commercial, as this is believed to -- or not believed. This will minimize the time to be able to initiate a Phase III clinical development and will definitely also prove valuable for a future partner. And talking about partners, we are intensifying our dialogue with interested global pharma and big global biotech who have taken a lot of interest in mitazalimab after these interim Phase II data. And we expect again that a deal will be imminent in the quarters after the top line readout, as just outlined by Sumeet. So if I could have the next slide. Here, you can see an overview of our internal programs. It will give you a good sense of our robust immuno-oncology pipeline that we have built internally and that we continue to develop with substantial clinical and commercial potential. Our antibodies address key immune activation pathways and are designed with features that make them complementary to existing cancer therapies, whether that is chemotherapy as we see with mitazalimab in OPTIMIZE-1, all together with checkpoint inhibitors. And we believe that this puts our antibodies in a unique position as part of tomorrow's combination therapy, allowing them to help patients with hard-to-treat cancers. We see a number of inflection points coming up, which are worth looking out for. We have already mentioned OPTIMIZE-1 top line data early Q1 2024 and OPTIMIZE-2 initiation. And we are also expecting to see the first intermediate data from our Phase I study with 527 codeveloping with Aptevo Therapeutics, and we expect to see those data in the second half of this year. So on the next slide, please. We have an overview over our existing partnerships. And I bring this up because, I think, that's an aspect of Alligator's development that I feel is often overlooked by our investors. And we have built these over the last 5 to 6 years. And they're now starting to delivering value with already 2 assets in the clinic together with Aptevo and our collaboration with AbClon and Henlius. In addition, we have the partnership we have entered into in 2019 and 2021. And as you already heard about the Orion collaboration, these partnerships are moving ahead and are providing our significant optionality in how we develop Alligator in the future. Now with these words, let's turn to our CFO, Marie Svensson, to review our latest financial results for the quarter. Marie?

Thank you, Soren. Next slide. Yes, thank you. I will start with going over the financial figures for the quarter. Net sales for the second quarter '23 amounted to SEK 17.4 million, up from SEK 5.2 million in the prior year period. Operating loss for the quarter resulted in SEK 63.7 million, an increase from SEK 45.9 million in the prior year. And cash flow for the quarter amounted to SEK 115.6 million compared to negative SEK 41.7 million in the prior year period. For the 6-month period, January to June, net sales amounted to SEK 27 million, up from SEK 10.5 million in the prior year. Operating loss for the half year period resulted in SEK 125.9 million, an increase from SEK 88.9 million in the prior year period. Cash flow for the half year period was positive SEK 63.4 million compared to negative SEK 85.5 million for the same period last year. Revenue in the quarterly and half year periods for '23 was a result of the research and license agreement with Orion, mentioned earlier, where a second program started earlier this year. So now 2 programs are running in parallel. In addition, Orion exercised a development option in the first program, which generated a milestone payment in Q2. Operating expenses for both periods was mainly connected to costs for the ongoing clinical trials for mitazalimab and 527, as well as Phase III enabling activities for mitazalimab. In the figure down to the left, you can see how expenses are distributed between our projects in Q2. And not surprisingly, 50% of our resources has been focused on the mitazalimab project. An important point I would like to bring to your attention is the focus on financial resources behind our R&D efforts. While Alligator dedicated around 70% of the operational expenses to R&D in 2020 and '21, this level was significantly increased in '22, reaching 81%. And our efforts have continued, leading us to dedicate 86% in Q2. Next slide, please. If we look at Alligator's operating cost on a rolling 12 months basis, we note an increase due to the expansion of our clinical trial activities and the increasing number of patients being enrolled and staying on in the trials, as well as the Phase III enabling activities Soren mentioned before. At end of June '23, Alligator's cash at hand amounted at SEK 160.6 million. Our Preferential Right Issue in the quarter secured SEK 181 million before transaction costs. In order to support the continued development of our key assets, the company is continuously working on opportunities for partnership, out-licensing deals and equity financing. This includes both business development for new partnering agreements with an upfront payment upon signing, as well as other financing options. And with that, I will turn the call back to Soren.

Thank you, Marie. That was crisp and clear. Can I have the next and final slide, which is an overview over the significant news flow from Alligator over the next 12 months. As you can see here, and already discussed in the webcast here, we expect to hear back from the European authorities about Orphan Drug Designation during Q3 this year. We will continue our discussion with the U.S. and European regulators on the best development path for mitazalimab in pancreatic cancer during the late Q3 and Q4 of this year. And that will lead to a readout of the Phase II top line data in pancreatic cancer early Q1 2024. With respect to our collaboration on 527, which is currently in Phase I, as already mentioned, we expect to be able to share the first preliminary data from that study in the second half of the year, probably most likely in Q4. So with that, we will now continue with the Q&A. And you will be able to post your questions directly in the chat.

And we have a number of questions coming in directly here. These are a number of questions from Richard Ramanius from Redeye. And I think, we'll have the first one going to you, Sumeet. How is the recruitment in the 527 Phase I study progressing?

Yes. So the program has started, and the recruitment is taking place as we are, yes, continuing to monitor it. And we expect that it will continue as -- I mean, this is a Phase I, first-in-human trial. And it follows a dose-escalation scheme and exactly. So the recruitment will continue as per plan, and this is currently the case.

Thank you, Sumeet. And let's then move on to a number of questions here. There is a number of questions coming in around the same topic here that I'll also address to you. This is from [ Patrick Boyle ]. Why do you see a lower objective response rate in the full cohort versus what you reported in the smaller cohort? All 23 patients in the interim had crossed the 17-week period, which is 4 months. Was that the case with a full patient population?

Yes. In fact, yes, the second part of the question is probably the answer to the first part. Exactly. So a lot of patients in this full analysis that we reported as an interim update recently have been in the treatment for a relatively short period of time. And that means that they have not had sufficient length of exposure to the treatment while they are ongoing with the treatment. But they need to have a couple of scans. And in the previously published analysis, majority of the patients had crossed the 17-week period, which was not the case in this analysis. A lot of them were ongoing, but have not crossed this particular sort of time point, where they had a couple of scans. And that's pretty much the reason why we see a slightly lower response rate in terms of percentages. But we anticipate it to go up clearly in the coming -- I mean, as they continue the treatment and follow-up.

Thank you. And I think just to reemphasize that point, we have a question from another investor here to say, do you think the trend of deepening the response -- deepening of responses will continued, therapy will also be seen as the treatment continues, and you continue with a longer follow-up in OPTIMIZE-1.

Yes. And this is quite a remarkable finding because late onset of response and its deepening over a continued long treatment is sort of unusual in the context of pure chemotherapy-based treatments, whereas this is also a classical effect that can be attributed to immunotherapies such as mitazalimab. And that has been the case as we reported that from the 23 patients, which were included in our first analysis, several of them had a deepening of their response and with the continued and long ongoing treatment. So the longest ongoing treatment has been 17 months. And I think we expect the trend to also come up and even be confirmed with our upcoming top line results.