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

Welcome to Alligator Biosciences interim report call for the Second Quarter of 2026. My name is Greta Hoog. I am the IR and Communications Manager at Alligator and I will be introducing today's call. With me today is our CEO, Soren Bregenholt, and our CFO, Johan Gileus. They will walk you through the latest developments at the company, after which they will be happy to answer any questions you may have. You may either submit these questions in the Q&A function of this chat or you may e-mail them to IR at alligatorbioscience.com. As you know, Alligator Bioscience as a publicly listed company. And I would like to note that today's presentation may include forward-looking statements. Please refer to the disclaimer on this side and to the next slide for the whole presentation. And with this, I would like to turn the call over to you, Soren.

Thank you, Greta. And once again, welcome to this alligator earnings call, Q2 2026. We have some WiFi issues here at Medici Land. So I will already now apologize if the line is unstable or there any other sort of technological fallout during today's meeting. With that out of the way, let's go to the next slide, Greta. So a couple of key updates from the company -- in April, we saw data from investigate initiated study presented at the Congress of American Association of Clinical Cancer Research. And at that meeting, also our the molecule called HLX 22, which is developed by Helius and derived from -- partly derived from HLX 22. We'll talk more about later today. Data on that was also presented. Then in May, HLX or Helius reported that 2 had announced follow-up data beyond the 39 months in gastric cancer. -- something that decade also reported. And later in June, the company also reported that all patients or the first patients had been dosed in all of the Phase III regions on the ongoing study with HLX 22 in gastric and gastrointestinal junction cancer, 2 important milestones for HLX 22. Why is that important? Another significant event reported from Medicaid after the quarter. In July, we reported that we will refocus on our financial interest in HLX22 and that we will discontinue independent development tab and that the remaining operations of the company will be wound down and of course, spend some time on that in today's call with the aim of giving the explanation why we have taken this decision and also convey to you the financial upside of the potential financial upside of our interest in HLX 22. Also in July, we announced the rights issue of units to approximately SEK 225 million with a bridge loan of SEK 19 million to secure the continued operation of the company. And I can tell you, as you probably saw earlier today, that today's extraordinary general meeting approved that rights issue and at the same time, also approved a share capital reduction. So if we take the next slide, we will spend some time on discussing the the pivot in strategy at Alligator and of course, also answer any questions that you may have towards the end of the call. As you are well aware, we have developed mitosalumab in first-line metastatic pancreatic cancer, a disease that currently is being treated with chemotherapies in first line. The development rationale for mituselumab and OPTIMISE 1 study that we have been reporting data on and discussed here several times was to combine mitazalimab with chemotherapy in first line. And as you all know, we have shown some pretty encouraging data in that setting. Now in parallel with Elgato developing mitazalimab, a number of companies have been developing new to class of small molecules or orally available molecules, tablet-based molecules targeting a mutation in pancreatic cancer called KRAS. Is approximately 90% of the patients with KRAS that has this mutation to drive the -- to drive their disease. We have known that these drugs would come. We have known that they had some level of efficacy in second line. We've also seen a glimpse of of data in first line during the year. And the hypothesis has been that even though that these drugs are being developed, there would still be a clinical rationale for a combination of mitazalimab and chemotherapy. If we change to the next slide, I think what has happened -- next slide, please, gate. What has happened actually since the beginning of June and until now is that we have seen the latest data from these molecules, they have been taking the clinical community in this indication by surprise how efficacious they are and how many patients they actually provide benefits for. If we just focus on the left-hand side of the slide here. First, we saw the paradigm-changing Phase III data from the molecule called Darexonocy from revolution medicine. We saw them presented at ASCO in the beginning of June in patients in second line, extending their life more than double than what had been seen with chemo alone here for setting a new regime for KRAS inhibitors in second line. Significant medical achievement and significantly good news for patients suffering from pancreatic cancer. What we have then seen since then, the latest at ESMO GI, so another medical conference in Munich, early July was then another set of data from this molecule now in first line. Again, blowing chemotherapy almost out of the water. And at the same conference, we also saw data from a more specific molecule from Revolution medicine called -- so combined with Folfirinox in first line, and these data showed that these patients almost 100% of the patients were actually benefiting clinically from this. So what this means for Alligator, what it means for patients with pancreatic cancer is that this new class of drug will provide a paradigm change in the standard of care both in first line, but initially in second line, we expect Derexonocy to be approved already this year in the U.S. at least. And then in 3 to 4 years, probably a similar change in first line, either to revolution mentions drugs or via those blocks of the year, some of the other players that are now and starting Phase III studies in first line with KRAS inhibitors. So a significant change expected in the standard of care in the treatment of metastatic pancreatic cancer, both in first and second line. That, of course, have a number of implications for a company like Alligator or anybody else developing drugs in the indication. First of all, the industry itself refocuses towards this new drug class. And those companies that are partnering in the disease, their focus is, of course, also changing towards agents that either KRAS inhibitors are complementary to KRAS inhibitors and away from drugs that primarily have data in the chemo setting. If we then talk specifically what this means for Alligator, it's very clear from our dialogues with our key opinion leaders, so leading physicians, treating conditions with with metastatic pancreatic cancer, both in Europe, in U.S. and also in Asia, there is a clear indication or a clear conclusion that standard of care also in first line will change away from the current chemotherapy backbone towards a KRAS inhibitor-based backbone. So of course, a significant change there. That also means that the commercial rationale for developing mitazalimab in combination with Folfirinox as we were preparing to start a Phase III for that commercial rationale do no longer exist. Hence, the rationale for the registrational study in this population is no longer relevant. We don't want to spend with -- it's not prudent or rational to spend money on developing a drug in a population that will not exist once the drug is ready to get approved. So here, the prudent business decision is, of course, to discontinue registrational development for mitazalimab in combination with chemo. We still believe that a combination of mitocolumab and a KRAS inhibitor, remains both scientifically and also most likely clinically relevant, we believe that some of the longer-term effects we see with mitazalimab will be highly relevant in combination with the KRAS inhibitor. We're now in combination with chemotherapy alone. The fact is that the next step in that development will be potentially a Phase I study followed by a randomized Phase IIb study, i.e., a clinical undertaking on par with what we have done with mitazalimab and OPTIMIZE and unfortunately, with our available cash with our current market cap. We do not see this as a and undertaking that educator can do without a partner. And as we do not have a partner, and I do believe that it will take some time before the industry has refocused itself toward combination strategies with KRAS inhibitors we took the decision to discontinue all further independent development of mitazalimab i.e., discontinue the preparation for the Phase III study. We had a number of IITs investigator-initiated trials. So remember these trials that bear no cost for Alligator. We have a couple of those ongoing close randomized Phase II study in the planning. We are reviewing those opportunities and the cost benefit of these programs, but our primary focus, as you can see in the next bullet point here is to preserve the royalty potential of HLX 22 within the company and only invest in these -- all those 3 opportunities, if we have secured a financial cushion, allowing us to do that. So we will start winding down remaining operations. We will reduce the organization and -- and the cost base, we have started that already, and we'll continue working that in the coming period. And then we will, of course, continue to seek to divest mitazalimab as a broader immuno-oncology asset within the coming months and -- and the press release of a couple of weeks ago have already created some incoming interest from companies seeking assets outside of metastatic pancreatic cancer. And that is, of course, discussions that we will engage in as we go along. So external factors has eroded the commercial rationale for continuing to develop mitazalimab in combination with Ontario -- we have decided that we are not able financially to pursue what needs to be done for develop mitazalimab in combination with the RAS inhibitor. Therefore, we have continued all further independent development. We are reviewing ongoing IITs, refocusing on preserving the royalty potential of HLX22 in the company and then wind down remaining operations and organizations to reduce the cost base in the company. Can I have the next slide, please? So just to reiterate these points. The principal value driver in Alligator now is our financial interest in HLX22, and we'll talk more about what that entails in just a second. It's a molecule that is being developed, owned and funded controlled by Shanghai Biotech. Alligator has a royalty stake in the molecule that when you do all the -- on the calculation sums up to 1.75% of the net sales of HLX22 -- and that is without any development costs or other cost to Alligator. We are reducing the cost base. I already told you that we are discontinuing in independent development with mitazalimab, including the Phase III preparation we are starting to reduce the organization to the minimum that is required to oversee the HLX22 program and abide to the legal obligations we have as a listed company. And then we are, of course, immediately starting to -- have started to review the cost base to save as much cost as possible as soon as possible. We have a number of other assets, Mitazalimab, 466, a bispecific antibody. We have a 527 codevelopment with a Seattle-based -- at TiVo. We will, of course, review the strategic opportunities of those assets and are pursuing our opportunity to divest these as soon as possible to further minimize any cost, even though the costs associated with these assets is minimal, so more to secure any potential long-term upside for Alligator and its investors. Next slide, please. So if we look at HLX22, again, just to reemphasize the point that this is now the main value driver of Alligator and sort of the main part of the investment hypothesis. In Alligator, it's a novel HER2 specific monoclonal antibody. It's differentiated from other HER2 antibodies that it increases the so-called internalization of HER2, significantly over what drops are already there and the current treatment regime together with trastuzumab and chemotherapy is being first and foremost, explored in gastric cancer, and I'll come back to that. The molecule originates from a discovery collaboration between educators subsidiary at the therapeutics and Korean Apron and -- the molecule is now out-licensed to developed and controlled by Chinese tenures. And if you really want to dig into the details, you can see that it actually got an INN name recently, so the molecule is HLX22, but also to yes -- so let's stay with the HLX22. How are Alligators commercial interest in this. We own we are own 35% of Arlon's revenue from Herclues -- and without disclosing the specifics of that deal, that amounts to up to 1.75% royalty on the net sales that is going to be for a need to allocate. We estimate that this will give an amount to a royalty income on an annual basis to Alligator between SEK 150 million and SEK 400 and and SEK 50 million a year between $15 million and $45 million. As I've said before in these meetings, there's a lot of numbers floating around in out there. This is alligator estimate. This is based on our estimates of a drug like HLX22. Other companies might have other estimates. That we are not commenting on. If we take the next slide, when do we see this come in, what time lines do we see for gastric cancer and -- and gastrointestinal esophageogastric junction cancer. First of all, we see that based on available data in public databases and industry standards that we expect the first Phase III data to come out in the second half of next year. It might be earlier. Based on that, we see a launch of the molecule sometimes in 2029, it may be earlier, it may be later. And based on our 2029 launch, we expect to see the first royalty revenue in Alligator in 2030. What we have seen with the molecule or heads you've seen with the molecule and out of the molecule is that -- the Phase II study showed a 80% reduction in the risk of progression of debt versus standard treatment in this gastric cancer indication. That data was and now announced at ASCO last year. And as I said, in May this year, reported follow-on data beyond 39 months of that study, indicating continued extension of the progression-free survival of these patients. So we really expect this drop to be potentially practice-changing in this indication. Moreover, developing the drug in HER2 positive breast cancer in 2 Phase II/III studies, 1 in recurrent and on breast cancer and 1 in so-called neoadjuvant in the new adjuvant setting is also expected to start shortly. So long progressed Phase III study in gastric cancer and gastrointestinal junction cancer and breast cancer coming up as a second indication. So if we take the next slide, Greta. Yes, I think for now, we will hold here and hand it over to your Johan.

Thank you, Soren. A couple of slides regarding the financials for the -- we have general operating expenses, as expected, and they are also then mainly around the the operations that we have in the land office, but we also have had some content for the CMC costs and clinical costs for the now discontinued Phase IIIs started during the first and now in particular, the second quarter then that we now have discontinued them. What we've also done, you need to know is that we have not made any provisions for the cost that will come as part of the wind down of mitazaimab, et cetera, then that will be made in the Q3 or maybe Q4, depending on the different requirements and the cash flow for those provisions will then be primarily during Q3 and Q4 20266, but can also then flow over to 27%. So let's move over to the next slide, Greta. And as we then have expected, we did quite a lot of wind downs when we did the the restructuring '24 would have an impact on '25 numbers. And we would then expect that we will come into general operating expenses between SEK 15 million and SEK 20 million. I guess we're now trending below that estimate. But on top of that, of course, you need to add the CMC in clinical costs for the Phase III preparation that I just mentioned. At end of June, we had $16.60 million in cash and then we raised the bridge financing here in July then to be able to cover costs and other things for the quarter that we're currently in and that will be part of the repayment issue will be the repayment of the bridge loan then. So with that in mind, let us move over to the rights issue that will come here in shortly. Next slide, please. So a couple of key aspects then. We have announced the terms. The terms will be that you will have 5 unit rights for each share that you own. And you need 1 unit right then to describe for 1 unit and 1 unit will then include 2 ordinary shares and in warrant of the Series another 15 for Series T 16 and both of them are given to you by free of charge then. So the price for the subscription of the unit will be per unit but which correspond to 2 per ordinary share. And if everyone all of the units are subscribed. There will be 3 billion more units and into the company than equivalent to 6 million shares. And some of the key dates then that you need to be aware of, we will find the prospectus next Monday and the record date for owning the shares in the second of September next week. And then there is a subscription period that goes from the fourth to the 18th of September. Please be aware that some of the banks have shorter deadlines than the 18th of September. So you might need to subscribe prior to the 18th of September. You can then either buy or sell your unit rights during the period 4th of September to the 15th of September. And a little bit less than a week after that, we will have the announcement of the outcome of the rights issue on second of September is tentative date. And the use of proceeds will be like following then. We will, as I mentioned, they repay the loans. We will then preserve the future royalty potential of HLX22, as mentioned by Soren, and we will have a very lean organization once the wind down is completed, there will be a very, very lean organization to maintain the obligations as a listed company primarily. And of course, there are costs that are associated with the wind down primarily than when it comes to CMC and clinical cost, but and also then the organization in general, the people that want need to lead the company, but also the other costs that we have obligations to settle them. And with a fully subscribed rights issue, we believe that we can have the money until the commercialization of the HLX22, as mentioned by Soren just recently. But of course, the runway will be dependent on the outcome of the rights issue. And we will, in the meantime, in the short-term perspective, we'll look through some of the short-term strategic opportunities for mitazalimab, but we're not prepared to do any major investments to see if we actually then do this. It has to be at a very low cost and for as it's important to preserve the cash for HLX22. So with that in mind, Soren I will hand over to you again.

Thank you, Johan. Maybe there is 1 more slide. Yes. So just to summarize what we have what we have talked about today that HLX22 is now considered the primary value driver for Alligator again, it's a drug that we have a participating interest in, we do not control or develop or fund any activities. And we are only privy to otherwise public information on the block. I think that's important to note. And everything we put out here in terms of numbers, whether it's money or whether it's time lines, our best estimate based on available information and general industry practices and standards. But global Phase III study in first-line HER2-positive gastric cancers. All patients have been dosed in all participating regions. We expect top line data or estimated top line data to be available in the second half of next year. the accumulated financial interest of alligator in the asset is up to 1.75% of the net sales. And we believe that, that would amount to somewhere between SEK 150 million and SEK 450 million per year into Alligator. We have announced and today got a proven a rights issue of up to SEK 125 million. And as Johan said, fully subscribe that rights issue will take us all the way to the launch of HLX22 and to -- also to ensure that we are reviewing and reducing the cost base to a minimum, allowing us to monitor HLX22 program. And of course, abide to all our legal obligation as a public listed company. Metazalimab here says that it's offered for out-licensing or divestment. I don't know if that's the right wording, but that's definitely something we are working structured on. We have other assets and technologies that we will retain for the time being and otherwise find strategic opportunities for these molecules. And we will continue to evaluate the ongoing investor initiated studies. I think the fair thing to say here is that there is both a financial component of that assessment, there is an ethical assessment of keeping people on drugs that they receive, but also not introducing new patients to drug that may not be developed. And there's, of course, also a general clinical interest and rationale that needs to be reviewed when we are looking at that. But that's all things and processes that are underway. And again, we believe that -- the rights issue that it has been announced today that if we look at the price, the pricing of that rights issue versus the potential financial upside in the HLX22 program is very interesting financial opportunity. With that, I will turn to today's questions. As Greta said, you can either write them directly to our IR mail, and I know there's a few there already or you can write them in the chat right here.