Arecor Therapeutics plc (AREC) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Arecor Therapeutic PLC investor presentation. For our recorded presentation [Operator Instructions] Before we begin, I'd like to omit the following poll. I'd now like to hand you over to the management team, Sarah. Good afternoon.

Good afternoon. Thank you. Good afternoon, everybody. It's a pleasure to be here. Thank you for taking the time to join us today. And I've got Sarah Howell CEO of Arecor Therapeutics, and I'm joined by David Ellen, our CFO. And we'll be talking through today our half year results for financial year 2026, the post-period raise. So as you know, but just as a recap for anybody now joining us today, Arecor is the clinical stage by pet company. We're very much focused on developing superior therapeutic that can reduce treatment bird and improve outcomes, the people living with diabetes, obesity and other cardiometabolic diseases. Our focus remains very much on our 2 core product areas within diabetes and the oral delivery of peptides. In both of these areas, we're addressing or looking to address high unmet patient need in large multibillion-dollar market here. So within the diabetes area, we have best-in-class concentrated ultra rapid-acting insulins and I'll talk today a little bit of a recap for those that know you well and for those joining us for the first time today, why we're developing these insulins, what's the unmet patient need. And then currently the commercial opportunity that comes with that. But essentially here, we've designed these insulins to enable that next generation of automated insulin delivery systems. These are longer way, much smaller systems that can be used in a fully automated mode. And again, we'll explain what that means. We have entered into we're pleased to announce with the recent results, hardening discussions with multiple insulin pump companies that are now a term sheet stage, and we can talk about that a little bit more. And we continue to work very positively with SQL Medtech around 82%, that 5x concentrated ultra-rapid-acting insulin towards Phase II and also a very positive negotiations there with those next agreement. Within the obesity space, this is very much around the oral delivery of the GLP-1. And so this is a and GLP-1 receptor agonist here, and we're very much focused again on developing that preclinical base package where we're looking to improve bioavailability GLP-1, which would be highly translatable to other peptide should that be successful. And of course, I'm sure you all would have seen on post period and financing, we've raised GBP 1.3 million gross proceeds under this placing. And essentially, that was around strengthening the balance sheet cash through to the end of 2027 now, and that's strengthening although expanded partnership negotiations with multiple insulin pump companies and also enables us to commit to those key and critical path activities, development activities essentially to generate all data that we require to file an investigational new drug application for our Phase II clinical study. And that into manufacturing that clinical trial material so that we can move at pace into that clinical study alongside our insulin pump partners. So I'm now going to hand over to David just to talk through the half year financials

Thank you, Sarah. First half 2026 key financial session are the key lens of that. So revenue $0.2 million, reflecting both the process on the influence and also sorry. The 2025 sale of the royalty rights to Ligand. So largely that brought in over GBP 5 million of non-diluted funding and then third part this year by September, we bought in GBP 0.7 million of nonvalue funding. If you're wondering that doesn't appear in the income for this year, the GBP 0.7 million was accounted within the gain loss disposal in the prior year. R&D expense has increased from GBP 1.3 million to GBP 1.9 million, reflecting our increased spend on the incident, especially on 82-78. And then the G&A expense decreased from GBP 1.7 million GBP 1.5 million in the half as we look to actively reduce certain corporate costs. The guidance is at the Board expects revenue for full year of GBP 0.3 million and a loss after tax of GBP 5.5 million and also the ending cash at the end of the year will be about GBP 5.7 million. And then as we saw on the previous side, the fund raise license the cash on way December 2027 allows us to strengthen the balance sheet for all the partnering negotiations and then keep us on the critical path broad the Phase II IND-related cynical manufacturing-related activities.

Thank you, David. So I'm going to move into talking around our insulin portfolio, which is a process for the company. So I think as most you're aware with helping portfolio of incidents here and what we've been able to demonstrate is with our technology, where we're taking existing insulin, we developed novel formulations also insulin to enhance that profile. So essentially here, we're looking at accelerating the adoption of incidents is very fast as the insulin, even at very high concentrations here. And we've demonstrated clinically here from concentration from 100 units per ml, which were 247 candidates right through to 500 units per ml, which is 278 that we've been able to clinically demonstrate superior pharmacokinetic and photodynamic profile compared to those very best insulins that are available today from Eli Lilly and Novo Nordisk. So this is essentially we've accelerated that absorption of insulin and we get an improved glucose lowering profile because of that here. And the reason that we're doing this is this very much a need in automated insulin delivery system. So just a quick recap for our patients where a continuous glucose monitor as the glucose at any point in time. This is said to an algorithm, which calculates based on that meeting, and insulin is needed to keep that individual inside their target for the glucose range which is automatically delivered by a pump. These are very much becoming standard of care now. These AID systems, in fact, both of the U.S., the ABA and Europe, the ESC now have updated the guidance actually this year within 2026 to recommend the AID deferred treatment option the people live with diabetes, both Type 1 and insulin intensive therapy type 2 diabestics. So there's very much a dry to move people across the AID system. And the reason for that is that we see better outcomes for people living with diabetes festive 1 cost control. They're using an AID system. But of course, there are still some challenges that remain within those systems, and I'll talk about those now and why our insulins a best place and, in fact, the only insulin that can meet those challenges and meet the on that patient needs and help people transition across to these AID systems. So essentially, when we look at insulin, the challenge here is as you concentrate up insulin, it slows down its absorption profile. So slower to absorb into the body and be available for blouse lowering. And we've seen that and we've demonstrated that clinically in head-to-head studies as well. And we've overcome this challenge, and we've overcome that from any concentration from 100 units to now over to 500 units per note. So very much looking at our insulin portfolio here as a platform approach. We bracketed these concentrations. So essentially, we can demonstrate this superiority of any concentration units are now and 500 units per now. And you would have noted certainly within our results within the presentation today. We've incorporated AT 290 into our portfolio and into our product pipeline here, which is a 2x concentrated insulin essentially 2x the concentration of 24/7, and we can talk about that a little bit more so we talked about the fact that AID systems are better for patients. They receive better outcomes, but we still see relatively low adoption here in the U.S. where the adoption is great. There's still only around 40% of people with type 1 diabetes and only 5% of people type 2 diabetes are using these AID system and the simple fact here is why more people not using these AID systems is that there's still too much work to use. There's too much in pace that's required in decisions that are needed to be made of those patients and by the patients and too much interaction with the AID system. What patients are looking for is they want pumps that they can work longer this may sound relatively straightforward here, but this is around when you are using these pumps and applying these pumps. The standard of care at the moment is that they went for 3 days. That means at the end of 3 days, you have to refill your incident cartridge, the renewing come right there and disclosing those, if that's base pump refilling another pump with insulin applying that aging infusion site. And this is something that has to be done every 3 days. If you can extern that for 7 days or longer, that obviously reduces the amount of time that the patient has to go through these processes and steps and this is alongside everything else that they need to do to manage disease. And they also want these pumps to be smaller. They're a very visible indicator that you're living with a chronic disease and you're wearing them on your skin. The move is very much towards wearable patch pump here, that's where the -- what the patients are looking for, it's where the industry is going and everybody wants these to be as small as possible. So if you want to work hamper longer and you want them to be very small, it means that you have to get more insulin on board in a smaller capacity. So you need concentrated insulin. And then we come to the speed. We know that if you don't do anything special here, which is what Arecor has done as you concentrate up that insulin, you're going to lose the speed and you're going to compromise it on it a [indiscernible] profile and again, that's what we've overcome here. And because we have the fastest insulin in development even at those high concentrations, it means that we can help at a very best out of the insulin and the tune to these algorithms that we can respond more rapidly in real time to the fluctuations in blood code. And why is this so significant again, if we think about burden for patients is here the wearing these systems today, they're in what's called hybrid closed loop mode. This means that meal times where we see the swift rise in glucose the individual needs to count the carbohydrates and estimate the carbohydrates. Nobody does that accurately is quite impossible. They then need to tell the system that they're going to the meal and how many cars they're going to have with that meal. And this is all down from the speed of insulin because insulin today is just simply not fast enough to react in real time the swift rises in [indiscernible] so if you have a much faster acting insulin, this gives us the potential to stop having to count cars but having to tell the system that you're eating a meal. And this is ultimately the holy grail for people living with Diabetes an ID system is to move across what we call a fully closed net system to fully automated and no input and interactions required around those very important yield time. So a combination of a foreclosed system plus longer wear and much smaller pump significantly lower the burden for patients, and we can do this whilst maintaining and improving outcomes because of the speed of our insulin. So if we look across what is available today, there are no concentrated rapid or ultra rapid-acting insulin available for use in AID system the incidents that are approved today for use in these systems are 100 units amount. So that's the standard concentration of insulin. So with those, obviously, you can't enable that longer wear smaller pump and also we have the superiority around speed. The alcohol platform is very much focused on that next generation of insulins that are more concentrated in assets and we have both AP 290. So that's a 2x concentrated insulin. That enables us to unlock the standard of tariff 3 day were for people with type 2 diabetes. The average person type diabetes in the U.S. requires around 100 units of insulin a day and the very largest pump with the largest insulin cartridge can only hold 300 units of a standard 100 units concentration incident to essentially means that majority of the type patient population are makes even for 3 days were and have a mind to and extend it are. And then it also extends out the addressable patient population you can achieve Southern Baywest taking more of those type 1, divest 6 to 7 days were and, of course, enables us that leap into fully closed loop AID systems. And then if we look at AP 278, what that brings to the table here is not only does it further expand the addressable patient population that can get to 7-day [indiscernible] it also enables that future miniaturization of these insulin as [indiscernible] which is very much where the insulin pump companies are innovating. And looking at bringing the next-generation incident markets but they simply want feasible and be practicable for use without a highly concentrated insulin and just to show that in some numbers, I know you've seen these heat maps before, but I think it's a useful way of demonstrating this. If we look again is U.S.-based data, so this is using the very largest insulin pump cartridge in the AID system today, this 3 mill cartridge, you can see here the type 2 diabetics with standard insulin 100 units per mil that are available commercially to then stay in approved for use. Nearly 50% of type 2 can't make it a 3-day wear because they're simply not using AID systems and simply not gaining the benefit of improved control that we see with them. And almost all of them can't make it to 7 days wear. And you can see that we can get more and more of that patient population to this 3 and 7 day wear as we go through our U200 and new U500 concentrated insulin. But it's not just a type 2 problem. We see this with type 1 as well. We look at going towards that 7-day wear over the type warm patient population cannot get to 7-day wear. And then if we further miniaturize these pumps make these increments cartridges much smaller, of course, is further replaces this issue. I think what you've really seen over the last -- certainly, over the last 18 months, 2 years is a significant shift in innovation from the insulin pump company. So it's the insulin pump companies that are developing all of this technology and hardware, if you like, for AID. So they're all focus really on this opening up the patient population, making their systems lower burden and more accessible for both type 1s, but also increasingly importantly to the type 2 patient population. So they're focused on getting approval for type 2 and indication, and that's across the majority of the commercial pump. We now have type 2s on their label. They're looking at higher insulin capacity longer where 2 of the 5 pumps are approved. The 7-day where the challenge is, of course, getting enough insulin on board to really transition patients across to this improved 7-day wear and they're very much looking at improving their form factors we have on cash pump on the market today from Insulet, they'll be joined by both MiniMed and B2Bionex with their cash pumps in 2027. So we really are entering an era of innovation from the internal pump company, and we can see here there's very much in need for a high concentrated ultra-rapid-acting insulin for them to achieve their ambitions and to deliver this next generation of systems to the patient population. So if you look at that in terms of the size of this patient population and unmet need and what that translates over to in terms of commercial opportunity here. Again, we're looking at the U.S., there's clearly an opportunity and an upside opportunity outside of the U.S. as well. We have around 4 million [indiscernible] in the U.S. that are candidates for an AID system. So as all Type 1 and intensive insulin therapy type 2s as well. And also, we see around 1 million of these are people diabetes that require more than 100 units a day for the plant gets to the 3-day wear time and they're simply not using AID systems. And then of that GBP 4 million, around GBP 1 million are currently in these AID systems today, but they clearly want longer wear, smaller pumps full close loop. Again, they're looking at lowering the burden, but improving their outcomes. And if we take that 2 million patient population, which we see as those who have the highest unmet need for a highly concentrated rapid-acting incidents of ads. And that translates to an insulin revenue opportunity of around $3 billion there. And of course, there's additional upside as we see these insulin pumps further miniaturize and more of this patient population will require a highly concentrated its rapid acting insulin -- you may ask the question, but why would the incident pump companies partner with Arecor, what's motivating them to get the term sheet stage we asked to look to further develop and bring in our core insulin AID system to market. And if we really look at the opportunity within AID, clearly growing. It has continued to grow year-on-year still significantly underpenetrated as we spoke about, around about 4 million addressable patient population in the U.S. using an insulin pump or an AID system today. And in the U.S. alone, if we look now at AID sales, so this is the human consumable sales -- it represents around a $20 billion revenue opportunity for the insulin pump company. So that is all of the 4 million patient population moved over to AID that would be the revenue-generating opportunity. But really to do that, we need to deliver on these 3 pillars longer wear smaller plants and an enabling fully closed lead system, and it's only a highly concentrated in track that to insulin that can deliver this and our core does have the only instance that we're aware of in developments that meet this profile. So that's why there's a good synergy here and a strategic fit, the Arecor and the insulin pump companies. So if you just talk a little bit around the development and regulatory pathway here and I think as everybody knows, we conducted 4 Phase I clinical studies across our platform of insulin. So 2, the [indiscernible] which is our 100 unit per mill insulin and [indiscernible] units per new insulin here and this is covering both type 1 and type 2 patient populations, and we've also got data through delivery through insulin pumps as well. So this gives us confidence that we can demonstrate that superiority against those best incidents available today, we demonstrated superiorities across all of those clinical studies we had significant interactions with the FDA over the course of this year. We've had 2 key meetings. You can see on this slide, this is the Type C and the Type B meetings that we've had with the FDA, and that's really locking down our approach to concentrated in our platform approach, enabling us to leverage data across these different concentrations to follow this abbreviated pathway to market and really gives us significant confidence around our Phase II clinical study design. We've been with that clinical study design and our protocols are very confident that, that's what are the shape of our clinical study and the design of our clinical study moving forward there. And essentially here, we have an approach that we can end Phase II with either our 2x concentrated incident, which is A20 concentrated insulin, which is AP2. And for both of those, we can leverage our phase on clinical day go straight into the Phase II clinical study I'm sure somebody can ask the questions, so I'm going to answer it now. The selection of which incline move forward into that Phase II clinical study will very much depend on the outcome of the partnership negotiations with the insulin companies there and the priorities on concentration across those insulin pump companies because it's really important for our core that not only do we develop and insulin and bring that incident to market, we're really confident about the development pathway and moving forward the data that you need to generate to submit our BLA for marketing authorization. It really involves that the device and the AID system is developed alongside or insulin. So it is available and approved at the same time on market to be able to deliver a concentrated ultra racked [indiscernible] has label approval from Arecor incident at the same time. And that very much drive our decisions there. Now an additional question, I'm sure that somebody may ask here would be what do you need to form a Phase II and a Phase III clinical study of this size and magnitude each concentration. We don't believe so here, again, we've had very positive discussions with the FDA around our platform approach here. So we would expect that to bring a further concentration to a different concentration of patients within that 100 to 500 units to mil will be a small bridging study to this base package that you see here today. So there's a real opportunity to address the near and medium-term patient need, getting patients to 3-day wear, moving Type 2 patients across the AID system and enable that study closed loop and also then in the future to have those incidents available for further miniaturization of AID systems, very much a platform approach here. So if we look at moving forward to the outlook for the company, of course, we have our best-in-class concentrated ultrarapid insulin. I hope as we've been able to talk through today, you can see there's very much a high unmet patient need in multibillion dollar market, and we have the only insulin that can address the challenges and enable that next generation of AID system. It's very clear that that's where the market is going and where industry is going to what the patients are looking for and very much what the insulin pump companies are committed to you here. And as I said, we're in those team very much engaged heavily in those partnering discussions with also insulin pump companies here to bring our core insulin AID product to market a [indiscernible] stage now. So what's coming up. We're looking -- our intention, of course, is to partner with multiple insulin pump companies here to take our insulin forward. That allows us to bring an insulin to market that has a broadest addressable patient population like our incident to be available for use in as many AID systems as possible. And of course, that will allow us to initiate that Phase II clinical study. We'll be very busy doing everything we need to do to be ready for that clinical study and then we'll be able to select which pumps is that we move forward with and also have that way through beyond Phase II and beyond. So we have a laser sharp focus on our diabetes and insulin portfolio. And of course, in addition to that, we have an upside potential from the oral delivery of peptides. If we can be successful there and bring through significant value creation opportunities to Arecor and of course, value to our shareholders. I'd like to thank everybody for listening in today and be very happy to take any questions that anybody has.

[Operator Instructions] Sarah, can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.