Circio Holding ASA (CRNA) Earnings Call Transcript & Summary

Welcome to Circio and our first half year report for 2024. My name is Erik Digman Wiklund. I'm the CEO. And together with me today, I also have CFO, Lubor Gaal. During this webcast, we will be providing you with an -- see we just let everyone in, some latecomers. During this webcast, we will be presenting you an update on our circVec, circular RNA technology development. At the beginning, we will talk about our new gene therapy programs. And at the end, Lubor Gaal will run us through the financials. So with that, I move into the presentation. Starting with our circVec development. As a bit of background, circular RNA is a very novel area in therapeutic development. It's really only emerged in the past three years. And in these three years, we've seen a very substantial activity in company formation as well as deals highlighted by this slide here. So far, two big pharmas, Merck and Pfizer have made moves into the circular RNA field. I think over time, we expect more to start entering this space because of the intrinsic advantages of circular RNA. Now one thing to know is that all these companies are doing something very similar. They're in a way, repeating with BioNTech and Moderna has done with linear mRNA that just makes circular mRNA instead and utilize that as the therapeutic. So the RNA is the product itself that is given to patients. And this is the fundamental difference with Circio. We have established our unique circVec expression system. And this is -- this circVec expression system is able to turn the patient's own cells into circular RNA factories. So we start one level higher. We've generated a DNA construct that makes circular RNA, and this happens inside the patient cells and that circular RNA subsequently produces a therapeutic protein. So we do DNA and virus that makes the circular RNA. All these other companies, they make the RNA and that is the therapeutic. And this is a fundamental difference, and it enables us to go into other areas where circular RNA today has not been able to go. So how does this work? This very simple graph highlights the advantage. In the yellow line on the graph, you see normal performance of mRNA. So we give here DNA to a cell and then it expresses a protein from mRNA, you can see the mRNA in the yellow line peaks early on and then drops off. And the circular RNA, that's the opposite. It increases over time. And this is because the circular RNA lasts longer. It has longer stability so they can accumulate in a cell up to a higher concentration. We show here also on the graph that our latest design that we've tested in vitro and in vivo circVec generation 2.1 has nearly 10x better protein expression than mRNA. And you see the lines below in the blue. This is where we started circVec generation 1.0. You can see that was already better at eight days. We improved it to generation 2.0 and then to 2.1, which each time has provided the step increments. And we're now at a system, which is very powerful compared to traditional mRNA-based expression, which is what everyone else is doing. It's the standard way to make a protein. We have done extensive characterization of our circVec constructs in vivo, and we released some data earlier this year, and we have substantially more data now. Here is a simple example showing how this works in the mouse models. So in this case, we inject into the muscle of a mouse. In the left leg, our circular RNA construct and in the right leg, our -- the mRNA construct. And then we look at the signal from the protein that is produced. This is a luciferase, so it lights up when you look at it in a scanner. What you can see here is that after two weeks or so in the mouse, we reach the maximum production level, both of the circular RNA and the mRNA. And that what happens is that the mRNA starts dropping off. From week 4 onwards, the mRNA really abates and you can hardly see a signal whereas the circRNA keeps going. And we stopped this experiment in four months and all the way out of four months to circular RNA kept expression -- kept expressing. On the curve, graphs on the lower left-hand side, we've done statistics and data analysis on this and the whole experiment just to show that this is not a case example in one mouse. It's highly statistically significant, consistent across the groups we test and the red line shows the advantage over the blue line mRNA, the red line is the circular RNA. This advantage is a game changer in gene therapy because in gene therapy, the problem is that you can't express enough protein and you can't express it for long enough. Having this type of technology enabling just by switching to circular mRNA expressing the protein at a higher level for longer will mean in the future. Everyone is going to switch to circular RNA-based expression rather than mRNA-based expression, which is the standard today. We've now run at [indiscernible] experiments that have been going for longer periods of time, and we have data up to six months. So this is a new [ experience ]. Again, we're now at the circVec generation 2.1. And then this example, we now have data up to day 175, so almost six months. And you can see in this case, we've injected the circVec, our construct 2.1 in the right leg of the animals. And in the left leg, it's the mRNA construct. And just look at the right-hand side of the pictures here, you can see that every single mouse has robust expression from the circular RNA still going at six months. That's a very long time. Remember, this is just one single injection, day 0, and it keeps going for six months. And from the mRNA expression is very little by comparison. So we're very excited about this. We're seeing the data translating nicely in vivo, and we're continuing to explore exactly how and where this can be best deployed. We also started to play around with the dose level and also how we administer and here is one example of something we find quite interesting. It turns out that the lower the dose we give, the bigger the advantage of circVec. So here, we have three dose levels. It's a high dose level on the left, middle and low on the right. And the more you go to the right, the lower the dose, the bigger the delta. And if you look at the graph on the far right-hand side, we actually achieved 14x higher expression at 64 days in this experiment here in the low dose. And if you looked at the trend from other experiments, this tends to improve over time, so it may be even better as we look forward. In the therapeutic setting, you're struggling to get enough vector DNA into cells. So we expect that usually will be in a situation like the right-hand side where you don't have as many molecules entering into the patient cells as you ideally would want. And if this holds true, I think the advantage might actually be even bigger than what we're seeing at the low dose here in the therapeutic setting. We don't think we have reached the maximum capacity of our expression system. The 2.1 generation has been upgraded to generation 2.2. We used machine learning to optimize the sequence structure. We modeled that on the left-hand side simply shows [ bi-informatic ] modeling, and then we put what we believe are the optimal sequences into our expression constructs and test them. And you can see now with our 2.2 design, we outperformed 2.1 by 2 to 4x, depending a little bit on what the protein you are expressing. And we also vastly outperformed our commercial machine learning tools or algorithm used for the same purpose. So our in-house tool seems to be far superior when it comes to optimizing circular RNA. So we're excited about this. We're now going to bring our 2.2 designs into the construct we're testing in vivo and also gene therapy formats and bring this into in vitro and mouse model experiments as we look forward. By no means do we think this is the maximum potential of the technology. We have several ongoing projects where we're looking at various aspects of our circVec system to see if it can be improved further. And our aim is to, later this year, announced a generation 3.0, which will give at least another step advantage like this over the 2.2. This data is very interesting. And it suggests like I said, that everyone should be switching to circular RNA-based expression. And just to highlight, this is not something we're just making up. Circio is actually starting to get noticed in the industry media, cell life science publications, high-profile ones in the U.S. and Europe are picking this up and starting to write stories about circular RNA and about Circio. And here on this slide is just a subset of some of the articles and interviews that have been published in media this year. So we're excited about this, and we're starting to build also on international visibility for our technology that we expect will help generate attention and interest as we move forward. So how do we deploy this in a therapeutic context. Well, we're focusing on gene therapy because that's what is most important to be able to express protein at higher level, higher durability and current approaches have substantial deficiencies. Now what I've shown you up until now, sort of technical DNA constructs that are sensible to use in the mouse when you do experimental work, they're not really drug candidates, not therapeutic products. We need to use a vector and a delivery system that can make this into therapeutic you can give to the patient in the future. And there, we are exploring several formats that can enable circVec to be a therapeutic product in the future. There are two ways to do this, either using a virus. Here, we're using the AAV virus, which is the standard gene therapy format or adenovirus, which is a legacy of the company, we're actually building this out of our old ONCOS program, and we have a substantial internal expertise in adenovirus. And then we're working on two synthetic DNA formats. So these are other DNA formats that are suitable for gene therapy. And we haven't disclosed what exactly these are, but these are something we're working on in the lab. Right now, the standard way to do gene therapy is using the AAV vector. And so far, eight gene therapies have been approved, six out of them are AAV based. All of them are based on viruses. So none of the DNA gene therapies have yet been approved. All our virus, one is [ purpose ]. One is adeno. The other is [indiscernible] AAV. So a natural step for us to start is by trying to see if we can improve on AAV gene therapy by simply switching to circVec. The idea is very simple. You take an AAV vector. The AAV will express the missing gene, which encodes for a protein using standard mRNA. This is the conventional way. It's what everyone does. We simply exchange this expression cassette making mRNA to circVec. So it will now make the same protein just using our circular RNA. This should enable higher dose -- sorry, lower dosing and higher protein expression and better durability. So we worked on building these constructs. We have successfully made AAVs that can make the circular RNA that make the protein so functionally -- it's doable, and we have achieved that goal. We've also demonstrated that in vitro. The circular RNA, you see on the right-hand side is a circRNA or circVec AAV virus and in the middle, you have an mRNA AAV virus. As expected, the circRNA AAV will generate more protein over time. So in the short term, in vitro experiment, we have almost doubled the expression from the circVec AAV compared to the mRNA AAV. So in vitro, it works very nicely. We've then moved on to put this into mouse models. And this is a bit fiddly. You need to kind of understand which tissues does it work, how can you deliver it, what is the expression dynamic in the mouse model. You remember from the plasmid DNA data we showed before, it takes a little while before you see the difference, and the difference depends on what tissue you inject into. So we start off by to sort of robustly available tissues you can deliver to. One is intramuscular injection. You see that on the top. That's a signal in the mouse leg after injection into the muscle. And below, we've injected intravenously. So we inject into the tail vein of the mouse, the AAV and then we see where it goes. What we learned from this is that, one, yes, we can get effective expression of circVec from AAV in mouse model. So it works. Technically, this is a construct that does what it's supposed to do. Secondly, we see that it looks a bit more potent in muscle. We get more expression in muscle. The red color indicates a higher expression. So the expression level is better in the muscle. When we inject in the tail vein, the [ more ] goes to the liver, and we get expression in the liver and in the tail, but we are particularly encouraged by especially this mouse -- muscle expression. And remember, all the other data I showed you before, is with the expression in the muscle. So this kind of maybe emerging as our favorite tissue at the moment for therapeutic development. So we have started to try and test now head to head our AAVs versus mRNA versus circVec AAV on top versus mRNA AAV at the bottom. Again, we give one single injection, and then we compare over time. So we do get robust expression in the muscle. We'll be now up to day 70. So far, we don't see an evident advantage of circVec AAV versus mRNA AAV, but this may change over time. So we continue to track this mice. We also are testing further changes to the setup here. So like I showed you before, the low dose was even better when we do this with our DNA construct. So we're going to try out a lower dosing with the AAV, see if that changes the dynamic [indiscernible] saturating the system. Also, the AAV we're using at the moment is a standard and liver targeting AAV, which is the classic approach. We're also now going to test muscle-specific AAV and see with a muscle-specific AAV, potentially at a lower dose, we're going to start seeing that dramatic difference versus the mRNA angle, which is the standard way to express. So this AAV program is progressing nicely. And we have a set of experiments plan to keep generating data as we move forward. So what are the plans and priorities and next steps. So we -- I think for value creation for the technology on the company, we're focusing on three buckets. The top 1 is the circVec platform itself. We want to keep improving. We're now at circVec generation 2.2. That is being brought into [ in deep-drawing ] in vivo testing to see how good it is compared to mRNA expression. Remember, almost all the data you saw was with a 2.1 generation. We are working to establish circVec 3.0. That will give us even better advantages and also further opportunities for patenting. So we already have patent filings that are in the drafting and planning stage based on the 2.2 and the 3.0 upgrades. So this enables us to improve the circVec system just overall. Number 2 is continue to pushing these gene therapy applications. We're going to explore a muscle-specific AAV and also look at those levels. And then hopefully, later this year, we'll be able to show you data where we are improving over mRNA AAVs. And we also start implementing our new features into the AAVs, the turnaround for making a virus is a bit slower. And we're currently using a 2.0 generation in AAV. We will start putting in our later features that should boost the expression even further. Business development is important for us. It's important for two reasons. One, it's validation of the technology and also our opportunity to gain financing in the future. But it's also a way to test our technology in other companies' systems, potentially enabling a deal for us in the future. So during this year and now recently, we have entered five research collaborations with companies in Asia, Europe and the U.S. to test circVec and our partners, either delivery or vector technology to see how that performs. So this, at the moment, are research collaborations, but as they mature, we generate data, we're already active in some of these. These are potential future partners that can in-license our technology or we can do mutual arrangements where we access each other's technologies for the benefit of making a therapeutic candidate that would be synergistic as compared to what each company could achieve on its own. We're also now very actively looking for AAV collaboration. So there are 15 or so companies globally that work on the AAV gene therapy format and investing heavily into that as one aim that Lubor and I have now is to see if we can take this AAV data, get a collaboration with an AAV company that are more expert in AAV than we are. We are circular RNA expert, not AAV experts. So it would be ideal if we can find a company that wants to test circVec in their in-house AAV formats and compare head-to-head. So that's an important goal now as we look forward. And overall, I think this puts us in a nice position to execute a strategic partnership during the first half of next year has been communicated in the past. So that concludes the technology part of the presentation. I now give the word to Lubor to run you through the financials.

Thank you very much, Erik. I'm very pleased to present the financial results and highlights for the first half year in 2024. Before I do that, I strongly encourage all our listeners to submit questions in the chat forum. Erik presented a lot of information. I'm sure you have questions, so I encourage you to please submit them. We did receive some questions before the call -- before the presentation, which we will try to address at the end of the presentation. And if you are -- if I'm not covering some of the financial aspect that you're interested in, please, of course, ask me a question afterwards and happy to address your questions. So with that, I want to start with the financial highlights. And clearly, we are going to talk about the Rights Issue, which we recently completed. We raised about almost NOK 20 million, which we completed in July 2024, of which we had a strong precommitment and pre-subscription from our existing shareholders, which we are very grateful. And it also includes, of course, an active contribution from the Board and all of the management. We strongly believe in our technology. As Erik pointed out, we have great potential, and we do need some time to figure it all out and then go forward, but this could be a big game changer going forward. We did receive, of course, additional subscription of NOK 8.7 million in a sufficient period and completed the financing at NOK 19.6 million. We did -- the goal of the Rights Issue was to provide financial resources for the next 12 months until middle of next year. And we did back this up with a financing commitment by Atlas who have committed financing to the company and fund the operations until June 2025. Another financial highlight that I think received much less attention was the waiver of the total loan of -- from Business Finland for a total value of over NOK 70 million. This was an incredible achievement by my finance department, led by [indiscernible] and also Mats Hermansen who managed to really convince Business Finland to cancel the debt in its entirety. This is a very unusual and big achievement. It is quite common that parts of the debt are being waived. But we were able to have all three loans that were outstanding from times related to ONCOS development and plus the interest. And this actually had a very positive impact on our negative equity. And in our current situation also, these payments, which were due, I mean, these loans were had come due, and we would have had to make payments every year between NOK 9 million to NOK 11 million, depending on the interest. And that would have had a severe impact on our current financial situation. And our current situation that would have meant that either we would kind have done less research and generate less results and have less of a chance of finding partnerships or it would have meant more dilution and having to take on more financing from Atlas. So in this position that we're in right now, having had the ability to have this loan canceled completely had a very tremendous positive impact on our financial situation. So this is not trying to be underestimated. So I'm very, very proud on my financial team who were able to pull this off. And as part of that also, of course, we put Targovax Oy into liquidation, so that we don't incur any further operating expenses all in the -- for the benefit of providing as much financial resources as possible to the R&D group to generate new results. With that, now I'm going to talk about the financial results of 2024, the first half year. As you can see, we have done further savings in our expenses and we are now close to a level of NOK 4 million per month burn rate. As you can see, total operating expenses are NOK 23 million. We are, of course, focusing our expenses or spending our money on research, even though here, real R&D expenses don't look very high. We also, of course, in the payroll expenses, we recognize the salary of the R&D personnel. And if we take that into consideration, we're now spending more than 50% on R&D. Of course, there's other things that we have to take care of as a public company that cause us to have certain expenses that we can't further reduce. You could see that we had an operating loss of NOK 23 million over the entire period. And below at the bottom, you can see that the cash burn was actually much less than that. That is partly because we had to defer or we were able to defer some of the invoices into second period. So it's now going -- it's to be expected that cash burn for half year is around NOK 24 million around that level. So that's our goal going forward for the rest of the year. You can also see here in the -- we recognize, like I said, in the net financial items, we recognize the waiver of the loan in Business Finland. That, of course, had a huge impact on our financial situation. And that actually is the major reasons why there is now a profit before income tax, which, of course, over the year will be even out. So let's [indiscernible] a bit how we're going to use the resources and we are, as I said, focused on optimizing the R&D output. We now have a very lean and efficient organization of about 10 FTEs. And as I said, we are prioritizing R&D staff. We're keeping -- which I [indiscernible] the majority of the employees because this is where we're going to generate value. Of course, as a public company, we do have to have certain function plays and the responsibilities which we have to have in the back office, while the finance department is very, very small, and the management also has been very lean. So we try to minimize the administration or the G&A expenses as a public company. What are we using the money for? In the R&D focus, of course, it's all about trying to generate partnerships or investors for that. We need to convince them of the technology. As Erik was pointing out, we have a lot of good results, a lot of exciting new results here. But of course, we also get asked a lot of questions about our technology. And as Erik pointed out, this is a brand-new technology, which raises of course, a lot of questions. And so we're generating more and more data to answer those questions. And I think when we have enough answers, we will then be in a position to have transactions with partners or investors. We're focusing, of course, on areas and signs where we think we can generate results quickly. And we're using collaboration, as Erik pointed out, we have entered into collaboration with companies in order to produce more data, but also, of course, to get access to new aspect of our technology, which we need in order to generate human therapeutics. And going forward, as I said, our cost bases are now around NOK 4 million a month in burn rate. But of course, we're always trying to look for improvements and we're really going to look at further cuts or reducing expenses without affecting the R&D output. I'm now here to announce that actually, Erik and me, we will take a significant pay cut as that, so that we're reducing, as I said, the administrative or G&A costs and have more money for R&D. So what is the financial outlook going forward. So as I said, we know we have the financing secured until June 2025 through a financing commitment from Atlas, which is available to us from October 2024, and we will utilize that. This is a very important achievement for us that we have secured the financing until middle of next year. There are other events that we're looking forward to that can, of course, affect our financing positively, which is the warrant exercise period that we had announced with the Rights Issue, and that will be in December 2024. And of course, we are aiming to enter our first strategic partnership in 2025, as we had communicated earlier. We are, of course, I am and Erik, and we are always going to talk to many different parties. We're talking to new investors. We also, of course, talk to a lot of companies. And we hope that some of these collaborations will be entered into will become financially valuable to us that we're [ turning to it ]. So we are continuously pursuing all options in order to improve the financial situation of Circio. And there are some active dialogues ongoing, but at this point in time, it's too early to talk about them. And with that, that concludes my presentation. And I think we're opening -- I'm inviting Erik again to come in, and we're open to some questions.

Thanks, Lubor. Let's take a look at the questions we have received from the audience.

Okay. So let me ask you the first question received. What more evidence do partners want to see before signing a license deal for circVec?

So that's a complicated question for us to answer, but I can give some examples. We mentioned we entered a few research collaborations. I think in those situations, what we are looking for is testing circVec together with the technology of a partner. And if that looks encouraging, that would probably trigger further experimental work and in vivo validation. And once that data package is strong enough and impressive enough, it makes -- a deal down the line. So I think this is the first step in getting to a future transaction. When it comes to maybe larger companies or big pharma, I think there, what is going to be needed is we have now technically shown in vivo this works, and we're improving it further. So both demonstrating the platform potential, I think there we're on very solid ground. And then the other aspect is to show in a therapeutically relevant context with a vector delivery system that is something you can give to patients in the future that you still have that same advantage and you can achieve it in with the disease relevant payload, for example. So I think we are sort of halfway there. We're continuously building both in terms of expanding and improving the platform and actually generating data together with partners that can be transactable in the future.

Excellent. I think this is a very important topic to our shareholders. The second question is sort of similar and says whether the most important upcoming R&D milestones and are you on track for [ BD ] deals. So maybe is there anything else to add?

In terms of short-term validation of the platform, we have some upcoming experiments in vivo. We're going to test circVec in new tissues. So that's going to happen in the next few months. We're continuing to progress the AAV. So that will be generating data both later this year and next year with AAV, turnaround is a little bit longer. It takes longer to make the construct, takes longer to do the in vivo experiments. With our technical DNA, we can go faster. So we sort of do that first and then it translates into an AAV later. So next AAV readout, maybe late this year or in Q1. The technical DNA readouts in new tissues will be October or November-ish, is what we anticipate. And then we're working on circVec 3.0 format. And I expect we should have that ready in Q4 at some point. So that's coming along. And then as we progress, it's hard to predict experimental outcomes. But we're proceeding according to our plan. I think I showed you today that we have now quite substantial data package. It's far more substantial than we showed you earlier this year. And of course, the bigger the data package, the more robust it is, the more likely it is that we have enough to get a deal done.

Yes, I want to add this collaboration that we entered into a very important step forward in this direction as well. I mean, some of the relationships we enter into because the other company is very interested in our technology. And if the results are positive, could probably take a license or enter into a collaboration with us that, of course, will trigger some payments to us or so to utilize our technology for their own technology. But we also have entered into collaborations where we're going to use their technology or their drug delivery technology in order to really improve our circVec platform. And now we can use that results in order to go and find other partners. And again, it's all about generating new data, having shown the versatility and the utility of our technology, which allow us then to find partners going forward.

Exactly, yes.

So now let's switch gears. One thing that we didn't talk about, somebody said, what about the status on TG01 clinical studies, when do you expect to get data readouts?

And that's also an important milestone. We have trials that are ongoing. We are not running these trials. So we don't have insight into the data. We don't have a day-to-day read on the progress. What we are aware of is the trial in Oslo. There is a planned data release for ASH in December. So we expect to see both safety and some translational biomarker data and very importantly, immune response data. So that will be from a mode of action perspective, a very important validation of the technology that we expect at ASH in December. For the Georgetown trial that is running at -- in Washington. This trial is financed by J&J and it's in a collaboration with J&J and BMS. We're doing a triple combo. That trial is progressing. Patients are being enrolled. It's sort of a step-by-step process to test safety along the way. So all is progressing according to plan. Data there will be next year. The trial at Kansas University had very slow enrollment. We've jointly with Agenus and Kansas decided that it's better to stop that trial and simply due to slow enrollment, only three patients were identified that [indiscernible] criteria. The progression of the patients were a bit faster than expected. And there is now a dialogue to explore other potential indications and study setups. So that trial will be now closed when the final patient has exited the study. And then Oslo and Georgetown continue to progress.

Very good, Erik. Switching gears again. I mean, can you comment on the share sale by Atlas?

So Atlas has been an important investor for us in the past 18 months. The financing by Atlas is what has been -- enabled us to continue to operate and generate this data that we have and build the platform that we have. Now Atlas is a debt provider, so it's an investor that invests in debt facilities. It's not a shareholder or a long-term biotech investor. I think that's just an important factor to consider. So Atlas holds convertible bonds, that's what they hold long term. And when they convert these bonds into shares, they are expected to sell those share. It's simply the modus operandi of the Investor Day. They do not have a mandate to own shares over time, and it's not the strategy of that investor. So each time there is a conversion, it must be expected that the shares are going to be traded in the market. Now we do have an agreement in place that stipulates certain limitations on how and when and the volume of shares that can be traded. And we have a close dialogue with Atlas, and they are abiding by that agreement. And we are very pleased by how this collaboration is progressing. But of course, we understand that it creates a certain dynamic in the trading potentially, and we are aware of that. We are continuously looking for alternative sources of capital. So this is something we use only as absolutely necessary.

And the next question goes in a similar direction, and maybe also something for me to comment on is our [indiscernible] is this commitment from Atlas. We talked about this finance committee to 2025. Will they support you for the next 12 months or until the middle of next year? Well, I mean, as I said, we have a very close dialogue with Atlas, and we have an agreement in place where they express their commitment to finance us until June 2025. So far, Atlas has fulfilled all the commitments to us. So we have no reason to believe that this would not be fulfilled. But as Erik [indiscernible], of course, we are not just relying on this source. We were talking constantly with other investors, potential investors to bring new cash into the company, new sources of funding. So that's something, of course, that we have as a big objective in our -- going forward for the company that we're looking for alternative financing, but we have the commitment from Atlas to fund us until the middle of next year.

I think that was it. Any final questions come in, Lubor or...

I don't see anything in the chat room.

So then with that, we sign off from Circio. Thank you all for attending. We are, as always, available to our shareholders. So don't hesitate to send us an e-mail or call us, and we are happy to explain more. Thank you very much.

Thank you very much. Thanks for your attention.