Cynata Therapeutics Limited (CYP.AX) Earnings Call Transcript & Summary

So good morning, and thank you for joining Cynata Therapeutics Investor Webinar for the December 2025 quarter. Presenting this morning will be CEO and Managing Director, Dr. Kilian Kelly, who will provide an update on our clinical programs, corporate developments and financial position, followed by a Q&A session. [Operator Instructions] Both Kilian and Chief Business Officer, Dr. Mathias Kroll, will be available to answer your questions. As a reminder, this webinar is being recorded and will be available on the company website in coming days. I'll now hand over to Kilian to formally welcome you all and commence the presentation.

Thanks very much, Lauren, and good morning, everybody, and thank you for joining us today. So as usual, with these quarterly webinars, we'll keep the presentation fairly brief, so we do have time for questions and answers. And the content is fairly high level, focusing on updates from the recently completed quarter. If you are new to the company and perhaps you don't have all of the background, please do have a look at our website where there is a lot of other information that will help you get up to speed. And of course, feel free to reach out if you need to know more. So the big news, of course, as anybody who's been following us will know is that we really are very close now to 2 major clinical trial efficacy readouts. We're expecting 2 different clinical trial results to read out during quarter 2 this calendar year. So literally within a few months from now. It is no exaggeration to say that this is the most important period in the company's history. It is really quite unusual for a small biotech company like us to have 2 very different clinical trials reading out within such a short space of time. And it's fair to say that the results of these trials, each of them independently, really could transform our commercial trajectory and, of course, our valuation. And these trials are -- just a reminder, they are measuring efficacy of our products in 2 conditions with huge unmet need. And of course, I'll talk a bit more about that in a moment. We're also building on quite a large body of data where we do have very encouraging safety and efficacy data already. So we're coming into this with a great deal of confidence that's sort of built on our previous clinical and indeed preclinical data. So in terms of the last quarter in terms of what we actually achieved, there was really important milestones in 3 different clinical trials. So in the Phase III osteoarthritis trial, we completed patient visits, and that was at the end of a 2-year follow-up. And that really is what sets the time line for the results that we expect next quarter. In the graft-versus-host disease trial, we completed patient enrollment, and that was also a huge milestone in any clinical trial. Enrolling patients is always the least predictable part of the clinical trial, and that's especially true in a rare disease like graft-versus-host disease. So it was hugely important that we reach that milestone. And in our kidney transplant trial, we had completed the first cohort of 3 patients. And during the quarter, we had the DSMB, the Data Safety and Monitoring Board, which is an independent board that reviews the data in clinical trials. They completed their review of that first cohort and gave us a positive recommendation to proceed to cohort 2. We also strengthened our intellectual property portfolio with new grants and allowances of patents in both the U.S. and the EU. We've continued to engage with regulators around the world to progress our development pathways, especially looking forward now towards commercialization and approvals. And that's something that's really been an ongoing activity, largely behind the scenes, but a very important activity that we've kept up with over the years. In terms of cash, we ended with $2.6 million at the end of the quarter. And subsequent to the quarter, we raised another $1.2 million using our ATM facility. And I'll explain a bit more about that in a moment. But the important point here is that, that gives us cash. We still have cash runway into the second half of this calendar year. And importantly, that is beyond these expected clinical readouts. So without wanting to labor the point, we really are at an important inflection point for the company. Both of those readouts, osteoarthritis and graft-versus-host disease expected in the next quarter, both of them potentially transformational for the company in their own right. Meanwhile, we're continuing with the kidney transplant trial. And we also have our diabetic foot ulcer program where we had positive data just over a year ago, and we are continuing to work on next steps for that one as well. So the graft-versus-host disease trial, as I said, results expected next quarter. More specifically, we think they'll be around June this year. We will, of course, keep people updated as we get closer to that time. We completed enrollment of 65 patients. We randomized 65 patients in this trial at sites in Australia, U.S. and Europe. A reminder that this trial is in high-risk, newly diagnosed acute graft-versus-host disease patients. And so we're using our treatment first line in combination with steroids. Every patient in this trial received steroids, which is the standard first line treatment. But in this trial, they're randomized to receive CYP-001, our product or placebo in addition to steroids. The primary endpoint is overall response rate at day 28, and that is the FDA's preferred approvable endpoint for this condition. So that's an important point. The result we get here will be directly indicative of what the FDA is looking to see in a pivotal trial. And a reminder that we're building on very strong safety and efficacy data from our Phase I trial, which again gives us reasons to be optimistic. So the osteoarthritis trial, which is a Phase III trial taking place in Australia only, this had a 2-year follow-up of 321 patients, and that 2-year follow-up was completed in November. We're expecting results in quarter 2. In this case, this trial is being run in partnership with The University of Sydney. So they're managing this process rather than us, which makes it difficult for us to be more precise about when the results are expected. But again, we will keep people updated as we get more information. This is a placebo-controlled trial. All of the patients received a total of 3 injections into the knee, which is an intra-articular injection. They received either our product, CYP-004 or placebo. And importantly, we are looking to show a disease-modifying effect in this trial. And what that means is, in addition to improving symptoms, we're hoping to show that we have an effect on cartilage thickness. What that means is osteoarthritis results in loss of cartilage thickness over time. The cartilage gets degraded. At the moment, there are no treatments that can stop that or even significantly slow it down. And what that means is many patients end up needing joint replacement surgery. So we're hoping to change that. And this trial is designed to show the effect on both symptoms, pain reduction as well as cartilage thickness. If we're successful, this could, in fact, be the first disease-modifying treatment for osteoarthritis. In other words, an absolute game changer. We have been advised by the TGA in Australia that if these results are positive, it should, in principle, support commercial approval in Australia, which is very exciting. And so as I said, this trial really, in its own right, has the capacity to completely transform this company. Our kidney transplant trial, which is at a much earlier stage, as I said, we completed the first cohort, which was reviewed by an independent DSMB, and they provided a positive review, and we're now progressing to the second cohort of patients. In this trial, we're aiming to use our product, CYP-001, to reduce reliance on immunosuppressant drugs, potentially even withdraw those drugs completely. And the main benefit of that is to avoid the significant toxicities that go with those drugs. So we look forward to sharing more news on this trial as the year goes forward. Now just briefly on that ATM facility. I'm conscious of the fact that this is fairly new in the Aussie biotech sector. It has perhaps been used a bit more in ASX-listed mining companies and so on. But in any case, many of our investors might not be particularly familiar with this type of instrument. So just to explain, it's a flexible funding facility that really is at Cynata's discretion. Importantly, it is not a debt facility. So it is a standby equity capital facility, which provides us with up to $7.5 million over a 5-year period. We have full discretion over if and when we use it, if we do use it, how much capital would be raised and what the minimum issue price would be. So there's no obligation on us to use it. We can pause it or terminate it at any time. And equally, on the flip side, there is no guarantee that this will result in any funding. So it's very, very different to some of those debt facilities, convertible notes and so on that people might be more familiar with. Now as you will be aware, if you've been following our announcements, we did recently use this. So in late January, we raised $1.2 million through this facility, and that was done to support working capital and ensure that we do have that runway beyond our upcoming results. And that's really what this instrument is intended to do. It's not necessarily something we would use all the time. It's certainly not an alternative to other financing mechanisms. It's simply another tool that we can choose to use if and when it makes sense for us. And it will still sit there. We may or may not utilize it in the future, but it's important for us to have that optionality. So just moving forward then to the outlook. So again, to reiterate, we have an incredibly exciting period ahead, especially next quarter. The results that we get from these 2 trials will obviously inform what happens next. So they'll help us work out what the clinical and commercial development strategy is. In the case of osteoarthritis, in particular, it may lead us towards a path to commercial approval here in Australia. And of course, it will also really spur on our partnership discussions. We've continued to be in discussions with various potential partners. Needless to say, at this point, they all want to see these results. And so they are excited to see the results just as we are. Once we have them, of course, we will be continuing those discussions in a very serious way. We have continued our regulatory dialogue, and we will continue to do that, again, especially on the back of these results. In the background, we are also looking at expanding our pipeline in various ways, which we have done quite extensively over the last number of years. And with regard to capital, we really have a very low cash burn at this point. The only trial we are directly funding is the graft-versus-host disease trial, which, of course, is almost finished. So we have a very low cash burn and a real focus on capital discipline, which is intended to allow us to get past these key inflection points and then hopefully onwards to bigger and better things. So I'll probably wrap up at this point and take questions and answers just to kind of remind everybody of why there's such a great investment case here. We have a manufacturing platform, which is genuinely unique and which solves a huge bottleneck in this field. It allows us to make these products consistently and at scale without needing new donors. And that really puts us in a unique position to capitalize on the potential of MSC-based therapies. I probably don't need to say it again, but we have 2 hugely significant clinical trial readouts coming up. And as I said, I think that has -- it couldn't be a more exciting period ahead. So I'll stop there, Lauren. And if we have any questions, very happy to take them.

Yes, we have a few questions, and I'll start with those around the osteoarthritis trial. So your Phase III osteoarthritis trial enrolled over 320 patients. Can you speak to how the trial design and patient population were chosen to give you the best chance of demonstrating disease modification and what makes you confident in the co-primary endpoints that you selected?

Yes, that's a great question. So in terms of the trial design, as I think I mentioned, we are working with The University of Sydney on this trial. So it's a partnership with The University of Sydney, a group led by Professor David Hunter, who is genuinely a world-renowned expert in osteoarthritis research. And so the trial was designed by Professor Hunter and his team. And it really calls upon a lot of research that he and the wider group have done over many years. In terms of the disease-modifying endpoint itself, it's based on MRI scans. So it's a very objective endpoint. It's a measurement of cartilage thickness based on MRI scans, and that's then assessed by 2 independent radiologists. So it's a very, as I said, objective and clearcut measurement. And if we can show an effect on that sort of endpoint, it would really be quite indisputable that our product is indeed having a disease-modifying effect. In terms of our confidence of achieving that, obviously, this is a double-blind trial. So we don't have any information at this point about how the patients have done in either the placebo or the treated group or even overall. So we don't have any information from this trial yet, just like everybody else. We're very much looking forward to having that information. But what we can say is that there's a lot of previous research that's been done by various different groups, not just our partners at The University of Sydney that has shown a number of very positive signals in terms of the ability of MSCs to have a disease-modifying effect. And we believe that the MSCs that we make using our unique platform are among the best, if not the best MSCs that are out there. And we have lots of data to show that. We've compared our MSCs in terms of the molecules that they secrete and so on with MSCs from other sources. And all of that data really points to the fact that our cells are very potent and consistent. So I'm of the view that if MSCs in general have the potential to modify this disease, then Cynata's MSCs are ideally placed to do that. So we can never give anybody any guarantees, of course, but I'm certainly very optimistic.

I'm sticking with osteoarthritis. Has there been any discussions with the FDA regarding this? For example, JointStem recently announced concessions made regarding time lines 6 months instead of 1 to 2 years for its planned knee osteoarthritis trial based on results in Korea.

Yes. So we're, first of all, clearly keeping a close eye on the news coming out of the FDA in terms of guidance and indeed the experience of other companies. And we have a very good and long-established relationship with the FDA going way back to when we started out in 2014, I believe it was our first meeting with them. So when it comes to specific outcomes like that in terms of what the trial design required by the FDA will be, we believe that, that's really a discussion that can only be completed when we have the results of this trial. So our aim is indeed to do that. We don't -- we're certainly not saying at this point that we would have -- we would need to do a 2-year follow-up trial for the FDA. We think that remains to be seen. And it will be informed not only by those other sort of developments in the field but also by the data that we have from this trial that we will have results from very soon.

Thank you. And if both your Phase III osteoarthritis trial and the Phase II acute graft-versus-host disease trial read out positively, what's the single biggest constraint to Cynata realizing commercial value within the 12 months following?

So look, if we -- if they're both positive, which is what we hope, I think it's pretty clear that, that would put us in an incredibly stronger position compared to where we're at today. In terms of -- I wouldn't necessarily really look at it at what are constraints to realizing the value. I think we already have active discussions ongoing with potential commercial partners. And I think in that scenario, we would certainly be in a very strong position to do very attractive deals on both of those assets. I might also see if Mathias has any comments to add on that particularly...

Yes, indeed, not only regarding these 2 assets, but both trials reading out positive in terms of efficacy, these being mid- to late-stage clinical trials, that would be absolutely fantastic valuation. And certainly, that's what we are aiming for. This will unleash a whole plethora of opportunities for other clinical and preclinical programs. So there have been companies circling and asking about our preclinical programs, considering putting these into the clinic. But to ultimately convince, you have to show that you've got these positive late-stage clinical results. And both of these trials being positive, that would be ultimate validation. They're completely different indications, completely different settings. Yes, that would open up so many opportunities. Indeed, it's hard to think about constraints, maybe being able to ramp up our resources quickly enough and our skills inside the company quickly enough to capture all of these opportunities quickly. That comes to my mind mainly.

Thank you. And now moving on to other indications. We've received questions about getting an update on the time line for your kidney trial and also next steps on progressing the diabetic foot ulcer trial.

So the kidney transplant trial is moving into cohort 2. And just a bit of background there for those who aren't aware, the trial is designed as a 3-cohort trial, first cohort complete. Second cohort, we're now going forward with, which is another 3 patients. In terms of the time lines for that, this trial is somewhat like the osteoarthritis trial is being conducted by a partner of ours, in this case, Leiden University Medical Center in the Netherlands. So again, they are actually running this trial. We are, of course, reliant on the information they provide us. At this point in time, we don't have clear guidance on when cohort 2 will be completed. We do hope to have an update on that pretty soon. I mean, we would certainly be hoping to see progress in the coming months on that, but I can't really put an exact time on completing it yet. In terms of diabetic foot ulcer, so as we said when we completed that Phase I trial with very encouraging results, we weren't in a position to move forward with another clinical trial under our own steam at that point in time, and that really remains the case now. Of course, that could very much change within the next few months. But what we have been doing is talking to partners, potential partners about that program and also planning what further trials and further product development could look like. I think we can say that, obviously, a partnership deal, we can never really sort of foreshadow that such a deal is going to happen. Once such a deal happens, we have to announce it, and we would announce it. But putting that aside, I think if it was a case of us moving that program forward under our own steam, in other words, starting a further clinical trial that we sponsor, I can say that certainly wouldn't happen until beyond the results of GVHD and osteoarthritis.

Okay. The next couple of questions are in regards to the financials within the quarterly. So the question is around the increase in research and development costs in Q2 compared to Q1 and then also how the company is planning on either starting or continuing projects if needing to look at a reduction in cash burn in order to extend your cash runway?

Yes. So regarding the sort of change from quarter-to-quarter in our expenditure, either overall or when sort of broken down into R&D, I would really caution people not to read much into that. We're obviously -- we have to fit into the rules set by the ASX in terms of reporting this. But when we're working on multiyear R&D projects, which we are, the quarter-by-quarter expenditure is very sort of lumpy with clinical trials, in particular, our GVHD trial, which has been our main expenditure over the past while. The budget is sort of set up or the payment schedule is set up as sort of milestones, as certain milestones within the clinical trial project are achieved, we have to pay certain percentages of the total budget to our contract research organization and so on. So what you tend to have is that there'll be a payment that is relatively large in the context of a quarter, but it's really just sort of random which quarter that falls into. So that really doesn't mean very much at all. And I think, unfortunately, just the way the ASX quarterly reporting works is it's perhaps not very helpful for a company like us, but it is what it is. In terms of our cash burn, as I said, our cash burn is incredibly low at this point. For this entire financial year, our cash burn is looking like being somewhere in the region of between $5 million and $6 million. It's really not very much at all. And it is dropping already. It's not that we have to sort of put projects on hold or anything for it to drop. As I said, our biggest expenditure has been on the GVHD trial, and most of that expenditure has now been incurred. So it is sort of naturally dropping anyway. Now of course, we hope in the future to be starting new projects, which will require new expenditure, but that's going to come after these readouts, and it's going to be informed by those readouts as well.

Thank you. And back to OA, is there a chance of a post-marketing trial in the U.S. rather than another Phase III?

So look, we're certainly not ruling any options out. And we -- I can say, in general, our aim once we get these results in both OA and GVHD is obviously, once we've had a chance to consider the results, if the results are very positive, which is what we hope, we will certainly be doing our utmost in the U.S. and indeed every other market to find the most accelerated path forward. There is some flexibility out there at the moment, not necessarily all sort of written down and a clear pathway, but we will absolutely be exploring all of those avenues. And if there is a way that we can accelerate commercialization, we will absolutely do that. But we -- again, we can't promise that, that's the case. It's going to depend, first of all, on what the results look like and secondly, how the regulators respond.

This might be a question for Mathias. Can you please elaborate on what type of deal structures are currently being considered, for example, equity investments, acquisition of Cynata's IP, royalty or licensing deals?

All of these and more joint ventures, strategic alliances that will very much depend on the nature of the contemplated transaction, the scope of the collaboration or transaction in general and the options to realize them. So we are generally focused on creating the most value for Cynata that we can. And the best way to achieve that will be reflected in the deal structure. So obviously, equity investments, yes, from certain shareholdings, obviously, they have to be takeover offers. So there are some rules and regulations in place. And -- but we've got the experience, and we will also seek complementary advice when the time comes in order to balance all of these different considerations out and come up with the best deal structure. In general, I would say that Cynata's intention is to remain a powerful development engine and to come up with additional technologies, improved versions of our technology and additional opportunities, more indications, versions of technology development that at the moment, we cannot really fund. And I think this will generate significantly more opportunities in the future. And for that, obviously, we need to seek deal structures that will bring powerful resources, but also cash into the company. So that will be our focus. But you can never rule out that some large company decides to just try and acquire Cynata.

And last question that we have time for today is, if clinical signals are positive and commercialization proceeds, how would you plan to value Cynata cells in relation to competitors' MSCs? And will the price differ based on indication?

Mathias, that might be one for you again.

I think that will very much depend on clinical results, of course. Clinical results will really tell the story how much value our therapy brings in relation to any other therapy, whether that is a cell therapy or just any other therapy. Usually, companies conduct health economic studies as they engage with the agencies that regulate pricing and reimbursement if such agencies exist. That also depends on the geography. So definitely, the proof is in the pudding, the clinical efficacy, the patient benefits, is it disease-modifying? Will it improve quality of life, reduce pain and so on? All of these are very important factors to consider. They will need to be compared to standard of care to the cost of other medicines, which are maybe not as good. And out of these, we will come up with a price that reflects fair value for everybody.

Perfect timing. That's all the questions that we have. Kilian, did you have any closing remarks?

Yes. I just want to thank everybody again for joining today. And more broadly, thank you for your interest and support in Cynata. I'm incredibly excited about the year ahead, and we look forward to connecting again in the near future. Thank you, everyone.

Thank you.

Thank you. That concludes today's call. Enjoy the rest of your day.