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

Thank you, and good morning to everyone. Welcome to Cynata's First Quarter Fiscal 2024 webinar. My name is Geoff Brooke. I'm the Chairman of Cynata, and I do appreciate everybody's attendance today. I must say at the outset, it does seem crazy to me that Cynata, given what you're about to hear, is valued as it currently is, and that is a market cap of $42 million. That just seems bizarre to me. I think the Australian biotech market is probably oversold, but that doesn't explain why our market cap is as low as it is. But hopefully, you'll hear from the team today enough information that will support my premise that we are significantly undervalued and still have a lot of upside in the stock. To summarize, I'd like to remind people, our shareholders, that our products are based upon using iPSCs, which are a Nobel Prize winning discovery. So we have real science. We have an absolutely first-class team, including the recent appointment of Mathias Kroll as Chief Business Officer, from whom you will hear later. We've already shown efficacy and safety in previous clinical trials that have been published in major journals such as Nature Medicine. Now barely a month goes by when we are not contacted by a professor of medicine in some universities somewhere around the world, who's experimented with mesenchymal stem cells that understands that autologous stem cells and other approaches using allogeneic stem cells that come from donations are just not a commercial opportunity. We now have our, as we call it, off-the-shelf MSCs that are derived from one single donation of iPSCs, and they're now being used in 4 clinical trials, one of which is a Phase III. So why we are worth $42 million is beyond me. The upcoming year shows the company reaching a number of very exciting milestones, as Kilian will describe in a moment. So we believe this is a very exciting time for Cynata and its shareholders. We very much appreciate the support of all of our shareholders and look forward to a very exciting year. I now hand over the Chair to Kilian and his team. Thank you again for participating. Thanks, Kilian.

Thanks very much, Geoff. And I'd also like to extend a warm welcome to everybody, who has joined us today. And we really look forward to telling you all about what's happening with Cynata right now and what we've got to look forward to. And before I get into the presentation, I'd like to take the opportunity to introduce our new Chief Business Officer, Mathias Kroll, who has just very recently joined us. And this is a newly created position, which we have decided to put in place with an eye on the next stage of the company's growth and our focus on commercialization of our technology. So I'll hand over to Mathias to introduce himself. And then after that, I'll move forward with the presentation. Mathias, over to you.

Thanks, Kilian. Good morning. My name is Mathias Kroll, and I joined Cynata Therapeutics a few weeks ago as Chief Business Officer. My background is in corporate functions in the Global Pharma industry, working in senior roles in business and corporate development, strategy, marketing and R&D in 9 countries across the globe. My previous employers include GSK, Sanofi, Bayer, UCB and a number of specialized companies developing biologicals and vaccines. During my career, I led a significant number of transactions of all types, which are common in the biopharmaceutical industry from small to very large. I relocated to Australia in late 2019 and took up a role as Chief Commercial Officer at QIMR Berghofer Medical Research Institute. It's really rare that I became fascinated with the potential of cell therapies, which is unfolding in this industry. I was then very excited when I got the opportunity of joining Cynata as the company is now nearing key clinical milestones, which will allow it to enter into late-stage development and commercial partnerships with companies with resources. On this path, I would like to thank you, our investors, in supporting us. Back over to Kilian.

Thanks very much, Mathias. So with that, I'll move on with the presentation. And obviously, this has been a year, where we have made a lot of progress. But just to take a step back and remind those of you who have been with us for a while or perhaps for anybody new to the story, you might be hearing this for the first time, but reminding you what Cynata is all about. So we're focused on the development of a revolutionary manufacturing platform. This is, as Geoff said, an iPSC-based platform, which I'll explain more in a moment. We call it Cymerus. And what the reason this is revolutionary is, it enables effectively limitless production of consistent and high-quality mesenchymal stem cell doses from a single blood donation. So that makes it completely different to the way that conventional methods work. And again, I'll explain that more in a moment. But the reason this is important is that this really overcomes the major obstacle to commercializing these therapies. These therapies have shown huge promise, especially over the past, say, 15 years or so. But the major obstacle to commercializing them has been the ability to manufacturing them at scale in a consistent manner, and that's what we can solve using our platform. So we've already generated compelling clinical data in 2 different indications, graft versus host disease and diabetic foot ulcers. And we have a rich clinical pipeline. We have 4 active clinical programs. And importantly, 3 of these programs are randomized controlled clinical trials, which will have results readouts between early 2025 and early 2026. So there are some really major inflection points upcoming for the company. And we're also about to start our fourth clinical program in kidney transplantation imminently. So this financial year really has been a year of progress for the company. So we've completed enrollment in 2 of those randomized controlled clinical trials. That's the Phase III osteoarthritis and the Phase I DFU trial. We've announced encouraging clinical efficacy data from DFU. We've started a new Phase II global clinical trial and enrolled the first patient in that trial, and that's our first trial under a U.S. IND under the U.S. FDA. And we're also about to start the kidney transplant trial. And of course, as I've just mentioned, we've strengthened our management team with the addition of Mathias. So just to tell you a little bit more about that clinical data. So our first clinical trial was in graft-versus-host disease, which we completed a few years ago. This was in patients with steroid-resistant graft-versus-host disease, which means that they had failed to respond to steroid treatment, which at that time was the only treatment available. The prognosis in those patients was really very dire. The vast majority of them would have been expected to pass away. Typical survival rates in this population according to the literature were around 20% at 2 years. We treated 15 patients, and we saw that 13 out of 15 showed an improvement of at least 1 grade and 8 out of 15 showed a complete response, and we saw 2-year survival of 60%, which, as I said, is very much higher than what would have been expected in the absence of a new treatment in these patients. The trial was published in Nature Medicine, which is one of the leading medical journals worldwide, and it was also featured on the front cover of that month's issue. And one of the reasons it was given such a high-profile publication is that this was the first ever completed clinical trial with iPSC-derived cells. So it was actually quite a major milestone for the wider field of stem cell research. Now more recently, in the last couple of months, we've announced initial data from our diabetic foot ulcer trial. So this trial is still ongoing. We've recently completed recruitment and the final patient visit will be in September this year, and we'll have final results shortly thereafter. But earlier this year, we were able to announce an initial analysis of results in the first 16 patients enrolled in the trial. 8 of those patients were in each group. So one was in the active stem cell dressing group and the other 8 went into the control group, which was standard of care dressings. And after 10 weeks follow-up, we saw that the median reduction in wound surface area was almost 88% in the active group compared to 51% in the standard of care group. So clearly, that's a very pronounced difference. And the images here show just an example of the incredible healing we've seen in some of these patients treated with the active dressings. So you can see the baseline photo on the left, where there's a very large wound. And by the way, these wounds had to have been nonhealing for a period of at least 4 weeks before enrollment. And then you can see just 4 weeks later after receiving the stem cell dressing, that wound has essentially completely healed. So that's a remarkable turnaround, and that's why we're really excited about the results that we're seeing so far in this trial. Now to go back to our manufacturing platform, as I said, this is really what the company is built on. And a conventional manufacturing approach for MSC-based products relies on getting tissue donations, for example, bone marrow or adipose tissue, otherwise known as fat or various other sources. They then isolate the MSCs from the donated tissue. And then they have to grow those cells, which is a process known as culture expansion, and that's to generate enough cells to treat patients. Now this approach has generated some really exciting evidence in clinical trials. But as I mentioned at the start, there's a lot of major fundamental challenges with this approach. So first of all, it's logistically challenging to get this ongoing supply of new donors. But more importantly, there's a huge amount of variability in MSCs derived from different people. And furthermore, when they go through this extensive culture expansion process, the MSCs actually change and they start to lose the properties that we're trying to harness. So there's some real issues there in terms of producing MSCs in large quantities using that kind of approach. Our process, our platform overcomes that because we can use a cell bank derived from iPSCs, which means from one donor one time, we can make all of the cells that we will ever need. So we completely avoid the need for new donors and therefore, the need -- therefore, we also avoid the problem of variability between donors. And also because we get our scale at the iPSC stage of the process, we avoid the need for extensive MSC expansion, so we avoid those problems with functional changes as well. And when you put all this together, what this means is we have a method for producing as many cells as we want from one donor one time with a very high level of consistency. MSCs in general, as I said, have been shown a lot of promise over the last 15 to 20 years. And the reason for that is MSCs have a lot of useful properties, including modulating or balancing the immune system. They also reduce inflammation, and they can promote tissue repair and regeneration. Importantly, they can also be used without matching, which means you can take MSCs from one person and administer them to any recipient. So our cell bank doesn't have to be matched to specific patients. We can use those cells in anybody. And that's really why these cells have generated so much interest over the past 15 to 20 years. And the advantages of the iPSC-based platform. So to explain what iPSCs are, first of all, these are mature cells from adult donors that undergo a process called reprogramming. And when they undergo that process, they then behave like embryonic stem cells. And all of us originally, of course, came from embryonic stem cells. The reason that embryonic stem cells or similar cells are useful is that they can produce themselves to an effectively limitless degree, and they have the potential to turn into any other type of cell, which, in our case, we're using them to turn into MSCs. So this is an ideal starting material for large-scale production. And just to reiterate, our cells are not embryonic. So we avoid all of the ethical controversy associated with that, but we have all of the advantages of those types of cells in that we can use them as this limitless starting material. We have a partnership with FujiFilm, which is based around manufacturing and really leveraging the infrastructure and expertise within the Fujififilm group for manufacturing these types of advanced therapies. And we're working specifically with Fujififilm Cellular Dynamics or FCDI in the U.S., which is a subsidiary of FujiFilm and which was also the entity that produced our iPS cell line. So we have a long and strong relationship with FCDI -- and Fujififilm remains a shareholder in Cynata as well. So that's really a great partnership for us. So as I mentioned earlier, we have a rich clinical pipeline with 4 different clinical programs running right now, and I'll just go through each of those now and tell you a bit more about where we stand with each of them. So our Phase II GVHD trial is a global trial. It involves sites in the U.S., multiple European countries and Australia. It's a randomized controlled trial seeking to recruit 60 patients with high-risk GVHD. It's already open for recruitment, and we've got the first patients enrolled at this point. We're aiming to complete recruitment by the end of this calendar year. And if we do that, we would expect results in the second half of next year. So that is really not too far into the future. And of course, we're hoping to build on those fantastic results that we saw in Phase I. Our diabetic foot ulcer trial, as I already mentioned, is ongoing, but recruitment is complete. So the time lines now are pretty clear. We've got the last visit expected in the second half of September. And obviously, we'll then be working to get the final results analyzed and released as soon as possible after that. So it's likely to be either late this year or early next calendar year. And again, the initial results that we've seen here give us a lot of confidence in terms of how this trial is going. Our osteoarthritis trial, which is in partnership with the University of Sydney and funded by the Aussie government under an NH and MRC grant. Again, we've completed recruitment in this trial. This is a Phase III trial with 320 patients with osteoarthritis of the knee. Again, it's a randomized double-blind trial. This, as I said, recruitment completed in November last year. It is a 2-year follow-up in this case, and that's because we're seeking to show a disease-modifying effect, which means we're not just trying to show an improvement in symptoms. We will hopefully show that, but we're also hoping to show that we're actually changing the disease process. And if we can do that, that would be absolutely huge because right now, there are no disease-modifying treatments approved for osteoarthritis and osteoarthritis is clearly a very common disease worldwide, and it causes huge problems. So if we can show a disease-modifying effect, it would be an absolute game changer for that condition. So we still have a little bit to wait for those results. But at this point, it's probably just a bit over 18 months away from now. So we're really looking forward to the results of that one as well. And finally, our renal transplant trial. In this trial, the aim is to essentially use the MSCs to allow the reduction of dose or the withdrawal of certain drugs called an immunosuppressive drugs, which are used to prevent rejection of transplanted organs. And the reason that there's interest in doing that is that those drugs are extremely toxic and they cause huge problems. So if we can move away from those drugs, it would be a huge step forward. This trial is expected to commence imminently. There's 3 cohorts in this trial, the initial 2 cohorts of 3 patients each. And the first of those, we should complete during this calendar year. So this is another exciting opportunity for the company, and there will be news flow from that in the not-too-distant future as well. Now just to quickly finish off, I do want to leave some time for questions, but we have, over the past 10 years or so, formed many research partnerships with a lot of very high-profile academic groups around the world, and we've generated positive data in preclinical studies in a whole range of diseases. There's further information on all of that on our website. But of course, this really illustrates the potential wider value of our platform. We have a partnership-driven business model from a commercial perspective as well. So we are seeking partners in terms of potentially making our platform available to others, who might pursue additional opportunities. And of course, we're also seeking to seek development partners for our existing clinical programs. And so that has the potential to bring in some revenue in the relatively short term. And so that's an important aspect to our strategy as well. And so our catalysts, we really do have a lot going on, as I mentioned earlier. So very soon, we should be announcing the commencement of enrollment in the kidney trial. We then should have initial results from the first cohort in that trial later this year as well as completion of enrollment in the graft-versus-host disease trial. We should have results from the DFU trial. And a reminder, this is the final results early 2025 or maybe late 2024. And then in the second half of '25, we should have the GVHD results followed by the osteoarthritis results in the first half of 2026. So there are really quite a number of very major inflection points for the company coming up. And then as Geoff said, our current market cap certainly doesn't price in success in any of these, let alone all of them. So I think there's a clear opportunity there. And so at that point, I won't dwell on the corporate overview and so on. I will allow people to read that at their leisure. And I think in the interest of time, I will move from there on to the questions that we have received from the audience today.

And the first question that we have received is where we manufacture. So we don't have our own manufacturing facilities. We use contract manufacturers. Initially, we manufactured with Waisman Biomanufacturing in the U.S. in Wisconsin. They were one of the earliest facilities to utilize iPSCs, which is why we partnered with them. And all of our products so far that we've used in clinical trials has been manufactured there. But right now, we -- under our partnership with Fujififilm, we're establishing our manufacturing process at Fujifilm CDI, which also is in Wisconsin, and we will be manufacturing product there for further trials, at least that's the current status. And I should probably quickly mention that it's not really coincidental that both of those places are in Wisconsin. The Cynata technology itself was invented at the University of Wisconsin Madison. And CDI, which is now FCDI was founded by scientists at the University of Wisconsin, one of whom Professor Igor Slukvin is also an inventor of Cynata's technology and a founder of Cynata. So Madison, Wisconsin really is a sort of an epicenter for stem cell research worldwide. And that's really why we have such a strong connection to that area. So other questions that have come in. Another one is, do we plan to start any new clinical trials in other diseases in the near future? So the short answer to that right now is that we are focused on our existing 4 clinical programs. So we undertook a strategic review in July last year. And the outcome of that was that we have these 4 active programs, and we're going to focus our resources on those. So successfully executing those trials is our #1 priority right now. Now that said, as I also mentioned, we have quite a wide body of preclinical data already, and there's clearly potential for our products to be used in other clinical applications. And so that obviously is something that we are certainly pursuing. It may be through partnerships. It may be through something that we do ourselves at a later date. But right now, we're not planning to start any new clinical trials ourselves, for example, within the next 12 months, at least, I think I could say that. Another question I've got is, can we be more specific about the time lines for the DFU results? So as I mentioned, we're expecting the results either late '24 calendar year or early '25. And the last patient visit is pretty -- is locked in essentially as in the second half of September. As a rule of thumb, we kind of expect a time line from last patient visit to results of about 3 to 4 months. In this case, of course, 3 months from last patient, last visit is just around Christmas time. So that sort of introduces a bit more uncertainty. But look, as I said, we're pretty confident it would be early 2025, and perhaps a little bit before that. But I think that's as clear as we can be right now. Obviously, as we get closer to the time, we should have a better idea. I should also explain that there is quite a lot to happen. And perhaps, if somebody hasn't been involved in clinical trials, it might be confusing as to why there's a gap of a few months. But after the final visit, we have to have data entered. We have to then go through a process called monitoring and data cleaning, which is all part of the quality control. And we also, in this trial, have wound images that have to be assessed by a third party who's blinded to treatment. So that all takes time. And then, of course, we have the statistical analysis and quality control of the final output. So it does take a little bit of time to get all that done. But as I said, it really -- it should be within about 3 to 4 months of that final visit, which would be around about the end of the year. In terms of the next question, so there's a question, do we have a pain endpoint in the osteoarthritis trial? Yes, we do. So we have co-primary endpoints, which is -- one is based on pain and the other is the cartilage thickness as assessed by MRI scans. So we're looking at both. And obviously, we hope to show a benefit on both. The next question is that newly approved drugs normally migrate to off-label use. What off-label uses do we foresee with MSCs. So well, I mean, first of all, that is correct. And to explain what that means to somebody who might not know, off-label use means if a product is on the market for a specific medical condition, sometimes it gets used for other things. And of course, that's a possibility. MSCs have a lot of potential uses. So I think, if our product was on the market, that's something that might happen, but we really couldn't speculate on that. And just to be clear, a company that's marketing a product does not control that. In fact, it's -- the company would not be allowed to promote such uses or anything. So I think, yes, we can acknowledge that's a possibility, but it's not really something that would be a part of our sort of strategy in any way. And next question is how we should think about the commercial pathway for the DFU product given the near-term prospect of final results. Is there a good comparable transaction in this area? So look, the commercial pathway, I guess we should separate it. There's a development pathway, which, of course, will involve a further trial, but whether that's a trial run by Cynata or by a partner remains to be seen. And our overall strategy is to partner these assets. And I think with very encouraging data from this trial, that may well be the basis for us to do a really good partnership transaction. But of course, that remains to be seen as well. We don't have the final results yet. And of course, we have conversations ongoing, but I think there's a real opportunity there for sure. There's a question then about whether things like breast implants and Botox and so on could be replaced by stem cells. Look, that's certainly a possibility if we talk about this in a broader sense. There are -- there's research ongoing regarding tissue replacement more generally. That's not something that we are pursuing at the moment, at least. But yes, I think the short answer is that's a possible application. And that is the final question that I've received, and I think we are virtually at the end of our time. So I think we would probably wrap it up there. I'd like to thank everybody again for their time today and for their support. And if you're new to the Cynata story, please feel free to get in touch and find out more. And of course, we would love to see you on the share register. And finally, thanks to Geoff and Mathias for taking part in the session today. And so I think we can close the webinar there. Thank you very much.