Evaxion A/S (EVAX) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the MSD partnership and business update. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Christian Kanstrup. Please go ahead.

Good morning, and good afternoon, everyone. I'm Christian Kanstrup. I'm the CEO of Evaxion, and it's a great pleasure to invite you to this MSD partnership and business update call. With me today, I have Birgitte Rono, our Chief Science Officer; Jesper Nissen, COO and CFO; and Mads Kronborg who is our VP of IR and Communications. And let's just take a look at Slide 2, forward-looking statements. We will be talking about the future, and we do know when talking about the future, there is uncertainties related to that. So please pay attention to this slide here. Then what are we planning on covering today? I will start out with a brief strategy recap also to see how the MSD agreement fits into our strategy. I will go through a summary of the agreement. Birgitte will talk about EVX-B2 and EVX-B3, and then we will be talking about recent milestones. I think it is fair to say we have had a super busy September with a lot of corporate milestones achieved, and we wanted to use the opportunity to recap on those. Finally, we will sum up and then open for the Q&A. So on Slide 3 -- or Slide 4, just a quick strategy recap. As you will remember, we have the three-pronged business model: focusing on targets, focusing on pipeline, focusing on responders with AI-immunology at the core of our strategy, while we also do have a multi-partner approach to value realization. And this is, of course, where the MSD agreement which we will be discussing today fits perfectly into the strategy because that's both addressing the target part of the strategy as well as the pipeline. The target part around the inclusion of EVX-B3 pipeline with MSD assuming responsibility for our existing pipeline asset, EVX-B2. So I would say all in all a perfect fit into our strategy and the three-pronged business model that we are executing upon. And with that, let me just go into the actual MSD agreement and talk a little bit about what it means for us, what it means for patients and some of the details. First of all, I think it's fair to say this is a transformative partnership for Evaxion, no doubt about that. It has significant financial and strategic value to us, both on the short term but also on a long term. We will be receiving an upfront payment now of USD 3.2 million. We will be receiving up to $10 million in 2025, which is contingent upon MSD, exercising its option to license either one or both candidates, i.e., important near-term cash coming in in this year and in 2025. Then we have milestone payments of up to $592 million per product plus royalties on sales. And this is important because, of course, this provides a very critical source of income and funding for the years ahead and allows us to look further into the future when we are planning our strategic initiatives. What it also means having this agreement with MSD signed is a massive validation of both our AI immunology platform and our pipeline, and this is from the world leader in vaccine development and commercialization. And that's also important, the fact that MSD is the world leader in vaccine development and commercialization because this will enable a fast and effective development of EVX-B2 and EVX-B3 to address serious unmet needs. As Birgitte will show later, there are no vaccines available today for any of these 2 infectious diseases which, of course, means that we are addressing a serious unmet need and thereby a significant commercial opportunity. This is also a strong -- example of strong execution on our partnership strategy where we are focusing on monetizing the value of both our platform and our pipeline candidates. So it's fair to say truly a transformative partnership for Evaxion. Let's jump to the next slide and go a little bit more into details with the agreement and then an overview of that. It's an option and license agreement on 2 AI immunology designed novel vaccine candidates. EVX-B2 is a protein-based vaccine candidate for gonorrhea, EVX-B3 is a vaccine candidate against an undisclosed bacterial pathogen. MSD is to take full responsibility for the further development and commercialization of both vaccine candidates following option exercise. So that's the overall structure. And if we then jump to the next one to look at the financials in the agreement. Then as already mentioned, we have an upfront $3.2 million due now upon signing, exercise payment in 2025, up to $10 million. Then we have development, regulatory and sales milestones per product of up to $592 million. One thing that's important here is, if you're looking at getting to total deal value, then milestones are not additive per product, hence you can't just say $592 million and time it by 2 to get to total deal value, because the way the agreement is structured is that there are certain rebates when both products are licensed. So important that it's not additive but up to $592 million in milestones per product. Then we have low single-digit royalties on sales. So with that brief overview, let me just hand over to Birgitte to give a little bit of insight into the gonorrhea market to start with.

Thank you, Christian. So I would like to start with just introducing what the medical needs for gonorrhea is and what the market potential is for a vaccine. So CDC, Centers for Disease Control and Prevention, they classified gonorrhea as an urgent threat. And this classification relates to the limited treatment options available as gonorrhea has quickly developed resistance to all but one single class of antibiotics. And further, as Christian alluded to, there's no preventive gonorrhea vaccine available currently. Further, we do see very high estimated numbers of new cases with more than 80 million infections annually. The global market is estimated to $2.1 billion in 2027, and that is based on, of course, the antibiotic sales numbers and does not link to a vaccine. As I mentioned, there's no approved vaccine currently. So with this high medical need and an attractive market potential, we decided to develop the EVX-B2 vaccine candidate against gonorrhea. And EVX-B2 is a multi-component protein-based vaccine candidate that we have designed with the use of our AI-immunology platform. EVX-B2 is a preclinical asset which demonstrated ability to protect against several Neisseria gonorrhea strains in a vaginal colonization mouse model, and the data here is depicted to the right. Furthermore, we have also shown that EVX-B2 is efficient in killing more than 50 clinically relevant Neisseria gonorrhea strains. So now let's turn to the EVX-B3 program. So we initiated this project in September '23 as a collaboration with MSD, with the objective of developing a vaccine against a bacterial pathogen. And it aims to address a serious global medical issue by targeting a pathogen that we know is responsible for recurrent infections, there's also increasing incidents and there's often associated severe medical complications with infections of this pathogen. And again, there is no vaccine available currently. We have completed the first phases of the collaboration with MSD, and we are now in the late stage of this program.

Thank you, Birgitte. I think it's very clear from the presentation here that significant unmet needs that are to be addressed. And in the end, of course, that's one of the reasons for us being here. So very happy to have the opportunity of partnering with MSD on these 2 assets. So to sum up this part, again, a transformative partnership for us. provides us with an important source of revenue, both cash in hand now, but also milestones and payments coming in in the future, of course, assuming that MSD is exercising the option. But very important validation of our platform and our pipeline. And I could think of no better partner than teaming up with the world leader in vaccine development and commercialization for bringing these assets forward. So at Evaxion, we are truly excited about the prospects here, of course for patients but also for us as a company. And with that, we want to leave the MSD agreement for now and then just zoom in a little bit on some of the milestones that we have communicated over the past months because it has truly been a busy month, and these milestones have been so important that we also felt it was a great opportunity of just recapping what it actually is that we have presented. During September, we have been presenting the launch of our EDEN 5.0. We are presenting the preclinical proof of concept on EVX-B2 as an mRNA version and then we had the readout on EVX-01 Phase II 1-year readout presented at ESMO. And then Birgitte will go through these in a short while. But also just to touch upon the milestone of EVX-B3 and the collaboration with MSD, where we had the conclusion of target discovery and validation work. Of course, you can say now we have made the license agreement around B3, but also with the inclusion of B2 in that. So truly exciting. We are on track for a preclinical proof of concept for the precision-based ERV cancer vaccines, also in the second half. And for the ambition of generating 2024 business development income or cash in equal to our 2024 cash burn, then we now have the first $3.2 million in here. But of course, it's also clear that we are getting closer to year-end. But we do have an exciting pipeline of business development deals, which we are progressing on. But also clear, of course, time is limited for the rest of 2024, so the risk in getting to $14 million this year is increasing. But of course, now we also have the USD 10 million coming in in 2025. So even though some deals might push into '25, we will remain very encouraged about our business development pipeline and the activities we have ongoing here. And we will continue driving those deals forward, whereas we have communicated previously, there's a strong interest both in our platform but also in pipeline assets. And with that, Birgitte, will you say a few words around first, the EVX-01 2-year or Phase II 1-year data?

Yes. So as Christian mentioned, one of the milestones achieved in September relates to our EVX-02 program. So at the ESMO Congress, we presented 1-year clinical data from our ongoing Phase II study investigating the effect of our personalized cancer vaccines, EVX-01, in combination with anti-PD-1 therapy in advanced melanoma patients. So we've reported an encouraging overall response rate of 69% as per RECIST. Additionally, we could see a reduction of the tumor target lesions in 15 out of 16 patients depicted here on the waterfall plot to the left. And as shown in the graph to the left, the majority of the tumors continue to decrease in size. And we are eagerly following the patients' progress over time and are looking forward to the full data readout in 2025. And if you're interested in learning more about this EVX-01 data presented at ESMO, you can visit our website where we have additional information available. So one of the other major milestones we have achieved in September, that was the launch of a new version of our EDEN model. And we use in to identify B-cell antigens included in our infectious disease vaccines. And this upgraded EDEN version can now predict toxin antigens allowing for development of improved bacterial vaccine. And we know that bacterial toxins are often the key contributors to disease and with neutralization of those that is definitely essential for developing effective vaccines. And we strongly believe that this new addition will have a great impact on our future vaccine design. And yes, it's been a busy month. And the last of the 3 milestones achieved in September was on our EVX-B2 messenger RNA program. So in September last year, we entered into an agreement with Afrigen Biologics to develop a messenger RNA EVX-B2 vaccine. And earlier this month, we presented the preclinical proof of concept for this vaccine candidates. And we saw that it could trigger a targeted immune response in mice shown in the graph in the middle panel here with the ability to eliminate several Neisseria gonorrhea strains, and that is depicted in the figure to the right. And the data provides preclinical proof of concept for this messenger RNA-based version of EVX-B2, but it also underlines that AI immunology identified antigens are delivery, modality-agnostic as we have shown that both protein-based vaccines and messenger RNA vaccines are definitely able of -- capable of inducing a targeted immune response.

Thank you so much, Birgitte. So just to sum up here before we open for Q&A, I mean, we have just signed a transformative partnership with MSD validating our platform pipeline and strategy, which also significantly improves our financial outlook. And we continue to execute strongly on our strategy. We have achieved a number of milestones as planned and communicated and among those groundbreaking Phase II data on EVX-01, which clearly underscores a significant commercial potential for this personalized vaccine candidate. Then what we have been doing during the past many years is a continuous development and improvement of our AI-immunology platform, which we now have also taking a step further with the launch of EDEN 5.0. And then again, the mRNA B2 data is validating the delivery modality agnostic feature of our platform. So all in all, I would say we are very well positioned for a long-term value creation and a continued strong execution upon our strategy. So with that, we would be happy to open for Q&A and take any questions you might have.

[Operator Instructions] And the first question comes from the of Thomas Flaten from Lake Street Capital Markets.

Christian, just on the economics of the deal. So for example, you said that we shouldn't duplicate the $592 million, but can we assume that the $10 million is $5 million a piece, and if they elect to go with only one compound that it would be $592 million divided by 2? Or how should we think about if they move forward with a single opportunity only?

Yes. The way you should -- the up to $10 million is if they exercise both. I think we haven't provided the details on single, but I can say it's more than $5 million. And the $592 million is the potential highest milestone on a single product. But the way you should look at it is that if both are being brought forward, the economics will not be 2x $592 million but in fact less than 2. And the reason for not disclosing that number is it depends on quite a lot of different things. So it's difficult to come up with a precise number. So we rather wanted to guide on the highest possible on the max for a single product, if that makes sense.

Yes. No, that's super helpful. And then second question, what are the data points that triggers the milestones that would put Merck in the position of exercising one or both opportunities in 2025?

I mean for EVX-B3, it's in principle just finalization of the work plan that we entered into last year. So that collaboration was not concluded, is still running. So it's finalization of that. So that's the original work plan we set out to do, where we already have given an update on the first basis of that. Reason for entering into this agreement now is that we have been seeing quite strong interest in EVX-B2 from other parties, and MSD had a strong interest and also, yes, taking on EVX-B2, and that's why we decided that now we are going to combine both B3 and B2 into one licensing agreement despite the fact that the work plan related to B3 is not final. So you should see for B3, it's finalization of the original work plan. For B2, it's -- I would say, some preclinical validation where the MSD will be doing.

The next question comes from the line of Swayampakula Ramakanth from H.C. Wainwright.

Christian, Birgitte, congratulations. So just like EVX-B2, which is a protein-based vaccine, EVX-B1 is another protein-based vaccine that you've been working on for a while, which is against Staph aureus, that being a big unmet need, what's the interest of companies such as MSD to initiate a transaction with you folks?

I mean, of course, RK, now I can't comment specifically on B1 in an MSD context, but I can say that we are seeing interest in B1 from potential partners. I think it's also fair to say that there has been some who have been concerned by the prior clinical failures in the Staph area. But fortunately, as we also have communicated, we did present some exciting data in large non-rodent animals earlier on this year, which is definitely providing comfort. So this is one of our priorities from a BD point of view to focus on getting into a partnership around B1, because as you say, there is a significant unmet need and it's a fairly advanced candidate as well. So that has a lot of focus, and we are in discussions around that.

Okay. And then on the B2 mRNA vaccine that you're working along with Afrigen. What more work do you need to do with this? And then would a deal with Afrigen end up being similar to the one that you just signed with MSD or how should we think about that because that's another one waiting to happen?

Yes. I mean I first take the deal-related question and then I'll hand over to Birgitte for the additional work. You can say, from a deal perspective, first of all, of course, the collaboration with Afrigen is for low and middle income countries. So you can say from a commercial perspective, quite different than the territory for the MSD agreement, which is worldwide. So you should not be looking at similar financials in an agreement with Afrigen around low and middle income countries. I think that's very clear, because the territory is different. And Birgitte, do you want to say a few things on...

So the data we presented here in September was initial preclinical work. And there's, of course, more work in front of us. We will do different versions of the messenger RNA construct and test those on animals, and we will also look at the ability of the vaccine to induce a broad response against many different clinically relevant streams as we have done with the protein-based version of the vaccine. So we just added on the preclinical development.

And the last question from me is on EVX-01. Obviously, it was very exciting data that was released at ESMO. So post that data release, what sort of inbound calls are you getting? And what's your confidence on partnering that molecule out, if not in '24, at least in '25?

Yes, you can say, of course, we only presented the data about 2 weeks ago, but I think it's also fair to say that there is a lot of excitement around the data both from, I would say, the medical community, but also from the pharma world. And so that's an important first step. And then, I mean, this is also a focus area for us to advance possible partnership discussions on EVX-01. It had naturally been awaiting the data readout here. So that's something that will be a focus area in the time ahead. And you can say, okay, it's always very difficult to give predictions around likelihood of doing a deal. But as you say, the data is good. It's a different modality than what's on the market today. But I would say also supported by the Moderna Merck data, there is definitely growing confidence in cancer vaccines. So I'm optimistic that we can advance discussions here. And I think you should probably look more at that as into '25 rather than '24 deal.

As there are no further questions, I would now like to hand back to Christian Kanstrup for any closing remarks.

Thank you so much. And I would also like to thank all of you for joining in on this call, which marks an important point in time in the vaccine journey with a significant expansion of our MSD vaccine development collaboration and also having delivered on a number of important milestones over the past months. So we will surely continue focusing on executing on our strategy, which includes a strong focus on partnering and are appreciative of the validation and the trust from MSD in both our platform and in our pipeline. So we are looking forward to continuing that collaboration in parallel with advancing other discussions as well as, of course, continuing the Phase II trial with EVX-01 based upon the exciting and encouraging data that we presented at ESMO. And with that, I would like to thank you all for listening in and giving us the opportunities to present the latest status here. Thank you so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.