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

Good day, and thank you for standing by. Welcome to the Evaxion out-licenses vaccine candidate, EVX-B3 to MSD Webcast and Conference Call. [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, Interim CEO and CSO, Birgitte Rono. Please go ahead.

Thank you. So good morning and good afternoon, and thank you all for joining us, and a warm welcome to this exciting conference call. I am Birgitte Rono, CSO and Interim CEO of Evaxion, and I'm joined today by Thomas Schmidt, our CFO; and Mads Kronborg, VP of Investor Relations and Communications. So earlier today, we shared an important update. MSD or Merck has exercised its option to license our EVX-B3 program, and this marks a significant milestone not just for Evaxion, but for the broader field of AI-driven drug development. It is the first time a pharmaceutical company has in-licensed a vaccine candidate, discovered using AI. And we are extremely proud to be leading this change. So today's call will, of course, focus on this major milestone and alongside, MSD holds an option on a vaccine candidate, EVX-B2 for which the evaluation period is extended with a decision period on potential in-licensing now expected in the first half of 2026. So let's begin by walking through the agenda for today's presentation. So I'll begin with the highlights of the MSD deal, and then I'll walk you through our proprietary AI immunology platform and how it enables a novel vaccine target discovery. And then Thomas will present our financial and cash position, and I will return with some conclusion remarks before we open the floor for a Q&A session. Before we dive into the detail, I would like to remind everyone that today's presentation may contain forward-looking statements and these are subject to risks and uncertainties and actual results may differ materially. So this is a historic moment not just for Evaxion, but also because it marks the first ever in-licensing of an AI discovered vaccine candidate by a major pharmaceutical company. The exercise fee of USD 7.5 million extends our runway into the first half of 2027. The deal confirms our strategy of value creation through partnerships, even with industry giants like MSD. It also validates our AI immunology platform and our R&D pipeline and further, it ensures future development of the EVX-B3 candidate without cost for Evaxion. And not related to the EVX-B3 deal as such, the EVX-B2 evaluation period has been extended. So let's take a closer look on how this partnership with MSD has evolved over time. In 2023, we began a target discovery collaboration our EVX-B3 addressing a bacterial pathogen with high unmet medical need where no vaccine is available. One year later in 2024, the collaboration expanded to include EVX-B2 with an upfront payment of USD 3.2 million and potential milestones up to $592 million per product. And now in 2025, MSD has exercised its option on EVX-B3 by extending the evaluation period for EVX-B2, demonstrating commitment to both programs. It fits into our broader pipeline and strategic milestones for this year. As you can see, 2025 is shaping up to be a pivotal year for Evaxion. We have already achieved several key milestones and more are on the horizon. We've completed EVX-01 dosing and release supplemental Phase II data. We've added a new infectious disease vaccine pipeline candidate, and we have now seen that MSD has exercised the option, which brings in USD 7.5 million. Looking ahead, we expect further progress of our cancer vaccine candidate, the CMV program and also a progress within improving our AI immunology platform. Further, we also anticipate an additional new business development agreement. And now let's shift focus to the technology that powers these breakthroughs. So AI immunology is the heart of our innovation. It's our proprietary platform that has been validated in 3 clinical trials. It is fast, we can do target discovery within just 24 hours. It is scalable, and we can apply AI immunology to over 100 different diseases. We have also seen that we can reduce the testing by 80% and the platform is also delivery platform agnostic. It works across protein, DNA, messenger RNA and peptide modalities. It is extremely accurate. We have seen in our EVX-01 Phase II trial that we have a 80% hit rate of the vaccine target that we have administered to the patients. It is also cost effective. We can see that it is 90% cheaper than reverse vaccinology, which is the standard way that pharma is identifying novel vaccine targets. So let me describe how our AI immunology works in more detail. We see it in genomic, transcriptome or a proteome date and then our AI model identifies the most promising antigens for vaccine development. It then spits out a ranked shortlist that we can start working on and it accelerates vaccine validation and design. We have used AI immunology in our EVX-B3 program. So EVX-B3 is a prime example of our platform's potential. It targets a bacterial pathogen with no approved vaccine despite decades of research. Previous efforts have yielded little progress. So EVX-B3 could be a breakthrough addressing recurrent infection and severe complications caused by this pathogen. And now MSD has decided to in-license this program, which underscores the potential of the EVX-B3 vaccine candidate as such. And also the ability of our AI platform to identify therapeutically relevant vaccine targets. Now let's turn to the second program under evaluation, EVX-B2. MSD decision to extend and an expand the evaluation period for EVX-B2 reflects their continued interest and commitment to this program. With further testing underway, a licensing decision is expected in the first half of 2026. And if MSD decides to exercise, Evaxion will receive $2.5 million in option fee and up to $592 million in milestones as well as royalties on sales. So let's take a closer look at what makes EVX-B2 so promising. EVX-B2 addresses a critical unmet medical need, gonorrhea. With rising antibiotic resistance and no existence prophylactic vaccine, our multicomponent approach offer a compelling solution. The preclinical data is strong, and the global impact could be significant as more than 80 million new inspections were reported globally in 2020. Now I will hand over to Thomas, who will walk us through how this deal impacts our position.

Yes. Thank you, Birgitte. And as Birgitte said, truly a remarkable day for us as Evaxion as we've now outlicensed the B3 program. And the program in itself and the deal that we have made with MSD is obviously that here and now, we received USD 7.5 million on the in-licensing of the B3 program, which obviously also means that all future costs in development now will be dealt with from MSD perspective. So we will have no cost further involved in that. But we will have potential milestones to support our future cash generation as hopefully, the program progresses through development phase, regulatory approval and sales with a total of up to USD 592 million as well as royalties included in the deal. So truly a remarkable change also in terms of how we can generate future cash. And if we do look at our cash position and what this also means for our cash position. First and foremost, let me also just mention the initiatives that we have done throughout 2025, so far in with a focus to strengthen our financial position. Earlier in the year, in January, we have done capital market activities and public offering, totaling close to USD 17 million. In July, we also announced that we did an agreement with the European Investment Bank to convert debt into equity worth USD 4.1 million. The USD 4.1 million, I should, of course, mention is not cash income, but will improve not only our balance sheet, but also the upcoming and forthcoming interest rate to be paid. So therefore, also improving our cash flow as we move forward. And now as of today, during September and as announced today, we then will receive $7.5 million income from the in-license of the MSD -- or out license, sorry of the MSD B3 program. That will bring our cash runway into first half year of 2027. So really also gives us a nice cash position and a nice cash runway to fund the continued operations of our company. And I think as biotech -- tech bio company, that is really, really a good position that we have moved ourselves into with these initiatives. And with that, I hand it back to Birgitte.

Thank you, Thomas. So as we conclude today's presentation, I would like to highlight the significance of this deal. So the deal represents a strong validation from a global leader in vaccine development, reinforcing the credibility of our AI platform and the strength of our R&D pipeline. It also confirms our strategy as it underlines our ability to out-license and monetize assets through high-value partnerships. And moreover, it underscores the uniqueness and value of our proprietary AI immunology platform, which continues to deliver differentiated vaccine candidates. And finally, as Thomas just alluded to, the agreement strengthens our financial position, extending our cash runway into the first half of 2027 and provides a solid foundation for continued execution. So thank you for your attention, and we are now happy to take your questions.

[Operator Instructions] And your first question today comes from the line of Thomas Flaten from Lake Street.

First question for Thomas. Will this be recorded as revenue? Or will it be just a pure balance sheet transaction when we look to update our model?

Yes. So the $7.5 million that we will now receive from Merck will be recorded as revenue.

Excellent. And Birgitte, can you maybe give us some more detail on the nature of the extension of the evaluation period into the first half? Was it just work they didn't complete? Was there incremental interest in doing some different work? I'm just trying to understand, that's a pretty significant delay. And I'm just trying to understand what caused that?

Of course. So we have been working with the MSD research lab on the B2 for almost a year now. And they have done several experiments confirming our findings. We know that they're interested in strengthening the data package. So with this extension and I also call it expansion, they're conducting several new experiments.

Okay. So just to clarify, it's an extension and an expansion?

Yes.

Your next question today comes from the line of Kevin DeGeeter from Ladenburg Thalmann.

Really exciting announcement. I guess just sort of stepping back, one of the promises of AI sort of target discovery is the ability to kind of scale and scale rapidly. How many potential targets could you sort of look at with other pharmas perhaps from a business development perspective with the available resources and kind of just stepping back, kind of any learnings from this experience from Merck. I mean this was a bit of a unique opportunity to take, target of interest by Merck and just really sort of run it all the way through to license. Yes, I'm just trying to understand if you can do more business development, how quickly can this model kind of scale?

Yes. Thank you for that question. So it definitely depends on how far we take these programs. So our AI immunology platform would be able to identify promising targets within 24 hours. And then, of course, after AI immunology ranking the top candidates, we would do some design experiments and would also manufacture these candidates for preclinical systems. So in terms of limitations for indications, we don't really see any limitations. AI immunology is also scalable. We can -- we expect that we can use the platform in other disease areas where there is a strong immunological component. So I don't see that there are any limitations in terms of how many deals can you make within this space as it is scalable to other therapeutic areas. And one key example, autoimmune diseases where I think there's, in the past, been a focus on civil targets and not a lot of new ideas are coming out in this space. We would definitely be able to use AI immunology and target these diseases in a different way than what have been done in the past.

Very exciting. And then just as sort of my follow-up, you mentioned business development in your prepared comments. Getting this license agreement done, I think, is likely to help in any future business development discussions. Is your priority more with regard to potentially out-licensing the Evaxion developed programs that many of which you've already disclosed to the investment community? Or is it more focused from a business development resource perspective on opportunities like this one with Merck, where the pharma brings you a candidate that the investment community hasn't learned about previously and may not know that much about initially.

Yes, really great question. So the answer is we will do both. We definitely welcome any requests on target discovery collaboration. So similar to what we have done with MSD. But we will also continue with our own R&D pipeline. So taking programs to preclinical development and also select candidates into early clinical development. So it will be -- the focus is on both of these 2 tracks.

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

Congratulations. With the added $7.5 million to your balance sheet, where do you see the immediate need for funds? Is that going to be utilized more in pipeline/new molecule development? Or is it going to be earmarked more for expanding your AI models and trying to bring another new immunology platform?

Yes. Thank you for that question. So we will definitely invest in improving our AI immunology platform in the future. This is not a very costly exercise. We use, yes, public data for improving AI immunology and then building new tools. So this is more a resource demanding exercise. We will, of course, also invest in our R&D pipeline in the future and since we have our own lab and animal facility, we can actually move fast and also pretty cost effective from AI target discovery into preclinical development. And then, of course, it becomes more costly if you take programs into the clinic. The ambition of Evaxion is to continue to do preclinical -- early preclinical studies and late preclinical studies and also taking them into the clinic.

Fantastic. Regarding EVX-B2, the decision that Merck is yet to make. I know you gave some color regarding how they want to progress from here. But in your own discussions, based on all the data discussions that you did on B3, what do you surmise Merck is thinking regarding the B2 program? And how definite are you that they would follow through and pick up that option as well? I mean, exercise that option as well before the end of first half '26?

Yes. So as I mentioned, MSD will do more testing of EVX-B2, so expanding the evaluation program. I think we will not speculate on when they will decide, and I'll not speculate on what exactly they would like to see, but there's no doubt that they have continued interest in this program.

Very good. And then coming to EVX-01, it's exciting that within a month from here, we're going to see the 2-year data point. And Merck also has interest in melanoma with KEYTRUDA potentially losing its patents in 2028. So do you see a path forward with Merck on that or any other anti-PD-1 -- currently anti-PD-1 therapies, which are out there for melanoma?

Yes. So it's very exciting that we will be presenting 2 years data from our EVX-01 Phase II study at ESMO on October 17. We are -- as we've mentioned earlier on, we are looking for a partner for our main assets and Merck could definitely be a good fit, but it could also be another pharma company with an interest in personalized cancer vaccines. So I don't see that we are limited or that it can only be MSD. It can definitely be another pharma company.

So last question from me. So on the docket, you still have 2 clinical candidates to announce. One is in the ERV and the other is infectious disease. So when you plan to announce the made candidates for these 2 programs, would you also be presenting any preclinical data around them? Or would it just be the candidates?

No. We will definitely be presenting preclinical data on this vaccine candidate later this year. Yes, we are extremely excited about the ERV-based cancer vaccines and their potential within this share vaccine field.

[Operator Instructions] And your next question today comes from the line of Soumit Roy from Jones.

Congratulations again on the out-licensing deal A quick one, broadly looking at the business development perspective, the ROI seems to be better in the infectious disease area. Is this where we can see the company completely converting over the years? Or oncology still remains a major focus?

I'm not entirely sure what you mean. Could you perhaps repeat? So your question was around whether we would solely focus on one therapy area?

Yes, if you would focus -- Turn more into the infectious disease area because the ROI and turnaround seems to be much more effective there going to flu vaccines, which are highly mutable year-to-year and there is a demand for effective flu vaccine every year. Do you see the company more effective in the infectious disease area than oncology?

So thank you for that question. So we do have the ambition of staying in oncology and also continue in infectious diseases and further to expand into other therapeutic areas. We do see a clear fit for AI immunology, so our core platform in several diseases where there is a strong immunological component. So we will definitely try to scale into additional therapy areas as well.

Got it. On the oncology side, the EVX-01, we have the 2-year data coming and I understand these patients will continue with a booster, 2 to 3 booster dosing after 2 year and follow-up. Will there be any further development into Phase II? Or we'll wait for a partnership, and then meanwhile, you move into EVX-03 or any other targets?

Yes. So we are definitely looking for a partner for EVX-01. We will, as you mentioned, we now have a subset of patients in this expansion phase of the trial. So they will receive EVX-01 as monotherapy, and we will, of course, monitor their clinical status but also T-cell responses in these patients. But yes, we are looking for a partner that can continue the development of this very exciting asset.

Great. I missed this, you probably addressed it in the previous question. Did you give us a time line on when the next candidate in oncology will be announced? Or do you have an idea?

We have a milestone coming up in this fall. And that is lead candidate nomination of our ERV-based cancer vaccines. But we have not yet disclosed anything around the next or the timing of our next candidate that will enter into the clinic.

Congratulations again on the deal today.

[Operator Instructions] There are currently no other questions. I will hand the call back to Birgitte Rono for closing remarks.

Yes. Thank you, and thank you for all for participating. And if you have any further questions, please do not hesitate to reach out to us. Thank you.

Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.