Faron Pharmaceuticals Oy (FARN) Earnings Call Transcript & Summary

Good morning and good afternoon, ladies and gentlemen, and welcome to Faron's Half Year Presentation Conference Call and Webinar. [Operator Instructions] The presentation is being recorded. [Operator Instructions] I will now hand over to Markku Jalkanen, CEO of Faron. Please go ahead.

Thank you. Good afternoon and good morning for those in the U.S. Thank you for joining us for this half year results presentation. We would obviously like to do this live, for example, in London, but obviously, the COVID-19 is setting up the corporate limitation for us. And hopefully, in the future, we have a possible to meet face-to-face again. But I hope it works this way, and we really appreciate your flexibility and the patience in this matter. I'm joining this call with Yrjö Wichmann, our VP of Funding, sitting here with me in this headquarter space; and then we have our CFO, Toni Hänninen, joining from Zurich. And obviously, we all are available for the questions at the end of the presentation. So moving on to the second slide. It's just a reminder that we're a public company and this disclaimer is really telling conditions. And obviously, we may be doing some forward-looking statements, and that's just for the completeness of the presentation. Then moving on to the third slide. I hope you like our fresh new slides. We have been spending some time really to renew it, and this is the first time we are using them. So we believe that all the 3 projects we have, they are all focusing on harnessing the power of the immune system that is protecting us from a number of different conditions. The immuno-oncology product is to remove the immunosuppressive elements from the tumor. And obviously, we hope that, that will result in the activation of the immune system and actually could start fight against the tumor. Then with the CD73 activation, we actually produced one of the most anti-inflammatory product in our system, and that's adenosine. And obviously, we believe that that actually could impact a number of conditions, including the COVID-19, which eventually will damage our lungs, and that's the reason why people are dying from that condition, and we will come to that one as well. And then we have a third one, again, focusing on the immune system. We believe with the new findings in this area, which we call Haematokine, has a capacity to renew our hematopoietic stem cells, and I have here the information on that as well in my presentation. So the Slide #4 is really summarizing what we have at the company. We believe that we really have a pioneering immune techniques to save lives. If that is really the case, we have a breakthrough possibility for a number of these drug candidates. You also know today that we are hard to -- treating a hard condition, which is usually life threatening, including, obviously, the cancer, also the lung problem, respiratory problem. And whenever nowadays, you have a success in these products, normally you have a fast-track or other regulatory favors and that usually means that you also can get the drugs very fast to the market. So we think that we have multiple assets really to take to the market during the next 2 years, and that is illustrated in our pipeline on Slide #5. The MATINS trial is focusing on this anticancer treatment, Clevegen, where we remove -- we put -- repeat the immunosuppressive macrophages which have invaded the tumor to protect tumor cells against the host immune system. The MATINS part here looks a little bit small, but remember that actually contains 10 different individual cancer cohorts, which are under the way really to produce signal on treatment later this year. We're also aiming to initiate hematological cancer trials next year, and I'm preparing material for that part as well. Then with Traumakine, the active ingredient, it's interferon-beta. It has to be given intravenously in order to protect the lungs. Subcutaneous or inhaled will not have the same effect as the intravenous will have. And this drug is now in 3 different trials, the well-known WH Solidarity, but also the REMAP-CAP because originally community-acquired pneumonia, but it's really heavily dominated at the moment by the COVID-19 affected patients. And the third one where we believe that we have a final analysis of the -- not only the interferon-beta but compared to the dexamethasone treatment as well, and that will be carried out in U.S. only, and that's soon underway as well. And then also spending a little time, not that much, on the Haematokine to prepare the IND package. And once that's ready, we will then move on. And if you look at the Slide #6, we have kind of highlights for the Clevegen during the last 6, 8 months. So the completion of Part I gave us a guidance how to move on, and we selected 1 mg per kilo dosing. It's much lower than normally. These antibodies are given -- obviously, it's based on the good safety and initial efficacy sign. It's now expanding in Part II with those 10 cancers cohorts, as I've already indicated. We have presented the data both at ASCO and ESMO, very recently, also in ESMO. Got a lot of attention and a lot of questions later on, what are the mode of the action and so on, and we come to that one later on. And we have been extremely surprised that the recruitment of this MATINS Part II trial has gone so well. Part of the reason the clinicians have said that they have not seen this good safety with the modern cancer drugs, and they are very pleased that they don't need to be worried about that part at all. And nowadays, the CLEVER-1 active ingredient is a monoclonal antibody and it's given the name bexmarilimab and you start to see that in the future use. And on the Traumakine side, as I said, 2 big global studies and third one on the preparation. We also published a paper describing the risk and the molecular mechanism why the corticosteroids cannot be in line with Traumakine. They may be used so that the interferon-beta treatment is first and then corticosteroids later on, and we may discuss that later on. And we have also decided a new manufacturer for interferon-beta due to the fact that we have no condition to produce that from the previous source. And obviously, we have important markets already about this litigation, and I may ask more about -- say more about that also in the later stages. Then I will turn the word to Toni, who would actually look at the financials of the company for the first half of the year. Toni, please?

Thank you, Markku. On to Slide 7, so financial highlights of the period. We did a EUR 14 million gross equity round in April very successfully, which brought our cash balance for the end of H1 of EUR 11.6 million, which is a significant increase compared to prior year, where we had EUR 2.9 million in the bank. The operating loss has increased to EUR 7.1 million from EUR 6.3 million as a result of accelerated R&D and then trial expenses that we have here. And our net assets of EUR 7.3 million are significantly stronger this year than it was last year, where we actually had a negative number of EUR 1.8 million. During H2 and ongoing, we have nondilutive funds which we have announced of EUR 7.9 million, and these are not included in the cash balance of EUR 11.6 million. So that is an ongoing cost period. And that as a sum brings us in the current working capital into quarter 1. And that assumes full expansion of those 10 cohorts in the MATINS that Markku just mentioned a few slides ago. On the intellectual property side, we have further gotten more -- granted more IP protection on the Traumakine and same also for the Clevegen or bexmarilimab. And also in the Haematokine, we are pending. So we are clearly working very heavily on that and have received the first review. So that is ongoing. And of course, additional IP protection is all the time sought very actively to protect our assets. So I'll hand over back to Markku. Thank you.

Thank you, Toni. And moving on, looking to Slide #8, and then moving on to Slide #9. The -- targeting the myeloid cells, we are not alone there, but there are just a fraction of that activity, what is with the PD1 and PDL1 and as a matter negative checkpoint inhibitors. You can see in the Slide 9, those targets, which are already recorded to be in different clinical phases. And obviously, macrophage colonizing a [indiscernible] is one of the key one, but there are already [indiscernible] in there. It's [indiscernible] said that the myeloid cells are the ones that actually can generate the immunosuppressive elements and they can promote the cancer growth. That concept is and has been there quite a long time. So in order to kind of improve the current negative checkpoint immune -- checkpoint inhibitor efficacy, you need additional theme, and myeloid cells are predicted to be one that actually may have a significant impact on those. And obviously, if you then look at the Clevegen, now moving on to Slide #10, there are a list of things on the top of this table. And as you can see, many of them are critical for a development of the cancer and making it to really metastasize. At those points, all of them are affected by anti-CLEVER treatment. And the main theme there is that it can reprogram those macrophages which are along the tumor or inside the tumor. And with that reprogram, you redifferentiate them and activate them. You can make them to survive much longer and make even regulation of the proliferation of the new cells. And all this means at the end of the day that you have an active immune system that can actually recognize the tumor. So we should really have a very unique possibility as illustrated in Slide #11. This is the famous tumor life cycle presentation where we can actually see the important happenings. One of them being the initial activation of immune system against the tumor antigen, taking them to the lymph node and presenting them to the immune cells, which then come back and kind of a traffic to the tumor where they can actually start to fight against the cancer. And without this activation, we would be in a hopeless situation. So why CLEVER-1 is so important is partially shown already in Slide #12. The top panel shows the expression of CLEVER-1 in various stage tumors. The blue one is a low expression and the red one is a high expression. And if you take all the tumors which are recorded, and I can say that this is a really significant number of patients, you can see less -- CLEVER-1, you have better survival rate [indiscernible]. Then if you look at the current immunotherapies, the ones that have no efficacy, have high expression of CLEVER-1. The one that have lower efficacy have a heavy expression of CLEVER-1. And then further on, on the right-hand side, there is an example of uveal melanoma. There's no treatment for it at the moment. How dramatic the difference between these expressions are. If you have a high expression of CLEVER-1, you have no hope at all. So obviously, what Clevegen antibody will do is to remove the CLEVER-1 function from that environment, and that's the reason why it can be so helpful. And if you then think about how it does it, we know that it helps to activate the T-cells to remove the T-cell exhaustion. That is one of the broke -- the negative checkpoint molecules, especially in the middle, if we lock all the genes analyzed from these kind of conditions where T-cells are exhausted, you can see that the Stabilin-1 that is the gene that is encoding for CLEVER-1 has a very prominent position and some other information here just supporting that. So we have an indirect evidence from the existing tumor materials [indiscernible] really to kind of support the fact that the CLEVER-1 expression is critical for the survival of these patients. Slide #13 is the description of the current MATINS situation where we are. As said, Part I gave us a dosing 1 mg per kilo. We are doing some additional cohorts to test also the frequency. Now we have a 3-week interval, and obviously, we want to know if we can increase the efficacy going down to 2-week or 1-week interval, and we are just about to expect to get the approval for that part as well. In Part II, we have 10 different cohorts. We have indicated those previously. And at the moment, we have an understanding that already 4 of those, which I indicated with the dark color on the right-hand side, are the candidates to move on to the Part III. That is the pivotal part containing first 30 additional patients or 29, and then moving on to the pivotal part based on the discussions that we will have with [indiscernible]. That selection is based already on the data what we have, but obviously, we would like to have all the patients for each of the groups standardized and then moving on. And again, reminding, no safety issues. As shown in Slide #14, there are no really grade 3 to 4 adverse events among these patients 30. There are some grade 1 and 2, like [indiscernible] cancer patients, these are not serious ones. So we believe that the safety is really good, and we have not obtained maximum dose toxicity. And at the same time, we already have patients who have clinical response, 2 partial responders and 2 stabilize after the first image has been taken. And obviously, this is very exciting us, and we continue. And we also know that at the same time, when you have this patient treatment ongoing, we increased the peripheral natural killer cells which are needed to close or slowdown cancer growth, but also to increase the plasma interferon beta [indiscernible] which is the 2 cells are using to fight against the cancer. Slide #15, illustration of 2 responders. The orange arrows indicated the shrinking metastases of the lungs. In these cases, there is a COC, colorectal cancer, on up and then refractory melanoma, which, by the way, had already gone through the PD1 treatment and had no efficacy on it. So this is a very promising in our mind. And obviously, in the next 3, 4 months, we'll be very excited to get the data from those additional cohorts which are now expanding and some of them are already completed because the recruitment has been really good. Then one of the biggest surprise was published in last December at the ESMO Immuno-Oncology Meeting, and this finding is illustrated on Slide #16. Here, we can see analysis of different receptor and negative inhibitor molecules, and the red one is up regulation post-Clevegen treatment, the difference is in 7 days, and the blue ones are decline. And if you look at the red ones, there are really no immune activation involved receptors and chemokines, as they are articulated, and that's what we're expecting. But if you then look at the big line and that's the very interesting finding. Many of the negative immune checkpoint molecules are declined, including CTL4, PDL1 and also PD1, indicating that this single treatment actually could take down those -- the other drugs targeting at the moment. Those drugs are selling [indiscernible] this year, maybe even more. And you can then see on the right-hand side also, the activation of CD8 effector sales, which are part of that activation we would like to see in the cancer patients. And also want to remind here, these patients are patients who had no alternatives anymore. They have done maybe 4 to 6, 7 different lines of treatments, and that is the reason why these findings are so important. And obviously, everybody is interested to learn more how we're going to progress and will there any combinations coming? We will report once we are ready to report. I can't say more at the moment. Then I turn the word to Yrjö, who would like to say a few words about the potential of the Clevegen project.