Faron Pharmaceuticals Oy (FARN) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Faron Pharmaceuticals Unaudited Half Year Financial Results for the 6 months ended June 30, 2021. [Operator Instructions] I will now hand over to the CEO of Faron, Dr. Markku Jalkanen to open the presentation. Please go ahead.

Thank you very much, operator. Good afternoon or good morning for those in the U.S., and thank you for joining us this conference call where we go over the presentation for the first 6 months of this year. Would be really nice to see you all, but obviously, this is the time where we need to do it this way, but hope to really soon get over this one. I'm here also with our CFO, Toni Hänninen, who is in Zurich. Hello, Toni.

Good morning and good afternoon.

And with that, could I get the next slide, please. That is just to remind -- Slide #2, please. Just to remind you that there will be some forward-looking statements during the presentation, and this is just to disclaim those. Next slide, please. So as you know, we really have been focusing on the immunotherapies where we maximize the system we have to defend ourselves in this rather hostile world. Our main target is CLEVER-1 that we believe is the main cause of this immune suppression around the sides where one example is the tumor. We believe that it actually could probably use a signal, hide me, for the cancer cells. And obviously, that is really important to be moved if we want to target the removal of cancer. We have a very interesting position here. We have other efficacy. We have a number of new gastric cohorts, and this is going to move on to the pivotal phase after further experimentation later this year, and we are all excited. The pipeline -- next slide, please, the pipeline illustrated in the next slide is just an example where we are at the moment. The original MATINS trial has become a platform of us. There we can test various combinations and individual cohorts. And as we have already released, we now have 4 different gas cohorts where we have early efficacy demonstrated. The MATINS patients are a last line patients in the cancer treatments, and we are using a monotherapy. So when you evaluate the results, keep that in mind. And we anticipate really to move on to additional trials on the second half of this year. So a very exciting time for us at the moment. We also have made significant progress with the Traumakine, the second asset, and I will tell that more about as well. And looking at the Slide #5. The -- the significant progress is really illustrated with the fact that now we have a cutaneous melanoma, gastric cancer, cholangiocarcinoma and hepatocellular carcinoma, solving a disease control rate that is from 30% to 40%. And again, this is a stand-alone treatment post other treatments these patients have gone through previously. And additional trials are really planning to start, and I will call some of them over. And at the same time, we have really security patents in U.S. and Japan to really protect bexmarilimab. But then more importantly, we finally -- not finally, but have succeeded really to get the companion diagnostics to really measure the CLEVER-1 from the tumor samples, and this is a really important aspect as well. Traumakine now has part of this Phase III -- Phase II/Phase III trial in the U.S, we call it HIBISCUS and there we have a significant support from the Department of Defense. So with that one, we believe that we can finally solve the problem in which order the current treatment should take place in those patients. And obviously, we are in favor of starting that with [indiscernible], Traumakine and then continue with additional medication if needed, and it's a very exciting project as well. With this I -- next -- the next slide, Slide #6, and ask really Toni to look at the numbers from the first 6 months of this year.

Sure. Thanks, Markku. So highlights of the first 6 months of the year, 2021, our cash balances at the end of the period were EUR 7.0 million, and our operating loss was EUR 10.4 million, which was an increase compared to prior year, and this is mainly driven by the EUR 3.5 million increase in the R&D expenses due to the acceleration of our pipeline assets, where Markku just gave you the highlights, and we'll elaborate a little bit later more details. Net assets were EUR 2.8 million at the end of the period. And earlier in the year in February, we did a EUR 15 million gross equity raise from new and existing shareholders, including the EIC, which first time invested in a publicly traded company. We are very pleased and we're excited about that participation. And then also earlier in the year, as Markku mentioned, we had a commitment of USD 6.1 million from the U.S. DoD to support the HIBISCUS trial where we announced yesterday the first patient in. With that, I'll hand over back to Markku. Next slide, please.

Thank you, Toni. So let's move on and look at the bexmarilimab. So this is really a humanized anti-CLEVER antibody, and this is really the summary. The few things which makes it really unique. The target is unique. We are the only one at the moment who is doing it. And if this target is really in charge of hiding the cancer cells from a more immune system, it's important really to unlock it. We also know that it's very safe at the moment, really haven't set the dose toxicity and all the adverse events related to the drug are really minimal, especially if I compare those the ones which have been seen with some harder setpoint inhibitors. And all of this really means that we have an opportunity really to transform treatments of cancer by combining with the existing other treatments. And having this opportunity really to have extensive IP coverage, it really means that this opportunity is really significant. To now have the next slide. So as you may recall, the setpoint inhibitors have improved significantly the outcome of the current cancer treatments. But yet, they still help only a part or portion of these patients as illustrated here on the left-hand side. So in order to improve this outcome, we really need to improve the conditions where these are exercised. And we believe that if we can remove this immunosuppressive [ micro ] cells from the tumor side and from the patient in all occasions, we have much better success in doing that. Next slide, please. So macrophage is around the tumor. You can see that on the right-hand side from these in immunohistological stainings. And now we have this diagnostic tool to do it. And macrophages are well appreciated really to take part in a number of activities which promoted tumor growth and the spell. So it's accepted well that you need to remove macrophages, but not all of them. CLEVER-1 is specifying 1 special group, which seems to have the highest immunosuppressive capacity. So if you can reprogram those into a antigen-presenting cells, you actually can make them to stimulate the immune system, and that's the whole purpose of the treatment with the bexmarilimab. And as shown in the next slide, you really have now worked out an assay that helps us to detect CLEVER-1 in those tissue samples. They could be tumor biopsies or they can be samples from the surgical operations. And then we can look at how abundant CLEVER-1 expression on those macrophages really are. And that would help us hopefully also to define the target population in the future together with some other biomarkers what we are currently studying in those populations we have been treating. So this is a significant milestone and often asked when we get there and now we are there. It's all validated using a commercial analysis kits and instrumentation is a widely used all over the world. Significant milestone. Next slide, please, that's 11 -- 12, Slide #12. So normally, these tumor associated macrophages clean everything out and they are supported by the CLEVER-1 function. It's a scavenger receptor, but it also maintains the phenotype, which is really effective of removing this material. And the whole purpose of this really is to remove it so that it's not available for the immune activation. In a way, they hide the environment. And that's the reason why this is so important for the cancer cells. Cancer cells [indiscernible] the amenity of these tumor macrophages. And as I said earlier in my presentation, the same situation in some of the physiological conditions. If you want to hide [ emperor ] from other immune system, if you are using these same cells, then they migrate to placenta and the pregnancies over they disappear. Here, we would like to make the tumor associated macrophages, who are CLEVER-1 positive to disappear or convert them to antigen-presenting cells. And this is a very unique mode of action nobody else has been targeting previously. So , please, is debating question the cancer cells is making. Next slide, please. Then one of the amazing discoveries, which we have now confirmed during the first half is really that it's not only present this CLEVER-1 on the surface of these macrophages. There's also a soluble form, and we have been able to document that is built in the exosomes which these cells are sending into a circulation. So you wonder why is that done. It's very simple. This soluble CLEVER-1 can directly inhibit T cells. And obviously, if we would like to activate the T cells, for example, using a negative setpoint inhibitor. Maybe it's really important to remove the soluble CLEVER-1. So soluble CLEVER-1 has become a target of our development work as well. Obviously, we want to monitor its sparing and also control that the dosing is optimized really to do that. And we already know, as shown on the right-hand side of the slide, soluble CLEVER-1 amongst are increased in cancer patients. Next slide, please. From the animal experimentation, we already know that we can control the tumor growth as controlled in the presence of CLEVER-1. Several models shown on the left, lung lymphoma and also memory, but also in the middle in melanoma, where we also compare that melanoma growth anti-PD-1. And if you look carefully, it looks like CLEVER-1 is more effective in that model than PD-1 negative inhibitor removal. Then the new thing was that we also figure out that the CLEVER-1 is heavily expressed by acute myeloid cells, and we have tested those in ex-vivo conditions. And when we control the CLEVER-1, the control replication of these cells. And that is one of the reasons why we really would like to move on to this first malignant condition where the myeloid cells are involved. Could I have the next slide, please? Now one interesting thing what we learned from those animal experimentation that we actually increased the presence of this cytotoxic CD8 cells in those tumors, which have been treated with bexmarilimab or the [indiscernible] antibody. And you can see that in an increased concentration of cells who are transient B positive. Transient B is one of those proteins T-cells used to kill the cancer cells. And we definitely would like to see that around. Now when you look at the mapping space, we see the same. Those are direct dots in this big picture. And this is a very important finding. This is a post-treatment induction of granzyme B cells in those tumors. And at the same time, we also see the increase in the [indiscernible] in those patients from the baseline, from original baseline. Again, indicating that we are activating the immune system. And now the question is, are they targeting the cancer cells. And if you really think about that they migrate the tumor, then they should do it. Next slide, please. The important design of the MATINS really is based on those facts. We collect biology from humans under bexmarilimab treatment. We learned from that and then we move on. Then we can have adaptive designs in the middle really to modify the cohort in order to get a better understanding. As we have indicated, we are now testing the increased frequency in dosing. We started with 3-week interval, but we are now getting down to 2 weeks and to 1 week. And then using that, we then come to the point when we can actually really design the very first pivotal cohorts for next year and prior to that really to communicate this with the regulators. And along this then apply the companion diagnostics. And very interestingly, the ESMO abstract that was sent [indiscernible] meeting September, that was selected as a late breaking abstract and that is currently under a preparation for the final form. And hopefully, at the same time when the presentation is taken place at the meeting, we hopefully be able to provide additional information at that time. Next slide, please. And when you look at the ones who are responding to the treatment, which you can follow as resist images from those patients post 4 cycles or 7 cycles. We have a significant disease control in some of the cohorts. Cutaneous melanoma, gastric cancer, cholangiocarcinoma and hepatocellular carcinoma, in this case. We have some cohorts who have no response whatsoever like [ pancreas ] carcinoma, uveal melanoma. This is a significant response, 30% to 40%, that alone could mean that the regulators really have a feeling that they actually should support us to move on further onto the pivotal phase. And then the question is what size of the trials we need to run. That we learn next year. Next slide. And then if you look at this, you can also look at the individual patients as listed on the left-hand side. But then more importantly, on the right-hand side, you can see the safety profile. There's hardly no drug-related adverse events, as you can see. Look at the Grade III or IV, which are usually the severe ones hardly anything and the same for the Grade I and II. This is a significant opportunity really for the combination therapies because we are not adding additional toxic risk when combinations are carried out. And this may be the reason also why the clinics has been really active -- have been really active in conducting the recruitment. And we have close to 160 patients already now recruited, and it's really a good sign because this isn't done around the corona time. Next slide, please. As said, we need to remove the soluble CLEVER-1 from the circulation. And you can see on the left-hand side, when we are administering bexmarilimab, it goes immediately down on the day 2. That's on the left-hand side. But then already on the day 8 and later on, after 2 weeks or 3 weeks, we are back to the baseline. So this is the key marker for us really to follow the occupancy of the receptor itself on the surface of the myeloid cells, but also [indiscernible]. But then one very interesting pharmacodynamic effect we have observed and already presented previously. This administration takes down some of the negative setpoint inhibitors. Here, we saw 1 example, and that is the PD-1 level in the peripheral cells, CD4, CD8 in this figure. And as you can see, 24 hours post administration of bexmarilimab, we practically includes PD-1 levels. So very important finding. And maybe the reason why this pharmacodynamic effect then is beneficial in those patients in this cap earlier. So a unique target, unique pharmacodynamic effect and very safe. It is a really opportunity we'd like to continue as fast as we can and move on to the final pivotal phases. Next slide, please. Yes. And if you then look at the opportunity, number wise, these all listed cancer cohorts are very significant in size. Look at in the middle, standard of care in the refractory population. In all of them, it's more than 50% who are still refractory on the first line or second line treatments. So obviously, these patients need the help. And we are ready to do it as soon as we have data enough really to go out. Next slide, please. So the design really to move on to the pivotal part is to continue some of the dosing testings, which are currently ongoing, collect the data, go back to the FDA or EMA, ask advice what size of the pivotal expansion we need to do and then plan all the way the marketing approval. This is already ongoing work. And the MATINS continue to be a platform, maybe in the future, we combine there already with PD-1 inhibitors or something else to look at what impact it has given on those who are negative at the moment. But that is the plan. And this is a very similar what was done some 10 years ago for the PD-1, PD-L1 inhibitors. We are [indiscernible] -- we learn when the dosing is optimal. Next slide. So then the plan. Next slide, please. The plan is really to focus on those 4 cancer cohorts described here in each of the new adjuvant treatment and then also the combination with the lung cancer where the PD-1 inhibitor is already as a standard of care and then initiate this leukemia study. And you can see the collaborators we have on the right-hand side. And we have a significant people of clinical experts, oncologists really around us helping us to this time on the protocols for these studies. I wanted to highlight one example, and that is the next slide. And that is the neo-adjuvant study. Many of the colorectal cancers are really cold tumors. They have been not activating the immune system. We do not necessarily know what it is, but some people think that as there are very little limitations. So the genetic burden is so low, they do not activate the system. With this setting, we are going to apply to renal cancer and colorectal cancer. We killed the single dose of bexmarilimab 2 weeks prior the cervical operation. We have a biopsy prior and then at the time when the operation -- the clinical operation, the surgical operation is conducted, then we get the additional samples. And if we can really show that with single treatment, we can convert these cold tumors hot again, they become target for setpoint inhibitors. Very interesting data collected from those tumors. And if we get [indiscernible] because we don't necessarily yet look at the efficacy within the short period of time. It's really to look in the conversion of this very important study for us and is about to start. Next slide, please. So back to this one. This is a really important for us. And I would say, and Toni will go over it later on, 75% of the resources we have, if not more really go into this development. Then a few words about the Traumakine. Please, next slide. So as we announced yesterday, we now are in the HIBISCUS trial. It's on the left-hand side. But just to remind is that with this Traumakine treatment, we hope to be able to produce locally one of the most anti-inflammatory compounds we have in us, and that's [indiscernible]. Is probably used by CD73 and inter-from [indiscernible] CD73 if it's lost from the cell services. And the HIBISCUS trial, next slide, is a very simple setting, but very interesting. We run it against dexamethasone. As you may know, dexamethasone has been largely now recommended to be used on the COVID-19 patients, and we have opposed that. We know from the ex vivo and in vivo experimentations that steroids can block the inter computer signaling pathway. If that happens, you wouldn't have antiviral help from [indiscernible]. So with this trial now, we run them head-to-head. And now we have initiated that in the U.S., we plan to have 10 to 15 sites, we soon have 5 sites open. And then looking the situation of the interim analysis after 70 patients, we can then make the further evaluation of this. I also want to share that the IDMC, the independent data monitoring committee carefully followed this because, obviously, they want to see how the 2 arms are separated from each other so that they can actually follow that and then advise the trial study accordingly. Very important and very pivotal trial for us and happy to have also the Department of Defense really helping us to conduct this one. Thank you. Next slide. I would now like to let Toni to continue with the corporate highlights. Toni, please?

Sure. Thanks, Markku. Next slide, please. So a push towards approval. So as Markku elaborated what we achieved here so far is we see a single agent activity in multiple tumors, which are refractory to standard care. In other words, all existing treatments have failed for these patients where we see activity. And in the setting that we have done in MATINS is an all-comer setting, which is showing the clinical benefit here as Markku elaborated. And out of that, these 4 cohorts or cancer types that Markku mentioned that we are really expanding and accelerating, hepatocellular carcinoma, has a standard of care with 75% refractory to combo treatment. On the second line melanoma, the market is forecasted to be $1 billion market by 2026. On the gastric, we see a significant growth in the Western markets. Asia is already a very high instance already, but we see the investment market in significant growth over the next 5 years. And then in cholangiocarcinoma, it has a limited market size as currently there's no innovative drug approval on the market. And to recap, our pathway here is the checkpoint inhibitors, they have been approved with exactly similar trial sizes approximately 100 to 200 patients and with a very low overall response rate of 10% to 20%. So next slide, please. On the back side, what are the near-term catalysts. As you can see here on the slide, we had a very busy first 6 months or 8 months by now as of today with multiple milestones that we've achieved. And out of that, we also have a lot of plans and a lot of milestones coming up in the second half of the year, so additional data release in [indiscernible] in solid tumors, we got the late ESMO -- late breaking abstract in ESMO, confirmation of the final doses and frequency, the [indiscernible] meeting for the pivotal expansion and guidance. And then the cohorts should be starting recruiting in the first half of next year. And additionally to that, we had the neo-adjuvant study that Markku just elaborated and also the hematological malignancies starting in Q4 of this year. And at the end, we also do an investigator-driven trial on a PD-1 combination. So just a single agent. Next slide, please. And then to recap also on the Traumakine hematokine. So Traumakine, CMC, the commercial scale preparation is ongoing with HEC, progressing very, very well. And then for our HIBISCUS yesterday, we announced the first patient in. That's a study for COVID supported by the DoD. And out of that, we hope to get the interim analysis as soon as possible, followed by the course of presentation of the military health research symposium REMAP-CAP readout and then organization data release with the DoD. And last but least, hematokine is in preclinical studies, and we are advancing those preclinical studies all the time. So with that, I'll hand it over back to Markku, and thank you.

Thank you, Toni. So this is really the summary of the current situation, and we are extremely excited about the second half of this year because a lot of additional information will be analyzed. And as I said earlier, especially with the biomarker data will be a key thing for being able to hopefully enrich the population even further and understand how this response is taking place. There are some ideas there, but they have to be confirmed. So with all of this, really thank everybody joining us. And as said at the beginning, you have enough possibility to send my questions to us, and I transfer this back to the operator. Thank you very much.

[Operator Instructions] Our first question comes from Jon Berggren from Kepler Cheuvreux.

So I have a question regarding your main assets, of course. So I mean, about a year ago when I first talked to you guys, you were pretty focused on investigating what kind of tumors that were high expressers of CLEVER-1 and that these patients will obviously potentially benefit more from treatment with bexmarilimab. So and then in January, you made this discovery about soluble CLEVER-1. And that a lot of patients in the trial had abundance of soluble CLEVER-1 basically. But now and when you have this key opinion leader update in June, you talked a lot about folks and patients with no underlying incremental responses and essentially making tumors health basically. So to filter out high CLEVER-1 expression tumors in patients who also have soluble CLEVER-1 with no underlying response that things can complex to me. And I know that you accept all comers in trial now. But do you aim to filter out patients with these kind of conditions in the pivotal arms of your trial?

Thank you. It's a very good point. That is the reason why we have collected a really massive amount of biomarker data are also related to the information. And especially we know that if we have [indiscernible] activation of going and if you can help those who have been previously activated. That is really key thing to understand is that activation dependent on the presence of CLEVER-1 positive tumor associated macrophages. Now we have a tool to do it. We go back and stay in every sample we have from those patients to get a really high-quality data. And it's -- I can assure that becomes part of this development work in the future. What are the best information really to classify, to enrich the patients, we hope to learn this fall, all of that information.

Our next question comes from Miles Dixon from Peel Hunt.

Firstly, just ask firstly on the bexmarilimab, the advanced tumors, the numbers. I seem to remember that you were initially talking about 30% of the control and you're now talking 30% to 40% subject, which indications you look in. Is that a consequence of more data coming in? Or is it better understanding of the data that you had originally?

It's really the accumulation of the data, not all the patients where at the stages we could evaluate them. Now when the full cohorts are available, that is the final number of the data. So it's 3 out of 10 in those 3 ones; and the hepatocellular which is the latest one, it's 4 out of 10.