Faron Pharmaceuticals Oy (FARN) Earnings Call Transcript & Summary

On behalf of the Board of Directors, I'm pleased to welcome you to our AGM. Again, it's virtual this year. Markku and the team are in Finland, and I'm talking to you from my office in Edinburgh in Scotland. During 2021, Faron continued to make significant progress across the business. The company has maintained its focus on pipeline delivery, including the initiation of clinical trials and generation of further clinical data. The management team has been reorganized and strengthened with new hires, and we've raised funds during the period. All of this has been achieved against the continued challenges of a business operating in the COVID-19 environment. A key priority for Faron has been to continue to advance our wholly-owned novel precision cancer immunotherapy candidate, bexmarilimab, through the Phase I/II MATINS clinical trial. Over the course of the year, we generated and presented important clinical data showing that heavily pretreated, late-stage cancer patients, who received clinical benefit from bexmarilimab, can achieve long-term survival benefit. And in addition, bexmarilimab has generated compelling efficacy data and continues to be safe and well tolerated. Markku will brief you in his presentation on the data and plans for 2022. 2021 saw the COVID-19 pandemic continue to evolve. Life science companies, including Faron, have responded to the global call for treatments for COVID-19. There's been unprecedented innovation in this space with vaccines and therapeutics. We have responded by contributing to international investigational studies of Traumakine,, in severe COVID-19 patients. These studies have generally been impacted by the widespread use of steroids in these patients, negating the effect of Traumakine. And with the success of the vaccine programs and antivirals, there's less need for studies in these severe patients. Despite the difficult funding environment, Faron successfully secured further investment in 2021 to progress the pipeline. This is confirmation of the potential of our product candidates and also the expertise and credibility of our management team. The Board has met regularly to discuss the company's performance in 2021, to review the clinical programs, discuss ongoing business strategy and assess the company's financial situation, so we can continue to progress the pipeline and deliver value for shareholders. In 2021, the meetings were mainly virtual. Then in November, we were able to meet in the U.S. for in-depth sessions on strategy, products and financing. This opportunity to meet was welcomed by Management and the Board members. On behalf of the company, I'd like to thank all the staff at Faron, who have achieved so much in 2021. I'd like to thank my colleagues on the Board for their commitment to the company, our partner organizations and steering committee members for their support and expertise; Faron's investor for showing continued confidence in the company and importantly, the health professionals and patients across our trial network. I'd also like to extend a warm welcome to Dr. Marie-Louise Fjällskog, our new Chief Medical Officer. Her knowledge and network will be invaluable to Faron as we continue to accelerate bexmarilimab through clinical development, while progressing our other product candidates. And finally, I'd like to thank our management team for their leadership through 2021, particularly Dr. Markku Jalkanen, our Chief Executive Officer; Toni Hänninen, our Chief Financial Officer; and Dr. Juho Jalkanen, our Chief Operating Officer, who also acted as Interim Chief Medical Officer in 2021. Under their expert guidance, we're looking forward to another year of continued progress during 2022. I will now hand over the meeting to the Chair as presented in the notice of the meeting, attorney-at-law Riikka Rannikko.

Thank you, Frank, and good morning. [Foreign Language]. The Chairman of the Board, Frank Armstrong, has opened the meeting. Good afternoon, everyone. My name is Riikka Rannikko. I will be chairing this meeting and will also be recording the minutes. [Foreign Language] The official language of this meeting is Finnish. However, the CEO's review and the CFO's presentation will be held in English, and those will also be available on the company's website after the meeting. I will resume very shortly in English, the Finnish language chapters of this meeting. And note that there has been a possibility for the shareholders to present questions in advance or may counter proposals. However, the company has not received any such questions or counter proposals by the time set in the meeting. All of the practicalities of the meeting are presented in the notice also in the Finnish Companies Act, and we will record them in the minutes. I won't be reading out them loud during the meeting as a whole. [Foreign Language] And in accordance with the notice to the meeting, the corporate -- company's Corporate Counsel, Kaisa Kyttä, shall act as the scrutinizer of the minutes and the supervisor of the counting of the votes. [Foreign Language] I note the notice to this AGM was published on the company's website and through the regulatory information service on 25th of March '22, and the notice of the annual meeting and the agenda will be attached to the minutes. All of the proposals to the meeting and all of the other documents that require to be held available have been on the company's website as of 25th of March '22. [Foreign Language] And we note here that the results of the votes cast are presented here point by point. We will be recording the results in the minutes of the meeting and we can note that the number of shareholders represented in the meeting is 10, and they represent a total of 8,325,837 votes, which represents approximately 15.6% of all of the company's shares and votes. And we note that all of the other proposals to the AGM have been approved, save for the authorizations in points 15 and 16. And we will not be handling those proposals in detail later on, but we will record the results to the minutes. [Foreign Language] We are adopting the list of votes, and we'll attach that to the minutes. [Foreign Language] The company's CEO, Markku Jalkanen, will present the CEO's review for the financial period 2021. And Toni Hänninen will present the financial information for the previous financial years. Welcome.

Thank you, Riikka. I also wish you all welcome to this '22 AGM of Faron Pharmaceuticals. We are living in a little bit odd times. We are just getting over the pandemics, and now there is a war in Europe, really unfortunate situation. But I'm also happy to say that these have not really impacted in our development work during the '21 or is really affecting at the moment. We have no activities in the clinical sites in other than Western countries at the moment. The pandemic is getting over. As our Chairman already indicated, the biggest challenge for us has been the massive use of steroids in our clinical studies related to Traumakine activities. And obviously, we have already announced that we are not progressing in that sector anymore. I remind you that I will have future-looking statements in my talk. So this -- we are to disclaim those. And before moving to the pipeline matters, I would like to ask now our CFO, Toni Hänninen, to share you with the company '21 numbers, financial side and some other activities. Please, Toni. come in.

Thank you, Markku. Good afternoon also from my side. Here going, so I'm going to talk about Faron at a glance first and about the financial numbers and then also about the future plans. So Faron at a glance, as you know, we are dual listed in Helsinki and in London. Our market cap currently around EUR 150 million. Our main location is Turku. We also have offices in Zurich, and in Boston, we currently have [ 3 ] employees. In the U.S., our total headcount is 40, and we've been founded in 2006. So I've been in business around 15 years. If you look at the key financial and corporate information of last year, so our cash balances at the end of the year were EUR 6.9 million in contrast to EUR 4.9 million (sic) [ EUR 4.1 million ] a year before. And our loss was EUR 21.1 million, which was up from EUR 16.9 million, mainly driven by our R&D activities in order to accelerate our pipeline, and Markku's going to share you more information about the pipeline in the coming slides. Our net assets at the end of the year were EUR 2.9 million. And during the year, we raised EUR 26.5 million in February and October, within 2 fundraises. And here, I would like to notably also express my thank you to the EIC, European Investment Council, who invested altogether EUR 8.5 million twice into us in both of the fundraises, and we are the first publicly traded company, where they have invested in the history of the [indiscernible] fund. And then post period, we secured a funding agreement with IPF Partners, which is a specialized Geneva-based health care funding company, a debt agreement up to EUR 30 million, and we drew EUR 10 million immediately at the end of February, and then we have additional EUR 5 million and EUR 15 million that are subject to certain conditions being met. So goals for '21 and '22. So what are our really corporate goals that drives our main activities? So reshape the pipeline. So create an accelerated development program for bexmarilimab, Markku will give you a detailed outlook about this; direct majority of our resources into this program, both in terms of personnel and in terms of finances as well; and then focus Traumakine to ischemic reperfusion injury with external funding, as we have done Traumakine with external funding also in the past for the large part. Then our activities in the U.S. So we are building the team as we speak. As I mentioned, we have 3 people in the U.S. At the moment, Marie-Louise Fjällskog, as mentioned by Markku and Frank earlier, is leading the activities on the U.S. side, mainly building on the medical and regulatory team for the pipeline reshape. And then on the corporate side, we have comms and IR activities, and I'm very happy to finally announce that we have a VP of Investor Relations joining us in New York, starting May 1, to drive our activities towards the U.S. capital markets. Within that, having said that, of course, Wall Street readiness requires a lot of compliance work from my end. So that is also a preparatory step for us to move forward to the U.S. capital markets. Our team. So Markku, here with me today. So our management team is very experienced in different industries from big names that you know. I want to notably highlight here Marie-Louise Fjällskog. She joined us January 1 of this year, based in Boston. We are extremely excited to have on Board. She brings a wealth of knowledge, experience and network and can really drive our development programs further. And then I want to express really a big thank you to the Board of Directors, Frank, under your leadership, to their strong support that the Board has conducted for us during the year '21. And then here also, notably, I would like to then welcome Erik Ostrowski, who is joining us also on the Board. So we have totally 4 U.S.-based Board members after that. Erik has a long career in finance, and he has been the CFO of Summit Therapeutics, which is an AIM-listed company, and took them public to the U.S. capital markets. So I am, personally, very excited to work with Erik going forward on our activities. With that, I would like to hand over back to Markku.

Thank you, Toni. So we have been focusing really to control our immune system. As we have noticed during this pandemic, it's really important that we have a functionally well-orchestrated immune system, which can be controlled to defense us, but not really overreact that actually could kill you as well. So what we have in our pipeline are 3 targets. We can activate the immune system using Clevegen, bexmarilimab, to remove immune suppressive cells from the environment they have migrated. We can suppress the overreaction by using interferon beta intravenously to really slow down the cytokine storm, which is related to a number of the conditions, often also man made, for example, if you think about many of the cell therapies for cancer. And then we also have a target that we believe can activate the bone marrow for reducing cells, and that is really to regain the production of our blood cells in the occasions where we may have a damage in the bone marrow or there was a treatment that actually could suppress the activity. So the activation of the hematopoietic stem cells, either in vivo or ex vivo, it's really important for those patients, who are suffering for that condition. And this is the current pipeline. Picture really focusing on immuno-oncology application with bexmarilimab, and I will spend most of the time really to update you for that matter and then also tell what the plans are in the future side. So moving into that one, bexmarilimab, we call often bex, just to keep it simple. And we have a very strong science and clinical adviser group really to guide us. As you can see from this picture, really well recognized people over the world. And with these people, we really can move on the protocol writing and clinical trials, which should be really properly also accepted by the regulators. Bex has a significant opportunity. We are all excited about this, what we call r checkpoint inhibitors that can control T cell activation. They can release the brakes of those T cells and activate them maximally to really attack whatever they recognize. The problem there is that they do not recognize every time their desired target. We have a lot of T cells, for example, in many of the tumors, but even you activate them, they do not recognize them because they were never presented with that antigen to attack that target. We need something on top of it. As a result of this non-recognizing T cells, we have a significant population who are not benefiting anything out of these treatments. And on the right-hand side, you can just look at the numbers, we have roughly 200,000 patients just in the U.S., where the PD-1 inhibitors are not really giving the help as they could be helping those ones who are benefiting from this treatment. Even you combine many of these checkpoint inhibitors is not helping them. It's actually increasing the risk of adverse events. And that's the reason why they are not likely to be used, at least not at the same time, but maybe in the [ row ] order, but yet not really giving. And now the main question is who and what are these refractory patients who are not benefiting out of these treatments? And what benefits the bexmarilimab can provide? And that's really my focus. We already know from the vast publications that the macrophages [indiscernible] myeloid cells migrating from the bone marrow to the site of the tumor, build an immune-suppressive environment to the tumor. They can produce what we call hide me signal. That is really important. It is also a physiological mechanism involved, for example, during the pregnancy when the embryo has to be protected against mother's host immune system. Otherwise, it would attack and reject the embryo. This system has been adopted by the tumor cells. And now the question is, how we can remove that? We believe that the CLEVER-1 receptor here in the middle on the right-hand side is the molecule that is maintained this myeloid cell phenotype that produces the hide me signal now. When we block CLEVER-1, the myeloid cells adapt a completely different transcription system and produce antigen-presenting capacity that can now activate the immune system that is the lower part of this cell profile where we can see it leaving all the way to the inflammatory cytokine-producing -- production. And there is now the key thing, why this is so unique mode of action and should be combined with a number of current treatments where the [indiscernible] end result is very evident. So this is just illustrating the same. If you don't remove CLEVER-1 function, they maintain the hide me and antigens are not presented. Everything has degraded and removed from the environment. Show me use bexmarilimab to activate the cells, and now we activate the immune system, very critical for those patients who have a declined immune system to the condition they are having. And it's not only the cancer, there are some chronic infections. This similar application is possible to exercise later. So in year 2021, we actually confirmed a number of those filings we had indicated earlier. First of all, we know that bexmarilimab is extremely well tolerated. We have over 200 patients already treated and very mild profile of side effects, mainly Grade 1 and 2. We have seen some immune-related adverse events or reactions, which is a good thing because it shows that the drug is active, but those have been -- doctors have been able to manage those with the steroids. But then more importantly, we already have seen a clinical benefit in the patients who had no options anymore. We call them last line cancer patients because that's often you need to start with when you introduce a new treatment. And we have shown in -- especially in some of the [ cancer ] types that we have a significant extension of overall survival. And I come to that one later on. It's up to the 30% to 40% in patients or among the patients who have no options anymore. That is very significant. And then people have asked us, who are those, [indiscernible] to know who those are and what kind of profile they have? And there, we have been using biomarkers really to predict the responders. And we believe that the patients who have a low interferon gamma, TNF-alpha, interleukin-6 levels, meaning that they have very silent immune system. Those are the ones we can activate, exactly the way we have been believing for years already, and now it's coming through, through this clinical data. And at the same time, we also have been able to develop a companion diagnostic system, meaning that we can now look at the CLEVER-1 levels within those tumors when these patients come to the trial. And that is already indicating to a certain extent that is beneficial. And more data will come during the quarter 2, rather soon, really among those patients we have been treating. I'm sorry that we keep waiting you for a while. But with this type of trial structure, it's a good thing that you have alive patients. If they would all died soon and we have a result, that would not be a good thing. So just be patient and wait for further information, which is on the way to you. So looking at this, you can just see what I said, increase our survival, that's the red curve, the blue one is those who are not getting the clinical benefit. And then on the right-hand side, you can see those markers, we indicated that actually could pick up the patients who are getting the benefit, really important. One example from the melanoma. These are all checkpoint refractory patients. We have 5 here. And you can see that there is a strong presence of macrophages and CLEVER-1 positivity, but they are completely lacking of the T cells, meaning that these tumors are cold, not having an accumulation of leukocytes or lymphocytes into the tumor. You can also see that the baseline level on the right-hand side, lower 2 panels with the red curves that the interferon gamma levels are really low. But as soon as they receive the administration of bexmarilimab, you activate interferon gamma expression. And this is a very strong -- keep in mind, this is a [indiscernible] scale, meaning that you have a multiple induction of interferon gamma expression by the immune cells. And happy to tell, as you noticed last night, when we inform more details about this patient group, all those who are benefiting out of this treatment are still alive after 12 months. It is a significant extension of the patient life among those who were predicted to die rather soon after giving up over on the other treatments, very significant finding as well. So we have cold tumors among a significant population of the patients, and we believe that those are PD-1 -- PD-L1 refractory patients, they have to be converted hot in order to help them with those PD blockade. And that's where our really target population at the moment is. And if you look at this rationality a bit further, this is now really a scientific analysis either from our own data or even look in the existing literature. What is really important is, if you look at, first, the PD-1 blockade, they can activate the T cells, and that is in the middle third column, cytotoxic T cell activation. They are really strong in that. But there's no information that they activate macrophages, nor they can significantly increase the interferon gamma. There is some information that they can enhance the antigen presentation and that could be really the way when you activate maximally the T cells that you actually can obtain that. But then look at the effect what bexmarilimab can do. Activate the macrophages from immune suppressive ones into immune stimulating, increase interferon gamma, TNF-alpha presence, activate innate immunity activity that we have shown some years back and then enhance the antigen presentation. Then if you combine these, you can see how significant benefit it is. So our aim is not just to combine this for reason a number of the companies are doing. We want to do this because it is clear benefit for the patients who are resistant for the current PD-1 blockade. And this shows up in our plans. The MATINS has provided us information that would allow us really to consider different pathways with those individual cancer cohorts. And we would like to have an opinion from the regulators before we move on, and that is the main target of the second half of this year. Then the plans will be finalized for the structure of that expansion part, which we hope to be able to take to the pivotal stage as well. At the same time, we are in collaboration with San Antonio unit in Texas to initiate the first combo in lung cancer, where the combo - the PD-1 blockade is already accepted in the first-line treatment. But then on top of it, we are planning to have our own BEXCOMBO, where we plan to have a basket trial so that we have opportunity to really follow the data while it evolves. And obviously, that is a very important as well. And then one very exciting one is this malignant -- hematological malignancy, where the malignant cells, the acute myeloid cells actually have the CLEVER-1 on the top of the surfaces. And this is a very severe condition after 5% -- 5 years, only 10% of the population are still alive, and it's really a cancer type where additional efficacy is needed. There, we are planning to go in combination with the current treatments in dual treatment first and in triple treatment later on. And that is moving on already in the first half of this year, rather soon as well. So very exciting time really to move on. So -- and a lot of people are asking what are the next steps for us. We would like to really take this on so that we can build up a significant new data really to rank us to the point where some of the other macrophage targets have already been previously. And as you can see from these examples, there have been multibillion deals. Can't say when this will take place, but happy to say that there are a number of companies discussing with us. Then the bexmarilimab competitive advantage I already indicated, and that is very significant. But obviously, a lot of the data has to be really come from these new trials. And while it's collecting and accumulating, we are really having a much better position to really move on with all the partnering discussions as well. But this is really a significant opportunity for us. Few words about Traumakine. So this is an intravenous interferon beta, and it's the only way you can actually give it to the patients if you would like to have a systemic, strong effect from this interferon beta. The subcutaneous or even inhaled ones are not as effective as this intravenous one. And as you know and remember, we would like to upregulate the molecule called CD73, which is responsible to a local producer -- production of the anti-inflammatory compound called adenosine. Adenosine can protect you for the capillary damage, and if you don't have this production, you have a tendency to lose your capillary integrity and usually that results in the organ failure. And that we can see in a number of conditions. So we have closed the HIBISCUS study, as we have already announced, but there was a significant number of opportunities with this very unique way of treating these patients, and they are listed on the right-hand side. And we plan to continue the development after -- with the external funding we have. And obviously, that is a very important part, really to define the next steps. Just to indicate already from the life-threatening conditions, this is a study we conducted with the open aortic surgery. Looking at the data carefully, we can tell you that if you do not upregulate the CD73, you have a tendency to die. However, if you upregulate the CD73, you survive and that is on the left-hand side. We also noticed in this same study that again, glucocorticoids can block this upregulation of CD73. So when we move on with these clinical studies, we have to carefully control that the glucocorticoids are not disturbing the interferon beta signaling pathways. And that work is ongoing at the moment. And we will, hopefully, during the course of the year, report further activities on that. And then the AOC3 inhibitor. There, the plan is really to get the cancer patients helped by increasing the hematopoietic stem cells. And the principle is very simple. You inhibit this AOC3 enzyme activity that can locally produce hydrogen peroxide and that hydrogen peroxide can control these hematopoietic stem cells. If you stop the production of hydrogen peroxide in these niche structures of the bone marrow, you let the hematopoietic stem cells to proliferate, and that is a very simple way to reproduce them in the patients who are suffering the lowest -- renovation of these cells. And we are hopeful that we may be able to announce something around this area as well. So harnessing our immune system is something we are focusing on. We have the scientific network backing us. We have adviser to take the clinical material further. And we just think that this is a very significant opportunity for the company. Bex in [ accelerate ] program, Traumakine looking for new reshape and focusing on those ischemic conditions. Marie-Louise is joining us as a new CMO, helping us to build also a group on the U.S. side and then a good financial position to move on should help us really to move on in this year. And looking forward really to further progress we are going to make during the year. So with this, I really would like to thank you all for your support over the years and keep following us. We have also increased our communication channels to a number of different ways, and we hopefully can bring you up with a more positive news also during the course of this year, both in the H1 and H2. Thank you.

Thank you, Markku and Toni. [Foreign Language] We note that the auditor's report is appended to the financial statements of the company, is also contained in the materials to the meeting. And I'm reading aloud the auditor's opinion. The auditors say that the consolidated and the parent company's financial statements give a true and fair view of the company -- group's financial performance and financial position and cash flows in accordance with the International Financial Reporting Standards, IFRS, as adopted by the EU and comply with statutory requirements. [Foreign Language] And the other information statement given by the auditors is also clean. If based on the work we have performed, we conclude that there is a material misstatement in the strategic report, directors' report, remuneration report and the corporate governance statement, we are required to report that fact. We have nothing to report in this regard. [Foreign Language] The financial statement documents have been presented as required by law. [Foreign Language] We are ready to move on to the adoption of the financial statements. [Foreign Language] The voting result is visible on the screen. [Foreign Language] We'll resolve to adopt the financial statements for the financial period 2021. [Foreign Language] We have the proposal by the Board not to distribute a dividend for the financial year 2021 and that the loss for the financial year would be carried forward to the reserve for invested unrestricted equity. [Foreign Language] The votes are shown on the screen. [Foreign Language] Chapter 9 is about resolving on the discharge of the members of the Board of Directors and the CEO for the financial period 2021. [Foreign Language] Frank Armstrong, Markku Jalkanen, Matti Manner, Leopoldo Zambeletti, Gregory Brown, John Poulos, Anne Whitaker [Foreign Language] Markku Jalkanen. [Foreign Language] The persons who have been discharged from liability in this agenda have not participated in the voting, and they are the Board members that have served in the company's Board during the financial year 2021. I just read the names out loud and the CEO of the company, Markku Jalkanen. And the results appear on the screen. [Foreign Language] And we hereby resolve to discharge the Board members and the CEO for the financial year 2021. [Foreign Language] We have a proposal to adopt the same remuneration to the Board members that was adopted last year. The main points are visible on the screen and the proposal in its entirety. It's in the notice to the meeting. [Foreign Language] And we have the votes, so we confirm the remuneration to the Board of Directors according to the proposal. [Foreign Language] We resolved next on the number of the members of the Board of Directors. [Foreign Language] We have a proposal to elect 7 members to the Board of Directors, which is the same number as we currently have. [Foreign Language] We have the votes for the proposal. [Foreign Language] 7 will be the number of the members of the Board of Directors. [Foreign Language] We elect the members of the Board of Directors. [Foreign Language] And we have a proposal to reelect Frank Armstrong, Gregory Brown, John Poulos, Leopoldo Zambeletti, Markku Jalkanen and Anne Whitaker to the Board and the proposal that Erik Ostrowski be elected as a new member to the Board of Directors for the term ending at the end of the next Annual General Meeting. [Foreign Language] And Frank Armstrong would continue as the Chairman of the Board. [Foreign Language] We confirm the composition of the Board according to the proposal. [Foreign Language] And we have the Board's proposal based on the proposal of the Audit Committee that the auditor be remunerated in accordance with the invoice presented as up until now. [Foreign Language] And we hereby adopt the proposal as presented. [Foreign Language] We elect the auditor. [Foreign Language] We have a proposal to reelect PricewaterhouseCoopers Oy to continue to act as the company's auditor, and they have informed that Panu Vänskä would continue as the key audit partner. [Foreign Language] And we confirm the auditor as proposed. [Foreign Language] And as noted regarding the authorization to the Board to decide on the issuance of shares or options or other special rights entitling to shares, the votes do not support this authorization. However, the authorization granted to the Board last year will remain in force until 30th of June this year to the extent it's still not being used during the financial year. [Foreign Language] Likewise, the authorization proposal in point 16 are to decide on the issuance of shares without consideration to the company has not been adopted by the shareholders, and we, hence, document that to the minutes. [Foreign Language] We are ready to close the meeting. We have handled all of the proposals made to the meeting and the minutes of this meeting will be available on the company's website, on the latest, 6th of May, 2022. And I close the meeting. [Foreign Language] Thank you, everyone, participating in this meeting and listening in and the management of the company, and I wish you a very nice weekend. Thank you very much.