Faron Pharmaceuticals Oy (FARN) Earnings Call Transcript & Summary

Good afternoon, and good morning for those in America. Welcome to listen to the H1 '22 results of Faron Pharmaceuticals. My name is Markku Jalkanen and I am Faron CEO; and I'm here with our CFO, Toni Hanninen.

Hello, good morning.

As always, we will making also forward-looking statements and that's the reason why I want to show this corporate disclaimer. You have seen this before. But I really would like to focus now today on our bexmarilimab, BEX like we call it shortly, because we believe that that would be a really the revolutionary way of improving our current cancer treatments. We think that, especially in the combination front, we can improve the immune system to be activated against the cancer cells in order to really remove them from us. We have built an accelerated program really to move along faster, especially in the spring. We still work on Traumakine as well and we will hopefully be able to tell more later this year about that. But for BEX, we have really built now a very experienced clinical oncology team and led by our new CMO, Marie-Louise Fjallskog. I'm really impressed the work they have done. And Toni will talk more about the cash position, how we have been able to strengthen that and what the future will look in that front as well. So looking at the pipeline, we have now treated more than 200 patients with Bexmarilimab, a significant number. We have 10 different cancer groups really involved in that. We have very compelling 12-month survival data obtained, and I will update that one. It is really a responders who normally do not really get into response for the current other immuno-oncology treatments. And on top of it, we now can identify the patients who get this response. And obviously, that will be a really important part also for our future planning and execution of the trials. And again, I will open that a bit more. And then during this period, we started a new -- completely new bexmarilimab study, BEXMAB, and that is on the first hematological malignancy, acute myeloid leukemia or where the myeloid cells are involved [indiscernible] awful diseases where we have limited possibilities to really treat the patients at the moment. So then Toni will also show some of the significant worldwide expense on our patent rights and also talk about the financials. And so let's see and look at the pipeline, and I will obviously show also later on the plans regarding the pipeline progress we anticipate to take place during the next 8 to 12 months. So MATINS is coming to the end. We are pretty much now recruit the Part I and II. And obviously, that will continue to provide additional information, which we anticipate to be really useful when we go to talk to the regulator, especially the FDA. The principal investigator driven BEXLUNG study in San Antonio is about to start. And as I said earlier, we have a combination also for that and that protocol hopefully will be really for the review on the second half of this year. And BEXMAB now initiated. The Traumakine will be focusing purely to the ischemia reperfusion injury where we can avoid any dexamethasone steroid use at the same time. And that is the main really remark over there. And we will come up with the plans so that hopefully early next year, we have a really straight forward way to move on with this. And obviously, the ischemia reperfusion injury is an area where patients have a tremendous need to be helped to avoid their death. Also in the activation of the bone marrow, whatever the cause has been to start it off, we have a plan really to have anticipated IND submission early next year. So all of these are the background and at the moment, bexmarilimab is really taking almost 85%, 90% of the resources we are using to do the clinical development. So I ask Tony to talk about the financial highlights.

Thank you, Markku. From the financial highlights before we go into our numbers, maybe look a little bit on the market side. So the last 18 months, we operate in a very, very challenging market. The biotech market, in fact, on the stock exchange has gone down roughly 50% in the last 18 months from its all-time high. So with that, I'm very pleased to announce and report that we were able to strengthen our cash position from EUR 7 million to EUR 9.9 million in this first 6 months of this year, but also last year we were able to improve our cash position every time we report it to the market. So across the last 18 months, consistently we have improved our cash position every time we have reported to the market. So a big thank you to the team. I know it's been very, very hard work, dedication, a lot of resilience, so very proud of the achievement of the team here. On the operating loss side, our operating loss is EUR 13.4 million, up from EUR 10 million, so roughly EUR 3 million difference here, mainly driven by the buildup of the U.S. entity and acceleration of the pipeline and the R&D activities that Markku will talk about later in more detail. Our net assets were negative EUR 5.2 million. And as announced in February, we strengthened our cash position through the funding agreement with IPF Partners where we drew EUR 10 million. There's further potential for another EUR 5 million plus EUR 15 million under certain conditions met. In June, we conducted a private placement of $4.5 million. The actual full private placement was EUR 5 million, but out of that EUR 0.5 million settled on the H2 side early July. So in our reported numbers, we show EUR 4.5 million of private placement issuing 2 million new shares to existing and new shareholders. As a part of this equity raise, we were able to attract LLS, the Leukemia & Lymphoma Society as a new investor. Leukemia and Lymphoma Society is a New York-based non-profit organization, the biggest and the oldest in the world that is specializing in blood cancers. And what they normally do in the investment due diligence, they look at our team, our science and also assess our capability of bringing our therapy forward. So we are very excited about this partnership and have a big thank you for the vote of confidence from LLS and the LLS team. So on the next page. We mentioned about the patents that Markku already mentioned. So last year, we filed a U.S. patent and now this year in the first 6 months, we increased the patent protection in Europe, in Japan, China, South Korea, and Mexico, so a lot of large main territories. We continue this work in H2 for the other meaningful significant territories. And here, all of our patents are granted through 2037. So this offers a very, very good and solid commercial protection for our bexmarilimab program. So with that, I would like to hand over back to Markku.

Thank you, Toni. I'm going to mainly focus really bexmarilimab, BEX like we call it. And so the data, which we have anticipated really take place again during this period, and that is to provide a revival benefit for the last line patients who had no options anymore for anything than the supportive care. And that also means that the current immuno-oncology PD-1 blockade is ineffective. So if this really holds up to the whole cancer population, it would be a significant improvement. If you look at this slide, I have shown this before. The patients we are treating coming from this red part, more than 80% of the population, casual population, who are not responding to the current PD-1 blockade. And obviously, if you look at the market size of this 13% or so, it's already a very significant, some USD 30 billion at the moment. So if you can just double that with any way, that means that the one who can do it actually could have access to a rather significant market. And obviously, we hope to be the one that actually can do it. And the reason why we think so is that we can really ignite the immunity in those cancer patients who have lost that or not been able to generate. PD-1 blockade works with those who already have activated immune system because they activate the T cells, those T cells that actually can kill the cancer cells. And this is a really important aspect to understand why we are so excited about this work we do at the moment. So what we plan to do is really complete the MATINS, take the data to FDA, and then build we believe that it's potentially randomized trial to compare the treated, BEX treated, patients to standard of care or whatever treatments the doctors may chose at that point. We anticipate that the first combo in San Antonio is about to start and then repeal at the same time, a basket trail for BEXCOMBO which will allow us really to have more selective also in the next steps in that trial. And I'm really happy to report the BEXMAB, the first hematological malignancy where the myeloid cells produce the leukemia, is now on the way. And the first cohort, hopefully, will be soon recruited. And then obviously, being an open study, whenever we get the first results, we probably will come up to the market as well. So this is a very exciting pipeline at the moment, and it's really focused. And again, I want to thank Marie-Louise Fjallskog really lining up this well. Exciting time for us. And really based on this MATINS trial, we are really finishing the recruitment. And then the data analysis, there are 2 ways of looking it. Its first is to look in the occupation of the CLEVER-1 in those patients that we get first. And then second is really look at the efficacy. And then think about it if the increased frequency of dosing also increase the over survival of these patients. That will obviously take longer and then we have to really think about when and how far we take that analysis as well. Currently, from the previous Part I and Part II in the middle, on the left-hand side, we have been able to follow those patients for more than 12 months already and that data you have seen. We have some very interesting experiments or no patient groups where we have seen a very significant survival effect. This is a 12-month data. On the left-hand side, melanoma and then gall bladder or bile duct cancer on the right-hand side. And as you can see, the patients who do get the clinical benefit and also fulfill the criteria of the biomarker analysis, they have 100% response rate. Look at those who do not, that's only 6%. And those are the blue curves here and the red one is the effective one. If you look at the old 10 cohorts we had in this MATINS trial, we have a 63% response rate in those patients who have a clinical benefit and only 9% in all of the population, and those are also indicated here. And remember, these are the patients who had no anymore other options read by part in my slide previously. And then the group, if you compare those who have this benefit to those who do not, you can start to see that they are really the patients who have inactive baseline biomarkers in their circulation. Interferon-gamma, TNF-alpha, interlocking-6 typical markers indicating that your baseline is low, you don't have the immune activation. So it's really important to understand. We also know today initial data that if you look at the CLEVER-1, it's the target. And if specially you look at the intratumoral CLEVER-1 on the surface of these macrophages, it is a significant correlation to that as well. And obviously, we are really to hopefully be able to report additional data on this front as well. You can also make an analysis, statistical analysis, of this using this kind of a method, a rock called. And here, if you look at the area under the curves between -- in the middle, we have the line going up and more area you get under these curves, more significant that is. And on the right-hand side -- on the left-hand side, you have 2 of these markets, interferon-gamma, TNF-alpha, and you have almost 90% certainty or probability to have a right analysis of this material. If you add all 4 interferon-gamma, TNF-alpha, interlocking-6 and 8, it goes more than 90. And more than 80 is already excellent predictor. And if you have more than 90, it's outstanding. So this is again showing that we have a very exciting position also to enrich our population among those patients we have been treating previously, obviously then increasing the clinical benefit among those patients. So just to summarize, bexmarilimab is extremely well tolerate. It's really not giving that much of a Grade 4 or 5 adverse events. We have seen some immune reactions, which we actually would expect, but those have been possible to treat with the steroids. I mentioned already this a clinical benefit with some of the cohorts could go up to 40% of the patient population and biomarkers can really predict the clinical benefit. One next really thing is to look at if this increase in dose frequency can actually produce better single-agent activity, and that's what we have been analyzing also together to those receptor occupation in order to have a final data to predict and take to the regulators how we want to advance with the next stage of the development. And that is underway. Then to support the combination strategy we have been building up is really to show in this slide. As we know, the PD-1 blockade mainly activate the cytotoxic T cells. Those are the cells that can kill the cancer cells. They can kill a number of other things, but especially within the cancer patients. There's very new evidence that they activate macrophages, which are the immunosuppressive ones to target for us. They may activate interferon-gamma and NTF-alpha regulation because when you activate the T cells, you do that at the same time. But there's no sign that they can activate in immunity system in order to really activate our immune defense against the new antigens. And another important aspect with the bexmarilimab treatment is that you really enhance the antigen presentation in order to initiate the immune or immune reaction against those antigens. So if you take these arrows and combine them, you get a very significant combined effect on our immune system. It looks like we are now being able to affect everything. These arrows are not necessarily at the same level because they come from the collection of the papers. But at least given the direction and the reasons why this combination makes lot of logic and should help the cancer patients once we get on the first line. The BEXCOMBO first-line setting directly coming to the combination. And then we have been really thinking about the first target. And here, we have been thinking really those where the PD-1 blockade is least effective, head and neck, urothelial cancer and some form of rheumatoid lung cancer. And this is a typical treatment, look at the dosing first and then increasing the size of the cohorts in order to get the signal and then moving on to the pivotal part when that material is available. Then BEXMAB, on the right-hand side, you can see that almost all these myeloid cells, these patients carry on are CLEVER-1 positive. The reason why this is so exciting now we are really actually treating leukemia cells, which also carry the CLEVER-1. And if that CLEVER-1 is the reason why the immune suppression is so strong in these patients, it would be extremely important to take these cells out from those patients and inactivate them. And that's exactly what we try to do. And here, the trial is also rather simple. We have started with azacitidine, which is the first chemo treatment typical to these patients, and those combinations are going on. And once that's done and we have really a sense of the dosing, we can then combine that with the brand new product called venetoclax, which is also another chemotherapy for these patients. This condition is really fatal. 90% of the patients die within the first 5 years after recognition of. And also here, what is really nice for us when we do the open study, these patients are regularly examined both the bone marrow and the blood samples. And obviously, that data is collecting at the same time. And once that is done, dosing optimization, we can actually move on to the Phase II. We were able to start the study because the bexmarilimab is so well tolerated with rather significant dosing already. So if you look at the protocol, which you can obtain from the clinicaltrials.gov, the first cohort is already receiving 1 mg per kilo every week, and that is a significant concentration. So I'm really looking forward really to start to see some data from this trial as well. So future immune therapy can be improved. We have shown single-agent activity, which is not that common with the new counter drugs, well tolerated. Patients definitely have demonstrated to us that we activate the immune system. We have a strong scientific rationale really to do the combinations. And on top of it, really looking at biomarker data, what we have at the moment to really enrich the patient population wherever that is needed. And I'm pretty sure that all these different facts are really well received by the regulators when we go and meet them in the future. With that, I'm happy to now really open the Q&A session, just type your name and question in the question box, and click and submit it to us, and we're happy to answer any further questions you may have to us. Thank you very much.

So Markku, there is questions coming in. A couple came in as you were speaking, but they're starting more now. But I'll start with a few that came in. The first being, could you please tell us more about funding needs to move bexmarilimab forward to the market? And as part of that, is partnering the strategy you are pursuing.

I'll let Toni to answer the first one. But as I said, for the partnering activities, now when we're building up the data, more oxy is taken [indiscernible] the partner candidates. And we are really surrounded by the partner candidates. I have also said that this is not a point where we really generate the shareholder value. And I don't want to really be to vast it any conclusion which partner is the right for us. But those discussions are ongoing. So hopefully, something will come up in the future. But again really hard to predict because these negotiations usually take place and also all the DD processes and -- but it looks really exciting. And for the financing part, I'll let Toni to answer.

Thanks Markku. I think on the cash need, as we publicly communicated in our corporate deck, so we're looking at to bring both BEXMAB and BEXCOMBO into Phase II data. We need roughly EUR 50 million. And in order to bring into the BLA to the market, another EUR 100 million. So as Markku elaborated, so we are looking at the different options here, how far will we take it on our own money, so to say. And when do you partner and that's kind of the discussion that we have internally and of course with the Board to get the maximum shareholder value.

So Toni, that's a good transition. So there were a couple of questions about shareholder value, and I guess, summing them up. What are the upcoming milestones that could have a meaningful impact on shareholder value?

I'll let that Markku maybe…

Thank you. A really good point. It's an additional data. There's nothing wrong with the current data. But believe me, it's so excited to really deal with the population that has no effective treatment and we are already showing single-agent activity over there. But obviously, the final readout to the point where we can actually take the material to the FDA and get their opinion what they want us to do next, we are mainly focusing on the data from MATINS trial, but obviously these other trials when they develop, we can additionally then discuss with them. And that all is really giving us the patient population where all kind of valuation models can be applied. And as we all know, one significant good year life can be priced nowadays in U.K. that is GBP 50,000. So you just can make the calculation if the population is 100,000 or more what kind of upside we have is apex project. But obviously, we need data and that's we are really working hard and we really try to accelerate everything as much as we can.

Okay. So another one on sort of what's the regulatory path for BEX? And is a single randomized trial going to be enough? I'm assuming they mean in the MATINS setting. Or do you expect to meet this or 2 trials? So I guess in interim step before you get to a regulatory registrational trial.

In the last line, if you can have randomized trial with the significant overall survival benefit, normally the regulators take a positive view on it. And that's what we are hoping for. And that is the reason why the meetings are so important that you get pre-advice really for those activities. If you then look at the indications, would that be bile duct cancer carcinoma or melanoma, which already have shown in this cohort what we have currently treated, which had not been enriched or preselected, is already 30% to 40%. If you then apply the biomarker and we can have 50% to 60% outcome in the clinical benefit rate and that over survival is extended by 12 months. I believe that then the Data Monitoring Committee can actually advise us how far we need to go with that one. And we do not necessarily talk about 500 or even 300, it actually could be even smaller. So that is the pathway with the randomized trial. Then these other ones where we have these combinations there, if we start to see immediately the effect, then that can be easily expanded into a large trial. But obviously, that data is still yet to become and I'm not really predicting how that is going to progress.

All right. And then there's one on dose and frequency and where that stands in terms of figuring out what the optimal dose and frequency would be for patients in MATINS.

We are pretty much recruited the patients and the sample analysis for the receptor occupancy is already indicating that we really are not that far away from the optimal dosings, what we have. If you want to use the increase in the efficacy and clinical benefit, then we have to utilize the traditional cancer method, and that is the resist analysis. And those we take roughly every other 3 months. So now the question is how long we actually would wait that one. My personal view is that maybe already the reset occupancy would be enough really to go to the regulators and tell that we are now done with the dosing and then measured all the PK and PD analysis and here is the results. And as I said earlier, we already have in BEXMAB 1 mg per kilo every week and not alarming sign of any toxicity. So maybe we are rather close already with the dosing.

So one I guess for Toni, which is how much should we expect the OpEx to increase for full year relative to 2021? And then any sense of a split between R&D costs and G&A increase as part of that?

Okay. Thanks. That's a great question. So for this year, currently we spent EUR 13.4 million in the first half of the year. We expect the second half of the year to be actually a little bit lower. And it has 3 reasons. In the MATINS trial, as Markku elaborated, we don't have that many patients coming in the second half as we are doing the preparations for the FDA meeting. Second, on the Traumakine front, the Hibiscus study was closed in, we announced that in April. And third, we had some one-off costs as we are ramping up the U.S. activities in the first half of the year. So we expect this to be relatively in line with last year. We don't actually expect an increase. But in turn compared to the first half of the year, we are currently estimating we actually have less spend in the second half of the year compared to the first half of the year. The split between the G&A and on the R&D side, we don't expect any material change there.