Faron Pharmaceuticals Oy (FARN) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us for this webcast on H1 '23 results of the Faron Pharmaceuticals. I'm Markku Jalkanen, Faron's CEO. And I'm here with our CFO, Jim O'Brien. As always, we will be recording this and it will be available on our web page, together with the slide deck we are using today. And also, I would like to inform you that there is a Q&A session and you can send those questions in, so that they are available at the end of this presentation, and we are really happy to answer to those ones. So as you know, we are a listed company, public one, and this is the disclaimer. We would like to present, not reading it through, you remember that. And I would like to start introducing Jim. Jim joined us in April and has been our CFO since that. And Jim has tremendous experience on the public markets in U.S., including IPO activities. And he is very valuable now when we are expanding our activities in Boston. We have obviously in the Seaport area, that's 10 minutes from the Logan Airport, very nice one, and you can even see Jim over there. So we start with our numbers. And to begin with, I actually asked Jim really to summarize what was the first half of this year 2023. Please, Jim.

Thank you, Markku. Hello, everybody. I'd like to refer you to our press release that we issued earlier today for a detailed report of our financial results for the first half of 2023. Let me take a moment and highlight some of the key financial items so far this year. Faron has had a very productive first half of 2023, both in terms of operating activities and in finance. The cash position in the first half of '23 was strengthened by 2 private placements totaling EUR 18.6 million of new equity. The company entered the third quarter of this year with EUR 12.8 million of cash and has funds sufficient to support the current level of activities until the end of 2023. Research and development and G&A expenses were EUR 8.5 million and EUR 4.3 million, respectively, in the first half of the year, compared to EUR 10 million and EUR 3.8 million, respectively, in the same period last year. During the first half of 2023, nearly 70% of all of our cash expenses were directly supportive of bexmarilimab in the clinical development program, including manufacturing activities. G&A expenses were flat year-over-year when excluding onetime items and financing costs. For the 6 months ended June 30, 2023, the company reported a net loss of EUR 13.7 million or EUR 0.22 a share, compared to a loss of EUR 13.1 million or EUR 0.25 a share in the same period in the prior year. Cash used in operations for the first 6 months of the year was EUR 11.6 million compared to EUR 11.1 million in the same period last year. Faron currently has 66.2 million of common shares outstanding and has 9.9 million shares available for issuance. Faron's recent financial performance has been marked by a strategic emphasis and focus on capital efficiencies, a key element of extending our cash runway and without compromising our ability to advance our clinical program. This capital efficiency has allowed us to achieve more with available resources with a focus on clinical outcomes that Markku will speak to in a minute. It's a very exciting time for Faron, and we look forward to a very productive second half of the year. With that, I'll turn the meeting back to Markku.

Thank you, Jim. So I would like to say a few things about the other reorganizations we have done during the springtime. One of the Board member, Leopoldo Zambeletti, decided to help us in our partner activities and step down from the Board. Earlier during the spring, during the AGM, Tuomo Pätsi was selected as a new Board member, and we then on top of it have a significant number of advisers, both on the mode of action side, but also on the clinical side, when we do the development, and help from these people has been really significant and will be really valuable at this point. But let's move on and look at what we have really done with the bexmarilimab. There is a significant understanding that the resistance in current candidate treatments is really due to the lack of interferon beta signaling in those tumors. Those tumors are then often cold tumors. And 1 really visible sign of that is lack of the lymphocytes/leukocytes that actually could attack the cancer. Our lead asset, bexmarilimab, or Bex, like we call it often, is an antibody that can convert these immunosuppressive macrophages into immunostimulating macrophages. And obviously, that is exactly we would like to achieve because then we know that we can upregulate the interferon production in those micro environments where the cancer cells are located. And these change in the micro environment is really critical to the success of the current IO treatments. We have advanced significantly during the last 12 months and especially the springtime. And we have now said that we plan to really file first BLA application that is to obtain the marketing approval on the year '25, and that would be then done with the hematological application to begin with. But before getting there, I need to remind you of the mode of action of this bexmarilimab. We convert this immunosuppressive macrophages, which usually removes all the antigen material from the tumor environment, and that is to hinder the activation of immunity against the cancer. So they have built environment where they cannot be visible for our immune system. So this do not show me signal has to be removed in order to get the activation, and that is exactly what bexmarilimab does. By blocking the Clever-1 receptor function, we convert now these immunosuppressive macrophages into immunostimulating one. Not only they activate the antigen presentation, they also start to produce chemokines that can activate additional cells around there, and that could then result in show me situation. And now all of a sudden, this silent environment is activated. And that is exactly what we have now shown already in the MATINS trial patients. This is just a summary of that material, which is also now put in the form of a manuscript and hopefully soon published. What we have really shown is that we activate the intratumoral macrophages post bexmarilimab administration. We also know that we have a clinical benefit out of that treatment. They are described in the left-hand side, where the response rates are described up to 40% in some of the cancer types and we know that when this happens, we also extend our survival of this patient. So that is the benefit we have seen as a single agent treatment in the last-line cancer patients who had no other options anymore, rather significant really discovery. Then in the middle bottom of the picture, you can see that the ones who respond to bexmarilimab treatment, they increased the interferon gamma production, a sign that we activated the immune system in those patients. In nonresponders, it goes the other way around. And obviously, those may already have been exhausted by the previous immuno-oncology treatments, and that is the end result where there was very little hope of helping them even with this treatment. And on the right-hand side, we have been then looking at the profile of those cells, and we have demonstrated that, yes, we do activate the immunity, increasing the interferon signaling, but some other signaling pathways, which are involved in the activation of the immune reaction. So very fundamental information now to be provided for the people who are interested in the mode of action of this antibody. But then even more interesting is now when we look at the mode of action with the hematological malignancies and I especially mean now malignancies which have a myeloid background. The word myeloid means that they have the same origin as the macrophages or monocytes in the circulation. Not only now we activate the immunity in those patients, but we can also target the myeloid leukemia cells, and that, we have learned, can actually reduce the viability of these cells. This is done by shutting off the oxidative phosphorylation in those cells. They are running out of the gas, ATP, that's their gas, and then they lose their viability. So we have a dual action now on these cancer cells and keep this in mind when we look at the data. That explains why we have a so dramatic outcome on those patients we have been now treating with the bexmarilimab. We also know from these treated patients, myeloid leukemia patients, that we do activate immunity in the bone marrow. That is shown on the left-hand side. So higher dose, especially from 1 mg per kg to 3 mg per kg increases the antigen presentation of 3 mg per kg, and also with some of the patients at 6 mg per kg. And then at the same time, it increases the presence of these defense cells in the bone marrow. A very nice sign of, again, that we activate the immunity. And now it takes place in a tissue bone marrow where this malignant hematological blasts are actually multiplying and spreading to other locations of the system. So absolutely, in my mind, really stunning data. And you can then easily understand that we are so excited now to move the Bex trial to the next phases. And soon we will be starting the Phase II and hopefully then also the pivotal part next year, and I will really focus on that one. MATINS trial has provided us safety profile, which is extremely good for the bexmarilimab. It also has provided the dosing and the frequency, which we then have applied to these other trials. And then on top of it, after BEXMAB, we also would like to initiate the BEXCOMBO as soon as we have additional resources. That's now already in the states where the regulatory authorities have accepted the protocol, and we are ready to go. So looking now at the BEXMAB study. I just want to repeat what we have already shown previously. We have 2 arms in this trial. We have a duplet where we combine bexmarilimab with the standard of care being a single agent azacitidine, which is a preventing cell preparation, but we also would like to have additional effect, and that's the combination for that. Then the triplet where we combine with the additional chemotherapy azacitidine with venetoclax because that is now the first-line treatment and we would like to learn also how bexmarilimab is affecting in that setting. We are now focusing really to move on with the doublet, and we are happy to inform that we have 4 very active sites in Finland university hospitals; 2 open sites in U.S., City of Hope close to L.A. and then MD Anderson in Houston; and soon we will have sites open in Yale and North Carolina and Fred Hutch in Seattle. And having that data available later in the fall obviously will guide us to move on. A month ago, we published very interesting data on the last 6 mg per kilo dosing cohort and it's this 1 in here. As you remember, we have had 5 patients in each of these cohorts. This is now looking at the data post 2 to 4 cycles, and keep that in mind when we look at the next one, this is very early data, but you can already see we have complete remission in 3 out of 5 patients. 2 other ones have been stabilized. But if you look at these 3 lower ones, this CR, complete remission, means, when you have a small m, that bone marrow is now empty of these cancer cells, the immune plus. And in the last one, which is without this m, means that their blood values have been normalized as well. So we have really nice 3 objective responses among these 5 patients. I'm really looking forward also to see what happens to those 2 other patients who have been now stabilized, if we can actually see a drop in the blast number also in there in the next readout. But then if you look at the all 15 patients we have treated at this point, you can see that the 6 mg per kg is really very early read out and really promising at the moment, but really have some other interesting findings as well. The ones who have responded is also durable, meaning that it has extended, among some of the patients, past 1 year already, and that is very significant, because the prognosis of the survival is really short with these patients and many of them have been refractory to the previous treatments and the prediction lifetime is only from 3 to 6 months. Out of these patients, if you look at how many of them have started to reduce the blasts, it's almost 10 out of this 15, and you can see that before the 0 line. And you can also see here that it looks to us like MDS is providing the best response at the moment. But obviously, now when we are expanding these cohorts into higher number, we learn more about the effect and efficacy, but also looking at the biomarkers, we can then come up with a conclusion what would be the most suitable dosings to go further in the Phase II stage, where we need to run based on the guidance from FDA to different dosing levels. But that will be done later in the fall. To summarize -- to compare really or put the context to these findings, it's very important to realize, if you look at the standard of care responses in this table, both in the MDS, which are HMA failure, and the refractory AML, the outcome is 10% to 15% who can actually have a response in any of the treatments. And you can see that the predictive lifetimes are very short. We have set up a bar for BEXMAB, and you can see these in the MDS, 20%; maybe in the R/R AML 28%. And if you look at the numbers which we already have, even they are small numbers. We already have very significant findings. In MDS/MSA, all 3 patients have had objective response. It is a very significant result really. So obviously, this we keep in mind when we are setting up the final goals for us. But already today, we can just conclude, the medical need to help these patients is really significant. Again, also in this setting, bexmarilimab is well tolerated. Out of those 15 patients we have now treated, 8 of them have objective response. And it's really observed across the 3 dosing double cohorts. And I'm not really predicting yet which will be the best one. Then there are patients who have had azacitidine prior to coming to the trial, and we have a significant response in those with our combination. And this is also very important because then those patients become available really to the trial. I can also say that in this setting now when we have sites open in U.S., we have also started to get magrolimab anti-CD47 refractory patients into our trials. And among those who have already objective response, there are a few of them there. So it's very interesting really target for us. And obviously, you also read this morning that now we have Orphan Drug status for AML. We are expanding other regulatory activities as well and the call is to file the BLA in 2025. So the combination looks to us very attractive, that's bexmarilimab and azacitidine. And it's really easy to understand why this is superior over the other ones. It really activates the immunity, and at the same time reduces the viability of these cells. This mode of action is very unique. There is no other treatment that has the similar one, at least we do not know. And obviously, this is something that we are pursuing really during the next 2 years in order to really get to the patients this type of the help. Then a few words about the combo. As I started, the cold tumors do not have activated T cells that can recognize the tumor antigens. Something has to be happened here. You have to activate the innate immunity in order to generate new T cells. So converting cold tumors with Bex treatment would allow us to have a situation where you can then target these converted hot tumors with the current checkpoint inhibitor treatments. And that is exactly what we would like to do with our combo treatment. Our plan here is to first give Bex 1 week before starting the standard of care PD-1, PD-L1 treatment and then continue them together. We are planning to target the head and neck cancer group to begin with because they are very resistant to current IO treatments. It's a very attractive environment, but there are some other ones as well. We also know, if it's needed that we can enrich this population by locking the intratumoral Clever-1 expression, we have immunohistological staining for that one, and we can build a diagnostic tool around the trials, and maybe at that point we also would like to look what is the PDL content of tumors because that also could tell us what the level of the PD-1 targeted molecules there are in those tumors. So this, as I said earlier, is really now ready to go, and that is very important. So then moving on and looking at the future outlook. On the clinical side, we really aim now to complete the dose escalation, and I'm happy to say that we have additional 15 patients or so already recruited and they are in the trial. And we expect to have a readout of those final cohorts during the early Q4. Dose selection will be done post that one, and then we are ready to really hit the road with the Phase II. And as I mentioned earlier, that will be selected to dose levels, and then continue with the randomized part between dose levels and then look at the final readout for the efficacy. Then ongoing regulatory interactions. You learned about that today. There will be hopefully something else later during the quarter 4. And then if we would have additional resources, we would be ready to really initiate the BEXCOMBO. That preparation work is ongoing at the moment. Then on the corporate side, we are continuing building the U.S. readiness and built over there with the team built. It's really important for us, not only for the clinical purposes, but on the regulatory purposes. But then also really thinking the investor markets over there. We also are glad that these results we have published during this first half is really intensifying our partner discussions. And obviously, that is 1 of the reasons why Leopoldo left the Board and is now actively involved in our partner discussions. Then at the same time, enhancing the market access and the support of the communication activities is really critical for us and really to build Faron on the U.S. soil as a very promising biotech coming from Europe. And that, hopefully, will become very visible during the second half of this year and hopefully the first half of next year. So with this, closing this presentation, I want to thank you for your time, and we are really ready now to take your questions and happy to answer. Thank you very much.

We have now reached the end of our half year results briefing, and it is time for the Q&A portion of our webcast. [Operator Instructions] So our first question comes from Miles Dixon of Peel Hunt. You mentioned good biomarker data in AML. We know from MATINS how good the biomarker data is. Is there anything that you've seen in the BEXMAB biomarker data that is different or surprising versus MATINS?

First of all, it's interesting that we can actually look at that in the bone marrow, and they are frequently taken not every day, obviously, but that has provided us access really to look at what is going on within the site where the blasts are proliferating. And as I told, it's really getting the immune activation on, and hopefully, that will help the patients not only at that situation, but also for long term. Then there are some other markers we can look at and obviously some of them are related to the same as we used with the MATINS trial. But then there are some unique ones, and that analysis is ongoing at the moment, and we believe that later in the fall, especially when we are preparing material for the ASH meeting, which will be early December, we probably will publish something about that. And there will be some very interesting results. I just can't say what those are, but it's really looking good at the moment. It's a really good question, Miles. Thank you very much.

Thank you, Markku. Our next question is, would Faron consider progressing into BEXMAB Phase II while maintaining 100% ownership?

Ownership of bexmarilimab is our key asset. As said earlier, there are intense discussions at the moment around us. Would that result in a situation that we can actually move on. It's really up to the third parties. But the purpose of company is really to build the Phase II results to the point that we can understand what type of the pivotal part we need to continue. And that is really important for us because we believe that at this point, this asset is really increasing the value for the shareholders. And to make too rushed decisions and deals may not be optimal for us. And we keep that in mind while we have these discussions. Jim, maybe you would like to add anything?

No, I think you exactly hit the nail on the head. We're looking at all the options and it's a valuable asset to the company and the shareholders.

Our next question is about whether Faron is planning to apply for Orphan Drug status in the EU?

That is what we plan to do. And then there are some other opportunities as well. So yes, having that document available and then converting that also to the numbers in EU, probably, I would say, would allow us really to get the Orphan in Europe. Yes, the answer is yes.

Right. So on Faron -- sorry, our next question here is about -- in terms of bexmarilimab, it's mentioned as an add-on to other drugs. So the MATINS therapy trial is expensive as a follow-up study and therefore significant. Do you still see Bex as a monotherapy treatment in the future or only as an enhancer to other treatments?

I think that, that needs to be answered in the patient trial. We have an opportunity maybe to go with the refractory patient populations. Then also look at the enrichment cohort, where we only would focus on high Clever-1 expression patients and randomize those against non-Clever-1 expression patients. We just felt that the BEXMAB and focus on myeloid leukemia is so important and would really allow us rather fast movement all the way to the marketing application that we needed to focus on that one. At the same time, the combination is supported with so many data points at this point, and the interferon levels are really indicating what actually could be also the target patients. Unfortunately, there is not available as yet really to look them in the vital population, but we are collaborating with the companies that actually could provide us interferon gamma signature from the baseline levels. And maybe that could be something we actually could move on. But why not use the combination if that makes a lot of sense, like in our case, if the activation of new T cells is needed in order to get the full capacity out of the current immuno-oncology treatments. I'm just happy to do if we can double the efficacy levels. And I can just remind you that, that is a humongous opportunity if we can really show that.

Thank you, Markku. So the next question is concerning Bex and cold tumors as evidenced by the MATINS data. So what do you think is the reason that there seems to be a lack of efficacy in cold pancreatic and ovarian cancers. Does this mean that Clever-1 does not play a role in immune invasion in these cases and that these cancers will not be considered for further study with Bex? And there's a couple of other questions within this 1 big question, but I'll let you address that first before moving on.

Well, the MATINS was done with the last-line advanced cancer patients. We have no idea how exhausted their immune system already had been used. So we are looking to patients who had gone through several trials, almost 3 different treatments in general. So to really make the conclusion out of these very difficult ones like pancreas, we may need to do additional studies. And that is really 1 reason why we also have been thinking that we may need to get to the first line in order to have more intact immune system, which we are activating. And that would then really have more significant results also. So for us, it was a significant increase into our survival because those patient groups we were treating, they all have the same progressive disease stage when they came to the trial. It's kind of unfortunate that we didn't randomize them, but we couldn't do that at that time. Now later on, it really would have been 1 of the options to really move on into randomized trial early on. But we have learned tremendously from the MATINS trial that data is valuable. And 1 thing which I'm not presenting here is also that we are not looking the interferon signaling pathways. We are looking all the pathways from those tumor samples which help us to really analyze the situation and add additional tools to really modify the Bex effect and maybe that actually could provide us another way really to progress with these last-line patients.

And continuation of that question, Markku, what about other cold tumors mentioned like gliomas and sarcomas? Does Faron have the clinical research data on those?

I'm really looking forward to day when we can really go into glioma or sarcoma. And maybe that is something we should actually test in small trial? And what would be the protocol for that, we have been heavily thinking that. But that is an example where we actually could have a remarkable difference and then combine that with some of the current treatments. Yes, we haven't really forgotten those. I really would like to do, especially the sarcoma next.

Thank you, Markku. Our next question is concerning overall survival for BEXMAB. So what is the statistical goal for overall survival in BEXMAB? Is it a percentage increase or an extension of 2 to 3 months of life?

Yes. I mean, the randomized trial, you look at the extension, that's the standardized system, and then you look at the p values, and you just increase patient number in order to get the authorities to agree. With the randomized trial, we may have a situation that what is the other part of the randomization. If it's a doctor's choice or are there more synchronized kind of treatment practices in those centers we are using for the study? And what is the ratio of -- is it 1:2 or 1:1 or something else? All these are still open, and we are working on those issues. And hopefully 1 day we can come up with a conclusion that this is really the right way to move on with that one. But we need some additional information from those MATINS patient tumors in order to really conclude everything.

Thank you. So how do you estimate the potential patient numbers for MDS and AML that could be treated if Bex enters the market? And if efficacy is observed in azacitidine-resistant cases, doesn't this directly imply that there's no reason not to use Bex for everyone since aza efficacy is so poor alone and the disease worsens over time?

The data we are generating at the moment is mainly focusing on second and third line. And we are not really comparing the first line at the moment. We may be there 1 day. The population we are treating is from 10,000 to 20,000 in the Western countries. The opportunity could be more significant when we move on some MDS patients. So AML, as such, based on the Orphan Drug is 100,000 patients in U.S. alone. So it is a significant population if it's an Orphan. And you may also recall that there are some special benefits when you have Orphan return payments and some other things for the R&D. So we really wanted to get this done, and we are focusing on also further applications when we move on. So the treatment price, obviously, is something we have no idea at the moment. But looking at what they have been predicting for other treatments, this is a significant upside alone. We talk about easily a very significant peak sales with those populations.

And actually speaking of Orphan Drug Designation, can you expand on the significance and benefits of it for Faron, please?

Obviously, the easiest 1 is to explain that it can provide you exclusivity. But eventually, we have that already through the IP we have placed over the years. But it provides a number of other recognitions, and 1 of them is recognition by the regulatory authorities. In a way, introduce the topic to the regulators and you have further discussions with them, and that will then allow us to have additional discussions and filings and that will speed up the treatment. And when you have rare disease application, it's speeded up. And then it comes to the point that there's this compensation possibility, which maybe you could actually...

There's also tax benefits that are available to researchers. So that's a very attractive benefit for having the Orphan Drug Designation. So very pleased to have received that.

Yes. Our next question is concerning about being active or partnering discussions at the moment. What level of compensation are you expecting from a licensing deal? And is also M&A a possibility here, or only a partnering deal?

No, I can know no way where it ends up. Let's put it that way. No way telling it. But it's easy to look at some comparable deals, which companies have done, and there are many of them even during this H1 '23 and more previously. So those material I can provide. But obviously, can we get there, that is really what we are trying. But maybe it requires the Phase II data. Let's see what happens. Very exciting time for us. Absolutely. And busy.

Thank you very much, Markku. That was a great response. So one another question here. So what is the timing for the next upcoming readout for BEXMAB?

As I said, Q4 this year is, as you may have already learned, we roughly read them every 3 months. There's no point to go there every month to look at the data. But that's roughly the period. And with that, the latest 1 was in mid-July, so we are almost halfway of that. So somewhere in October, November, we should have the data. And obviously, that is extremely interesting to us because now we have a larger cohort number for those different dosing levels. So that's something we definitely are looking forward. And obviously, that is something that we are happy to release once it's all done and analyzed.

So as a reminder, please submit your questions in the box at the bottom of the webcast window as we are approaching the end of our questions at this point. So the final question so far, until we get more, is that you're obviously considering BEXMAB to target Clever-1. Can you just remind us the importance of this target. So does bexmarilimab have certain properties that differentiate from other targets in the space?

That's a very, very, very, very good question, and I thank whoever made it. The mode of action is very unique. There is nothing like this. And we are really reprogramming these myeloid cells, macrophages or monocytes. And in the case of the leukemia also, the immune blasts, which have the same myeloid background. That's very unique. If I look at some of the ones that may have not really produced a good result in the AML recently, their mode of action is completely different. They have nothing to do with the reprogramming of the macrophages. Having said that, there are a few candidates who may be doing reprogramming of macrophages, but they are targeting different signaling pathways than we do. This is a very unique way of trying to influence the bad immunosuppressive cells in those tumor patients in order to activate their immunity. So that's the aim. And it looks like we are getting there. We are extremely excited about this.

Thank you, Markku. So we have now reached the end of our Q&A portion of our webcast. Thank you very much, everyone, for your questions, and I'll pass it back to Markku to close.

Yes. Thank you very much. I'm really grateful to number of people who have really participated in advancing the BEXMAB. And the most important part is obviously the patients. Also, the clinical sites are really active. As soon as we have opened a new set of the open slots, they are filled in almost immediately. So this has been so pleasant to work with those sites. I'm so thankful. Also, all the other parties, our people at the company, but also our shareholders who have supported us over time, this is really an exciting time for the patients, for company and hopefully for the shareholders, and we keep you informed when we progress. Thank you very much, and looking forward to see you again next time.