Faron Pharmaceuticals Oy (FARN) Earnings Call Transcript & Summary

Welcome, everybody, to the H1 results webcast of Faron Pharmaceuticals. My name is Juho Jalkanen, the CEO of the company. I hope you've all had a relaxing summer charging your batteries because we have an action-packed second half coming up. But before we go into that, let's have a look at what the first half looked like. Standard disclaimer because we will be making some forward-looking statements. But what brings us all together here? Relapsed/refractory MDS a dreadful condition, very poor survival, basically no effective treatment options, nothing. On the other hand, on the right-hand side, what can we possibly bring to the table? We can extend survival. We have an excellent response rate. We can possibly truly change the treatment paradigm in this condition. But then to the actual H1 results. I'm going to hand it over to our Chief Financial Officer, Yrjö.

Hello. My name is Yrjö Wichmann. I'm the Chief Financial Officer of Faron. And it's my pleasure to give you highlights of the H1 financial results. As you might have heard, we did a substantial fundraising in the first half, which led to the fact that we had a plus EUR 30 million cash balance in the end of June. And we have sufficient funds to support our operations for the first quarter 2025. Our operating loss was slightly lower than last year period. It fluctuates from year-to-year so it's nothing exceptional in this respect. As mentioned, we did raise EUR 35.5 million with a fairly extensive transaction extended both U.K. market and Finland and also retail investors in both countries. Resulting of that, we had roughly 105 million shares in the end of first quarter. And the Board still has an authorization to issue 19.1 million shares, which is available until the end of first half next year. After this transaction, our trading volume has gone up substantially, and we have the largest share trading volume among the First North companies in the Helsinki First North, and our market cap is among the largest in Helsinki First North. So we have actually quite well succeeded also in [ raising ] our shareholder base and increasing the liquidity of the share. So that was in a nutshell. Over to you, Juho.

Thank you, Yrjö. As Yrjö mentioned, there in the bottom, we have truly changed the stock. I would say H1 has been truly transformational, that word I see often used, but I seldom see in this respect the change we've done. But let's go over the sequence of events. We've seen during H1, we started off well and going into Phase II in relapsed/refractory MDS with bexmarilimab. After that, though many of you are aware of the capital markets situation that has been going on for some while now in the biotech sector, we too were not immune to it. And we hit the minimum cash level set by IPF Partners. We did quickly corrective measures and 2 consecutive small bridging rounds after that. Then we did significant cuts in headcount and our operative cost, which you've just seen in Yrjö's report. Then we had a CEO and CFO change, which is always a big thing for a company like us. We then continued to show the excellent results in Phase II that we have seen already in Phase I, which then led us to do a substantial public and institutional offering both in Helsinki and London to become a healthy, strong company funded to complete Phase II. So that's the sequence in events. And I would say we accomplished this very well because, as Yrjö mentioned, we ended up raising EUR 35.5 million, which is a record for the company and is a landmark raise in the Nordics for biotech, I would say, during this year. We've continued to produce outstanding results in our clinical trial. We've also taken this data to the FDA and got an, I would say, exceptional feedback. We had a fast track just granted. We have an accelerated development program basically stamped by the FDA. I dare to say we are the most exciting and advanced asset in development for the treatment of relapsed/refractory MDS, and we are now the industry-leading macrophage reprogramming agent. If you look at our results, others have not achieved such results as we have. So at the end of the day, we have transformed into a financially very healthy, cost-effective company that's here to deliver on our objectives: to complete Phase 2 and partner, as already communicated to the market. Now it gives me great pleasure to introduce a new face to the company. I welcome to the stage our new Chief Medical Officer, Dr. Petri Bono. Welcome, Petri.

Thank you, Juho.

Nice to have you onboard.

Thank you. Great to be here on stage, and good afternoon, everyone. So I'm more than delighted to be welcomed by Juho today at the stage, and happy to tell you about some recent advances. And -- but before I go into them, so I would like to a little bit to introduce myself. So my name is Petri Bono. I'm a medical oncologist by my basic training and also Associate Professor of Cancer Biology at the University of Helsinki before joining Terveystalo. I was a Chief Medical Officer at Terveystalo, the largest private health care provider company in Finland. And before that, I was in various leadership positions at the Helsinki University Hospital, including leader -- Director of the Comprehensive Cancer Center for 6.5 years. I'm fairly familiar with bexmarilimab, our leading asset, since I have been also the principal investigator in the global first-in-man Phase I trial with bexmarilimab in solid tumors. But that's about my background. And then I'm more than excited to tell about the recent progress that we've had and also a little bit open what to expect now in the fall and in the winter. So what we have...

The audience is expecting.

Great. Let's start with the fascinating news from FDA. First of all, already in July, we announced the positive feedback from FDA regarding the registrational clinical development plan for bexmarilimab, or BEX as we call it, for the treatment of high-risk myelodysplastic syndrome, MDS, with a clear recommendation that we should contact directly on confirmatory Phase III study in frontline high-risk MDS without requirement of a separate randomized Phase III in the later stage or in the relapsed or refractory setting, and that the accelerated approval for BEX in relapsed MDS could be achieved with an interim readout of the response rate of the frontline Phase III study. In a nutshell, what this means only require -- only one randomized Phase III is required from us to get approval. Then this week, on Monday, we had a recent press release out about FDA's latest decision, so that they have granted to our BEX fast track designation for the treatment of relapsed/refractory myelodysplastic syndrome in combination with azacitidine. And here from the bullets, you can see what this means in practice. It means more frequent meetings with the FDA to discuss the development path and plan to ensure correct collection of data needed for the full approval. And also it means eligibility for accelerated approval and priority review if relevant criteria are met. And what are these relevant criteria? They are that there's unmet medical need for the disease and also that it is a serious, important disease where -- which is lacking suitable treatments. And when we -- we need to remember that when we're talking about relapsed MDS, so the current overall survival in -- with the current agents, so it's around 6 -- 5 to 7 months in median. And it means that actually it's a number that we see as an overall number in metastatic pancreatic cancer. So it's a deadly disease. But then let's move forward after this exciting FDA news that how does the H2 look? And then what can you expect from us to see next? First of all, we will have an R&D Day and provide further market guidance on bexmarilimab's anticancer development plan as well as an update of the ongoing Phase II survival data in October 2024. Unfortunately, I cannot yet at this stage tell you the exact date, but anyway in October. So we don't need to wait a long time when we open more our R&D pipeline. Then about the BEXMAB MDS recruitment status. So it's running. It's enrolling. It's enrolling well. And the recruitment is projected to be completed by the end of the year or end of Q4 2024. And the major future releases of the results, so they will be at the medical congresses, as is typical in the industry. And the current plan is that the next data release from BEXMAB new patients, so that will be at the ASH meeting, the American Society of Hematology meeting taking place in December. And then thereafter, the next one will be next June at ASCO, the American Society for Clinical Oncology Annual Meeting or the European Hematology Association Meeting. So that's -- those are the time points where you can expect to get data, for example, from the response rates and duration of responses and so on. So we go to a so-called more normal rhythm of reporting scientific results from enrolling clinical trials. And then I'm really happy to tell that in solid tumors, we are also making progress with the pipeline there. First bexmarilimab PD-1 inhibitor combination trial, so that's in preparation -- or the preparations have been initiated, and this will be the first trial to examine the safety and of course also preliminary efficacy of BEX PD-1 inhibitor combo or BEX checkpoint inhibitor combination. And the first trial site, it will be at Royal Marsden Hospital in London, U.K. But more about the development plan in solid tumors in October in the R&D Day.

Thank you, Petri. Great segue to open the floor to questions. So nice to see so many of you here today. Please, the stage is yours, and we're happy to answer basically almost anything.

Thanks very much, Juho. First question, can you say anything more about your discussions with partners? So have you started those with relevant companies? And if so, can you give an indication of how many and what's your target to complete those discussions?

Thank you. Excellent question. I know this is -- many await answers to these questions. One must understand that these discussions which, I can say, are ongoing are under discrete confidentiality. We cannot speculate them. We cannot give guidance and time lines for that. That's just industry standard. So for the audience, I have to say you have to keep your head cool and hold the line.

Okay. A financial question. Will the cash runway into Q1 2025 cover finishing the Phase II trial as well as beginning the Phase III?

This is mostly for me.

Over to you, Yrjö.

We will end the recruitment or finish the recruitment by the end of 2024. But the current cash runway will base on the covenants, which we would be reaching in the end of Q1. We would not be completed with the -- or able to have the full readout of the Phase II trial. So it will be close, but not close enough.

I'll just elaborate on that. When the readout comes, we're going to be starting to looking at the covenant level. They're pretty right there as the readout will come on the response rate. But never in our plans have we had that we would go into Phase III with the current amount. So again, as previously communicated, we are looking to partner for Phase III.

Okay. Next question. Regarding the potential for an accelerated approval in the relapsed setting, what magnitude of response rate do you believe you would require?

Do you want to take it or should I? So actually discussing with KOLs, leading KOLs in the world on this and also the FDA, so they will be concentrating on CR and PR. And that is basically currently 0% to 5% with the existing treatments. And we're at 15% to 20%. So that's the magnitude of CR and PR we would like to see for approval -- or FDA would like to see for approval.

Could you provide some more color on the patient populations in the Phase II trial? So are you including frontline high-risk MDS patients? Are you no longer recruiting refractory MDS patients? And without providing any internal guidance, what are the potential markets for frontline high-risk MDS? Is there any upside in targeting both populations?

I can tell about the recruitment status. So we are enrolling both at the moment, both frontline and relapsed patients.

And regarding the markets, as mentioned, relapsed/refractory, basically untapped market. Still a significant amount of patients, we're talking tens of thousands. Then in the frontline setting, a significantly bigger market. Still the market dynamics, the main competitor, the aza-venetoclax has a combination who are running in Phase III for the frontline setting. If it's positive, it is likely to become the new standard of care. How do we fit into that picture? First of all, our safety profile is a lot better. We believe our survival will be better. Since it's very well known if you refract to aza-venetoclax, you usually do even worse than refracting on aza alone. So -- and we've shown in the relapsed/refractory population that we can work also after a combination of aza and venetoclax. So in the front line, there's plenty of space to play. And if the aza-venetoclax trial is negative, then it's still an open space just for us. And it's a big, big market.

What is the optimal plan for getting to the pivotal trial? Is it licensing after the BEXMAB data or another capital raise to finance that trial?

That's a very good question, and that's what we aim to optimize at the moment. So as the Phase II readout comes to completion, that's like -- that's when you get the best deal. But then we're going to be close to running our fumes. So I'm going to say that, that would take it all the way and maximize your deal value, that would require a capital raise. But partnering is in motion, and we're likely to partner before that.

And then a question about fast track designation that was announced this week. How will that benefit the company going forward?

Of course, it's a clear sign from the regulatory authorities about the potential of the asset. And now it's not just in our mind anymore an exceptional agent, but also the regulator thinks that it's of special interest. And that's why the fast track was designated, bexmarilimab, in the treatment of MDS.

And maybe just to add to that because I've discussed this a bit with some investors, because we've been asked about external validation on our drug, on what we do. This is the external validation you get from a -- the best you can get from a regulatory authority. So basically -- because, for example, we get asked why aren't there any big VCs yet or pharma? Well, I could say pharma is coming. VCs, they do magnitude of tickets of funding the Phase III. But we're likely to partner and not raise funds to go into Phase III. So -- but this is the ticket you get from the FDA. They have now validated the technology. They believe in the technology. They want to go forward with us in partnership to develop this.

Thanks very much. That's all the questions, Juho.

Thank you, everybody. Have a safe trip home. Stay tuned for more exciting news.

Thank you.

Thank you.