Heidelberg Pharma AG (HPHA) Earnings Call Transcript & Summary

Hello, and welcome to the Heidelberg Pharma Annual Press and Analyst Conference 2021. My name is Lydia, and I will be your coordinator for today's event. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Jan Schmidt-Brand to begin today's conference. Thank you.

Hello, ladies and gentlemen, and welcome to the Heidelberg Pharma conference call to discuss our 2020 fiscal year results and to provide a business update. My name is Jan Schmidt-Brand, and I am CEO and CFO of the company. Joining me on the call today is my colleagues, Professor Andreas Pahl, Chief Scientific Officer; and Katja Arnold, our Investor Relations consultant. Please note that this presentation is available for download on the Heidelberg Pharma website. This conference call is being recorded and the replay will be available on our website after the live event. Before I begin, let me remind you that we will be making forward-looking statements on this call as well as during the question-and-answer session. Please see our safe harbor statement here on Slide 2. For a more detailed discussion of the risks and uncertainties affecting our business, please see the 2020 management report published today on our website. If you wish to ask questions in German or English, please feel free to do so after the presentation. We will be pleased to answer your questions during the Q&A session. On the call today, we will give you a brief corporate overview and outline key achievements over the past 12 months. We will then provide an update on our proprietary ATAC programs as well as our partner projects. This will be followed by a review of our financials and an outlook for the year ahead. Please turn to Slide 4. This slide provides a quick overview of our company. As a reminder, we are the first company to deploy a completely new mode of action in cancer treatment by using the toxin Amanitin to develop anti-cancer therapies. Amanitin is a natural toxin found in the death cap mushroom and has a unique biological mode of action, the inhibition of RNA polymerase II, which could serve as the basis for developing highly effective innovative drugs. We use our proprietary and innovative technology to manufacture antibody targeted Amanitin conjugates. We call them ATACs. With our model proprietary technology, we seek to provide cancer patients new treatment options that improve efficacy, overcome resistance mechanisms and kill both proliferating and dormant tumor cells. We plan to use the biomarkers to stratify the patient population and expedite clinical development. Before we enter the core of our presentation, I want to briefly discuss the impact of COVID-19 on our business. We have been fortunate that our day-to-day business processes have only been affected to a small extent. We take our responsibility for the safety of our employees very seriously and where possible, our staff has been working from home. For those employees who needs to be on site, we have implemented a rolling system to comply with all safety regulations. We experienced some delays among our collaboration partners with early-stage projects due to reduced capacities and temporary laboratory closures that has since then been lifted. Telix Pharmaceuticals stopped patient recruitment for the pivotal Phase III ZIRCON trial in March 2020 as a result of the pandemic, but has now resumed enrollment. There have been few disruptions and delays in our supply chain and research and development activities. And our own projects proceeded according to plan in the 2020 financial year. Please turn to Slide 5. I'm delighted to welcome 2 new members of our management team. András Strassz joined us in 2020 and was recently promoted to Chief Medical Officer. He has a strong experience in clinical development, including oncology, and joined us from Affimed, where he served as Medical Director. Previously, he held positions in clinical development at Sandoz and Amgen, among others. Mr. Mathias Locher joined us just this year as Chief Development Officer, a newly created position. He came from Janssen where he was Senior Director External Innovation at the J&J London Innovation Center. Prior to that, he held management positions at Covagen, Merck Serono, Micromet and ASTA Medica. Both of them has a wealth of experience that will be invaluable as we advance the development of our ATAC programs, including bringing HDP-101 into the clinic soon. Please turn to Slide 6. The majority of our activities are focused around the ATAC platform technology. With this proprietary technology, we are developing our own product pipeline. Our lead product candidate HDP-101 is initially being developed for multiple myeloma. At the same time, we are working on additional proprietary ATAC candidates that will undergo preclinical testing to determine the efficacy and tolerability. We will talk a bit more about these efforts later in the presentation. We have also entered into collaborations with biopharmaceutical companies to develop new product candidates, with a partner's antibody using our ATAC platform. Two key ones being Takeda and with Magenta Therapeutics. We are particularly excited about the great progress we made in our collaboration with Magenta over the past year, and we'll provide you an update on that as well today. On the manufacturing end, we have the technology and organization in place to supply our own projects as well as our license partners with GMP quality Amanitin Linking material, which is important for clinical trials. We also have 2 partnered legacy clinical assets from the [ pharma Telix ]. These licensing deals provide us milestone payments and long-term upside revenue potential without any cost or resources on our end, as we do not longer invest in those assets. Please turn to Slide 7. We made strong progress during 2020 despite the challenging environment. Let me start with our lead product candidate, HDP-101, a BCMA ATAC. During the year, we completed the preclinical toxicity testing required to enter human clinical testing. We put together a detailed clinical trial plan, selected clinical sites and have been working with our CRO to put in place the logistics around planned clinical trial. In the fourth quarter of 2020, we were quite active on the regulatory front. We had a pre-IND meeting with the U.S. agency FDA in October to discuss our clinical trial plan for HDP-101. At the American Society of Hematology virtual annual meeting, we presented the design of the planned clinical trial, one practical use to increase awareness of the trial amongst the medical community. We will discuss the design in more detail later in this presentation. In January, 2021, we subsequently submitted an IND application and received clearance from the FDA in February to initiate our first [ in-human ] trial. This certainly was an exciting moment for us. Moving beyond our lead drug candidate, so the preclinical work was conducted to optimize 2 additional ATACs and these were internally nominated as next development projects. We come to HDP-102 and 103 later in detail. Heidelberg Pharma has signed a master service agreement with Berlin-based ProBioGen for the production of the 2 antibodies [ starting ] from saline development, process development up to GMP manufacturing. We are pleased with how well this relationship is working. Production of material for toxicity testing for HDP-102 was completed on time with high yields and high quality. Now looking at the avenues during the year related to our proprietary programs. As you may recall, preclinical data showed that Amanitin has the potential to be particularly effective against aggressive tumors in connection of the 17p deletion. Our scientific partner MD Anderson has been working in this area of research for some time, including showing this in preclinical models. Together, we demonstrated that the Amanitin conjugate, HDP-101 was especially efficient at attacking tumor cells from multiple myeloma patients with a 17p deletion. The MD Anderson team presented its findings at ASH 2020. In March 2020, the patent office -- U.S. patent office granted MD Anderson patent around this work. We hold an exclusive license to these patent rights. In the same month, the European patent office granted Heidelberg Pharma, an important patent for our proprietary technology for the production of antibody targeted Amanitin [ polymerase ]. Now turning to our ongoing collaborations. We were pleased that our partner, Magenta, continued to make good progress with its programs utilizing our ATACs. They also presented new data at ASH as well as at other scientific and medical conferences during 2020. In September, we received a milestone payment from them related to Magenta-117. Our partnership with Takeda is proceeding as agreed although Takeda has not yet publicly disclosed any information on their work. Takeda is testing new options for targets, which have led to extend its collaboration with us for the period of 1 year into 2021. Before moving on, let me also say that a word -- say a word of thanks to our long-standing and largest shareholder, dievini, without whose support we would not have been able to get to this critical stage in our development, mainly about to initiate a human clinical trial testing with our first proprietary program. Dievini supported us with several financings throughout the year. And just last week, we announced a further commitment of up to EUR 30 million, which we expect to be sufficient to conduct operations through mid-2022. Please turn to Slide 8. I'm very pleased with the progress we and our partners made during 2020 and already in 2021. Let me now turn the call over to Professor Pahl, our Chief Scientific Officer, who will walk through these achievements in more detail. Please turn to Slide 9. Andreas, please go ahead.

Thanks, Jan, and hello, everyone. Let me spend a few minutes to discuss the new features of our ATAC technology as demonstrated in preclinical studies and the translation into potential clinical deficits. In contrast to most other treatment modalities, ATACs are efficacious on dormant tumor cells, which could translate into longer progression-free survival and minimal residual disease negativity. ATACs [indiscernible] on tumor cells with ultra-low target expression, so we could see even deeper responses in the clinical studies. Our [indiscernible] Amanitin provides another novel action with the ability to overcome resistance because all tumors will be naive to the inhibition of the RNA polymerase II. With the 17p deletion, we have a biomarker to stratify patients and to expedite clinical development and potentially we could obtain a breakthrough designation and an accelerated approval. However, we have seen a much cleaner safety profile as compared to other payloads in our preclinical investigations. And lastly, we recently showed that ATACs kill tumor cells in a way that stimulates the immune system and that this leads to a synergy with checkpoint inhibitors which I will discuss on the next slide. As a reminder, these are preclinical findings we need to confirm in our clinical program. Please turn to Slide 10. Earlier work has indicated that treatment of ATAC molecules induces an immune response. A research group at the School of Medicine at Indiana University and scientists at Heidelberg Pharma have now shown in a joint publication in a high-profile journal that our payload induced immunogenic cell death and showed strong synergies with checkpoint inhibitors. As you can see here on the left slide that the check inhibitor alone shown in green has no effect on the growth of a tumor model for triple-negative breast cancer. An ATAC targeting HER2, which is present only at low levels on the surface of these tumor cells was able to inhibit the tumor growth as indicated by the red curve. And this ATAC now was combined with a checkpoint inhibitor and much more pronounced inhibition of tumor growth was achieved as shown in blue. This synergy led to significantly increased survival as shown on the graph on the right. These results were recently published in Science Translational Medicine. These results suggest that combination therapies of ATACs with checkpoint inhibitors could be an effective treatment strategy in the future. Please turn to Slide 11. Another area of interest that we frequently discuss is our 17p deletion biomarker approach, about which we are seeing more and more supportive findings. You will recall that 17p is a section of chromosome 17 that contains the tumor suppressor gene TP53. Again, a broad advantage, tumor cells frequently lose this chromosome section and this leads to a codeletion of the neighboring gene for the major supplement of the RNA polymerase II, as shown on the left red box. This reduces the amount of RNA polymerase II in these tumor cells. As a consequence, these tumor cells become particularly sensitive to the treatment with Amanitin. The use of such a biomarker offers the opportunity for us to potentially accelerate development of some of our ATACs to targeting the patient population, which most likely to benefit from our treatment. Please turn to Slide 12. A great example of where this biomarker approach might work well is with our lead candidate HDP-101, which will soon enter the clinic for the treatment of multiple myeloma. As Jan mentioned earlier in the presentation, the MD Anderson research team has demonstrated that HDP-101 was particularly effective and efficient at attacking tumor cells from multiple myeloma patients with the 17p deletion. Given that multiple myeloma patients would need the distribution of a particular high medical need for more effective therapies and a much poorer prognosis, this finding is quite exciting. The possibility of identifying this particular vulnerable patient population using this biomarker could enable a highly expedited initial development program for HDP-101 and this has the potential to speed up the [indiscernible] process [indiscernible] clinical data show HDP-101 to be safe and effective. And of course, this is subject to regulatory [indiscernible]. We are developing a companion diagnostic to detect and quantify TP53 [ RNA polymerase II ] gene deletion in patients. We have completed initial feasibility studies, decided for the first test and are currently evaluating this assay on [ archived surrogates ] from myeloma patients. We plan to use the biomarker test in the second part of the HDP-101 clinical trial in multiple myeloma after dose escalation for patient stratification. Please turn to Slide 13. We are excited about the progress made with HDP-101 over the last 12 months. This slide highlights where we stand. We are completing contracts with various sites in the U.S. and Germany and this work is ongoing, and we are pleased with the pace at which we are bringing new sites on board. As mentioned earlier, we just received IND clearance by the FDA to start our clinical trial in the U.S. We have submitted a similar application, the CTA or clinical trial application to German regulatory authorities and expect a decision in the third quarter of this year. We look forward to enrolling the first patient in this study in the U.S. in the second quarter this year as well. Please turn to Slide 14. Here now some more details about the planned clinical trial. The study is an open-label, nonrandomized, multicenter phase I/IIa trial evaluating HDP-101 in patients with relapse or refractory multiple myeloma for whom limited treatment options exist. The primary aim of the Phase I dose escalation part is to determine the maximum tolerated dose and to establish the recommended dose for the Phase II part. Up to 36 patients are planned to be enrolled in this part of the study. In the Phase I part of the trial, we will evaluate if there are any dose-limiting toxicities in the patients. The study scheme as depicted in the lower part of the slide ensures a safe dose escalation to reach a therapeutical effective dose in these patients who have limited or no therapeutic options. The primary objective of the Phase IIa part will be to assess the preliminary anti-tumor activity of HDP-101. Up to 30 patients are planned to be enrolled and patients will be stratified based on our biomarker for 17p deletion status. As already mentioned, we are expecting to start enrolling patients in the next quarter. Given that the first part of this trial is a dose escalation study, the timing as to when we might have first data is difficult to predict. Please turn to Slide 15. We are pleased to have been able to make the decision to advance to other ATAC candidates into development over the past year. Let me briefly discuss them here. Today, we are happy to announce the tumor target for HDP-101. We released an anti-CD37 antibody for this program. CD37 is over-expressed in B-cell lymphoma cells but not found on normal stem cells or plasma cells. This makes it an excellent target for developing drugs to treat Non-Hodgkin lymphoma or NHL. Another ATAC candidate we are bringing forward into development is HDP-103, an anti-PSMA ATAC for the treatment of metastatic castration-resistant prostate cancer. Prostate-specific membrane antigen, PSMA is a surface protein that specifically appears on prostate cells and is over-expressed in prostate cancer making it an attractive target for an ADC approach. For both of these areas, NHL and advance prostate cancer, the use of a 17p deletion biomarker makes sense as there is a high prevalence of this deletion. GMP development has already started and [indiscernible] development with HDP-102 and 103 is slated to begin in 2021. This will initially include a preclinical toxicology study with product candidates manufactured at CDMOs. Antibody and payload manufacturing for both product candidates is ongoing. Should development go as hoped, IND applications for HDP-102 and 103 could be submitted as early as next year. Please turn to Slide 17. Let me turn now to our Magenta collaboration. As shown on this slide, patients undergoing stem cell transplant gene or cellular therapy need to be conditioned. This means the disease cells and stem cells must be removed to create space for the transplant. This is done traditionally with chemotherapy alone or in combination with total body irradiation. This conditioning process is associated with significant toxicity. As a result, many patients today are not eligible for this treatment. Magenta is developing targeted disease-modifying ADCs that make it possible to accurately remove the disease-causing cells in the body only and safely [ but certainly ] [indiscernible] blood system without chemotherapy or with radiation. Magenta to date has exercised 2 of 4 options under our agreement. One, to develop ATACs against the target molecule, CD117 and one for CD45. During 2020, Magenta presented preclinical data with a product candidate MGTA-117 at several scientific meetings, conducted additional preclinical studies and made preparations for a Phase I first in-human trial. In September, Heidelberg Pharma received an undisclosed milestone payment related to the initiation of the GMP toxicology studies. Magenta has indicated they probably expect to submit an investigational new drug IND application to the U.S. FDA in mid-2021, and then will plan to start clinical testing in the second half of 2021. In May and June 2020, Magenta announced collaborations with 2 U.S. companies AVROBIO team and Beam Therapeutics. Each company will test MGTA-117 for conditioning patients receiving its gene therapy treatment. It is exciting to see this program being evaluated for another treatment area beyond the initial conditioning for stem cell transplantation. Magenta is also conducting preclinical testing with CD45-ADCs in various transplants and autoimmune disease models. For autoimmune disease, they have [indiscernible] that conditioning with the CD45-ATAC will deplete immune cells, including the autoreactive lymphocytes. The restoration of a complete immune system via hematopoietic stem cell transplantation will reset the immune system and able sustained remission. [indiscernible] successful development of these approaches could open doors for innovative applications of ATAC beyond oncologies [ quantities of the ] immune system. Please turn to Slide 18. Our partners for our legacy clinical programs already made some nice progress nonetheless over the past year as well. Let me start with Telix, which is developing TLX250-CDx already labeled from the antibody girentuximab which binds to the tumor-specific antigen [ CA-9 ] a clear cell renal cell carcinoma. The therapeutic candidate here is [ 250 ]. Here Telix is conducting a Phase III study. Second, with the TLX250 companion diagnostic for diagnosing renal cancer using positron emission tomography, PET. The study is a global market center Phase III trial that starts in Europe, Turkey, Australia, Canada and the U.S. Patient recruitment had to be suspended due to COVID-19 lockdown but was resumed in Europe in mid-June 2020, and the first patient in the U.S. was enrolled in the study in early 2021. The second study is expected to complete recruitment in mid-'21. In July 2020, Telix announced the receipt of a breakthrough designation from the FDA for the TLX250 companion diagnostic, which offers a number of important benefits to Telix in terms of speeding up the regulatory process. Telix is also planning the further development of the therapeutic [indiscernible] candidate TLX250. TLX250 will be tested in 2 Phase II combination studies, STARLITE-1 and STARLITE-2 with immunotherapies. The applications to start these trials in the U.S. are expected to be submitted to the FDA in the first half of 2021 with the goal of initiating the first trial in the second half of this year. Additionally, Telix has completed Phase I enrollment of its Phase I/II ZIRDAC-JP study in Japan in TLX250 companion diagnostic [indiscernible] renal cancer. The goal of this study is to confirm dosing and pharmacology in Japanese patients. Also Telix worked on partnerships. Telix entered into a strategic license and commercial partnership with Grand -- with China Grand Pharmaceutical and HealthCare Holdings for several Telix product candidates, including TLX250 companion diagnostic and TLX250 for Greater China. CGP has committed to program related investment for the clinical development of the therapeutic TLX250. Heidelberg Pharma has licensing agreement with Telix is not directly affected by this agreement, but we are entitled to future royalties on sales of TLX250 companion diagnostic until it's [indiscernible] in CGP's territories. Telix announced also a collaboration with Eczacibasi-Monrol Nuclear Products Co. for the manufacturing of TLX250 companion diagnostics in Turkey. The first Turkish patient in the Phase III clinical trial has been dosed. Please turn to Slide 19. We are excited to see our partner RedHill initiate the development of RHB-107, an oral serine protease inhibitor for the treatment of patients with mild-to-moderate COVID-19. Based on new scientific findings showing that the mechanism of action of serine protease inhibition also can play an antiviral role against COVID-19 and the mutual data showing that RHB-107 can effectively inhibit the [ SARS-CoV-2 ] replication. RedHill decided to advance RHB-107 into clinical testing in corona patients. In February 2021, the dosing of the first patient in the U.S. Phase II/III study in mild-to-moderate COVID-19 patients in an outpatient setting was announced. Earlier in 2020, RedHill announced plans to study RHB-107 combination with another development candidate opaganib, which is third arm in the Phase IIa study in advanced bile duct cancer, cholangiocarcinoma subject to discussions with the FDA. With that, let me now turn the call back to Jan, who will walk you through the financials.

Thank you, Andreas. I'd now like to come to the financials on Slide 21. As a reminder, our fiscal year ends on November 30. All numbers for the period, as you see, were within guidance. In the 2020 fiscal year, Heidelberg Pharma generated sales revenue and other income totaling EUR 9.6 million, an increase of 20% compared to the fiscal year 2019. This was mainly due to increased sales revenue from research collaborations with the ATAC technology. Other income was EUR 1.1 million, and the biggest part of the figure was EUR 0.6 million from the reversal of unused accrued liabilities. Operating expenses, including depreciation and amortization rose significantly to EUR 27.9 million in 2020, mainly due to the increase in research and development expenses. Looking briefly at the breakdown of expenses. Cost of sales are costs directly related to sales revenue. These costs were EUR 5.6 million in 2020, mainly related to expenses for customer-specific research and for the supply of Amanitin linkers to licensing partners. Research and development costs rose year-over-year to EUR 18.3 million as planned due to the expansion of cost-intensive [indiscernible] and good manufacturing practice or GMP production and preclinical and regulatory preparations for the clinical trial HDP-101. Production of antibodies for HDP-102 and HDP-103 also was a factor in the increase. At 66% of operating expenses, R&D remained the largest cost item. Administrative costs were EUR 3.6 million. These includes staff costs of EUR 2.1 million, an increase due to an increase in the number of employees related to the expansion of business activities. Other expenses for business development, marketing and commercial market supply activities, which mainly comprise staff and travel costs were EUR 0.4 million. Net loss was EUR 18.4 million, which was significantly higher than the previous year due to the increase in operating expenses. Please turn to Slide 22. The group had cash and cash equivalents of EUR 5 million at the close of the fiscal year. In April 2020, we raised EUR 14.4 million gross proceeds from a private placement for the group's main shareholder dievini selected institutional investors. A commitment of EUR 15 million dievini had been made in July 2020. Converted into a loan to be drawn down in several tranches in 2021. IN March '21, dievini confirmed a new financing commitment of up to EUR 30 million. The latter enables the company to prepare its 2020 financial statements on a going concern basis and extends the cash reach into mid-2022 if business proceeds as planned. Please turn to Slide 23. Turning now to our guidance for the fiscal year 2021. We expect to generate between EUR 5.5 million and EUR 7.5 million in revenue and other income. The amount is expected to be lower than in 2020 as we anticipate supplying less Amanitin to our partners, given the high yields we were able to produce in 2020. Revenue guidance includes potential income from existing ATAC collaborations, including MTA contracts as well as license agreements for the legacy programs. Sales revenue from a potential new license agreement was not included in this planning. Based on current planning, operating expenses are expected to be in the range of EUR 36 million to EUR 40 million, higher than in the 2020 reporting year due to an expected increase in costs related to the soon-to-start clinical trial with HDP-101 as well as manufacturing and preclinical work related to our new product candidates, HDP-102 and HDP-103. Earnings before interest and taxes, EBIT, in the 2021 fiscal year are expected to be between minus EUR 30 million and minus EUR 34 million. If income and expenses develop as anticipated, financing requirements for fiscal year 2021 are expected to increase compared to 2020. Funds required are expected to be in the range of EUR 30 million to EUR 34 million. This corresponds to an average monthly use of cash of EUR 2.5 million to EUR 2.8 million. The results of operations in the next 3 years will depend to a large extent, on whether we are able to enter into additional agreements for ATAC partnerships and license agreements with various pharmaceutical partners. We expect that expenses will continue to exceed income over the next 2 years as we expand our R&D activities and move into clinical development with further projects. Please turn to Slide 24. I will not go into detail here but you can see some basic stock performance data, analyst coverage and ownership information on the slide. We continue to be quite active in Investor Relations and despite the need to meet virtually, we have met a number -- with a number of specialized -- specialist investors all across Europe and the U.S. to discuss our progress and our strategy. Let me now wrap up with you what you can look for during the rest of 2021. Please turn to Slide 26. We expect 2021 to be another busy and productive year at Heidelberg Pharma. Starting with HDP-101, we expect to initiate our first human clinical trial. We have already received the go-ahead to start the study in the United States, and we are waiting clearance from German regulatory authorities. We are signing up sites on both sides of the Atlantic and very much look forward to when we are able to announce that the first patient has been treated sometime during Q2. We are continuing the development of the predictive biomarker for the 17p deletion, which we plan to implement in the second part of our clinical trial, the dose expansion phase. We expect first data in 2022. Beyond HDP-101, we will continue to advance the development of HDP-102 and 103, the next proprietary product candidates we are bringing into development. Turning to our collaborations. We hope to sign additional research and option agreements with new biopharmaceutical partners, similar to the agreements we have ongoing with Takeda and Magenta. All I can say is that due to the attractive ADC deals and financings and a lot of advance in other ADC companies, we have gained quite a bit of interest in our technology. We also look forward to continued achievements in these ongoing collaborations, including Magenta entering its first ATAC into clinical development later this year. Regarding our legacy clinical programs, Telix expects to complete enrollment in its ongoing pivotal [ clinical study ] with TLX250-CDx this year and to start a clinical trial with a future candidate, TLX250 during the year. RedHill biopharma plans to test RHB-107 as the third arm in a Phase I/IIa combination study in advanced cholangiocarcinoma, subject to discussions with the FDA, and they will also continue the trial with RHB-107 in patients with mild-to-moderate COVID-19. All research and development activities for our out-licensed legacy programs are performed by our partners. Heidelberg Pharma is not involved. However, as a [ licensee ], we would share some of the revenue associated with any potential successful development. Please turn now to Slide 27. Our investment summary. We are -- we at Heidelberg Pharma believe that the ADC field is an exciting one to be part of, and it is an area of R&D that is producing highly promising therapies. We are excited about what the future holds for us and are driven by our vision of developing new options to address major challenges in cancer therapy. We are focused on developing our own proprietary pipeline of [ cancerite ] candidates, and we also are collaborating with other biopharmaceutical companies to find novel ATACs to treat a variety of tumors and address other [ cancerite ] issues and even potentially to move beyond the field of oncology. We believe we are well positioned to reach our goals and bring new hope to patients. On Slide 28, you can find our current conference schedule for the first half of the year. We thank you for your time, and we are happy to now take your questions.

[Operator Instructions] Our first question comes from Dennis Berzhanin of Pareto Securities.

This is Dennis Berzhanin from Pareto Securities. Just a couple on the 2021 guidance and one on the pipeline. So for 2021, the guidance appears to be quite conservative, especially compared to last year and the year before. And I think the reason for that is that there was higher volumes provided of [indiscernible] linkers to partners and higher yields achieved last year. I just wanted to dig a little bit deeper to understand if there are any other drivers, especially in 2021, given at least the last few years with the sales revenue over EUR 7 million for each year, is there -- are there any challenges, maybe COVID-19 or any -- do you think that's maybe affecting not you, but the partners? Just to understand a little bit about the top line guidance? And then second part of the question related to the expenses. Just wanted to understand with the higher expenses, of course, some part of it is due to the clinical development of HDP-101 and the 2 new preclinical candidates. I was wondering if you could break up maybe roughly speaking, how much additional R&D expenses is for the 2 new additional pipeline candidates versus HDP-101, just to get a little bit of flavor. And finally, related to these 2 HDP-102 and HDP-103. I was wondering if you could discuss the -- some of the steps in the preclinical development, some of the milestones you're hoping to reach, specifically this year, and whether you will be prioritizing one versus the other?

Thank you, Dennis, maybe I'll start with the financial issues. So with regard to the top line development, it's actually not very easy to understand. But the fact is that the agreements we had in the first time despite of the fact that they were about the supply of Amanitin were not classical supply agreements. They were just at a fixed price per gram. So there were more oriented at the doing. So it's more a service-oriented agreement because we didn't know the yields, and we actually didn't want to take the risk on the yields. Now -- and this related to a certain, let's say, target amount we had agreed with our partners, and we worked towards these target amounts. Now as we see the year 2020 closing and early 2021 that actually the processes have been improved so much that the quantities we ultimately had planned for the partners had already been achieved. So that further a new, let's say, service like agreements are simply not necessary right now because the quantities are high enough. So sort of kickback of the success to the top line of the next year. But there's nothing, let's say, it's just the allocation of time and the allocation of the material, which has been produced over time and the needs that are anticipated this timeframe. So for the time being, yes, it will be lower with regard to this [indiscernible] supply, but it will be growing on the pure IP side and partly compensate for this lower supply payments. Does this answer the question?

Yes.

So short term, it's maybe negative -- not positive news, but in the long term, it's certainly very good news that we can improve the yields and lower the cost of manufacturing so much. So the next question you were addressing is about the breakdown of expenses. So we are anticipating as the admin cost will be more or less like in the last year. And the supply cost, of course, will be lower due to the, let's say, the effect I was describing, we will have around EUR 30 million R&D cost. And let's say, 2/3 of that is dedicated to the newly external cost of these 3 products, with a slight -- where you can basically divide it by 3, the 2/3. So there's an equal spending more or less on the 3 candidates because HDP-102 and HDP-103 require quite a bit of manufacturing efforts. While 101 is slightly dominating due to the clinical costs that come on top of some early manufacturing costs as well as we have to take care for the next supply we need for the clinical trial. Is that sort of clear?

Yes, perfect. And that's definitely good color on that.

With regard to COVID-19 challenges? Well, as mentioned, we didn't have challenges internally. We don't expect big challenges for the next year internally. But we hear from the market that mainly CMOs are currently complaining about their raw material supply. We cannot yet assess exactly what that means and how this can be compensated for. It's mainly due to the fact that all the raw material obviously shifted to COVID-19 medicines and vaccines. So that's something coming up on the horizon, but it's too early to really make a judgment on that, but could be a challenge. With regard to the preclinical development goals, I would like to ask Andreas maybe to give you a flavor.

Sure. So a brief high level overview. So we are a full steam of the ADC development. So we are [indiscernible] of the antibody. So we will make no progress during the course of the year to prepare the [ tox bridge ] of the ADC. And then later this year, we will initiate the IND-enabling studies, so mainly the [GLP relevant and ] [indiscernible] primate studies to really run all the [indiscernible] studies for the IND package then ready to start next year. The details is a typical IND-enabling program, nothing specific. So the first year is mainly up to [ CMC ], transferring all the processes to the CMO production in the second year on the IND-enabling studies. And with regard to prioritization, both programs are more or less in parallel, 103 is very slightly behind because of the floods at the CDMO, but they are running more or less in parallel and for the time being, they will continue to run in parallel. And then we may need to decide next year if both are running smoothly how to prioritize, but currently, both are running in parallel.

Did you cover everything, Dennis, I think so?

Yes, thank you.

Moving on to our next caller. We have Marcus Wieprecht of Stifel Europe.

Marcus Wieprecht, Stifel Europe. Congrats on the good results. I have 2 quick ones. My colleague asked already the relevant one. So there are 2 smaller ones left. On the HDP-102 and 103, I have a follow-up question. In that regard to the timeline and also with regards to the formulation manufacturing process. Are there any lessons you may have learned from your experience with formulating HDP-101, considering that there were some delays in all the preclinical tox studies, which I think were relating to formulation issues. So is there anything you have learned? And if so, what would that be? And with regards to timing, you mentioned start the clinic next year. Is there anything where you could be a bit more precise, first half, second half, that would be interesting. And the second topic I would like to hear your thoughts on is the recent additional EUR 30 million funding commitment from dievini. Has there been any thoughts you are aware of whether that is, again, kind of a debt funding? Or will that include some equity? Any thoughts here, that would be helpful.

Andreas, go ahead.

Okay. I'll start with the first part. So the 2 questions about the follow-up programs. Of course, there have been a lot of lessons learned from the 101 program. You mentioned the formulation, but also since we established the GMP manufacturing of the linker Amanitin, this needs not to be repeated. So we can really build up on that established GMP manufacturing process at the CDMO at Carbogen. So the second and the third program is always, and we would be a poor company if we have no learnings from the first program. So we -- this is running much more smoothly, we can build up on established processes, like the communication, [indiscernible] and so on. So there are a lot of savings coming from the first program. And with regard to more specifically, usually, we are, of course, very careful. What I can say, the first patient won't be the first half next year. So I would put it to the second half next year that the clinical trial can start at the earliest.

Okay.

Well, then with regard to the additional funding, this is just the commitment. So it is not yet qualified in any way, and there are no plans already -- not yet. With regard to whether this would be a loan or equity. So this is open for discussion.

[Operator Instructions] Our next caller is [indiscernible].

Can you hear me well?

Yes.

I was just wondering if you could provide a little bit color or maybe expected dose range for the Phase I study of [ HDP-101 ]. And maybe would this range somewhat help us to define therapeutic window for the product?

Usually, we are not, let's say, publicly disclosed the dosing from the trial. The therapeutic window has been established prior even to the IND submission. So we put all our preclinical data, the [indiscernible] efficacy models, the toxicology studies into a pharmacometric modeling. So we get a [indiscernible] population-based PK/PD modeling. And there, we have a very detailed understanding of what we expect in the dose escalation cohorts. And so as a general flavor, what I can tell you is that from the earliest point on, we can expect to see responses in the patients. Of course, we expect this let's say, from the third, fourth cohort on, and we still have enough space until we reach the anticipated maximum tolerated dose in these patients.

That's great. And maybe what kind of safety signals would you pay most attention to, considering maybe the [indiscernible] itself?

These are -- the myeloma patients are highly morbid patients. So they have already very good safety monitoring. In particular, we have these, let's say, the definition between the trial protocol but one example, liver enzymes is one of the safety signals, we will look very, very careful at -- because everybody knows about the Amanitin. So this will be one of the sickness we are looking in particular.

And maybe just speculation on our side. But in your opinion, could this basically the [ efficacy ] updates serve as a trigger for additional out-licensing opportunities for ATAC platform itself.

Of course, I don't believe it's a secret that everybody is very looking at our company for the first patient's dose and every patient dosed with an Amanitin-based drug will very much help every ongoing partnering discussion. So again, the world is really waiting for that.

At this time, we have no further questions. [Operator Instructions] And with that, I will turn the call over to Jan for any concluding remarks.

Yes. Thank you, Lydia. So thank you, everybody, for joining and for your questions. And yes, I hope to hear and see you soon. So thanks a lot. Thank you a lot, and bye-bye.

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