Heidelberg Pharma AG (HPHA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining Heidelberg Pharma's conference call to discuss 2021 fiscal year results and provide a business update. [Operator Instructions] Please note that today's call is being recorded. [Operator Instructions] I would now like to turn the call over to Dr. Jan Schmidt-Brand, CEO and CFO. Please go ahead, Jan.

Thank you, Regina. Hello, ladies and gentlemen, and welcome to the Heidelberg Pharma conference call to discuss our 2021 fiscal year results and to provide the 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 colleague, Professor Andreas Pahl, Chief Scientific Officer; and Katja Arnold, our Investor Relations consultant. Today, we try a new conference call setting. We now combine presentation, audio and video, and we hope this will be more convenient for our audience. 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 2021 management report published today on our website. Should you wish to ask questions, 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. We also will provide an update on our proprietary ATAC programs as well as our partnered projects. This will be followed by a review of our financials and an outlook for the year ahead. Slide 4 provides a quick overview of our company. We are the first company to deploy a completely new mode of action in cancer treatment by using the toxin Amanitin to develop anticancer 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. With our novel 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. Today, I can finally say we are in clinical development with our first product candidate, and we plan to use a biomarker to stratify the patient population and expedite clinical development. Our business model includes developing our own pipeline of ATAC products, as we call them, supporting partnerships involving our ATAC technology platform, and we have additional upside potential via our out-licensed legacy clinical assets. As of the end of 2021, we had 96 employees, roughly 15% more than the year before. The majority of the new employees work in research and development, manufacturing and business development, which is almost 75% of our staff. We are excited about this growth because it also reflects the growth of our pipeline and partnership activities. Before diving into the pipeline, let me start with some great additions we made in 2021 to our executive management team. We promoted Dr. András Strassz to Chief Medical Officer. He has done a great job of building our clinical development operations at Heidelberg Pharma and bringing our first program into the clinic. Dr. Mathias Locher joined in March 2021 as Chief Development Officer. And together with his team, he was key for moving ahead our nonclinical development and GMP manufacturing activities. We also promoted Dr. George Badescu to Chief Business Officer. He previously was our Vice President, Business Development and also in charge for our collaborations with Magenta and Takeda. George was the driving force behind our recently announced strategic partnership with Huadong. Despite the ongoing pandemic, we succeeded in obtaining financing commitments from our main shareholder, including a loan of EUR 15 million and raised EUR 20 million via a private placement in early summer. In February 2022, dievini increased the remaining financing commitments to EUR 36 million to secure our growth planning and to bridge our financial requirements through mid-2023. Therefore, we are delighted to have entered a strategic partnership with the Chinese pharmaceutical company, Huadong Medicine, at the end of February 2022. This is a transformational deal for Heidelberg Pharma, both in terms of the financial reach it gives us and that we now have a strong development and commercialization partner to bring our programs into Asia. With an upfront payment of EUR 20 million and Huadong's plan of an equity investment, this year, we will be in a stronger financial position. Let's move on now to our pipeline. As you can see from this slide, we have a substantial and growing pipeline of ATAC programs and partnerships, and also our partnered legacy clinical assets develop nicely into new indications. The first 2 ATAC programs: HDP-101, which is currently in clinical development; as well as our 3 preclinical programs HDP-102, 103 and 104 are all part of the strategic collaboration with Huadong. I will share some more information about the 3 most advanced of these programs later in the presentation. We have ongoing ATAC technology collaborations with Magenta and with Takeda, which have been progressing nicely as well. I'm also pleased with the progress that has been made with our non-ATAC legacy assets, and we'll also provide an update on these. We have made good progress with our ATAC programs and technology despite some challenges. With our lead program, HDP-101, we were excited to announce the dosing of the first patient in our first-in-human study in February 2022, just a few weeks ago. This was the first time the patient was treated with one of our ATACs, truly a momentous event for all of us here at Heidelberg Pharma. We had made good progress during 2021 in moving the preparations for this trial forward. In February 2021, the U.S. FDA approved our IND application to conduct the trial, and we received similar clearance from the Paul Ehrlich Institute in Germany in July. Unfortunately, we then experienced significant delays in initiating trial sites. Like many other biopharma companies, the pandemic was a key contributor to these delays. There were fewer staff available at the clinical sites, and the centers that have agreed to be part of the trial had to reallocate resources due to surging COVID-19 hospitalizations. Communication with the trial centers also became more difficult with limited in-person visits permitted and strained staff resources. In addition to these challenges, U.S. sites required additional testing for the infusion system. We also did in-depth training of staff. We were finally able to onboard the first clinical centers in the fourth quarter of 2021 with, as I said, the first patient being dosed in February of this year. Two clinical trial centers are now operating in the United States and one in Germany, and we are working to bring on more sites. Andreas will discuss the trial design and our development plans in a bit more depth later in this presentation. Work on our next portfolio candidates, HDP-102 and 103 progressed as planned. HDP-102 is an anti-CD37 ATAC. And HDP-103, the PSMA-ATAC. The latter had caught Huadong's attention and kicked off our negotiations. For both ATACs, we completed production of the antibody material for toxicology testing. We also completed production of the Amanitin linker in both non-GMP and GMP quality as for GLP tox studies and planned Phase I trials, respectively. We were pleased to see the high production yields for both the antibody material and linker. We also conducted planned preclinical studies, and other studies are in preparation. In 2021, we presented and published quite a variety of data at scientific conferences. Andreas will come to this later. Turning now to our ATAC technology collaborations on the next slide. As a reminder, in addition to our proprietary ATAC programs, we also have ATAC technology collaborations under which we grant a license to our ATAC technology to be applied to our partners' antibodies. For each target, partners have the right to exercise an option for global development and commercialization rights. The agreements generally include upfront payments, reimbursement of preclinical development costs, milestone payments and royalties. We currently have ongoing 2 multi-target research agreements, one with Magenta Therapeutics and one with Takeda Oncology. In September 2021, Magenta received clearance from the U.S. FDA to conduct a Phase I/II clinical trial with the ATAC candidate Magenta or MGTA-117. The first trial center was opened at the end of December, and the first patient was dosed in March 2022. Magenta had previously exercised this option for 2 target molecules, for CD117 in 2018 and for CD45 in 2019. MGTA-117 is the first clinical ATAC candidate to be used for targeted preparation or conditioning of patients for stem cell transplants or gene therapy. The ongoing first-in-human dose escalation trial is evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of Magenta 117 as a single dose in patients with relapsed refractory acute myeloid leukemia or myelodysplastic syndrome with excess blasts. Magenta is also continuing the preclinical validation work of a second product candidate, a CD45 ATAC in various transplant and autoimmune disease models. The cooperation with Takeda intensified in 2021 with the development of the detailed research plan, and work is ongoing. This agreement was extended until the end of 2022 and a new target defined. Turning to our out-licensed clinical legacy assets. We were delighted with the progress that our licensees, Telix and RedHill Biopharma reported during 2021 and early 2022. In March 2022, Telix reached the target number of kidney cancer patients in its Phase III ZIRCON trial with TLX250-CDx. As a reminder, TLX250-CDx is a radiolabeled form of the antibody girentuximab, which binds to the tumor-specific antigen CA9 on clear cell renal cell carcinoma. Accumulation of this antibody in tumor tissue can be visualized by PET scans. This diagnostic has the potential to fundamentally change the therapy planning for renal cancer patients and avoid potentially unnecessary surgery. Data from the trial are expected in the second half of 2022, and Telix is talking with the FDA regarding initiating a rolling biologics license application or BLA. Telix has plans to broaden the indications for TLX250-CDx. In mid-2021, Telix initiated a Phase I study to evaluate the feasibility of using TLX250-CDx to detect bladder cancer. And in October, they announced that the first patient had been dosed in a Phase II study in patients with triple-negative breast cancer. These 2 studies are the first in a series of studies that Telix is planning to use TLX250-CDx to evaluate CA9 expression in a variety of cancers beyond renal cancer. In addition to TLX250-CDx, Telix is also developing the therapeutic radio-immunoconjugate antibody, TLX250. In September 2021, the FDA cleared Telix to initiate a Phase II trial in advanced clear cell renal cell carcinoma. The study will evaluate TLX250 in combination with immunotherapy, nivolumab. Turning to our other out-licensed clinical candidate RHB-107 or upamostat, the oral serine protease inhibitor. Licensee RedHill is conducting a Phase II/III trial with RHB-107 in for the treatment of COVID-19. The rationale for the study is that RHB-107 has demonstrated both antiviral and potential tissue protective effects and was shown to strongly inhibit SARS-CoV-2 replication in a preclinical human bronchial tissue study. Because RHB-107 targets human cell factors and not the virus itself, the compound also has the potential to be effective against emerging virus variants and mutations. RedHill initiated the Phase II/III trial in the U.S. in nonhospitalized patients in early 2021. Initial positive results from the Phase II part of the trial were announced in March 2022. Although not powered for efficacy assessment, the Phase II part of the study showed highly promising results, including a 100% reduction in hospitalization due to COVID-19 with 0 patients in the RHB-107 arm hospitalized with COVID-19 compared to 15% in the placebo arm. The study also showed an 87.8% reduction in reported new severe COVID-19 symptoms. The study met its primary outcome measure with RHB-107 demonstrating a favorable safety and tolerability profile. RedHill has indicated they plan to meet with the FDA to discuss the next steps in the second quarter of this year. Let me now ask Andreas to provide some more details on our own ATAC projects. Andreas, please go ahead.

Thank you, Jan, and hello, everyone. Let me start with HDP-101, our lead ATAC candidate, which, as Jan said, has recently entered clinical testing for the treatment of multiple myeloma. I will talk a bit more about the trial design in a minute. HDP-101 is a BCMA-ATAC. Expression of BCMA is strongly associated is multiple myeloma, and this target is currently a hot area of development in this indication. In preclinical testing, HDP-101, showed a targeted elimination of BCMA present cells as well as a good safety profile. Also of interest is previously published data from a research team at MD Anderson, demonstrating that HDP-101 was particularly effective and efficient and attacking tumor cells from multiple myeloma patients with a 17p deletion. Multiple myeloma patients with this deletion, with a much poorer prognosis, thus a high unmet medical need for more effective therapies. This information supports the potential to use a biomarker stratifying for this deletion, and we are working on a companion diagnostic. Here are some more details about the ongoing clinical trial. The study is an open-label, non-randomized, multicenter Phase I/IIa trial HDP-101 in patients with relapsed and refractory multiple myeloma. The Phase I dose escalation part of the study is to determine an optimal and safe dose for HDP-101 for the Phase IIa part of the study. It is planned to treat up to 36 patients who will receive HDP-101 intravenously once every 3 weeks until disease progression, discontinuation and investigator discretion or patient withdrawal. During this part of the trial, tolerability of different dose levels will be evaluated and the biomarker will be evaluated retrospectively. During the Phase IIa dose expansion part, the recommended dose of HDP-101 will then be administered to 30 patients. The primary objective of the Phase IIa part of the trial, to assess preliminary antitumor activity of HDP-101, along with further evaluation of the safety of the drug. Patients in this part will be stratified based on the 17p deletion status with the companion diagnostic. As Jan mentioned earlier, we have onboarded 3 sites: 2 U.S. sites, the MD Anderson Cancer Center and the Winship Cancer Institute at Emory University; and one German center, the Heidelberg University Hospital. We are in the process of bringing additional sites on board. This slide gives you an idea of the current expected time lines and our development plans. The certifications of the dose expansion will be assessed for efficacy and safety with the sufficient response rate in these high-risk patients. We will apply for an accelerated improvement pathway and discuss with the agency how to develop this expansion cohort into a registrational cohort. In parallel, we will pursue a full development in standard risk myeloma patients. This full development path will later on also include other indications and combination of HDP-101 with other drugs. With the ongoing and unpredictable trajectory of the pandemic, however, you should view these time lines of cautions. If all goes as hoped, we should see first clinical safety data from the Phase I part of the ongoing trial later this year. Bearing any unexpected safety findings, we would then initiate the Phase IIa part of the trial in 2023. To wrap up the discussion of HDP-101, let me take a minute to discuss the unique features of our ATAC technology and HDP-101 as demonstrated in preclinical study and how we hope these will translate into potential clinical benefits. As I said earlier, BCMA is being widely studied as a target in multiple myeloma treatment. But given the features of our technology, we truly believe that HDP-101 has the potential to become a best-in-class therapy shown to be safe and effective in clinical testing. To start, 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. HDP-101 has been so to be effective against tumor cells with ultra-low target expression so we could even see better responses in clinical studies. Our payload Amanitin provides a novel mode of action with the ability to overcome resistance because all tumors will be naive to the ambition of our [indiscernible]. The already approved BCMA target ATAC blend rep has demonstrated alternate toxicity. This has not to date been an issue with Amanitin or with HDP-101. With the 17p deletion, we have a biomarker to stratify patients, which could help us to expedite clinical development and, given the major unmet need in this subgroup of patients, opens the door for possible direct flow therapy designation and an accelerated approval pathway. It's early days for that, though, and this all will still need to be discussed with the regulatory authorities. I also want to mention that we have shown that ATACs cure tumor cells in a way that stimulates the immune system, and this create a synergy with checkpoint inhibitors. As a reminder, these are preclinical findings we need to confirm in our clinical program. Let me now briefly discuss our next 2 product candidates in a bit more detail. We have made good progress with HDP-102 and 103. The antibody, antitoxin linker material production was completed as planned, and nonclinical development is ongoing. HDP-102 is an ATAC targeting CD37, which is overexpressed in B-cell lymphomas. Given this, we plan to develop HDP-102 for specific indication of non-Hodgkin lymphoma. There's a high prevalence of 17p deletion in this disease. In cell, it's another indication where it will make sense to use our biomarker to the determine the patients most likely to benefit from treatment with HDP-102. As Jan mentioned earlier, preclinical data were presented at the AACR Annual Meeting in 2021, showing that CD37 ATACs demonstrated strong antitumor activity, inhibited the growth of hematological tumors even at low concentrations, in addition to good tolerability. These data are supportive of the potential of HDP-102 to treat non-Hodgkin lymphoma. Let me also mention some nice preclinical results related to HDP-102 that we presented in December 2021 at ASH. The data presented were from a research collaboration with the University of Torino in Italy and related to Richter's syndrome, a very aggressive form of non-Hodgkin lymphoma. The data from patient-derived xenograft models showed the strong efficacy of CD37 ATAC on these primary tumor cells, leading to a highly significant [ among the patients ]. The data support the potential of Richter's syndrome as a future indication of HDP-101. Another ATAC candidate we are bringing forward into development is HDP-103, an anti-PSMA ATAC for the treatment of metastatic and castration-resistant prostate cancer. Prostate-specific membrane antigen, PSMA, is a surface protein that specifically appears on prostate cancer cells and is overexpressed in this prostate cancer, while expressed in only a limited way in normal tissue. This makes it an attractive target for an NEC approach. And then prostate cancer is another area where there is a high prevalence of 17p deletion and saw a good indication to apply our biomarker. In vitro and the vivo efficacy, tolerability and pharmacokinetic studies have shown that HDP-103 has a promising therapeutic window. Additionally, data presented at the 2021 AACR Annual Meeting show that ATACs targeting PSMA demonstrated strong antitumor activity in intermitted tumor growth even at low concentrations in addition to good tolerability. Both candidates are on target to submit IND applications to initiate clinical testing next year. Furthermore, we conducted some very interesting assertion of our technology with our scientific collaborations. In February 2021, we published preclinical data from exploratory work with HER2-ATAC, which consists of the HER2 targeting antibody trastuzumab antitoxin Amanitin. The results generated in a cooperation with the research group from the Indiana University's School of Medicine in Indianapolis published in the peer reviewed journal of Science Translational Medicine. The HER2-ATAC showed strong efficacy in treating tripe-negative breast cancer, confirmed induced immunogenic tumor cells in the tumor [ meta ] and the potential for a combination therapy with synergistic efficacy in combination with checkpoint inhibitors. At the AACR meeting, also the MD Anderson Cancer Center discussed preclinical data from a collaboration with us evaluating the combination of ATACs with the new checkpoint inhibitors. Treatment of cancer cells with ATACs triggers their immunogenic cell death, leading to activation of the immune system. Combining this immune stimulatory properties, ATACs with immune checkpoint inhibitors may represent a promising approach for developing new cancer treatments. Let me now turn the presentation back to Jan to discuss the 2021 fiscal year financial results. Jan, please?

Thank you, Andreas. Let me start with the profit and loss statement for fiscal year 2021. As a reminder, our fiscal year ends on November 30. Please note that our guidance for the fiscal year 2021 issued in March was adjusted on 1st of October 2021 to reflect lower anticipated sales revenue and lower operating expenses for the full year. Anticipated sales revenue from license agreements that had been expected during fiscal year 2021 are now expected in the next year, so 2022, as some of our partners will reach milestones later than projected, due in part to the ongoing pandemic as well as due to regulatory requirements. On the expense side, delay in the start of our clinical trial with HDP-101 led to lower-than-expected development expenses. Our 2021 results were in line with this adjusted guidance. Looking at sales revenue and other income. For fiscal year '21 sales revenue and other income was EUR 2.3 million compared to EUR 9.6 million in 2020. Sales revenues -- sales revenue of EUR 1.7 million includes revenue from collaboration agreements for the ATAC technology of EUR 1.2 million and from the service business of Heidelberg Pharma research of EUR 0.5 million. This decrease was mainly due to deferred planned milestones payments from various partners as discussed above and fewer supply of Amanitin linkers to our ATAC partners as they already had sufficient stock from last year's supply. Other income of EUR 0.6 million consisted mainly of government grants to support Heidelberg Pharma research projects but also income from the reversal of unused accrued liabilities and from patent cost charges related to out-licensing. Turning to operating expenses. Operating expenses or operating costs were EUR 27.9 million in 2021, unchanged year-over-year. Cost of sales includes costs directly related to sales revenue. These costs are mainly related to expenses for customer-specific research and for the supply of Amanitin linkers to licensing partners. They include GMP process development work and early stages of compound manufacturing, which will be used for customer supply in the coming year. Cost of sales for fiscal year 2021 was EUR 4.7 million, representing 17% of total operating expenses. Research and development costs rose slightly to EUR 18.7 million in 2021 compared to EUR 18.3 million in 2020 due to the expansion of cost-intensive external manufacturing of all 3 ATAC product candidates and preclinical and regulatory preparations for the clinical trial with HDP-101. As said, the delay in the clinical development postponed some of the planned R&D costs into '22. At 67% of operating expenses, research and development remains the largest cost item. Administrative costs were EUR 4.0 million compared to EUR 3.6 million in the prior year and accounted for 14% of total operating expenses. Staff costs were EUR 2.3 million. The increase was related to an increase in the number of employees due to the expansion of business activities as well as salary increases. Legal and operating consulting costs were EUR 0.7 million, and expenses related to the Annual General Meeting, Supervisory Board remuneration and the stock market listing totaled EUR 2.6 million. Other items were EUR 0.4 million. Other expenses for business development, marketing and commercial market supply, which will mainly include staff costs were EUR 0.5 million, representing 2% of operating expenses. These expenses were slightly higher than the EUR 0.4 million in the year before. Turning to our financings and the balance sheet. Despite the market environment, we have been quite successful in our financing activities. As a reminder, at the end of 2020, our main shareholder, dievini, committed to a shareholder loan of EUR 15 million that was fully drawn down in [ tranche ]. In March 2021, they confirmed a further financing commitment of up to EUR 30 million. This was partly used for a capital increase in June 2021. Heidelberg Pharma AG issued EUR 3.1 million new shares from authorized capital, which corresponded to just under 10% of shared capital. In a private placement, we were generating gross proceeds of approximately EUR 20 million. The price per share was EUR 6.44, which represented a discount of approximately 3.9% to the daily closing price. I will focus on just a few points in the balance sheet. At November 30, '21, Heidelberg Pharma had cash and cash equivalents totaling EUR 6.1 million. Looking at current liabilities, this figure rose to EUR 14.9 million, and the close of the reporting period compared to EUR 6.6 million at the close of 2020. It comprises financial liabilities of EUR 10.5 million related to the shareholder loan from dievini, including accrued interest. Equity was EUR 6.7 million at November 30, '21 compared to EUR 12.9 million at the end of the prior year. The equity ratio was 30.8% compared to 65.7% at the end of 2020. We now come to our guidance for 2022. Let's start with the financing activities. After the close of the period in February 2022, we secured a financing commitment of EUR 36 million from dievini. Based on the current planning, including this commitment, the group's financing is secured until at least mid-2023. Furthermore, we closed an important license agreement and the investment agreement with Huadong Medicine, and I will come to it in detail on the next slides. But given that this deal has been announced just recently and is still subject to various approvals, Heidelberg Pharma is not including the effects of this partnership in the 2022 forecast at this time. The license agreement also requires a separate assessment with regard to revenue recognition under IFRS 15. Both agreements will have an impact on Heidelberg Pharma's results of operations, financial position and net assets, so the financial outlook will be adjusted in due course. Let me now discuss our guidance for the fiscal year 2022 as of today. We expect sales revenue and other income from -- for fiscal year '22 to be between EUR 7.5 million and EUR 9.5 million. This figure mainly includes sales revenue from ATAC license agreements and, to the lesser extent, potential milestone payments related to our out-licensed legacy assets. We expect this figure to increase when the revenue related to the licensing agreement with Huadong is included. Based on current planning, operating expenses are expected to be in the range of EUR 41 million to EUR 45 million, significantly higher than in 2021 due to the increased clinical trial activity related to HDP-101 as well as preparations for clinical trials with HDP-102 and 103, including manufacturing. Earnings before interest and taxes, EBIT in the fiscal year '22 is expected to be between minus EUR 22.5 million and minus EUR 26.5 million. With preliminary inclusion of the licensing agreement with Huadong, Heidelberg Pharma expects to post an improved operating result. The result of operations in the next 3 years will generally depend to a large extent on whether we are able to enter into additional agreements for ATAC partnerships and license agreements with other pharmaceutical partners. If income and expenses develop as anticipated, funds required for the 2022 fiscal year are projected to be in the range of EUR 33 million to EUR 37 million or an average of EUR 2.8 million to EUR 3.1 million per month. Once the cash influx expected for the year from the licensing agreement with Huadong is included, this funding requirement should be significantly reduced. Finally, I would like to highlight our strategic partnership with Huadong. Let me say again how excited we are about this major collaboration. The deal is transformative for Heidelberg Pharma, but we truly believe it is a win-win partnership. Not only are the numbers, a deal volume up to nearly USD 1 billion, substantial, but this exclusive license agreement provides us with a strong partner for our ATAC programs in Asia, a major and growing pharmaceutical market. Our strategic partnership involves 2 agreements: an exclusive licensing agreement and an investment agreement. Let me start with the licensing agreement. Heidelberg Pharma has granted Huadong exclusive development and commercialization rights for HDP-101 and 103 for select countries in Asia. For these 2 programs together, we will receive an upfront payment of USD 20 million and are eligible to receive milestone payments of up to USD 449 million. Furthermore, we granted Huadong an exclusive option for 2 other preclinical candidates, HDP-102 and 104, for the same territory. Upon exercise of the option, we would receive an undisclosed option exercise fee and would also be eligible for milestone payments. In total, we would be eligible to receive up to USD 461 million. In addition, we would be eligible to receive tiered royalties ranging from single digit to low double digit for all candidates. Huadong also has the right of first negotiation to license our next 2 ATAC candidates for their territory. The deal is providing a strong partner in Asia, and Huadong's territory includes select countries in Asia listed below, but excluding Japan, India, Pakistan and Sri Lanka. The funding we receive will support advancing the development of our current product candidates and enable us to further broaden the pipeline. This supports our global product development strategy in Asia. Furthermore, we will build a robust ADC product pipeline with best-in-class potential. Coming to the investment agreement on the next slide. This movement involves 3 parties: Heidelberg Pharma, Huadong Medicine Investment Holding and our main shareholder dievini Hopp BioTech Holding. Under the terms of this agreement, Huadong will invest up to EUR 105 million via a planned rights issue and the purchase of shares from dievini. Importantly, this investment is in addition to the funding we received under the development and licensing agreement. We are planning a rights issue of up to EUR 80 million. It will be based on a prospectus, and we will use authorized capital. We plan to offer up to 12.4 million shares at a price of EUR 6.44. This is the same price as our licensed financing round in April 2021. Please note that these figures are now in euro due to the German law requirements of the rights issue. Huadong will participate in this rights issue and acquired to approximately -- up to approximately 26% of Heidelberg Pharma shares outstanding. dievini will offer its subscription rights as needed to enable Huadong to reach this level of ownership. Huadong plans an additional share purchase from dievini to reach total shareholding of up to 35% of Heidelberg Pharma share capital post rights issue. dievini will remain our largest shareholder, and I'd like to thank them for the support of this transaction. Following these transactions, Huadong will become our second largest shareholder. We are delighted to bring on board another large, extremely supportive and strategic investor as we grow our company. As a reminder, this offering has not yet been approved by regulators. We do not expect any roadblocks but have planned for delay for a few months and refusal scenarios just to be safe. Let me wrap up with a look at what to expect in the year ahead, starting with our proprietary pipeline. Recruitment in the Phase I/IIa trial with HDP-101 in multiple myeloma is ongoing, and we expect to see safety data from the Phase I part of the trial in the second half of '22. Preclinical and toxicity studies with HDP-102 and 103 are ongoing, and we expect to be able to file INDs for these product candidates in '23. We expect that the funding from our partnership with Huadong will not just support but it will significantly strengthen our ability to advance our ATAC programs in development. Turning to our ATAC partnerships. We expect Magenta to continue to advance its first data projects, MTGA-117, in clinical development and to continue preclinical validation work for a CD45 ATAC that has the potential to be used for the treatment of various autoimmune diseases such as multiple sclerosis. This would be the first time that one of our ATACs was played outside the oncology field. We are not able to provide details, but the Takeda collaboration is ongoing. We continue to pursue additional research and option agreements with pharmaceutical partners. Regarding our out-licensed clinical assets. Telix is expecting top line data from the ongoing Phase III ZIRCON trial with TLX250-CDx in the second half of 2022. Telix has been granted breakthrough therapy designation in the U.S. and is discussing with FDA plans to submit a rolling BLA. As a reminder, Heidelberg Pharma is eligible to receive milestone payments and royalties, reaching double-digit percentages should the product receive marketing authorization. Telix is planning additional trials with this diagnostic antibody in other indications and has an ongoing Phase II trial evaluating the therapeutic antibody TLX250 in patients with advanced metastatic renal cancer. Patient recruitment in the STARLITE-2 trial has been started. Heidelberg Pharma's partner, RedHill, is planning to discuss the next steps with the FDA following positive results in the Phase II part of its Phase II/III trial in patients with COVID-19. Heidelberg Pharma is eligible to receive royalties to double-digit percentage range if RHB-107 is approved. With this, I would like to turn to our last slide and your take-home message. Why do we think Heidelberg Pharma is a good investment case to look at? We believe that the ADC field is an exciting one to be a part of. It is an area of research and development, producing highly-promising therapies. This transformational deal we have announced with Huadong is supporting our strategy to become an important global ADC player. 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 believe we are well positioned to reach our goals and to bring new hope to patients. That concludes the formal part of our presentation, and we would like to now open the call to questions. Regina, do we have any questions?

[Operator Instructions] The first question comes from Dennis Berzhanin, and it's a written question. He asked, could you provide the drivers to the -- for the 2022 guidance? What are the reasons that the top line figure is anticipated to be EUR 7.5 billion to EUR 9.5 million given that you were able to achieve EUR 9.5 million in 2022 -- in 2020, sorry?

Well, let me first comment on the sales projection. As you all know, we don't have a regular sales or service business that is providing these income items, but we have milestones that our partners hopefully meet. We sell GMP supply to partners. We have collaborations ongoing, so there's not yet a steady flow of income that drives our vaccines to our business, and that's the reason why we had very nice sales in 2020. And as we already expected for the lower sales in 2021, we knew, as we elaborated in this presentation that the need of supply for our partners will be close to 0 because we supplied them sufficiently the year before. So all the supply element was missing in 2021. We were expecting some milestones, namely from Magenta and Telix. And as we read or as we elaborated in our presentation as well, these 2 milestones were delayed and will come now in 2022. So it's just a delay, not -- we are not missing these sales items. So 2022 will be quite attractive on the side of sales again, irrespective, as we also showed of the Huadong sales that will come partly on top, depending on meeting the requirements we still have to meet and on the respective IFRS 15 assessment. I hope this answers your question to the sales part. Could you repeat the first sentence, please, Regina?

Could you provide the drivers to your 2022 guidance? What are the reasons...

Okay. So I guess I already mentioned the drivers for the 2022 sales development, which is mainly the supply, which will be, let's say, an issue this year again and also the milestones that we anticipate as being met by our partners. On the cost side, of course, the drivers will be meeting the goals, meeting the time lines, entering into the development and manufacturing activities as we plan to do it. And while this is cost planning and this will come when we actually [ lift the slots ] and then manufacturing can be done as planned.

Okay. Next, we have a question from Katja Arnold.

Yes. It's not a question. It's just a little small note. Jan, the EBIT guidance between minus EUR 32.5 million and minus EUR 36.5 million as shown in the table, that was correct. I heard something around EUR 26 million, so please keep that in mind. Thank you.

Okay. Next, you have a follow-up question from Dennis. It seems that the impact of Huadong partnership was not included in the guidance. Could you tell us how the guidance should change assuming this partnership closes as planned?

If we knew that, we hadn't given the guidance. Right now, as mentioned and elaborated in our presentation, we still have some approvals to go through, and we have to do the assessment under IFRS 15. And we will announce this as soon as we are through that, and we can somewhat have a clearer picture on these developments.

Okay. Another follow-up question. Could you break down the expected operating cost in 2022? How much would go towards HDP-101 versus the rest of the pipeline?

We do not disclose this detail of cost allocation.

Okay. And the last follow-up question. How large of milestone payment did you receive from Magenta earlier in 2022? Do you anticipate further payments this or next year?

We do expect further payments this year, but we do not disclose individual milestone payments.

Okay. The next question is from the line of Thomas Schießle with EQUI.TS.

Congratulations once more on this Huadong deal. And the question is you are , you will grant an option for the next 2 ATACs, which you will select in your R&D work. Will you cooperate with the Huadong if it comes to the specifics of these 2 additional ATACs? And will these ATACs be solid tumor or non-solid tumor ATACs? This is the question.

Maybe it's a question for Andreas.

I assume that's about 102 and 104

No, no, the 105 and the...

106. Okay. Yes. So these are projects which are early and ongoing in R&D. So we do not expect, let's say, any, let's say, collaboration with Huadong on these kind of projects because they already selected. We cannot disclose now whether it's heme or solid tumors. Probably, it will be a mix, one solid and one heme tumor.

And the general understanding is that also Huadong want us to pursue our projects, so it's not the principal idea that they take part in our R&D activities. It's still us. They are an investor and they are a licensor. So moving ahead, the project is in our responsibility.

But does this increasing activity means for your workload and your -- and the people you have to hire in the future?

We, of course, have to develop the development part of our activities and our competencies, and we are working on clinical and preclinical development resources and also, let's say, adding to the regulatory QA and all these functions that are more development-related. We are very well established in the research area, but all the development areas to grow accordingly with more and more projects entering the development pipeline.

So this will be an ongoing process of increasing the number of employees?

Yes, necessarily because, well, development needs specific expertise.

Next up, we have a written question from [ Dylan Sumhath ] with Bryan Garnier. To follow up on the exact phasing plan on HDP-101, when can we expect the next cohort to enter? And when may we expect to see some top line data? And does that perhaps coincide with the conference presentation?

I guess that's again for Andreas.

Yes. So we are not disclosing exactly when each cohort is going to be started. As mentioned, we progress as planned through the dose escalation. Our current aim is in the ASH primary, let's say, conference for hematological cancers. So our current goal is to have a late-breaking abstract by the end of the year for ASH to have, let's say, first initial results from the dose escalation trial of HDP-101.

Thank you, Andreas. This concludes the Q&A session. I will now hand the call back to Dr. Schmidt-Brand for closing remarks.

Thank you, Regina. So ladies and gentlemen, thanks for being with us. Thanks for your interest in Heidelberg Pharma. And hopefully, see and hear you soon. Bye-bye.