Herantis Pharma Oyj (HRTIS) Earnings Call Transcript & Summary

[Foreign Language] Good afternoon, everyone, and welcome to Herantis Pharma Annual General Meeting, which this time is organized in a bit unusual circumstances. My name is Aki Prihti. I am a Board member in the company. [Foreign Language] The first item on the meeting agenda is opening of the meeting. [Foreign Language] Let's open the meeting, and note that the live webcast has been started. [Foreign Language] Due to the current situation, there are no other Board members present. Managing Director, Pekka Simula, is, however, also present in the meeting. For our English-speaking audience, certain formalities of the meeting will next be explained in Finnish as required by the Finnish Law. However, a brief summary will be provided also in English in the slides shown in the webcast. [Foreign Language] Marko Berg.

[Foreign Language] So the meeting will be held in Finnish, which is the official language of the company, but the questions and counterproposals, of course, can be presented also in English, if so decided. [Foreign Language]

[Foreign Language] Thank you, Marko, for the running of the meeting thus far. And as Marko introduced, now is the time for the CEO's review. And the CEO's review will be presented in English, while the slides are mainly in Finnish. [Foreign Language] -- sorry, so switching to English. So the company is aiming at breakthrough in unmet clinical needs. And the focus of Herantis Pharma at the moment is Parkinson's disease as a one indication and secondary lymphedema as our other clinical stage target indication. Parkinson's disease is an incurable brain disease. Typically, it starts with motor symptoms such as tremor and rigidity. And as the disease progresses, the symptoms get worse and the currently available treatment only alleviates the motor symptoms of the disease. And even there, the currently available drugs only help until the disease progresses further, and the available drugs begin to lose their efficacy or the amounts -- their doses need to be increased so high that they begin to have intolerable adverse effects. Lymphedema, on the other hand, is also a chronic disease, which is caused by accumulation of lymph, the liquid in certain tissue. Here in the picture on the right is a woman suffering from breast cancer associated lymphedema. So in this case, her breast cancer treatments have caused so much damage to the lymphatic system that the lymph begins to accumulates in her damaged or affected arm. And as you can see, it's a significant impact on quality of life, it's deforming, disabling disease that does not have any efficacious treatments. So this target disease are definitely needing much better treatments than available today. And if we start with Lymfactin, our clinical stage drug candidate, the target there is to cure secondary lymphedema by growing new lymphatic vessels. So really going to the root cause of the disease as the disease is caused by the body's inability to circulate lymph correctly, our aim is to repair the damages in the lymphatic system by growing new lymphatic vessels. And this we're doing with our Lymfactin drug candidates based on a very natural approach. So Lymfactin is a gene therapy based on a human growth factor called VEGF-C. And if you look at the Picture 1, the top picture, the green lines here indicate lymphatic vessels. And as you can see, there are certain cuts in the lymphatic vessels, stopping the lymph from flowing or circulating normally. And our Lymfactin is then injected in that area. So looking at Figure 2, there is now in those cut areas where Lymfactin has been administered, it has resulted in this sprouting of new lymphatic capillaries, thanks to VEGF-C expression. So it's really a normal approach -- natural approach in growing new lymphatic vessels. And those capillaries then eventually mature into a functional collecting lymphatic system, as indicated in Figure 3. So really aiming to reconstitute the Lymphatic system. So that's our drug candidate for the treatment of secondary lymphedema. Whereas in Parkinson's disease, we're also using in a similar way, a natural approach. So CDNF, our drug candidate for Parkinson's disease, aims to revolutionize the treatment of Parkinson's by helping neurons to survive and restore their function. Parkinson's disease is caused by the death of dopaminergic neurons in a certain region of our brains. So those neurons that are responsible for producing dopamine. And CDNF is a natural human protein, we all have it in our brains whose role is to help keep our neurons alive. And that's exactly the mechanism we are now harnessing for the treatment of Parkinson's disease. CDNF actually helps neurons stay alive using several different mechanisms, as indicated here with numbers 1, 2, 3, 4 and 5. Most importantly, CDNF reduces so-called ER stress, endoplasmic reticulum stress, which is an intracellular mechanism or states that neurons may end up with causing them to stop producing proteins and eventually proceed to apoptosis. And this is linked to many neurodegenerative diseases, not just Parkinson's, but also ALS, Huntington's disease, Alzheimer's disease and so forth. So it's very exciting that CDNF can very potently help the neurons recover from ER stress and regain their function. Also very excitingly in Parkinson's disease, CDNF can directly inhibit the oligomerization of alpha-synuclein, which results in the formation -- which would otherwise result in the formation of toxic Lewy bodies that are a hallmark of Parkinson's disease and that are toxic to the neurons. So that's also in the very core of current Parkinson's research at leading centers in the world. And to summarize where we are in the development of these clinical stage assets, this is an overview of our development pipeline. So Lymfactin for the treatment of breast cancer associated lymphedema is currently in a Phase II clinical study. The clinical study has been fully recruited already, and it's currently in a 12-month blinded follow-up period. So roughly at the turn of the year or first quarter next year, we will unblind the study, and then we will be able to compare the efficacy of placebo versus our Lymfactin. CDNF for the treatment of Parkinson's disease is currently in a Phase I/II clinical study. It's a first in human clinical study, so it's the first time ever in the world when CDNF has been administered to human patients. But we've already been able to do it as a randomized placebo-controlled study in real Parkinson's disease patients. So it's not a healthy volunteer study, but it's already a study that in addition to studying the safety of CDNF will also provide us some with information on its biological activity. So 2 very exciting clinical studies with first-in-class compounds ongoing. And also the CDNF study is fully recruited. And very recently, we completed the first 6-month treatment period in all patients. Also in our pipeline, we have a next-generation non-invasive CDNF, which we call the xCDNF. These are molecules that we have shown to recapitulate the mechanisms of action of CDNF. So it functions exactly the same way. It has exactly the same efficacy in disease models as CDNF. But in addition to that, very excitingly, it can penetrate the blood brain barrier. So it can reach the brain much easier than CDNF. So this suggests that the next-generation drug compound could be administered to patients, for instance, Parkinson's disease patients, much easier than the currently developed CDNF. Going forward to the highlights of 2019. As said, we have completed patient recruitments in the Phase II clinical study with Lymfactin and also in the Phase I/II clinical study with CDNF in Parkinson's disease. In Lymfactin, we also completed all patient treatments already. And in the CDNF study in Parkinson's, we expect to complete all patient treatments in June this year, so in a couple of months from now. Also, in 2019, we selected the lead compounds for the xCDNF program and now continue the lead optimization. And importantly, we also completed 2 successful financing loans in March and December 2019. And as part of the latter, we had our shares dual listed in Nasdaq First North Growth Market Sweden. So our shares are now also listed in Sweden. And briefly on what's already happened in the first months of 2020, it's been a great start to this year. In February, we announced the first interim results from the Parkinson's study after completing the first 6-month treatment period in all patients. So of course, very importantly, we reached the primary end point of the study. It's a first in human study. So the primary end point is always safety. And based on the results after the first 6 months, CDNF has been safe and well tolerated. And thanks to also having the placebo group in the study, we were really able to compare the placebo group and 2 different doses of CDNF group. And we were able to see that the side effect profile in both groups was very similar. So really no differences in terms of safety. But even more excitingly, already in this first 6-month treatment period, we were seeing signals of efficacy of CDNF. So one of the -- maybe the most important secondary end point or exploratory end point in this clinical study is DAT PET imaging. It's an imaging modality that can be used to assess the viability of dopaminergic neurons in the brains. And in this imaging, it's expected and known that patients with Parkinson's disease have a continuous decline. So they are expected to have a decline of their DAT PET signal by about roughly 10% every year. So in a 6-month treatment period, it would already have been expected that there is either a leveling of the DAT PET signal or a decline of maybe up to 5%. But in the other CDNF treatment group, we had DAT PET responses in 60% of the treated patients and even very significant responses. So we saw patients with dozens of percent increase in their DAT PET signal. And this is very exciting considering the mechanism of action of CDNF. So this seems to really match very nicely the hypothesis we had for CDNF. We've also seen promising signals in other endpoints, but let's keep in mind that this is the first in human study, a small number of patients and the treatments still continue. So we are patiently looking forward to seeing the results after the second 6 months of treatment, and we expect to announce more results from this clinical study in the third quarter of this year. But this -- really maybe the most exciting observation here is that since these are patients with a very advanced Parkinson's disease, these are patients with average more than 10 years of disease history with Parkinson's disease, which means that these patients don't have too many dopaminergic neurons left after disease progression. So this is actually the maybe most important part that we believe that these results will justify doing next clinical studies in earlier-stage patients, who will have more dopaminergic neurons left when the big study begins, and that will then enable even better results in the real target patient group. So also very exciting progress from our xCDNF, the next generation CDNF program, in the first months of this year. So we have now shown that the xCDNF molecules we have created and already optimized to some extent do retain the efficacy, the same mechanisms of CDNF, but they're also stable in circulation and they do penetrate the BBB. And this is here indicated with 2 very recent pictures. In the top picture, we're showing an in vitro study in which a lead compound from our xCDNF program was tested in cultured neurons. And those cultured neurons -- so if you -- the first bar -- the left most bar there, the untreated control is showing that if nothing is done, then those cultured neurons just stay okay. So 100% of them are viable. And then they are challenged with MPP, so that's a toxin that challenges the function of the cultured neurons and begins to cause ER stress and neurodegeneration. And the orange bar shows that MPP accreted -- or MPP challenged neurons treated only with the vehicle control are suffering quite badly. But then if we again treated them with our xCDNF molecule, the darker blue bar shows that we can completely restore the dopaminergic function in these cultured neurons. So it's complete restoration. This is very significant. And also very significantly, if you look at the light blue bar, if we include yet another thing, so we include an inhibitor that blocks the xCDNF receptor, we again get no restoration by using xCDNF. So this also verifies that we know exactly the mechanism that is behind xCDNF's efficacy, which is very important. And the lower picture is also a very exciting recent study. This is a rat study in which we can collect samples from the rat's CSF, in vivo as during the study. So we can administer our xCDNF compound systemically and then we can measure the amount of xCDNF that ends up in the brains of the rats in real time. And we see a very nice peak of the necessary clinically relevant concentration of xCDNF in the brains of these rats. And obviously, combining these results with the signals of efficacy we are already seeing in the clinical study with CDNF, this makes a very exciting package suggesting that these xCDNF compounds could make a very significant opportunity going forward using a simple systemic administration and also maybe targeting other neurodegenerative diseases, not just Parkinson's disease. And then, of course, a very important topic to remind of, as we discussed in webcast some weeks ago, so far, there has been no essential impact from the COVID-19 pandemic on the operations of Herantis. And we, of course, have to say that we have been very fortunate in this situation. It's, of course, something that no one was planning for. And very fortunately, our patient recruitment in the clinical studies is complete. In the Lymfactin study, all of patient treatments have been completed. And in the CDNF study, we now have just 2 patients left receiving treatments, all other patients have received all their treatments. So while there will be some minor impact, such as we'll have to reschedule some PET imaging procedures in the Parkinson's study and some follow up visits in the Lymfactin study. It will not -- as it currently seems, it will not have essential impact on these studies or their outcomes. Of course, our team has done a great work together with the study sites, which have been very flexible, helping us ensure that there is minimal impact. So thanks very much to those collaborators and team members. And also, we are very fortunate to have raised funding just in December last year. So we are well funded, not in an urgency to go fundraising again. So our outlook and guidance for 2020 remain as previously communicated. And of course, there are some subcontractors or international partners who may be impacted by the situation. So for instance, some subprojects related to the Phase III preparation of the Lymfactin Phase III clinical study or CDNF Phase II clinical study preparations or optimization of the xCDNF lead compounds, some subprojects in some of those might be impacted or delayed due to our subcontractors not being able to perform on studies, as previously planned. But again, we don't see any material impact on our plans, the greater picture. And of course, at times like this, it's also important to act responsibly for a company like Herantis, this comes very natural. This is a real picture from one of our virtual morning coffees. So we have always been working from different locations. Now of course, everyone in our team is working from their home offices, and its always great to have these virtual morning coffees. We now have switched to doing this every day because otherwise, there's very little direct contact with some colleagues, and it's always good to see every morning that people are doing well, both physically and mentally. So I think that covers the CEO's review for 2019. There haven't been any questions through the webcast, but any questions from the audience here? [Foreign Language] Then I guess we can continue to the auditor's report. So I'll hand it over to Marko again.

[Foreign Language]

Hello, everyone. My name is Mats Thoren and I'm recording this from my home in Stockholm, a few days before the Annual General Meeting of Herantis Pharma. First of all, let me extend my sincere hope that you and your families are safe. And this must, of course, be everyone's first priority these days. And also why it would be highly inappropriate even if it were possible to bring in someone from the hotspot of Stockholm. I would naturally have preferred to be able to introduce myself in person, but that is not possible, Pekka asked me to record a short introduction of myself. So here it goes. I'm a Swede, based in Stockholm, pushing 50, and I have spent the last 20 years of my career involved in the financial side of the health care sector. First, as an equity analyst for SEB. Then I was responsible for Swedish Healthcare at Handelsbanken's Corporate Finance Department. I then left and started an investment business called Catella Healthcare, together with a colleague, which was at that part of the Catella Corporation and funded by Inter IKEA, which is the financial part of the IKEA family of companies. I did that for about 10 years, after which I worked as an investment manager for a Swedish investment company called MedCap that specialized in the health care sector as well. Today, I manage my own investment company, and I also sit on the Board of a Swedish-listed Medtech company in the X-ray business called Arcoma. And I will also soon join another Swedish-listed company that is not disclosed yet, I think. During these years, I have participated in a huge number of successful as well as unsuccessful transactions, which include every type of financing as well as IPOs and company sales. So this is, of course, one area where I hope to be able to contribute to Herantis going forward. Together with Pekka and his team and the rest of the Herantis Board, I am looking forward to working hard to realize the huge potential in the CDNF and Lymfactin projects, and also bring the Herantis investment story to the world. This is probably where I should just shut up now and let you get on with the rest of the AGM. I wish you all a very happy and healthy Easter. Thank you. Bye.

[Foreign Language]

Well, it's my great pleasure on behalf of Herantis whole company to thank our outgoing Chairman, Pekka for his major contributions for the company over the years. Pekka has been Chairman of the company since 2013. And during that, company has transformed from a small start-up company to what it is today, and Pekka's role in that has been absolutely critical. So thank you, Pekka. It's been a great pleasure working with you, and we all wish you all the best in your future endeavors. Thanks.

[Foreign Language]