Herantis Pharma Oyj (HRTIS) Earnings Call Transcript & Summary

Hello, and welcome to Herantis Pharma's First Half 2021 Call. This is Julie Silber, Investor Relations for Herantis. My colleague, Gabriela, and I will be the moderators for today's call. Please note, this conference is being recorded. [Operator Instructions] Joining us on the call today is CEO, Dr. Craig Cook, who will provide a presentation on the company's first half of this year's updates. After which, we will open up for Q&A. [Operator Instructions] Before I begin, I'd like to give a quick reminder to our listeners. During today's webinar, management may make forward-looking statements that involve known and unknown risks, uncertainties and other important factors beyond the company's control that could cause the company's actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Please note that these forward-looking statements made during this webinar speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances, other to the extent required by law. This webinar is being webcast and will also be available through Herantis Pharma's Investor website -- Investor Relations website shortly after the call concludes. With these formalities out of the way, I'd like to turn the call over to CEO, Craig Cook. Craig, you may begin.

Thank you, Julie. Good morning, everybody. Thanks for joining this update for the first half of 2021 for Herantis. The first 6 months of the year has been a busy and defining period for the company, and a number of significant highlights were achieved as part of this initial period. Most importantly was the strategic decision to focus the company and all of our resources on our CNS assets, CDNF and xCDNF. And that was a data-driven decision that was based on some of the other highlights in this slide, including generating key evidence regarding the effect of CDNF on biomarkers of Parkinson's disease. Also, we selected the lead candidate for xCDNF HER-096 to take into further development for the treatment of Parkinson's disease. And we've also progressed the intranasal CDNF formulation for further use for the CDNF asset. In addition, we took a decision to seek out licensing partners for our non-CNS asset, Lymfactin, following conclusion of an inconclusive Phase II study. And the final piece of important information was that Hilde Furberg was elected to the Herantis Board of Directors. So as a fully focused pure-play CNS company, this is what our pipeline now comprises. We have 2 assets, CDNF, which stands for Cerebral Dopamine Neurotrophic Factor. That's a natural protein that occurs naturally in the body. And the natural role of CDNF is to protect neurons in the body. That's completed a Phase I study towards the end of last year. The administration route of CDNF for that study was via a surgical device, an invasive surgical device. Moving forward, we are expanding this program to alternative routes of administration, and that's what we see up here in this darker blue bar in the middle of the graph where we're expanding and developing nose-to-brain or intranasal spray route of administration as well as subcutaneous or simple skin injection route of administration for CDNF. Then we have xCDNF, which is where a CDNF is a natural protein. xCDNF is a chemically synthesized version of CDNF. That's where we just recently selected HER-096 as the lead candidate, and we'll be taking that through the various preclinical stages in the next 12 to 18 months. And after 10 years of intense research and development efforts with CDNF and xCDNF, I think it's safe to say now that we are starting to bear the fruit of those efforts in terms of the outcomes and the results that we're generating in the various programs. And that's captured on this slide, where there's a number of new data points and enhanced understanding and validation of the mechanism of action and target engagement in terms of the mechanisms of disease. For CDNF and xCDNF, that's captured in this first left, moving from left to right. We've also gone on and generated strong human data, specifically as it relates to the impact of CDNF on the biomarkers of disease, and I'm going to touch on each of these pieces of information during the presentation. So the second key aspect was the human data. And then finally, we've also enhanced our understanding of the significant market potential for CDNF and xCDNF in Parkinson's disease. So I'm going to touch on all of these pieces of information. I'm going to start with the mechanism of action and target engagement. And the first key point to make regarding CDNF is it's focused on the core pathology of Parkinson's disease, which is a system called proteostasis. Now proteostasis is responsible for regulating all the proteins in the body and influencing the fate of every single protein from synthesis right through to degradation. And given that proteins are the building blocks of everything in the body, if we mess with proteins, we mess with the body and we get problems. And in diseases like Parkinson's and other neurodegenerative diseases, proteostasis goes wrong. For several reasons, proteostasis goes wrong. And we have a manifestation of disease. Now that's where CDNF and xCDNF step in. And the mechanism of disease and how CDNF impacts the disease from a therapeutic perspective is captured in this diagram. Now it's quite a complex diagram, so I'm going to try and break it down into the core components to understand the full benefit and effect of CDNF. So the top box here is the proteostasis network. And that comprises the production of proteins; the folding of proteins into the active structure, they need to be folded into a certain configuration to be active; and then the degradation or the quality control, if proteins are faulty or there's too much of a particular type of proteins such as alpha-synuclein, for example, then there's a quality control to get rid of those proteins. So that's proteostasis. That's the top box. The other important box is this box at the bottom called the Unfolded Protein Response or the UPR response. And the key effects of the UPR is to protect and balance proteostasis. So when there's challenges or stress to the cell or disease mechanisms, the Unfolded Protein Response is there to try and assist proteostasis and normalize proteostasis. Now in diseases like Parkinson's disease, these systems go wrong and they're overwhelmed. So there's problems with the proteostasis network, and Unfolded Protein Response is completely overwhelmed. It's unable to respond to the disease or the stress. And that's where CDNF steps in because it acts at multiple levels. It's a multimodal, we know that it's a multimodal -- now know that it's a multimodal mechanism of action working on these key pillars of disease that restores proteostasis, working on each of those steps, including synthesis, folding and function as well as degradation. It enhances that, restores that so that, that system can function. Plus, it impacts the unfolded protein response to try and rebalance the entire system and protect proteostasis so that the production of proteins is enhanced. Now this is a very active area of research. There's some major companies involved in this. There's, for example, Roche and Prothena are in partnership, Merck and Yumanity are in partnership, clinical labs and Google Health are in partnership, Denali and BioGen are in partnerships. So it's a very active area of research. Many of those companies or most of those companies focus on this degradation part of proteostasis and specifically alpha-synuclein. With CDNF, we covered that as part of the actions of CDNF. So we also correct the degradation. But we do a lot more than that, we also focus on the synthesis as well as the folding and function in the top, plus we have an effect, an impact on Unfolded Protein Response. So we have a much more holistic role and approach to proteostasis and its mechanisms of disease. So that's, hopefully, giving you an understanding of the mechanism of CDNF and how it impacts the core of the disease pathology. Another key piece of information that we've generated recently is the levels of CDNF in healthy individuals versus Parkinson's patients. And that's what we see in this slide. On the Y-axis, we have -- it's levels of CDNF in the cerebrospinal fluid, so around the brain. And then on the X-axis, we have different groups of patients and measured CDNF in those patients. So in fact, the HC, that's healthy individuals, healthy controls, and we can see that CDNF levels there are normal. But then everything to the right of that, all the red flags, that's different time points in Parkinson's patients. And we can see that the CDNF levels are dramatically lower than for healthy individuals. And this is a key piece of information, because if we combine what you've just learned about proteostasis, plus what I'm telling you now about CDNF and the levels of CDNF in patients, we can understand the impact that the Herantis CDNF and xCDNF products can make both for proteostasis and correcting proteostasis as well as replenishing these levels of CDNF in patients and getting -- and normalizing the levels of CDNF. So we add 1 plus 1, and we have a real significant potential impact of CDNF. What about the blood brain barrier? Now the blood brain -- or crossing the blood brain barrier. The blood brain barrier is a very impermeable tough membrane that covers the brain, surrounds the brain. And the role of the blood brain barrier is to prevent harmful substances from entering the brain and doing damage. And the problem for treatments looking to treat disease of the brain is they have to be able to cross the blood brain barrier, and that's a notoriously difficult thing to achieve and many therapies have failed because of that. What we're seeing here is xCDNF and its ability to penetrate the blood brain barrier. This is a recent study completed in mice. Y-axis is concentrations of CDNF -- sorry, of xCDNF. And X-axis is different time points. These mice were injected with xCDNF, and the blue plot is the concentration in blood. So nothing remarkable there. As you'd expect, it increases and then reduces over time. But what is remarkable on this slide is the proportion of the injected xCDNF that crosses the blood brain barrier into the interstitial fluid of the brain. This is more than 20%, in fact, of xCDNF is crossing the blood brain barrier into the brain. And once it's there, it's sticking around for a long period of time. And that's a significant proportion because many comparable products or other molecules, potentially 1 -- lower single-digit percentages. So 20% is a significant achievement in terms of proportion crossing the blood brain barrier. Let's talk a bit about the efficacy. Again, this is data that we've generated in the recent period, and I'm covering all the highlights from the recent period to give you the full picture of what we've achieved. So once you cross the blood brain barrier, we need to know that we retain the potency of xCDNF. And that's exactly what we see in this slide. So this is an experiment where animals were induced with Parkinson's-type disease, and then some of the animals were treated with xCDNF and others weren't. On the left-hand side, we're looking at dopamine neuron survival. So the Y-axis is how many dopamine neurons. And dopamine neurons is the key pathology of Parkinson's disease. So we're looking at the percentage of dopamine neurons that have survived. And the X-axis is different groups. The control group are healthy animals, so they weren't injected. They didn't have Parkinson's disease-induced, and as you would expect, 100% of neurons survived. But the bars to the right, the colored bars to the right, are animals that were induced with disease. The red bar here is animals that were induced with Parkinson's-type disease. They weren't treated with xCDNF. And we can see that in this 4-week period, they lose almost 50% of their neurons as a result of the Parkinson's disease. But for the animals that were treated with CDNF on the right-hand side, the blue bars. And in fact, if we focus on the high-dose CDNF, the dark blue bar, we see there that almost 50% more neurons survived and are protected following CDNF treatment. And as I said, this is only a short treatment duration in this model. It's 4 weeks, 1 dose every week. With 4 doses, there's a protective effect, 50% more than the animals that weren't treated with xCDNF. So that's a significant result, both statistically as well as clinically. Then we looked at alpha-synuclein. So here, lower is better. So the Y-axis is levels of alpha-synuclein and lower is better because this is one of those toxic proteins that I mentioned when I was going through proteostasis. This is one of the proteins that cause damage, so you want to get rid of these proteins. And this is where companies are focusing. A lot of companies are focusing on this aspect. And again, we're looking at the same group. So the control group, you'd expect the alpha-synuclein levels to be low. The vehicle group, these animals that were induced with Parkinson's, so their alpha-synuclein levels are through the roof. But if we look at the groups that were treated with xCDNF, they are dramatically reduced. They're super normalized. In fact, below, even the control group, the normal group. So from an efficacy perspective, this is a big tick in this box in addition to the ability to be able to cross the blood brain barrier. So that has given hopefully a useful flavor and context as to the increasing validation and understanding and data generation that we've achieved regarding the mechanism of action and engagement with the disease mechanisms. I'm now going to talk a bit about the human data, and this gets even more exciting because what we've observed and generated is that in patients that were treated with CDNF in the Phase I study, we analyzed the biomarkers. We did a comprehensive, extensive review and analysis of 50 biomarkers in the study, and we recently completed the analysis of that. And what we have noticed is that, first of all, there's a clear change of the biomarkers in response to CDNF treatments in patients. Those changes in the biomarkers are correlated with improvements in motor function as well as biological scanning, so brain scans of these patients. So we have the change in the biomarkers, but they also correlated with the improvements clinically and from a scanning perspective. Some subjects, interestingly, were found to carry genetic mutations relevant to Parkinson's, such as LRKK2 and GBA. And the biomarker signature that's coming out of this analysis really supports the modulating effect of CDNF treatment on proteostasis, as I explained in the earlier slides. But this now is human data where it reflects changes in proteostasis, and we know that there's a direct molecular interaction with alpha-synuclein. So here's a patient that was in the study. And we've pulled together all the data regarding his motor score, so his movements and his ability -- his mobility, that's a motor score. We've looked at the imaging. We've looked at the biomarkers, the proteomics, and we've looked at the genetics. He was a 60-year-old gentleman with very advanced disease, 10-years plus, from first motor symptoms. And in the study, he was on placebo for 6 months and then he was put on to CDNF for the second 6 months. If we look at the motor score, here, lower is better. So the score that we use is something called UPDRS. And the lower the score, the better. The first 6 months, which is this column over here, the patient was on placebo, as I mentioned. And nothing really remarkable there, maybe a slight improvement in placebo. But then once the patient is transferred on to CDNF, there's a dramatic improvement in the motor score in the UPDRS and his mobility and his ability to move around and his dexterity. So that's the motor score, the clinical score. Then we looked at the imaging. So here, we have a brain scan of the patients, and we're looking specifically at the dopamine neurons and the concentration of dopamine neurons and functional viable dopamine neurons. Here, higher is better. In the first 6 months, over here on these 2 quadrants or the left-hand column, we see that the signal actually reduces over time while the patient is on placebo. Once the patient is transferred on to CDNF, we see that profile actually correct and even potentially show an uplift as a result potentially of the CDNF treatment. So we've looked at the motor score, there's an improvement. We've looked at the imaging, there's an improvement that correlates with the motor score. Then we had to look at the proteomics and the biomarkers. And again, we've got 2 columns here, the first 6 months on the left-hand side and the second 6 months on the right-hand side. Red means response. So in the first 6 months, when the patient is on placebo, there's a worsening of those biomarkers, as we can see by the blue or the different shades of yellow and white. But once the patient is transferred onto CDNF and received CDNF treatment, we see a dramatic lightening up of those biomarkers as they respond to CDNF. So we have the motor score, the imaging score and now we have the biomarker score as well, all of them correlating. And then in this particular patient, we had to look at the genetics. And this patient had a LRKK2 gene mutation, which is a recognized genetic mutation in Parkinson's. So as a whole, here, we're pulling together all the different aspects of this patient's treatment -- this patient's results as a result of CDNF treatment. And we see a very compelling picture correlating between the biomarkers, the clinical and the motor score. So that's the human data and the biomarkers that I wanted to go through. What about the market potential? So what we know about Parkinson's disease worldwide is that it's exploding. Many other central nervous system diseases like Alzheimer's, stroke, a lot of those diseases are plateauing out. They're sort of stabilized and leveled. But with Parkinson's, that's not the case. Parkinson's continues to explode as a result of both man-made factors as well as genetic factors. And this is why it's been coined now as the Parkinson's pandemic, because that is really how it's considered, as a pandemic proportions. And that's why there's so much focus on trying to make a difference for patients suffering from Parkinson's. And if we look at how that translates into our markets for us, as Herantis with potentially disease-modifying therapies in Parkinson's, so to slow, stop or even reverse the disease pathology, the total addressable market is EUR 120 billion, and these are independent estimates. This is not our data, this is independent data. Of which, for CDNF and xCDNF, we are estimating a potential 8 billion market size peak sales for CDNF and xCDNF. So a significant market for assets that can make a difference for patients suffering from Parkinson's disease. This just summarizes where we're at in terms of the development. So here, on the staircase diagram, we have the typical biotech and drug development process from discovery through to lead selection Phase I, Phase II, ultimately approval and commercialization. With CDNF, that's a clinical-stage asset. The intracranial administration route completed the Phase I towards the end of last year. Now we're expanding those administration routes to intranasal or nose-to-brain, nasal spray, and simple subcutaneous or skin injection. That's currently completing preclinical. And then we have xCDNF where, as I mentioned earlier, we have selected the lead candidates that we are now taking into further development. And in parallel to all the activities going on in terms of developing and progressing the assets, we have a rich potential news flow for the next 12 to 18 months. And some of the major milestones for this period include completing the formulation projects for the new administration routes for CDNF during the second half of this year, continuing and updating preclinical efficacy for the xCDNF candidate, HER-096, also the second half of this year. The first half of next year for CDNF, we aim to complete the preclinical efficacy and feasibility assessment for these new administration routes in Parkinson's disease. Also during the first half of next year, we expect to be well into the IND-enabling and toxicology program for HER-096 as we prepare both assets to enter the clinic. And then finally, we expect to have an observational biomarker study because biomarkers is going to be a key. When you see the data that I went through on the biomarkers and how compelling that is, that's clear and safe to assume that biomarkers will be a big part of our program moving forward. So we expect during the second half of next year to conduct an observational biomarker study in Parkinson's disease patients. So in conclusion, I hope that, that was a useful overview, and I hope that the key takeaways that you remember regarding Herantis is, first of all, the compelling science. So that whole picture regarding proteostasis and the clear evidence of target engagement as well as replenishing CDNF levels, so that's the science. Then the second key point is the exciting data as it relates to CDNF, specifically the biomarker data that I went through. The third key point is also the exciting data regarding xCDNF and the fact that, that has been successfully reengineered to cross the blood brain barrier and retain its potency. The market opportunity, as I mentioned, for Herantis' assets as a disease-modifying therapy, would be EUR 8 billion, independently estimated. The news flow plan for the next 12 to 18 months is potentially rich, which is a key focus for the company. And then finally, I think the team, we know what to do, we know what's needed. These are some of the brighter scientists I've ever worked with in my career. So we're clearly focused on ensuring that our activities take care and cover the key value drivers for the assets as well as for the company. So we know what's needed and we know how to do it. So I hope that's been a very useful overview for the first 6 months of this year, and I'm happy to take questions and answers right now.

Thank you, Craig. We would like to open up for Q&A. [Operator Instructions].

First question for Craig is, based on the genetic and biomarker data that has begun to emerge, which we have seen increased companies going down the route -- that route, particularly within neurology, which has traditionally been a tricky area to develop drugs in and to focus in on particular subgroups of patients based on genetic phenotypes and so on, is that something you're considering or potentially looking into?

Yes. So yes. So I think, as I mentioned, as I covered, the biomarker data that we've generated in humans is very strong and quite unique, in fact, for a drug treatment in Parkinson's disease. So the plan is to build on that and to use that to shape the clinical program as we move forward. So by the time we get into the clinic, we will know what biomarkers we need to focus on, and that will be built into the clinical trial that we enter as -- into patients, into Parkinson's patients.

Great. Thank you. Next question is what is the rationale behind having both CDNF and xCDNF in development?

Well, they're such strong programs. Both of them are such strong programs with respective merits that CDNF is a biological protein and it's a clinical stage asset. xCDNF is a chemical molecule, that's an earlier stage asset. So right now, given the data and the strength of the data in both programs, there's -- we're back in both programs. There's clearly interplay between the programs, and we'll continue to evaluate the respective merits of the 2 programs as we progress through development. But right now, they are such strong programs that, for us, we're back in both. And as we go, we'll evaluate the programs and the data that we generate from those programs.

Great. Thanks. The next question in the queue is, you mentioned in the report that one activity during the first half was in CMC for CDNF and xCDNF. Can you elaborate a bit more on the upcoming CMC activities in 2021 and 2022 and how costs are expected to develop in this area?

Yes. So for CDNF, that's a biological protein and it's a recombinant manufacturing process. That is conducted with a partner in Finland called BioGen. We currently have stock to get us through the next 12 to 18 months. Following that, we would need -- or in parallel to that, we would need to prepare for the stock that's required for the clinical program. And we sort of right now, we -- between the stock that we have to get us through to next year, and we will need to embark on a new CMC run closer to the clinic. So that's for CDNF. For xCDNF, this is a chemically synthesized molecule, so it's much simpler from a CMC perspective than the protein. And we're doing that with a company in Switzerland called Bachem. Again, that batch is under production. We require that for the next phase of the development. But clearly, that's something that we need to complete by the end of this year.