Herantis Pharma Oyj (HRTIS) Earnings Call Transcript & Summary

Good morning, and welcome to the Herantis Pharma Second half of 2021 Live Webinar. My name is Julie Silber, and I will be your moderator for today's event. Presenting today will be interim CEO, Frans Wuite. The next slide, if you can click forward, shows our disclosure statement. As a quick reminder to listeners, during today's webinar, management may make forward-looking statements involving 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. Please note that the 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 than to the extent required by law. Today, the company will give a brief update, and then we'll conclude with a Q&A session. For the Q&A session, please feel free to write your questions via the questions section on the webinar dashboard. As a reminder, this call is being recorded and will be available for replay shortly after the event. And with that, I would like to turn the webinar over to Frans. Frans, you may begin.

Thank you, Julie. As Julie introduced, my name is Frans Wuite. I'm the interim CEO after the CEO transition earlier this year of Herantis. I've been on the Board of Herantis now since 2014. And it's the great pleasure that I have this possibility to give you update on our company and its plans going forward. But before we do so, we have recently published our 2021 full year results. And I would just like to share some highlights of the year we grew. We have made significant process -- progress with our lead molecule HER-096. We have demonstrated that it passes the blood brain barrier in a rat model. It's a very important milestone in the development of drugs for neurodegenerative disorders. And we've confirmed efficacy in preclinical disease models as well. And simultaneously, we've identified some very interesting biomarker candidates in a Phase Ib study with a [indiscernible] CDNF. All of the operational highlights I can probably mention that we have been able to establish a Scientific Advisory Board, assisting our 4 esteemed individuals, all global industry and academic leaders in the field of Parkinson’s disease drug development. We've also managed to attract Hilde, Hilde Furberg, to our Board of Directors last year and within the under the umbrella of the [ collaboration ] agreement with Nanoform in Finland, we have been able to synthesize and show the stability and activity of nanoform CDNF in [ Parkinson's disease ]. Last but certainly not least, we've been able to complete the private placement exceeding EUR 4 million last year. Let's take a quick look at the company, just to introduce ourselves properly as we do in [ Scandinavia ]. Our company develops disease-modifying therapy to address the unmet clinical need of Parkinson's disease. I'll talk about that a bit later. Our lead asset, as I mentioned, is a small peptide molecule with a unique mechanism of action and an easy route of administration that's extremely important [indiscernible]. We have an experienced Board of individuals and management team, and we have 13 employees currently, 5 of them are PhDs We're founded in 2008 in Helsinki, and we've had the scientific discoveries go back to the University of Helsinki. So that's what we are working on how to develop further. Our IPO in Finland was in 2014 on the First North and subsequently a second listing in 2019 in Stockholm. Our largest shareholders company both in Sweden and Finland. They are Swedbank Robur, Nanoform and AP4 Fonden. Our market cap currently hovers around EUR 22 million. But let's talk about Parkinson's disease now for a moment. So Parkinson's disease is actually quite a common neurodegenerative disorder. The symptoms of the Parkinson's disease are caused by degeneration and decay of dopaminergic nerve cells in midbrain. And when this happens, it causes symptoms, severe symptoms, both motor and non-motor symptoms as they are called. So this means things like slowness of movement, tremors, difficulty in maintaining balance happen. And of the non-motor symptoms, they say also depression, anxiety, sleeplessness, lack of concentration, things like that, quite cumbersome things we have on also the motor symptoms. And the treatments today do not stop the progression of the disease. And on this table diagram on the right-hand side, you can see that the dopaminergic neurons are rapidly declining once you have been diagnosed or actually prior to your diagnosis of Parkinson's disease. So when you have had Parkinson's disease for a year, you will more or less only have half of your dopaminergic neurons active any longer. And after 10 years, you hardly have any left in an active mode. So all this causes a huge economic burden and it's a growing problem with the aging population. So it's estimated that it grows to beyond 12 million patients by 2040. The economic burden is also very high, both for households and for the society. To address this devastating situation and this grave unmet medical, need, Herantis [indiscernible] drugs and now I'm proud to demonstrate with a few slides. We have made remarkable success in developing a potentially disease-modifying therapy to delay exactly what's happened in the route problems of Parkinson's disease. Let's look a bit closer in the next slide to the mechanism action of both actually the model CDNF of which HER-096 has been derived from and also HER-096. They have a truly unique disease-modifying mechanism of action. In these cells that are affected, there is constant chronic cell stress. And that causes the cells to start misfolding proteins. So it's like a protein factory where both the dismemberment of the proteins as well synthesis of proteins happens, and this protein stages is derailed in Parkinson's disease. What then happens is that cellular stress generates misfolding of proteins and aggregates start piling up in the cells and typical of Parkinson's disease are the alpha-synuclein aggregates. And when this happens, it's a very toxic process for the cell and gradually they started to generate and they start dying. That leads again to neuroinflammation, and there's neuroinflammation and tissue is in any way, all this forming vicious circle that is difficult to stop and rapidly progresses. Now to halt this process, to stop this process, CDNF and now also effective HER-096, are working on the root level of the problem. They will reduce the cellular stress in these cells and subsequently also affect the aggregation of the alpha-synuclein proteins. Also a remarkably strong effect on reducing the neuroinflammation in tissues -- around the neural tissue. Let's go to the next slide. There are some significant hurdles for the development of pharmaceuticals in play. And that is the blood brain barrier. The nature has developed a very functional and strong barrier to repel harmful substances for protecting the brain. But at the same time, if you want to develop drugs that need to -- pharmaceuticals that need to reach certain areas in the brain, you have a problem. Large molecules, biological molecules, even small molecules do not pass the brain barrier. So there is a very hard discovery and research work required to overcome this barrier. And now finally, the discovery and research team of Herantis has managed to develop a small peptidomimetic particle, that in the first animal test clearly shows it can penetrate the blood brain barrier. And I will talk about this a bit more in a second. But we are now looking forward to taking this demonstration in to next year. So we are reaching a very important milestone for our company. So next slide shows that the molecular structure in a very schematic way of the CDNF, large CDNF protein. And the team at Herantis have identified the active site for all this -- for the mechanism of action and the relevant active site is the basis for the synthesis of the HER-096 molecule. And as mentioned, it is a synthetically manufactured molecule, which makes it far easier to manufacture than the large biological CDNF. However, we have now demonstrated that it retains fully CDNF biological activity and it is indeed designed to reach the brain upon subcutaneous administration. That's a much, much more patient-friendly route of administration than what has to happen with the administration of the larger molecules like CDNF that require intracranial administration. And last but not least, it can be manufactured very cost efficiently, rapidly via simple chemical synthesis. In the next slide, we just show that we wouldn't -- you that we wouldn't be sitting here, and we wouldn't be listening to a presentation about HER-096 if we have not built this on a solid platform of CDNF science. CDNF molecule was discovered in Helsinki in 2007 and subsequently lead to a very [indiscernible] articles and publications about the biology and science around CDNF. The company has -- Herantis has developed further preclinical evidence for CDNF indicating truly in several animal models, how it works and how effective is CDNF, and also the safety has been demonstrated. We have thereafter being able to give it to patients in a Phase Ib study, but that required intracranial administration that I was mentioning to a moment ago. The results were very promising. I'll talk a bit of that in the next slide or so. So right now, we are looking at HER-096 as a small molecule that is based upon a solid science of CDNF as a route of it. And it is clearly derisking our developmental efforts of HER-096 going forward. So let me just show you some examples of the work that we have previously performed on CDNF. One of the encouraging and promising results that we were able to see was in the monkey model. So it was [indiscernible] monkeys that have Parkinson's disease. And when we looked and compared to placebo group to CDNF, who, also here, it has to be -- have to be given intracranially. We could very well demonstrate that in the [indiscernible] the placebo group, the degeneration continued and hardly can see any of the dark staining cells on this biopsy. It was a very different picture in the CDNF-treated group, where a large majority of the dopaminergic neurons was rescued. And it's very important to link this type of findings to what happened in real life too, in this case, animals. And we were able to indicate that the motor function as well as the non-motor functions were significantly improved in CDNF group compared to the non-treated group or the placebo. This study was also done in collaboration with the University of Pittsburgh and funded by the Michael Fox Foundation. The next slide shows you just a snapshot of how we see the results from the Phase Ib study with CDNF that was also previously on [indiscernible]. We are very happy with the clinical results. It has met its primary outcome, which was -- we hope that it will be safe if it's given directly into the brain, intracranially in patients, and that was the case. It was very well tolerated, and these patients were in a very advanced stage of Parkinson's disease. And then there were some signals in the exploratory endpoints that showed even in this very last stage, late stage patient population, a positive trend after the CDNF treatment, both clinically and also looking at the PKG, their kinetic markets, so bradykinesia reduction, slowness of movement was reduced at 1 month and 6 months of treatment. If we just look down on the lower bar, we can see that there is -- we have taken a sample of one of these patients who responded particularly well. This is a 62-year-old male with disease duration of 10 years. And the first 6 months, this patient got placebo and thereafter 6 months of CDNF. You can see on the left bottom corner, the UPDRS score indicates improvement. The less it shows the better the condition is. So you should clearly be able to see that between 6 and 12 months of time duration in this study, the patients have significant improvement in the UPDRS score. And that was gradually stepping away after 25 months but still not the start of the same level as the start of the treatment. So we want to believe that there is some longer-term effect of the administration even upon cessation or stopping the treatment. And what is also important in this case is to relate that to other things that you see happening simultaneously. And we have done extensive investigations also with imaging technologies. So the dopaminergic activity in midbrain is something that we can measure also with PET scans. And during the placebo period, you can see that this activity goes down, what we talked about this is in line with the degeneration of the dopaminergic nerve cells. After that, during CDNF treatment, the whole process seems to stabilize for the duration on CDNF [indiscernible], which then subsequently upon the cessation of the treatment in the follow-up period continue to go down [indiscernible]. So there are some hopeful signs indicating that there's biological activity. And if we are now able to go into earlier stage patients in the next phase with our less invasive technology, there should be a good hope for us to see the better results and a significant improvement of the clinical signs and symptoms. We also -- I should say we have been able to collect promising biomarkers also from the [indiscernible] spinal fluid and blood that may indicate activity of CDNF we can use going forward in clinical studies with HER-096. So it was very nice to have this as a basis for the HER-096 studies. And we have now ticked off the box and showed clearly that it does the same thing as CDNF as it comes to improving the dopamine neuronal survival. So a 45% improvement in that case is a very strong signal of efficacy. And similarly, the decrease in the aggregate formation is seen in this mice and the reduction -- clear reduction of the neuroinflammation of the area is indicated by these markers. So the blood penetration, as said, is remarkable. We've been able to [ sail ] that 20% of the concentration in the brain or -- the 20% of the concentration in blood is seen as also the concentration of pre-HER-096, in the brain is 20%, more than 20% of the concentration blood -- sorry, pick up here. And I think that is very encouraging as therapeutic concentrations that we expect to need for it, are way below this level. So it bodes well for potential safety margin and therapeutic margin for going forward. Safety studies are progressing at the moment and the studies that we've done in animals without toxic findings. Let's move on from here. So we are very excited about this great progress with 96 in the preclinical setting. And now we're moving to take our 96 into the next stage. And there's an important milestone as I was mentioning here earlier on waiting for us, which we intend to reach in 2023 and that is the blood brain barrier penetration and demonstration of safety in human. But before that, we are very busy this year. We are generating data and compiling the data into a clinical trial application package, which is due by the end of this year. This will be submitted to the regulatory authorities. And pending their approval, we will commence a Phase I study next year. And so we should have, by our estimates and calculations, we aim to have results of this study showing our potential reaching the milestone in '23 in the second half. That this is an important milestone, is illustrated by the following slide. Pharma companies, big pharma companies are very actively scouting for drugs for pharmaceuticals that penetrate the blood brain barrier for any type of CNS, central nervous system affecting diseases or drugs, but they have particularly also looked for Parkinson's disease therapies. And what is remarkable here that this happens -- seems to happen all the time around Phase I. And with Phase I, the demonstration of blood brain barrier is linked. And of the recent studies -- the recent projections, you can see that, for instance, the ABL & Sanofi deal that was published and made public earlier this year in January, that had -- was in preclinical stage following a monkey study where the conjugated antibody was able to get through the blood brain barrier, and that launched this partnering activity and signature of the deal. So roughly, we can see that the upfront payments, which are the life parts of these bars amount to roughly $100 million upfront, and the total deal amounts are between $1 billion and $2 billion, depending on the asset and the stage of development. But this is a significant fringe of activities right now going on. So we hope to be in the situation of having Phase I demonstrated milestone data next year. So you can imagine that we are also actively pursuing business development activities at the moment. Finally, I would just like to summarize with the next slide, the investment proposition that we have. So we have a potential blockbuster in our company for Parkinson's disease with a unique mechanism of action. The market is clearly not saturated. There is no disease-modifying therapy today and the deals reflect the value of the solution, and they are between $1 billion and $2 billion around Phase I and the evidence that we have is significant. We have an extensive derisking with the CDNF data model of both preclinically and clinically. And we are now very encouraged about the results that we get from HER-096 demonstrating exactly the same things as we have tested and studied with CDNF rescued in the dopaminergic neurons and passage of the blood brain barrier now so far. So our strategy is to find a good partner to take the development forward together or by the partner beyond Phase I data. And that's what we are focusing our efforts behind and hope to be successful with the results demonstrating this next year. I think I'll pause here with my presentation. I would be keen on taking any questions that you may have.

Thank you, Frans. As a reminder, you can write your questions via the question section on the webinar dashboard. We have a few questions that have come in. The first one is, why have you chosen to focus on HER-096? And what will happen with rhCDNF?

Thank you. I think that's a very justified question. So the mother molecule and the recombinant human CDNF that we are able to manufacture and have is, of course, a very important molecule for us as a backup going forward. We have also investigated alternative administration routes for it. And I think it's a good reference substance for us to retain in the company. But we are focusing on HER-096 because, as we mentioned, it is a small article that can be given in a much more convenient way than CDNF or large molecules. It is also easy to manufacture, much cheaper. And last but not least, I should also mention perhaps that it has a very attractive [indiscernible] life, which is not irrelevant for the development of pharmaceuticals. That's, I think, in a nutshell, what we would like to say about why we have chosen to focus on 96 rather than CDNF.

Great. The next question is, can you elaborate on why penetrating the human blood brain barrier is such an important milestone for Herantis?

Well, I think that's -- yes, maybe I hope I have explained some of that in my slides, but I think it is demonstrated by the fact that if you don't have the entry ticket into the brain, you will not be able to enjoy what's behind. And that's exactly what it is about. So if you want to affect the brain in therapeutic concentrations, then you need to be able to penetrate the blood brain barrier. And there's been an awful lot of companies even set up just to work on transporting mechanisms to try to alleviate this, but not very many have succeeded. And to have this very mechanism built into the small peptide that we have without the need of having any transporting mechanism or molecules is a great benefit for us. So that's, I think, reflected also in a frenzy of the partnering activity at an early stage, just around blood brain barrier penetration by the big pharma companies.

Great. Thanks, Frans. The next couple of questions are about cost. Can you give any guidance on OpEx and personnel costs in 2022, given the focus now is going into the clinic?

Well, I think what we have done is we're shifting of course. As any company has the structure, has to follow strategy. As it comes to the personnel and staff, I think we have a very capable team of handling multiple things. They have been in the clinic before with the CDNF Phase Ib study, as you may remember. So we have that capability within the company. We have also taken drugs through Phase I successfully within the team. So I think we will be using the synergies and the capabilities that we have in our company to optimize this, just putting the resources behind HER-096 will be our imperative moving forward. So I do not expect in that regard to expand the organization on the short term. What happens then beyond Phase I will be discussed at that point in time.

Great. Are there any costs associated with the Lymfactin program that are still on the P&L?

We are -- we have halted the activities with the Lymfactin studies for a very good reason. So we do not foresee to have us going forward [indiscernible].

Great. Can you elaborate a bit on the cost-effective manufacturing process for HER-096 and related to a potential process for biological CDNF?

Well, I'm not the right specialist [indiscernible]. It's for [indiscernible] this question better. Well, I do know it's really a fraction, synthetically produced and can be produced in large quantities in top notch centers. In this case, it's produced in Switzerland, one of the largest manufacturers in the world of synthetic peptides. So we're in good hands, and we are very confident that this will carry us forward in a much easier and better way than the biologically manufactured CDNF that requires cell cultures and assays. And there's always a potential for things going south with biologicals, which we do not -- we do not foresee happening with synthetic manufacturers with peptides. So also from tech transfer point of view, having multiple sites in the U.S. for this, in Europe, I mean, that's not a problem for the synthetic peptide. It is much easier to do than in [indiscernible]. That's what I can qualify, but I can't comment too much on the cost differences more than that. I just know for a fact looking at our cost planning that it is a fraction of the cost of [ biologicals ].

Great. I'm going to ask one more time if there are any more questions out there, please feel free to type your questions in the questions section. And with that, Frans, we have no more questions. I want to remind everyone that this will be -- this is being recorded and will be on our website shortly. And oh, wait, we have one question that just came in. The question is, what is the patenting situation with HER-096?

As I indicated, I mean, this is confidential information, of course, but since it's a relatively new discovery, I mean there is very fresh patent lives there going up to 30 years, which is, of course, a great benefit when we are talking about future [indiscernible]

Okay. We have another question that came in. Could you go through the competitor's clinical programs?

That's a long story, but I think there are studies with competitors in Phase II, Phase I. Unfortunately, there have been also some failures in some of these. It's not an easy deal. And penetrating the blood brain barrier is a problem. Showing efficacy is not always easy for those. They have a different mechanism of action. We are not focusing on one particular target. We are more going for the route level of alleviating the cell stress in these patients, which should result hopefully in a more integral and a disease-modifying mechanism. So rather than me commenting on competitors' fortunes, I would like to just rest my case and say that we are pretty hopeful that we have covered a large population base potentially with unique disease modifying mechanism of HER-096.

Great. And with that, I'd like to thank everyone for listening to today's call and remind you that it will be live up on our website shortly. And with that, I conclude today's webinar. Thank you.