Herantis Pharma Oyj (HRTIS) Earnings Call Transcript & Summary

[Audio Gap] Investor Relations for Herantis Pharma, and I will be the moderator for today's call. Please note that this call is being recorded. [Operator Instructions] Presenting today is CEO, Antti Vuolanto. CFO Tone Kvale will join the call for the Q&A portion. [Operator Instructions] Additionally, 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 made -- the statements made 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 implied or timing predicted by such forward-looking statements, and reported results should not be considered as an indication of future performance. Please note these forward-looking statements made during the webinar today speak only as of today's date, and the company undertakes no obligation to update them, reflecting subsequent events or circumstances other than those required by law. This webinar is being recorded and will be available soon on the Herantis website under the header News and Events and the sub-header Company Live Presentations. With these formalities out of the way, I now would like to turn the call over to our CEO. Antti, you may begin.

Thank you, Julie. So let's first remind us shortly what Herantis is about. So we are a drug development company and our mission is to develop -- disease modifying therapy to address the unmet clinical need in Parkinson's disease and then potentially also in other neurodegenerative diseases. Currently, we are fully concentrating on our lead asset, HER-096. That is a small peptidic molecule that really has a unique mechanism of action and also easy route of administration by skin injection. During this year, we have clear goals. So we want to demonstrate the safety on blood-brain barrier penetration in humans by the end of the year. Let's then jump into last year and briefly review what we were able to achieve during the year and then some other highlights. So if we go into the R&D side, we announced in January 2022 that the company will focus on HER-096, and thereby, the previous development programs with CDNF were winded down in a controlled manner. During the year, we were able to achieve great preclinical results with HER-096. So both on the proof-of-concept or efficacy side, we were able to collect and achieve a very compelling package of data that demonstrates that HER-096 really can modify Parkinson's type of pathology in animal models and we can also affect the symptoms of the animals by affecting the disease processes on the background. And of course, in December, finally, we were able to submit the clinical trial application, which means that we were able to collect a comprehensive toxicology package that was sufficient for us to move forward with our plans towards a Phase Ia clinical study. And if we go into the business side, in Q2, we had 2 financing rounds, so a directed issue and then a rights issue. And we were able to raise funds, EUR 8.7 million. That was the planned amount for us. And we were really happy that we were very successful even though the environment was not the easiest one to raise financing for a biotech company. And during that financing round, we defined that those proceeds will be used for preparing the Phase Ia study and to run the Phase Ia study during this year. And currently, we are in a good phase or good speed in delivering on these milestones. In July, I was appointed as the CEO. And just a reminder that I've been working with the company since 2018 as the Chief Operating Officer. In December, NASDAQ Stockholm approved our delisting application from First North Growth Market Sweden. We have disclosed the reasons why we wanted to do this. And I think that it's a good step for the company to be listed only in Helsinki for the time being. And what was really positive news in December was that we were selected for the European Innovation Council Accelerator program that provides us a grant of EUR 2.5 million, and then an option for additional equity investments to be used for HER-096 further development. And we will then later this year or later during the first half of this year, disclose more information on this once we have signed the grant agreement with EIC. And a very important event after the reporting period is that in February both the Finnish Medicines Agency, Fimea, and ethics committee, they have approved the clinical trial application for Phase Ia clinical study. So now we are preparing the practicalities, and we will then inform later once we are ready to start the clinical study. This slide summarizes the key financial figures. I won't go them through. No surprises there. Just a couple of remarks. So basically, we have been able to reduce the operating expenses. It's not because we have winded down the activities, but we have concentrated more on the lead asset HER-096 and actually, as presented with the last slide or the previous slide, we have had a very good progress with that during last year. And just a reminder that we are funded through the Phase Ia clinical study taking place this year into next year, which is a good position for us. So let's have a short R&D update here. So let's go first into Parkinson's disease. So just a reminder that Parkinson's disease is a disease of degeneration of dopaminergic nerve cells in the mid brain, and this deterioration and loss of dopaminergic activity in the certain brain area causes severe motor and non-motor symptoms that are typical for Parkinson disease. And what is very important to understand is that at the time of diagnosis, approximately half of the dopaminergic activity in that brain area has been already lost. So if we want to develop a disease-modifying treatment, such a treatment should start in our opinion as early as possible after the diagnosis. The current treatments cannot stop the progression of the Parkinson's disease. So the mainstay is levodopa that helps to restore the dopamine levels in the brain. However, the disease progresses on the background. And at some certain time point, the levodopa-based treatment cannot anymore manage the symptoms and the symptoms get worse and result in compromised quality of life of the patients. So why the current treatments are still based on levodopa that has been invented like 60 years ago? The biggest challenge there is the blood-brain barrier, and that is a mechanism that protects the brain from foreign substances to enter the brain tissue. And most of the pharmaceuticals cannot pass the BBB. The figure is like 95 -- over 95% of pharmaceuticals has a limited penetration in the brain tissue. So there have been historically many promising or, let's say, numerous promising therapeutic candidates. However, because they haven't been able to be delivered to the brain tissue and they have never became drugs for Parkinson's disease. But we believe that we have a great solution for this. So HER-096 has a unique mechanism of action and it's also readily or episodically penetrates the brain based on animal data. So what we aim with HER-096 is to slow down or stop the process of midbrain neurodegeneration at the early stage of the disease, and thereby, prevent the Parkinson's disease-related symptoms to get worse. And if we can show this in clinical settings, that would revolutionize the treatment of Parkinson's disease and, of course, revolutionized the quality of life of those millions of patients suffering from Parkinson's disease. And based on our estimation and also external estimations independent from us, there is a huge market for a disease-modifying therapy for Parkinson's disease. So it's estimated that the potential growth of Parkinson's disease drug market during the next 5 to 10 years, which is estimated to double from the current EUR 5 billion to more than EUR 10 billion, that will be driven by the disease-modifying drug. So we are talking about multibillion opportunity only in Parkinson's disease. And of course, based on the previous data that we have from CDNF, we know that the same mechanisms might be very relevant also in other neurodegenerative diseases. However, currently, we are fully concentrating on Parkinson's disease. So what HER-096 is? We believe that it is a perfect candidate for Parkinson's disease. It combines the unique mechanism of action coming from the CDNF protein. And HER-096 has been designed based on the active side of the CDNF protein, so HER-096 captures the same activity as the protein but in a smaller molecule that is, as a drug molecule, much better in many ways, both practical way and the manufacturing and the route of administration and the characteristics once it's administered in the patients. And of course, the reduced size allows efficient blood-brain barrier penetration. So HER-096 activities, that it's protect and rescues midbrain neurons. The target in the neurons is a pathway called unfolded protein response pathway, and by balancing it, it helps the neurons to retain their normal activity, and thereby, having stabilized the dopaminergic activity in the midbrain. So we know that HER-096 in animal models [Technical Difficulty] survival. It reduces the amount of toxic protein aggregates such as alpha-synuclein. And it also reduces neuroinflammation in the animal models. And this is exactly the same as we have seen before with the CDNF protein, parent protein. And then going forward with the HER-096 clinical development. The aims are that -- eventually, that demonstrate that HER-096 can slow or stop the progression of the disease on the, let's say, the neuronal cell level. And we want to demonstrate that, that disease modification in the tissue level has also effect on the Parkinson's disease symptoms. And the first step in this process in this clinical development is the Phase Ia clinical study that we will run during this year. We have planned that the readout for the study will take place before the end of the year. And that readout will be the safety and blood-brain barrier penetration in humans. And this is truly the first step in the clinical development. During last year, we concluded the preclinical program, and the results confirm the mechanism of action and it allows us to move to clinical studies. So on a high level, the toxicology studies, we run with 2 animals species, rats and dogs, with 28 days repeated dosing, so dosing it every day for 28 days. We got really good data, good safety profile with tolerability of subcutaneous HER-096. We found some local reactions due to the injections. That is normal for subcutaneous administration route. The pharmacokinetic studies and tissue distribution studies showed that after a simple skin injection, we got therapeutic levels in the brain tissue of these animal species. Actually, the levels were so high that they exceeded the required therapeutic level up to 100x. So we have a good window there, and we believe that once we go into the patients, we will be able to demonstrate relevant therapeutic concentrations also in humans. And subcutaneous dosing in alpha-synuclein based Parkinson's disease mouse model showed exactly what we expected them to show. So we were able to modulate the target pathway, the unfolded protein response pathway in the target brain area. And this resulted in significant protection of the dopaminergic neurons in that area. And that protection was associated with reduced level of protein aggregates or alpha-synuclein aggregates and actually completed removal of neuroinflammation. And moreover, these activities on the neurons resulted in improvement of motor symptoms. And this video shows the last point. So a normal aged -- here are aged mouse. The first one is a normal aged mouse. The second one is the aged mouse with the alpha-synuclein based Parkinson's pathology, and it really struggles with the motor coordination by walking in the bar walking test. And the third mouse is then the pathologic mouse treated with HER-096. And as you can easily observe, the improvement of the motor coordination of the treated mouse compared with the diseased mouse and even the normal aged mouse. And this is exactly the type of efficacy that we would want to see in animal models, and this is what we want to then transform into the patients so that we can really truly affect on the symptoms as well, and thereby, improve the quality of life of the patients. This year, we will run the Phase Ia clinical study. If we go into the time line. So we have the regulatory approval already available. We expect to start the study within the first half of the year. We will obviously inform the market as soon as we start the treatment of the study subjects. And we expect the results by the end of the year. And the objectives of the study is to establish the safety and tolerability of a single subcutaneous dose of HER-096. We also want to study the blood-brain barrier penetration. And then we have also endpoint-related exploratory biomarkers that we can then exploit further in the clinical development. And I will show here what is the Phase Ia study design. So we will start with the lowest dose of single -- or administering the lowest dose of HER-096 subcutaneously. Once we have collected the data, there is a data safety monitoring board assessing those. And if everything looks good, we can recruit the second cohort with increasing dose. And the same process goes on with third cohort, fourth, fifth and sixth, if we can demonstrate the safety. And once we have established the highest dose that is safe and tolerable, we will go one dose down and recruit then elderly healthy individuals, from which we will then collect CSF samples for measuring the blood-brain barrier penetration of HER-096. So the milestones for this year: the regulatory approval. We already achieved that. Then during the first half, the first dose in the Phase Ia study. And for the second half, to release the top line data of the Phase Ia study, so the safety and blood-brain barrier penetration. And just to remind you that we are funded through these milestones. As a summary, HER-096, we believe that has a great potential to become a disease-modifying therapy for Parkinson's disease. It has a unique mechanism of action and we believe that it's a perfect candidate for addressing the unmet clinical need there. We have a great market, over 8 million patients globally. And truly, if such a new type of molecule can be brought into the market, it's a multibillion market for such a drug. We have great evidence on HER-096 on the preclinical side from several different animal models. And I want to highlight that the previous CDNF preclinical and clinical data really derisked the development as we are building on the same biology. We have very intimate knowledge about that biology. So we are in, let's say, in a much better shape than most other companies starting at clinical development. And our strategy is to find a development partner for HER-096. And we believe that the Phase Ia clinical readout, it's an important milestone for the partnering point of view and, of course, very important for further HER-096 development. This is what I had in mind to say today. So I guess we can move into the Q&A session.

Great. Thanks Antti. We have a few questions in queue. [Operator Instructions] The first question is, now that you have received the CTA approval for the Phase Ia study, when will you begin enrolling healthy volunteers into the study?

Yes, that's a very good question. Of course, we are really happy that we were able to have the regulatory approval. It was very well aligned with our thoughts of how the process would take place. Now we are preparing all the practicalities related to setting up the study. It requires setting up the site, starting patient recruitment, delivering the drug into the clinical side. And we will inform the market as soon as we have the first patient in the study. But I believe that definitely within the first half of the year.

Great. Can you guide us a bit further on cost development for 2023? How much will the recent grant impact your cash runway?

Yes.

Yes. So I can just answer that. A good question. We have reduced our cash burn significantly compared to last year, and we have a cash runway into 2024. When it comes to the grant, we have not signed the EIC grant agreement yet. We will come back to the market and inform when we have done so. But what I can say is that the project is going over 2 years. And the total limit is EUR 2.5 million, and it also requires matching funding from the company. But for 2023, it will impact the cash flow very positively.

Great. The next question is, what would be a clinically meaningful treatment effect in Parkinson's in your perspective?

Could you please repeat that? There was some...

Sure. Sorry about that. What would be a clinically meaningful treatment effect in Parkinson's in your view?

Yes, that's a great question. So how we position HER-096 is that we believe that the best patients for HER-096 would be newly diagnosed patients whose Parkinson's disease-related symptoms would be mild. And effect of HER-096, a good effect would be, in my mind, to stabilize the symptoms as they are when the HER-096 treatment would start. And that would allow, I would say, just a normal life for the patients thereafter. Of course, optimally, we would hope that we would even be able to regenerate the neurons. So that would mean that even the minor symptoms would be alleviated. But that remains to be seen once the clinical development goes further.

Great. Next question is, can you compare the potential level of blood-brain barrier penetration with HER-096 compared to alpha-synuclein antibodies that are in development?

That's again, a good question. However, I would say that, that's a little bit like comparing apples and oranges. We believe that it's not so important to define a percentage of the dose entering the brain. It's more important, more relevant to define what is the minimal required concentration level in the brain that can be achieved so that the concentration is enough to get a therapeutic effect. And we know from the preclinical studies that we are able to greatly exceed the minimum required concentration in the animal models. If we just put this in a way a plain figure, in a rat model, we were able to deliver a concentration that was over 20% of the concentration in blood, which is a very high number in -- a typical number for alpha-synuclein antibodies is around 1% or 2%. So yes, we exceed that greatly, but it really depends on how much it's needed to have in the brain to get a therapeutic effect. And there, it's difficult to compare these percentage figures. But as I said, with HER-096, we have a clear -- let's say, we have a big margin there. So we believe that once we go into humans, we are able to see a therapeutic relevant concentration in the CNS.

Great. The next question is, what is the status with finding a development partner?

Again, something that we have been working -- or we have been focusing a lot during the past 12 months. So we have been in contact with over 50 pharmaceutical companies located all over the globe. We have had very good discussions with them. We know quite well what is the expectations of these companies related to the development that we -- they would like to see from us. Definitely, the Phase Ia study is very important. Understanding the mechanism of HER-096, that's important. We have got very positive feedback from these discussions. Of course, it's very difficult to predict when the discussions can be materialized into something really material for the company. But we are definitely -- this is our definite focus area that we are constantly working with.

The next question is, what type of learnings from the CDNF clinical study have you implemented in the clinical design for HER-096?

That's a very good question. And there, I would say that what we have learned from CDNF is that understanding the biology behind the HER-096 is very important. Establishing biomarkers for future clinical studies, that will be one of the key criteria for success. So we need to establish those endpoints for the clinical studies that are meaningful for our HER-096 and its mechanism of action. And those are the learnings from CDNF that direct our planning towards then through this Phase Ia study with healthy volunteers towards the follow-on clinical studies where we will start treating Parkinson's patients. So we believe that, that gives us truly a good position to design studies from which we will get meaningful results guiding us going forward.

Great. This question talks about the competitive market. What does the competitive market look like for Herantis in your opinion, what are some of your competitive advantages?

Yes. So the current treatments, they are mostly dopamine replacement treatments. They can treat the symptoms, but they don't affect the disease progression and somewhat of time the efficacy diminishes. There are several different kinds of drug candidates in development. They typically target one aspect of Parkinson's disease. And we believe that at HER-096 has a broad mechanism of action addressing directly the dopamine neuron survival and affecting the protein aggregates and affecting on the new information, we believe that this broad mechanism of action gives us the opportunity to treat Parkinson's disease in a more comprehensive way than maybe most of the other disease-modifying track candidates currently under development.

Great. Well, this concludes the Q&A portion of today's call. And Antti, do you have any closing comments?

Yes. I would like to thank our investors for the continuous support for Herantis. I think due to the support that we have received, we have been very successful during 2022, delivering those data and those milestones that we defined for last year. And I think we are looking at a very bright future for Herantis during this year and beyond. So thank you for this, and we continue working with HER-096 and hopefully, rather sooner than later, we are able to deliver something very meaningful for the patients to really address the unmet clinical need that varies. Thank you.

And this concludes today's call. Thank you for joining.