Herantis Pharma Oyj (HRTIS) Earnings Call Transcript & Summary

This meeting is being recorded.

This is Gabriela Urquilla, Investor Relations for Herantis and I will be the monitor for today's call. Please note, this call is being recorded. [Operator Instructions] On the call today, we have Herantis Pharma's CEO, Antti Vuolanto; and CFO, Tone Kvale, who will go a first half report of 2023. At the end of management's remarks, a Q&A session will begin. [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 and performance and 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 implied or timing predicted 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 than those required by law. This webinar is being recorded and will be available soon on the Herantis website. With these formalities out of the way, I'd now like to turn the call over to our CEO. Antti, you may begin.

Thank you, Gabriela, and welcome to the webinar also on my behalf. So Herantis Pharma. So what we do, we develop disease-modifying treatment to address the unmet clinical need in Parkinson's disease and other neurodegenerative diseases. And our lead assets, HER-096, that is a small peptide or peptidomimetic molecule that really has a unique mechanism of action. And that is combined with the ability to use subcutaneous injection as a patient-friendly administration route. We are currently running a Phase Ia clinical study in which the purpose is to establish the safety, tolerability and blood-brain barrier penetration of HER-096 in healthy volunteers, and we expect the top line data readout in Q1 this year -- Q4 this year, sorry. So Parkinson's disease. Parkinson's disease is a disease of degeneration of dopaminergic nerve cells in the midbrain, and those cause the severe motor and nonmotor symptoms, which are typical for Parkinson's disease. What is good to remember is that at the time of diagnosis, approximately half of the dopaminergic activity is already lost. So basically, at the time of diagnosis, we would need to have efficient treatment urgently in order to prevent further decrease in the dopaminergic activity. However, the current treatments, which are mainly based on levodopa treatment that has been there for almost 60 years, that helps to restore the dopamine levels and it helps to deal with the symptoms, but levodopa can't affect the disease progression at all. And the efficacy of levodopa-type dopamine replacement therapies, those diminishes over time. One of the main challenges in developing, disease-modifying treatments for Parkinson's disease and also other neurodegenerative diseases is the blood-brain barrier. It is -- or the biological function of the blood-brain barrier is to prevent harmful substances to enter the brain to protect the brain tissue. However, at the same time, it blocks most of the pharmaceuticals for entering the brain. So to summarize, there is a clear unmet clinical need. We would need to be able to develop novel type of disease-modifying treatments that can be administered in a patient-friendly way through the blood-brain barrier. And so far, these kind of drugs are not on the market. However, we strongly believe that HER-096 is one of the best candidates currently in the development to address these challenges. And we aim with HER-096, to slow down or stop the progression of the midbrain neuron degeneration, already at the early stage of the disease and we want to prevent the Parkinson's disease-related symptoms to get worse. And if we look at the potential market, currently, there are approximately 10 million patients suffering from Parkinson's disease globally. Currently, the pharmaceutical market size is approximately EUR 5 billion for -- mainly for the levodopa-based treatments. However, it has been estimated that the market will grow to over $10 billion by 2029, and this is driven by the development of disease-modifying treatments such as HER-096. So we strongly believe that if we can bring HER-096 into the market, there is a great market opportunity for us. The what HER-096 is? So HER-096 is a peptidomimetic molecule that has been designed based on the active side of a natural protein called CDNF. So basically, we have been able to capture the activity of that protein into small peptidomimetic molecule. And we have been able to show that the small molecule, HER-096, really has the same activity as the CDNF, the mother molecule. So it captures the activity for modified unfolded protein response in the neurons. It is a synthetic molecule. So basically manufacturing activities are rather simple. And basically, it's very easy to scale the manufacturing into industrial scale. We have currently very strong and very compelling preclinical evidence with HER-096. We know that it effectively passes through the blood-brain barrier in multiple animal models. We have also been able to establish the evidence of the target pathway modulation that has resulted in increased concentration or the amount of dopamine in the brain. And further, we have been able to show that in mouse Parkinson's disease model, we have been able to improve the motor functions with subcutaneously administered HER-096. And of course, this is a great foundation for the clinical development. So we have completed a thorough preclinical toxicology safety package. We have not seen any signs of systemic toxicity. And thereby, we are currently running the Phase Ia clinical study that started in April, and we expect, as I said, readout in Q4 this year. And the readout, the top line data, would include safety, the blood-brain barrier penetration data. So how HER-096 functions in the brain? We know that in Parkinson's disease and actually in other neurodegenerative disease is the target neurons they, suffer from chronic activation of stress responses resulting in that -- the neurons are not functioning in their, let's say, natural form during the disease. In Parkinson's disease, also we know that there is new information in the supporting tissue and also accumulation of aggregated alpha-synuclein proteins within the suffering neurons, and that's also secreted into the environment of these neurons. And we have been able to show that HER-096 actually acts on all of these three key mechanisms of Parkinson's disease -- in Parkinson's disease mouse model. And of course, going forward, we want to demonstrate the same thing in humans. So what is the -- our hypothesis of HER-096 in terms of what we can achieve with that in Parkinson's disease treatment, hopefully, in the future? So the first bullet here summarizes the mechanistic activity it has, what I already referred to into the previous slide. But as a treatment, we should slow down or stop the progression of the midbrain neurodegeneration at the early stage of the disease. So basically, we foresee that once a patient has been diagnosed with Parkinson's disease, that would be the ideal time for starting HER-096 treatment. We have also shown in mice model that we can affect the Parkinson's disease symptoms, and this is also our aim in Parkinson's disease patients going forward. And related to the administration, we currently believe that it would be enough to administer HER-096 1 to 3x per week by subcutaneous injection as currently -- it seems that we don't need to have a constant presence of HER-096 in the brain, but it's enough to have these 1 to 3 doses a week. So then I will describe you the Phase Ia clinical study that we are currently running in healthy volunteers. There, the safety -- there, the objectives are to establish the safety and tolerability of a single subcutaneous dose of HER-096. We also want to establish the blood-brain barrier penetration, and then we have some exploratory biomarker endpoints as well. And the part 1 of the study is -- or have been conducted with young, healthy males of aged 20 to 45 years. We have had 6 increasing dose levels or each dose group, 8 healthy individuals have been recruited. And after each dose group, data and safety monitoring Board has reviewed the safety data and then allowed us to continue with the dosing of the next dose. And as we have just announced, we have not started administrations in the part 2 in which we recruit over 50 years aged, male and female, healthy subjects. And in addition to the safety and tolerability data, there, we will assess also the blood-brain barrier penetration. So we will take cerebrospinal fluid samples from which we measure how much of the subcutaneous dose has been delivered into the central nervous system. And of course, we believe that this data will be very important as we go forward in the drug development. The timelines. So we dose the first healthy individual in the study in April, and now we started the part 2 now in August, and we expect to have the top line data by the end of this year. And of course, what is very interesting are the next steps. So of course, we first need to thoroughly study the Phase Ia data before we can start planning all the details of the subsequent steps. However, we currently believe that the next clinical study would be a Phase Ib type of study in Parkinson's patients may be rather limited in the number of patients and the study duration. And we also are active with other Phase II proof-of-concept clinical study preparations. And now if we go into the first half of this year, and this slide summarizes the business highlights, which are very much linked to the Phase Ia clinical study. So we got the regulatory approval for the Phase Ia study in February, and we dosed the first healthy volunteer in April. And on the business side, the -- we signed the EIC accelerator grant in April. And in addition to the grant funding as we have disclosed, we are eligible to get up to EUR 15 million of equity investments from EIC fund. And then the two events after the reporting period are the -- in July, we announced that we started the recruitment of the older healthy volunteers for the part 2 of the clinical study. And in August, we announced that we have started the dosings in the part 2 of the Phase Ia clinical study. If we look at the key financials for the first half, I won't go through the exact numbers. But overall, you can see that compared to last year, we have significantly been able to reduce operating expenses due to the focus on only HER-096 development, but we have also had some other cost-saving measures, including the reduction -- some reduction of the headcount. Just to mention that we are funded through the Phase Ia clinical study into second quarter of next year. So as a summary, we believe that HER-096 truly has the potential to become a therapy -- a disease-modifying therapy for Parkinson's disease and it truly has a unique disease-modifying mechanism of action. We foresee that there is a great market opportunity, multibillion market opportunity for HER-096 as there is the unmet clinical need for disease-modifying treatments. And we believe that we have a strong position among the drug candidates that are currently under development for this unmet need. We have great evidence for HER-096 in preclinical settings, both in terms of the efficacy, safety and blood-brain barrier penetration. And I want to highlight that we have very long experience with the same mechanism of action also with a mother molecule with CDNF. So we believe that this -- has a strong impact on our development and derisks the development. And as a strategy for the company, so we want to create value for HER-096 in preclinical and clinical development. And then at suitable time point, we want to find a good development partner for later stage clinical development and commercialization of HER-096. So this was basically all that I had in mind for presenting you the first half report and activities of Herantis. So then, we are ready for questions, and we are happy to answer.

Thank you, Antti. At this time, we will now start the Q&A portion of the call. [Operator Instructions] Our first question today is, how large is the potential market for HER-096?

Yes. So as already mentioned during the presentation, the current market for Parkinson's disease pharmaceuticals is approximately USD 5 billion. And there are estimates showing that it will grow to $11 billion. The current drugs, the dopamine replacement agents, that's -- sorry about that. So basically, the driver for increasing the market within the next 5 to 8 years to EUR 10 billion is assumed to be driven by the development of disease-modifying therapies. And as I said, we believe that we have a very strong position there. And we believe that for HER-096, the market potential is multibillion also for -- in Parkinson's disease.

Thank you. The next question is, could HER-096 be targeted to a wider range of aging-related diseases and degeneration?

That's a very good question. So the target pathway that we addressed with HER-096, that's not limited to the dopamine neurons that are relevant for Parkinson's disease. So the same mechanism is also relevant for other neurodegenerative diseases. So it is very much possible that we can address those other neurodegenerative diseases with HER-096 as well. And there actually are quite strong preclinical evidence with the mother molecule, CDNF, that is if it has activity also beyond Parkinson's disease. However -- sorry. However, currently, the focus is in Parkinson's disease, but going forward, studying-- so other neurodegenrative diseases, they are of interest for us. And the Phase Ia clinical study that we are currently running, although it has been designed, Parkinson's disease in mind, it also is a stepping stone for other potential neurodegenrative diseases.

Thank you for that. The next question is what will the next step after you have the data from Phase Ia study be?

Yes. So of course, we need to get the readout from the Phase Ia clinical study in order to have an insight of the details of the results, in order to plan for the next steps. But what we currently believe is we go into study HER-096 in a Phase Ib type of a study with limited amount of Parkinson's patients and maybe a rather limited duration of a study. Of course, going there would require finding resources for such a study. So secure financing for that. And I have to remind you that preparation of a clinical study always takes time. So we need to be aware of that, that always when planning clinical studies, we need to have proper preparations on several fronts. So -- but currently, we can't give any more accurate estimates.

Thank you. The next question is, can you describe the equity aspect of the EIC agreement? Also, how will that -- how will the rest of the grant payment be distributed?

Yes, I can answer that. So we have reached EUR 2.5 million from the EIC as a grant. That grant is distributed over a 2-year period. So now in May, we received EUR 1.4 million, and that is booked into the bank account, of course. But the grant is obtained upfront. So we have recognized this as a short-term debt in the balance sheet. . And there -- amortized is an income according to the -- we have the expenses and the project are kind of going forward. So it impacts the equity positively with a part of the project, which will be kind of booked as an income. And you can see from the P&L now, we have EUR 280,000 booked asset operating income that go directly into the equity line. And that is the 70%, which is the [ ICI ] (sic) [ EIC ] funds part of the project, which we started in May. So totally, EUR 2.5 million will come in. Next year in May, approximately, we will receive the next installment of EUR 750,000. And then the last one would be first half of 2025. And all of these EUR 2.5 million will impact the equity positively.

Thank you. The next question is, can you describe the purpose of a potential Phase Ib trial, the lengths of what that would be and potentially efficacy signals, et cetera?

Yes. So remembering that a Phase Ia clinical study has -- is a single administration in healthy volunteers. One of the main objectives would be to start multiple dosings in Parkinson's patients. As I said, we don't have currently the details of the study yet. We need to analyze the Phase Ia data before going into the very details. However, I would maybe foresee the number of patients would be quite limited, maybe tens of patients and the duration would be also visited. I'm not speculating here how much, how -- what would be the duration of such treatment there. The endpoints would likely be around showing HER-096 target engagement and potentially biomarkers for a limited sized clinical study with limited duration, having efficacy signal readout is quite unlikely. But of course, we will come back with more details as soon as we have more plans, more accurate plans on the study designs after we have disclosed the Phase Ia top line data.

Thank you so much. [Operator Instructions] With that, there are no more questions in queue, and I'd like to turn it over to management for closing remarks.

Yes. So thank you for joining the webinar. As I said, we will have a very interesting autumn ahead. We are really much looking forward to get the Phase Ia clinical data in the Q4, and of course, then planning the future of HER-096 development. And at the same time, the Phase Ia clinical data would be key for going forward with our partnering efforts. So with this, I would like to thank you for following this webinar, and I wish you all a very good day.