Herantis Pharma Oyj (HRTIS) Earnings Call Transcript & Summary

Welcome to Herantis Pharma 2023 Report Webinar. My name is Antti Vuolanto. I'm the CEO of Herantis. And together with me, we have CFO, Tone Kvale, in the studio. During this webinar, I will present, first of all, why we are so enthusiastic about our lead candidate, HER-096, and then to last year's figures, followed by questions and answers session. And during this webinar or throughout this webinar, you are able to submit questions for the Q&A session. And then we have the necessary forward-looking statements. Not going through them through detail, but let's go into Herantis. So Herantis Pharma, we are a listed company from Helsinki, Finland, established already 15 years ago. And during these years, we have been mainly concentrating on developing disease-modifying treatment for Parkinson's disease. And now our lead asset, HER-096, is a small engineered peptide molecule that has a very unique mechanism of action derived from a previously studied CDNF protein. But now we have been able to capture that in the small molecule, which allows us to use subcutaneous injection as an easy route of administration. And this actually, we have now demonstrated during last year when we completed a Phase Ia clinical study. First of all, we presented good safety profile, but we also demonstrated efficient blood-brain barrier penetration. And together with the very strong preclinical data that we have, this is, of course, a very nice starting point for further clinical development. And as we have already mentioned many times before, the ambition of the company is to engage with a partner before starting a Phase II program with HER-096. But let's go through first why we are so enthusiastic about HER-096 and what is the capacity of HER-096 to act as a disease-modifying treatment for Parkinson's disease. So the normal function of the dopaminergic neuron is summarized in this slide. So in the middle, you see the functional dopaminergic neuron. It produces dopamine, the small dots. They are below the neuron. It's a transmitter -- neurotransmitter that then is received by another neuron controlling further the normal motor function. And surrounding the dopaminergic neurons, you see microglial cells, which role is to monitor the environment and keep the environment suitable for the dopaminergic neuron. And in normal stage, they are, in a way, inactivated. However, in Parkinson's disease, the dopaminergic neurons degenerate in the midbrain in a place called substantia nigra. And what happens there? First of all, there is a chronic neuronal stress in a cell organelle called endoplastic reticulum or ER. ER stress is actually caused by accumulation of misfolded proteins. And that results in turn, a chronic activation of a pathway called unfolded protein response pathway, which is very important for us because that's the target pathway, the main target pathway for HER-096. So in addition to the ER stress, it's very much a process called proteostasis, which is the key mechanism in the cell controlling the synthesis folding and degradation of proteins, the main building blocks of cells. And the failure of the proteostasis results in accumulation of toxic alpha-synuclein aggregates, which are very harmful for the neuron, but also for the environment of the neuron. And in addition to that, the microglial cells are activated. They try to signal the neuron that the environment is not favorable and they secrete [indiscernible]. In a normal stage, that could be positive. But in the chronic stage, it's harmful for the neuron. Actually, these 3 items ER stress, the accumulation of toxic alpha-synuclein aggregates and the neuro information, they cause a vicious cycle in which all of these 3 components strengthen each other and makes the life of the neuron even worse. And that results in decreased dopamine production. So -- and that, in turn, results in movement disorder. And when this process continues, the dopaminergic neuron degenerates and eventually loses its ability to produce dopamine. And eventually, it will cause the death of the neuron. But with HER-096, what we have shown in preclinical settings is that we can break down this business cycle. How we do that is that HER-096 target is the unfolded protein response pathway. And if you remember from the last slide, it is chronically activated in degenerating dopaminergic neuron. However, when we treat those neurons with HER-096, we can inactivate the UPR and normalize the ER function. We also address the amount of toxic alpha-synuclein aggregates. We can decrease the amount substantially, and we can also alleviate the neuro information. So basically breaking down the vicious cycle. And we have shown in preclinical settings that we can normalize the dopamine production in the dopaminergic neurons, which in turn means that we are able to normalize the motor functions. Many of you have seen earlier the nice mice video showing clearly that, yes, we have a clear effect on the motor functions. So basically, using HER-096, we can change the degenerating dopaminergic neuron into functional dopaminergic neuron. And thereby, we can normalize the motor function and stop the progression of Parkinson's disease. And we are really extremely happy about the great preclinical data that really demonstrates all the effects that I showed here. And this makes us very enthusiastic about the potential of HER-096 in the treatment of Parkinson's disease. If you look at the status of the HER-096 program in addition to the preclinical data. So if you look at the manufacturing side, HER-096 is a synthetic molecule, have already scaled the manufacturing in a large scale. And as a synthetic process, it's very straightforward. We are currently manufacturing GMP product for the Phase Ib clinical study that we expect to start later this year. And we do some -- we are currently doing some formulation work to even decrease the volume of injection going forward. With preclinical toxicology studies, we have done 1 month tox study. We are continuing the toxicology program towards the end of the year to enable later on a Phase II program. And in clinical settings, we have completed a Phase Ia clinical study. We are aiming to start Phase Ib clinical study later this year. And what I want to highlight is the patenting situation. So we are very strong there as we have a composition of matter patent for only 4 years ago with HER-096. And let's go into 2023 report. So about the business highlights. So the Phase Ia clinical study that we conducted last year, even ahead of time in October, we reported the top line data that demonstrated very favorable safety and tolerability profile. We demonstrated also a very good pharmacokinetic properties, especially the significant HER-096 concentration in CSF, so demonstrating the blood-brain barrier penetration after the subcutaneous injection. So basically, this shows that we have very good starting point for further clinical development. We also were able to strengthen the financing position. So we started the European Innovation Council Accelerator Grant Program or Project. In May, we secured the financing for that -- in April, EUR 2.5 million grant funding. We signed a term sheet with EIC Fund during the summer that allows us to raise EUR 15 million of equity from EIC Fund going forward. And we were really happy that we were able to complete a directly share issue of EUR 4.5 million in December, and also welcoming EIC Fund as a new investor in the -- and shareholder of the company. And also, we were able to strengthen the equity of the company during the autumn as Business Finland waive of some of the R&D loans that they have granted to Herantis for the development of CDNF. So all in all, very successful year 2023, providing us a very good starting point for this year and further development of the company. There are some events after the reporting period. The science team is currently during this week presenting at AD/PD Conference in Lisbon. So for the first time, they will present the Phase Ia clinical study results to scientific audience, and they are also presenting preclinical data of HER-096. And there, we also have provide some new data on the potential of HER-096 to regenerate of -- regeneration of stressed neurons. And then Tone will present the figures.

Yes. Thank you, Antti. So for 2023, we actually ended up with a profit, and that is due to the cost saving measures that we implemented during 2022 and also an extraordinary item. And as you can see on the left side of the slide here, we have operating income of EUR 5.3 million in 2023. Most of that stems from the Business Finland waiving of the development loan, as Antti mentioned, of EUR 4.5 million. In addition, you also remember that we got the grant from European Innovation Council last year, and EUR 0.8 million of that is also booked here in the other operating income box there. And then in the middle there, you see the OpEx by item. The total operating expenses has been reduced with 37% compared to '22, and mainly due to that we have reduced headcounts and also that we now are focusing all the resources we have on developing of 096. So we ended up with EUR 280,000 in profit, and that's a huge improvement compared to last year. The explanation you see on the left. In addition to that, I want to mention that we also completed the bankruptcy proceeding from one of our subsidiaries, Laurantis. And in the financial items, you can find that we got EUR 607,000 in their ASA finance income that also helped for the profit and loss. So during the year then, we are -- have been strengthening our equity position. Cash position by the end of last year was EUR 5.5 million. In addition to the cash, we also have placed close to EUR 1 million invested in short-term fixed income security. So that comes on top of the EUR 5.5 million there, as you can see. Cash flow from the operating activities ended at minus EUR 4.6 million compared to minus EUR 8.9 million last year, and the significant improvement there is related to cost saving measurement. So as I said, positive equity, EUR 4.7 million compared to a negative equity last year, strengthening due to the waiving of the Business Finland loan, but also we had the successful fundraising in December a year of EUR 4.5 million.

Okay. Thank you. So for this year, we have clearly 3 milestones, all of them are related to the Phase Ib clinical study. So first of all, we want to -- we will submit the clinical trial application during the first half this year. We will have the trial application approved during the second half. And also, we aim to start the treatment of the first Parkinson's patients in the Phase Ib clinical study in the second half of this year. One of the topics that we have been discussing a lot and what has been asked from us is, of course, seeking the partner for HER-096 development going forward. And that's, as I mentioned in the beginning, that's one of the bigger ambitions of the company to engage a development partner. And if you look at the process for having a partner on board, we believe that we have been able to substantially increase the value of the company and increase the value of HER-096 during the past years. So just a reminder that before HER-096, we studied the CDNF protein. So we gained preclinical and clinical experience with the same target mechanism in Parkinson's disease, in patients, and we have been able to utilize that expertise in the development of HER-096 and also justifying the effects of HER-096 with discussions with pharma partners. And it's only 4 years ago since we filed the global patents of HER-096. We have been able to establish manufacturing, which is straightforward. We have been able to demonstrate preclinical evidence of disease modification with HER-096. Last year, we were able to demonstrate the delivery of HER-096 in human brain after subcutaneous administration. And when we go forward, we have significant opportunities in further development of HER-096 in Parkinson's disease and in other neurodegenerative diseases. And with the partnering discussions with the pharma companies, we are constantly, in a way, advertising and telling them the story, and we are getting very good attention from them. Of course, it's very difficult for us to define a certain timeframe when we could close a deal with a partner, but that's clearly one of the most active things that the company is currently doing. And what kind of an investment opportunity Herantis is? Let's -- if we start with the market. So the Parkinson's disease treatment market is rapidly growing. During this year, the market size is approximately USD 5 billion, but it's estimated that it will grow up to USD 12 billion by 2030. And we want to be part of that growth, and that growth will be driven by the development of disease-modifying treatments such as HER-096. And we believe that HER-096 is among the best candidates to become a disease-modifying treatment or even treatment that can stop the progression of the disease. And the problem is that truly, the currently available treatments may not slow down or stop the progression of the disease. So regardless of the current treatments, the disease always progresses. So there is a high unmet clinical need. We believe that our solution is really unique. So we are addressing very -- in a very broad way of the pathology behind Parkinson's disease. And we believe that that's the reason why we have a very good opportunity to really affect the disease progression. And so far, the evidence that we have been able to collect, starting from the previous work with CDNF protein through the great effects that we have seen with HER-096 in preclinical settings now transforming into human data with the blood-brain barrier penetration, we believe that we are among the best candidates in Parkinson's disease and also potentially in other neurodegenerative diseases going forward. So with this slide summarizes what we have. But I would like to thank our great team, our partners that we work with, our shareholders and especially our health volunteers that have participated in Phase Ia clinical study during 2023. And it was a very successful year and as I said, a very nice starting point for this year. And this ends the webinar or the presentation part of the webinar, and now we can go into questions-and-answer session.

Yes. So I will ask the questions. We have 1 question here. Are you satisfied with Herantis' performance year-on-year? You mentioned it already, but can you say more?

Yes. So basically, I'm extremely happy about the milestones that we achieved during the last year. Both the clinical study that we were able to conduct during the last year and the results demonstrating the safety and blood-brain barrier penetration of HER-096 in human. Of course, great starting point for further clinical development, but also strengthening the financial position. The environment wasn't really friendly for a small biotech during the last year, but we were able to secure the financing from EIC Fund. We were able to complete the financing round in December. I think we did a very good job last year.

Yes. Next question. You reported promising preclinical data this week. Can you say more about that? I think you also mentioned that, but maybe...

Yes. So basically, the team is currently in AD/PD Conference in Lisbon, which is the biggest annual conference on Alzheimer's and Parkinson's disease. And there, we have some fresh preclinical data on the potential of HER-096 to regenerate stressed neurons, of course, strengthening preclinical package. And that's, of course, important going forward.

Next question. What can we expect from the Phase Ib clinical trial? And why can't you go directly to Phase II?

Now that's a very good question. So we need to remember that the Phase Ia that we conducted last year was a single dose study in healthy volunteers. And now the next step logically is to start dosing with Parkinson's patients, and we need to do multiple doses there to demonstrate the safety and tolerability in the patient population before we can go into longer studies. So that's definitely the aim and a very necessary step in the regulatory path going forward.

Next question. When will you be able to report the outcome from the Phase Ib trial?

Yes. So the current plan is that the first administrations in Phase Ib will start during this year, so during the second half of this year. And we believe that the data will be ready to be released by the end of 2025.

Yes. The next question. Can you comment on the cash runway? And I guess I can comment on that. We have funding into Q2 2025. Next question, can you use biomarkers in Phase Ib?

Yes, that's one of the very important objectives also in Phase Ib. So we have done good or great biomarker work already with the CDNF clinical study earlier. And now we continue that with the preclinical studies with HER-096 and clinical study, the Phase Ia with HER-096, and we have identified several candidates of biomarkers. And we will continue this work in Phase Ib. And this is a very important preparations going forward towards the Phase II clinical study. So that's one of the important items for Phase Ib to have as much information about the biomarkers as we can.

Good. I think that was the last question. If anyone have other questions, you can send that to -- you have your e-mail addresses there, or you can send it to the Investor Relations e-mail after this meeting. Oh, let's hear one more. Are you looking for Parkinson's patients volunteers for the Phase Ib work?

Yes. So as soon as all the practicalities are [indiscernible], then of course, as I mentioned, we will have in Phase Ib also Parkinson's patients treated. And of course, we need to then have volunteers for that study.

Yes. We should also maybe mention that we are running a trial in Finland only.

Yes. So we are running this, as I said, at the same site as we did the Phase Ia study.

Good. That was all questions, so.

Okay. So thank you for joining this webinar. I hope that we were able to present to you what we are doing. And with all the good questions, I hope that you have now a good view on the potential of the company. And so thank you for joining, and I wish you a very nice day.