Herantis Pharma Oyj (HRTIS) Earnings Call Transcript & Summary

Good morning. My name is Antti Vuolanto, I'm the CEO of Herantis Pharma. And welcome to the first half report webinar for Herantis Pharma. So first, the necessary forward-looking statements, and let's go then into the company update, followed by the first half report highlights. So Herantis Pharma, we are a clinical stage public company and we develop disease-modifying therapies for Parkinson's disease and other neurodegenerative diseases. And our lead asset is HER-096, that is peptide that mimics CDNF protein and CDNF protein has been earlier shown to break the cycle of Parkinson's disease pathogenesis and we have last year, completed the Phase Ia clinical study with HER-096 demonstrating a brain penetration and good safety profile after subcutaneous administration. What is very specific for Herantis and HER-096 is that we actually have signs of efficacy already in clinical settings with the mother molecule, as we call it, the CDNF in Phase I clinical study with fairly advanced Parkinson's patients, and this is truly unique. And combine this with a strong preclinical data of HER-096 demonstrating the mechanism of action, the activity in Parkinson's disease pathogenesis and ability to affect the symptoms in Parkinson's models, is a great combination to work with and continue with and continue with the clinical development. I want to also highlight the team, both the operational team at the company, but our very experienced Board and the advisory Board consisting of senior industry experts in clinical development of therapeutics up to the market. So we believe that that's a great combination with great biology that we are working with. So why innovation is needed for Parkinson's disease? So the current therapies only treat symptoms. They don't affect on the disease progression. So currently, there is no cure for Parkinson's disease. And even with the current symptomatic treatment, it is not always efficacious and there are also significant side effects. So it's clear that there is a high unmet clinical need and all the Parkinson's patients are really eagerly waiting for new types of drugs that can really slow down or even stop the progression of the disease, hopefully, at the early stage of the disease so that the patients can keep up with their normal life, which is currently not possible longer term. If you look at the market currently, the market size for Parkinson's disease therapeutics is approximately USD 5 billion, and it's expected to grow up to USD 10 billion by 2030. And this growth will be driven by the development of disease-modifying treatments drugs as HER-096. Based on our market research, we can have a big share of that global market once when and if HER-096 will reach the market. And these figures only show the potential in Parkinson's disease as we know also the same kind of a biology could be used also in other neurodegenerative diseases later on. About the mechanism of action. So Parkinson's disease is caused by the degeneration of neurons in a certain area in the midbrain. And a hallmark of that degeneration is one pathway called unfolded protein response pathway, that is chronically activated in Parkinson's patients, resulting in neuron degeneration and eventually the death of the neurons and accumulation of toxic alpha-synuclein aggregates and neuro inflammation. And what we have been able to show in preclinical settings is that we can break this cycle and reprogram the neurons to act normally so that they can keep up with the normal functions and production of the dopamine that is controlling the motor functions of humans. So the key advantages of HER-096 are its neuro restorative. We have great evidence on that. We can administer that subcutaneously, which is quite unique as many of the disease-modifying drug candidates has to be delivered intracranially. And we have very good safety data in clinical settings already. So what is the status of the data currently? So could we have the video here? Yes. So what we have shown in preclinical settings is that we can affect the symptoms. So in this video, there is -- the first mouse is a normal aged mouse walking over a bar walking test for motor coordination. The second mouse has induced Parkinson's like pathology and it's really struggling to coordinate the movement. And the third mouse is like the second one with the pathology, but treated subcutaneously with HER-096. And as you can see, we have been able to cure the motor symptoms. And we know that the cure is due to the increased amount of dopamine in the brain, which is a result of stabilizing the target mechanism, unfolded protein response pathway. And we have a truly robust data demonstrating the whole chain from the mechanistic intervention in that pathway until the effect on the motor symptoms. And this is, of course, very encouraging, and this is what we want to transform into patient studies going forward. Last year, we completed the Phase Ia clinical study in healthy individuals. And there, on the left-hand side, you see the results of the brain penetration. And in that study, we demonstrated that after a single subcutaneous administration of HER-096, we were able to achieve a concentration of HER-096 in cerebrospinal fluid. So into the CNS between 50 and 100 nanograms per ml, which is well within the therapeutic range of HER-096 shown in preclinical settings. And on the right-hand side, there is a graph about the pharmacokinetics and the profile -- pharmacokinetic profile in plasma is very good and expected. So this data provides us a great starting point for Phase Ib clinical study that we expect to start later this year. And the Phase Ib clinical study is a necessary step between the Phase Ia towards the Phase II clinical studies and in Phase Ib and objectives is to, first of all, demonstrate the safety and tolerability of repeated dosing in Parkinson's patients, but also study about the pharmacokinetics and then biological responses to HER-096 administration using biomarker data. And in the study, we have up to 16 healthy individuals to complete the pharmacokinetic study. And then we have up to 24 Parkinson's patients who will be administered for four weeks, two times a week subcutaneous HER-096. And then we are, of course, closely monitoring the effects of HER-096 in these patients. And we are really enthusiastic about this study. It's great that we are now able to soon start the first study of HER-096 in true patients. So that's a great milestone for the company and very important preparation towards the Phase II clinical studies. And in Phase II studies then the objective is to demonstrate the safety, so the effect of HER-096 on Parkinson's disease. And let's go now more on the first half report and the results. So first of all, about the business highlights from the first half. So we submitted a clinical trial application for the Phase Ib clinical trial in May. And that study will take place in Finland, and we expect soon to get the approval and start the clinical study by the end of the year. We also received a milestone payment of EUR 750,000 and from the EIC Accelerator grant that we obtained originally April '23. Very happy about the events after reporting period. So July 1, we announced that we got a research financing from Michael J. Fox Foundation and Parkinson's U.K. through The Parkinson's Virtual Biotech, and they will finance our Phase Ib clinical study and advance the biomarker efforts. The Board also has decided a new option rights -- option program for key personnel. Let's spend a minute with discussing about the research funding that we obtained from the Michael J. Fox Foundation in Parkinson's U.K. These two charities are the leading charities for Parkinson's disease research on the globe. And especially Michael J. Fox stamp on our program delivers quite a bit of value for us preparing for the next clinical studies, but also for the partnering point of view. As these charities made a scientific evaluation of our assets, and they believe that HER-096 is among the best candidates that could provide or could address the unmet clinical need of Parkinson's disease. And here, I also want to highlight that now during or since April 2023, we have been able to secure EUR 6.1 million of nondilutive research funding from these charities and from European unions through their European Innovation Council Accelerator grant. And both of these finances have involved the scientific evaluation of our asset, and we are really happy about this. And combine this with a commitment of EIC fund of direct equity investments of up to EUR 15 million from which we raised EUR 1.5 million earlier. This is a great achievement for Herantis going forward. So Tone, maybe you will take us through the financials.

I'm Tone Kvale, I'm the CFO of Herantis. So for the first half this year, you can see that the operating expenses, they are in line with the increased activities that we have in the first half. We have filed CTA. We're also working -- preparing for both the Phase Ib and Phase II which involve increase in the CMC expenses and CMC is related to manufacturing and control. We are also working on a development program for biomarkers. So there is where the money goes. On the left side of the slide there, you can see the other operating income, and that is the grant from the European Innovation Council, which Antti talked about earlier. And the loss for the year, for the first half ended at negative EUR 2.6 million, and that relates to the increased activities. So if you go to the next slide, there you can see that the equity position has been strengthened compared to the same time period for last year. We have cash position at EUR 3.4 million, and that consists of cash in the bank. And also, we have moved money to a fund, a short-term fixed income fund to try to get some more higher interest. So that's a kind of combination there. We received EUR 750,000 from the European Innovation Council in June. So that's a part of the cash but just to make a note that the research funding of EUR 3.6 million is going to be paid in three installment and they are not in the bank as of today. That's something we're going to receive when we are also reaching certain milestones. And then cash flow from operating activities ended at negative EUR 3 million. And we have a positive equity of EUR 2 million by the end of June, and that has strengthened compared to, as I said, last period last year. So I think that's what I want to say about the financials.

Thank you, Tone. And that actually covers now the first half report and the company update. So as a highlight, we believe that our HER-096 is among the best potential candidates for Parkinson's disease and other neurodegenerative diseases as disease modifying therapy. There is great commercial potential in HER-096. We have the right ingredients, both the team, the asset and everything around that. And now during this and next year, we are preparing for the Phase II trials, and that preparation includes running the Phase Ib clinical study, which is a great milestone for the company. I think next, we have a Q&A session. So if you have any questions, please ask us and we'll try to provide good answers for that.

And we have already received some questions, and we can start with that. Can you explain the financial terms of the research funding agreement that we obtained from Michael J. Fox and Parkinson U.K?

So basically, the research funding, EUR 3.6 million. That's a loan that the company needs to pay back if the project is successful. So HER-096 generates either sales revenue or other type of value, for example, in licensing agreement. And the agreement is like that but if we get a certain amount of gain from that project, we need to pay 10% back to the charities until we have paid 4x the capital they provided. So maximum, EUR 14.4 million. So when the company has earned EUR 144 million, then we have had the obligation to pay back that EUR 14.4 million. So we believe that this is a very good instrument for all the parties and we are really happy that we have received that kind of external validation. So we need to also value that very highly. We believe that having Michael J. Fox and Parkinson's U.K., taking part of our journey is very important going forward. For example, if we consider partnering the program at some point of time in the development.

And the next question is, what is the aim for the upcoming Phase Ib clinical trial? And do you expect to see any efficacy data from that?

So clearly, the aim is to bridge -- to have a bridge between the Phase Ia clinical study in healthy individuals towards Phase II and remembering that in Phase II, we believe that we need to treat the patients for a long time, maybe six months. So we need to have more safety data with the patient population. And that's clearly the aim. But of course, we want to see also biomarker-related endpoints in the study so that we understand better the effects that HER-096 might do in the biology again, allowing us to design the Phase II. The Phase Ib is not designed to provide efficacy data. It requires longer treatment and more patients. So it's important to manage the expectations that there is a certain purpose for Phase Ib and that's great if we achieve that.

And next question is, since you now have secured EUR 3.6 million in funding, are you fully funded until the start of the Phase II clinical trial?

Maybe you will ask.

Yes, I will ask. I'm sitting on the bank. So with this funding and securing this Phase Ib trial, we have cash into the second half of [ 225 ]. So we will be able to deliver the top line data from the Phase Ib. But with this money, we will not be ready to start our Phase II trial because there's a lot of preparation we need to do, especially on the CMC side. So we need to consider some time to raise additional cash, but that we'll come back to. So but we are so happy that we got this EUR 3.6 million and that we can go ahead now and do the Phase Ib, we did external validation from Michael J. Fox and Parkinson U.K. That's a really big achievement, I think, for the company. So in addition, we have more questions coming in. That's nice. What is the state of biomarkers in the clinical study context?

There, the Phase Ib is really important. So in Phase Ib, we are now testing our hypothesis about biomarkers. And of course, it's difficult to predict what the data will be looking like. But we believe that, that gives us a good opportunity to design Phase II clinical studies. So overall, the biomarker program has advanced well and it's been quite well resourced due to the fact that we have received the EIC funding and now also supplemented with the Michael J. Fox Parkinson's U.K. financing. So we are pretty happy about the progress and the status of that program.

Next question is what is the state of preclinical studies in other indications?

As we have disclosed earlier, we believe that HER-096 can be efficacious also in other indications, for example, Alzheimer's or ALS and that's also something that we have data with CDNF program. So far, we haven't disclosed any data and we are not yet ready to disclose any specific data about this and the studies that we are currently are conducting.

Which clinical study results are needed before the potential partners would agree to make a big deal? Easy question.

That's the easy question. There is no clear-cut answer. There are tens of different companies who are interested in neurodegenerative diseases or Parkinson's disease. And each of these companies have different objectives, what kind of an asset they would like to acquire. So -- and it varies from preclinical until commercial phase. So there is no clear-cut answer. Of course, the Phase Ib and the fact that it is the first time we administered HER-096, into the Parkinson's patients, we believe that, that's a big milestone. But of course, we need to see the data, and then we need to see whether there is a match with a big player when we have the data. Having said that, it is also possible that a partnering deal could be even done earlier, which there has been cases before. And as we have announced to the market earlier, we are like having these discussions on a continuous basis with the multiple pharma partners. So we just need to wait and see.

Which drugs currently in clinical trials in Parkinson's disease are you mostly worried about as a competitor?

Great question. And my answer is that we are actually not worried about any of the competitors. We have a completely different mechanism of action if we compare to any other compounds in the development. So we are not head-to-head competing with any of these. And actually, it would be great if there would be success in drug development in Parkinson's disease modification, that would pave the way for us as well, both in regulatory and also in commercial aspects. And eventually, we believe that when we go 20 years down the road, the best treatment is most likely a combination of maybe two different drugs that address a little bit differently the Parkinson's disease pathology. So overall, I believe that the overall success in the field is also beneficial for us.

In the upcoming study, is really twice a week optimal dosing, not more frequently?

We have previously said that we believe that the right administration regime would be from one to three doses per week. Based on the data of Phase Ia pharmacokinetics, we have selected two times a week in Phase Ib as we believe that, that could be optimal. Of course, we are continuing the pharmacokinetic studies there. And based on those data, we have enough information to then plan what would be the administration in Phase II clinical studies.

When do you expect to get the approval for the Phase Ib application? How predictable is that application process? Or is it more like a black box?

The application process for clinical trial applications in Europe, it changed last year. And currently, it's very much predictable. And we expect to have the decision by the -- during Q4 -- Q3 so that we are able to start the clinical study during Q4 this year.

How can early onset Parkinson's patients participate voluntarily in the Phase II trial, what qualifies must these patients have to be a part of this voluntary trial?

The question is about Phase II study. And of course, we haven't yet disclosed any details about potential further Phase II study. And if we are running that, it could earlier start in '26. So let's maybe not discuss that too much. But the Phase Ib clinical study that is starting. We have the clinical site, which is a commercial site in Finland, CRST, and they recruit the patients. So conducting CRST would be the route for the patients to participate in the study if they want to do that.

What are the main side effects of HER-096?

Good question again. Based on the data from Phase Ia, the majority of the safety-related events have been related to the actual administration or the subcutaneous administration, and it's not specific for HER-096. It's more general due to the administration route. But if you look at what biological effects HER-096 has, we haven't yet seen any side effects like systemic side effects due to HER-096. So currently, it seems that we have pretty clean profile. But having said that, the Phase Ib is very important to understand more about the possible side effects in Parkinson's patients.

I think that was the end of the questions we have received.

All right. Thanks for the many very good questions. It was really happy to have those questions. And thank you for listening the webinar and you are always welcome to contact us at Herantis. Tone or myself, we are happy to answer any questions. And I hope to -- hopefully you will join any future webinars with us and would like to continue following our great story. Thank you.

Thank you.