Immunovia AB (publ) (IMMNOV) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Immunovia Press Conference Call. I'm George, the Chorus Call cooperator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jeff Borcherding, CEO. Please go ahead, sir.

Thank you very much, and good afternoon, everyone. Yesterday, we announced a major plan to restructure our operations to focus on our promising next-generation test for the detection of pancreatic cancer. I am excited about the test we have in development and wanted to share additional information about this decision and our path forward. As we discussed on the first quarter earnings call, we face 3 major challenges. The first is demanding payer requirements for robust clinical data. This clinical data is key to securing reimbursement from U.S. payers and generating revenue. The second challenge is proving clinical utility in pancreas cancer. These studies must be large, and they often have to take place over a longer period of time if they are prospective studies. The third challenge that we face is the risk-averse financial market and limited access to capital that comes along with that. In response to these 3 challenges, we undertook a process in conjunction with our Board of Directors to evaluate our options. There were really 2 key parts of the assessment. The first key part of the assessment was looking at our ability to generate data showing better patient outcomes with the use of our early detection test. That's the key to securing payer reimbursement. The second part of our planning process that I'll talk about in a moment, was focused on our financial situation and the financial realities we face. But starting with how we generate the patient outcomes data that would enable us to secure reimbursement. As we thought about that issue, we thought about a couple of challenges. One of those challenges is related to our product, IMMray PanCan-d. Our test is partially reliant on CA19-9. This is one of the 9 biomarkers in our test. Unfortunately, CA19-9 is not produced by about 10% of people. As a result, for those people, we cannot produce an IMMray PanCan-d result. The inability to produce CA19-9, unfortunately disproportionately impacts minorities, including those of African ancestry and Hispanic ethnicity. In addition to thinking about the IMMray product and its ability to deliver results, we thought about some of those clinical study challenges. We know that prospective studies require a very large number of patients followed for multiple years. We don't have the resources to conduct such a study on our own. We need to partner with existing studies that have funding from other sources. Because these studies are broader and are often supported by multiple sponsors, we know that these studies are likely to incorporate different arms for different assays, including other commercial assays and CA19-9 alone. We have to be confident if we're going to participate in these studies that our test could succeed in comparison to others. As we thought about generating the clinical data, we also thought about our opportunities. The next-generation test that we have in development is one that we've been working on since last year. Our next-generation test for early detection of pancreas cancer incorporates new biomarkers and it's specifically designed to work equally well across different risk groups. In addition, it's expected to provide accurate results in patients who don't produce CA19-9, and to reduce our overall reliance on CA19-9 in the test. Doing that would make our test equally useful for patients of different ancestries and ethnicities and that's really critical. We have a moral and an ethical obligation to serve patients equally and to help eliminate some of the health care disparities that have led to higher rates of mortality in pancreas cancer for these minorities. As I mentioned on our last conference call, one other opportunity that we have in the clinical study arena is doing retrospective studies. We have identified investigators who have access to both clinical samples of serum as well as clinical information about those patients that could allow us to do retrospective studies, which would save time and obviously, quite a bit of money compared to the larger prospective studies. So that was the assessment that we went through as we looked at both our product challenges and our clinical study challenges and then the opportunity that we have with the next-generation test. I mentioned that the second part of our planning process really looked at our financial situation. Capital markets at this point, continue to be risk averse. That's true across the Nordics, in the U.S. and in Europe. In addition, our lower market capitalization means that any equity raise would result in substantial further dilution. And clearly, we've already experienced quite a bit of that with the rights issue that we completed. During the last conference call, I talked about our burn rate and our cash reserves. I mentioned at the end of Q1 that we were running at the low end of our historical burn rate of about SEK 15 million to SEK 20 million per month, but it's frankly, still too high. We also, at that time, had cash to fund us through the first quarter of 2024, which, if we don't make changes, would continue to be the runway. That's simply not enough runway in the current financial environment. As we think about different cost-cutting moves, those cost-cutting moves that we had made previously reduced our run rate, but not quite sufficiently, not enough for what we needed. Finally, as part of our financial analysis, we also had a number of conversations with investment bankers and with prospective investors. Those conversations confirmed and reinforced the financial challenges that we had seen from our perspective. So after looking at all of these factors, the Board and I came to a number of conclusions. We cannot sell and market the current test, IMMray PanCan-d and, at the same time, adequately support the next-generation test. We need a sharper focus. The next-generation test gives us the best opportunity to deliver the clinical study results that are needed to secure reimbursement. To adequately fund their R&D efforts, our clinical efforts, for that next-generation test, we made the difficult decision to remove the IMMray PanCan-d test from the market. Doing that will meaningfully lower our run rate. I mentioned in the press release yesterday that we expect significant staffing reductions. Those reductions will occur both in the U.S. and in Sweden, across a range of functions, including our sales team, customer service and operations. We will retain key personnel that are critical for the work on our next-generation assay, both from an R&D standpoint, a clinical study standpoint as well as the preparation work to market and sell that test when it is ready in 2024. We'll also be looking at our operating expenses. Now that we will not have a test in market, we will be able to reduce those expenses as well, and we'll be working on doing that in the next coming weeks. These moves will allow us to extend our cash runway further into 2024, and we'll share a more detailed plan when we report our second quarter results. At this point, it would be preliminary to say exactly what the reduction in our burn rate and the extension of our cash runway will be, but we should have more clarity when we report those results in August. In summary, I'm really excited about the potential of our next-generation test. It gives us an excellent opportunity to demonstrate clinical utility that's needed to secure reimbursement from U.S. payers and to generate revenue. We've taken dramatic but necessary steps to focus our resources on the next-generation test. These steps will bolster our financial health and they provide flexibility in a tough market environment. I want you to know that I remain committed to our mission of saving lives through the early detection of pancreatic cancer. And I also remain committed to doing all that we can to reward you, our shareholders, for your investment in the company. I truly appreciate it, and I'll do everything I can to provide the rewards that you're hoping for. With that, I'll say thank you and open it up for any questions that you might have.

[Operator Instructions] The first question comes from the line of [ Michael Loughman ] from [ CTC ].

Thank you, Jeff, for this run-through of the alternatives. I was just wondering, could you expand a little bit about the choice of assay going forward? And why it wouldn't be necessary to have your own labs going forward if you choose a more standardized assay or standardized machine?

Yes. Yes. As we mentioned in the press release yesterday, the new asset that we bring to market will be on a commercially available platform rather than the IMMray platform. This will allow us to scale production much more quickly. It will also allow us to produce the test at a lower cost of goods sold. So it provides substantial benefit from both of those perspectives.

[Operator Instructions] There are no more questions at this time. Excuse me, we have a follow-up question from the line of [ Michael Loughman ].

So just a follow-up. If you look at what's available in terms of machines out in the lab, it's mostly ELISA and LUMINEX. Can you expand a little bit about the differences between these 2?